October 2016 E-mail Update

Here is our 10/11/2016 e-mail update. It is sent after the statistics for the preceding month have been posted on the Board of Realtors website. You can find previous newsletters by visiting www.stott.com/news.

Please use the following link to access our most recently published quarterly newsletter:

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After more than a decade of waiting for regulatory approval, D.R. Horton broke ground on its 11,750-home Hoopili community on September 8th. The entire build out of the new community is expected to take 20 years with the first phase consisting of 151 single family homes and duplexes, 142 townhomes, and a 1.8 acre park. About 70 acres of the 1,600 acre project will consist of parks, 200 acres reserved for commercial farms and community gardens, and there will be five new schools and three rail stations. D.R. Horton donated five acres to the Hawaii Humane Society for its second Oahu campus, and one acre for the Waianae Coast Comprehensive Health Center for a new health center. The last new town completed was Mililani, which Castle & Cooke started developing in 1960 over a 20-year period.

A long-standing federal deed restriction limiting the use of 100 acres of land at Aloha Stadium to public recreation purposes has been recently removed. New development of the area, which is near a planned rail transit station, would require the state to make a decision about the future of deteriorating Aloha Stadium. Various proposals for replacing the stadium have been floated by the University of Hawaii and the state but none have gained any traction.

Genki Sushi received permission from the Hawaii State Department of Health to reopen on Oahu 24 days after it was shut down for sickening 252 customers with Hepatitis A. The Kauai restaurant will remain closed to complete renovations that are already in progress.

About 41,000 people will see a large jump in their health care insurance with the state’s approval of a 35% increase in premiums for HMSA customers and a 25.9% increase for Kaiser customers. Hawaii did not escape the carnage as Obamacare continues to collapse under its own industry distorting weight. President Bill Clinton summed up the scenario with his quote: “You’ve got this crazy system where all of the sudden 25 million more people have health care and then the people who are out there busting it, sometimes 60 hours a week, wind up with their premiums doubled and the coverage cut in half. It’s the craziest thing in the world.”

Federal researchers recently returned from an expedition off the Big Island to tease out reasons why the ecosystem has such a rich variety of life forms when the surrounding ocean waters are among the least productive in the Pacific Ocean. The area about a mile off the south shore is teaming with saw-tooth eels, dragonfish (think scary deep-sea creature with glowing lure in Finding Nemo), spookfish, frogfish, and other strange species. It will take researchers years to draw conclusions, but initial theories center around nutrients being brought up from the depths due to the rapid rise of the volcanic chain from the sea floor. The University of Hawaii and Bangor University in North Wales, United Kingdom participated in the expedition.

The Reason Foundation, a libertarian think tank, released its 2016 Annual Highway Report and Hawaii ranked dead last for urban pavement condition and 48th out of the 50 states for performance and cost effectiveness. The state spends $63,482 for every mile of maintenance compared to New Mexico’s (#1 for maintenance) $3,231 per mile and the state’s overall program costs $405,269 per mile compared to South Carolina’s (#1 for cost effectiveness and overall ranking) $35,286 per mile. The article tries to paper over the discrepancies by blaming it on Hawaii being an island making materials more expensive, but fails to explain how the state with the fewest miles of road has such high overhead costs and such poor road conditions. Panos Prevedouros, Chairman of UH-Manoa’s Civil and Environmental Engineering Department, may have come up with the understatement of the day with his quote, “there is a lot of room for improvement.” The statistics reported are reliable because the dollar figures are self reported numbers by the state governments.

The Honolulu Authority for Rapid Transportation’s (HART) rail project does not appear to have any winners up to this point. The Honolulu Star Advertiser reported that Kiewit projects to lose $100 million on the 10 miles of elevated rail in West Oahu that it is building due to construction delays and the cost of flying in and housing construction workers. Hawaii’s labor pool is too small to support construction of the rail project and booming commercial real estate construction market. Kiewit declined to bid on future rail work even though it had the equipment in place to continue. Shimmick/Traylor/Granite has been selected to build the next 5.2 miles of the cash strapped rail project.

Recent news reported by the Honolulu Star Advertiser seems to indicate that things are likely to get worse for HART’s signature project. Rail officials and Kiewitt opted to use narrow plastic shims instead of a plinth (an elevated concrete platform) to provide the level surface underneath the rails. About two percent of the shims and electrical insulation on the tracks have cracks and not one train has even started to run. Workers also found snapped strands in three steel tendons that hold the concrete guideway together. Kiewitt and HART have hired forensic engineers to investigate the root causes of the problems. Meanwhile, HART has raised the total price tag of the project another $700 million to $8.6 billion and board chairwoman, Colleen Hanabusa cautioned that the numbers can still change.

High construction costs have been cited as the reason for delaying the planned mixed-use project in the former Kamehameha Drive-In Theatre across from Pearlridge Center. Live Work Play Aiea, a development consisting of retail, offices, restaurants, public spaces, a hotel, and condos won’t start the first phase of construction until early 2018. The condos may not begin for another three years or longer. The City and County of Honolulu has described Live Work Play Aiea as the first transit-oriented development project along HART’s elevated rail project. Honolulu has jumped to the top spot as the most expensive place to build in the nation.

China Oceanwide Holdings Ltd., which recently bought two oceanfront lots at the Ko Olina resort is under contract to buy the last three undeveloped parcels. The company plans on building two luxury-branded hotels and a luxury-branded residential condominium. Construction is scheduled to begin next year. The site, located next to Disney’s Aulani, will be home to Atlantis Resorts and similar in concept to Atlantis The Palm, Dubai. Atlantis Dubai is home to a waterpark, aquarium, and more than 20 restaurants and nightclubs.

Hawaii regulators recently approved a proposal by Hawaiian Electric Company (HECO) and its subsidiaries to let customers “opt into” a residential pricing scheme based on Time of Use. The highest rates would occur during the hours of 5:00 pm and 10:00 pm when electrical demand is the highest. For Oahu, the lowest cost is during the night between the hours of 10:00 pm and 9:00 am while the lowest cost for Maui and the Big Island are during the day between 9:00 am and 5:00 pm. The difference between the high and low rates is $0.33/kWh for Oahu, $0.35/kWh for Maui, and $0.50/kWh for the Big Island. The demand cycle has shifted dramatically as rooftop photovoltaic panels have been installed on residential and commercial buildings. Some have argued that TOU pricing schemes are needed to fully integrate renewable energy sources and charge customers fairly. The two-year, interim program is optional for all residential HECO customers and customers may “opt out” at any time without penalty.

HECO recently signed a contract to test the capability of a flywheel system designed by Amber Kinetics to store and release electrical energy at the utilities Campbell Industrial Park power plant. Efficient energy storage devices are needed if Hawaii is to successfully continue its push to integrate wind and solar energy into the electrical grid. HECO’s first large-scale battery storage system recently became operational at Campbell Industrial Park.

A four year old, 21-megawatt wind farm on the slopes of Haleakala, shut down when one of the turbines of one of the eight towers separated from the tower structure and fell to the ground. Sempra U.S. Gas & Power LLC, the operator, is working with Siemens, the manufacturer of the tower, to determine the root cause of the catastrophic tower failure. The remaining towers will remain shut down and access to the wind project will be limited until the root cause is known and the structural integrity of the other seven towers has been determined. The power generated by the wind project is sold to Maui Electric Company, a subsidiary of HECO.

The macadamia felted coccid, an invasive pest, is causing significant damage to Hawaii’s macadamia nut industry. The tiny insect infestation results in distortion of the nuts and stunted new growth. Politicians are asking for federal funds to come up with a solution to the problem. It will be interesting to see if funding will be found and what the solution could be: Genetically modified organism (GMO), sterilized coccids, pesticides, or importing a predator (risks importing another invasive species).

Some local businesses and tourist attractions have started using “Pokemon Go” to attract children and adults to their establishments. The Waikiki Aquarium offers a $5 rate from 2:00 pm to 4:00 pm daily (a discount to normal admission prices) to allow players to capture Pokemon on the grounds. The Waikiki Aquarium saw visitor count jump by 1,000 during the first month once word got out about the special. Sea Life Park recently held a back-to-school “Pokemon Go” event for $7 and augmented their six PokeStops and two PokeGyms with 25 lures. 1,053 people showed up for the event and SeaLife Park increased their revenue by selling Pokemon themed musubis, pizza, and popcorn. A PokeStop is a physical place where players can collect eggs and PokeBalls in the virtual reality game. A PokeGym is a physical place where players can “battle each other” in the virtual reality game. Businesses can purchase lure modules that will attract more Pokemon to their locations in half-hour blocks. Are you now as confused as Tim about all the excitement? Try asking your kids or grandkids and maybe they can explain it to you. Or better yet, they can show you.

Waikiki Brewing Company signed a lease to open a second location in Kakaako that will include a brewery, canning operation, and tasting room. Tim and Tracey recently dined and enjoyed brews at Kauai Beer Company while visiting a friend on Kauai in September and thoroughly enjoyed the experience. While in Kauai, Tim was wearing a Staycation shirt from Karbach Brewing Company in Houston and was stopped by a couple from Houston on the Napali Coast. Visiting microbreweries and buying their T-shirts has become a fun activity and conversation piece. Ironically, Tim and Tracey have not visited Lanikai Brewery and Waikiki Brewing Company yet. That will change.

A new senior living community has opened in Kapolei. Ilima at Lehano offers independent living, assisted living, and memory care support. The facility has 84 residents including 16 memory care apartments with their own secured area and outdoor garden. The apartments allow pets and offer a fitness center, salon, swimming pool and café. The much needed project comes at a time when assisted living facilities have a three to five year waiting list on Oahu.

In a sign of the digital times, Fujifilm Corporation is closing its Hawaii regional office. Fujifilm will continue to service Hawaii customers from facilities on the mainland. Fujifilm Corporation provides supplies and services in medicine, graphic arts, optics, enterprise storage, motion picture and photograpy. The company is selling the building it built in 2002 which includes a PV system that provides about $210,000 in savings per year.

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