[Note: Senator Maile Shimabukuro sponsored the bill, SB1412 (2021), that allocated $95m in special purpose revenue bonds for this project.]

By Andrew Gomes
Investors wanted for Oahu surf park project, Star-Advertiser, 24 Sep. 2022

Developers of a planned surf park on state land at Kalaeloa are trying to interest the general public in the venture as investors through an unusual offering.

An Ohio-based company is seeking to raise about $100,000 for the $155 million project called Hono­kea Surf Villages and Resort by selling shares of stock in an affiliated company.

Honokea’s developers, local big-wave surfer Brian Keaulana and Kenan “Keno” Knieriem Jr. of HK Management, partnered with Columbus, Ohio-based real estate fundraising firm Rhove to help finance the surf park project, which Rhove describes as being in a pre-development phase with high loss risk.

“Our partnership with Rhove perfectly aligns with our community focus,” Knieriem, CEO of the development firm, said in a statement from Rhove announcing the endeavor. “Partnering with Rhove is truly about the social benefits of community ownership. We are passionate about including the local community and bringing surfing to more people. What better way than to provide people with a true ownership stake.”

As of Friday afternoon, Rhove reported receiving $2,956 from 59 investors, or $50.10 on average. The company said the total represents 2.76% of its goal, which equates to a goal of $107,000.

The company said investors, who may contribute as little as $1, receive fractional shares of equity in the development project through a series of stock in its affiliate, Rhove Real Estate 1 LLC. The company cautions that investments in the Honokea project are tentative and do not involve any guaranteed return.

“Any investment involves risk and may result in a total loss of principal,” the company states on its website. Rhove also explains that if it doesn’t achieve its fundraising goal within six months, then full refunds will be provided to investors.

Rhove describes Honokea Surf Villages and Resort as being in a pre-development phase of 18 to 22 months to be followed by 12 to 14 months of construction and projected completion in 2024.

In 2021, HK Management persuaded state lawmakers to give the company tentative authorization to sell up to $95 million in tax-exempt, low-interest revenue bonds under a Hawaii law that allows such financing for projects that have a public interest.

These so-called special-purpose revenue bonds are something lawmakers can authorize for private projects that have a public benefit and are within several allowed industries that include agriculture, health care, nonprofit schools, affordable housing, manufacturing and telecommunications.

Such bonds provide a form of tax-free financing that is cheaper than commercial lending, and the obligation to repay investors who buy the bonds rests solely with the private entity and not the state.

In urging the Legislature to approve the bond financing through Senate Bill 1412 in 2021, Honokea representatives touted aspects of their plans that included boosting surf and film industries, given that the project aims to provide Olympic-level training and is slated to have a surf and aquatic film studio.

The main piece of the envisioned park is a 5.5-acre lagoon where man-made “perfect” barreling waves up to 8 feet would be generated.

Other elements of the project include 50 boutique bungalows for rent, a private bar, a business center and function room, 7,000 square feet of retail space, 5,000 square feet of restaurant space, a rock-climbing wall, a skate park, a BMX track, a ropes course, beach volleyball courts, a dive tank, a lazy river, a surfboard- shaping facility and a surf history museum.

Honokea is envisioned for development on 19 acres of vacant land owned by the Hawaii Community Development Authority near the Diamond Head end of Kalaeloa Airport that was once part of Barbers Point Naval Air Station.

HCDA, a state agency, noted in testimony on the revenue bond bill in 2021 that HK Management did not yet have a land lease.

HK Management in August received an 18-month extension from HCDA to continue due-diligence work on the property and exclusively negotiate a lease.

At the August HCDA meeting at which the extension was granted by the agency’s board, HK Management representatives said the company has been working with the agency to use the Kalaeloa site for five years, and a draft environmental assessment was published Friday as part of the ongoing effort to develop the project.

“We’re very excited to be working with the staff,” Knieriem said at the meeting. “And we think that we have a fascinating facility that will really bring excellence in sports, arts, industry and culture to Kalaeloa, especially, namely community.”