Hawaii Kai condo plans nixed for third time

Plans for a $300 million luxury condominium in Hawaii Kai called Hale Ka Lae have been scrapped, the third time in five years that anticipated construction has been called off.

Hanwha Engineering & Construction, a South Korean firm that became the project’s main investor in 2009, recently canceled plans for the 242-unit condo and 80 units of rental housing for low-income seniors on a separate site shared by existing elder-care facility Lunalilo Home.

The company has hired local development and consulting firm Avalon Group to re-evaluate the project and try to move forward with a new plan.

"At this point we are in a transition phase and are evaluating all of the options for the project’s viability,"said Christine Camp, Avalon president and CEO.

Camp said possible options include rental apartments and incorporating required affordable housing on the same site, though no decisions have been made. She added that when a new plan starts to take shape, it will be shared with the community. Camp, who grew up in East Honolulu, also said the developer is aware of and will be sensitive to community concerns.

"It will be Avalon’s focus to bring local sensibilities by working with local teams and experts to finally complete this project on a timely basis," she said. "One thing that everyone can count on is that we will keep the project within the setbacks, density and, most importantly, height (conditions) as set forth in the project’s unilateral agreement for the approved zoning."

Hale Ka Lae has had a rough history as a project initially begun by local developer Mike Klein and known as Hale Ali’i.

Klein launched sales in 2009 with condo unit prices roughly from $1.3 million to $3.7 million and amenities including lagoon-style waterways, floating cabanas and a sand-edged pool with ozone-purified water.

Construction was projected to start in 2010, but Klein ran into trouble over treatment of archaeological features on part of the site, including petroglyphs, rock walls and remnants of a coconut grove that some preservationists consider part of an ancient heiau complex.

Difficulties also involved grading land without proper approvals and threats Klein made to sue community members for making alleged defamatory statements.

Hanwha ousted Klein, managed to patch up community relations, redesigned the project and relaunched sales in early 2011 with unit prices between $685,265 and $3.4 million.

As part of the redesign, Hanwha arranged to sell a 5-acre portion of the condo project site containing the archaeological features to the Trust for Public Land for preservation as a cultural reserve.

Yet at the end of 2011, after resuming site work and reporting favorable sales results, Hanwha halted construction and refunded buyer deposits after announcing that a financing loan fell through. The company called the suspension temporary.

Last year Hanwha was advancing the project again, and had finalized a land lease in May with Lunalilo Home to build 80 units of senior rental apartments to satisfy a city affordable-housing requirement. As part of the lease, Hanwha donated $75,000 to the charitable trust that provides housing and services for Native Hawaiian seniors.

Hanwha representatives told the Hawaii Kai Neighborhood Board in July that construction of the affordable-housing component was expected to begin in the third quarter of 2014, according to board minutes.

In November, however, Hanwha negotiated to terminate its lease with Lunalilo Home and, in consideration for backing out of the deal, agreed to donate $100,000 to Lunalilo Home.

Camp said the decision to pull back was based on a lack of market support for the condo units in the project, which featured a private dining and wine-tasting room, pools, a golf simulator, a theater and a fitness center.

There had been some opposition to the senior rentals from immediate neighbors of Lunalilo Home, but that wasn’t why Hanwha canceled the plan, she added.

Mike Greco, a development project manager who led Hanwha’s now-aborted plan, agreed. He said there was broad community support for the 10-story luxury building’s design and the senior housing that would benefit Lunalilo Home with lease rent over about 60 years.

Greco, who no longer is involved with the project, said Hanwha perceived the condo project as too risky even with Oahu’s housing market posting modestly strong gains and several luxury condo tower projects on the horizon in Kakaako. "It’s unfortunate," he said.

J. Kuhio Asam, executive director of Lunalilo Home, said the trust has adjusted to the setback by soliciting interest to expand Lunalilo Home more broadly on its 5-acre site instead of just the two acres that Hanwha was going to lease.

"It’s actually an exciting time for us despite the disappointment,"he said.