Bill approved to intervene in Kukui Gardens sale

Lawmakers passed a bill last night that would use the state's condemnation powers to intervene in the sale of Kukui Gardens, the state's largest affordable rental housing complex, which is being sold to private developers.

Opponents of the deal fear that the developer could raze the 857-unit complex for luxury housing.

"Kukui Gardens supports the character of the neighborhood by being the primary source of workforce housing for all of historic Chinatown," House Housing Chairman Michael Kahikina (D, Kalaeloa-Nanakuli) said before House Bill 2239 was approved. "The 857 affordable rental units in Kukui Gardens are irreplaceable in the current Honolulu housing market."

The bill goes to Gov. Linda Lingle, who can sign it into law, veto it or allow it to become law without her signature.

"The residents, the surrounding community and the island of Oahu would benefit from the active intervention of the state in this transaction to ensure there is no negative impact on current and future residents," Kahikina said.

Last week the measure was approved by House and Senate conferees, to either exercise condemnation powers or have the state partner with a nonprofit developer to keep the complex on the edge of Chinatown affordable for low- and moderate-income families. It is home to about 2,500 residents.

The bill says: "It is in the public interest and is required for public use to acquire Kukui Gardens as an affordable housing project by exercise of the power of eminent domain."

Kukui Gardens Inc., the nonprofit that built and operates the complex, put it up for sale in January. In recent weeks, private real estate investment firm Carmel Partners of San Francisco has emerged as the buyer, paying about $130 million for the 22-acre project.

Under the language of the bill, the state would either work out a partnership with Carmel or move to acquire Kukui Gardens by eminent domain.

The sale is being driven by the 15-member Kukui Gardens board of directors. The board is composed of five members of the Marianist Center, a Catholic religious order that operates Chaminade University and St. Louis School; five members of St. Francis Medical Center; and five members of the Clarence T.C. Ching Foundation, a nonprofit established by Clarence Ching in 1967 to qualify for federal housing financing and tax-exempt status.

Built 36 years ago with about $16 million of Housing and Urban Development money, Kukui Gardens' rents, under its agreement with HUD, must be kept affordable until 2011. The measure passed yesterday seeks to keep them affordable until at least 2016.

The bill calls for public financing of any acquisition by condemnation "through the expenditure of general funds, revenue bonds, rental housing trust funds, federal and state low-income housing tax credits or any other public and private funds."

The bill says that at least 50 percent of the units must be set aside for residents whose household income does not exceed 30 percent of the median family income. Rent for a one-bedroom unit is about $444 a month.

Carmel Partners, which has avoided publicity, issued a statement yesterday confirming that it is the buyer.

Carmel said it "intends to fully honor the HUD requirement to keep the Kukui Gardens property units at below-market pricing through April 2011 and work creatively to develop a strategy that helps preserve the resident mix for the long term."

The sale to Carmel is subject to approval by HUD.

The Carmel statement said that during the next five years it "will develop and implement a transition plan that will allow deserving elderly, ethnically diverse and disadvantaged residents to remain while, at the same time, ensuring that a viable business model can be maintained."

Many residents fear that to service the $130 million price, Carmel will be forced to raise rents and will eventually raze the project for luxury housing.