Last-minute plea fails to save Waiehu housing project

Commission reverts 116 acres back to agriculture

In what ultimately was too little too late, Oahu developer Sterling Kim fell short Thursday of resurrecting his Hale Mua affordable housing project on former macadamia nut land in Waiehu.

He told state Land Use Commission members meeting at the Maui Arts & Cultural Center that he had lined up $47 million in financing to reacquire the property from Southwest 7 and to develop the project’s first phase, beginning as early as late this year.

“I know this is the eleventh hour,” he said, acknowledging that he had not complied with commission conditions attached to its land redesignation approvals in 2007. But, “I beseech you to give this project a chance.”

Kim told commissioners he was unable to pursue the project and abide by commission development conditions because he had lost the property through foreclosure.

In a letter to the editor published Aug. 14 in The Maui News, Kim said that he had financing for the project from Central Pacific Bank after the development was approved in 2007, but the Great Recession hit and CPB was one of the banks that needed to be bailed out.

In April 2011, Kim’s Hale Mua project property was foreclosed on after he defaulted on a $10.6 million loan from Southwest 7. The lender and new property owner earlier informed the commission that it had no interest in developing the property mauka of Kahekili Highway.

Southwest 7 attorney Randall Sakumoto reiterated Thursday that his client did not oppose reverting the property from urban to agricultural use.

On June 4, the commission issued an order to show cause why 116.2 acres should not return to its former land use. The commission noted that it had reason to believe that certain conditions attached to the project had been violated or not met, including the construction of affordable housing, provisions for public school facilities, transportation improvements and annual reports.

On Thursday, Kim acknowledged that he knew of Southwest’s foreclosure action and that he had not appealed a decree of foreclosure. He said he later learned that he still retained some kuleana properties in the project area that had not been included in the property mortgaged to Southwest 7.

After being allowed to participate as a party in Thursday’s LUC proceedings, Kim gave a PowerPoint presentation to inform commissioners about the project area and plans to build hundreds of homes, 51 percent of them affordable to families of four earning from 70 to 125 percent of median income.

Kim said he had received a commitment to finance the project, but that was contingent on the commission’s decision on the property’s reversion from urban to agricultural use. He said the property retained its fast-track approval for development, which had been granted by the Maui County Council in 2005.

Although commissioners expressed support for affordable housing and sympathy for Kim, the consensus from commissioners’ comments was that they were bound to rule that there had been no substantial commencement of the project because no housing had been built and other conditions had gone unmet.

Commission member Gary Okuda said pursuing affordable housing projects “makes a lot of sense.”

But, he said, “we all know that development is really a tough game. There’s things that have to be done. And, it’s very hard to really predict things that may or may not happen. But in this case, we’re bound by certain things that have happened, particularly the foreclosure action. And, unless and until title to the property is transferred out of Southwest 7, frankly speaking Southwest 7 . . . is the owner of the substantial portion of the petitioned area. And so without their agreement as far as not reverting the property it really creates a real lack of evidence on the record not to revert the property.”

The commission voted 7-0 in favor of reverting the Waiehu property back to its agricultural land-use designation.

The county Department of Planning and state Office of Planning did not oppose the action.

Originally, Hale Mua Properties sought reclassification of 240 acres from agricultural and rural districts to urban, but on Feb. 12, 2007, the commission denied reclassification of 120.9 acres and ordered the reclassification of the 116 acres from agriculture to urban.

Project plans called for building 238 affordable and 209 market-priced homes, and there would have been $15 million to $20 million in off-site improvements, including an extension of Imi Kala Street with a new bridge crossing the Wailuku River. Project plans included sites for an elementary school and a park.

* Brian Perry can be reached at bperry@mauinews.com.

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