Kaneohe Ranch

Work to Begin Soon on Kailua Project

March 09, 2012
By Andrew Gomes
Honolulu Star-Advertiser

Construction on the townhouses was halted by a downturn in the state economy.

After a four-year delay largely to wait out economic and real estate market downturns, construction is moving ahead on an upscale townhouse condominium complex in Kailua formerly known as Ironwoods.

The project with 153 units across Kailua Road from Kailua District Park was renamed Ka Malanai and is slated to begin construction next month after infrastructure work began last month.

The local Schuler Division of Texas-based homebuilder D.R. Horton anticipated in 2006 that construction would start in mid-2008, but the recession put the roughly estimated $100 million project on hold.

“We had a very stiff roller coaster ride, and we feel we have pulled out of the low point and are on the way back up,” said Bob Bruhl, Schuler’s vice president of development.

Bruhl said the company plans to offer a small number of units for sale through a lottery in the fall, then release units for sale in phases. Prices are expected to range from the $400,000s into the $800,000s, according to past Schuler estimates, though Bruhl said he is not sure the top end of prices.

If sales and construction proceed favorably, initial units could be complete next summer, with full build-out in the latter half of 2014.

Ka Malanai will be the first large-scale addition of new houses to the Windward community in more than 30 years or so. However, the project also displaced a greater number of cheap, old rental apartments that had long satisfied a critical need for homes affordable to low- and moderate-income residents.

About 200 mostly rental units in a dozen or so two-story walkups were demolished on the property in 2007.

The demolition was inevitable, according to Schuler and the property’s former owner, a subsidiary of dominant Kailua landowner Kaneohe Ranch.

Kaneohe Ranch faced a mandate from the Environmental Protection Agency to close 80 multifamily cesspools that served the roughly 50-year-old apartment buildings. The EPA in 2005 outlawed large-capacity cesspools to protect the environment.

The federal agency allowed Kaneohe Ranch to pay a fine and let renters and cesspools remain until ground leases expired on the apartments in mid-2007. Schuler, which bought the property in early 2006, assumed responsibility for the EPA mandate.

Some apartment tenants and affordable-housing advocates criticized the redevelopment plan for displacing one of Kailua’s biggest collections of affordable rental apartments.

The timing, they noted, was especially bad because tenants were being forced out of below-market housing at a time when rents were soaring along with competition for inexpensive places to live on Oahu.

Bruhl said the delay in building Ka Malanai had no bearing on the loss of the old apartments because without cesspools the apartments had to be vacated.

Bruhl also said building affordable homes on the site was too expensive for the developer, given the cost of the land and costs to add sewer connections and properly remove asbestos, mercury and lead when the old buildings were torn down.

According to property records, Schuler paid about $21 million for the property. A breakdown of other costs wasn’t available.

Bruhl said Schuler agreed to make several improvements benefiting the community, including repaving Kailua District Park’s parking lot and adding about 15 more stalls, widening Kailua Road in front Ka Malanai to add a turn lane and a sidewalk, improving drainage along the road and placing utility lines underground.

Total investment in the project is estimated at close to $100 million. To recoup that much would mean Schuler needs to sell units for about $650,000 on average.

“This is not a luxury set of condo buildings,” Bruhl said. “They are nice. They’re on the high end. They have to be because of the investment we’re putting in. That’s a serious commitment to Kailua.”

The layout of Ka Malanai calls for six four-story buildings each with 21 to 30 units. The first floor will accommodate parking, with residences on the upper floors. Three large landscaped courtyards will separate the buildings.

Initially, the project was expected to include three additional lots on the Wai­ma­nalo side of Aoloa Street. But Kaneohe Ranch didn’t sell one lot to Schuler in 2006 because residents of the Kailuan owned their units on leasehold land through a cooperative.

Kaneohe Ranch offered cash incentives for Kailuan owners to leave early, but ended up suing to evict some in early 2008 after the ground lease expired. The building was later demolished.

Bruhl said Schuler has had discussions to buy the lot, which is next to two other lots Kaneohe Ranch sold the developer, but no certainty or a timetable for a deal and redevelopment exists.

If a deal is reached, the three lots could be integrated with Ka Malanai or developed as something different.

One of the remnant parcels owned by Schuler is still occupied by tenants in two apartment buildings called the Countryside Apartments.

The complex with 16 apartments wasn’t demolished because it didn’t have a cesspool.

View Original Media Clipping