Suit filed over Kukui Gardens transfer
The former owner of the Kukui Gardens housing complex says its mortgage holder is not allowing it to pay off what it owes on the loan until it pays $4 million in prepayment and other fees.
The nonprofit Kukui Gardens Corp. is suing Indiana-based HC Mortgage Co. Inc., its successor company, HOLCO Capitol Group Inc., and the president of the two companies, Kevin C. Horton. In its lawsuit, KGC claims HOLCO's demand for prepayment and other fees, including a percentage of the sale of the property, is illegal and amounts to extortion.
KGC says HOLCO is also withholding $4.5 million it placed in two reserve accounts as a condition of its loan from the U.S. Department of Housing and Urban Development.
HC Mortgage, HOLCO and Horton could not be reached for comment.
KGC obtained a $16 million loan at a below market-interest rate from HUD in 1969 to construct the 857-unit affordable housing complex. The mortgage is set to mature in 2011.
In 1986, HC Mortgage purchased the mortgage from HUD. Last December KGC closed on the sale of the property to San Francisco-based real estate company Carmel Partners and the Hawaii Housing Finance and Development Corp. for $131 million.
In order to sell the property, KGC needed the consent of the federal housing commissioner to prepay the loan that HOLCO obtained for KGC.