The commercial core of Oahu’s emerging "second city" of Kapolei is slated to become a blend of businesses and homes next year with two residential communities now under construction.

A 499-unit rental apartment complex named Kapolei Lofts broke ground last week and is projected to deliver its first homes in the fourth quarter of next year.

Development firm Forest City Enterprises Inc. announced the $140 million project last year on 17 acres leased from an affiliate of James Campbell Co., the master planner of Kapolei formerly known as Campbell Estate. 

Construction of Kapolei Lofts follows work recently begun on an initial 84-unit phase of a senior-living community called ‘Ilima at Leihano on an adjacent site. The ‘Ilima homes by Kisco Senior Living are slated for completion in September.

Kapolei Lofts and ‘Ilima represent the first residential additions to Kapolei’s commercial core, which includes mixed-use zoning that allows housing.

A more expansive mostly residential subdivision called Mehana being developed by D.R. Horton with up to 1,150 homes has been growing over the last several years just below Kapolei’s downtown edge.

Dave Rae, a Campbell Co. spokesman, said Kapolei Lofts represents a significant new addition to the second city.

"We’re very excited about it — not just for bringing people to the urban area of Kapolei, but also meeting an incredible need for rental housing,"he said.

Jon Wallenstrom, president of the local affiliate of Ohio-based Forest City, said production of new rental apartments on Oahu has been scant in recent decades, especially compared with the mainland where he said 10 percent to 15 percent of new home construction is rentals.

"Honolulu has never done that,"Wallenstrom said. "We’re meeting a niche that hasn’t been filled."

Kapolei Lofts will be available largely at market-priced rents, though 20 percent of units will be affordable to lower-income households. 

While there is broad support for low- to moderate-priced rentals, some community leaders have opposed Kapolei Lofts because they feel its location should be saved for businesses as more and more homes get built in outlying areas.

The Makakilo/Kapolei/Honokai Hale Neighborhood Board was divided in a December vote where five members opposed the project, three supported it and one abstained.

Thad Spreg, one of the board members who opposed the project, said Kapolei needs office space and other businesses more than a residential apartment complex, according to meeting minutes.

Other concerns included traffic impacts and area schools being at capacity.

Wallenstrom said adding attractive rental homes in downtown Kapolei will help attract more businesses to the area and make it convenient for people to walk or bike to work. 

The target market for Kapolei Lofts includes young professionals, single-parent families, empty-nesters and retirees who want moderate-priced apartments with resort-style amenities, according to Forest City.

Monthly rental rates are projected to range from about $1,250 to $3,200 for 400-square-foot one-bedroom units to 1,200-square-foot three-bedroom units. The rents are based on present median income levels and could be different next year.

Under a city requirement tied to land development approvals, 100 units at Kapolei Lofts must be affordable to households earning no more than 80 percent of Honolulu’s median income. That equates to $53,700 for a single person, $61,350 for a couple and $76,650 for a family of four as calculated by the city Department of Planning and Permitting.

Another 300 units will be affordable to households earning up to 140 percent of the median income, which equates to $80,948 for a single person, $92,512 for a couple and $115,640 for a family of four under city calculations.

Planned amenities include a "resort-style" pool, a cybercafe, a bike-sharing fleet, a gym, and rooms for meetings and entertainment. Units are designed with 9-foot ceilings and lanais large enough for outdoor dining.

A 1.5-acre linear park dubbed Palailai Mall will bisect the property. A 10,000-square-foot building for retail and/or restaurant use is also planned.

Forest City anticipates accepting rental applications next summer.

The developer is building the apartments in 14 three-story buildings. The first building is expected to be finished in the last quarter of next year. The whole project is expected to be finished in August 2016.