Hokulia project back in business

The development's lot owners are now seeking permits and contractors

As the dust settles in the wake of the six-year Hokulia development controversy, lot owners who have had millions tied up in the $1 billion luxury Kona project are now focused on the next steps.

Their tasks are to get the right building permits, contractors, and designs into place to build the dream homes they envisioned for their lots.

John De Fries, chief executive of 1250 Oceanside Partners, said the development team is reactivating permits and rebidding all of the contractors.

But that may prove to be a challenge, given the escalation of construction costs and competition for contractors in today's building boom.

"All contractors are busy," said Brian Berry of Re/Max Brokers and past president of the Kona Board of Realtors. "They're still finishing a lot of previously approved developments."

Of the 170 lot owners who bought into the first phase of the project as early as 1999, about 50 are in various stages of design review, while another five are applying for construction permits.

Three to four homes should break ground by the end of this year, according to De Fries, with 20 more expected to start beyond 2008.

Changes resulting from the March settlement have not appeared to affect the attractiveness of the lots.

Lot ownership still comes with membership in the Jack Nicklaus golf course, now at about $150,000 annually, though there will no longer be a members' lodge.

And there will only be 665 rather than 750 homes.

Also, as part of the settlement, lot owners and homeowners would contribute one-quarter of 1 percent of resale proceeds, in perpetuity, to the Hokulia Foundation, a nonprofit set up to provide health care, education and affordable housing for the Kona community.

But a more immediate -- and more costly -- impact of the dispute is higher construction costs for homes at Hokulia.

Architect Roger Brasel of Hawaii Island Architects LLC, who is designing plans for four Hokulia lot owners, said that construction costs have gone up between 60 to 75 percent compared to two years ago, due to higher material costs and the shortage of labor.

He estimates that an 11,000-square-foot home that had its permits prior to the judge's ruling will now cost between $5 million to $6 million to build.

"This is the most dramatic increase in cost of construction out of any time period we've seen," he said.

Yet Brasel said he is excited because compared to other Big Island resort projects, the lots at Hokulia are larger, and design rules less restrictive.

"I've seen a lot of different subdivisions," Brasel said. "This is, far and away, going to be the nicest residential subdivision Hawaii's ever seen."

Lots on the market

While the developer and Protect Keopuka Ohana battled one another for more than two years, the lots sat in limbo, because the 2003 decision by Judge Ronald Ibarra denied Hawaii County from issuing building permits.

Some ended up on the market, and many more are now hitting the market.

Berry, of Re/Max Brokers, said there has been a flurry of vacant land sales at Hokulia since news of the settlement went out in March.

Some lot owners were scared, he said, by the legal mire, and though they trust the reputation of Oceanside partner Lyle Anderson, they have moved on.

"Because of the length of time the legal problems took, a lot of them have made other investments," he said, "They've been waiting all this time, and now say, 'Well, my portfolio has changed, I'm going to sell and go to Aruba.'"

Others took a gamble over the years -- and did fine.

More than a dozen lots traded hands before the settlement, according to property records, for lower prices in 2004 and 2005, but still at a profit.

Those selling this year are making up to 60 percent more than the original purchase price.

Alan Livingston of Livingston Realty on the Big Island says at least 21 lots from Hokulia phase I listed for between $1.65 million to $5 million.

"It's been a pretty active market," said Livingston. "I think it speaks basically to the credibility of Lyle Anderson and his track record."

At least one home -- one of four which had permits to build before Ibarra halted Hokulia -- is also on the market for $5.6 million.

Mika Ono of Livingston Realty has listed the three-bedroom home for more than a year, and shown it to potentially interested buyers.

But so far, she hasn't had any serious offers.

The home by Phil Davis Architects offers ocean views, an outdoor barbecue, two detached guest suites and 275 coffee trees. The owner bought another property above Hokulia, and put the home on the market.

The hitch: Electricity for the home still comes only from a generator.

"Once the county water and electricity is hooked up, it should be easier," she said.

Dean Gilpin & Associates has more than a dozen lots on the market, for between $1.65 million to $5 million. Broker-in-charge Phil Fukushima said interest has grown since the settlement.

But the market has yet to catch up to where it was five years ago, according to Davis, who then designed a handful of homes that never got built at Hokulia. Instead, the lots went to market.

Lot owners today are slow to move forward with new construction, he said.

Power coming

De Fries said 1250 Oceanside Partners is working with Hawaiian Electric Light Co. to install power lines for the first phase of Hokulia within the next three months.

Both potable and non-potable water wells are available at the development site, he said. Other utilities are expected to follow.

Sales for the remaining 53 lots in phase I are expected to begin in October. Phase II lots should hit the market by the end of the year, according to De Fries.

Mark Geist is one among the group of about 170 lot owners that recently dropped a $265 million suit against the state and Hawaii County. A U.S. District judge dismissed the suit on Monday.

Geist, a retired California investment banker, finished building his home -- the third completed at Hokulia -- at the end of last year because he already had a county permit prior to Judge Ibarra's decision. He purchased his lot in 1999.

It was simply time to move on, he said.

"We think it's a very special place," Geist said. "We're excited to get this all behind us and to become part of the Kona community."

Jack Kelly, one of the plaintiffs that sued to stop the development, said Protect Keopuka Ohana is involved with implementing the settlement agreement.

The group will continue to monitor cultural sites and environmental issues, he said, and push for land-use reform.

THE LONG AND WINDING ROAD » 1999: Developer 1250 Oceanside Partners begin construction and lot sales for the Hokulia project, which was granted approval by Hawaii County. » 2000: Litigation begins. Protect Keopuka Ohana and four Big Island residents file suit against 1250 Oceanside Partners challenging heir entitlements. » Sept. 2003: 3rd circuit court Judge Ronald Ibarra halts the Hokulia project, ruling that it's an inappropriate use of agricultural lands. 1250 Oceanside Partners already had sold more than 170 lots and invested $350,000 into the project. » Nov. 2004: Oceanside files an appeal at Hawaii Supreme Court seeking to dismiss Judge Ibarra's ruling. » July 2005: Lot owners file $265 million suit against Hawaii County and the state. » March 2006: Both plaintiffs and 1250 Oceanside Partners reach an out-of-court settlement. » June 2006: Paul Alston, lot owners' attorney, files to dismiss the $265 million suit.