KAILUA-KONA — The developer of Kamakana Villages has backed out of the North Kona project. ADVERTISING KAILUA-KONA — The developer of Kamakana Villages has backed out of the North Kona project. The state agency tasked with overseeing the financing and
KAILUA-KONA — The developer of Kamakana Villages has backed out of the North Kona project.
The state agency tasked with overseeing the financing and development of affordable housing in Hawaii has given the OK for Forest City to pull out of Kamakana Villages at Keahuolu, a major affordable housing development.
But even with Forest City withdrawing from the project, the Hawaii Housing Finance and Development Corp. still anticipatesthat the project will go forward.
“The state remains fully committed to building affordable homes at Kamakana Villages,” said housing information specialist Kent Miyasaki.
Forest City Hawaii Kona LLC was picked in 2008 to develop Kamakana Villages, a 2,330-unit community on 272 acres in North Kona. More than half of those units, according to documents at the HHFDC, are meant to be affordable at 140 percent of the area median income and below. The development includes affordable senior and family housing expected to be ready for move in later this year.
The same year Forest City was named as the developer, the HHFDC also approved a $25 million loan to Forest City for Kamakana’s development. The agency approved an increase of $5 million to that loan in 2016 for the Manawalea Street Extension, which will extend that road from its current endpoint at Keanalehu Drive down to Ane Keohokalole Highway.
Two months after that loan increase got approval, the HHFDC board approved changes to the development agreement needed to reduce the scope of work and accommodate Forest City’s possible withdrawal.
The company’s parent company had recently converted to a real estate investment trust, making it subject to certain IRS rules that limit development activities, according to a footnote on documents submitted to the board.
Furthermore, increased infrastructure and development costs, combined with a lower availability of government subsidies and demand forced the company to reconsider “the timing and feasibility of the project under the development agreement.”
“The company made a strategic decision some time ago to exit large master-planned communities and to also focus on a few very large markets like New York, San Francisco and Washington DC,” said Jon Wallenstrom, the former president of Forest City Hawaii and now a principal at Alakai Development. “The combination of the company no longer developing master-planned communities like Kamakana Villages and the focus on larger markets really made Kamakana Villages an odd asset for the company.”
During last month’s meeting, the Hawaii Housing Finance and Development Corp. board OK’d an amendment to the development agreement for Forest City’s withdrawal as master developer.
“Forest City has pulled out of the project and will soon have very limited future obligations as Forest City, the State of Hawaii, Hawaii County and Alakai complete the necessary paperwork,” said Wallenstrom.
The approval, according to HHFDC files, requires the Manawalea Street extension project to be completed, requiring that the initial loan given to the company, which was reduced to a total of about $8.4 million, be used to finance its development, construction and related activities.
Wallenstrom said the obligation for the road has been passed to Alakai Development, owned locally by Wallenstrom and another principal.
That road, he added, “will be starting very soon.”
The amendment to the agreement indicates that Alakai Development Kona is in negotiations with local developer Stanford Carr about getting development rights to allow some entity majority-owned and managed by Carr to succeed as master developer.
If they reach an agreement, HHFDC plans to put another submittal before the board for approval within the next three months.
“At this point, we are moving forward under the assumption that an agreement between Alakai Development and Stanford Carr will be reached, and Stanford Carr will be the successor master developer,” said Miyasaki of HHFDC. “We also continue to discuss options with the county since we’re all working together to meet shared goals of increasing affordable units and reducing homelessness.”
Forest City’s withdrawal won’t affect operations by The Michaels Organization, which built the first two affordable housing projects — aimed at families and seniors — in the community, said Laura Zaner, vice president of corporate communications and marketing with The Michaels Organization.
