Who Owns O‘ahu?
Mystery buyers, high fliers and all those LLCs—we take a look at who’s claiming stakes on O‘ahu.
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The Big Developers
Kaka‘ako: For The Rich, Right?
Source: University of Hawai‘i Economic Research Organization (UHERO)
For the past few years, depending on who you talked to, the redevelopment of Kaka‘ako was either long delayed or hastily approved; an example of Hawai‘i taking care of its own or selling out to developers and construction unions; and was being built for the overseas rich as a place to park their capital or for put-upon locals who wanted to move out of their grandparents’ houses.
Now that the first towers are sold out and the second and third waves of construction are gathering momentum, it’s possible to see what kind of New Urban Community is taking shape—to sort out the fears from the dreams and compare the sales pitches with the results.
One cautious, hopeful impression: So far, we’ve avoided the creation of a high-rise, overseas-millionaires-only, super city.
According to Howard Hughes vice president of development Nick Vanderboom, “At our first two residences, Anaha and Waiea, we’ve found that well over 50 percent of the buyers have turned out to be local residents.” Other sources cite the low-amenity, affordable developments by Stanford Carr, Castle & Cooke and Marshall Hung. Far from getting pushed out of Kaka‘ako, one expert says, “We actually may be seeing the average person getting pushed into Kaka‘ako.”
Nor did this insider see local buyers acting as deep-pocket speculators: “I saw only 10 flips at One Ala Moana and 12 at Waihonua,” he says, referring to 2014 data for two new luxury towers. “I’ve heard some say they’re holding on for the kids. It could be the only way to make sure they have a house.”
These aren’t ultra-high-net-worth individuals, so the rising rental market may be encouraging them.
The rental market has definitely affected plans over at Howard Hughes. “We have a request in with HCDA (Hawai‘i Community Development Authority, the government entity with special-district jurisdiction in Kaka‘ako) to make an approved for-sale building, 988 Halekauwila, into a rental instead,” says Vanderboom. “Our research shows us that the need for rentals is four to five times the current supply.”
Urban planning isn’t known for sensitivity to local sensibilities. However, the other large landowner and developer in the area, Kamehameha Schools, has strived to anchor Kaka‘ako in Native Hawaiian values and culture—while heeding the bottom line. “In our nine blocks, we purposefully wanted to build a community with the rich, the people just starting out, the people just having their first move-up place to live,” says Paul Kay, director of real estate development at Kamehameha Schools.
“When I grew up here, neighborhoods weren’t characterized by social class and income,” he recalls. “You could have a bank president on the street and a local HECO lineman on the street. We fought, we laughed, we played in the street. Nobody cared what kind of shoes you wore.”
Kay explains Kamehameha Schools’ vision as a design ethos: not just houses, but a community. Instead of a “my home is my castle” mentality, he says, “you will live your life in this community. You won’t just drive out in the morning and return in the evening to your four walls. Your café is the dining room, the restaurant is a meeting place. The classroom is the community center. Your office might even be an event like Honolulu Night Market. There will be jobs here, places where talented, creative people get to showcase their talents.”
Still, the splashy sold-out success of the luxury towers at One Ala Moana and Waihonua doesn’t mean it’s a slam-dunk for other towers under construction. The owners in both places benefited from a strengthening economy and the lowest interest rates in history. Both developers also timed the luxury wave perfectly, selling to people least affected by—or quickest to recover and, thus, to profit from—the last financial crisis.
But for everyone else trailing after, a lot can happen between signing a contract and taking possession. That typical two-year lag is of equal concern to the overseas and local buyer. For the Japanese market, “The value of the dollar versus the yen is something to watch,” says Better Homes and Gardens Real Estate Advantage Realty broker Jaymes Song. “With the yen now 120 to the dollar instead of 80, it’ll be interesting to see how it will play out.”
Right now, an average purchase price of $1.6 million will be $2 million in two years. For our buyers, interest rates also hold the key—everyone knows they’re going up. But how much?
As of this writing, there were still units available at Symphony, The Collection, and Ward Village’s Anaha and Waiea. Projects such as 400 Keawe and Keauhou Place had held lotteries that included some reserved housing for middle-income workers qualifying under the 140-percent-of-median-income rule. (That’s about $82,200 for Honolulu.) Price points ranged from $350,000 to several million dollars. Some new towers are being pre-sold before the public report. Brokers are also happily grouping older condos in the neighborhood under the Kaka‘ako banner.
Meanwhile, says Song, “developers are rushing to cash in by getting approvals, selling and building as fast as possible before the next guy starts or before demand wanes.”
Although an outbreak of flipping could change things, it seems clear that Kaka‘ako is urban Honolulu’s best chance for a new community. “With two market-rate residential towers and the affordable rental tower,” says Vanderboom, “we’ll be providing homes for over 70 percent local buyers with our first three projects. For the vast majority, we expect the new home to be their primary residence.”
Kaka‘ako’s development offers a shift from O‘ahu’s population living horizontally—in suburban-style single-family houses—to living vertically, in towers. “All along, this has been a place to come together,” says Kay. “Hawai‘i is not a dead culture, but a living culture. Not just a story of the past but one of how the past informs us.”
Showdown in Lā‘ie
The City Council rejection of the BYU-Hawai‘i/Hawai‘i Reserves Inc. plan to build a new subdivision outside the urban border in Mālaekahana shouldn’t have come as a complete surprise. On several occasions since the 1980s, Zion Securities and its successor, Hawai‘i Reserves, for-profit arms of the Mormon Church, have announced and then canceled affordable housing plans inside the Lā‘ie footprint—each time after rallying community support for needed sewer and infrastructure funding that was then used to expand the Polynesian Cultural Center and hotel, and BYU-Hawai‘i.
What was a surprise was the strong stand by City Council member Ikaika Anderson. “For me, it’s just not pono to develop in this certain area,” Anderson told news reporters before the vote.
Apparently the “build a resort and housing will come” approach has met its match in an upwelling of North Shore sentiment against a dramatic alteration of the community’s rural character.