Category Archives: Economics

Inside one of those large gated properties on Kahala Avenue

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On Friday afternoon, Meda and I drove over to the other end of Kahala to inspect the contents of one of those walled and gated Kahala Avenue homes. The home recently changed hands, and the new owenrs are getting rid of its contents in an online auction by McClain Auctions Hawaii. The auction bidding started on Thursday, and the final round of bidding starts at noon Sunday, where the items come up for last minute bids, a minute or so at a time.

Photos of the 350 items are available online. Just go to the McClain Auctions website, then click the link “View Auction” link.

This property is loaded with marble statues, inside and out. Clearly, our lack of life size, or larger than life size statues is terribly out of sync with the taste of those who designed this property.

We came away from our initial look at the items with the sense that we perhaps suffer from a little known malady, “Statuary Deficit Disorder.”

Note: This is not one of those former Kawamoto properties.

Real estate records show the property was purchased in 1986 by William Weinberg, who owned what was then known as the Kahala Hilton Hotel. It was purchased by a Japanese businessman in 1996 and immediately transferred to a Bahamanian corporation. It next sold in 2004 to a San Francisco-area real estate investor, who paid $4 million more than the previous sale.

And then in 2006, it sold to another Japanese company for $29 million (no, that’s not a typo), which then reportedly invested additional millions into the home.

It sold quietly last month for $15 million, based on the reported Hawaii conveyance tax of $187,500, to a California entity. That was $14 million less than the previous purchase price, and doesn’t include any additional investments between the sales in 2006 and 2023.

The new owner is reportedly eager to get rid of all the contents, renovate, redecorate, and flip!

The property consists of 1.5 oceanfront acres with a 9,896 sf home with a vast 4,500 sf lanai. The lanai alone is nearly three times the size of our house!

The auction listing describes the decor as Baroque/Rococo style. I don’t know if that’s an accurate assessment.

Whatever the label, it’s a breathtaking example of crazy excess, conspicuous consumption gone wild.

Imagine what it costs to light, air condition, and clean this monster! Add in the cost of landscaping and landscape irrigation, insurance, maintenance, and other normal expenses, not the mention the opportunity costs of tying up so much capital, that the monthly expenses must be truly staggering.

Here are a few photos I took as we walked through the property.

The large engine in one photo is the backup generator for the home’s air conditioning system.

Glimpsing the excesses of the 1980s and 1990s

It’s time to treat immigration as the solution rather than the problem

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Isn’t the answer here pretty obvious?

One the one hand, the economy is being hit by shortages of people needing or wanting work, which drives up labor costs, adds to inflation, and generates labor strife.

Worker shortages are fueling America’s biggest labor crises, Washington Post, Sept 16.

U.S. Construction Industry Lags Due To Global Labor Shortage, BusinessWest.com, Sept 16.

America’s small businesses are running out of workers, CNN Business, Aug 19, 2022

And on the other hand…

Immigrant farming key to solving labor shortage, News5, Cleveland.

Retiring baby boomers are creating a labor shortage—immigration could be the solution, Fast Company, Sept 17.

Immigrants are key to addressing America’s labor shortage, lowering inflation, and growing our economy, The Hill, August 29.

There’s a solution to the labor shortage — and it’s the undocumented workers who are already here

We need to stop insisting that immigration is a problem to be used for political stunts, and begin treating a rational immigration policy as a solution.

ALICE in paradise: Struggling to stay afloat

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An interview broadcast on Hawaii Public Radio’s “The Conversation” on Wednesday put some facts and figures behind what we all know, that its hard to survive in Hawaii’s economy.

As a result of economic woes during the Covid pandemic, three out of five families in Hawaii (59%) are now either living in poverty, or fall in a category of “asset limited, income constrained, employed,” referred to as ALICE, a term for working households that are just barely able to make ends meet. That figure is up from 42% in 2018.

Michelle Kauhane, senior vice president of community grants and initiatives for the Hawaii Community Foundation, “we’re talking about households who have very little savings because they are living paycheck to paycheck. So there’s not a lot of reserves.”

And the number could easily grow, since there are additional families with incomes just above the ALICE threshhold, and could easily fall as a result of any kind of economic shock.

Hawaiian and hispanic families have the highest proportion living in below the ALICE upper limit, which was $148,771 in 2018. And the overall rates were highest in Hawaii and Maui counties, according to data Kauhane cited.

Aloha United Way and the Hawaii Community Foundation are partnering with a group of nonprofit agencies is focusing on promoting family financial stability and affordable housing.

There’s a lot more information available in a report, “ALICE in Hawaii: A financial Hardship Study,” published in 2020.

This puts our situation in pretty stark terms. But we’re not alone. Communities across the country are reflecting the pronounced growth in income inequality that began in the 1970s and has worsened progressively since.

More on the question of our older reinforced concrete buildings

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The sudden collapse of the 12-story condominium has prompted lots of talk about the problem of our older buildings and the combined effects of age, deferred maintenance, water intrusion, climate change, and so on.

Here are a few more links.

An old friend, Chuck Smith, summarized a lot of the concerns in a blog post a few days ago on his “Of Two Minds” blog (“A Few Things About Reinforced Concrete High-Rise Condos“).

The second most remarkable thing about the sudden collapse of the Florida condo building was the rush to assure everyone that this was a one-off catastrophe: all the factors fingered as causes were unique to this building, the implication being all other high-rise reinforced concrete condos without the exact same mix of causal factors were not in danger.

Before we accept this conveniently feel-good conclusion, there are a few things we should consider about reinforced concrete high-rise condos.

He then goes on to make a number of excellent points, discussing the problems of reinforced concrete, the specialized business of analyzing and repairing such problems, questions of liability, and what happens in more affordable buildings when the costs of repair exceed the sometimes modest original apartment prices.

This one seems to state the bottom line:

Reinforced concrete high-rises built decades ago to the building codes of that time may not be up to snuff should ground settlement exceed modest limits or structural weaknesses develop. Age and water are enemies of all structures, but multi-story buildings are especially at risk.

Then, thanks to Jay Hartwell, here’s a link to the first in a Hawaii Business Magazine series published last year (“A Condominium Can Last Hundreds of Years, But Not Its Components“).

Here’s the beginning of the excellent series by Noelle Fujii-Oride. Links to the next two articles in the “Condo Owners Beware” series are found at the end of the first story.

A 40-year-old Honolulu condominium can show its age in many ways: brittle, leaking pipes; cracks in its concrete walls and decks; rusted rebar; and corroded railings and window frames.

Dana Bergeman is the CEO of Bergeman Group, a local construction management company. He says many of Hawai‘i’s condominiums were built in the 1960s and ’70s and are reaching the point where they will need major infrastructure, cosmetic and architectural improvements to keep their value and remain liveable.

“As these buildings become older and older, they’re going to need more and more care,” he says. “Buildings are a lot like people in that sense. As people age, they have greater needs and greater health care needs and need additional attention. Buildings are no different.”

Hawaii Business Magazine spoke with plumbers, exterior renovators, homeowner association managers, real estate experts and reserve planning specialists to learn more about these capital improvement projects. They say that keeping an aging condo functional and safe can cost millions of dollars, take months or even years to complete and requires that condo boards plan well in advance.

What follows is a report on some of the larger capital improvement projects, typical for aging condos, and how much they will cost on a per unit basis.

Highly recommended!

And today an article in the New York Times explored similar issues confronting Chicago. Yes, the city of Chicago, a city, it reminds us, was built on a swamp. Read on.

See “The climate crisis haunts Chicago’s future. A Battle Between a Great City and a Great Lake.”