Lahaina fire sparks bitter business disagreement over responsibility for rebuilding

Shortly after the Aug. 8 wildfires destroyed the shopping complex known as West Maui Center in Lahaina, the property's owner, Honolulu real estate broker Kendric Wong, met at the Pacific Club d 'Honolulu property's tenant, Jadiev Watumull, a well-known real estate agent. investor and member of one of Hawaii's most prominent philanthropic families.

As described in a lawsuit filed by Wong against Watumull, the meeting did not go well.

The lease for the property required Watumull to have adequate insurance to rebuild the property if it burned in a fire, and if the coverage was not sufficient, then Watumull was supposed to pay the difference with his own funds, the complaint states.

Watumull had previously provided a certificate of insurance showing policy limits of $45 million for comprehensive building coverage, the complaint states. Wong therefore had reason to believe that Watumull could rebuild as required by the lease.

But, according to the complaint, Watumull offered to do no such thing. Instead, according to the complaint, Watumull said he would not rebuild unless Wong agreed to extend Watumull's ownership of the property beyond 2034. Watumull later had another proposal which did not involve reconstruction at all.

“On or about September 13, 2023, Lessee wrote to Lessor and offered $8.3 million to purchase from Lessor the interest in the Property,” the suit states.

Wong declined to comment for this article, as did his attorney, former Hawaii Attorney General Doug Chin. Watumull's attorney, David Louie, also a former Hawaii attorney general, did not respond to a call for comment.

In this case, Wong alleges that Watumull withheld insurance information, refused to comply with the lease and effectively put Wong over a barrel.

There's nothing surprising about the dispute, says Sumner La Croix, professor emeritus at the University of Hawaii's Economic Research Organization.

“To me, this looks like everyday events that happen after a disaster,” he said. Watumull's alleged pressure on Wong to sell “sounds like a garden variety trade dispute.”

The property in question sits on 3.5 acres at 910 Honoapiilani Highway in Lahaina. It previously belonged to Kamehameha Schools. For years, Hawaii Omori Corp. held a leasehold interest in the office, retail and restaurant complex, but sold the lease to Watumull for $1.7 million in 2004, according to reports at the time. Watumull's leasehold interest in the mall runs until 2034, the lawsuit states.

Wong's family acquired the underlying land in 2013, making Wong the lessor and Watumull the lessee, documents attached to the complaint state. Tenants before the fire included small businesses like a UPS store, a Sherwin-Williams paint store, a veterinary clinic, a mortgage company and a scuba diving store, Google map images from before the fire show.

In general, the law would favor the right of a landlord like Wong to compel the tenant to comply with the terms of the lease, said David Callies, a retired real estate law professor. For example, if the lease required Watumull to have adequate insurance, as Wong asserts, Callies said, “they are technically in violation of the lease if they did not have insurance.”

But Callies said he couldn't comment definitively on Wong's lawsuit without studying the lease and other documents. For example, Watumull might seek to view the fires as an “act of God” that could allow Watumull to get away with it.

Additionally, Callies said, Watumull's financial strength could give it an economic advantage if litigation persists. Watumull is a well-known real estate investor whose family is a major charitable benefactor and sponsor of cultural attractions like the J. Watumull Planetarium at the Bishop Museum. In 2018, Honolulu Magazine reported that Watumull's parents, Indru and Gulab Watumull, had been such great benefactors of the Honolulu Museum of Art over the years that the museum dedicated its gift shop to them.

Still, Callies said, Wong might have no choice but to go to court “if the guy says, 'Here's what we're going to offer you and everything we're going to do.'”