Queen Kaahumanu Center foreclosure moves ahead | News, Sports, Jobs

Queen Ka‘ahumanu Center is shown Wednesday. A judge on Thursday granted a request to foreclose on the mall amid a monthslong lawsuit over its failure to pay a more than $80 million loan. The Maui News / MATTHEW THAYER photos

The future of Maui’s main mall remains in limbo after a Wailuku judge on Thursday granted a request to foreclose on Queen Ka’ahumanu Center amid a monthslong lawsuit over its failure to pay a more than $80 million loan.

Second Circuit Court Judge Blaine Kobayashi during a Thursday morning hearing approved a summary judgment for foreclosure in favor of the lender and granted a decree of foreclosure.

“The court has reviewed the underlying pleadings in this case,” he said. “The court at this time is going to go ahead and grant the plaintiff’s motion for summary judgment.”

Attorneys for the mall, the lender and the receiver have yet to finalize the order and did not respond to requests for comment Thursday on next steps.

Queen Ka’ahumanu Center in Kahului has been embroiled in the foreclosure lawsuit since November, when lender U.S. Bank filed for foreclosure, saying the mall’s owners, QKC Maui Owner LLC, defaulted last June on an $88.5 million loan.

Queen Ka‘ahumanu Center fronts Ka‘ahumanu Avenue in Kahului in this aerial photo taken in May 2020.

With costs, fees, interest, expenses and other accruals, the mall now owes $118.7 million as of April 6, according to the lender’s motion for summary judgment filed April 30.

Meanwhile, court documents show that mall tenants owe about $2.3 million in back rent and other fees.

As part of the summary judgment, Oscar Parra of California-based Pacific Retail Capital Partners will be appointed as commissioner and will oversee the sale of the mall property.

Once finalized, the decision also authorizes the lender to be a purchaser at the sale without any requirement of a down payment.

Parra has been serving as receiver for the 571,000-square-foot Queen Ka’ahumanu Center property, which is anchored by Macy’s, Sears and Foodland. U.S. Bank on Nov. 16 requested that management of the property be placed under a receiver, who manages, oversees, takes control of and operates the property.

A handful of shoppers wander the grounds of the Queen Ka‘ahumanu Center on Wednesday. The mall’s fate is in limbo after a judge granted a request to foreclose on the property, which will go up for sale.

A financial report by Parra in April showed that mall tenants owe more than $2.3 million. Some tenants who owe thousands of dollars are no longer occupying spaces at the mall.

The mall tenant with the highest outstanding balance is Fun Factory, a Hawaii-based family entertainment center chain, which owes $328,612, according to the April report. The Walking Company, a comfort shoe company headquartered in California, owes $123,082. Also, Pretzelmaker, a Global Franchise Group LLC company that specializes in hand-rolled pretzels, owes $100,873.

Steven Lau, executive vice president and chief financial officer at Fun Factory, said on Thursday that he can’t confirm the amount owed.

“It is because of the COVID we are negotiating with the landlord for rental relief and we have not reached an agreement yet,” he said.

The Walking Company and Pretzelmaker did not respond to a request for comment Thursday afternoon.

Stephanie Zimmerman, manager and general counsel for the mall owners, also cited the economic impacts of COVID-19 in discussing the mall’s situation.

“The current ownership of QKC has held and operated the center for nearly 20 years and is very saddened by this situation,” she said in a February email to The Maui News. “The impact of COVID-19 on the community has been very far-reaching, with many of our tenants shut down for long periods of time through no fault of their own.”

In its heyday, the mall, constructed in 1972, was bustling with movies, shops and food options. Weekend nights of the middle ’90s were filled with high schoolers who socialized near the balcony on the second floor that overlooks center stage. Performances, activities, farmers markets and nonprofit events at the mall provided central meeting places in previous decades.

However, the embattled property also became the scene of significant crimes in recent years, including a stabbing death March 18, 2018 in the second-floor bathroom near the Macy’s men’s store and another nonfatal stabbing on Oct. 12, 2012 in the second-floor restroom near the food court.

When the mall defaulted in June of last year, Maui’s retail stores were barely reemerging from mandated pandemic shutdowns that began months earlier. Mayor Michael Victorino allowed retail stores, including shopping malls, to reopen in May, and many remained closed well into June.

Last month Queen Ka’ahumanu Center had 86.5 percent occupancy with a total of 144 units and a gross leasable area of 571,010 square feet, according to the April financial report.

As with other commercial spaces, mall vacancies have been increasing over recent years, with intermittent reports that anchor tenants like Sears may close up shop.

Recent tenant closures have included Hallmark Cards Inc., a nearly 45-year mainstay that shut down in May.

* Kehaulani Cerizo can be reached at kcerizo@mauinews.com.

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