The Kukui Gardens apartments will remain affordable under a compromise that will require upward of $55 million in state funding.

Tenants and the San Francisco-based buyer of the 857-unit apartment complex on the edge of Chinatown reached an agreement this month to divide Kukui Gardens roughly in half.

One portion will remain as affordable housing under control of the tenants and eventually will have up to 800 units. The other half will be developed by Carmel Partners into a mixed-use residential, retail and office complex.

"This will prevent the displacement of hundreds of low-income and elderly residents," said Carol Anzai, president of the project's tenant association and a Kukui Gardens resident for 33 years. "This will keep Kukui Gardens affordable forever."

The fate of Kukui Gardens, one of the state's largest affordable housing projects, has been in question since the nonprofit owner, Kukui Gardens Corp., put the apartment complex up for sale in January 2006.

Residents were worried that Carmel, which agreed to purchase the property for $131 million last March, would tear down the complex and build more expensive housing that would displace hundreds of low-income tenants.

To avoid pushing residents out, Carmel has agreed to sell 11 acres of the 22-acre complex, with 415 of the 857 units on it, to a nonprofit representing the tenants. The tenants organization, Faith Action for Community Equity, will arrange financing through government and private sources to buy the land, renovate the existing apartments and add an additional 200 to 400 affordable apartments.

The tenants' portion of the project will cost about $80 million, including land and construction costs.

LONG-TERM SOLUTION

The deal is contingent on tenants obtaining $55 million in state financing. House Speaker Calvin Say recently introduced a bill appropriating the money for the transaction and a tenants group is working with the leadership in the state Senate for a similar measure.

Kukui Gardens Corp. officials said yesterday that they support the agreement between Carmel and residents, adding that it provides a long-term solution for low-income tenants' housing needs.

"As we have said all along, Carmel is the best hope for continued affordable rentals at Kukui Gardens because they have the resources to implement much-needed repairs and maintenance, as well as the experience to successfully manage the property," the company said in an e-mail.

Under the deal with Carmel, rents largely will stay the same. The apartment complex charges tenants between $444 and $1,100 a month for one- to four-bedroom units.

Chan U Lee, an affordable housing expert who is working with Kukui Gardens' tenants, said half of the 415 units will be reserved for residents who earn less than 30 percent of the state's median household income. Depending on family size, this ranges between $11,000 a year and $29,000 a year.

The other half of the units will go to tenants earning less than 60 percent of the local median household income, Lee said. Depending on family size, this ranges between $22,000 and $58,000 a year.

CONCEPTUAL STAGE

Kukui Gardens tenants with incomes exceeding those levels will be able to stay in their apartments until 2013.

"The reason we are doing this is primarily because we'd like to keep the affordability there and keep residents there," said Ron Zeff, Carmel's chief executive officer.

According to Zeff, Carmel will redevelop its half for residential, retail and other commercial uses. He said the company's plans are still in the conceptual stage and that any development would be based on demand and the community's input.

Carmel's redevelopment likely will be a scaled down version of some of the proposals it has already floated.

In an Oct. 10 e-mail to Ted Liu, director of the state Department of Business, Economic Development and Tourism, Carmel Chief Investment Officer Chris Beda said the buyers were considering building 3,700 residential units, 235,000 square feet of retail and office space, 4,500 parking spaces and an 800-room hotel at the Kukui Gardens site.

The redevelopment plan would "integrate nicely into planned mass transit and future housing needs," Beda said in the e-mail.

2,500 RESIDENTS

The Kukui Gardens complex, bordered by Liliha, Vineyard, Beretania and 'A'ala streets, is close to the proposed Dillingham Boulevard station in the city's mass transit project.

In a previous e-mail to Liu, dated Sept. 5, Beda expressed an interest in acquiring Beretania Recreation Park, a city park surrounded on three sides by the Kukui Gardens complex. According to Beda's e-mail, "the park in the middle of the site is key to the success of this plan."

Beda could not be reached yesterday for comment.

City spokesman Bill Brennan said the city has no intention to sell the park "for any reason."

Kukui Gardens was built in 1970 by local developer Clarence Ching and is home to about 2,500 residents.

The project used financing from the U.S. Department of Housing and Urban Development. In exchange for HUD financing, Ching agreed to keep the units affordable until 2011.

Public outcry over the sale to Carmel Partners prompted the state Legislature to approve a measure last year giving Gov. Linda Lingle the power to use the state's condemnation process to acquire Kukui Gardens. Lingle signed the bill into law in July.

In October, Bishop Larry Silva of the Catholic Diocese of Honolulu asked the owners of Kukui Gardens to reconsider their decision to sell the affordable housing project. Money from the sale would have gone to a foundation that benefits three major Catholic institutions in Hawai'i — St. Francis system, Chaminade University and Saint Louis School.

Reach Rick Daysog at rdaysog@honoluluadvertiser.com.