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Beginning
and the end
As Outrigger readies its massive
Waikiki renewal project, many
old-time businesses face being
priced out of the area
Trudy Hanson fell in love with Hawaii 19 years ago and realized her dream of moving to Oahu 10 months ago. Settling in came easy. She found an affordable rental at the Ohana Coral Seas, a job at the Waikiki Broiler and a ready-made friends at the Irish Rose, a neighborhood pub.
Under construction
» Outrigger Hotels & Resorts plans to demolish the Ohana Edgewater, the Edgewater Lanais and the Ohana Coral Seas along with the Lewers Street Loft & Lanai to make way for a 90,000 square-foot two-story entertainment and retail complex that will front an open plaza on Lewers Street.
» Plans also call for the conversion of the Ohana Reef Towers, from a 480-room hotel into a 195-unit time-share. » Outrigger will demolish the lower-two floors of Ohana Waikiki Tower and the Ohana Waikiki Village and transform the properties, which have a combined 880 rooms, into a 421-suite hotel. » The second phase of the project calls for the demolition of the Ohana Reef Lanai and the Ohana Royal Islander. These properties will likely be replaced with an 898-room, 350-foot tower.
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"These few blocks made up the whole of my close-knit life," she said last week from a barstool at the Irish Rose Saloon on Lewers Street. "The closings have really affected me."
Outrigger's redevelopment will spruce up a crowded corner of Waikiki, the most prominent symbol of Hawaii's tourist industry. The promise of more high-spending visitors also will entice new retailers to enter the market. But the increase in real estate values could price the little guys out of the market as rents rise and retail space becomes more compressed. The project, for better or for worse, also will change the make-up of one of Waikiki's most eclectic neighborhoods, known for catering to the budgets of kamaaina and economy travelers.
Outrigger plans to replace five low- to mid-rise hotels and the aging retail around them with a single high-rise tower, open space and a nautical-themed complex of shops, restaurants and entertainment along with a 240-stall parking garage.
Completion of the project will increase property values for the neighborhood by turning an aging and congested portion of central Waikiki into a combination of new and refurbished upscale time-share and hotel accommodations, said Melvin Y. Kaneshige, senior vice president and chief operating officer of Outrigger Properties.
"In the end, we think that even we will be surprised at the increase in valuation," Kaneshige said. "That's good and bad. We'll have to pay higher property taxes, but it will also increase values for the whole neighborhood."
Al Kai, left, and Ben Tutor play darts at the Irish Rose Saloon on Lewers Street in Waikiki. The pub is now closed to make way for redevelopment.
"We've already seen more acceptance of paying higher prices in Waikiki," Toy said. "When the Aston Waikiki Beach Hotel and the Waikiki Beach Marriott renovated their hotels and substantially raised rates, the market accepted the change."
As the product continues to improve, it will have greater appeal for the upscale market, he said.
Redevelopment also will enhance Outrigger's 300,000-square-foot retail portfolio in Waikiki, said Barbara Campbell, vice president of retail development and leasing for Outrigger Enterprises.
"You are looking at existing conditions that are substandard," she said. "There are some restaurants and retail shops where termites are the only things holding up the walls."
As the project prepares to get underway, traffic on usually crowded Lewers Street has noticeably dropped and closed signs decorate once-thriving retail establishments.
The House of Hong, which has served Chinese cuisine to patrons since the 1960s, was among the first to close. The family restaurant stopped operating in April and was replaced by the House of Hong Buddha Bar & Lounge, but that too is on the chopping block.
Usually bustling, Lewers Street has quieted down as many businesses close ahead of the area's redevelopment.
The Irish Rose, the Islander Coffee House, Blue Ginger, Nohea Gallery, Bamboo Window/Mad Hatter, the Polynesian Palace, Outrigger Photo and several smaller businesses in or near the Ohana Reef all ended their lease agreements with Outrigger this month. While most businesses on the ewa side of the street have until March to move, many more closings, including the more than 30-year-old Trattoria restaurant, are taking place ahead of construction. The Red Lion, MacDonald's, Royal Islander and Davey Jones Ribs also will close, as will Buzz's Steak & Lobster.
Outrigger has factored in the same amount of retail space, 130,000 square feet, for the project, but plans to cut the number of establishments to achieve an open pedestrian-friendly marketplace, Campbell said.
New retailers will be in a more attractive setting, but won't be upscale, she said.
"We'll leave the designer boutiques to Kalakaua," Campbell said.
The Red Lion, a popular late-night spot, is one of the Lewers-area businesses closing during Outrigger's redevelopment.
William Comerford, who along with Fred Remington owns the Irish Rose on Lewers Street, questions whether or not redevelopment will be worth the hassle and price.
Sales at the Irish Rose have grown from $850,000 a year in 1997 to about $1.8 million annually, but redevelopment could stop the bar's growth, Comerford said.
If Comerford and his partner accept space in Outrigger's new project their rents could increase from a base of $5,000 a month plus a percentage of the profits to about $500,000 a year, he said.
"The question is, 'Can you sustain a rock 'n' roll bar charging $6 a beer?'" Comerford said.
Comerford, who is still negotiating with Outrigger, plans to reopen in a new location by May 1. While the Irish Rose is closed, Comerford will lose $140,000 to $160,000 a month in sales. He will also have to lay off most of his 22 employees.
Outrigger executives Melvin Kaneshige, left, Barbara Campbell, center, and Barry Wallace show Outrigger's Waikiki plans, including a 350-foot high tower to be built just mauka of the Outrigger Reef On The Beach Hotel.
Outrigger's massive investment, combined with the area's repositioning as an upscale retail /lodging district translates into higher rents, Kaneshige said.
"You won't find many of the same tenants since we're replacing a bunch of dilapidated buildings with new, larger retail space," Kaneshige said. "Some of the mom and pop businesses, who are our current renters, won't be able to stay."
Lynda Jones, who recently lost her job when Food Galaxy got pushed out of Kalakaua Avenue due to rising rents, said it's becoming increasingly difficult for the mom and pop shops to operate in Waikiki.
"It's too bad," she said. "They provide all the charm."
Outrigger's plans won't make Lewers Street better, Jones said.
"Hawaii is changing too much, too fast," she said.
"The retail community knows that now is definitely the time to focus on different kinds of visitors coming into the state," he said.
Outrigger will offer its first time-shares through a partnership with Orlando, Fla.-based Fairfield Resorts. Outrigger will also introduce Hawaii's first all-suites hotel when it transforms the Ohana Waikiki Tower and the Ohana Waikiki Village, which have a combined 880 rooms, into a 421-suite hotel to open in the fall of 2006.
The improvements will better position Outrigger and Oahu, which has been losing ground to destinations like Las Vegas, the Caribbean, Mexico and the neighbor islands that have poured money into new visitor products, said Barry Wallace, senior vice president of operations for Outrigger.
"Waikiki has been hurt by the growing number of destinations that offer better quality hotel rooms," Wallace said. "The creation of a more upscale product might make people, who are contemplating trips to other destinations, take a second look at Waikiki."
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