Howard Hughes Corp., one of Kakaako’s largest and most powerful landowners, has a complicated relationship with the island’s future rail transit line.

On one hand, the Dallas-based developer has touted the benefits of a rail system running through its planned 60-acre Ward Village community. It’s even used that feature at times to help sell its upscale mix of shops, restaurants, parks and new condominium towers.

At the same time, however, it’s spent years locked in a high-stakes legal battle against the city over a narrow, two-acre stretch of land that’s needed if rail is to one day snake through the neighborhood.

The eminent domain dispute has been costly, with local rail officials describing it as the largest real-estate risk to the multibillion-dollar transit project. Meanwhile, the state Circuit Court judge overseeing the case recently signaled that it might land before the Hawaii Supreme Court if the two sides are unable to settle.

“It is beyond dispute that this eminent domain case is quite extraordinary in terms of the importance of the largest public works project in Hawaii history since the construction of Oahu’s freeways,” Judge John Tonaki said in a February hearing, according to a transcript in the court record.

Howard Hughes previously agreed to incorporate rail through Ward Village when it sought the necessary state permits for that upscale, walkable community. Given that, Tonaki said, the company’s compensation “in this court’s opinion can only be answered by the Supreme Court.”

Attorneys hired by the city and Howard Hughes alike have spent much of the past three years jockeying in court over evidence that could eventually be presented before a jury.

“The number and breadth of these motions are unlike any other case which this court is currently handling but is understandable given the stakes involved,” Tonaki wrote.

The two sides have filed at least 19 such motions combined. They’ve deposed at least 80 witnesses. Still, there’s “a lack of conclusive guidance” from either statutes or case law to help issue key decisions in the lawsuit, Tonaki added. 

Originally, the city looked to pay Howard Hughes some $13.5 million to take those two acres via eminent domain, based on the city’s own appraisals.

Now, it could pay as much as $23 million in legal fees alone in order to avoid paying Howard Hughes as much as $220 million in damages associated with taking the land, according to court documents. And that’s for a rail line that now might not even reach Kakaako.

Members of the Honolulu Authority for Rapid Transportation board met twice in private session in February to discuss a “settlement authorization.” They didn’t report anything following those talks, and haven’t had any other such discussions since.

“There are no settlement negotiations ongoing between HART and Howard Hughes,” Kevin Whitton, a spokesman for the agency, said in an email. “There is no indication that the parties are close to reaching a settlement.”

A trial was supposed to finally start in May, but it was taken off of Judge John Tonaki’s calendar while Howard Hughes pursues appeals on some key pre-trial decisions that Tonaki issued late last year.

Those decisions “are estimated to have dismissed over $100 million of Howard Hughes’ severance damages claims in the litigation,” according to Whitton.

Two Acres, High Stakes

How could two acres of land be worth as much as $220 million in damages?

For Howard Hughes, that largely comes down to what it calls the “lost tower.”

The company maintains that a Kakaako rail station built just east of Ward Avenue and Halekauwila Street would stop it from building another 400-foot tall condo tower in that same spot, in addition to the nine that are already either built or in the works.

The city would keep the “aerial rights” to the land – or the rights to the space above those two acres – “thereby preventing Victoria Ward from constructing a residential tower as planned where the transit station is to be located,” Howard Hughes states in its court arguments.

That leaves the area “with no economic value,” it added.

But did Howard Hughes actually plan to build a tower in that exact spot, where the building would abut the planned station? The city and even the judge remain skeptical.

“Given the stakes, it would seem that the first thing the … Defendants would have provided to the Court would have been plans, drawings, at least conceptual design, as to what type of development this would have been,” Tonaki wrote in a December court decision.

Further, Tonaki wrote, Howard Hughes and its local subsidiary, Victoria Ward Limited, never submitted plans for such a tower to the Hawaii Community Development Authority, the state agency that oversees that part of Kakaako.

“It would appear that the so-called ‘lost-tower’ was in fact a tower that never existed,” Tonaki wrote, ruling that it was too “speculative” and could not be considered for damages in a jury trial.

It’s one of the decisions that Howard Hughes is looking to appeal.

Mark Murakami, an attorney representing Howard Hughes, forwarded questions regarding the lost tower and other legal issues to Bennet Group Communications, which also represents the company.

“Ward Village suggested various alternatives that would have mitigated the impacts on tenants and the neighborhood, and the cost to HART, but the suggestions were not taken, leaving Ward Village no choice but to follow the condemnation process as required under both Hawaii and federal law,” the company said in a statement.

Howard Hughes declined to comment further.

Banking On Rail While Suing For Damages?

It’s clear that the developer and Victoria Ward included the prospect of a rail transit line running through the area to help promote Ward Village – at least to a certain extent.

Archives of the Ward Village website, available through the Internet Archive Wayback Machine, show that the company once included a map of the Ward Village area that featured the last two transit stations planned for rail. Those two stations were among the few icons placed on the map.

The map remained on the website through at least June 2016, according to the archived data.

Howard Hughes, through Bennet, declined to answer whether it had used any other marketing materials – print or digital or in other promotional activities such as presentations to buyers — to help promote Ward Village and the condo towers that it’s developing there.

However, in late 2017 – about a year before the city filed its condemnation suit against Howard Hughes – then-HART board member Ember Shinn had a notable exchange with Murakami during a public hearing in which she said the company was using rail to help sell its condos to an overseas market.

“I’ve seen it in your ads, I’ve seen it in your literature that you market on your condominiums to foreign countries,” Shinn told Murakami, “I was in Japan and I was reading an ad in one of the local, beautiful magazines … on Howard Hughes … and one of the things they said, ‘close to rail.’”

“We would hope that Howard Hughes, who is a very big player in Kakaako and very well-respected, would cooperate with us in this process rather than being an impediment.”

Now, amid years of cost increases and project mismanagement, city leaders aim to stop one station shy of that point and save the Kakaako station for a potential later phase of funding and construction.

“The good thing about this is that HART has nothing but time to negotiate a settlement,” said one agency official who spoke on the condition of anonymity because the official is not authorized to comment publicly.

Shinn and another former board member, Terrence Lee, have said that Howard Hughes once threatened HART with a “huge” legal claim if they didn’t build rail through Kakaako. The reason, Lee said, was that the developer was counting on the assumed increases in value to its condominium towers from the transit line.

Howard Hughes has repeatedly declined to respond to that assertion. In its court filings, the company claims that rail and all the accompanying noise and passengers would actually hurt the value of its Ward Village plans, not help.

However, the company did tout rail as a potential asset back when it sought the necessary state approvals for Ward Village from HCDA.

“The Master Plan embraces the City and County of Honolulu’s planned High Capacity Transit Station,” the company wrote in its Ward Village permit application to HCDA in 2009. “The new station within Ward Neighborhood should provide a fast and convenient travel option.”

Putting The Two Pieces Together

Through January, the city spent $13 million of the full $23 million that it’s authorized to pay in legal fees for the Howard Hughes lawsuit, according to HART.

Lori Kahikina, the agency’s executive director, said in an emailed statement that local officials aren’t sure whether it’s the most expensive case the city has ever had to litigate, but it’s “unusual” in “Howard Hughes’ aggressiveness and the magnitude of resources it is expending.”

What’s not clear as both sides remain deeply entrenched in the lawsuit is how aggressively either the city or Howard Hughes pursued an alternative that did not involve spending millions of dollars in attorneys’ fees.

Rail systems in other cities show that it’s possible to integrate elevated train stations into private commercial development. The recently built MiamiCentral mixed-use development in downtown Miami, for example, includes a station that runs through the base of a tower and accommodates several rail systems, including the city’s metro line.

“It is the city’s position that Howard Hughes is required to address and incorporate rail as a condition of its development, and benefits greatly from its permitted development,” Kahikina said in a separate email.

City officials did not say whether it would be possible for Howard Hughes to build a tower above the Kakaako station. “Any settlement discussions are kept confidential by the parties such that HART is not able to provide this level of detailed information,” Kahikina added.

The city has managed to get some rail-related easements from another major landowner just east of Ward Village: Brookfield Properties, which owns Ala Moana Center. City officials have in recent years pushed for even more easements around the mall, however. It remains to be seen whether the existing ones will suffice, should the rail line make it that far.

This story was supported by the Fund for Investigative Journalism.