Directors of the state Aloha Tower Development Corp. approved an agreement that allows UC Urban to proceed with its residential loft community connected with a downtown streetcar system and ferry terminal subject to the Legislature authorizing state bond financing for much of the public improvements.

If general obligation bond financing is approved during the 2005 legislative session, construction could begin in early 2006.

"With this agreement the ATDC is endorsing a clear vision for the future of Honolulu's downtown waterfront," said David Louie, a private attorney and agency chairman.

UC Urban received the unanimous backing from a mix of private business leaders and officials high in the administration of Gov. Linda Lingle on the agency board, including Ted Liu, director of the state Department of Business, Economic Development & Tourism.

"This initial agreement commits ATDC and UC Urban to a program, but recognizes that much of what needs to be done will require coordination and consensus from the private corporations, the Legislature, various other state agencies and county government before it can become a reality," Liu said.

UC Urban principal Ken Hughes said both he and agency members worked patiently to agree on the plan that has evolved since he responded to a request for proposals in late 2002.

The ambitious project would be developed in several phases, though the agreement allows amendments to content and sequencing.

An initial phase would include modifying traffic access to the Aloha Tower area and developing Piers 5 and 6 with about 360 condominiums, retail, restaurants and parking. Another 210 condos would be developed in two later phases.

The loft-style condos are projected to sell for $360,000 to $800,000, with an estimated 8 percent of proceeds going to the state and the Office of Hawaiian Affairs because the project is on ceded land.

Hughes said his company would arrange private financing for the the Pier 5 and 6 work estimated at $150 million.

Other elements included in early phases would be relocating two Hawaiian Electric Co. power plant buildings to make way for a park, and starting a 2-mile downtown streetcar system.

Removing the parking from Irwin Park and developing a parking garage at Pier 2 would happen in later phases.

Two optional elements are creating a downtown bypass tunnel under Nimitz Highway and transforming Piers 10 and 11 into a new cruise ship terminal with parking, a bus and taxi queuing area, state Transportation Department offices and residential condos.