Rosier economy amps up size of East Kapolei mall

A department store, cinema, hotel and 50 more retailers and restaurants have been added to plans for a first phase of the long-delayed Ka Makana Ali’i regional mall in East Kapolei.

DeBartolo Development LLC, the mall’s Florida-based developer, is announcing today that it has more than tripled the size of the project’s first phase to 700,000 square feet from about 200,000 square feet.

A second phase is still planned that would bring Ka Makana to 1.4 million square feet, which if developed would be the third-largest shopping center in Hawaii and the first regional mall built on Oahu in more than 30 years.

By comparison, Ala Moana Center is about

2 million square feet, and Pearlridge is 1.2 million square feet. (Ka Makana’s 1.4 million square feet includes two hotels and about 200,000 square feet of office space.)

It was two years ago that DeBartolo announced its initial phase of Ka Makana would be more of a neighborhood retail center on 18 acres, anchored by a grocery store and about 25 other tenants including Walgreens, 24 Hour Fitness and McDonald’s.

The relatively small size was a response to weakness in the economy, DeBartolo said.

"The economy was going slower," said Ed Kobel, DeBartolo’s president and chief operating officer.

But since then the economy and development activity in the Kapolei area have improved, which has boosted interest from prospective tenants and prompted the size of phase one to be increased.

"We’ve cranked it up because of the demand from tenants," Kobel said.

Pieces of what had previously been slated for the second phase are now incorporated into the first phase, including one hotel, the cinema and a department store. In all, the first-phase plan calls for 75 tenants on 50 acres of the 67-acre project site.

The second phase would add a second hotel, another 200,000 square feet of office space and more retail.

DeBartolo is not naming any new tenants for phase one at this time, though the company has previously shown plans indicating that Macy’s could open a department store at Ka Makana.

Kobel said construction should begin in January if a few outstanding permitting issues, including entry locations, are wrapped up by July. The first tenants could open in fall 2015.

"We are excited to be pushing ahead towards breaking ground on Ka Makana Ali’i and bringing a great new shopping experience to the communities of West Oahu," he said.

The first phase of the open-air mall is projected to cost about $260 million, according to Kobel. A similar amount would likely be spent on the second phase, bringing the total project cost to around $500 million.

If realized, Ka Makana potentially could become the single largest job center in the Kapolei region, with 8,000 long-term jobs created by businesses at the complex.

Ka Makana also would join other major development projects completed in recent years in the Kapolei region, including the University of Hawaii at West Oahu, the Salvation Army Kroc Center, Aulani Resort and Department of Hawaiian Home Lands residential subdivisions. Thousands more homes are planned by D.R. Horton at its Ho’opili project and by Hunt Cos. in Kalaeloa near the Ka Makana site.

DeBartolo’s project is on land owned by DHHL and is envisioned to become the largest revenue source for the state agency, which is backlogged in its mission to provide homes for Native Hawaiians.

The agency stands to receive more than $140 million over the first 25 years of the 65-year lease that can be extended to 85 years.

Much of the rent, however, is backloaded, with relatively little paid in the first few years.

DHHL for the last 18 months has been receiving a $500,000 lease option payment. The lease formally starts after the first phase of the mall opens.

DeBartolo also has a right to opt out of developing a 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.

Ka Makana has been set back by numerous delays since it was announced in 2006. Initially an opening was forecast for 2009, but lease negotiations and economic turmoil pushed back the timing.

Terms of a lease were approved in early 2011. An environmental assessment was completed in January 2012, followed by a state Land Use Commission approval finalized three months ago.

Darrell Young, deputy DHHL director, praised DeBartolo in a statement. "The partnership between the department and DeBartolo Development has been great, and we look forward to the promise and possibilities that Ka Makana Ali’i brings to the community and our beneficiaries."