Just because something is legal doesn’t mean it makes good sense.

That’s how I feel about Alexander & Baldwin’s proposal to build six luxury condominium homes on a single oceanfront lot on Kahala Avenue.

A&B’s project is planned at 4607 Kahala Ave., where it intersects Hunakai Street. It is one of 30 properties A&B bought from Japanese billionaire Genshiro Kawamoto. The project is allowed under Hawaii’s residential zoning codes so long as the company gets all the required permits.

But I am not sure A&B’s Kahala condos will end up helping anybody except wealthy out-of-towners seeking second homes or a place to park their money.

Alexander & Baldwin proposes to build six luxury condominium homes on a single oceanfront lot on Kahala Avenue.

Alexander & Baldwin proposes to build six luxury condominium homes on a single oceanfront lot on Kahala Avenue.

Courtesy of Alexander & Baldwin

You have to wonder about changing something that for more than a century has been a single-family-home neighborhood into a condo development. Opponents say it will set a precedent for more dense residential building in Kahala and will destroy the character of their neighborhood.

They argue that a condo development will increase the already high home prices in Kahala and eventually have a trickle-down effect, hiking property prices elsewhere on Oahu.

With the median home price on Oahu now $760,000, many middle-income families here are struggling to buy a home.

Buyers for homes priced over $3.5 million “are predominantly international, Asian buyers and from the West Coast.” — Myra Brandt, real estate broker

If A&B gets permission to proceed at 4607 Kahala Ave., it will be the first time a fee-simple, luxury, multi-family condominium is allowed in the Kahala residential area. Until now, fee-simple Kahala oceanfront land has been for single-family homes only.

A&B’s proposal is to build three warehouse-sized duplex buildings on the 1.3 acre lot, with each building featuring two condo homes.

In addition, plans for the single lot to include two driveways, a guest parking lot and six swimming pools.

“They are definitely big homes, but there are many big homes along this stretch here,” says Jeff Overton, a principal of Group 70 International, which did the design and planning work on the project for A&B.

Attorney William W. Saunders Jr. says, “The A&B project will encourage everybody who has a big enough lot in Kahala and elsewhere on Oahu to want to do similar multi-home condo projects. It will double or triple property values.”

A&B spokeswoman Tran Chinery says in an email that A&B, for now, is not planning any other condo projects on its Kahala holdings. A&B has sold 21 of its former Kawamoto properties, but it still has nine left.

“There are currently no plans to undertake attached residential developments such as that proposed for 4607 on the remaining owned lots in Kahala,” says Chinery.

Saunders is suing on behalf of the non-profit group Friends of Kahala to stop the project, saying its cumulative effects have not been considered as they should be in the environmental assessment  — “such as the effect of driving up real estate prices for everyone, increasing taxes and contributing to Hawaii’s already critical affordable housing crisis.”

They Rarely Sell To Locals

Supporters for A&B’s planned project at a recent public hearing were all from a single real estate company, Berkshire Hathaway HomeServices Hawaii Realty, a company with ties to billionaire Warren Buffett.

When the real estate agents from Berkshire Hathaway testified, they identified themselves only as people who grew up in Kahala or had close ties to the neighborhood. They failed to say they were home sales professionals with the potential to list and make money from the sale of the luxury condos.

Under the city’s rules, such disclosure is voluntary.

The city’s Department of Planning and Permitting held the hearing Aug. 3 to collect public opinion on a Special Management Area permit A&B needs to proceed with the Kahala condos.

Alexander & Baldwin proposes to build six luxury condominium homes on a single oceanfront lot on Kahala Avenue. A&B’s project is planned at 4607 Kahala Ave.,

The property at 4607 Kahala Ave. is a single-family lot.

Courtesy of Alexander & Baldwin

Berkshire Hathaway agent Rachel Ross testified that A&B’s project would help solve Hawaii’s housing shortage.

“Every time we create new homes, and we know there’s a shortage of homes here, if we build six more here then families move up and maybe move from the ridge to property down here,” said Ross

But it is unlikely any local families will be buying homes in A&B’s proposed Kahala condo project.

City tax assessment records show that since A&B started selling the former Kawamoto properties three years ago, only one of the seaside properties was sold to a local resident.

“The A&B project will encourage everybody who has a big enough lot in Kahala and elsewhere on Oahu to want to do similar multi-home condo projects.” — William W. Saunders, attorney

That was to local contractor Bob Armstrong, who bought 4635 Kahala Ave. from A&B on Sept. 13, 2013, for $4,375,000.

Real estate broker Myra Brandt says local buyers rarely purchase Oahu’s most expensive luxury properties.

Brandt says buyers for homes priced over $3.5 million “are predominantly international, Asian buyers and from the West Coast. The buyer strength is from people who have made money in the technology and finance industries.”

Brandt is the principal broker for List Sotheby’s International Realty.

A&B says it plans to spend $40-$45 million to build the three large condominium structures on the Kahala lot for six as-yet-unidentified potential buyers. Each structure will house two families, one on each floor. The total living space for each unit will be 5,000 square feet.

A&B says in company reports that the two units in the building to be built closest to Kahala Avenue are expected to sell for $6 million each.

The other two buildings will be constructed closer to the beachside of the property. The four units in those buildings will listed for $10-$12 million each.

Not Just A Kahala Issue

This proposed condo development highlights a much larger phenomenon on Oahu. Building density is increasing each year, not just in the urban core but in Oahu’s formerly tree-filled suburbs as well.

Current zoning codes allow homeowners to build large homes on very small residential lots and to put up many homes on large lots in neighborhoods that until now have been single-family home neighborhoods.

Honolulu Planning and Permitting Director George Atta says in an email that A&B’s proposal to build six homes for the single property is perfectly in keeping with Oahu’s zoning code.

“The Land Use Ordinance allows these kinds of developments based on the zoning and the size of the lot,” Atta writes.

Alexander & Baldwin proposes to build six luxury condominium homes on a single oceanfront lot on Kahala Avenue. A&B’s project is planned at 4607 Kahala Ave.,

An aerial view of the proposed condo site on Kahala Avenue.

Courtesy of Alexander & Baldwin

A&B  development manager Craig McGinnis says A&B’s 4607 Kahala Ave. property is large enough to allow the company to build up to up to seven single-family detached homes if it wants. He brought this up at the hearing to make the point the company could add more density if it wanted, but that instead it chose to build less.

Saunders says he has recently discovered a covenant that might prevent A&B from building the multi-unit luxury development.

Saunders says when Bishop Estate, now known as Kamehameha Schools, sold its leasehold land in Kahala in the mid-1980s and ’90s, it required fee-simple buyers, including the then-buyer of 4607 Kahala, to retain the former leasehold covenants allowing only one home per lot. But A&B disputes that contention

“The Land Use Ordinance allows these kinds of developments based on the zoning and the size of the lot.” — George Atta, Honolulu Planning and Permitting director

Berkshire Hathaway HomeServices Hawaii’s president, Tracy Bradley, was among those at the hearing speaking in favor of the A&B project. Bradley, who grew up in Kahala, said “I don’t see any negative to our community.”

In a phone conversation later, Bradley added, “If people don’t like what A&B is doing they need to address changing the zoning code that allows the project.”

Bradley says A&B has not promised Berkshire Hathaway the listing for the property and A&B confirms that.

Market Impact Downplayed

Economist Paul Brewbaker says the protest against the A&B project is “simply protectionism from Kahala homeowners who want to protect their market power.”

Brewbaker says if A&B is allowed to proceed, he doubts if its Kahala condominium project will have any significant effect on the immediate Kahala real estate market or an eventual trickle down effect that would make it increasingly difficult for Oahu residents to be able to afford homes.

Brewbaker regularly writes economic reports on Hawaii’s real estate market.

He says the effect of the A&B project on the Oahu real estate market at worst would be neutral.

“They are definitely big homes, but there are many big homes along this stretch here.” — Jeff Overton, Group 70

If even one local family bought a condo in the A&B project, it could have a positive effect of freeing up the local buyer’s former home for another local family to purchase, he says.

The real problem causing the housing crisis on Oahu is not A&B and other developers creating luxury properties, but that the overall production of new homes in Hawaii is so small, he says.

Brewbaker says when he was a teenager growing up in Kailua in the 1970s, there were 10,000 to 15,000 residential units constructed every year. Now, Brewbaker says, there are not even 3,000 new units built each year on Oahu.

Atta has until Aug. 31 to submit his report on A&B’s Kahala condominium proposal to the Honolulu City Council.

The Council is charged with approving or rejecting Special Management Area permits. A&B needs such a permit because its proposed Kahala building site is on protected coastline.

The public will have more opportunities to testify when the Council schedules hearings on A&B’s proposed Kahala condominiums.

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