Honolulu officials brokered a deal Monday to resuscitate the $142 million sale of 12 public affordable housing complexes to a private developer. The agreement relies on city coffers to make the transaction possible.
This set off a series of tense negotiations between representatives of the development group and the Caldwell administration to salvage the sale, while simultaneously addressing the possibility of future litigation if it collapses.
But on Monday, Managing Director Ember Shinn announced that the city had come to an interim agreement with the development group that will give it more time to complete the transaction by a March 31 deadline.
Her announcement came shortly after the city’s deadline of 4 p.m. Monday to broker a deal or search for a new buyer.
“The parties are committed to taking extraordinary efforts to make this deal work for the betterment of the tenants of the housing properties and for the city and its residents,” Shinn said in a written statement.
Those extraordinary efforts include extending city financing to the private development group, which is made up of Highlands Property Development out of California, Richard Gushman, a well-known Honolulu developer and Stephen Gelber, a local real estate and tax attorney.
Specifics on what the financing might look like were not available Monday, and it’s likely those won’t be hammered out until a later date.
There’s also the possibility the city’s financing might not be enough to save the deal. In a Jan. 6 letter, William Rice, of Honolulu Affordable Housing Partners, said his group still needs to make sure the financing will allow the sale to pencil out.
If the affordable housing deal falls through, the possible ramifications could be severe. The city could potentially be on the hook for millions of dollars in litigation expenses given that Honolulu Affordable Housing Partners has said Martin’s political dealings were directly to blame for its lenders backing out.
Honolulu’s budget — which already suffers from projected shortfalls — would also feel the pinch if it lost out on a $142 million windfall. That money from the deal is supposed to go toward paying down debt, funding various nonprofit ventures and propping up Mayor Kirk Caldwell’s homelessness initiative.
The development group had also offered to pay up to $50 million in capital improvements to the apartment complexes, something city officials said was lacking from other buyers’ proposals.