Honolulu, Hawaii, issued more than $100 million in bonds to finance the development of a multifamily rental property for low- and moderate-income residents in the city.
The bond will finance a loan to a private company, Komohale Maunakea Venture LP, which will develop the property in Honolulu’s Chinatown neighborhood. The project will be part of the Maunakea Tower Apartments, a 379-unit property developed by the company.
The bonds received a rating of Aaa/VMIG 1, the highest rating from Moody’s Investors Service. The bonds mature on June 1, 2027, and carry a yield of 3.43%. The coupon rate is 5%.
Proceeds from the bonds will be “used to finance a portion of the costs of the acquisition, rehabilitation, installation, and equipping of a multifamily rental housing development,” according to the official statement accompanying the sale of the bonds.
The bond issuance comes as housing becomes increasingly expensive in Honolulu and across the country. The city consistently ranks among the most expensive for renters, and the median two-bedroom apartment rented for about $2,500 last year. As the Federal Reserve continues to raise interest rates to combat inflation, many economists have noted that such rates could be keeping would-be homeowners in the rental market, inflating rents.
The 32-story building will feature several amenities atypical for affordable housing in the United States, including a swimming pool and parking garage. As part of its deal with the government of Honolulu, Komohale Maunakea will invest $29 million in renovations of the development. Two-thirds of its units will be one-bedroom apartments, and one-third will be two-bedroom apartments. The monthly rent for a one-bedroom will be $1,361, and the monthly rent for a two-bedroom will be $1,612. The bonds will be backed by revenue from the development.
Citigroup Global Markets Inc served as lead underwriter on the issuance, purchasing the bonds for $105 million. The price reflected a premium of about $5 million.