In March, Julia Ke walked among the homes in Kaūmana, which are now razed. - Photo: Lisa Asato

DHHL resumes work
on stalled homes

By Lisa Asato - Ka Wai Ola

It was a bittersweet moment for Laura Henderson to watch her partially built home in Kaumana, in Hilo, be razed due to damage from months of exposure to the elements. On the brighter side, the fresh start makes room for a new home for her and her longtime partner, Julia Ke, on the same lot of homestead land they had selected in 2006.

“It brought tears to my eyes,” Henderson said after watching her home being hauled away in pieces. But seeing the cleared land gave her renewed hope, and she said rebuilding from scratch allowed them to get unexpected upgrades, like a propane fireplace instead of a wood-burning one, and to get it better situated in their three-bedroom home. “It's in another corner, so we're stoked,” she said.

In mid-May, the state Department of Hawaiian Homelands resumed work at the Hilo site under contractor Coastal Construction. In April, Shioi Construction resumed work on homes at Kekaha, Kaua'i. CNS Construction will be the contractor for the homes in Pana'ewa and a contractor is being finalized for Lāna'i.

Homesteaders Laura Henderson, Julia Ke, Eugene and Judith Mariano. Photo: Lisa Asato

The developments were part of the fallout of the December 2007 bankruptcy of Fredco Inc. and Menehune Development Co. Inc., which left the projects – and its 132 homes in various stages of development on three islands – in limbo. When the bonding company, Hardware Hawai'i, failed to step in and take over the project, DHHL did, promising beneficiaries that it would make things pono.

“Our approach has been to do all we can to make things work,” said DHHL Chairman Micah Kāne. “This includes expanding choices beyond the original turnkey award to converting it to a vacant lot award for those who wished. We have also committed to keeping costs to the original contract price and have provided emergency financial help to those who needed it.”

In March, DHHL filed a lawsuit in state Circuit Court against Hardware Hawai'i Ltd. and its related businesses seeking compensatory and punitive damages, interest and attorneys' fees and costs. He said the department used about $4 million from a contingency fund to cover additional costs resulting from the bankruptcies. “None of it will be recouped from our beneficiaries,” he said. “It will need to be recouped from our legal challenges.”

Kāne said DHHL has worked with Fred Yamashiro, owner of Fredco and Menehune Development, since 1994, including as a contractor on 255 units in Villages of La'i 'Ōpua in Kona, and attributed his bankruptcies to underbidding. “In a high economy we're just going to have to look at capacity more closely, the capacity of the developer to deliver.”

After months of inactivity following the bankruptcy of a former contractor, the state Department of Hawaiian Home Lands resumed work in April on homes in Kekaha with new contractor Shioi Construction, pictured here. Work in Kaūmana under new contractor Coastal Construction restarted in May. - Photo: Courtesy of DHHL

Kane said the department will be making technical changes to the way it handles future scattered-lot projects, which are designed to provide lessees more input on options. The system involves a contract between the lessee, contractor and bonding company as well as the interim lender. “So there are checks and balances in those relationships that should catch any defaults,” he said. “But I think in this case it didn't. So in order to assure that our beneficiaries are protected, we're going to have to require that we're a party of the bond so we can intervene if we have to.”

He said the homes in the affected projects represent less than 5 percent of the “thousands of units under construction right now.”

While the beneficiaries KWO interviewed all expressed frustration and took economic hits paying for added months of storage, rent and other things – costs that were taken care of by DHHL through grants – they also expressed no anger toward DHHL, and banked on the department's promise to make things right.

The months of uncertainty and emotional ups and downs for Henderson and her future neighbors have come with an unexpected benefit. The group, which includes Judith and Eugene Mariano, Iwalani Harris and Joe Lee Hong, have grown close, and when their homes are complete – which is expected later this year – they plan to celebrate together with a block party.