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Title Page Growing Value Organically; Sustainable Real Estate Development and Long Term Value Creation in Rural Communities on the North Shore of Oahu, Hawaii

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Title Page Growing Value Organically; Sustainable Real Estate Development and Long Term Value Creation in Rural Communities on the North Shore of Oahu, Hawaii Title Page Growing Value Organically; Sustainable Real Estate Development and Long Term Value Creation in Rural Communities on the North Shore of Oahu, Hawaii by Gordon Karau Master in Architecture Dalhousie University, 2006 MBA in International Business University of Texas at San Antonio, 2011 Submitted to the Program in Real Estate Development in Conjunction with the Center for Real Estate in Partial Fulfillment of the Requirements for the Degree of Master of Science in Real Estate Development at the Massachusetts Institute of Technology September, 2012 ©2012 Gordon Karau All rights reserved The author hereby grants to MIT permission to reproduce and to distribute publicly paper and electronic copies of this thesis document in whole or in part in any medium now known or hereafter created. Signature of Author Center for Real Estate July 30, 2012 Certified by Dennis Frenchman Leventhal Professor of Urban Design and Planning Thesis Supervisor Accepted by David Geltner Chair, MSRED Committee, Interdepartmental Degree Program in Real Estate Development 1 Abstract 2 Growing Value Organically; Sustainable Real Estate Development and Long Term Value Creation in Rural Agricultural Communities on the North Shore of Oahu, Hawaii by Gordon Karau Submitted to the Program in Real Estate Development in Conjunction with the Center for Real Estate on July 30, 2012 in Partial Fulfillment of the Requirements for the Degree of Master of Science in Real Estate Development ABSTRACT The topics explored in this thesis are first how the value inherent in agriculturally zoned land can be used to support the development of an organic farm and sustainable living demonstration center; and second, whether or not the existence of an organic farm can be considered a high value residential amenity - can access to fresh food, a strong local community, and a lush, bountiful, chemical free environment support 15-20% average yearly growth in real estate values? Or more succinctly, is it possible to ‘grow’ real estate values organically ? Thesis Supervisor: Dennis Frenchman Leventhal Professor of Urban Design and Planning 3 4 Table Of Contents Title Page ........................................................................................................................ 1 Abstract ........................................................................................................................... 2 Table Of Contents ........................................................................................................... 5 Introduction ................................................................................................................... 8 Scope Of Work ................................................................................................................ 9 The Politics Of Developing On Agricultural Lands In Hawai’i ........................................ 10 Agricultural Clusters ...................................................................................................... 11 Growing Value Organically ............................................................................................ 12 Chapter One - Site Context ......................................................................................... 13 The North Shore ........................................................................................................ 13 Pupukea CDP ............................................................................................................ 13 Waihuena Farm ......................................................................................................... 14 Site Analysis .................................................................................................................. 22 Climate ....................................................................................................................... 22 Air .............................................................................................................................. 22 Solar Incidence .......................................................................................................... 23 Topography ................................................................................................................ 23 Soils ........................................................................................................................... 27 Vegetation .................................................................................................................. 31 Infrastructure – West .................................................................................................. 37 Infrastructure – East ................................................................................................... 38 Recommendations ........................................................................................................ 39 5 Chapter Two - The State and County Permitting Context ........................................ 41 State of Hawaii .............................................................................................................. 41 Special Management Areas (SMA) ............................................................................ 41 SMA Permit Processing Procedures .......................................................................... 43 Legislative Changes affecting the State Agricultural Zoning District ............................. 44 SB 2375 – Agriculture Based Commercial Operations .............................................. 44 SB 2646 - Permitting Exemptions .............................................................................. 47 City and County of Honolulu Permitting Requirements ................................................. 48 Agricultural Clusters ................................................................................................... 48 Agricultural Cluster Development Application Requirements ..................................... 49 Farm Dwellings & the Agricultural Income Threshold .................................................... 50 Chapter Three - Housing Study ................................................................................. 51 Pupukea CDP Housing Tenure & Pricing ...................................................................... 51 Area Median Income Calculations ............................................................................. 52 Conclusions ............................................................................................................... 55 Development Case Study .............................................................................................. 56 The Green Village, Bali .............................................................................................. 56 Site Planning and Farm Dwelling Placements ............................................................... 61 Projected Site Populations ......................................................................................... 62 Legal and Financial Organization .................................................................................. 65 Chapter Four - Agricultural Analysis ......................................................................... 67 Agricultural Case Study: Ono Farms, Kipahulu, Maui ................................................... 67 Agricultural Site Plan ..................................................................................................... 73 Upland Food Forest ................................................................................................... 73 Citrus Groves ............................................................................................................. 74 Lower Levels .............................................................................................................. 74 Restaurant / Retail Food Service Outlet ..................................................................... 77 A Food Tractor in the Food Desert ............................................................................. 78 Plant Nursery ............................................................................................................. 78 Agricultural Feasibility Analysis ..................................................................................... 79 6 Chapter Five - Financial Strategy............................................................................... 83 Phasing Strategy ........................................................................................................... 84 Development Proforma .............................................................................................. 91 Financial Scenario Analysis .......................................................................................... 93 Conclusions ............................................................................................................... 103 Long Term Successes and a Healthy North Shore Community ............................... 103 Agricultural Clusters as a Future Development Model ............................................. 104 References ................................................................................................................. 105 7 Introduction Waihuena Farm is a 20.86 acre farm located on the North Shore of Oahu, Hawaii. It is surrounded on all sides by world class cultural and recreational amenities, including the highly regarded Sunset Beach Elementary School, the world famous Banzai Pipeline
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