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The Honolulu Advertiser
Posted on: Thursday, October 11, 2001

The September 11th attack
Some landlords offering retail tenants rent relief

By Andrew Gomes
Advertiser Staff Writer

As many Hawai'i retailers endure a fifth week of dismal sales following the Sept. 11 terrorist attacks and ongoing U.S. retaliatory strikes in Afghanistan, some have begun to receive assistance from their landlords.

Several local shopping complex owners have temporarily reduced rent for some or all of their tenants suffering withdrawal of customers because of tourists afraid of flying and residents wary of buying.

Other retail landlords who so far have eschewed rent concessions say they are trying to help merchants by attracting more traffic with aggressive promotional campaigns.

"Everybody is looking for any relief that they can get," said local retail sales consultant Ron Martin of Success Dynamics. "It's just normal."

The rent breaks and promotional efforts follow weeks of retail layoffs, shortened store hours and cutbacks in merchandise orders as retailers try to save the bottom line and stay in business as sales drop.

Lloyd Jones, vice president and chief executive officer of Martin & MacArthur, a Kalihi-based diversified woodworking company with four retail furniture stores, said he's sought rent breaks for some his company's locations.

"In retail, there's very little you can play with. If your sales are off, you have rent, staff and merchandise," he said, noting that Martin & MacArthur already has cut back on staff and merchandise orders.

"Everybody's looking for (a rent discount)," said Mike Umakoshi, a business consultant working with Red Dirt Shirt Co. on Kaua'i.

Red Dirt Shirt has received rent concessions for some of its eight shops and has asked to defer portions of payments due other creditors. Still, it had to lay off a third of its work force Monday despite a slight uptick in sales. More staff cuts, Umakoshi said, will probably come this week.

"We're looking at the long-term, big picture (to) stay afloat now and build up the capital so that if it gets worse we can still stay afloat until things get better," he said.

Landlords who have responded the quickest generally have properties in tourist areas. For example, the Queen Emma Foundation, which owns and operates the International Market Place and Waikiki Town Center, gave about 175 of its tenants a 25 percent rent credit for October.

"Most of these tenants are small mom-and-pops, and they've been hurt most of all," said Joel Kennedy, foundation spokesman.

Kyo-ya Co. Ltd., owner of five Sheraton hotels in Waikiki and Ka'anapali, halved monthly minimum rent for its retail tenants this month. The company will reevaluate the reduction next month.

"I'm glad we were able to work hand in hand with them because it's been a tough time in retail for everyone," said Edna Wong, real estate properties manager for Sheraton Hotels & Resorts Hawaii.

Royal Hawaiian Shopping Center, Waikiki's largest mall, is giving its 140 tenants a 25 percent reduction in minimum rent for October and November, a spokesperson said.

Some shopping centers, such as Ala Moana Center, are examining requests for rent relief on a case-by-case basis, and trying to help merchants by increasing promotions to attract more traffic.

"We're trying to do our best working with merchants on multiple fronts," said Dwight Yoshimura, center general manager.

At Victoria Ward Centres, property owner Victoria Ward Ltd. is not giving breaks on rent because, for the most part, new attractions like movie theaters and the entertainment complex Dave & Busters are generating increased traffic, according to spokeswoman Dana Harvey.

But Harvey said the company is crafting a customer reward program in part because more shopping centers will be trying extra hard to attract kama'aina customers in this difficult time.

"We know that everyone will be fighting for the same dollars," she said. "That's one way we can respond and help out the merchants."

Some centers, such as Aloha Tower Marketplace, report that business has been increasing and that it's too early to make any rent concessions, a spokeswoman said.

In some of the worst cases though, retailers can't wait for landlords to act. Kent Untermann, owner of 12 Pictures Plus and Diamond Head Gallery stores, said that this month he started paying only common area maintenance and real property taxes to store landlords, deferring the rest of the rent until business recovers.

Untermann said his company had a $170,000 shortfall in its allocation for payroll, vendor payments and rent in September.

He had already cut payroll, and has not been able to reduce orders because the company manufactures most of what it sells. "We've got a double-fold position," Untermann said.

The financial strain is compounded because the company recently expanded, he added. And to top it off, last week was the worst week of the year for business.

"Our position is not to take it out on the landlord," Untermann said. "We're telling our landlords we owe you the difference. We don't have a fall-back position."

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

Correction: Waikiki Town Center is owned by the Queen Emma Foundation. A previous version of this story gave an incorrect name for the property owned by the Queen Emma Foundation.