Trust seeks partners for upgrade in Waikiki

By Andrew Gomes
Advertiser Staff Writer

Group 70 conceptual rendering Kamehameha Schools plans to renovate the Royal Hawaiian Shopping Center in Waikiki. The trust hopes to attract more Hawai'i residents to the 22-year-old center.

The nonprofit trust said it expects to select a partner within three months to finance and undertake the renovation, with Kamehameha Schools contributing the 293,000-square-foot property to the venture.

Kirk Belsby, the new chief investment officer of Kamehameha Schools, presented the timetable yesterday at a meeting of the National Association of Industrial and Office Properties' Hawai'i chapter.

The announcement marks a major advancement of the center renovation plan, which has been in a conceptual phase since being publicly disclosed 18 months ago.

If it moves ahead as expected, the project would be the first significant upgrade for the 22-year-old center that has struggled in recent years and has long been criticized for its concrete fortress look.

The upgrade also would add to the multitude of hotel, retail, beach and park improvements — totaling roughly three-quarters of a billion dollars — either ongoing, planned or completed in the past few years in Waikiki.

"We really want to be able to provide the community with a new Royal Hawaiian (Center)," Belsby said. "We really want to make it a gift to the local community, not just a benefit for the tourists that are coming."

Part of that goal will be to install new tenants that appeal more to residents, such as Cheesecake Factory, which has signed a lease and is scheduled to open by the end of the year. Other tenants are being sought, though Kamehameha Schools officials declined to identify prospects.

The four-story shopping center, which spans more than three blocks with about 150 stores and restaurants, has struggled primarily because of declining numbers of Japanese tourists. Many customers have increasingly been lured to more modern stores despite Royal Hawaiian Center's position in the center of Waikiki.

Recent tenant losses at the center have included two McInerny stores that closed, and Chanel, which moved into the 2100 Kalakaua retail condominium across the street.

The losses have hurt the income of Kamehameha Schools, a nonprofit institution whose main mission is to educate children of Hawaiian ancestry.

The foundation's revenue-producing property in Hawai'i posted a negative return of 2 percent during the last fiscal year ended June 30, and a 1.4 percent gain over three years, compared with Mainland real estate assets that earned a 16.6 percent return last fiscal year and 18 percent over three years.

At one time, Royal Hawaiian Center, which opened in 1981 at a cost of $40 million, was one of the largest income generators for Kamehameha Schools, which over the past couple of decades has diversified its investments.

Today Hawai'i real estate accounts for 29 percent of the foundation's $5.4 billion in assets, with another 10 percent in Mainland real estate and 61 percent in public securities.

Belsby said the center upgrade will be followed by a plan to develop, again with a partner, a $100 million high-tech office complex in Kaka'ako expected to be built in two phases, each with two low-rise buildings and a parking structure.

Sanford Murata, director of commercial assets for Kamehameha Schools, said the project is meant to complement the neighboring University of Hawai'i biomedical complex now under construction as well as a plan to build an aquarium and marine research complex nearby.