Howard Hughes Corp.'s lead man in Hawaii wants to redevelop Kakaako correctly
By Vicki Viotti
David Striph didn't rise in the ranks at Howard Hughes Corp. quickly; it happened instantaneously.
Well into his career in real estate financing for a bank, he struck up a friendship over a major loan with David Weinreb and Grant Herlitz, who at the time wore different hats. Just after flying the red-eye back to Dallas with his wife, following one of their regular vacations in Hawaii, he got a call from his lunch buddies.
"They said, 'Hey, we're becoming CEO and president of the Howard Hughes Corp., and our most important asset is in Hawaii, and we need somebody we know and trust to go out there and learn the culture and run the asset." And I said, 'You got to be kidding me! Literally, I'd just got back from here. And that was it. A couple weeks later I was here."
Striph, senior vice president, at 55 oversees the 60-acre development in Kakaako that at full build-out could amount to 22 high-rise towers. He comes to work now in what used to be the IBM Building, a period-design structure that has been renovated and enhanced in full "Mad Men," late-1960s glory. ("The only thing we're missing are the martinis," he said.)
The Detroit native got his accounting degree in Illinois and has called California and Texas home as well. But he credits his "Midwest upbringing" for his easy adjustment to Hawaii, where he said "family values" count a lot, too.
What also counts is the investment in relationships, and the corporation has put a lot there, including various alliances with arts and cultural organizations. The ground-floor information center includes a video room where interviews with several from the Native Hawaiian community are screened. Considering the area's history with the unearthing of native burial sites, that counts a lot.
Despite the scale of the development -- which just expanded with Howard Hughes' leasing Kewalo Basin's boat harbor from the state -- he shies away from depictions as the big guy. Pose with the information center's extensive scale model of Kakaako? No, thanks.
"We had somebody take a picture of one of our development guys," Striph said, "and he looks like King Kong over the city."
Striph, who has two grown children, enjoys his new life here; one morning this week, his workday started with a surfing kayak ride in Maunalua Bay.
QUESTION: What's the timetable for the first two towers?
ANSWER: The first tower ("Waiea") is under construction, started a few weeks ago. And it'll be done in late 2016. And then the other tower, which is kitty-corner from it -- "Anaha," where Pier 1 used to be, right here on the corner -- that should start in the next couple of months, and it'll be done late 2016 or early 2017, right about the same time.
Q: Their sales status right now?
A: As of May 1, we were 70 percent in Waiea and 54 percent of Anaha, or so. ... We've made steady progress since those figures. But that's all I can publicly say right now.
Q: Is that on pace with what you guys expected?
A: It is. Probably a little bit ahead of pace.
Q: Those towers are pretty high end, right?
A: There's a range in both of them. In Anaha, we had units that started at $400,000 ... that's probably a studio.
The plan here overall is to build a neighborhood that's got a completely wide range of housing, starting with affordable reserved housing and on up. ... We want this to be a neighborhood for everybody. We don't want just wealthy people living here.
Q: Don't property values here make master-planned communities pretty challenging?
A: They do. Property values and, probably as much as anything, the construction costs. ...
Q: So how do you go about things differently here?
A: We have to manage costs very carefully. And the other thing that really honestly happens here is some of the higher-end stuff helps support doing the affordable stuff. And it helps support building the park that we're going to build, and a lot of the community amenities that we're doing.
Q: That would be an advantage to having one developer do all this?
A: It's a huge advantage. Because nobody could or would do that. ... The buildings that we built here for Nordstrom Rack and Pier 1, if somebody was doing that as a one-off project, they would never build something that nice. ... Nobody would spend the extra money that we spent to have the beautiful materials, landscaping, open space there. But we're trying to build a community, so we're going to spend more money.
Even on our reserved housing towers. You could look around, you know. That, you can see right above there, that's a reserved housing tower, that plain-looking brown one ... because that's what you have to do to make money at it. But because we have this whole 60 acres, and we're trying to create this neighborhood, this community, we're going to make those buildings nicer than economics would tell you should ...
Q: How long did the corporate decision process take to do this whole project?
A: We inherited a master plan from General Growth. And we spent probably two to 2 1/2 years studying the history of the land and the people that lived here and the culture, and then tried to adapt that master plan to bring some of that forward. So I'd say 2 1/2 to three years. And it's still evolving.
Q: How does this rank among all the Howard Hughes projects, in terms of magnitude or money?
A: I don't know the answer to that. But I can tell you we have a huge commitment to the property. We call it the crown jewel of the Howard Hughes portfolio. So that probably tells you something ...
Q: When people hear 22 towers, they picture them right next to each other, right?
A: And (indicating the scale model) you can see it's not. And this is probably over about 15-20 years. ... The gray one back there is the reserved housing tower ("reserved" housing is the 20 percent of "affordable" units set aside for buyers earning up to 140 percent of area median income).
Q: And that's your project?
A: Yep. ... That should start early next year.
Q: How many units are in that?
A: There are 424; 375 are reserved. We're front-loading it. We only have to build 105 or 110 in this first phase, but we're going to build 375 of them. So we're going to do it all up front.
Q: How many phases are there?
A: Well, we don't really know. It's going to depend on market demand.
Q: What's the cost of building the three towers in the first phase?
A: Well, I don't know; I can just give you some facts on Waiea alone. We're actually having a study done on the economic impact of the whole thing. So I'll have new numbers shortly, but I don't have them yet.
Just Waiea alone: Right now it's a parking lot. We pay $171,000 a year in property taxes. It's estimated that it will be over $2.2 million, every year. So, $2 million more to the city every year because of that.
Also, $55 million a year in GET (general excise tax) to the state. Economic impact just from that building is $925 million. It's going to create about 5,000 jobs. Anaha will be similar; the reserved tower will be similar.
Q: But the construction costs?
A: I don't have that yet. We're still looking into that. A lot! (Laughs)
Q: How long-term is the commitment? Is this a development that's going to be done, and Howard Hughes is gone?
A: All I can say is we probably have a 20-year project here, right? We just signed a lease to take over the harbor that's over 30 years. I moved here, I moved my family here, I bought a home here. We're committed to living in Hawaii. The whole company is.
Q: But is it typical for a developer to come in, and then move on at some point?
A: Maybe here, but I don't think so. I think once you set up a base of operations like we have here -- I don't know how many people we have here, we have 40 people, probably -- and you learn the market, I think it only makes sense to stay in that market.
I don't think it's typical. I know there have probably been some people who have come here and left, but probably nobody that had the opportunity like we have: 60 acres, right in the center of town. And it's a 15-year build-out, probably.
Q: Do you have any doubt that the market's going to support all those towers?
A: No. ... There's such a critical shortage of housing here, and there's nowhere to build other than right here, essentially, that no, I think there's going to be plenty of demand. I don't think it's going to be an issue.
The timing could be -- you know, it may be 10 years, it may be 20 years, we're calling it 15, it may be 12. That I can't tell you, because we're going to have ups and downs in the market.
Q: About Kewalo Basin, what was the reason for taking on that lease? Isn't that a big capital investment?
A: Very big capital investment. And I think it shows our commitment to the community.
Truthfully, there's probably better places we can put our money and earn a better return, but we see this as our entry to our neighborhood. It connects, really, Ward Village essentially from mauka to makai. And we think it should be a great amenity for the community. And we're willing to invest money in that.
We're trying to create a great community here for everybody. And the fact that we have the opportunity to improve such a great asset. It's not being run to its potential, but it has the potential to be a great asset, is probably the way I would say it.
It's right across the street from our project, and if you notice, the park we're putting together, the village green, runs right to it. So it makes a lot of sense for us to take it over and make sure it gets redeveloped properly, that it's well maintained, that it's safe and secure, that it's marketed better. ...
We came in and said (to state officials), "Look, we'll just do what you were going to do -- we'll put the money in and in exchange for that, we'll take a lease and we'll rent spaces in an effort to get a return on our investment."
Q: So you'll rent slips.
A: Yeah. Just like they are now. Hopefully, we'll do a better job of it.
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