Windward Mall enjoying faster leasing process
By Andrew Gomes
Advertiser Staff Writer
Shoppers who have been to Windward Mall recently may have noticed fewer empty spaces at the Kane'ohe shopping center. If they haven't, they soon will, as pending leases are finalized in the next few weeks and a 10-screen theater opens May 22.
Owner: Kamehameha Schools Size: 530,000 square feet; 88 tenants Coming attractions: Stores opened since September: Occupancy: 80 percent; projected to be 95 percent by year-end Customer traffic: 350,000 people a month on average; projected to rise 25 percent with theater traffic
But beyond the storefronts, in a second-floor office next to the small-appliance department of Liberty House, there is another kind of change going on at O'ahu's third-largest mall.
•
Windward Mall at a glance
In short, owner Kamehameha Schools has streamlined leasing operations from a process hinged on trustee approval to one determined by internal rate of return. As a result, the time it takes to sign new tenants has been drastically reduced and financial returns have increased.
The adjustment has helped the mall build occupancy to 80 percent, up from less than 70 percent at times since JC Penney closed its 87,000-square-foot store in 1998.
The roughly 110,000 people living between Kahuku and Waimanalo have more shopping and entertainment options as a result of the changes, which also are generating improved returns for Kamehameha Schools, the $6 billion trust that benefits children of Hawaiian ancestry.
Additionally, the trust plans to expand results by implementing the mall's leasing program at other centers it owns, including Royal Hawaiian Shopping Center in Waikiki, Hawaii Kai Towne Center in East O'ahu and Keauhou Shopping Center on the Big Island.
Faster deals
Mall managers, in conjunction with local real estate firm Sofos Realty Corp., have been working on the changes for nearly 12 months, though it took about six months just to stop the old system's paper train, according to Robert Shaver, operations manager for Pauahi Management Corp., the trust's for-profit subsidiary operating the mall.
The time to sign tenants after an offer was made shrank from as long as eight months in some cases, to three or four weeks, said mall representatives.
"From an offer to a signed lease in a month? That's very good," said Scott Crockford, real property vice president of Maui Land & Pineapple Co., general partner of Maui's Queen Ka'ahumanu Center.
Crockford said it normally takes longer to complete Ka'ahumanu Center leasing deals, though he strives to get them done within a month.
Shaver said Windward Mall had missed out on signing tenants in the past because it took so long to approve leases. "Leasing is selling," he said. "If it takes weeks — or month after month after month after month — the chances of losing someone is very great."
Even if a tenant was eventually signed, Shaver noted, Kamehameha Schools missed out on rent during the interim.
"We feel the mall is making a turn," said Steve Sofos, president of Sofos Realty. "It's being run on a business approach. It's being run the way any other institutional owner would run a business."
Shaver emphasized that Windward Mall, even under the old operational system, wasn't performing poorly, although mall officials would not say if the center is profitable or not. "We're not desperate," he said. "The mall's doing well; it's going to be better."
Higher projections
Sandi Haunani Oguma, Windward Mall marketing director, said she expects occupancy to rise from 80 percent to about 95 percent by the end of the year.
Customer traffic is "conservatively" expected to rise 25 percent from an average of 350,000 people a month, to 437,500 people a month.
Recent tenant additions to the mall have helped get the numbers up to where they are. For instance, Oguma said a Satellite City Hall that opened last May averages 2,000 customers a day. Existing tenants, many of whom have been eager for theaters and the consumer traffic they generate, said they have seen business improve recently and anticipate continued gains.
Terry Hermann-Santos, owner of Ono Yogurt, is pleased by the upturn. "Definitely December was good," she said. "January is always down because it's after Christmas. We saw an upswing in February; February is normally a down time, so that's good. So from our point of view, things are looking up."
Much of the anticipated increases in occupancy and customer traffic are expected to be from the theaters.
Last year, the mall spent $11 million to construct a theater shell (from the upper half of the old JC Penney store) and a 135-stall parking deck. Signature Theatres is spending $6 million to finish the 10-screen moviehouse. The complex, scheduled to open May 22, would fulfill a more than 10-year-old plan by the mall to add theaters and open in time for this year's big summer releases.
In another entertainment push, the mall starting Sunday will be the site for filming a new local game show to be televised on KHON Channel 2 for 26 weeks starting April 8. Dubbed "Hawai'i's Ultimate Game Show Jan Ken Po," the game is a combination of Hawai'i trivia, "Family Feud" and the childhood papers-scissors-rock contest. 'Ohana teams (family, business, organizations) will compete for "Windward Mall dollars" redeemable for mall merchandise.
"We think it's going to be a really fun show for Windward Mall and bring back the interest in things Hawaiian," said entertainer Carole Kai, the show's co-executive producer.
Herman-Santos said mall merchants are being allowed to get involved by providing goods and services such as hair styling, clothing and food for production crew personnel and contestants as a form of promotional product placement.
Restaurants are another area the mall wants to improve. Windward Mall has a food court with eateries such as Panda Express, Arby's and Pretzelmaker, but Oguma said the center — and Kane'ohe in general — has lacked a good selection of sit-down dining options for a long time.
The center is precluded from adding stand-alone restaurants outside the existing retail floor area, so it plans to put two full-size, sit-down restaurants in empty retail spaces. One national chain is in the final stages of negotiation, although officials declined to give details.
Excluding the theaters, the restaurant is one of four tenants representing 20,000 square feet of space that will boost occupancy and help attract shoppers, if leases are finalized.
A new look is also in the works for the center, which was built in the 1970s. Possibly as early as the second half of next year, the mall could get a facelift provided Kamehameha Schools grants a renovation request. Oguma said a $15 million to $20 million budget is desirable. A more thorough renovation would probably run $55 million-plus.
Community benefit
Improving attractions at Windward O'ahu's dominant mall is expected to help the community by recapturing local consumer spending lost to Leeward businesses.
Business at Windward Mall has been affected by Pearlridge Center, which opened in the early 1970s and has had two major renovations since. The same was true when Pearl Highlands Center in Pearl City and the combination outlet/big-box retail center in Waikele opened in 1993. The effect of siphoning away potential Windward Mall customers was exacerbated when H-3 opened in December 1997.
"Windward dollars that stay Windward are good for Windward," said Randy Moore, president of Kane'ohe Ranch, a private trust that owns commercial property in Kailua and Kane'ohe, including Kailua Shopping Center and the land under Windward City Shopping Center and Aikahi Park Shopping Center.
"H-3 is not a one-way street," he said, "so if Windward Mall is able to regenerate itself as a more attractive and well-merchandised and well-maintained mall, then there's no reason why folks living in Pearl City wouldn't want to drive over and visit."
