Kakaako tower facing extraordinary maintenance fee hike

Living in Kakaako was supposed to be pretty affordable for several hundred moderate-income Hawaii residents who bought into a condominium tower via lottery last year at Ward Village.

But eight months after Ke Kilohana opened, homeowners are facing a roughly 50% increase in monthly maintenance fee charges.

The hike is the works to address financial deficits for the 425-unit workforce housing tower that has cost far more to operate than developer Howard Hughes Corp. estimated in 2016 before sales and construction commenced.

The higher expenses also have led the board of directors representing owners to contemplate ways to cut costs, including using homeowner volunteers to maintain landscaping as part of a “gardening club” and reducing or eliminating air conditioning in hallways.

“It’s like ridiculous,” Matthew Wu said about the size of the maintenance fee increase.

Wu moved into his two-bedroom unit in July and said he decided to buy, in part, because the maintenance fees were low for a high-rise with amenities that include a karaoke room, movie room, music room, gym, playroom for kids and outdoor park with a barbecue area.

Two yellow-framed lanai gathering spaces high up in the building also are features of the tower, which has a Longs store on the ground floor and was the first condominium tower at Ward Village mainly reserved for residents with moderate incomes.

The average price for 375 condos with one to three bedrooms reserved as workforce housing was $510,776 and represented a below- market price that satisfied a state affordable- housing requirement. Another 49 units were sold at market prices, including a few penthouses. One unit is for the resident manager.

Hughes Corp. estimated that monthly maintenance fees would be around $270 for one-bedroom units, $400 for two-bedroom units and $525 for most three-bedroom units.

However, electricity use for common areas and labor costs for security, cleaning and building management turned out far higher than anticipated, according to a copy of a budget presentation to Ke Kilohana’s board of owners earlier this month.

The presentation said expenses have exceeded revenue from maintenance fees by $50,000 a month, and therefore no money from maintenance fees is going to build up reserves as intended.

Hughes Corp., which estimated operating costs with input from major condo management firm Hawaiiana Management Co., did warn Ke Kilohana buyers that estimates may not be accurate.

“Insurance, energy and labor costs are currently in flux and can substantially increase over a short period of time,” the developer said in its public condo report prepared for prospective buyers. “Purchaser recognizes and acknowledges that such common interests and maintenance fees are subject to change as the project evolves. Such estimates are not intended to be and do not constitute any representation or warranty by the developer.”

Still, the size of the increase is hard to accept for some Ke Kilohana homeowners.

“I feel like I got set up,” Wu said.

Another homeowner described the operating cost estimate as negligent, but not all Ke Kilohana condo owners are angry.

Jun Han, a first-time homeowner who lives with his girlfriend at Ke Kilohana, said the increase is high but is being applied to a really low rate.

“It’s not too painful for me,” he said. “I’m not happy with it. I don’t want to pay extra.”

Wu and some other residents said the board was looking at a 53% increase last week.

That would add roughly between $150 and $280 to the monthly maintenance bill for owners. The board presentation said that the higher maintenance fees would be comparable to higher-priced condo towers including Symphony, The Collection and Keauhou Place.

It wasn’t publicly clear whether the board approved such an increase. The board earlier this month was contemplating a 47% increase, up from a 35% hike recommended in November by Hawaiiana, which manages the property for owners.

According to the board’s budget presentation, Hughes Corp. was willing in December to give the owners association $600,000 plus 17 parking stalls and 114 storage lockers in the building that would help the association generate revenue to offset its deficit.

Tod Gushiken, a Ke Kilohana homeowner and board president, opted not to comment Monday.

David Thomson, Hawaiiana’s representative for Ke Kilohana, did the same.

Hughes Corp., which has one representative on the nine-member board, issued a statement that said, “Since before Ke Kilohana opened its doors on May 15, we have offered our assistance with solutions on operations practices as well as other cost savings measures, and we look forward to continuing to collaborate with the association. We want to see every property in Ward Village flourish, especially for the residents of Ke Kilohana who were able to take advantage of HCDA’s Reserve Housing Program.”

HCDA refers to the Hawaii Community Development Authority, a state agency that regulates development in Kakaako and requires that 20% of new homes be affordable to residents with moderate incomes.

Hughes Corp. has built four towers to date, including three luxury towers with average unit prices over $1 million. Two more towers are under construction, and the company has a master plan to develop up to around 4,500 residential units in 16 towers, yielding a requirement for 900 moderately priced homes.