The Crowning of Kakaako

The coming redevelopment of the Kakaako Waterfront is billed as a master stroke of new urbanism in Honolulu. So why are some leaders worried?

September, 2005

From his bird’s-eye perch on the 10th floor of the Gold Bond Building, Daniel Dinell gazes out onto the blighted Kakaako Waterfront each day and sees the Sydney Opera House.

Though not the actual Sydney Opera House, explains Dinell. The executive director of the Hawaii Community Development Authority envisions the Hawaiian equivalent of the Sydney Opera House, something iconic that reflects the people and the Island culture. Honolulu has Diamond Head, but there is no one building that is so emblematic, unique and memorable. Honolulu needs its own Sydney Opera House, its Eiffel Tower, its Empire State Building.

Like never before, Dinell can see such a waterfront building rising out of the urban decay that dominates that waterfront today, rising upon decades of redeveloping Kakaako District and the state’s robust economy. He points to the land nestled near Point Panic, with striking views in every direction. That is where the city’s icon could sit.

Next, Dinell sees locals, some who live in the area, strolling down a picturesque promenade that abuts Kewalo Basin, something like South Street Seaport in New York City or Pike Place Market in Seattle, but again a uniquely Hawaiian version, he says.

Locals are there during the day, the evenings and the weekends, too, unlike downtown, which fizzles out after the workday, unlike Aloha Tower Marketplace, which lacks the critical mass, and unlike tourist-flooded Waikiki. The vision of Kakaako Waterfront is the city’s ultimate gathering place for locals and an engine for economic growth, Dinell says, as it anchors an emerging medical research park nearby and a growing community inland.

It’s heady talk.

The rub lies somewhere between the visioning and execution, where market forces and the public good vie. Some leaders fear that, when lofty mission statements touch down with reality, the ultimate development of public land could become the playground of rich Mainlanders and fail to address the need to diversify the state’s economy.

The only locals in Kakaako might be the people behind the cash registers, some say.

While just about everyone sees sunnier days ahead for Kakaako waterfront, not everyone agrees on the color of the sun.

A PERFECT STORM

What makes this urban oasis so palpable on a July afternoon is that Dinell and HCDA are vetting four proposals – all sealed until the contract is awarded – to master develop 36 acres of state-owned land in Kakaako makai and manage Kewalo Basin marina.

Developers have pitched to build here before on smaller parcels. DG “Andy” Anderson’s group had proposed a Ferris wheel-centered entertainment/retail district. Kajima Urban Development LLC had offered to erect an aquarium. But those ideas were scrapped as HCDA moved to hand the entire 36 acres to one master developer.

Now the economy is booming, driving more developers to vie for the last sizable, developable urban waterfront – land the county assesses roughly in its underutilized state at more than $125 million.

Now, HCDA is poised to pick someone to build that vision.

“It is one of the most important development opportunities in the state today, not just because it is waterfront, but because it is so prominent. It is so important to set the tone for Honolulu as a city,” Dinell says.

Few disagree. From the Legislature, which has funded infrastructure development in Kakaako to area businesses, institutions and residents, people believe the waterfront can be a crowning parcel for Kakaako, its redevelopment and the establishment of a truly vital urban village in Honolulu.

The precedents for success in Kakaako are building.

Throughout the district, buoyed by the booming economy and attractive placement between Downtown and Waikiki, new businesses are emerging in areas where new roads and drainage were built. Condominiums are sprouting throughout the mauka side of Kakaako.

The new University of Hawaii Burns Medical School building is completed on the makai side of Kakaako. The Office of Hawaiian Affairs has talked about using state land nearby for a cultural center and headquarters. A cancer research center remains in the offing. More life sciences research facilities are planned on land owned by Kamehameha Schools, one of the largest landowners in the district, along with General Growth Properties and the government.

The idea of creating out of urban eye-sores an urban village, where people live, work and play, to help alleviate transportation woes, improve quality of life and spur more economic growth, is taking shape.

“There is almost a perfect storm of great things happening in Kakaako,” says Susan Todani, director of the commercial assets division for Kamehameha Schools.

SO WHY WORRY?

This is what Dinell sees when he peers out of his office window at Kakaako today:

There are dilapidated warehouses and abandoned buildings. There are city garbage trucks lined in rows, high chain-link fences, barbed wire and rusting corrugated tin roofs. Bright spots include the new University of Hawaii Medical School building. There are the undulating, grassy hills of the waterfront park, literally built upon the ashes from the old incinerator. A treasure for Hawaii families is the Discovery Children’s Center, housed in the renovated incinerator building. The John Dominis restaurant offers a nice waterfront view, but it is hemmed in by blight.

Kakaako makai needs an anchor, a face, an identity.

So at a meeting of the Kakaako Improvement Association, a group of concerned businesses in the district, you would be hard-pressed to find anyone opposed to redevelopment. “We are not NIMBYs,” says Beverly Harbin, a KIA board member.

What worries Harbin and others is a shift in HCDA to include residential properties in the waterfront district. The Request for Proposals asks for 500,000 square feet of public and commercial space and 250,000 square feet of entertainment and retail. Then there is room to build parking and residential units. HCDA also wants a developer to manage the marina, perhaps adding boat slips.

HCDA is in the process of changing land use rules to allow residential, something the original designers felt was inappropriate. HCDA is also attempting to raise the height limits of a section along the basin from 45 feet to 65 feet.

Harbin points out that in 1998 an HCDA environmental assessment determined that “Concerts and other special events which may be held in the Makai area would also generate significant amounts of noise and traffic which would be incompatible with residential use.”

Harbin says the lifestyle conflict alone is reason to keep residential out of Kakaako makai. But Harbin says an even more risky situation is that the residential units will be built as luxury units, which middle-income residents cannot afford, let alone lower-end wage earners. That is a wrong use of public lands, she says.

“[Kakaako makai] will become very elitist,” Harbin says. “I am not going to let them destroy something that is so valuable for our future kids.”

John Breinich, chair of the Ala Moana-Kakaako Neighborhood Board, says the neighborhood group is also concerned, about the residential component. Though, he adds, much will depend on how each developer handles the issues, and whether the community feels the housing is appropriate.

“I think the community is saying don’t build something that we are not a part of,” Breinich says.

SETTLING THE TAB FOR PUBLIC GOOD

Jeff Dinsmore, vice president of Hawaii development for General Growth Properties, ensconced in his office in the IBM building, runs his fingers over his company’s proposal for the Kakaako waterfront land. Like the other bidders, he declines to discuss the proposal details before HCDA picks its winner.

But Dinsmore is willing to talk about the bottom line.

“When you look at the people that ended up on the short list, you have got three primarily housing guys and us, the retail guy,” Dinsmore says. (The other three groups are A&B Properties Inc., Kewalo Nui Partners LLC, which is partnership led by Texas-based Hunt Building Co. and SCD Kakaako Waterfront, which is Stanford Carr Development LLC.)

“Right now it is difficult to make a lot of these developments pencil out because construction costs have risen so much in the last 12 months.”

Dinsmore explains the HCDA has asked for an iconic building and public uses that do not generate substantial revenue. He adds that in Hawaii today the commercial property construction market is cool. “Housing is a driver to generate enough revenue to pay for other things,” Dinsmore says. “I think [HCDA] is responding to those concerns.”

Dinsmore adds that to create an around-the-clock gathering place you also need people living in the area. He says places such as downtown are 9-to-5 communities, and users of Ala Moana Beach Park shift dramatically after sunset.

“You are going to have a lot of open space down there and when it closes up at the end of the day, the denizens of the dark will move in. Unless people are down there. To recapture the [Kakaako waterfront] you need to have residential,” Dinsmore says.

“How it shakes out from the public standpoint will be who gets to live there. The question is whether state property is going to be made available for millionaires from the West Coast,” he says.

Dinell says HCDA can use deed restrictions and other methods to ensure that the residential that goes in is for local people. The HCDA plan calls for affordable housing, but that is defined in a Hawaii context. In other words, moderate housing that a working professional could afford.

Dinell adds on the mauka side of Kakaako, 30 percent of the housing is affordable. However, that percentage will drop with the building of three new luxury condominiums, which were given waivers on the requirement for affordable housing following the Sept. 11 economic funk.

Dinell says HCDA has taken into consideration the need for a critical mass of users and the long-term economic success of the area, along with public-use concerns.

That is why HCDA decided to team with the private sector to redevelop Kakaako, to strike a balance. HCDA had devised earlier plans that proposed an amphitheater, an ocean research center and retail along the Ewa side of Kewalo Basin.

HCDA is only offering guidelines today, such as an iconic building and a parking garage that would be masked by retail and housing. The charge is to simply create an economically viable live, work and play environment on Kakaako waterfront. “We wanted to be suggestive without being proscriptive,” he says.

LIFE SCIENCES, OR (IT’S A) BUST

For House Speaker Calvin Say, the bottom line on Kakaako waterfront is whether a proposal incorporates life and biosciences research.

“If the proposals that we are considering do not include life and bioscience, I would for one have to ask the authority to reconsider its actions,” Say says. The speaker believes Hawaii has enough retail jobs for its people, what it needs is a diversified economy.

Say says the medical school has already run out of research space. The push should be for building life sciences and developing jobs that are high paying and independent of fluctuations in the travel industry. Say is ready to put up a fight. While HCDA, an independent agency charged and empowered to redevelop Kakaako, will pick a proposal, Say notes that more funding will be needed for infrastructure and environmental remediation.

The Legislature holds the purse. Say also plans to make political waves if he has to. “I will put in a resolution to rescind the project. You put your money where your mouth is as far as diversifying the economy,” Say says.

House Rep. Galen Fox, whose district includes Kakaako, expressed concern that the bids will not be revealed to the public until after HCDA decides which one is best. Administration officials say that procurement laws prevent publicizing the proposals until the top choice is made. Dinell says that to help incorporate public comments, community leaders have been included on the architectural committee reviewing the proposals.

After the developer is chosen, HCDA will also take the plan out to the public for comment, to build consensus. Some fear that will be too late. A decision is expected this month.

CHICKEN-SKIN WORDS

Robert Oda, project manager of commercial assets division of Kamehameha Schools, says perhaps the best way to grasp the Kakaako waterfront is to view it from the sea. From there, Kakaako is an inscrutable void amid a shoreline that has towering downtown Honolulu and Waikiki as its bookends.

It has been that way for decades. HCDA was formed in 1976 to foster the redevelopment of Kakaako. HCDA reports that $217 million has been invested in Kakaako by the state since then and, as a result, the private sector has poured in more than $2 billion. But the waterfront has lagged behind the makeover.

Not anymore.

“We are nearing a critical mass,” Oda says. But, Oda says, at the same time, in 2005, the state and others have to ensure past mistakes are not repeated when it comes to the waterfront. Oda points to Aloha Tower Marketplace as a redevelopment project that did not meet expectations. “Aloha Tower Marketplace never took off. Aloha Tower has become the stepchild of Waikiki and it still isn’t getting its daily meals.”

That means integrating the emerging research park with the waterfront development. Kamehameha Schools has performed economic studies, secured $28 million in new market tax credits, and issued a request for proposals to build life science research facilities on some of its land. That use will dovetail with the new medical school. Oda says Kamehameha and the medical school can also benefit from a gathering place-type development planned by HCDA. The diversity of use could help make the makai area more vibrant.

T. Samuel Shomaker, acting dean for the medical school, echoed Oda’s statements. Shomaker could see the waterfront adding strength to the area by making the life sciences pursuits more attractive. Shomaker went so far as to say the residential element could benefit the medical school, as long as staff and students could afford it.

Oda summed up the feeling of many stakeholders who support the redevelopment of the waterfront: “It just has to be done right.”

Dinell says HCDA plans to pursue both its mission and the overall mission of redeveloping Kakaako district. The waterfront redevelopment is a crowning moment, not a stand-alone castle.

“It is chicken-skin words. But it says actually in [HCDA's enabling] law, to meet the highest needs and aspirations of Hawaii’s people. I mean I don’t know how you don’t get chicken skin reading that,” Dinell says. “And that is what we are trying to do.”

Doing that the right way – even agreeing on the right way – is another story.

So expect some turbulence as lofty visions touch down with reality this month on the Kakaako Waterfront; because the “the highest needs and aspirations of Hawaii’s people” clearly remain in the eyes of the stakeholders.

The Final Four
A&B Properties Inc.
A&B Properties Inc. is a Honolulu-based subsidiary of Alexander & Baldwin Inc. (NASDAQ:ALEX) and owns and operates Matson Navigation. A&B also runs sugar and coffee production in Hawaii and is involved in substantial real estate development and property management in Hawaii and the Western United States. In Kakaako, A&B has approval to develop the luxury condo complex Keola Lai.

Kewalo Nui Partners LLC
Kewalo Nui is a partnership led by the privately owned Hunt Building Co. based in El Paso, Texas. A development, construction and property-management company, Hunt specializes in residential design-build development and construction projects. Hunt has primarily focused on development and construction opportunities associated with the federal government. In Hawaii, Hunt is involved in redeveloping military land.

SCD Kaka‘ako Waterfront LLC 
Stanford Carr Development LLC is a development firm headquartered in Honolulu. The company describes itself as an architectural design and community-development firm. Two featured SCD residential projects are Kahealani, a $600 million residential development on Maui, and Hawaii Kai Peninsula, a $250 million residential development. SCD was founded in 1990.

Victoria Ward Ltd. 
General Growth Properties (NYSE:GGP) owns Victoria Ward Properties and is the second-largest-owner operator of malls in the United States, with 200 million square feet of retail space. The company is based in Chicago and has properties in 44 states, including the South Street Seaport in New York City. In Hawaii, General Growth operates Ala Moana Center and Ward Warehouse, among several mall properties.

Sources: Hawaii Community Development Authority, Alexander & Baldwin inc., Hunt Construction Co., Stanford Carr Development LLC, General Growth Properties, Hoover’s Inc. and Hawaii Business.

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