Nordstrom to anchor new Ward shopping complex

By Andrew Gomes
Advertiser Staff Writer

Victoria Ward Ltd. plans to replace its aging Ward Warehouse shopping complex in Kaka'ako with a new $150 million-plus center anchored by a three-level Nordstrom in a move that would dramatically alter O'ahu's retail marketplace.

A Nordstrom department store would anchor a new shopping center replacing Ward Warehouse under a redevelopment plan by landowner Victoria Ward Ltd. In the interim, Nordstrom plans to open a giant shoe store, at Ward Centre. Victoria Ward

The ambitious project would bring about a new wave of competition for Hawai'i retailers and introduce into the mix another powerful Mainland retailer, Nordstrom, which would gain its first full-line store in Hawai'i after more than 10 years of searching for a site. The center also would add to growing real estate improvements in Kaka'ako.

At 550,000 square feet, the project would have roughly the equivalent leasable retail space of Windward Mall or Waikele Center, and become the third-largest shopping center on O'ahu. Victoria Ward operates about 600,000 square feet of retail space, including the 120,000-square-foot Ward Warehouse.

But delivering on the proposed project will be no easy feat, according to analysts, who note Victoria Ward still needs to find financing amid an increasingly skittish capital market, as well as a development partner willing to share a risk that could run as high as $200 million.

"No doubt, it's challenging," said Fred Noa, vice president and leasing specialist at local real estate firm Chaney, Brooks & Co.

Success or failure for Victoria Ward stands to affect competition for retailers at other shopping destinations on the Island, and many of the landowner's own 140 retailers and restaurants. Still, retail analysts note that Victoria Ward has several things going for it including a lack of competing retail development projects, the pull of Nordstrom and momentum of plans to build a biosciences park and residential high-rises nearby.

Mitch D'Olier, president and chief executive officer of Victoria Ward, acknowledged the challenges ahead, and said the work to overcome them is in initial stages.

He said he is in "early stages of dialogue" with Mainland and local developers, including Indianapolis-based mall developer Simon DeBartolo Group, which developed and operates the giant Mall of America near Minneapolis and redeveloped the glitzy Forum Shops at Caesars Palace in Las Vegas.

Victoria Ward also has enlisted the help of a Mainland investment-banking firm to explore financing options.

D'Olier noted that it takes market timing, tenant commitments, a development partnership and financing to all come together to realize the project. The community also will be a source Victoria Ward looks to for support. "In Hawai'i, like in most places, developers propose projects, but communities do projects," D'Olier said. "We'll need the support of all of our community as we go forward with this project."

Victoria Ward also is counting on surrounding development projects, such as the University of Hawai'i medical school and cancer research center planned nearby just makai and 'ewa of Ward Warehouse. Also nearby, Kamehameha Schools plans to build $100 million high-tech office complex in two phases that could start as early as 2003.

Another aspect of Victoria Ward's greater vision is to have up to six residential high-rises at both ends of its property. D'Olier said he's discussing that project with residential developers, and believes a high-rise on Victoria Ward property will break ground before the Ward Warehouse redevelopment.

Noa said the surrounding projects will add to the critical mass for Victoria Ward's retail plan. "All of a sudden, you have a lot more discretionary income in the community," he said.

D'Olier called Nordstrom's commitment, which both sides had been working on since May, a strong vote of confidence in not just Victoria Ward, but in the local economy.

"We know we're having tough times in Hawai'i," he said. "Victoria Ward Ltd. and Nordstrom know we're going to get through the tough times and look for wonderful times ahead."

Douglass Smoyer, president of the Honolulu retail consulting and leasing firm Retail Strategies Inc., believes that with no major competing projects vying for new tenants, Victoria Ward should be able to attract other key tenants that will help move the project forward.

"There's a whole element of retailers that are not in Hawai'i, many of which ... would like to be here," he said. Nordstrom, Smoyer added, will help attract those tenants and financing. "Nordstrom will assure (Victoria Ward) of getting a lot of top retailers, and that leads to the ability to get financing," he said.

But others say financing still could be tricky. Jim Stanney, director of real estate advisory services for KPMG in Hawai'i, said lenders lately have been sending mixed signals.

"I think everybody is spooked," Stanney said. "We're largely a tourist-dependent economy and dependent on airlines to get everybody here. That has led to some concern. ... It's kind of an ebb and flow. There is still capital out there. We're probably not at the top of the list — unless you've got a real attractive package."

Some Ward Warehouse tenants are hoping the plan succeeds. Laurie Baron, who has operated art galleries at the center for 21 years and is co-owner of Nohea Gallery, noted that Ward Warehouse, constructed largely of timber in 1974-75, was built as a temporary structure.

"We've been waiting for this the whole time," she said. "I'm dancing. I'm just completely thrilled."

Retail analysts said the expansion primarily would affect Ala Moana, the state's largest mall, while Nordstrom would most closely compete with Macy's, which acquired the Liberty House chain in July. Competition, however, would be felt islandwide.

"Any time you add that much square footage it impacts everybody," Smoyer said.

Nordstrom, which yesterday also announced that it will open a 16,500-square-foot shoe store at the 'ewa end of Ward Centre in July, said that store will be incorporated into the full-line store when it opens.

"The redevelopment of Ward Centers is an incredibly exciting project and we believe it will offer customers a strong retail environment," said Blake Nordstrom, president of Nordstrom Inc. "We're happy to be a part of it."

Victoria Ward needs a variety of government approvals, including plan approval from the Hawai'i Community Development Authority, the state agency that oversees development in Kaka'ako, building permits from the city and permission to create diagonal parking on Auahi Street, which is part of the plan in addition to a parking structure.

Reach Andrew Gomes at agomes@honoluluadvertiser.com or 525-8065.