Lahaina Fire Sparks Bitter Business Disagreement Over Who Is Responsible For Rebuilding

Not long 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 Honolulu’s Pacific Club with the property’s lessee, Jadiev Watumull, a well-known real estate investor and member of one of Hawaii’s most prominent philanthropic families. 

As described in a state lawsuit brought by Wong against Watumull, the meeting didn’t go well. 

The property’s lease called for Watumull to have adequate insurance to rebuild the property if it burned down in a fire, and if coverage wasn’t sufficient, then Watumull was supposed to pay the difference with his own funds, the complaint says. 

Watumull had previously provided a certificate of insurance showing policy limits of $45 million for blanket building coverage, the complaint says. So Wong had reason to believe Watumull could rebuild as the lease required. 

But, according to the suit, Watumull offered to do nothing of the sort. Instead, the complaint alleges, Watumull said he wouldn’t rebuild unless Wong agreed to extend Watumull’s leasehold interest in the property past 2034. Later, Watumull had another proposal that didn’t involve rebuilding at all. 

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

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

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

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

“To me this sounds like everyday stuff that happens after disasters,” he said. That Watumull is allegedly putting the squeeze on Wong to get him to sell “sounds like a garden variety business dispute.”

The property in question encompasses 3.5 acres at 910 Honoapiilani Highway in Lahaina. It was previously owned by Kamehameha Schools. For years, Hawaii Omori Corp. owned a leasehold interest in the office, retail and restaurant complex, but sold the lease to Watumull for $1.7 million in 2004, news reports from the time indicate. Watumull’s leasehold interest in the shopping center runs through 2034, the lawsuit says.

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

In general, the law would favor a lessor like Wong’s rights to hold the lessee to lease terms, said David Callies, a retired property law professor. For instance, if the lease required Watumull to have adequate insurance as Wong asserts, Callies said, “they’re technically in breach of the lease if they didn’t have insurance.”

But Callies said he couldn’t comment definitively about Wong’s suit without studying the lease and other documents. For instance, Watumull might seek to cast the fires as an “act of God” that could let Watumull off the hook.

In addition, Callies said, Watumull’s financial strength could give him 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 Bishop Museum’s J. Watumull Planetarium. In 2018, Honolulu Magazine reported that Watumull’s parents, Indru and Gulab Watumull, had been such big benefactors to 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 all we’re going to do.’”