City Housing Project Sale

16 01 2014

The City and County of Honolulu is in the process of finalizing the sale of the City’s twelve affordable housing properties to the selected buyer, Honolulu Affordable Housing Project, LLC (HAHP). The potential sale has raised serious concerns with the members of the City Council that the project wasn’t handled properly and that the buyer has not been able to secure the financing needed for the purchase.

Due to the Council’s expeditious approval of legislation authorizing the sale of the properties in 2012, the buyer had over a year to secure financing for the sale. According to the purchase and sale agreement, the closing of this transaction was to have taken place on April 1, 2013. An extension was granted by the Honolulu City Council in good faith and the agreement was to close on September 26, 2013. Another extension was allowed to extend the closing to March 31, 2014.

HAPH has not secured financing and has asked the City to change the terms of the sale to allow seller financing, which means the City would receive $132 million to $138 million within six months to a year of the sale on March 31st. There is also the issue of gap financing, which is the difference in total funding needed for a proposal and the amount of funding already made available. The gap financing shortfall would be about $4 million to $10 million and taxpayers would be responsible for the financial deficit, which the buyer would have up to 20 years to pay the City. If the sale proceeds, the City would only receive about $5 million from the money currently held in escrow.

Part of the proceeds from the sale, totaling $142 million, includes over $36 million in federal grants that the City would receive to disburse to eligible nonprofits and fund City programs to provide shelter and services to low-income, disabled, and homeless. Under rules by the U.S. Department of Housing and Urban Development (HUD), the $36 million in federal grants would have to be spent by May 2, 2014 or face possible sanctions by HUD which may include the possible loss of these funds and any future funding.

Council Chair Ernest Martin in the News Regarding the Loss of HUD Funds
EXCLUSIVE: HUD blast city housing program – Hawaii News Now – KGMB and KHNL



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