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COURTESY DEBARTOLO DEVELOPMENT LLC
DeBartolo Development LLC received approval from the Hawaiian Homes Commission to begin construction on the first phase of the $400 million Ka Makana Alii. Above is an artist’s rendering of the project.
The developer of a regional mall planned for East Kapolei on Department of Hawaiian Home Lands property received approval yesterday from the Hawaiian Homes Commission to build a small phase initially and defer paying rent on most of the land for up to six years.
The commission approved final terms for leasing 67 acres to an affiliate of Florida-based DeBartolo Development LLC, moving the long-planned $400 million project called Ka Makana Ali‘i closer to breaking ground.
First announced in 2006, Ka Makana features 1.1 million square feet of retail space integrated with 200,000 square feet each of hotel and office buildings, making the retail space alone about the size of Hawaii’s second-largest mall, Pearlridge Center.
DeBartolo representatives said construction on the initial phase — a 200,000-square-foot neighborhood retail center — could begin next year if an environmental assessment and state Land Use Commission approval are completed without undue delay.
Under terms of the 65-year lease, DHHL stands to receive more than $140 million over the first 25 years from DeBartolo, providing a big boost to the agency’s financial ability to develop homes for native Hawaiians.
However, DHHL won’t be getting as much money as quickly as it had previously envisioned.
That’s because the economic and financial market downturns in recent years hindered DeBartolo from developing the project at one time, according to the commission.
DeBartolo sought to split ground rent into phases along with its revised development schedule. Instead of paying $4.7 million annually over the first 10 years for all 67 acres, the developer received approval to pay $1.3 million a year for 18 acres comprising the first phase once construction starts.
The $3.4 million annual balance would be deferred, allowing DeBartolo to pay none of that in the first two years followed by $1 million in each of the next four years. After six years, all deferred amounts would be due.
DeBartolo retained a right to opt out of developing the second phase within six years, but would owe a termination fee ranging from $500,000 to $6.3 million depending on the timing of such a decision.
Yesterday, Edward Kobel, DeBartolo’s president and chief operating officer, said he had every confidence both phases will move ahead as planned.
“With DHHL’s support for Ka Makana Ali‘i, we’re excited to see our vision for the people of West Oahu come to life,” he said.
Alapaki Nahale-a, commission chairman and DHHL director, described the final lease terms as a compromise that will benefit the agency and community. “We’re very excited about this project,” he said.
If realized, Ka Makana potentially could become the single largest job center in the Kapolei region, with 7,000 direct and indirect jobs created by businesses at the complex.
Kobel said the first phase is fully tenanted, though final leases have yet to be signed, so tenants cannot be disclosed. Among the tenants will be a drugstore, grocery store, pet store, fitness club and restaurants.
At 200,000 square feet the first phase would be a fairly typical size for a neighborhood retail center on Oahu. By comparison, Hawaii Kai Towne Center, anchored by Costco, is 262,000 square feet. Mililani Shopping Center, anchored by Foodland, is 180,300 square feet, and Waianae Mall, anchored by Longs, is 170,275 square feet.
DeBartolo is in the middle of leasing work for the second phase, and Kobel said demand is strong, though he said it’s too early to estimate a timetable for construction.
