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POSTED: Thursday, June 18, 2009

In an ever-changing script at Waterfront Plaza, the discount movie theater at the downtown complex is about to be turned into an outpatient surgery center.

Surgical Care Affiliates LLC, which has 128 surgical facilities in more than 30 states, has signed a 15-year lease for an undisclosed price with plaza owner Pacific Office Properties Trust Inc. to move into 17,000 square feet of space currently occupied by Wallace Theaters.

Pacific Office Properties, which has been upgrading its tenant mix since buying the property in 2004, is still seeking a business for the remaining 7,000 square feet fronting Ala Moana that makes up the rest of the space housing the theater.

The surgery center will be owned and operated by a newly formed joint venture between Birmingham, Ala.-based Surgical Care Affiliates and Hawaii Health Partners Inc., the state's largest health-care provider.

Construction of the surgery center is expected to start in September with the opening planned for the fall of 2010.

Surgicare of Hawaii, a subsidiary of Surgical Care Affiliates, will relocate from its current location at Queen's Physicians Office Building III at 550 S. Beretania St. when the new center is ready.

“;This is an exciting addition to a growing number of health-care-related tenants that include CVS/Procare, Covance clinical trials, Neospine surgery center, and Hawaii P.E.T. Imaging,”; Pacific Office Executive Vice President Larry Taff said. “;We believe that the proximity to local health-care facilities, the John A. Burns School of Medicine, and the abundance of parking make Waterfront Plaza an ideal location for many businesses in the health-care field.”;

Pacific Office Properties, which has been seeking to reposition the tenant mix at Waterfront Plaza, better known as Restaurant Row, bought out Hollywood Theaters' lease for $2.45 million. The theater, which has to vacate the premises no later than Aug. 9, had a lease dating back to 1993 that was good for another 40 years at just $1 a year while providing theatergoers with free parking.

The trust said earlier this month when confirming the theater's departure that the theater, which offered tickets for as low as $1.25, depressed the value of the property and was a drain on parking revenue.

“;The new lease is economically much more favorable (to Pacific Office Properties) than the current one,”; Taff said. “;The fact that people were buying theater tickets (to get parking validation) rather than paying for guest parking was a minor annoyance.”;

Scott Wallace, president of Hollywood Theaters, said yesterday that the last picture show will be on Aug. 2.

“;This party's over,”; he said. “;I don't know the title (of the final movie), but the last day will be the 2nd.”;

Spokespersons for Surgical Care Affiliates and Hawaii Pacific Health did not return calls seeking comment.

However, Surgical Care Affiliates said in a March press release that it was teaming up with Hawaii Pacific Health and was in the final stage of site selection.

In the March release, Surgical Care said the new center would offer an array of medical services, including orthopedics, pain management, ophthalmology, general surgery, otolaryngology, urology, obstetrics/gynecology, plastics and podiatry.

Hawaii Pacific Health consists of Kapiolani Medical Center for Women & Children, Kapiolani Medical Center at Pali Momi, Straub Clinic & Hospital, Wilcox Memorial Hospital on Kauai, Kauai Medical Clinic and Kapiolani Medical Specialists.

Taff said the approximately 7,000 square feet of space remaining that is being left vacant by the theater lends itself to some type of service office.

“;I wouldn't call it pure retail, but an office use with a retail component, an office user that would like to have greater visibility than a normal office user would have,”; Taff said.

Taff said the trust had been talking with the surgery center and another potential tenant for the space.

“;I wouldn't say so much we chose them as they chose us,”; he said.

“;One of the reasons they chose us is because we've added a lot of medical tenants since we acquired the property. It's an industry less susceptible to recession than a lot of them.

“;This particular tenant is a very strong operator, very well capitalized and is teaming up with Hawaii Pacific Health, which has a big presence in the Hawaii health-care community. So long term, I think people working in that space are more likely customers to other existing businesses that are on the property, and having that tenant there will attract other medical users, including doctors, to the property in the future.”;

HEALTHY MOVE

Waterfront Plaza owner Pacific Office Properties has landed a new tenant:

                                                                                                                                               

» What: An outpatient surgery center

» Who: Surgicare of Hawaii, a joint venture of Surgical Care Affiliates LLC and Hawaii Pacific Health Partners Inc., the state's largest health-care provider

» Facility size: 17,000 square feet

» Moving out: Hollywood Theaters

» Last movie: Aug. 2

» Construction: Starts in September

» Center opening: Fall 2010

Source: Pacific Office Properties Trust, Surgical Care Affiliates LLC