In January of 2015, barely a month after Luna Loa Developments, LLC, was formed, its sole member of record, Rajesh Budhabhatti, signed onto an affordable housing agreement with the County of Hawai‘i. Terms of the agreement called for Luna Loa to develop at least 106 low-income rental units on 4.6 acres along Pua Melia Street in the village of Waikoloa within five years of February 4, 2015 – the date the agreement was signed by then- Mayor Billy Kenoi.
Luna Loa had no experience in real estate or development. Nor, at the time the agreement was signed, did it even own the property where the housing was to be built.
Yet because the housing agreement called for the units to be affordable to households with incomes below 60 percent of the area median income (AMI), Luna Loa received 212 so-called “excess” affordable housing credits. The length of time the units would need to remain affordable was, the agreement said, “a period of at least ten (15) years.”
Not until April 21, 2015, did Luna Loa actually take title to the property, which had earlier been owned by D.R. Horton/ Schuler Homes. The nominal price, reflected in the conveyance tax paid as well as property tax records maintained by the county, was $1 million. It is unlikely that this was a cash transfer. More likely, the payment was made in the form of excess housing credits.
Records reviewed by Environment Hawai‘i at the county Office of Housing and Community Development (OHCD) did not include a purchase and sale agreement similar to the one in the file for West View Developments. However, the deed transferring title to Luna Loa refers to a purchase and sale agreement made on January 2, when Luna Loa had been in existence for just over two weeks. That agreement is unrecorded, but the log of Luna Loa credits prepared by OHCD does mention a transfer of 30 credits to D.R. Horton Homes.
That same log indicates that Luna Loa had begun selling off credits even before it took title to the Waikoloa property. In March, an entry in the log shows Luna Loa had sold four credits, at $50,000 each, to RCFC Kaloko Heights.
And the sale of credits continued even after Luna Loa had sold the property to an entity called K00674 Waikoloa, LP. That sale occurred on April 21, the same day that Luna Loa had itself taken title.
In other words, Luna Loa owned the property for less than a day, and yet had received 212 affordable housing credits without developing so much as a single unit.
In January of 2016, Luna Loa sold three more credits to Glory Nani Mau, at $30,000 each. That allowed Glory Nani Mau to satisfy the affordable housing requirements for its 22-lot subdivision south of Hilo. Alan Rudo prepared the memo to the county Planning Department on May 24, 2016, stating that the developer had satisfied the condition.
The sales continued. In March, Luna Loa conveyed 12 credits to Moaniala Holdings, LLC, developer of the Hilo Hillside market-rate subdivision, no sale price recorded.
Inexplicably, Luna Loa acquired four credits from West View Developments in May 2016.
In 2021, the new landowner, now renamed A0674 Waikoloa LP, worked out a new affordable housing agreement with the county. Since taking title, the company had scaled back the project. It would still consist of rental units affordable to households earning less than 60 percent of the area median income. But now there would be just 60 such units, not the 106 called for in the original affordable housing agreement with Luna Loa. (Reflecting this decrease, the OHCD log of Luna Loa credits shows a deduction of 95 credits from the balance, leaving Luna Loa with 70 unsold credits.)
An environmental assessment for the project, to be called Kaiaulu o Waikoloa, was published in 2019. The build-out time-line in the EA stated that construction was expected to start in November of that year and continue through 2021 with a total project budget of around $30 million.
A year later, and still there was no earth turned at the site. The developer now was requesting from the Hawai‘i Housing Finance and Development Corporation an extension on its approval for tax-exempt bonds for the project, now estimated to cost $35,520,000. In a report submitted to the HHFDC board, Douglas R. Bigley, representing the developer, stated that the project had been delayed by the need to address possible unexploded ordnance, from the time in the 1940s when the area had been used as a military training ground, and also difficulties associated with the COVID-19 pandemic.
Still, Bigley stated, “Kaiaulu o Waikoloa remains a viable project and has a path to completion.” Any further delays “should be manageable within the requested timeline.”
While the timeline has been delayed, there has been progress. In March 2021, the county issued the first building permits for the project and more than a year later, work on the complex is nearing completion.
— Patricia Tummons
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