Financial constraints delay Nauru construction project
By Andrew Gomes
Advertiser Staff Writer
Financial constraints of a Republic of Nauru investment trust have delayed construction of a fourth residential condominium in the Pi'ikoi/Ala Moana area and led the trust's Honolulu development arm to seek alternatives including the possibility of selling the undeveloped property.
Nauru Phosphate Royalties (Honolulu) Development Inc., which built the blue-glass-sided Hawaiki and Nauru luxury towers, had anticipated starting construction last fall on its fourth condominium, a $110 million high-rise.
Last week, the state agency overseeing redevelopment in Kaka'ako amended Nauru Phosphate's planned development permit, pushing back the tentative construction start date for the next condominium by one year, to March 31, 2003.
D. Scott MacKinnon, a Honolulu attorney representing the Nauru trust, said yesterday that he's not sure what will happen with the next phase of the project, Hokuloa Tower, or a fifth and last luxury condo planned for the site.
"They are re-examining what they are going to do in Honolulu," he said of the trust.
MacKinnon said that to obtain construction financing in today's market requires the trust to chip in 35 to 40 percent, or about $40 million, of the estimated $110 million cost of the project.
But because of bad returns on trust investments in recent years and other capital commitments, the trust cannot pay for its share of Hokuloa construction, MacKinnon said.
MacKinnon said the trust, therefore, is exploring selling its Honolulu property with all development rights, or finding a joint-venture partner to help finance and possibly develop Hokuloa and the fifth planned tower.
MacKinnon said he could not discuss what stage the review is at.
"They are actively pursuing available options," he said.
Two people who have been in contact with prospective buyers say the trust is asking around $20 million for the remaining undeveloped property totaling about five acres, or about $92 a square foot — about $37 a square foot more than what Nauru Phosphate paid for the property in 1984.
Christine Camp, president of Avalon Development Co. and a Hawaii Community Development Authority board member, said land values in the area are between $90 and $100 a square foot.
"I think that property is intrinsically a good location because of the views it affords and what's happened at (Victoria Ward Centres) — the miracle on Auahi Street," she said. "It's such a pleasant area to be in."
Camp said she expects someone to begin developing a residential high-rise in Kaka'ako soon, given a strong market, Victoria Ward's master plan calling for as many as six residential condos, and Nauru's master development plan.
Local real estate experts say Nauru Phosphate, even with its financing trouble, still maintains an advantage over other residential high-rise developers in the area because the company has all necessary development permits.
The 8-square-mile island nation south of the equator in the Pacific initially obtained wealth from phosphorous mining, but suffered investment losses in recent years and has become more recently associated with money laundering as an offshore banking haven.
Nauru Phosphate entered the Hawai'i market in 1984 when it purchased an 18-acre site bordered by Ala Moana and Pi'ikoi and Waimanu streets from Dillingham Corp. for $43 million.
The firm completed the 304-unit luxury condo, Nauru Tower, in 1991 and a 282-unit affordable condo, 1133 Waimanu, in 1996. Construction of the 425-unit luxury condo, Hawaiki Tower, was begun in 1993 but halted three years to wait out a market slump. It was finished in 1999 and sold out earlier this year.
The fourth tower, designed in signature blue glass, was planned to be similar to the $110 million, 46-story Hawaiki Tower in size and development costs, but contain fewer — though larger — apartments at slightly higher prices from $550,000 to $575,000.
Two years ago, Nauru Phosphate converted plans for its fifth building from commercial to residential use, and accelerated its development timetable to respond to higher than expected market demand.
Reach Andrew Gomes at agomes@honoluluadvertiser.com or 525-8065.
