State can't let Kukui Gardens slip away
Some deals can be sealed with a handshake. The current concern over the fate of the low-income rental complex Kukui Gardens suggests that stronger guarantees will be needed in this case.
A story by Advertiser business writer Rick Daysog examined the track record of Carmel Partners, a San Francisco-based real estate investment company reportedly negotiating to buy the 857-unit project from its nonprofit owners, Kukui Gardens Corp.
That company has indicated it will not "flip" this project out of the affordable market. But it's only prudent to review its history, in Hawai'i and elsewhere, which certainly has involved redevelopment, rent increases and resale of the upgraded properties, with a sizable profit margin.
For example, Carmel was part of a group that in 2002 bought Moanalua Hillside Apartments for nearly $50 million, spent $10 million on improvements and raised rents by up to a third. In January 2005, the group sold the complex for $108.5 million.
The buyers have been meeting privately with tenants to calm their fears. Let's hope some written assurance of their intent to keep the units affordable — perhaps a covenant — is being offered that can keep these units available to low-income renters beyond the 2011 expiration of the federal housing subsidy.
Short of seeing that kind of contractual arrangement, the state can't stand by and leave the issue of housing 2,500 low-income residents unresolved. There's already a critical shortage of affordable housing in the Islands, and with cost-of-living indicators on the rise, the situation will only get worse.
Kukui Gardens Corp. is pressing to turn over ownership quickly, which is too bad. With more time, a nonprofit entity could be formed to finance a purchase that could benefit all concerned.
Failing this preferred solution, the state must stand ready to exercise its own power to secure the project as affordable housing. Gov. Linda Lingle has said the state is prepared to step in to protect the loss of Kukui Gardens. And separate bills enabling alternative solutions, condemnation or creation of a special district, are proposed as vehicles.
We simply can't let Kukui Gardens slip away.