Isle medical plaza project in desperate need of funds
Plans for the Maui Medical Plaza hatched nearly eight years ago when doctors sought help from Montana multimillionaire and part-time Wailea resident Ben Brown Sr.
They complained their offices were cramped and old, and, at the Maui Clinic on Puunene Avenue in Kahului, Alexander & Baldwin did not intend to renew its tenants’ leases beyond November 2008.
Now, with the $45 million project ready to break ground and in desperate need of financing, the doctors are getting cold feet. Indeed, the medical plaza’s fate hinges on whether island doctors will embrace a project that drew fire from Maui planners for its six-story height and its location across Hana Highway from 24-Hour Fitness and next to the wildlife sanctuary at Kanaha Pond.
Brown, 72, has sunk $7.5 million of his own money into buying the project’s 2.5-acre property, developing plans and gaining approval in 2011 from the Maui Planning Commission, a commitment that has helped drive him into bankruptcy.
“I need a venture partner,” he said last week in a phone interview from his ranch near Billings, Mont. “I’ve carried it as far as I can go. I’m at the end of what I’m able to do as far as money.”
What’s needed is financing for construction of the 250,000-square-foot building with 350 parking stalls, he said.
Lining up project financing is Jody Jones, senior vice president of business development and income-producing properties with Search Commercial, a Dallas real estate company.
Last week, Jones said he was wrapping up the first stage of financing for the Maui project. He aims to pre-lease 60,000 to 70,000 square feet of office space before construction begins.
“I’ve been told that’s very doable,” he said, adding that it’s his understanding that there’s a dearth of quality physician office space on Maui.
While he’s “ready to move forward,” he needs a group of Maui doctors who’ll say: “Look, I will lease space in your building.”
And there’s the rub.
As of Saturday morning, the only “founding tenant” listed on the project’s website at www.mauimedicalplaza.com is pharmacist Les Krenk of Maui Clinic Pharmacy.
Maui gastroenterologist Dr. James Hansen remains a staunch supporter and said he has spoken to island doctors about making a commitment to development of the new medical plaza. But they have been reluctant to sign letters of intent to lease space in it.
Doctors also are balking at paying what’s expected to cost an additional $1 or $1.50 per square foot (versus the prices of current spaces) for the new office space, he said. So, many doctors tolerate their current offices.
“That’s a big issue, a huge issue,” Hansen said. “As long as the patients don’t complain, the physicians are happy staying in places that are run down or converted homes.
“I think we can do better,” he said. “The difficulty is competing with the status quo.”
Although the new office building would “cost a little more,” he said, “what this building provides to the patients is worth it. Healing is part of our mandate. We want patients to feel at ease, feel good and feel comfortable.”
The project would provide more than office space for doctors, Hansen said. It would allow them to offer patients “total health care” because the facility would house a surgery center, urgent care, physical therapy, radiology and laboratory services, he said.
“We’re doing more than just offices,” he said.
With doctors and medical professionals now offering services spread out in different locations, “everything’s fragmented,” Hansen said. “It’s not user-friendly.”
Hansen said it’s his understanding that lenders being courted for the project want to see a commitment from physicians who will sign letters of intent before the financiers make money available for construction.
Hansen said he thinks Maui would be more successful in attracting physicians from Oahu and the Mainland if a quality medical office facility were available.
Ironically, the situation that spurred the project in the first place no longer exists.
After it became clear that the medical plaza project was gaining momentum, A&B reversed itself and renewed leases for physicians and other tenants in the Maui Clinic building, Hansen said.
He said he still has his office at the Maui Clinic and will be there for another year or two at least, but there’s not enough space in the “old, old building” and he sees rodents, spiders and centipedes there.
The Kahului clinic is made of concrete, so “it’s not going to fall down,” Hansen said. But “I think it’s inadequate.”
Meanwhile, the medical plaza project is “shovel ready . . . We’re ready to build,” Brown said.
Needing a venture partner with the “capability to make this happen,” Brown said he found dck worldwide, a global construction company headquartered in Pittsburgh and with offices on Honolulu and Guam and in Iowa, Nebraska, Florida, Nevada and the United Arab Emirates.
A developing partner agreement has been signed with dck, he said. The construction company would take over financing and construction.
Brown said he’ll get a developer fee and 10 percent equity in the building.
“What I’ve been doing is investing all my money in this medical plaza,” he said.
And that’s taken a toll on him. He’s going through a bankruptcy that he said is a “reorganization” of his finances.
Calling himself “very asset rich,” but cash poor, Brown said he has $17 million in assets and $7 million in debts, and as he liquidates what he owns he aims to “pay off everything.”
Brown said he has mortgaged everything he has and has put up for auction his 426-acre Echo Canyon Enclave Ranch with three horses; a 6,400-square-foot house; and a four-bedroom, four-bath “ski place” near Big Sky Village in Montana. The sales could bring in between $4 million and $6 million total, he said.
With the lower figure, he said he’d be able to pay off his debts. With the higher figure, he’ll have “a lot of money,” he said.
“We’ve had inquiries from (buyers in) 11 states,” said Brown, a native of Billings.
He said he was “being optimistic.”
“I’m overly optimistic all the time,” he said.
Brown said that four weeks ago he received an offer from a retailer who wanted to buy the Hana Highway property. The representative told him that the potential buyer was a “major retailer,” but wouldn’t disclose the interested party.
While he has the option to sell, Brown said he doesn’t want to do that, still believing in his vision of a medical plaza.
“This building is important to Maui,” he said.
Brown has been embroiled in a bankruptcy case and in legal disputes with his sons. He said he’s suing them for $1.6 million they owe him. A reorganization plan was filed two years ago in the bankruptcy case, he said. “The court’s very happy with it,” he added.
Meanwhile, the estrangement from his sons has been “horrible,” he said.
He said he had a succession plan in which all five of his children would become millionaires. However, those plans fell apart, and he said his adult children don’t talk to one another, and he hasn’t talked to them for a couple of years.
He made his fortune from owning pawnshops on the Mainland. He said that he gave his sons 15 pawnshops, and now they have only nine.
“It’s a mess,” he said. “It’s almost a Grecian tragedy.”
Brown wants to retire at the end of the year with the medical plaza under construction. Although he would sell much of his property as part of the bankruptcy, he said he’d keep his three-bedroom apartment in Billings and his three-bedroom condominium at the Grand Champions in Wailea.
Jones said most of the project’s permitting processes have been completed. So, once pre-leasing commitments are made, within six months, construction should begin.
“We would like to have this open and operational by mid 2015,” he said.
Jones said he’s confident the project will move forward.
“I’m a rainmaker,” he said. “I try to make things happen.”
It seems little has happened easily with the medical plaza project. After five years of planning and revisions, the medical plaza received a special management area permit from the Maui Planning Commission in August 2011. Two commissioners, Ward Mardfin and Penny Wakida, voted against it, not because they opposed the medical facility but because it was between Hana Highway and the 235-acre Kanaha Pond Wildlife Sanctuary. The refuge is home to three endangered birds – the Hawaiian stilt, the Hawaiian coot and the Hawaiian duck – and the Blackburn’s sphinx moth.
The project site’s lot is separated from the bird refuge by a drainage canal. One of its 2.5 acres is a wetland, and the U.S. Army Corps of Engineers has approved a plan to mitigate its loss by enhancing 5 acres of degraded wetland managed by the Hawaii Coastal Lands Trust at Waihee.
* Brian Perry can be reached at email@example.com.
* This article includes a correction from the original published on Sunday, November 10, 2013. A national retailer who approached Maui Medical Plaza developer Ben Brown Sr. about purchasing his project’s 2.5-acre site between Hana Highway and the Kanaha Pond Wildlife Sanctuary has 180 outlets on the Mainland.
A story published on Page A1 and continued on Page A8 on Sunday was incorrect in reporting the number of retail outlets the prospective buyer could locate at the site. The Maui News apologizes for the errors.