Advertisement - Click to support our sponsors.

Chinatown
may get a
residential
high-rise

Given the asking price,
the broker and analysts say
that would make the
best use of the land

---

By Tim Ruel
Star-Bulletin

A renewed push to sell a large undeveloped lot on the edge of Chinatown may soon usher the building of a $60 million high-rise, which would be downtown's first major residential project in six years.

Blue Chip Corp., a Japan-based owner of several properties in Hawaii, has retained a new local broker to speed the sale of a 2.15-acre fee-simple lot across from Aala Park. The property, bordered by Nimitz Highway, King Street and Iwilei Road on the Ewa side of Nuuanu Stream, has been a parking lot for more than a decade.

Blue Chip, which took over the property in July 1999 for $9.34 million, is asking $10.5 million, or $112.36 per square foot.

At that price, the broker and local analysts say the property is best geared toward development as a residential high-rise.

"They (the owners) basically want us to contact the development community here and on the mainland, with the scenario of what might be useful," said Christine Camp, president of Avalon Development Co., the real estate firm hired to sell the property. "This is by far the largest block that's now available in that area."

The most likely buyer would be a sophisticated mainland syndicate that knows how to build the right mix of affordable housing to capitalize on tax credits, she said.

The property was previously marketed by the downtown real estate firm Fusako Grant Inc. for the past couple years. The original asking price was $14.5 million, or $155.17 a square foot. "It was overpriced," Camp said.

The City Council once considered making the property an extension of Aala Park, but never followed through.

The city, which is now remaking the run-down park with a $2.3 million face-lift, does not appear interested in the next-door land anymore, said Council Chairman Jon Yoshimura, who represents the downtown district.

With Hawaii's real estate market turning around, the owner wants to sell as soon as possible, though it could take six months to a year, Camp said.

Once it's sold, building a high-rise would be the most cost-effective use for the property, given the asking price of $10.5 million, said Andres Albano Jr., vice president of development consulting for commercial real estate firm CB Richard Ellis Hawaii Inc. A small building would not cover the expense, he said.

Avalon has estimated the viable size of a high-rise from 250,000 to 330,000 square feet, Camp said, noting the property's zoning allows up to 200 feet in height. At that size, the total building cost would range $55 million to $61 million. "We're being very aggressive, I think on the pricing."

Regardless of size, residential use would make more sense than commercial, Albano said. "You can see the demand for residential has increased." The 330-unit One Archer Lane project in Kakaako, completed in February 1998, has sold out, and downtown has about five months of inventory left, Albano said.

Meanwhile, there is still too much office vacancy for a new commercial building, he said.

One hitch with a condominium, however, is that the lot may be too close to Iwilei for some residential developers, Albano said.

The last two residential developments in Honolulu's central business core were the 120-unit Harbor Court and the city's 236-unit Marin Tower, both built in 1994. A new residential project would most likely work if it taps the affordable end of the market, because a luxury condo would not fly next to Aala Park, which is a haven for the homeless, said Ron Teves, president and CEO of real estate brokerage Chaney Brooks & Co.

"I would think if it's high-end residential, then you've got an issue with the residents of Aala Park," he said.

However, the park's improvements -- which include new lighting, game facilities and parking -- may make the area more desirable, at least for moderate-income residents. "We're hoping that whole area will be gentrified," Camp said.

A new development could also support some retail and business tenants, since the block carries mixed zoning. "It's an appropriate spot for retail as an extension of Chinatown," she said.

In addition to owning the downtown land, Blue Chip Corp. also has a slew of high-end residences on Kahala Avenue. The Japanese company is not selling those right now, but likely will later, Camp said.