LAHAINA - While the Lahaina Gateway Center is headed for a foreclosure auction Wednesday, several business owners said they don't expect they'll be impacted by the sale.
Developers of the shopping center, which opened in 2008 and is estimated to be worth at least $50 million, were unable to make the mortgage payments and lost the nearly 140,000-square foot property to Central Pacific Bank. According to court documents, the bank had allowed five loan extensions, then filed for foreclosure early this year.
Developer Bilarjo LLC said they fell behind due to "soft sales" at the shopping center, but court-appointed commissioner Wendell Brooks Jr. said that may be turning around.
"The cash flow from the tenants is quite good now," he said.
"This is a tremendous location on this side of the island, and we have premium stores here and an excellent look," said Hawaii Golf & Tennis owner Paul Betts, a tenant. "I think they just got caught up in the economic tsunami."
The shopping center's leasing broker and agent Scott Crockford of CB Richard Ellis Inc. said the owners were victims of bad timing and "bad luck."
"The location is incredible," he said.
Positioned at the intersection of Keawe Street and Honoapiilani Highway, Lahaina Gateway Center is one of the first commercial centers visitors see in West Maui on their way to condos and hotels.
The shopping center is also in close proximity to Lahaina Cannery Mall, Old Lahaina Luau, Longs and a new Walgreens, and construction is nearly complete on a large condominium complex nearby.
Tenants Lisa and Henry Telles opened a Teddy's Bigger Burgers franchise at the Lahaina Gateway Center just last month and held a blessing for the new restaurant Saturday.
Henry Telles said they've been doing gangbusters already at the shopping center (which is not affiliated with any of the other "Gateway" shopping centers on the Valley Isle).
"I think the bank is very happy we're here," he said. "And we're real positive about being here. . . . We don't believe the foreclosure will affect us."
He noted that the restaurant has a lease for five years, with an option for up to 15 years. It includes a clause that secures it regardless of change in ownership or foreclosure.
About all that can happen is that their rent could go up, but only slightly, according to the binding agreement, he said.
According to a CB Richard Ellis website, there are approximately a dozen available spaces at Lahaina Gateway Center in sizes that range from 682 to 5,000 square feet.
Sheryl Toda, spokeswoman for Foodland, said the lease for the company's new Foodland Farms Lahaina gourmet market also won't be affected by the foreclosure. The store is also performing very well, she said, and the staff is quite confident about its prospects there.
Brooks said that although the developers were able to make their monthly mortgage payments on the original 2006 $41 million construction loan for some time, he believed other costs, such as architects, designers, attorneys and marketing, eventually sank them.
The owners took out a second loan of $7.5 million to stay afloat as long as possible, according to court papers.
The Lahaina Gateway Center foreclosure sale will take place at noon Wednesday on the steps of the Wailuku courthouse, Brooks said.
He said he's already had several apparently serious inquiries about the property, which also comes with 750 parking stalls. The mall is already roughly 80 percent occupied, he noted.
"I think that's pretty good for this environment," Brooks said. "It certainly makes it an even more attractive property."
Whoever bids on the shopping center has to bring with them a cashiers check worth 10 percent of the ultimate sale price, which obviously will be the highest bid the bank can get, Brooks said.
"We're not going to give it away for $10," he joked.
If there are no bidders who meet the minimum price Central Pacific Bank is looking for, the bank will simply retain ownership, Brooks said.
"If the bank wants to protect its investment, it may have to keep it for themselves for a while," he said.
Bilarjo is owned by William Gresham and Jolyn Bien, of Maui, and Larry Caster, of Honolulu. Their Honolulu attorney, Andew Beaman, could not be reached for comment Friday or Saturday.
For more information on the auction and property, contact Brooks at wendellbrooksjr@aol.com or 808-722-3495.
* Chris Hamilton can be reached at chamilton@mauinews.com.
