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The Honolulu Advertiser
Posted on: Saturday, June 5, 2010

Hawaii land being liquidated over failed Kahuku Village plan



By Eloise Aguiar
Advertiser Staff Writer

A company that had hoped to sell old plantation homes in Kahuku to longtime residents for $75,000 each now faces financial trouble and has placed the remainder of its Hawai'i property nearly 2,000 acres on the market.

Florida-based Continental Pacific LLC entered the Hawai'i market in a big way starting in 1998, purchasing nearly 12,000 acres of mostly agricultural land on the Big Island and O'ahu. The company subdivided the land, added infrastructure and sold the lots, doing well for a while.

In all, the company invested about $65 million in the land.

Then sales bottomed out in the past few years. And a failed attempt to give 72 Kahuku households a chance to own their old plantation home has cost the company millions.

Today, Continental Pacific has about 1,923 acres remaining on the Big Island and in Kahuku and will liquidate as much of its property as possible, said Jere Henderson, one of the managing and founding members of the company. The company is also selling some of its land on the Mainland and elsewhere.

The O'ahu properties include the land under Kahuku Medical Center, which has a long-term lease, Kahuku Village, Kahuku Golf Course, a number of beachfront properties and hillside land. There are 60 parcels altogether, including two lots Continental is foreclosing on in Kahuku. On the Big Island, Continental Pacific owns land in Puna and oceanfront in Pepe'ekeo.

Declining property sales and a costly, failed effort to create affordable housing for the Kahuku Village residents are to blame for the company's problems, Henderson said. Sales dwindled to almost nothing in 2007 and worsened this year, with zero sales so far.

"We've lowered our prices considerably, in a lot of cases 50 percent and still get no activity," he said, adding that he has about 1,500 acres left on the Big Island and about 423 acres in Kahuku.

But it was the Kahuku project to sell plantation homes to low-income people, some of whom lived there when the plantation closed, that left the company scambling, Henderson said.

In 2006, Continental Pacific proposed a 10-point plan to the Kahuku Village Association in which residents in 72 homes would purchase their houses.

The plan included owner-financed home purchases, two private beach parks for the community, the creation of 18 oceanfront market lots to be sold to pay for improvements in the village, donation of the golf course and two cemeteries to approved entities, and the construction of cabins and related activities at old Adams Field.

After the company invested two years and $1 million in studies, including an environmental assessment, the city Department of Planning and Permitting requested a much more involved and expensive environmental impact statement, Henderson said. The cost would have been prohibitive and add years to the project as the interest on the land grew to $3 million today, he said.

"The DPP just led us down the road to believe that after we did all this we would be able to subdivide these people's lots out and have some lots on the beach in Kahuku," Henderson said. "After two years they told us you can't do that."

PERMIT ISSUES

The DPP said that in that two-year process Continental Pacific was "continually changing its proposal without submitting an application."

"Ultimately , CP submitted an application for an Existing Use Permit to 'legalize' after the fact all of the dwellings on site," said city spokesman Bill Brennan. "This application was approved with conditions by the department."

The permit allows the homes to be repaired or redeveloped even though they don't meet current building codes.

Carl Bonham, an associate professor in the University of Hawai'i's economics department, said everyone knows that the permitting process here is difficult and some of that is supposed to be that way. Developers plan for the time-consuming process, Bonham said.

"There's a lot of room for improvements in the way the whole process works," he said. "I don't think anybody would argue with that."

Bonham said he is not familiar with the Kahuku project but noted that cash flow is a problem with others as well. Nevertheless, he said, Hawai'i's economy is improving and if the company is selling, "it's because they believe they can get value for it and they think that they can sell it."

VILLAGE HOMES

Despite the failure to complete the project and sell the plantation homes for $75,000 as promised, the company continues to work with the Kahuku Village Association to keep the residents in their homes, said Leslie Llanos, a KVA resident and board member.

"At this point, Continental has been keeping their word," Llanos said, adding that any sale of the village would include protection for residents. "Continental Pacific has made it clear to us that they're at a point where they're so stressed and burdened by the whole thing that if somebody came with a magic number they probably would sell. But even so they would be considerate of our people and make conditions."

The residents at Kahuku Village recognize that a new owner will mean higher prices for their homes, so they are trying to secure their lots now.

Henderson said the company wants to create a condominium property regime for the village residents and sell them their homes. Continental Pacific is also trying to create three lots out of a larger parcel to separate out the golf course and beachfront homes from the village homes.

"We're working like we're pretending it's not going to sell and we're going to go on and try to do that, but we have to sell something because we're out of cash," he said.

Besides the Kahuku Village Association, a second group has formed to initiate negotiations for the village homes.

The principals of Kahuku Plantation Residents Association were at odds with KVA, opposing parts of the 10-point plan, especially the development of 18 market-priced beachfront lots.

With the announcement of the sale, both groups said they are interested in securing the homes in Kahuku Village for the residents living there.

The Kahuku Plantation Residents Association is concerned about affordability, said Margaret Primacio, a member of the association's steering committee.

Costs will be incurred with these city conditions and Primacio said that would increase the price of the homes.

"All those added costs are going to be a burden to the buyer, so land is going to have to be affordable to the people," she said. "We're going to stand strong about that."

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