Sunday, June 22, 2003


Kakaako mauka's auto repair shops are beginning to share space with new retail and residential developments like the luxury Nauru tower in the background.

Heading for a Tune-Up

While recent attention has been
focused on medical centers and
aquariums in the works south of
Ala Moana, the rest of Kakaako has
been quietly getting ready for change

The pace is slow in Kakaako. It has a real "old Honolulu" feel to it. Small businesses go about their work, quietly recognizing that change is inevitable, but not too worried about the future. After all, they've spent decades hearing about redevelopment plans that never came to anything.

But there is a growing awareness that change is coming. It's fueled by a new spurt in development on the makai side of Ala Moana, centered around the University of Hawaii's new medical center.

In Kakaako mauka, where most Kakaako businesses are located, there is a growing sense that the old way of life must change, and soon. The makai developments will need the support of housing, recreation and shopping facilities in the mauka area and that means many of those old houses and quonset huts must go.

Kamehameha Schools, owner of 40 acres on the mauka side and about 10 acres makai of Ala Moana, is taking its own steps. It has been managing its leases so most of its tenants will lose their locations within the next five years and certainly all of them in 10 years, said Sanford Murata, Kamehameha real estate manager.

Steve Akamine's auto body shop, in keeping with the character of "old Kakaako," is housed in a Quonset hut.

But even Kamehameha, formerly known as Bishop Estate, doesn't have hard and fast plans and recognizes that anything that happens within the Kakaako district will be regulated by a state agency, the Hawaii Community Development Authority.

But change will come and Murata thinks it will be good for Honolulu. So do HCDA officials and Victoria Ward Ltd., owner of 65 acres in Kakaako mauka that includes Ward Warehouse, Ward Centre, the Farmer's Market and the new Ward Entertainment Center, as well as many small business lots.

A lot of the old plans have gone. One reason was the sale of Victoria Ward a year ago to Chicago-based General Growth Properties Inc. Victoria Ward had plans for high-rises, as well as its ongoing development of retail centers primarily aimed at local residents. General Growth is a real estate investment trust and has different needs, so is rethinking those plans.

An opportunity

But the development buzz is growing, and those involved say it is a once-in-a-lifetime opportunity to develop a new town within a city, using the largest controlled urban area left on Oahu.

Kakaako mauka is equal in size to 70 percent of Waikiki. The 450-acre area spreads all the way from King Street to Ala Moana in width and Piikoi Street to Punchbowl in length. Waikiki is 640 acres.

While the recent publicity about its future has been concentrated on the makai area, with talk about an aquarium, shops and parking structures, Kakaako mauka has been changing. Streets have been improved, widened, straightened and extended. Drainage and utilities have been redone. There are new high-rises, new shops, new movie houses.

But much of the old Kakaako remains contributing to a variety that runs from the polished luxury high-rise apartments at the Piikoi end to auto-repair shops in rusty World War II Quonset huts in the core of the old slum area.

Driving through the oldest and densest part of Kakaako can be hazardous. Drivers have to keep their wits about them as they dodge around double- and triple-parked cars, dumpsters and chunks of machinery, while avoiding head-ons with delivery vans or tow trucks.

Leave the car somewhere else and take a walk and the character of the place become apparent. It is home to hundreds of small businesses, as well as houses that were built early last century. There are take-out food places, a few bars and convenience stores.

The people doing business there know that changes are coming and they share a lively interest in what the big land owners might have in mind.

But those players say there are many decisions still to be made. "We're looking at any and all possibilities," said Jeff Dinsmore, general manager of Victoria Ward. Developing and selling condominiums is less of a priority than it was with the old Victoria Ward, the commercial real estate arm of the Ward Estate.

"We are a real estate investment trust and selling things isn't what we really do," Dinsmore said. There is not a lot of incentive to make a profit from selling property as 90 percent of a REIT's taxable income has to be paid out to shareholders, he said. A better course is developing and leasing retail space.

HCDA, which has spent some $300 million upgrading the Kakaako infrastructure, is completing one part of the puzzle, Dinsmore said.

There have been more than 25 years of study since HCDA was formed, and there have been suggestions that it might take another 25 years to complete the job.

Kamehameha Schools says that's about right, with Murata talking about a "one-generation" time span.

But Kamehameha's vision is already in the works.

Murata talks about a quadrant idea, dividing its land into four parts, split mauka-makai by Cooke Street and Ewa-Diamond Head by Ala Moana.

Quadrant one would be a "learning community," on the downtown side of Cooke Street and inland from Ala Moana. "Maybe our own office building would go there," Murata said. He envisions a community campus used by Hawaii Pacific University, parts of the University of Hawaii and other institutions of learning.

Alu Like, a Hawaiian community nonprofit that has some educational functions, is already there, as is Hawaii Technology Institute, a computer-learning facility.

Quadrants two and three are makai of Ala Moana and involve the medical school and related activities. Back on the mauka side of Ala Moana is quadrant four, which would be an extension of what Victoria Ward has done, with retailing and some residential.

Murata said Kamehameha Schools, as a perpetual trust, has different goals from some of the private land owners and can think long-term. For the near term, high-rise residential and a "super block" concept won't work, he said. Kamehameha could set out to do a 400-unit high-rise condominium, but it would take years to sell and would not be economical or the best use of the land, he said.

In an "urban village" approach, Kamehameha envisions low-rise structures of perhaps four stories of residences, with parking and shops and leisure facilities, selling maybe 100 condominiums in a year.

Planning for the future

Even if development will take some years yet, some business operators have already taken steps to move off land owned by the big estates and secure their own fee-simple properties.

"We've been renting from Victoria Ward for nine years now, two blocks ewa of Ward Avenue," said Jim Frierson, owner of a swimming-pool wholesale supply business called Island Pool & Spa at 523 Ahui St.

"We always heard this was earmarked for residential," he said. Victoria Ward hasn't suggested a move and has been a good landlord, he said, but he is moving the business soon to two-thirds of an acre of on Waimanu Street.

"We felt probably we didn't have a good long-term fit with General Growth and of course General Growth paid real money ($250 million) for Victoria Ward and they have to look a lot harder at their investment" than Victoria Ward did as an arm of a family trust, he said.

Island Pool & Spa definitely wanted to stay in Kakaako, however, and that was made possible by a federal loan with the Small Business Administration that allowed up to 90 percent financing for an owner-occupied industrial property, Frierson said.

"I'm kind of torn by the changes" that are coming to Kakaako, he said. "I'm sorry to see the development that has made Kakaako too expensive for startups. Kakaako was the greatest business incubator in the islands," because of its low rents. The old area mauka of Halekauwila Street is still home to startup businesses and "comes close to still offering that funky lower-rent possibility," he said. But it also has narrow streets, bad drainage and junk everywhere, he said.

HCDA has been working on the area's infrastructure.

Kamakee Street, for example, has been widened and extended into a real conduit between Kapiolani Boulevard and Ala Moana, culminating in a four-way traffic light intersection that improves movement and safety across from Ala Moana Park.

The HCDA also is finishing up an extension of Queen Street to intersect with Pensacola Street.

"That's going to make it a lot easier for people driving to Kakaako," said Don Ojiri, president of printing and publishing company Obun Hawaii Inc. He has worked at Obun's Waimanu Street plant for 21 of the company's 33 years.

Along with that extension will come a new community park. And drainage is being improved. "Water that collects on Cummings Street will drain off some way, we hope within the next couple of years. Waimanu will be pretty much cleaned up and the streets will look a lot better," said Ojiri, who also is president of the Kakaako Improvement Association.

One study of what might be possible, done earlier this year by New York-based urban design firm Cooper, Robertson & Partners for Kamehameha Schools and Victoria Ward, showed a relationship between the education-science-recreation ideas for Kakaako makai and what might need to be done in Kakaako mauka.

Most of the housing for people who work in the makai area would have to be in the mauka portion, the study said. But it also suggested low-rise condominium units in the makai area, perhaps even some townhouses along the Kewalo Basin waterfront.

That notion doesn't sit well with some people. The Kakaako Improvement Association took an official stance against it, arguing in part that it might make it hard for mauka land owners to make their own plans for residential development.

There are also those who would like to see as much as possible of the makai area kept as public parks. If they have their way the pressure for mauka development will grow.

Meanwhile those who have businesses in Kakaako love it and want to stay.

Marty McClain, owner of McClain Auction House and the Honolulu Furniture Antiques and Gallery at 825 Halekauwila St., has had his business in Kakaako for 20 years, first on Queen Street in the area now used by the Word of Life church and, since October 1996, in its current location on Victoria Ward property.

"This is a convenient place to be, in between downtown and Ala Moana Center," McClain said. His customers are spread from Hawaii Kai to Pearl City and "we're in the middle," he said. Parking is not that much of a problem because the auctions and viewing of materials due to be sold take place at weekends when the surrounding businesses are closed.

"Our business brings people into Kakaako who normally wouldn't come," he said, such as housewives from Kahala.

McClain isn't panicking about the changes that are coming, but he is keeping his eyes on the trends. "We are concerned like everyone else," he said, since his firm has only four years left in its lease from Victoria Ward.

Small landowners

One of the most visible entities in Kakaako mauka is the H. Hamada Store at 885 Queen St.

"The people I'm talking to around here on (Kamehameha Schools) land most likely will have to relocate when their leases expire," said owner and manager Elroy Hamada.

He is not worried about his own site, however, since it has been in the family in fee-simple ownership since the store opened in 1958, but he stays in touch with what might be happening around him.

Steve Akamine is in a similar position, with his Steve's Auto Air & Body Works on family owned land at 734 Ilaniwai St.

"There's a lot of small owner-occupied places around here," he said, and he thinks that would make sweeping changes difficult. "They would have to get several properties together to do anything big," he said.

Like some other Kakaako mauka business people, he doesn't expect vast change in the very near future. In any case, HCDA rules require that business that are forced to relocate must be fairly compensated. There have been suggestions, too, that some business might need only a temporary relocation, moving back into the area and into new premises after Kakaako redevelopment.

Akamine's operation definitely adds character to Kakaako. The workshop, which does mostly auto air conditioning repair and service, is in a Quonset hut. His office is in a much newer low-rise warehouse building, with another business between his shop and the office. The business, started by his dad, has been there 14 years.


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