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The Honolulu Advertiser
Posted on: Thursday, February 28, 2002

State panel weighs Aloha Tower plan

By Katherine Nichols
Advertiser Staff Writer

The state put off for one month a decision on whether to begin lease negotiations with Rainbow Pier Development LLC, a developer that is proposing a $200 million complex adjacent to Aloha Tower.

Rainbow Pier president Peter Maher presented plans yesterday for the 7-acre development at Piers 5 & 6 that includes 1,500 new parking stalls, a ferry system that could transport 500,000 passengers annually, a 240-room hotel, a 110,000-square-foot office building, 59 townhouses, 16 luxury condominiums, restaurants, and a spa and fitness center.

Board members of the Aloha Tower Development Corp., the state agency governing development surrounding the Aloha Tower Marketplace, questioned the ability of Rainbow Pier to manage a multiuse project of such a size and decided to delay any decision on moving ahead until they have more information about the developer and the financing.

"It has some real implications for Aloha Tower and the state," chairman David Louis said to the board. "We need to look before we leap."

In addition to $45 million in tax-exempt revenue bonds from the state, Maher said he has 100 percent financing from Intercontinental Commerce Corp., based in Rockville, Md., for the first phase of the project. Maher estimates that the commitment from Intercontinental will amount to $150 million.

Plans for Phase II of the complex include an underwater hotel off Maui, said Maher, who indicated that Rainbow Pier might ask the state for financing at that point.

The key element of the plan is the inter- and intra-island ferry, according to Maher. "The ferry is what's buttering the bread of this project," he said.

Rainbow Island Express plans to use a hovercraft with the capacity to carry 35 automobiles and 179 passengers. A trip to Maui, for instance, would cost $39 each way and take about one hour and 40 minutes.

Maher seemed unconcerned about potential competitors in the interisland ferry market, saying there was no need for exclusivity in licensing.

Rainbow Pier is seeking a lease at Honolulu Harbor Piers 5 and 6 from the Aloha Tower Development Corp., the state agency overseeing redevelopment of the area.

Aloha Tower Marketplace was built in 1994 at a cost of $100 million. It was supposed to be the first phase in a $700 million, five-phase project stretching from Piers 5 to 14. The original plan included the marketplace, which represents just 6 percent to 8 percent of development authorized for the area, as well as a hotel, condominiums and an office building.

But developer Aloha Tower Associates ran short of money, could not complete additional phases and fell behind in lease rent payments to the state agency.

Aloha Tower LP, a partnership of investors including Trinity Investment Trust LLP, acquired Aloha Tower Marketplace in 1998 out of foreclosure, but the partnership filed for Chapter 11 bankruptcy last month. The festival marketplace with about 120 shops and restaurants continues to operate.

Meanwhile, Aloha Tower Development Corp., which regained development rights for the areas surrounding the marketplace two years ago, hopes to find a developer or developers to finish the master plan.