Builder gets extension on year-late affordable homes

When the Kakaako condominium tower Waihonua opened more than two years ago, a clock began ticking to start building some associated affordable homes required under state rules.

Recently the deadline buzzer on that clock rang, and now the affordable housing is expected to start construction toward the end of this year — almost a year late.

The Hawaii Community Development Authority, a state agency regulating development in Kakaako, decided Wednesday to give Stanford Carr, the developer of the affordable-housing project called Hale Kewalo, extra time to get started after unforeseen challenges.

The project, however, will still deliver more homes and at dramatically lower rents for lower-income residents than required.

Hale Kewalo rents are projected to be as low as $451 a month and serve some households earning no more than 30 percent of Honolulu’s annual median income, which equates to about $21,000 for a single person.

Carr said he expects to obtain financing for the $70 million project by September and break ground right after that.

“We’re on track now,” he told HCDA’s board before its decision.

Under HCDA rules, the equivalent of 20 percent of Waihonua’s 341 condos needed to be produced at prices affordable for moderate-income residents.

Waihonua’s developer, Alexander &Baldwin Inc., announced in 2011 that it would satisfy the requirement by building a five-story building with 72 one-bedroom rentals on the corner of Piikoi and Kona streets a block from Waihonua.

Though HCDA rules allowed these units to be affordable to residents earning up to the median income — about $70,000 for a single person — and that rents remain affordable for 15 years, A&B pledged to make Hale Kewalo affordable to seniors earning no more than 60 percent of the median income and maintain such rents for 50 years.

Another rule required that construction on Hale Kewalo begin within two years of Waihonua opening.

Waihonua opened at the end of 2014. But building Hale Kewalo was delayed.

First, a developer that A&B worked with to produce Hale Kewalo couldn’t get sufficient financing. That led A&B, which initially anticipated starting construction on Hale Kewalo in 2012, to propose that Carr take over the project and A&B’s obligation.

HCDA approved that deal in 2015 through which A&B gave Carr the Hale Kewalo site along with $1.9 million. Carr said he intended to increase the number of apartments to 128 in an 11-story building and keep the same affordability.

Later, he finalized plans for 128 units that would maintain affordable rents for 60 years. Carr also made units more affordable, with 13 units for households earning up to 30 percent of the median income, 65 units for households earning up to 50 percent of the median income and 49 units for households earning up to 60 percent of the median income. There also is one manager’s unit.

Projected monthly rents range from $451 for a one-bedroom unit to $1,358 for a three-bedroom unit.

To help ensure the project would be built, HCDA could take the land and the $1.9 million if Carr failed to get financing by January 2016.

Carr at the time of HCDA’s approval hoped to start construction in 2015 if efforts went smoothly to obtain financing from the Hawaii Housing Finance and Development Corp., a state agency that helps facilitate affordable-housing development.

Instead, Carr was tripped up by HHFDC changing its evaluation process. So HCDA gave Carr until January 2017 to secure financing.

Carr got the financing commitments from HHFDC in March 2016 for $31.5 million in bonds, about $3 million in federal and state tax credits and a $10.6 million loan from the state’s rental housing trust fund. The tax credits can be claimed for 10 years, giving them a value of roughly $30 million.

At that time, Carr projected starting construction in a year and was obligated to actually close on the financing by March 10. But on March 13, he informed HCDA that requirements tied to new federal flood maps held him up from meeting his financing deadline.

On Wednesday, Carr said the flood map issue has been resolved and that he should close financing by September and then break ground. If that plan holds, construction is expected to finish in early 2019.