COURTESY KC RAINBOW DEVELOPMENT This is an artist's rendering of the 492-unit Moana Vista, planned for 1015 Kapiolani Blvd., next to the recently completed Public Storage facility, in the foreground. By swapping density rights with the storage development, the Moana Vista will have more square footage than otherwise.

Developers look again to swapping for density

The Moana Vista condo on Kapiolani is the latest to use this approach

As the population density of Honolulu's urban core increases, developers are once again looking to reach deals with neighboring landowners as a means of building more in the same allotted space.

KC Rainbow 2 Development is the latest firm to employ this strategy, using a joint development agreement with Public Storage Inc., its next-door neighbor, for the 492-unit Moana Vista condominium project, unveiled in May.

The agreement allows KC Rainbow to build more residential units, commercial space and parking on its 2.5-acre development site at 1015 Kapiolani Blvd. than would otherwise be allowed.

Daniel Dinell, executive director of the Hawaii Community Development Authority, said such agreements are allowable between one or more parties to maximize floor area and density.

"We're just looking to make sure that it's logical, and that the properties are linked in a way that makes sense," he said.

Posec Hawaii, developer of the 909 Kapiolani Condominiums, used a similar agreement with the Musicians Association of Hawaii, the union that owns a building and 14,000 square feet of land on the Diamond Head side of Posec's site.

Such deals are not unique to the current wave of development in Honolulu. Developer Jack Myers in the late 1990s arranged a similar deal with the Catholic Diocese next door to his residential tower, One Archer Lane, at 801 South King St., acquiring density rights from its cemetery to add more units to the high-rise condominium.

In Moana Vista's case, the nature of the agreement has changed since the project was conceived.

Allen Leong, KC Rainbow's director of operations, said the original letters of intent signed last summer were between Moana Vista, Public Storage and Obun Hawaii Inc., a printing and publishing company that owns a 2-story building and printing plant almost 10,000 square feet behind the Moana Vista site.

The project plans and the joint development agreements were approved by the HCDA in December 2005.

Public Storage and Moana Vista finalized their joint development agreement in February, Leong said, in which Public Storage agreed to swap some density rights with KC Rainbow for a fee he declined to disclose.

But Obun Hawaii pulled out of its joint development agreement with KC Rainbow in March.

"It just didn't fit their business model," said Leong.

KC Rainbow estimates a loss of about 16,000 square feet of floor area for Moana Vista. The reduction meant that only about 100 units -- instead of the 124 envisioned in early plans -- are now set aside for "affordable" rentals.

Members of the HCDA board are negotiating with KC Rainbow to look for ways to restore some of the original number of affordable rentals to the project. Leong said he was in negotiations with several other parties, but so far has nothing definite.

But the overall shape of the project is still the same, he said.

The plans are still to offer a 41-story residential tower atop a 5-story podium at the 1015 Kapiolani site, and a smaller residential tower including affordable rentals and public parking at the Waimanu Street site.

KC Rainbow and Public Storage are discussing the possibility of offering more storage units within the commercial portion of the Moana Vista project.

Leong expects to present the revised plans before the Ala Moana neighborhood board this month, then return to HCDA in August for approval.

When sales for Moana Vista first started in May, two-bedrooms started in the low $400,000s.

The project is about 80 percent sold, with units above $500,000 remaining.

The project is slated to break ground in October, with delivery expected as early as March 2009.

KC Rainbow, owned by Silicon Valley entrepreneurs Fred and Annie Chan, is the developer of Moana Pacific, the twin oval towers nearing completion on Kapiolani Boulevard.