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The Honolulu Advertiser
Posted on: Thursday, May 16, 2002

Wal-Mart completes Ke'eaumoku deal

By Frank Cho and John Duchemin
Advertiser Staff Writers

Wal-Mart Stores Inc. yesterday concluded its deal to buy the long-vacant Ke'eaumoku superblock near Ala Moana Center, paying an estimated $35 million for the site where the world's largest retailer now plans to stack Sam's Club and Wal-Mart stores.

The purchase of the 10.5-acre property resolves the destiny of one of urban Honolulu's most-coveted undeveloped commercial properties. Developers and big-box retailers from Wal-Mart to Home Depot to Kmart had attempted to buy the parcel from the Wichman Family Trust for more than a decade, but each of the deals had fallen through.

Wal-Mart spokeswoman Cynthia Lin said yesterday that the company plans a 155,000-square-foot Sam's Club for the top floor of its building on the site, a 150,000-square-foot Wal-Mart store on the bottom floor, and several other shops on the parcel bordered by Sheridan, Makaloa, Rycroft and Ke'eaumoku streets.

Lin said several hundred workers probably would be employed at each of the stores and the company wants to finish construction by early 2004.

The sale to Wal-Mart is expected to reshape retailing in Honolulu's urban core perhaps more than any other previous proposal for the coveted site. Analysts said yesterday that the addition of the massive stores in the center of Honolulu will dramatically change the area, giving consumers increased choices but also putting added pressure on nearby retailers.

"The No. 1 discount retailer will now be in the urban core. This is going to put pressure on your primary retailers anywhere from a one-mile to a 20-mile radius," said Stephany Sofos, a Honolulu real estate analyst.

Sofos estimates that the two stores could bring in $150 million to $300 million a year in sales. "And those sales are not coming from a new market. Shopping centers in Pearl City, Kailua and Hawai'i Kai will all be affected," Sofos said.

Several analysts have previously noted that nearby retailers such as Daiei, Longs, Ross, Foodland and many other smaller stores can expect new competition from the world's largest retailer, though to some extent a Wal-Mart and Sam's Club will draw new levels of customer traffic that could benefit everyone.

Some residents fear traffic congestion, and union organizers two years ago led rallies opposing the nonunion retailer before neighborhood board meetings, but it seemed most consumers welcomed Wal-Mart's plan because of convenience and low prices.

Wal-Mart has previously said its plans include a six-deck parking garage with about 1,500 stalls, along with heavy landscaping and a Hawaiian territorial style of architecture. To mitigate traffic, Wal-Mart plans to align Makaloa where it is offset at Sheridan, and install traffic signals at Kanunu and Ke'eaumoku streets. Signals are also being considered for the Rycroft/Sheridan intersection.

There also will be room for small shops along Ke'eaumoku with spaces ranging from 400 square feet to 1,000 square feet for a total of up to 7,000 square feet or so of retail space.

The consummation of the deal comes after Wal-Mart initially tried to buy the property in 2000. The company eventually agreed to buy the property but let a contractual deadline lapses and pulled out of the deal after sales at stores worldwide slowed in 2000.

In the latest round of deal-making, Lin said Wal-Mart was able to work past some of the financial questions and other obstacles that delayed the deal last year, but she declined to discuss details.

After Wal-Mart abandoned its initial plans, Home Depot and Kmart both stepped in and attempted to buy the property. Each later pulled out, with Home Depot citing concerns about the parcel's viability as a big-box site, and Kmart struggling with its Chapter 11 bankruptcy reorganization.

Big-box retailers have said the area is attractive because of its dense population and dearth of budget retailers, but the high price tag for the superblock drove some away.

"We had two backup letters of intent plus a couple of other people interested. There has never been a lack of interest. It was just a matter of finding someone willing to pay the price. Our job was to try to get the best deal possible for the trust," said Charles Wichman, manager a trustee of the Wichman Family Trust.

Wichman said the deal that closed yesterday was essentially the same one that was reached with Wal-Mart in 2000.

"I guess Wal-Mart had some second thoughts back in Arkansas and just decided it wanted to be in this market and they were going to go ahead with it," Wichman said.

The complex would give Wal-Mart two Sam's Club discount stores in O'ahu and seven Wal-Mart stores in Hawai'i: three on O'ahu, two on the Big Island, and one each on Maui and Kaua'i.

Reach Frank Cho at 525-8088, or at fcho@honoluluadvertiser.com.