Three years ago, an Ohio-based residential development firm expected 2016 would be the year Hawaii residents would be moving into a new affordable-housing tower on state land in Kakaako. But not only has this project — 690 Pohukaina — yet to break ground, it also now may be more uncertain than when it was announced.
The newest wrinkle in the plan involves the state Department of Education attempting to have the developer, Forest City Enterprises Inc., include public school facilities in the roughly $300 million high-rise project.
Incorporating an elementary school with the project is a big reason why the Hawaii Community Development Authority recently estimated that it could be two years before construction starts. HCDA, an agency that regulates development in Kakaako, initiated 690 Pohukaina as a public-private opportunity to produce affordable housing at little public cost.
Still, even this new projected timetable is uncertain given that the DOE’s push, if it results in a school being added to the plan, raises a question of whether competitive bidding to lease the state land should be redone because the project’s scope would have changed significantly.
Also, Gov. David Ige is unwilling at this point to say he supports the conceptual plan that Forest City proposed in response to a request HCDA issued in 2012 under then-Gov. Neil Abercrombie, who promoted development of the 690 Pohukaina site as an unprecedented opportunity.
“It would be safe to say that the governor supports affordable-housing projects for sure,” Jodi Leong, deputy communications director for Ige, said in an email. “However, it would be premature to say he fully supports this particular project because the discussions with the various agencies are not yet complete.”
HCDA and Forest City remain committed to 690 Pohukaina while acknowledging difficulties.
“We’re getting there,” said Anthony Ching in an interview before stepping down as the agency’s executive director Thursday for health reasons.
“We’re anxious to get going,” added Jon Wallenstrom, president of Forest City’s affiliate in Hawaii.
The school issue is the latest twist in what has been an unusual path for an affordable-housing project.
Taller than the tallest
HCDA published a request for proposals in January 2012, offering to lease 2 acres of state land bordered by Pohukaina Street, Mother Waldron Park, Keawe Street and the Halekauwila Place low-income rental housing tower to a developer with the best plan to produce affordable housing along with civic, community and commercial space.
One unusual aspect to the request was that HCDA asked developers to submit plans for a monumental 650-foot tower even though agency rules limited tower heights to 400 feet. Building to 650 feet, which is 250 higher than the tallest buildings on Oahu, was championed by Abercrombie but opposed by some community organizations and many residents.
Two developers — Forest City and Australia-based Lend Lease — submitted proposals. HCDA’s board selected the plan by Forest City.
Forest City proposed 804 rental apartments, of which 390 would be affordable to tenants earning no more than 120 percent of Honolulu’s median income. Another 390 would be for tenants earning up to 140 percent of the median income. These 780 units would remain affordable for 65 years, while 24 luxury penthouse apartments would rent for market prices.
The developer and HCDA projected that construction could begin in 2016. However, major challenges arose.
Raising the height limit would have been subject to public hearings and an HCDA board vote. But neither took place because state lawmakers who were frustrated by HCDA actions, overseen by a board largely picked by Abercrombie, passed legislation in April 2014 that encased HCDA’s 400-foot height limit in law. The law also replaced HCDA’s board with a new slate with fewer directors handpicked by the governor.
Ching said not allowing a 650-foot tower removed potential for Forest City to realize some added value in having a more unusual project. But Wallenstrom said the height wasn’t a big issue because Forest City created three plans that included a pair of 400-foot towers.
HCDA and Forest City finalized a site development plan and agreed upon ground lease terms but have been unable to sign a development agreement due to what Ching called a “snag.” Ching said he couldn’t discuss what the snag involves.
Wallenstrom said negotiations have sometimes been difficult but he isn’t sure why progress is taking so long.
“We’re anxious to get going,” he said. “I wish that we were under construction right now. The delay has been unfortunate. We need the housing.”
To be sure, it’s not uncommon for affordable-housing projects developed in Hawaii on state land with state financial assistance to take many years given the difficulty to obtain financing and agree on details.
Unique financing
Forest City made a quite elaborate proposal that included paying the state $14 million to lease the land for 65 years, charging the state $6.3 million for the civic space, not paying general excise taxes on construction spending and having HCDA pay for predevelopment and permit costs that an HCDA board committee estimated could total $10.2 million.
Using $40 million in affordable-housing credits to help finance 690 Pohukaina was an especially unusual element in the developer’s proposal.
HCDA typically provides such credits to developers that produce affordable housing not required under its rules. Developers of typical high-rise projects in Kakaako are required to make 20 percent of units affordable to moderate-income residents, and can satisfy the requirement by supplying credits they have bought.
For Forest City, earning and selling affordable-housing credits for 690 Pohukaina essentially means a comparable amount of affordable housing won’t be produced by other developers who would have had to produce them under HCDA rules.
The civic space was going to total 35,000 square feet for state office and library facilities. Forest City also proposed 30,000 square feet of commercial space for a restaurant, a small market, offices and other uses, plus 4,400 square feet of community space that would include an exercise facility, conference room, theater, coffee shop and surfboard storage.
However, these proposed deal terms were based on the project containing a 560-foot tower and a 394-foot tower. Forest City said its twin 400-foot tower alternative wouldn’t support any nonresidential components.
Adding a school
Where to put a school presents a challenge for 690 Pohukaina because the DOE envisions needing about 100,000 square feet of built space, according to Ching.
Part of the issue also is determining what a midrise elementary school next to a residential tower and a historic park would look like.
“It’s something that’s never been done before in Hawaii,” Ching said. “You don’t have an existing model or template.”
DOE officials expressed concern to HCDA about a future need for a new school in Kakaako about three years ago, given that a lot of high-rise housing is being developed while two elementary schools serving the area — Royal School and Queen Kaahumanu Elementary — were at capacity and couldn’t accommodate more students.
HCDA has said the DOE can designate Kakaako as an area where developers are required to mitigate impacts on schools from their projects.
Instead, the DOE has urged developers to help expand school capacity in Kakaako. Specifically, it asked for developable space for school facilities in written comments submitted in November 2014 on a luxury condominium tower called Ae‘o on which Howard Hughes Corp. plans to break ground in March.
The DOE made a similar request at about the same time in comments on a planned affordable-housing midrise on state land called Ola Ka ‘Ilima Artspace Lofts to be developed by Minneapolis-based Artspace.
Heidi Meeker, a DOE facilities development branch planner, expressed frustration at a 2013 HCDA meeting because tower developers and HCDA weren’t addressing impacts on schools from high-density residential projects.
Particularly concerning to Meeker was that HCDA previously set aside the 690 Pohukaina site, which was once home to Pohukaina School, to accommodate a new school.
Wallenstrom said Forest City isn’t opposed to working with DOE on its objective, and said the company has some experience in other markets developing school facilities in vertical space.
“Forest City has built schools in combination with projects that we’ve built,” he said.
If agreements can be reached, an environmental assessment would need to be published and the Board of Land and Natural Resources would need to approve the project and a lease because the state Department of Land and Natural Resources owns the 690 Pohukaina site.
In the interim, HCDA is subleasing part of the site to Fisher Hawaii, which operates an office and school supplies store. Another portion of the property is subleased to Hawaiian Dredging Construction Co. as a base yard. As the manager of the property, HCDA is receiving 20 percent of the rent, or about $55,000 a year for the two subleases. If construction of 690 Pohukaina is ready to proceed in less than two years, the tenant leases can be terminated with six months’ notice.
