Kukui Gardens buyer worries tenants
By Rick Daysog
Advertiser Staff Writer
By Rick Daysog
A San Francisco-based real estate investment company that has raised rents after improving property here is purchasing the Kukui Gardens affordable rental complex.
Carmel Partners is acquiring the 857-unit, downtown apartment project from the nonprofit Kukui Gardens Corp., people familiar with the deal said.
The price was not disclosed.
Kukui Gardens' owners said last month that they had a buyer, but did not disclose its name.
Kukui Gardens' brokers previously stated that the buyer will not redevelop the property and will keep rents near existing levels at least until 2011.
But residents at the 22-acre project — many of whom are immigrants or senior citizens on fixed incomes — fear the sale eventually will result in large rent increases and lead to the displacement of many low-income tenants.
"We're very, very worried about what happens after 2011," said Carol Anzai, a 33-year Kukui Gardens resident and president of the tenants association.
Carmel Partners' chief investment officer Chris Beda did not return calls. Lawrence Ching, Kukui Gardens' president, declined comment, citing a confidentiality agreement.
Founded in 1992, Carmel Partners is no stranger to Hawai'i's real estate market.
Last year, the company paid $79.5 million for 520 former naval rental housing units at Kalaeloa. At the time of the purchase, Carmel said it would invest $5 million to $8 million for improvements and keep the homes in the rental market for civilian and military tenants.
In 2004, the company bought the 204-room Aloha Surf Hotel in Waikiki for $15.7 million. Carmel later renovated the hotel and sold the units as condominiums.
The company also was part of a group in 2002 that bought the 700-unit Moanalua Hillside Apartments complex from a Mainland company for nearly $50 million.
The group spent about $10 million on improvements. Rents rose by about $100 to $200 for units previously rented for $800 a month, and increased by $200 to $360 for units previously rented for $925 a month. The group then sold the complex to an affiliate of Los Angeles-based Douglas Emmett Realty Advisors for $108.5 million in January 2005.
Like Kukui Gardens, Moanalua Hillside was developed by Clarence Ching, Lawrence Ching's father, using U.S. Department of Housing and Urban Development financing, in exchange for keeping the units affordable for a set period of time.
On the Mainland, Carmel Partners owns about 12,000 apartment units and has offices in Irvine, Calif., Denver, Seattle and Washington, D.C., in addition to its San Francisco headquarters. According to the company's Web site, the San Francisco Business Times listed Carmel Partners as one of the top 60 corporate givers to charities in the Bay Area.
But the company also attracted the attention of San Francisco regulators.
In January, the company and a partner, Olympic View Realty LLC, agreed to refund $310,000 to tenants at its 3,221-unit Parkmerced apartment complex under a settlement with the San Francisco District Attorney's Office.
The settlement followed an investigation into allegations that the landlords illegally passed on utility costs to tenants, which is prohibited under San Francisco rent laws, and came several months after Carmel and Olympic View sold the apartments to a New York real estate company.
The 36-year-old Kukui Gardens outside of Chinatown is one of the largest affordable rental projects in Hawai'i.
The apartment complex, which houses about 2,500 residents, charges tenants between $444 and $1,100 a month for one- to four-bedroom units.
In exchange for the HUD financing, Clarence Ching agreed to keep the units affordable until 2011.
The Rev. Bob Nakata, a former state lawmaker and advocate for the homeless who is working with Kukui Gardens tenants, said he's glad that Carmel Partners has said it will not redevelop the project, but he has concerns about the company's track record.
Nakata said he hopes to meet with the buyer soon to hear its plans for the project.
"I'm not optimistic," he said. "I think we'll probably have to gear up for a fight."
Reach Rick Daysog at firstname.lastname@example.org.