Hawaii Kai Shopping Center getting a repaved parking lot, new roofs and a renovated Safeway

It’s been called a disgrace, a slum and an eyesore. But those harsh descriptions of the Hawaii Kai Shopping Center in recent years are now being replaced by praise.

The nearly 40-year-old retail complex is undergoing an overhaul that includes an enlarged and renovated Safeway, a repaved parking lot, re-roofing and more changes ahead to address dilapidated conditions that still include plants growing out of rotting building facades supporting tenant signs.

“It’s really nice to see improvements,” said Shaun Go, a 34-year Hawaii Kai resident who was at the center on a recent day.

The makeover of the only retail complex with a grocery store in the East Oahu community is the result of a recent forced operational takeover stemming from litigation between Hawaii’s largest private landowner, a giant U.S. bank and a real estate firm led by a flamboyant Texas millionaire.

Originally named Kuapa Kai Center, the marina-front retail complex was built in 1982 by the master developer of Hawaii Kai, Kaiser Development, on about 10 acres of land leased from Kamehameha Schools.

Kaiser sold the center with about 50 tenant spaces in 1985, and it changed hands three more times after that, with an affiliate of Dallas-based Dunhill Partners becoming the most recent owner in 1998.

Dunhill’s ownership over the past few years began drawing public complaints about conditions at the center, including badly eroded parking lot pavement, dislodged roof shingles, poor lighting, gouged walkways and unsafe railings at the water’s edge.

State Rep. Gene Ward, who represents Hawaii Kai, noted in a March newsletter that many area residents have called his office to express concerns about the center for more than two years.

Bert Oshiro started a campaign on the petition website Change.org over two years ago urging Dunhill to make improvements or sell the property. The online petition that claimed “a once pleasant and safe shopping center has now morphed into a dangerous eyesore” attracted 1,132 supporters, some of whom criticized the property as a slum and a disgrace.

One petition supporter, Brooke Watson, called the center a “total embarrassment” to her community and said she felt bad for tenants because she and other consumers shop elsewhere because of the conditions.

In April 2020, Kameha­meha Schools filed a lawsuit against Dunhill claiming the real estate company had defaulted on its land lease rent and also violated the lease by not maintaining the property in good condition.

The trust sought to cancel the lease and take possession of the property.

However, a subsidiary of U.S. Bancorp filed a cross-claim in the case alleging that it holds a mortgage secured by the lease, which the bank could seek to assume or assign through foreclosure because Dunhill defaulted on the mortgage loan.

The claim by U.S. Bank National Association said Dunhill owes about $41 million on what began as a $33 million loan in 2006, and that the real estate company ceased making payments in June 2020.

U.S. Bank also claimed that Dunhill had not paid ground rent to Kamehameha Schools since January 2020 and owes the trust about $2 million. The bank also figured the shopping center needed over $1 million in parking lot repairs and $570,000 in roof repairs.

Dunhill did not respond to a Honolulu Star-Advertiser request for comment. The company manages and/or owns about 40 retail, residential and hotel properties mainly in Texas, according to its website.

Company founder and President Bill Hutchinson estimated his net worth in the hundreds of millions of dollars on the 2019 Lifetime TV show “Marrying Millions,” in which the 60-year-old described his relationship with a 21-year-old restaurant hostess for viewers.

In October, state Circuit Judge John Tonaki approved a motion by the bank to appoint a receiver to take control of Hawaii Kai Shopping Center.

The receiver, Linda Lazo of commercial real estate management firm CBRE, has filed reports with the court saying CBRE is working to reduce the center’s 18% vacancy rate while addressing deferred maintenance.

So far, repaving the parking lot is nearly complete, and new roofs have been installed on the center’s two biggest buildings, anchored by Safeway and Longs Drugs. Installation of LED lighting also is planned.

“Our initial focus is to improve the operational efficiency and complete capital projects to enhance the Hawaii Kai Shopping Center,” Marlene Daley, CBRE’s Hawaii director of property management, said in a statement.

In recent months Safeway has been upgrading its store, and plans a grand reopening June 16. The supermarket added 10,000 square feet to its footprint by expanding into vacant neighboring space, added an in-store Starbucks that includes outside seating, and has remodeled interior spaces.

Clem Young, who was having coffee with friends at the center recently, appreciated the enhanced grocery store but gave his biggest compliment to new asphalt outside.

“The biggest thing is they repaved the parking lot,” he said.