Kukui Kauhale, a nonprofit corporation backed by the Ecumenical Association for Housing in California, used nearly $46 million in federal funds to close the Kukui Tower deal yesterday. The money came from a Department of Housing and Urban Development program designed to preserve affordable housing.

The sale of the North Kukui Street complex was completed despite a preliminary HUD investigation that concluded proper procedures weren't followed by the local HUD office in approving the buyer's proposal.

But HUD assistant secretary Nic Retsinas, after reviewing the investigation results and the response of the local office, determined proper procedures were followed and authorized the deal to close, said Michael Flores, director of multifamily housing for the agency in Honolulu.

The federal money would have been lost if the sale hadn't closed by Monday.

That also would have jeopardized the affordable status of the project by allowing the owner, THC-Ginza Joint Venture, to convert the units to market-priced condominiums.

"The escrow closing means that Kukui Tower residents will not be uprooted," said Peggy Franklin, Kukui Kauhale president.

But Sarah Adamson, president of the tower's resident council, said she's worried the new owner "could make life miserable" for tenants who opposed the deal. They supported a competing plan for a resident cooperative to buy the project.

While the Kukui Tower deal went through, officials aren't as optimistic about a proposal to purchase the 700-unit Moanalua Hillside Apartments under the same preservation program. Roughly $80 million in federal funding is needed for that deal. But even if Congress keeps the preservation program alive for another year, it is not expected to appropriate nearly enough money to handle the backlog of projects seeking funding.