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The Honolulu Advertiser
Posted on: Thursday, February 6, 2003

Miami firm to purchase Kaka'ako high-rise sites

By Andrew Gomes
Advertiser Staff Writer

A Miami-based luxury condominium developer has agreed to purchase the land and development rights for two prime Kaka'ako high-rise sites from a Republic of Nauru trust, and plans to revive the stalled master-planned project that started with Nauru Tower.

Crescent Heights, a closely held private firm that has sold more than $3 billion in condo units from New York to California, still needs to complete the details but it is expected to complete the transaction as early as mid-March.

The deal, estimated at $20 million, is for two undeveloped parcels at the five-tower project that includes the blue-glass-sided luxury Hawaiki and Nauru towers and the "affordable" 1133 Waimanu building.

A Crescent Heights spokesman declined comment, but company officials have advised the Hawai'i Community Development Authority of its plan to acquire the two sites and proceed with development as quickly as possible, said Jan Yokota, agency executive director.

D. Scott MacKinnon, a Honolulu attorney representing seller Nauru Phosphate Royalties (Honolulu) Development Inc., confirmed a purchase agreement had been reached but said a confidentiality agreement prevented him from disclosing further information.

If completed as expected, the deal would restart Nauru Phosphate's plan to build two more luxury residential towers on the site once known as 404 Pi'ikoi just 'ewa of Ala Moana Center.

Last March, Nauru Phosphate, an investment trust of the South Pacific republic, disclosed that financial troubles had derailed development of an estimated $110 million project called Hokuloa, originally scheduled for construction in late 2001.

Nauru, an 8-square-mile island nation, obtained great wealth from phosphorus mining, but has suffered investment losses in recent years and is now more associated with money laundering as an offshore banking haven.

Because of the losses and capital commitments elsewhere, the trust was unable to provide the money needed to secure financing for Hokuloa, roughly $40 million.

Local developers expect that Crescent Heights could begin construction before the end of the year unless the development plan for the tower is drastically altered.

MacKinnon said it will be up to a new owner whether to proceed with the project as designed or with changes.

As planned, the tower's design is similar to 46-story Hawaiki but with fewer — though larger — units at slightly higher prices, from $550,000 to $575,000.

Yokota said permits for the project remain in place, and she has been pleased with Crescent Heights' involvement with the agency.

"We've been impressed by their interest and willingness to work together to improve the whole area," she said.

If Crescent Heights moves ahead with construction this year, it would be the second residential high-rise to do so in Kaka'ako, and could be followed by a third.

A partnership between local developers The MacNaughton Group and Kobayashi Group in December began selling units in an ultra-high-end condo Hokua, just 'ewa of Nauru Tower.

At prices from $535,000 to $5.5 million, 206 of 248 units have sold. Construction is scheduled to begin by the end of the year.

The third proposed project is being pursued by Japanese billionaire Gensiro Kawamoto, who bought most of an undeveloped block bordered by Queen, Keawe and South streets in 1989.

Earlier this week, Kawamoto said he hopes to advance his plan for a 20-story tower with 230 large one-bedroom units either for sale or rent to a middle-income target market.

Yokota said she has met with Kawamoto, who would need development approvals from the agency, which oversees development in Kaka'ako.

Local real estate market researchers believe there is more than enough demand for all three projects given the pace of condo sales and because the three projects target slightly different markets.

"There is room in this market as long as nothing changes the current trend for demand of condominiums," said Jeff Arce, chief financial officer of The MacNaughton Group.

Condos were the hottest seller in the residential market last year, as 5,406 sales of existing units topped 4,261 sales the previous year. At the end of the year, inventory stood at 1,695 units, slightly below 2001 and far below peak levels of 4,700 in 1991.

Nauru Phosphate purchased the greater 18-acre site bordered by Ala Moana, Pi'ikoi and Waimanu streets from Dillingham Corp. for $43 million in 1984.

It completed Nauru Tower in 1991, followed by 1133 Waimanu in 1996.

Hawaiki construction started in 1993, but was halted three years to wait out a market slump and finally completed in 1999.

In 2000, Nauru Phosphate amended plans for the fifth building from commercial to residential and expected to break ground around 2006.

Reach Andrew Gomes at agomes@honoluluadvertiser.com or 525-8065.