Business Report 1/25/16: Economics of Kakaako high-rise cancella - Hawaii News Now - KGMB and KHNL

Business Report 1/25/16: Economics of Kakaako high-rise cancellation

HONOLULU (HawaiiNewsNow) -

 Here's how condos are built these days: You announce the project, you show beautiful pictures of what it'll look like, and you sell. At this point you haven't broken ground. You're selling air.

The substantial deposits people put down help finance the project.

The system works well provided there are buyers willing to advance cash for units that don't exist. But the problem with other people's money is, if too few come forward, you've got too little cash to build.

The MacNaughton and Kobayashi Groups, both local, both reputable, have build several good projects. But the one they wanted to build on the site of the Cutter dealerships fizzled.

Not at first: more than 100 people reserved units almost immediately. Then sales slowed, leaving a larger number of units unsold. At the same time, construction costs rose 13 percent in two years. The same thing happened in the last building booms. Each condo project sold fast, until one didn't.

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