Honolulu city officials are continuing to pursue a major condemnation lawsuit against one of Kakaako’s most prominent developers over parcels needed to finish rail, despite all the new problems that cloud the project’s future.

But in a twist, the same developer, Howard Hughes Corp., could also launch a separate legal fight against the city if the last four miles to Ala Moana Center don’t get built as planned, current and former rail leaders say.

That’s because Howard Hughes and its subsidiary, Victoria Ward Ltd., based the designs for their mixed-use Kakaako development, Ward Village, on assumed increases to property values generated by the rail line, according to Terrence Lee, the Honolulu Authority for Rapid Transportation board’s vice chairman. 

The Dallas-based developer previously told HART it would bring a “huge” claim against the city if the rail line doesn’t make it through Kakaako, according to Lee and Ember Shinn, one of his former colleagues on the voluntary board overseeing rail.

It’s not clear whether Howard Hughes would still act on that threat as it’s currently battling the city over the very parcels needed to complete the rail line. Howard Hughes Senior Vice President Race Randle as well as administration officials within HART declined to comment on the situation last week. Both sides cited pending litigation. 

They’re at odds over the value of an approximately 2-acre stretch of property needed to erect the elevated line between Cooke and Kamakee streets. Court records show that a trial is now slated to start in March over the approximately $100 million impasse, which is described as the “largest real estate dollar risk on the (rail) project.”

Nonetheless, the situation with Howard Hughes — and what might occur under different future scenarios — reflects the broader uncertainties over what happens if the 20-mile, 21-station elevated rail line doesn’t get all the way to Ala Moana as planned.

Major snags in rail’s construction progress have pushed costs to an estimated $11 billion for what’s supposed to be a transformative project for transit and urban planning across Oahu. The full passenger service to Ala Moana now may arrive as late as 2033. Meanwhile, the COVID-19 global pandemic has erased much of the tax revenue that funds its construction. 

Honolulu’s incoming mayor, Rick Blangiardi, has pledged to somehow get the system past Middle Street. But if it ultimately stops short of Honolulu’s urban center then “HART would have to figure out a strategy” to use all the parcels the city acquired along the line and “make lemonade out of them,” said another prominent local developer, Stanford Carr.

Carr has already built several projects along the future rail corridor, including Keauhou Place and Halekauwila Place. Currently, those developments are set up to complement the rail line. 

If the line doesn’t make it that far, a master plan for the site that includes Keauhou Place and its neighboring development, Keauhou Lane, would allow his company to build more ground-floor commercial space there instead, he said.

“We kept that in mind when we designed and master-planned the block,” Carr said in a recent interview.  

Still, Carr stressed that he’s an optimist and that he believes “failure is not an option” for completing rail.

“We can’t build any more lanes. We expanded the H-1 freeway as far as we can go,” he said. “The rail is our solution for the future population growth and urban growth.”

A Land Dispute, And A ‘Centerpiece’

Howard Hughes’ 60-acre, rail-adjacent Ward Village project includes high-end condominium developments such as Ke Kilohana and Ae’o, as well as retail such as a Whole Foods Market and the Ward Entertainment Center, where the Consolidated Theatres Ward 16 are located.  

According to pretrial documents, the city estimated the total value of the portions of parcels it needs between Cooke and Kamakee at nearly $13.7 million. 

Rail’s federal oversight reports say that Howard Hughes has “informally discussed valuations as high as one-hundred million more than the present offer,” however.

Mark Murakami, an attorney who’s represented Howard Hughes in the matter, did not return a request for comment last week. 

He previously testified before the HART board and Honolulu City Council committees and has taken issue with the city for launching condemnation proceedings against Howard Hughes while negotiations were ongoing.

Other small businesses along the rail corridor have expressed similar concerns about the tactic, although city officials say they’ve followed the proper federal guidelines for the condemnation process. 

Murakami has further criticized HART and the city for giving the developer just two days’ notice before launching those proceedings.

Rail leaders haven’t been very receptive to those critiques.

In one notable exchange during a December 2017 HART meeting, Shinn, who served on the board from 2017 to 2019, told Murakami that Howard Hughes has been touting the rail progress while also hindering its progress.

“We would hope that Howard Hughes, who is a very big player in Kakaako and very well-respected, would cooperate with us in this process, rather than being an impediment,” Shinn said. She reminded him that Howard Hughes advertises its properties abroad as “close to rail.”

Recent court documents filed by the city echo that sentiment.

“Howard Hughes and other related entities have consistently touted the (Honolulu rail transit project) as a benefit to Ward Village,” attorneys for the city wrote. The company has described rail as “a tremendous opportunity for Ward Neighborhood” and a “centerpiece for Ward Neighborhood” in its development applications, according to the city.

Whether rail will ultimately make it that far — and how the situation unfolds with one of the island’s biggest developers — remains to be seen.