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A Site Selection Web Exclusive, February 2014
WEB Exclusive story

Hawaiian Beehive

The redevelopment of the Kaka’ako district of Hawaii is under
way, and a 50-year-old IBM building is playing a key role.

An overview of Howard Hughes Corp.’s 60-acre Ward Village parcel in Honolulu’s Kaka’ako District.
Images courtesy of HHC

The IBM Building, designed by Vladimir Ossipoff, recently marked its 50th anniversary.
The IBM Building, designed by Vladimir Ossipoff, recently marked its 50th anniversary.

It’s a storyline that seems to come straight out of “The Descendants,” the Alexander Payne film whose plot revolved in part around a decision faced by descendants of Hawaiian royalty about whether or not to sell prime real estate to developers.

In the case of Kaka’ako, a mixed industrial and commercial neighborhood in Honolulu, the land in question is not pristine like in the movies. But the views of ocean and mountains might be one day, as new skyscrapers go up from Howard Hughes Corp. (HHC), Forest City Hawaii and others converging on the redevelopment opportunity.

One of the centerpieces will be the preservation and renovation of the iconic IBM building along Ala Moana Blvd. in the heart of Kaka’ako. Dallas-based HHC, whose properties include master planned communities, operating properties, development opportunities and other unique assets spanning 18 states, is investing $20 million in the renovation.

Designed by famed architect Vladimir Ossipoff, the building recently marked its 50th anniversary, and still is occupied by IBM employees on half a floor, HHC on the second floor and an assortment of professional services firms on the other floors. HHC in Feb. 2013 announced that through the redevelopment, the majority of the space will continue to serve as an office building while a portion will serve as the future information and sales center for Ward Village. The concrete honeycomb exterior grille — the brise-soleil that makes the IBM building a distinct architectural structure — will be retained as part of the rehabilitation.

“As best I can recall, Val Ossipoff is quoted as saying ‘the grille is a punched screen and as such recalls the punch cards universally used in computing.’ This seemed an appropriate reason for relating IBM, a computer company, to its Honolulu home. Here is a unique grille, very permanent being made of uncoated concrete which provides shade and yet allows views out to the ocean and mountains and allows for a naturally lit interior,” said Sid Snyder, a longtime friend and business partner of Val Ossipoff, in a 2013 release.

“We look forward to the IBM building becoming an integral part of the vision for Ward Village,” said Nick Vanderboom, senior vice president of development for HHC. “It is rewarding to bring new purpose to this iconic structure.”

HHC announced its “forWARD” vision for Ward Village in October 2012, revealing plans to create “a vibrant neighborhood offering unique retail experiences, exceptional residences and affordable housing set among dynamic public open spaces and pedestrian-friendly streets.” The project will be built out over the next 10 to 15 years.

Sustainability is one of its key tenets: In November, Ward Village received LEED Neighborhood Development (LEED-ND) Platinum certification, making the Honolulu project the nation’s largest LEED-ND Platinum certified project and the only LEED-ND Platinum certified project in the state of Hawaii. Aspects helping the project earn the designation include community-wide strategies such as pedestrian orientation and design; efficient land use in a location served by transit; water and energy efficiency; recycling and reuse of materials; indoor environmental quality; and parking and transportation programs that include vehicle and bicycle sharing.

The 60-acre Ward Village parcel will eventually encompass 9.3 million sq. ft., with approximately 4,000 residential units and more than 1 million sq. ft. of retail and other commercial space. The first phase of the project was approved last summer with construction expected to begin this year.

‘A Gathering Place’

The Hawaii Community Development Authority (HCDA) is working to bring together private enterprise and government to make redevelopment happen and to establish the larger 600-acre Kaka’ako District as an economically and socially viable community that can provide a range of public benefits.

HCDA was formed in 1976 to oversee the transformation of Kaka’ako. Its 2011 master plan projects a rise in population in the area from 20,000 to 30,000 in 20 years amid a projected 8,000 new housing units. Executive Director Anthony Ching has overseen the approval of a number of new condo towers, and stood up to legislative and citizen criticism that the approvals are driven more by developer demand than market demand.

The HCDA says it envisions itself to be “the creator and leader to establish Kaka’ako as the most desirable urban place in Hawaii in which people can work, live, visit, learn and play.” To date the state has invested over $217 million on improvement district projects in Kaka’ako.

Meanwhile, HHC is investing in the job creation potential of its project as well as the structures themselves. In January, it launched the Ward Village Foundation with an initial commitment of $1 million slated for distribution via grants to worthy non-profits and projects over the next two years. Its first grant of $100,000 is going to locally-based non-profit Kupu, towards the construction of the Kupu Green Jobs Training Center. From this facility, Kupu plans to develop the next generation of local talent to take the helm of the new “green” industries moving in Hawai‘i.

Nick Vanderboom, senior vice president of development, Howard Hughes Corp.

Kupu in Hawaiian means "to sprout, grow, germinate, or increase." The kupukupu fern is one of the first plants to bring life back to the land after a devastating lava flow.

“Kupu is an outstanding example of an organization that aligns with our foundation’s core values, promoting culture, community and environment through their work training and educating Hawai‘i’s youth in sustainable job fields with an emphasis on promoting traditional Hawaiian values,” said Vanderboom.

In an interview early this month on the day after the Super Bowl, Vanderboom, a former starter at tight end for the University of Southern California football team under coach Pete Carroll, was still exulting in his former coach’s victory the day before at the helm of the Seattle Seahawks. But he was nearly as enthusiastic about the forward progress of Ward Village and the IBM Building renovation since the project was first discussed 18 months ago.

Noting the raising of the site’s grade and the addition of water features and indoor/outdoor space that replicate the brise-soleil structure, he said the project is “an opportunity for us to really show the master plan nature of the [Ward Village] project, and show a respect for the history of this place. This is the start of what we plan to do throughout Ward Village.”

Vanderboom says about half of the 60-acre parcel today is devoted to retail, with the balance industrial and office space. “Over time we’ll increase the amount of retail we have in the district as we redevelop,” he says. Asked if office space is possible, he says office construction “doesn’t really pencil today. That could change in the future, and we’d love to see the mixed-use environment like we have at The Woodlands [HHC’s successful development in Houston]. Right now there’s not the demand for that type of use. But there is significant demand for housing — there’s a shortage on Oahu, because there are so many land use constraints. It can be a challenging environment to develop in, but there is a real need.”

Vanderboom says HHC has flexibility as the Ward Village plan moves forward, but “at the moment we see it primarily as a residential neighborhood. We’re creating a gathering place and a great urban space, which doesn’t really exist today.”

Sweet Spot

Shortly after taking office in 2011, Gov. Neil Abercrombie initiated a proactive capital improvement project (CIP) program that invested in state infrastructure and facilities for the people of Hawaii while stimulating the local economy and generating jobs for local residents. The state expended $1.2 billion from all funding sources in fiscal year 2013 for state capital improvements and has appropriated $2.2 billion from all funding sources for various capital improvement projects in fiscal year 2014.

Asked how supportive the state and Gov. Neal Abercrombie’s administration have been, Vanderboom says, “Extremely supportive. He recognizes the need to develop additional housing, and develop it in the right place. Urban Honolulu is by far the most sustainable place to develop — it leverages the existing infrastructure, mass transit, road and sewer, that exist today.” And there’s more infrastructure for the area on the way, including a stop on a high-speed rail line that will go all the way to west Oahu and the airport.

“If you stop growth, it will just make housing more expensive for he average homeowner,” he says. “If you want to continue to expand housing, this is by far the most sustainable place.”

Twenty percent of the planned 4,000 units are required to be work force housing, which in Hawaii means affordable to those earning between 100 percent and 140 percent of the area’s median income for a family of four ($86,300 in 2013).

Asked how barriers to development in Hawaii compare to other jurisdictions in which HHC operates, Vanderboom says, “Development faces potential opposition no matter where you are. It’s about being transparent, reaching out to stakeholders, explaining our vision, and having an opportunity for dialogue. Developers often miss that step and don’t get engaged. Authenticity is really important to us — make it authentic to that community, that time and place, and create places that fit into the environment.”

HHC is also seeking to fully engage with the community in New York City, as its South Street Seaport redevelopment project meets with some neighborhood opposition. But despite some similarities, the 50th state will always be its own world.

“Hawaii is different from anywhere else in the mainland,” says Vanderboom. “Here especially it’s important to take the time to reach out to the members of the community, to understand those relationships and where they’re coming from.”

To date the state has invested over $217 million in improvement district projects in Kaka’ako, including infrastructure such as this seawall.

Past and Future Promise

In this case, those relationships do not extend to the original family of Victoria Ward (one of the descendants), who sold the land in 2002 to General Growth Properties, which owned HHC as a subsidiary until HHC became an independently traded entity. HHC assumed ownership of the Ward Centers property in November 2010. A history of Ward Centers relates, “Over a hundred years ago, Victoria Ward and her husband, Curtis Perry Ward, once owned an estate comprising over 100 acres in central Honolulu, including the land where Ward Centers is situated. At its greatest extent, these lands stretched all the way from Thomas Square to the shore. Until Hawaiian property laws changed in the 1870's, the Ward's stewardship responsibilities included all of the fringing reef fronting their property as well as fishing rights that extended indefinitely out to sea.”

One of Ward’s great great grandsons authored a book on the area’s history that HHC has learned from in forming its plans. But there is another layer of descendant in Hawaii: a recognized cultural descendant.

“Before 1848 there was no private ownership of property,” explains Vanderboom. So native Hawaiians who can prove ties to land have a seat at the table, for instance if native Hawaiian burials are ever found, “which does happen in urban Honolulu,” he says. “That is another layer of consultation, and we meet monthly. We have not come across any burials since we’ve owned the project, but we do consult with them in terms of doing testing. But larger than that, they’ve become a great resource in terms of educating us on the Hawaiian community’s history of development. They’ve been generous in that process in terms of giving their thoughts and their time, and have benefited the project tremendously.”

In the meantime, IBM continues to benefit Honolulu as a partner as well as a direct employer. A recent “Smarter Cities” case study by the company chronicled the city’s technological transformation:

“In November 2011, the Center for Digital Government recognized Honolulu as the top digital city in the US in the large-city category. This recognition is impressive, considering that in November 2004, the city evaluated its IT and network systems as being underfunded and out of date.” Among its upgrades was the deployment of Maximo Asset Management software, which manages everything from streetlight repair to property tax appraisals.

“This system enables city appraisers to evaluate Honolulu properties and leverages the city’s GIS system powered by Esri ArcGIS, a mapping and analysis technology from IBM Business Partner Esri,” reads the case study. “Using the updated appraisal information, the city increased property tax revenue by USD$1.4 million in the first three months — without having to send any appraisers into the streets.”

Presumably that technology will closely track property tax revenues from the new towers in Kaka’ako. HHC, among others, is counting on it:

“There will be significant tax revenues to the City and County of Honolulu and the State of Hawaii from both construction and ongoing operations,” said HHC when it announced its “forWARD” plan in October 2012. “Construction activity in the first phase will generate more than $22 million in one-time tax revenues to the State and County. Full build-out will yield $138 million over an estimated 15-year period. After full build-out, the property will generate more than $38 million in annual recurring revenue to the City and County and the State.”

It's no George Clooney. But to many Hawaiians, those kinds of numbers look mighty attractive.

HHC’s Nick Vanderboom says Ward Village will be “a gathering place and a great urban space, which doesn’t really exist today.”

Adam Bruns
Managing Editor of Site Selection magazine

Adam Bruns

Adam Bruns has served as managing editor of Site Selection magazine since February 2002. In the course of reporting hundreds of stories for Site Selection, Adam has visited companies and communities around the globe. A St. Louis native who grew up in the Kansas City suburbs, Adam is a 1986 alumnus of Knox College, and resided in Chicago; Midcoast Maine; Savannah, Georgia; and Lexington, Kentucky, before settling in the Greater Atlanta community of Peachtree Corners, where he lives with his wife and daughter.


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