Posted on: Wednesday, March 30, 2005

Harbor remake in jeopardy

By Andrew Gomes
Advertiser Staff Writer

An ambitious $300 million plan by a Texas developer to partner with a state agency to remake part of Honolulu Harbor into a residential-mixed use community served by streetcars has stalled after failing to gain support at the Legislature.

The project ran into difficulty recently when two bills failed to advance and allow the state to sell waterfront property near Aloha Tower Marketplace and form a joint venture with Ken Hughes of Dallas-based UC Urban.

Also not moving along were about $37 million in state budget requests to pay for area traffic improvements and relocating a Hawaiian Electric Co. power plant to make way for a park.

The future of the project was unclear following a meeting yesterday by the board of the state Aloha Tower Development Corp. working with Hughes, though Hughes said his plan is not dead.

"We're not shut down," he said. "We hit a bump in the road with the Legislature. We're regrouping."

Hughes told agency board members he needed to take the next three or four months to assess what options he might have to see the project through. He didn't discuss possible alternatives, but maintained general optimism.

"I still feel the project is extremely feasible," he said. "Where there is a will, there is a way."

Hughes has been working on the project dubbed Pacific Quay since he responded to a state request for proposals in late 2002. He signed a development agreement with the agency in October.

The developer had planned to start construction early next year if state financing was approved in this year's legislative session. That timetable now is in doubt.

But the inaction on other legislative requests set back the project on several fronts.

Hughes needed legislative approval to sell fee-simple loft-style condominiums at Piers 5 and 6. The state development agency controls the property, which is owned by the Department of Transportation, but cannot sell land. Two bills allowing such land sales are now considered dead.

The development and sale of 570 fee-simple condos was a change to the developer's initial plan to build rental apartments on land leased from the state.

Another bill that failed to advance would have allowed the development agency to become a partner in a limited liability company with Hughes. A partnership was sought as a way to share expenses and income of the project.

Other parts of Pacific Quay include removing the parking from Irwin Park, building a parking garage at Pier 2 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.

Several elements of the project were designed with a public benefit to be financed by a combination of state and federal money roughly estimated at around $150 million.

Public elements of the project include replacing the HECO plant with a park, starting a 2-mile downtown streetcar system and creating a bypass tunnel under Nimitz Highway.

The state agency sought $24 million in state money to begin work on the power plant relocation. Some $854,000 was included in Lingle's two-year budget proposal. The House recently eliminated the item.

Another $13 million was sought for traffic improvement work, and resulted in a $4.3 million budget item that was eliminated in the House. The Senate is considering the budget and would have to agree with the House on changes.

"We're hoping that the money is reinstated," said Dan Orodenker, Aloha Tower Development Corp. executive director.

Agency board members and Hughes said there appeared to be a lack of interest on the part of legislators to make the related bills and financing a priority.

Hughes could submit similar requests to the Legislature next year, but some agency board members are concerned they may be losing favorable market timing for attractive financing and condo demand.

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