Two developers are competing to build a 650-foot tower on state land in Kakaako to create the tallest building in Hawaii. So the odds may seem good that one of the proposals will succeed.
But the state agency overseeing the estimated
$500 million supertower project doesn’t have a good track record with proposals intended to tap the private sector to develop state land for residential or commercial use.
The Hawaii Community Development Authority has launched projects to develop state land with a private partner in Kakaako four times in the past 15 years — without a single one coming to fruition.
To be fair, two of the agency’s efforts fizzled because developers failed to perform.
A third project died when the agency concluded that the plan lacked financial viability, though the developer said politics were at play. The fourth, and most recent, was withdrawn by its developer after public and legislative backlash.
Major real estate development is generally arduous given the economic challenges of financing and predicting market demand. To do the same thing on public land adds more degrees of difficulty, such as public pressure and shifting political will.
The tower project known as 690 Pohukaina involves all of that plus unique complexities because it is tied to the city’s planned mass transit line and subject to an HCDA rule change extending the region’s present 400-foot building height limit by 250 feet.
Another challenging piece of 690 Pohukaina is that it attempts to produce a significant amount of affordable housing in a market where construction costs are incredibly high.
Anthony Ching, the agency’s executive director since 2008, acknowledges such challenges but also is optimistic about 690 Pohukaina being realized.
“It’s complex to build these types of projects,” he said. “It’s a worthy project.”
HCDA supporters say past performance isn’t indicative of future results. They also say that the agency has accomplished plenty since it was formed in 1976 to create an attractive urban community from a gritty industrial neighborhood with substandard roads and sewers.
The agency upgraded infrastructure, implemented public projects such as parks and a University of Hawaii medical school, facilitated commercial and residential development on private property, and built affordable housing using public money and fees from private development projects.
But enlisting the private sector to develop state land for commercial use and public benefit has been a glaring trouble spot for HCDA.
Companies involved in such public-private partnerships typically see opportunity and profit. But they also weigh risk. So the fact that two firms bid to develop 690 Pohukaina and spent an estimated $200,000 or more doing so suggests that they think they can pull off the tower project.
However, other developers also took shots with HCDA only to come away with nothing.
Affordable housing
HCDA has long contemplated redevelopment of the 690 Pohukaina site that was once a public school abutting historic Mother Waldron Park.
In fact, the agency issued a Request for Proposals (RFP) in 1992, seeking affordable housing for the parcel after then-Gov. John Waihee challenged private developers to build affordable rental apartments. HCDA accepted a plan led by a subsidiary of Korean construction firm Daewoo Corp. proposing 600 rental apartments in twin towers and giving preference to Native Hawaiians for half the units.
But a slowing Hawaii economy derailed the estimated $54 million project ($83 million in today’s dollars).
In 1997, the Legislature gave HCDA $250,000 to update a vision for the site and solicit development proposals for an elementary school along with 100 to 150 residential units. But after HCDA completed a master plan in 1999, it didn’t move forward with an RFP.
That opened the way for another state agency, the Hawaii Housing Finance and Development Corp., to issue an RFP for affordable housing on part of the site in 2006. A plan by local developer Stanford Carr was picked in 2007 over three other contenders. Carr encountered financing difficulties and delays, but is scheduled to break ground by the end of the year on Halekauwila Place with 204 affordable units.
Architectural icon
One of the most sought-after development opportunities in HCDA’s history has been the former sewage pumping station on Ala Moana Boulevard, a structure built with an 80-foot tower in 1900 as the city’s first waste disposal facility.
More than 90 formal and informal proposals have been floated to make use of the state-owned pump station and an adjacent parcel at the corner of South Street and Ala Moana Boulevard, according to HCDA, which envisioned the site becoming a gateway and architectural icon for Kakaako.
The agency solicited an RFP in 1997 to redevelop the site while preserving the building, and picked a plan for a restaurant by Hawaii chef Jean-Marie Josselin plus a microbrewery and open-air market.
The winning bidder, South Carolina-based developer Richard Weiser, beat two competing plans — one proposing a Hawaii fishing museum and one proposing a surfing museum, office, restaurant and retail complex.
But Weiser’s plan came unglued. First, Josselin backed out. Hawaiian musician Henry Kapono and some partners stepped in to open a concert hall and recording studio in conjunction with a restaurant and microbrewery operated by local chef Russell Siu of 3660 on the Rise. Yet Weiser couldn’t find financial backers for the Kapono-backed deal.
Another salvage attempt to interest celebrity chef Wolfgang Puck also failed, and HCDA pulled the plug after two years of efforts.
Seemingly undeterred, the agency began laying groundwork for a new RFP in 2005 by commissioning a policy and development strategy plan to help solicit proposals for the site. Community workshops were held in 2006 to provide public input on development potential, but no new RFP was issued and the pump station remains empty.
Coney Island
The biggest area in Kakaako for which HCDA has sought to harness private development is the peninsula makai of Ala Moana Boulevard that includes 200 acres of state-owned land.
The agency’s first RFP for part of Kakaako makai was in 1998 when it offered up 18 acres fronting Kewalo Basin.
Six qualified developers proposed a host of plans that included a theme park, aquarium, retail shops, Broadway-style theater, a high-tech park, biotechnology research center and an indoor snowboarding park.
But out of four plans that advanced, one by local restaurant owner and veteran politician D.G. “Andy” Anderson won tentative approval from HCDA’s board by unanimous vote.
Anderson’s $138 million plan dubbed Kewalo Pointe featured a Ferris wheel, laser-light tower, concert shell, restaurants, shops, art galleries, a carousel ride and miniature golf course.
The agency’s board voted for the plan despite an HCDA staff recommendation to reject it along with a runner-up. Then-Gov. Ben Cayetano also derided Anderson’s plan, saying he didn’t want Kakaako turned into a Coney Island.
A few months after Anderson began negotiating a development agreement with HCDA, several board members switched their positions and claimed in a subcommittee report that there was “substantial risk” of project failure because it overestimated revenue and underestimated costs.
Anderson called the report “sheer nonsense” and barely managed to control his anger toward HCDA, according to a Star-Bulletin story. “I come before you with a project that creates 2,600 jobs and you’re not interested?” he told the board. “Our project is solid.”
HCDA directors voted 7-2 to kill the project. Anderson, a longtime Republican leader in Hawaii, suggested the board dominated by appointees of the Democratic governor sacked his plan for political reasons.
Waterfront condos
Several years ago, some of the same Kakaako makai land was packaged in a new RFP that also was killed after an initial HCDA board endorsement.
The 2005 bid request sought to generate about 500,000 square feet of public and commercial space, 250,000 square feet of entertainment and retail, and about 300 homes.
From six responses, the agency selected one by Honolulu-based Alexander & Baldwin Inc. proposing about 1,000 condominiums in three 200-foot towers, restaurants, stores, a hula amphitheater, a waterfront promenade and a pedestrian bridge over the Kewalo Basin harbor channel.
A&B proposed paying the state $50 million for the land under the condos plus half of unit sale proceeds above a certain level, along with $600,000 a year in commercial property lease rent.
Public opposition mounted against the estimated $650 million project, mainly for using state land near the waterfront for mostly luxury private residences.
In response to the outcry, A&B removed one tower and the bridge. HCDA pushed ahead, and then-Gov. Linda Lingle expressed support. But lawmakers got involved and passed a near-unanimous bill in 2006 to prohibit residential use in Kakaako makai, after which A&B walked away.
Supertower
Teed up presently is 690 Pohukaina. HCDA issued the RFP earlier this year after Gov. Neil Abercrombie unveiled the plan late last year as an answer to urban sprawl and affordable-housing needs.
HCDA hopes to produce 300 affordable homes, 500 market-priced homes, space for state office and library facilities, community space and a high-tech business incubator.
Two developers — affiliates of Ohio-based Forest City Enterprises Inc. and Australia-based Lend Lease — submitted proposals in August. Details of their plans are to be presented at public meetings later this year.
Ching said 690 Pohukaina is a one-time opportunity because no other state land is suitable for such a tall tower intended to maximize density in a neighborhood slated for high-rises in proximity to mass transit.
“HCDA is really trying to create a community — a 21st-century community that doesn’t sacrifice open space,” he said. “It’s not about rail, and it’s not about tall buildings. It is anti-urban sprawl.”
Ching said the project is a way to deliver affordable housing without big subsidies like tax credits, state loans and free land that Halekauwila Place needed.
But some community members have vowed to oppose such a supertower.
Michelle Matson, a Honolulu resident who has sparred frequently with HCDA, calls the notion that 690 Pohukaina’s purpose is to create affordable housing a “guise” by the state to reward developers with profit.
Matson supports affordable housing in the area, including the 164-foot-tall Halekauwila Place. But she questions how building higher will help reduce unit costs significantly, and said that holding public hearings on raising the height limit after asking for 650-foot development proposals is backward.
“It’s an insult to the democratic process and sound planning principals,” she said. “It’s just part of HCDA wheeling and dealing with developers. There’s no sound planning. The governor just can’t come in and wave his wand and say he wants to have the tallest building in Hawaii.”
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