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Commission approves amended ground-lease deal with Kapolei developer, preserving community benefit
Summary
The Hawaiian Homes Commission approved an amendment to General Lease No. 276 with Kapolei Hawaii Property Company to restructure base ground rent, establish a 15‑year reduced‑rent period starting Dec. 1, 2024, preserve the 4% community‑benefit payment tied to the original contract rent, and require audit rights for DHHL; voice vote carried after an amendment to clarify the post‑reduced‑rent floor.
Linda Chin, acting administrator for the land management division, told the Hawaiian Homes Commission it is recommending approval of a proposed restructuring of the ground lease for General Lease No. 276 with Kapolei Hawaii Property Company (KHPC), the developer of the Kamakana Ali‘i shopping center in Kapolei.
Chin said the amendment would create a 15‑year reduced‑rent period beginning Dec. 1, 2024, and would (1) reset the base ground‑rent payment formulas for that period; (2) phase repayment of an earlier deferred rent balance; and (3) retain a 4% community‑benefit payment, which DHHL staff said will remain based on the contract rent rather than the lower restructured rent. "KHPC shall provide quality cash flow statements, and DHHL retains the right to audit the books and records to verify the accuracy and completeness of each of the cash flow statements," Chin said in presenting the recommendation.
KHPC representatives, including Drew Barquette of DeBartolo Development, said the owners have not taken distributions during the property’s stabilizing years, are still on construction financing, and need amended lease terms to refinance into longer‑term debt and invest in tenant inducements and capital improvements. "We’re finally seeing [residential] growth," Barquette said, adding the developer has been negotiating retail deals and plans common‑area and hotel upgrades that they said are critical to the property’s success.
Commissioners asked for simple clarifications on key terms: how the deferred $9.1 million would be repaid (staff said the deferred rent and interest had been calculated and would be repaid annually over a 15‑year period), how the cash‑flow participation and 20% end‑of‑period profit share operate as partial compensation for reduced base rent, and whether the community‑benefit floor was protected. Chin confirmed the 4% community benefit will be calculated on the original contract rent to preserve community dollars.
After public testimony in support from homestead leaders who asked for clearer packet timing and consistent notice practices under HRS chapter 91, commissioners adopted a clarified amendment to paragraph 2 so that rent after the reduced‑rent period "shall be reset to fair market rent, but not less than the scheduled contract‑based lease rent of $5,394,567." A motion to approve the recommendation with that amendment (moved and seconded on the record) passed by voice vote; the chair recorded the motion as carried.
What happens next: the commission’s approval authorizes staff to implement the amended lease language, subject to final documentation and review by the Office of the Attorney General. DHHL staff also said the amendment and reporting requirements (annual budgets, cash‑flow statements and audit rights) will be enforced to protect beneficiaries’ interests.
Why it matters: the restructure is intended to help the developer refinance construction debt, attract tenants and fund capital improvements while preserving the community benefit payment and adding monitoring provisions so DHHL can verify promised cash flows and expenditures.
