On any given day in Kailua, the streets are busy with tourists, some arriving by bus from Waikiki. Rented yellow kayaks ply Kailua Bay. Rented bicycles roam Kailua streets. Retail stores sell Kailua-branded beach towels and honu keychains and coffee cups.
The transformation of this Windward Oahu town from a sleepy bedroom community into a full-blown tourist attraction was neither accidental nor inevitable. Turning Kailua into what some derisively call "Kaikiki" required the efforts of many people who want to profit from Kailua’s natural beauty — B&B operators (legal and illegal), kayak vendors, tour companies, souvenir-selling retailers and the Hawaii Tourism Authority, to name a few.
But perhaps the most influential players have been the Harold K.L. Castle Foundation and Kaneohe Ranch Co., which now intend to make their own tidy profit off Kailua by selling a big piece of it — 38 acres of valuable commercial real estate in the center of town, upgraded in recent years by Whole Foods, Pier 1 Imports and California Pizza Kitchen.
That land is part of a $262 million deal to sell about 600 acres of foundation and ranch real estate assets; the deal with an unidentified public company has until Dec. 31 to close.
Kaneohe Ranch endured much criticism for its role in Kailua’s transformation. Nonetheless, its president and CEO, Mitch D’Olier, made no apologies, saying that surveys and public meetings showed that Kailuans needed and wanted more retail stores, so they would not have to drive over the Pali to do their shopping.
There’s truth in that argument; Kailua’s retail scene is more vibrant than it has been in years, and Kaneohe Ranch deserves credit for that. There also remains a mix of large and small businesses in the portfolio, including locally owned establishments that don’t cater to tourists, such as auto body shops.
With a new, as-yet-unnamed landowner, however, comes uncertainty about how Kailua’s future will be shaped.
According to the marketing materials from Kaneohe Ranch’s broker, the new owner will enjoy the potential for substantial future profit through redevelopment. Aside from the property already redeveloped, the broker says, there is lots of money to be made through "contractual ground lease market rent resets, land value appreciation, sales of non-strategic parcels, rental rate increases upon lease rollover and, as the town center is further enhanced, consolidation of CAM (common area maintenance) expenses in downtown Kailua, and more."
The materials also noted that since Kailua boasts a Whole Foods and a soon-to-be-built Target store, the town "is now on the national retailers’ radar screen."
Developers can have an outsized influence on communities, deciding what businesses will be allowed on their properties, and often seeking variances and rezoning to maximize the return on their investment — housing projects in Kakaako and Laie being two prime examples. Such moves could be particularly tempting in Kailua, where commercial property is scarce, expensive and capable of generating enormous long-term profits.
Nonetheless, decisions about the future of Kailua — or any residential community, for that matter — ultimately belong to those who live there. For Kailua, those decisions can be found in city zoning laws and the Koolaupoko Sustainable Communities Plan. The latest plan, finished in 2000 and up for review, sets certain standards and restrictions for commercial and industrial development. The new owner of Kaneohe Ranch’s portfolio should be sensitive to those plans, which are intended to ensure that Kailua remains what it has been for generations — not another Waikiki, but a place where people live, work and call home.
