The Macy’s store in Hilo’s Prince Kuhio Plaza will remain open for the foreseeable future, according to spokesperson for the national retailer.
The department store chain in February announced its second major downsizing since 2020, on the heels of fending off a $5.8 billion takeover bid by an investor group including Arkhouse Management and Brigade Capital Management.
“We look forward to continuing to serve our customers at Macy’s Prince Kuhio Plaza,” the corporate spokesman replied last week in an email in response to a query by the Tribune-Herald. “Our new strategy is designed to return Macy’s Inc. to profitable growth and enhance the customer experience.
“We intend to close approximately 150 Macy’s stores over the next three years. This allows us to focus our investments and resources on Macy’s go-forward locations … .”
The closures will leave Macy’s with about 350 stores nationwide, a little more than half the stores the company had prior to the COVID-19 pandemic.
CoStar, an online business publication emphasizing retailers, speculated in March that the Hilo store, one of Prince Kuhio Plaza’s anchor tenants, could be on the corporate chopping block because of a $35 million loan the mall backs as collateral that transferred to special servicing last year due to maturity default.
“We do have a $35 million loan on the property,” Prince Kuhio Plaza General Manager Daniel Kea told the Tribune-Herald. It did mature last April (2023) … and we were working on refinancing with the lenders. And that was cleared up and signed.
“I think everything was said and done and signed in March.”
The CoStar article also noted several other factors it thought might place Hilo’s Macy’s stores in jeopardy, including Hilo’s distance from Hawaii Island’s tourist areas and the stores’ reliance on local residents as its customer base. It also quoted the credit rating firm Morningstar DBRS, which opined that an updated appraisal of Prince Kuhio Plaza could result in a drop in the mall’s appraised $71 million value when the loan was issued, “given the property’s dated appearance, declining occupancy and upcoming scheduled lease roll.”
Macy’s and Sears — which closed its store in the mall in 2021, but retains and continues to pay its lease on an anchor space in the there — are both up for lease renewals in 2025.
“Macy’s and Sears and all the big-box tenants, they have five-year options,” Kea said. “So, every five years, their option comes up, and they just exercise that option. And in that option, terms are usually already set. It’s not like we were renegotiating anything.
“The bigger stores have had those terms from forever before. Even Sears. We did theirs in 2020, so (Macy’s) and Sears are both coming up next year.”
Kea said Sears is marketing the space through JLL Hawaii, a commercial property real estate firm in Honolulu.
“They’re trying to sublease, as far as I know,” he said.
Prince Kuhio Plaza has requested a 40-year extension of the lease of 39 acres of Hawaiian Homes land it occupies. If the request is granted by the Board of Hawaiian Home Lands it would extend the mall’s lease from its current end date of Sept. 30, 2042, to Sept. 30, 2082.
That extension is on hold, however, as the board and the state attorney general consider legal issues, most notably Act 236, a state law passed in 2021.
The law authorizes the Board of Land and Natural Resources to extend certain leases for public lands for commercial, industrial, resort, mixed-use or government use for no more than 40 years, upon approval of a proposed development agreement to make substantial improvements to the property.
The Department of Hawaiian Home Lands needs the revenue from commercial leases to provide homestead land to approximately 28,000 Native Hawaiians on its wait list for homestead lots or agriculture lots.
In an Oct. 13 letter to then-state Attorney General Holly Shikada, U.S. Department of the Interior Solicitor Robert T. Anderson said the feds have “significant concerns that any actions by the Hawaiian Homes Commission to grant extensions of commercial leases of Hawaiian home lands pursuant to Hawaii Act 236 … violate federal law and constitute a breach of trust by the state.”
Kea said it’s likely the mall’s lease will be revisited later this year “now that our financing has been settled.”
“We were actually on a pause pattern, because there’s no sense in getting a lease extension if we weren’t going to own the mall,” he said, the “we” referring to Brookfield Properties, Prince Kuhio Plaza’s parent company.
One Hawaii store targeted for closure this year by Macy’s is at Kukui Plaza in Lihue, Kauai. The anchor store in the garden island mall will be shuttered after 30 years in business, affecting about 40 employees.
Email John Burnett at jburnett@hawaiitribune-herald.com.