Shinn also explained that it doesn’t appear there is enough political will to grant additional extensions to give the buyer more time to finalize the purchase.
The developer, Honolulu Affordable Housing Partners, did not show up to the meeting, something Shinn said was likely due to possible litigation over the deal.
“We’ve been working really hard since Dec. 11 to salvage this collapsing deal,” Shinn said. “If it is salvageable, it will be through some efforts that will be extraordinary.”
One option Mayor Kirk Caldwell‘s staffers have explored is whether to offer the developer financing through the city. Shinn, however, was unable to provide much detail about that option during Friday’s meeting.
“I can’t expand on it because I don’t know what it would mean,” Shinn said. “We’re looking at it at the 30,000-foot level right now trying to figure out if there’s anything we can do to salvage the deal.”
She said the developer has until Monday at 4 p.m. to agree to forge ahead or the deal will be all but dead.
The sale would mean the city would no longer have to pay $20,000 per day to operate and maintain the facilities. Honolulu Affordable Housing Partners had also agreed to spend up to $50 million to improve the properties.
But the deal began to crumble last month when Honolulu City Council Chair Ernie Martin introduced two resolutions, one that would delay the sale and another that would cancel it altogether.
The resolutions were a political maneuver on Martin’s part. He and other council members were upset with how the Caldwell administration wanted to spend $35 million of the $142 million on charities and other nonprofits, and the intention of the council was to use the resolutions as leverage to voice their displeasure and possibly reallocate the funding.
Martin’s plan backfired.
William Rice of the Honolulu Affordable Housing Partners had said that the mere introduction of the resolutions caused his financiers to waver. As a result, he said, he will no longer be able to meet a March 31 deadline to close the deal because some of his lenders backed out.
Rice’s development group also sent a letter to the city alleging it had defaulted on its contract, and that the municipality would be on the hook for at least $2 million. The city could also be liable for the $4 million the Honolulu Affordable Housing Partners has spent so far just trying to finalize the purchase.
If the deal dies, Honolulu Mayor Kirk Caldwell has said the impact will be widespread. His homelessness initiative — a top priority of his administration — relies on $7 million from the affordable housing sale.
The administration also prepared its budget with the windfall and the savings from not having to operate the apartment complexes built into its bottom line. No sale means the budget will be squeezed further at a time when there is already a shortfall for both the current fiscal year and 2015.
Shinn said the administration is hoping to avoid falling further into a fiscal hole by working with the developer. She admitted this is more difficult now because of the threat of possible litigation if the purchase agreement collapses.
“They still indicated a strong interest and desire to continue the sale and find a way to move forward on this,” Shinn said.
Still, council members remained leery Friday. Council Member Ikaika Anderson said he was still skeptical that the mere introduction of a resolution could have complicated a financial deal, even one as complex as Honolulu Affordable Housing Partners’ proposal.
He said it seemed as if the developers are using the resolutions as an excuse to get out of the sale. Anderson also didn’t have much faith in Honolulu Affordable Housing Partners after the representatives of the consortium didn’t show up to Friday’s meeting.
“They had every opportunity to be here today,” Anderson said. “I’m stunned that they’re not here to at least continue to show their interest in continuing to move this matter forward.”
While the administration has reached out to other developers who previously bid on the complexes, Shinn said the city still has a major financial incentive to stick with Honolulu Affordable Housing Partners because the losing bidders didn’t put as much money on the table.
She said she was not allowed under procurement rules to say how much the other bidders offered to purchase the properties.
Read the latest back-and-forth between the city and Honolulu Affordable Housing Partners here: