Kaka'ako Properties

The story behind Kobayashi Group and The MacNaughton Group’s cancellation earlier this year of their Vida at 888 Ala Moana luxury high-rise condominium project started many months before the developers decided to ultimately nix the development.

B.J. Kobayashi, co-founder and partner of Kobayashi Group, who was a panelist at a commercial real estate industry event this week, said that they should’ve listened to his brother, Patrick, partner, president and CEO of the family-owned development firm, who four months before the final decision was made, first thought about stopping the project.

“It was really tough,” B.J. said. “We called every single homeowner and got their deposits back to them in four days. It’s the first time we had to shelve a project. The design was incredible.”

At the end of the day, though, what ultimately caused the two developers to cancel Vida was their rising costs, with Kobayashi noting that bids for their Park Lane Ala Moana project and King’s Village project came in three to four times higher than their Hokua condo project that was built 10 years ago.

Kobayashi also noted that Texas-based developer The Howard Hughes Corp.’s two luxury towers being built nearby may have also contributed the slow sales of Vida.

“My brother, Patrick, first raised his hand,” B.J. said. “One day, we were all in a conference room and we were looking at all kinds of scenarios to save it. My brother was right.”

Despite the cancellation of Vida, Kobayashi pointed out that there are a couple of sites that the two firms are looking at possibly developing, and one of those sites could be a high-rise project. The developers have already built the Hokua condo project in Kakaako and ONE Ala Moana near Ala Moana Center.

The firms are currently in various development phases for two condo projects in Honolulu, including Park Lane Ala Moana, which is under construction at the state’s largest shopping mall, and the 133 Kaiulani condo-hotel project in Waikiki at the former King’s Village site.

Building permits worth a total of nearly $25 million were recently issued for three new homes in the exclusive Kukio subdivision near the Four Seasons Resort Hualalai on Hawaii’s Big Island, according to PBN Business Leads research.

The largest permit, $12 million, was issued for an oceanfront 2-acre parcel in Kukio’s Kaupulehu subdivision owned by KFRZ Kona LLC, whose members include San Francisco-based real estate mogul Ron Zeff, according to Hawaii business registration and county tax records. KFRZ Kona LLC paid $10 million for the property in July 2015 and also purchased a 1-acre lot across the street for $1.5 million in September, according to data from the Hawaii Bureau of Conveyances.

Zeff is the founder and CEO of Carmel Partners, which sold a portfolio of rental properties on Oahu two years ago for $300 million to Douglas Emmett and Rockpoint Group, the largest multifamily sale in Hawaii in 2014.

Kailua-Kona-based Maryl Construction Inc. is the contractor on the KFRZ Kona project, which consists of eight detached structures with a total of 10 bedrooms, 10 full bathrooms, two half baths and a one-bedroom caretaker hale, or house, according to the permit filed with the Hawaii County Planning Department.

The second large permit issued was for $10 million for new house on a 2-acre parcel in Kukio. The parcel is owned by SMP Kukio LLC, whose member is Andrew Cooper, managing partner of New York wealth management firm AJ Wealth. SMP Kukio paid $1.55 million for the land in January 2015, according to tax records.

The third permit was a $2.5 million project in the Maniniowali section of Kukio, a five-bedroom, five-bath single-family residence. The 0.6-acre lot is owned by Lot 11 Kukio LLC, whose member, Gregg Todd, is president of luxury homebuilder GM Construction in Kailua-Kona, which has several Kukio homes in its portfolio.

To see more building permits, along with new business registrations, real estate transactions and court filings, the print edition of Pacific Business News, published every Friday.

The MacNaughton Group and Kobayashi Group would like to revisit developing projects in the Honolulu neighborhood of Kakaako again in the future, an executive from one of the Honolulu firms told PBN.

Earlier this year, the two developers canceled plans to build the Vida at 888 Ala Moana luxury high-rise condominium project and develop a neighboring parcel that would have added a total of 500 residential units to Kakaako.

“Primarily, it was the fact that we got off to a good start with our pre-sales, but over the past three to four months, there was a real slowdown in the market for Vida,” BJ Kobayashi, co-founder and partner of Kobayashi Group, previously told PBN. “Construction costs rising was probably one of the other factors.”

He also noted that there is stiff competition in Kakaako luxury residential market, where The Howard Hughes Corp. and Alexander & Baldwin Inc. also have projects.

“That doesn’t mean that, in the future, that there won’t be a space that could be absorbed,” Kobayashi said. “In our business, timing is everything.”

Jeff Arce, a partner with The MacNaughton Group, told PBN that when it came to Vida, there were a half dozen factors that led to the decision to not move forward with the project. That said, he noted that the developers did sell a lot of condo units.

Kobayashi pointed out that there are a couple of sites that the two firms are looking at possibly developing, and one of those sites could be a high-rise project. The developers already have built the Hokua condo project in Kakaako and ONE Ala Moana near Ala Moana Center.

“Our hands are full,” he said. “Our firms are always in the market looking for great high-rise sites.”

The firms are currently in some sort of development phase for two condo projects in Honolulu, including Park Lane Ala Moana, which is under construction at the state’s largest shopping mall, and the 133 Kaiulani condo-hotel project in Waikiki.

Read more about Honolulu’s growing luxury condo market in Friday’s print edition of PBN.