Development firms to build affordable housing through state resolution

A development partnership is positioned to start building a low-income housing tower in Pawaa later this year following a recent tentative endorsement by the state to finance the $89 million project.

The partnership, partly led by local development firms Kobayashi Group and MacNaughton Holdings, anticipates starting construction on the 201-unit project, called Hale Kalele, in August and finishing in early 2022.

Board members of the Hawaii Housing Finance and Development Corp., a state agency that helps produce affordable housing, unanimously voted on a preliminary financing endorsement last month.

The resolution stating the agency’s nonbinding “intent” to provide more than $80 million through bonds, a loan and state and federal tax credits follows the board’s selection of the partnership, MK Alder Street Partners LLLP, for the project nearly two years ago.

“It’s wonderful that we’re moving this forward,” Leilani Pulmano, HHFDC board chairwoman, said at the Dec. 12 meeting where the decision was made.

Mike McCartney, another board member, added, “Thank you. This is a long time coming.”

If a final financing decision follows, the 20-story tower would be built on land bordered by Piikoi, Alder and Elm streets and owned by the state Judiciary.

Two buildings on the 1.5-acre site were once used as a juvenile detention center before replacement facilities opened in 2010 as part of a new Family Court complex in Kapolei. The Pawaa buildings, which date back to before 1949, in recent years have been used for a community service and restitution program for juvenile probationers as well as for programs that provide counseling, school and rehabilitation for children who violate youth-specific laws such as truancy or curfew, or are low-risk offenders who can’t return home for safety or other reasons.

Ideas for how to better use the Pawaa property go back almost a decade, and resulted in an effort to produce new juvenile service facilities and affordable housing.

HHFDC produced an environmental assessment in 2016 based on conceptual plans and issued a request for development proposals from private developers in late 2017.

The agency offered to lease the property to a developer for 75 years at $1 a year, and rental rates must remain affordable to households with low incomes.

HHFDC’s board selected MK Alder Street Partners through a competitive bidding process in April 2018.

Hale Kalele is the first affordable-housing project for the Kobayashi and MacNaughton firms, which are largely known for Hawaii luxury housing and retail projects. The partnership also includes Steve Heimler of California-based Cirrus Asset Management.

Monthly rents at Hale Kalele are projected to range mainly from $1,213 for studios averaging 380 square feet of living space to $1,539 for two-bedroom units averaging 705 square feet of living space. Ten of the apartments will be rented for half as much to households with very low incomes.

Most of the units will be reserved for households earning no more than 60% of Honolulu’s median income, which last year equated to $50,640 for a single person, $57,840 for a couple and $72,300 for a family of four. Ten units will be reserved for households earning half as much.

Juvenile service facilities would be in a sequestered portion of the tower’s first two floors and controlled by the Judiciary.