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E. Kapolei mall plans delayed again

The developer must fix land use and lease issues before work on the project can begin

By Andrew Gomes

POSTED:
LAST UPDATED: 01:35 a.m. HST, Sep 15, 2010


This story has been corrected.

Four years after being announced, plans for a regional shopping center in East Kapolei are still tentative. But if development proceeds, the project is now envisioned to break ground next year and start off as a neighborhood retail complex.

The updated schedule for Ka Makana Alii represents a roughly one-year delay for starting construction, and is the second time anticipated groundbreaking has been pushed back by developer DeBartolo Development LLC.

However, DeBartolo has yet to finalize terms for leasing 67 acres for Ka Makana from the state Department of Hawaiian Home Lands, which makes the project still somewhat uncertain.

DeBartolo, a mall developer based in Florida, conceived Ka Makana as 1.1 million square feet of retail space integrated with 200,000 square feet each of hotel and office buildings at the corner of Kapolei Parkway and the North-South Road now known as Kualakai Parkway.

The retail component alone would be about the size of Hawaii's second-largest mall, Pearlridge Center, and has been viewed as an ambitious project despite concentrated population growth in West Oahu.

Originally, DeBartolo anticipated opening an initial phase in 2009. Early last year, the company said it expected to break ground by the end of this year and open an initial phase late next year.

Recently the company said permitting issues have delayed its timetable again, and construction is now projected to start next year.

DeBartolo officials previously hadn't announced a size for an initial phase. But in response to a recent request for a project update, the company said Ka Makana will initially comprise a 200,000-square-foot neighborhood and convenience center filled with businesses including a pharmacy, grocery store, bank, fitness center, pet store and restaurants.

"Ka Makana Alii will start with an exciting first phase to serve the everyday needs of the Kapolei and West Oahu communities," the developer said in a statement.

DeBartolo said it has signed leases with anchor tenants, and is in the final stages of lease negotiations with other tenants. However, DeBartolo declined to release names of signed tenants.

Even with the recent update, there is still some uncertainty over the development.

The developer has yet to file a petition with the state Land Use Commission to reclassify the approved use of the land from a regional sports complex to a regional mixed-use project.

Other traditional land-use entitlements, such as city zoning, isn't necessary because the land is owned by DHHL, which is exempt from city zoning ordinances.

Another unsettled issue is finalizing lease terms with DHHL. DeBartolo has only an exclusive option to lease the land, which it acquired in a competitive bid in 2006.

To date, DeBartolo hasn't paid any rent to DHHL, according to the agency. The agency is seeking minimum annual rent of $142 million over the first 25 years of a 65-year lease, or an average of $5.6 million a year over the first 25 years.

DHHL officials had hoped that the project would have started by now and contributed to revenue for the agency's efforts to provide residential lots and homes to native Hawaiians.

"It's been four years," said Kaulana Park, DHHL director.

Park said negotiations over final lease terms are still ongoing.

One new wrinkle that makes the mall project potentially more attractive to DeBartolo was legislative approval earlier this year that allows DHHL to extend commercial land leases for an additional 20 years.

But some observers believe setbacks to other development projects near the Ka Makana site combined with the economic downturn and retail growth in the region have negatively influenced DeBartolo's plans.

In Kapolei, the first phase of the Target-anchored Kapolei Commons shopping center opened early last year, and a second-phase expansion is underway.

Meanwhile, projects closer to the Ka Makana site have encountered setbacks -- such as the 11,750-home Hoopili community planned by D.R. Horton that was indefinitely stalled last year over state land-use approval, a University of Hawaii West Oahu complex that was delayed, and the city's mass-transit rail line that's close to a year behind schedule.

DeBartolo has maintained that its plan for Ka Makana hasn't been upset by setbacks to adjacent projects, financing, retail competition or the economic downturn.

It's not uncommon for projects of Ka Makana's size not to meet estimated timetables.

Local retail analyst Stephany Sofos believes starting small with a neighborhood center is a smart strategy.

"The community has a need for certain tenants now," she said. "In 10 or 20 years as the community grows, they grow with it."

Sofos said other regional malls started in a similar way, including Kahala Mall in East Oahu and Queen Ka'ahumanu Center on Maui.

At 200,000 square feet, an initial phase of Ka Makana would be about 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.

CORRECTION

A plan to build about 4,000 homes near the new University of Hawaii-West Oahu campus has been delayed, according to a UH-West Oahu spokeswoman. A Page B1 article Friday said plans for the complex had been scaled back.






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