The on-again, off-again Kohala development known as the Villages of `Aina Le`a is on again. In August, the state Land Use Commission gave new life to the project when it backed away from the action it took last April to have the 1,060 acres of Urban land revert to the Agricultural classification.
Why the turnaround?
For one thing, the commissioners seemed swayed by arguments of DW `Aina Le`a Development, LLC, which has taken over the project from landowner Bridge `Aina Le`a, that it could raise the money necessary to kick-start the affordable housing component of the project. Robert Wessels, the “W” in DW, gave the commission copies of construction contracts and architectural drawings that he said showed DW `Aina Le`a’s commitment and ability to have the affordable units ready for occupancy by the November 17, 2010, deadline that since 2005 has been a part of the Land Use Commission’s conditions on urbanization of the parcel.
For another, the Hawai`i County planning director, Bobby-Jean Leithead-Todd, insisted that the new developers had the backing of the administration of Mayor Billy Kenoi. “My instruction from the mayor is, if I’ve got viable projects, I’m to work overtime to make sure approvals go through so the guys can start construction,” she said. Although last spring she had given the developers a 50-50 chance at best of meeting the November 2010 deadline for affordable units, by the time the August meeting rolled around, she put the odds at 85-15 in favor of the developer.
And so, on a motion of six to three, commission members voted to rescind the previous order that the developer show cause as to why the land should not be reverted. Two conditions were attached to the motion: one, that the developer complete construction of at least 16 affordable housing units by March 31, 2010; and two, that the Hawai`i County Planning Department provide the LUC with quarterly progress reports on the project. (The motion itself was later determined to have been technically flawed. A re-do was scheduled for the LUC’s meeting in late September.)
A Clean Slate
The very fact that the developer has changed seemed also to play into the commissioners’ more accommodating views. Relations between Bridge `Aina Le`a personnel and the commission had become frayed, to say the least, in a series of fractious meetings over the last year. In February, Bridge signed an agreement with DW `Aina Le`a to have it take over development. (DW had a walk-on role developer in 2007, but that earlier development agreement fell through. According to documents given to the LUC, to settle disputes that arose back then, resulting in DW losing a $1,000,000 non-refundable down payment, Bridge agreed to sell in installments to Relco, a company owned by Wessels, the 1,062 acres of land reclassified to Urban, with Relco then agreeing to assign the purchase agreement over to DW, in which Wessels also holds a considerable stake.)
Three weeks after the LUC voted to have the land revert to Agricultural, DW `Aina Le`a asked that it be given status as a “co-petitioner” with Bridge in the LUC case and that the commission stay enforcement of the reversion order. In June, the commission agreed to grant the stay, re-open the show-cause hearing, and allow a one-day hearing for DW to submit additional evidence why the land should not revert.
That hearing occurred August 27 at the Marriott Waikoloa hotel, just a few miles from the land in question.
Although in the end the commissioners agreed to give DW `Aina Le`a a shot at developing the land, beginning with the affordable units, it faces a number of possibly insuperable obstacles. Among other things, over the next 13 months, DW must not only build the affordable units themselves – planned to be in two dozen 16-unit blocks on some 60 acres – but also provide access from Queen Ka`ahumanu Highway, figure out and build some way of dealing with sewage from the occupied units, and install water lines and other utility services to the project.
Alan Okamoto, the attorney for DW, questioned Wessels about several of these issues when arguing DW’s case at the August hearing. When asked about how wastewater would be handled, Wessels responded, “We are putting in our own package plant on this first phase. It’s a cartridge plant. The supplier feels like they’ve done it before, that the Department of Health can give fairly quick approval.”
Wessels also mentioned that the plant would likely be put on land in the state Agricultural District, prompting Commissioner Lisa Judge to point out that while such plants are an allowed use in the Urban district, “it’s not a permitted us on Ag land, which will necessitate additional permits from the county.”
“Is there a reason you’ve chosen the longer path?” she asked Wessels.
“We certainly didn’t want to choose the longer path,” Wessels replied, adding it was mostly a matter of aesthetics. “The manufacturer of the package plants says you can hide it, bury it, but you still have to have ponds. Our desire is to have it as far away from the residential area as possible.”
For intersection improvements, which involve use of state lands, an environmental impact statement will almost certainly have to be prepared. In 2007, an EIS preparation notice was published in anticipation of revamping the entire `Aina Le`a development as a project district, a move that would ease permitting and zoning issues at the county level. No draft EIS has been released yet.
According to planner Sidney Fuke, now working for DW `Aina Le`a, studies for the EIS are nearly all complete and the draft document will probably be released mid-November. “So, if the [state] Department of Transportation requires an accepted EIS before intersection improvements are made, it could be signed off in the first part of next year,” he said. But he insisted that building permits for the affordable units would not have to await completion of the EIS, and Leithead-Todd backed him up on this. The only project that might be delayed by the need to have a completed EIS was the package sewage treatment plant, she said. But, she added, “I don’t think we have a problem getting the EIS submitted and accepted, and getting the package site completed.”
Wessels was even more sanguine about the potential delays that could be associated with compliance with Chapter 343, the Hawai`i environmental disclosure law. When asked by Bryan Yee, deputy attorney general representing the Office of Planning, whether in his view the EIS approval was required before the project road could be connected to the Queen Ka`ahumanu Highway, Wessels replied, “I don’t believe the connection to the highway requires an EIS.”
Yee: “You think you can connect up this road, part of the Villages [of `Aina Le`a] project before the EIS is completed?”
Wessels: “I believe we can, yes.”
Financing
One of the first points brought up by Okamoto in presenting DW’s case before the LUC was that of financing. He mentioned specifically “a recent press release concerning funds from Singapore relating to this project,” and asked Wessels to elaborate.
Wessels described how the Capital Asia Group in Singapore “acts almost like a bank. They have agreed to provide and have actually sent money to Hawai`i escrow to fund construction on the affordable [housing] site.”
Leithead-Todd also praised the Singapore investors, noting that she and Mayor Kenoi had joined them for dinner recently when about a dozen of them were visiting the island. “They were real people, not a fictitious offshore bank,” she said. “I was very impressed.” Leithead-Todd later told Environment Hawai`i that she and Kenoi did not pay for their meals, at a restaurant at the Mauna Kea Beach hotel, but that she believed Sidney Fuke picked up the tab. She had no clear idea of the cost of her meal, but said she remembered her entrée was $28, “so I’d put a value of at least $100 on it.”
Asked if the subject of the `Aina Le`a development came up, Leithead-Todd said it did not arise in her conversations. “My conversations were more about what they did, their medical backgrounds,” she said. “I was intrigued by the fact that they all spoke English…. They invited us to have dinner with them. It was not so much a business-type meeting as a social gathering.”
According to the press release referred to by Okamoto, Capital Asia Group pledged $62 million to the affordable housing portion of the overall project. The group’s website (www.capitalasiagroup.com) suggests, however, that they are not using investment capital already on hand as a source of the funds, but are rather soliciting investors to purchase shares, at $9,600 each, in the land itself. Ten shares purchase “one investment lot,” with 432 such “investment lots” available. Liquidity is not a problem, evidently, with CAG promising an “assured exit” within 30 months and a 30 percent return on investment. Maps on the web page describing the “real estate projects” are lifted from the schematic diagrams prepared for the `Aina Le`a development, showing the proposed subdivided lot for the affordable housing in the context of the larger Urban land as well as a site plan for the blocks of townhouse units.
On August 29, just two days after the LUC hearing (less than 24 hours, if the international date line is taken into account), Capital Asia Group offered a seminar on “Hawai`i Real Estate Participation – The Villages of `Aina Le`a” at the Pan Pacific Hotel in Singapore. “You own the land, we build on it,” the invitation read.
Wessels confirmed that the investors would actually be taking an undivided interest in the land on which the affordable housing is to be built. Capital Asia Group “is selling undivided shares, that’s correct,” he told Environment Hawai`i in a telephone interview. “Because of the nature of many Asian investors, rather than do financing with interest, they actually take title and enter into a joint venture, then they sell. They buy a fractional interest, then they [enter into] a joint venture with the builder, then when the project is completed they sell it, with the builder. They enter into a sales agreement at the same time they do the purchase. It’s a kind of unique financing, but it fits the Asian culture.”
Will individual investors then have their ownership recorded? “Yes,” replied Wessels. ”That will be recorded in the Bureau of Conveyances.”
At the August LUC meeting, Wessels said that his company was poised to take title to the land slated for affordable housing just as soon as the LUC had voted to allow the project to go forward. As of press time, however, the matter was still in escrow. By phone, Wessels told Environment Hawai`i that he expected the deal to close by the end of September.
— Patricia Tummons
Volume 20, Number 4 October 2009
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