Hawaii Senior Housing Gets First Makeover in 35 Years
Novogradac: Journal of Tax Credits
January 2017 • Volume VIII • Issue I Published by Novogradac & Company LLP
STATE TAX CREDITS
Hawaii Senior Housing Gets First Makeover in 35 Years
TERESA GARCIA, ASSIGNMENT EDITOR, NOVOGRADAC & COMPANY LLP
The high cost of developing affordable housing in Hawaii means that preserving every existing unit is crucial. A mix of federal and state low-income housing tax credits (LIHTCs) recently helped an independent senior housing property on Hawaii’s Big Island do just that. Kamana Elderly Housing in Hilo, Hawaii, reopened its doors in November 2016 to new and returning residents after a complete renovation.
Big Island Housing Foundation, a local nonprofit housing provider, built Kamana Elderly Housing in 1982 as nine one-story buildings with 62 rental apartments and an on-site resident manager apartment. All apartments have one bedroom and one bathroom, totaling about 500 square feet of living space. As one of the few affordable senior housing properties in the city, Kamana Elderly Housing has historically experienced high occupancy rates and maintains a waiting list of about one-to-two years. The development is also in an attractive location next door to the Kamana Senior Center, which offers various programs and activities.
To extend the useful life of Kamana Elderly Housing, Big Island Housing Foundation partnered with Urban Housing Communities LLC, a California-based development company that previously helped Big Island Housing Foundation rehabilitate two of its multifamily housing properties in Hilo.
The recent renovation of Kamana Elderly Housing is the property’s first major update in its 35-year history, so all of the apartments’ outdated fixtures were replaced. "The property needed a facelift–a new hat, new dress and new shoes,” said Delene Osorio, executive director of Big Island Housing Foundation. "It’s a 100 percent renovation: new kitchen cabinets, appliances, flooring, wall coverings, added ceiling fans to the bedroom, windows and water heaters.” Developers reconfigured the layout of each apartment and added a dining counter for more open and functional living space. Other upgrades include energy efficiency renovations and accessibility improvements for disabled residents.
The property also features an on-site laundry facility, gazebos and picnic tables. David Tamura, who designed Kamana’s landscaping 35 years ago, returned to update the property’s landscaping and to install new, front-porch private gardens for the residents.
The development team wanted to complete the overhaul as quickly as possible, considering that residents needed to temporarily relocate during construction. "We did plan on an aggressive rehab schedule,” said James Rock, senior development manager for Urban Housing Communities. Financing closed in August 2016 and crews began work immediately, finishing the renovation within three months.
Osorio said residents were overwhelmed by Kamana’s transformation. "There were a lot of tears of joy,” she said. "Some of them had been waiting over a year for their own housing and to be independent. Even the contractors told us, ‘Now we know why you do this.’” All rented apartments will continue to operate with a Section 8 subsidy.
Rock said LIHTC funding was critical to the development, especially because of the added cost of shipping building material from the mainland. "Having resources available to improve the property makes sure it extends the life of the asset for 60-plus years,” said Rock. "Without the program, the funds available would be much more restricted and the scope of the rehab wouldn’t be as great.”
The Hawaii Housing Finance and Development Corporation (HHFDC) awarded Kamana Elderly Housing with a reservation of $5.6 million in federal LIHTCs and $2.8 million in state LIHTCs. HHFDC also approved nearly $8.2 million of tax-exempt issuance from the state’s Hula Mae Multi-Family (HMMF) bond program.
"The state is able to continue providing high-level quality affordable housing for residents by allowing these rehabs to take place and keeping units in service and livable for tenants rather than letting them fall out of service or letting them become condemned,” said Rock.
Alden Capital Partners acted as the tax credit syndicator for Kamana Elderly Housing and for the two previous LIHTC redevelopments by Big Island Housing Foundation and Urban Housing Communities. For Kamana Elderly Housing, Alden Capital Partners provided $5.4 million in federal LIHTC equity and $650,000 in state LIHTC equity through its multi-investor fund, Alden Capital Partners Tax Credit Fund 10. Alden Capital Partners also bought $5.3 million of tax-exempt bonds to fund construction.
Dana Mayo, Alden Capital Partners’ executive vice president, said that Hawaii is an attractive place to invest because of the strong housing market. "The demand for affordable housing in Hawaii is huge, partly because it’s an expensive place to develop,” said Mayo. "From an investor standpoint, even though [Kamana Elderly Housing] is far away geographically, investors like the demand and metrics of the investment.”
Jeff Weiss, Alden Capital Partners’ president, agreed that in Hawaii there is both a great interest and need for additional investments in affordable housing preservation. "This is our ninth property that we’ve been involved with in Hawaii,” said Weiss. "For properties in Hawaii–because of the elements–you generally need to spend a little bit more on maintenance to extend their useful life.”
Investment in Kamana’s renovation not only extended its useful life, but also allowed Big Island Housing Foundation to explore new affordable housing possibilities. "Going through this sale and renovation allowed us to look at funds in reserve toward building another senior [development],” said Osorio. Big Island Housing Foundation is planning to build an affordable housing property in Hilo next year.
This article first appeared in the January 2017 issue of the Novogradac Journal of Tax Credits.
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