Posted on: Friday, August 22, 2003
Aloha Tower Marketplace, state to end 2-year dispute
By Andrew Gomes
Advertiser Staff Writer
The owner of Aloha Tower Marketplace has agreed to pay the state more than $1 million in overdue rent and begin out-of-court settlement negotiations in an effort to resolve a 2-year-old rent dispute.
The agreement, reached last week during a hearing in the bankruptcy case of marketplace owner Aloha Tower LP, is a significant step toward resolving the company's bankruptcy as well as lawsuits against the state, a chronic parking shortage at the Honolulu Harbor shopping complex and other issues.
Both parties agreed to spend 60 days to work out a resolution on their own, and hire a mediator for an additional 30 days if necessary. The 90-day settlement period is scheduled to begin by Tuesday.
As part of the deal, Aloha Tower LP will release to the state $1.5 million of unpaid rent that has been deposited into an escrow account since January 2002 when the company filed for Chapter 11 protection.
The company also agreed to resume paying monthly rent. The Aloha Tower Development Corp., a state agency overseeing redevelopment of the area surrounding Aloha Tower, will receive the rent money.
Aloha Tower LP additionally agreed to suspend its $10 million Circuit Court lawsuit that blames the state for contributing to the marketplace's financial trouble, and will drop an appeal of a similar complaint that was dismissed in federal court.
Representatives of both sides said the agreement was a positive step, though they were careful not to characterize chances for successful negotiations.
"I think it is a good-faith effort intended to see whether the parties can resolve their differences," said Don Gelber, an attorney representing the state. "If they can, then they'll enter into a substantive settlement, and if they can't, then they'll be right back where they are now."
Chuck Choi, Aloha Tower LP's bankruptcy attorney, said if talks are successful, Aloha Tower LP can emerge from Chapter 11.
The main issue for negotiators is expected to be ground rent. According to bankruptcy records, Aloha Tower LP pays the state $83,000 a month — a sum the company claims is unfair.
Aloha Tower LP has said the state rejected several proposals to cure a parking shortage that has discouraged major tenants from opening stores at the marketplace and forced the company to reduce tenant rents, thereby inhibiting successful operation of the center.
Under the marketplace lease with the state, about 300 more stalls are required, and technically marketplace owners are in default on their lease.
Aloha Tower LP also has said the state refused to make good-faith efforts to direct cruise ships to dock at Aloha Tower piers, and converted a ferry terminal to a use that does not generate significant customers for the center.
The problems, marketplace owners said, contributed to average pre-bankruptcy operating losses of about $1.5 million a year since Aloha Tower LP acquired the center in 1998. While in bankruptcy over the past 18 months, the marketplace lost $1.7 million.
Reach Andrew Gomes at agomes@honoluluadvertiser.com or 525-8065.
