Lawsuits Embroil Developer of
2 Planned Honolulu Condo Towers
As reported by Honolulu Star-Advertiser last week, a couple of dozen investors from China and Japan have filed suit against the developer of a pair of controversial Honolulu Residential Real Estate development projects. Investors in the Hawaii City Plaza and Hawaii Ocean Plaza said they put a total of about $10 million into the Makaloa and Sheridan Street apartments in 2016, hoping their investment would help them obtain a green card. But the projects are now stalled, and the investors alleged that the developer is responsible.
It's not news to anyone that Hawai'i suffers from an affordability issue when it comes to Real Estate. The State of Hawai'i and the City of Honolulu have established guidelines for new development to include a percentage of affordable housing in all new residential condominium projects AND a limit on foreign investment in any single project to less than 50% of the total ownership. The unique market that the most remote archipelago on the planet presents is unlike any, so if you are a developer who wants to succeed here in Hawai'i, you better do your homework beyond the numbers and investment strategy otherwise you are wasting everyone's time and money.
Developers must walk a fine line in order to achieve profitability and fulfill the State and City housing requirements, as well as, navigate the shallow shoals and choppy waters of local politics, none of which is for the faint of heart. It makes sense that in the best interest of all parties involved that vetting not only the financial stability but the managerial efficacy and experience of ANY developer entering the Hawai'i market is clutch.
Respect for our housing regulations and what foreign developers can and cannot do is VERY important in order to protect our market from the uncertainty of over investment by foreigners that view our Real Estate as a profitable means to an end and are first to sell in a downturn. You cannot blame an investor for wanting to see a return on their investment, it's up to the State to protect its housing market from volatility and reduce the strain and severe cost that heavy foreign investment has on the affordability and pricing stability of our local market. It is also in the State's best interest to encourage and facilitate investors whether they be domestic or foreign to develop under the guidelines set forth and not to turn them away simply because they are oblivious to local business customs and expectations.
So here we are with a foreign developer using Hawai'i as an investment vehicle and what they care about is not Hawai'i, it's citizens, or it's sustainability but the developer's profit margin. To less scrupulous investors our concerns as locals become a matter to circumvent, ignore, and avoid because the locals are in the way of the investor's profits. Unfortunately, the smell of something foul has been wafting through this particular developer's dealings since the beginning.
To those of us who are familiar with the projects in question, are not surprised by the lawsuits levied against said developer. The State and City seemed to give the project every opportunity to come to compliance. What was most interesting to observe was how this developer chose to behave in a city known for its tropical beauty and more particularly it's cultural diversity.
When a foreign developer enters a highly developed Real Estate market like Honolulu and says they will do one thing but does another, trust can evaporate instantly. between the regulating authorities and the developer. When pressed as to whether the developer had failed to meet the criteria that ALL developers in the State of Hawai'i are required to meet, 50% or more percent of the project reserved for domestic consumption, instead of answering the question, said developer claimed he was the victim of racism and threatened to call for his home country to boycott Hawai'i. It is disappointing to witness the tantrums of an overconfident misinformed dilettante as they bumble their way through Real Estate Development and how easily they can undo themselves in the Hawaii Real Estate market.
These antics are not appreciated and the developer showed many signs of incompetency far before the lawsuits started. At some point, the writing appeared on the wall that these projects would turn into monuments of litigation and unfortunately the current political structure was not willing to shut down what appears to be an unstable and most likely uninsurable project that will simply rot on the vine for years as investor litigants and the State begin the death by a thousand pricks. Everyone loses here especially the people of Hawai'i who are in need of affordable housing, not some clown parade from out of town.
Note: the views expressed in this post are those of the author and are not necessarily indicative of HI Pro Realty.