KEAUHOU PLACE CONDOMINIUM PROJECT SUMMARY OF THE RESERVED HOUSING SALES PROGRAM AND TIMELINE. March 2015

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1 KEAUHOU PLACE CONDOMINIUM PROJECT SUMMARY OF THE RESERVED HOUSING SALES PROGRAM AND TIMELINE I. OVERVIEW & SALES PROGRAM March 2015 Keauhou Lane LP, a Hawaii limited partnership (the Developer ), will build a mixed-use residential commercial project consisting of a 43-story main tower and mid-rise town homes containing total of 423 residential units, to be named Keauhou Place (the Project ). The Developer will market eight-five (85) residential units within the Project to prospective owneroccupants as reserved housing units ( Reserved Housing Units ) pursuant to the Kaka ako Community Development District Mauka Area Rules, Chapter 22 of the Hawaii Administrative Rules (the Mauka Area Rules ), as administered by the Hawaii Community Development Association ( HCDA ). The purpose of the Keauhou Place reserved housing program is to provide housing to moderate income households (Gap Group Income) that would generally have incomes that are too high to qualify for conventional housing assistance programs and at the same time their income is too low to qualify for a market rate housing. The sales prices for the Reserved Housing Units will range from $357,900 to $530,000. Each unit will be assigned at least one (1) parking stall. The sale of the 85 Reserved Housing Units will be offered initially on a lottery basis only to those qualified persons who meet the maximum annual adjusted income of 140% or less than the annual median income (AMI) established by the Housing Urban and Development (HUD) for Honolulu. Developer intends to publish presale announcements for the sale of Reserved Housing Units in the Project in the Honolulu Star-Advertiser on Friday, March 27, 2015 and Sunday, March 29, From Saturday, March 28, 2015 to Friday, April 3, 2015, Reserved Housing Application packets will be available for pick-up at the Keauhou Place Sales Gallery, 500 Ala Moana Boulevard, #3A, Honolulu, HI (Restaurant Row fronting Pohukaina Street). The designated Reserved Housing Units will be offered to prospective purchasers through a public lottery system. Any person interested in purchasing a Reserved Housing Unit who meets the eligibility requirements described in Section II below may submit a completed Reserved Housing Application (defined below) to the Keauhou Place Sales Gallery beginning at 10:00 a.m. on Friday, April 10, No Reserved Housing Applications shall be accepted prior to this time. The deadline to submit a completed Reserved Housing Application and be considered for the lottery is 6:00 p.m., Thursday, April 16, All Reserved Housing Applications must be hand delivered. Applications delivered by , facsimile, mail or courier will not be accepted. The Developer will compile and maintain a list of all eligible prospective purchasers who have submitted a completed Reserved Housing Application to be included in the public lottery. The public lottery will be held on Saturday, April 18, 2015, 10:00 a.m., at the Keauhou Place Sales Gallery, at which the names of prospective purchasers who have submitted a completed Page 1 of 9

2 Reserved Housing Application will be selected at random to establish the order in which a prospective purchaser will be eligible to select a Reserved Housing Unit at a the Unit Selection Event and placed on the Keauhou Place Applicant Unit Selection Number List. Prospective purchasers whose names are selected at the lottery will be issued a Unit Selection Number and will be invited to attend the Unit Selection Event to be held on Sunday, April 19, 2015 at the Keauhou Place Sales Gallery. Prospective purchasers selected in the lottery who did not have an opportunity to select one of the designated Reserved Housing Units shall be placed on a back-up reservation list in the order in which they were selected in the public lottery. Prospective purchasers who receive a Unit Selection Number at the lottery must be present at the Unit Selection Event to select a unit, execute a sales contract and submit an earnest money deposit in the amount of $ upon said prospective purchaser s execution of a sales contract for a Reserved Housing Unit in the Project. The Reserved Housing Application Packet contains the following: 1. Keauhou Place Condominium Project Summary of Reserved Housing Sales Program and Timeline; 2. Keauhou Place Summary of Reserved Housing Application and Unit Selection Process; 3. Keauhou Place Fact Sheet; 4. Summary of HCDA Eligibility Requirements; 5. Keauhou Place Registration Agreement Reserved Housing Owner-Occupant; 6. Affidavit of Intent to Purchase and Reside in a Designated Owner-Occupant Reserved Housing Residential Unit; 7. Affidavit of Eligibility to Purchase a Reserved Housing Unit in the Keauhou Place Condominium Project; 8. A sample Pre-Qualification Letter from an approved project lender; 9. A Uniform Residential Loan Application form; and 10. Information from each of the approved project lenders (Honolulu Home Loans and Bank of Hawaii) A COMPLETED Reserved Housing Application Packet shall contain the following: 1. Affidavit of Intent to Purchase and Reside in a Designated Owner-Occupant Reserved Housing Residential Unit o Must be fully completed, signed by all prospective purchasers (attorneys-infact are not acceptable), and signatures must be notarized; 2. Affidavit of Eligibility to Purchase a Reserved Housing Unit in the Keauhou Place Condominium Project o Must be fully completed, signed by all prospective purchasers (attorneys-infact are not acceptable), and signatures must be notarized; 3. Keauhou Place Registration Agreement Reserved Housing Owner-Occupant Page 2 of 9

3 o Agreement must be fully completed and signed by all prospective purchasers; and 4. Loan Pre-Qualification Letter provided by Honolulu Home Loans or Bank of Hawaii. II. ELIGIBILITY REQUIREMENTS FOR ORIGINAL PURCHASERS. Listed below are the proposed eligibility requirements for prospective purchasers of Reserved Housing Units in the Project. The Affidavit of Eligibility to Purchase a Reserved Housing Unit in the Keauhou Place Condominium Project (with notarized signature) shall specify that the prospective purchaser complies with the requirements of Section II.A listed below. The form and content of the affidavit shall be reviewed and approved by HCDA. Developer or Developer s designated representative shall be responsible to process and file the affidavits. The pre-qualification for a mortgage loan ( Pre-Qualification Letter ) shall be based upon the developer s designated lender s verification that the prospective purchaser meets the eligibility requirements of Sections II.B and II.C below. The Pre-Qualification Letter shall establish the maximum price of a Reserved Housing Unit for which the prospective purchaser may select and is qualified to purchase. A. QUALIFIED PERSONS. Mauka Area Rules, Subchapter 7 Sale and Rental of Reserved Housing Units, Section ( Qualifications for reserved housing ). The following shall be required for a prospective purchaser to qualify for the purchase of a Reserved Housing Unit in the Project: 1. Purchaser is a citizen of the United States or a resident alien; 2. Purchaser is a bona fide resident of the State of Hawaii; 3. Purchaser is at least of legal age; 4. Purchaser does not have a majority interest in a principal residence or a beneficial interest in a land trust on a principal residence within or without the State for a period of three (3) years immediately prior to the date of application for a Reserved Housing Unit under Section of the Mauka Area Rules; 5. If married, Purchaser s spouse does not have a majority interest in a principal residence or beneficial interest in a land trust on a principal residence within or without the State for a period of three (3) years immediately prior to the date of application for a Reserved Housing Unit under Section of the Mauka Area Rules; 6. Purchaser shall be the owner and occupant of the Reserved Housing Unit; and 7. Purchaser has never before purchased a Reserved Housing Unit under Section of the Mauka Area Rules. Page 3 of 9

4 EXCEPTION: Subject to the approval of the HCDA Executive Director, a current owner of a Reserved Housing Unit may apply to purchase a larger reserved unit in accordance with Section (c) of the Mauka Area Rules, provided that: a. The applicant s current household size, determined by the number of individuals on title and their dependents, has increased and exceeds the occupancy guidelines established in Section of the Mauka Area Rules; b. The applicant has resided in the current reserved unit for at least one (1) year; and c. The applicant qualifies to purchase a reserved housing unit in accordance with Section (a), except that the applicant s current ownership of a reserved housing unit shall not disqualify the applicant under Sections (a)(4), (5) and (7) of the Mauka Area Rules. Requests to purchase a larger reserved unit in accordance with Section (c) of the Mauka Area Rules shall be sent in writing no later than two (2) weeks prior to the application deadline to Anthony J. H. Ching, Executive Director, Hawaii Community Development Authority, 547 Queen Street, Honolulu, Hawaii Such request shall indicate the applicant s current household size, as well as the date that applicant s existing reserved housing unit was first purchased and the then-size of the applicant s household. 8. Annual income shall not exceed 140% of median income of a family of four in the City and County of Honolulu, as established by HUD for B. INCOME RESTRICTIONS. Mauka Area Rules, Subchapter 7 Sale and Rental of Reserved Housing Units, Section ( Income ). To provide flexibility in sales to qualified persons, the sales program will allow any household size in accordance with Section of the Mauka Area Rules to purchase either a one- or two-bedroom Reserved Housing Unit, provided that all qualifying criteria are satisfied. The adjusted household income of a Qualified Person purchasing a Reserved Housing Unit shall not exceed 140% of median income. The maximum qualifying income limits for 2015 are as follows: 2015 Reserved Housing Income Limits 1 Household Size Maximum Qualifying Income 1 Person $85,150 2 Persons $97,300 3 Persons $109,500 1 Income limits are rounded to the nearest $50. Page 4 of 9

5 4 Persons $121,650 5 Persons $131,400 6 Persons $141,100 7 Persons $150,850 8 Persons $160,600 The adjusted household income shall be the income earned during the most recent calendar year preceding the date of application to purchase a reserved housing unit for which copies of filed state and federal tax returns are available, which shall be verified by said copies of filed state and federal income tax returns. As used in this section, adjusted household income means the total income, before taxes and personal deductions, received by all members of the prospective purchaser s household, including but not limited to: wages, social security payments, retirement benefits, unemployment benefits, welfare benefits, and interest and dividend payments but not including business deductions. C. ASSET RESTRICTIONS. Mauka Area Rules, Subchapter 7 Sale and Rental of Reserved Housing Units, Section (c) ( Income ). The total net assets of a Qualified Person shall not exceed 125% of the applicable income limits. The maximum household asset limits for 2015 are as follows: Household Size Net Assets Limits 1 Person $106,438 2 Persons $121,625 3 Persons $136,875 4 Persons $152,063 5 Persons $164,250 6 Persons $176,375 7 Persons $188,563 8 Persons $200,750 Total net assets include, but are not limited to, all cash, securities, and real and personal property at current fair market value, less the value of any outstanding liabilities secured by such assets. Total net assets do not include any retirement accounts and gifts to assist in unit down payments. D. OCCUPANCY GUIDELINES. Mauka Area Rules, Subchapter 7 Sale and Rental of Reserved Housing Units, Section ( Occupancy Guidelines ). The following are occupancy guidelines for the Reserved Housing Units: Page 5 of 9

6 Unit Size Permissible Household Size Standard Household Size 0 bedroom 1-2 persons 1 person 1 bedroom 1-3 persons 2 persons 2 bedrooms 2-5 persons 4 persons 3 bedrooms 3-7 persons 5 persons 4 bedrooms 4-9 persons 6 persons III. RESTRICTIONS ON THE SALE OF THE UNIT BY THE ORIGINAL PURCHASER DURING FIRST TWO YEARS AND BEYOND. A. EQUITY SHARING REQUIREMENTS. Mauka Area Rules, Subchapter 7 Sale and Rental of Reserved Housing Units, Section ( Equity Sharing Requirements ). 1. HCDA s share of the equity in a Reserved Housing Unit shall become due as follows: a. At resale if HCDA waives its first option to purchase the Reserved Housing Unit during the Regulated Term (defined below in Section III.B.1); or b. At resale of the Reserved Housing Unit after the Regulated Term. 2. HCDA s share of the equity in the Reserved Housing Unit shall be the higher of: a. Method 1 Original Share Equity An amount equivalent to the difference between the original fair market value of the Reserved Housing Unit and its original sales contract price, not to exceed the difference between the resale fair market value and the original sales contract price (HCDA s original shared equity amount for each unit will be shown on a Reserved Housing Unit Price List and Shared Equity Amount schedule to be included in the materials provided to each prospective purchaser); or b. Method 2 Percentage Share of Equity An amount equivalent to the HCDA s percentage share of net appreciation calculated as the difference between the original fair market value of the Reserved Housing Unit and its original sales contract price divided by the original fair market value of the unit. Net appreciation means the resale fair market value less original sales contract price and actual resale costs incurred, if any. c. EXAMPLE: An example of the calculation of HCDA's share of the equity in the Reserved Housing Unit is as follows: o Original Fair Market Value = $650,000 o Original Sales Contract Price = $614,000 Page 6 of 9

7 o Resale Fair Market Value = $725,000 HCDA's share of the equity in the reserved housing unit shall be the higher of: Method 1 (Calculation per (b)(1)): (a) Original Fair Market Value $650, 000 (b) Original Sales Contract Price ($614,000) (c) Original Share of Equity [(a) minus (b)] $36,000 This amount shall not exceed the following: (d) Resale Fair Market Value $725,000 (e) Original Sales Contract Price ($614,000) (f) Maximum Equity Amount under this section [(d) minus (e)] $111,000 The share of equity under Method 1 is $36,000. Method 2 (Calculation per (b)(2)): (a) Resale Fair Market Value $725,000 (b) Original Sales Contract Price ($614,000) (c) Actual sales costs incurred ($50,750) (d) Net Appreciation [(a) minus (b) minus (c)] $60,250 (e) Original Fair Market Value $650,000 (f) Original Sales Contract Price ($614,000) (g) Original Discount [(e) minus (f)] $36,000 (h) Original Discount $36,000 (i) Original Fair Market Value $650,000 (j) HCDA s Percentage Share of New Appreciation [(h) divided by (i)] 5.54% (k) Net Appreciation $60,250 (l) HCDA s Percentage Share of Net Appreciation 5.54% (m) Share of Equity [(k) multiplied by (l)] $3, The share of equity under Method 2 is $3, HCDA's share of equity is $36,000 (the higher of the amounts determined in Method 1 and Method 2). 3. HCDA shall determine the fair market value of the Reserved Housing Unit at the time of the initial sale and at the time of resale. The price and terms on the resale of units shall be approved by HCDA. Page 7 of 9

8 B. CONDITIONS ON THE TRANSFER OF RESERVED HOUSING UNITS. Mauka Area Rules, Subchapter 7 Sale and Transfer of Reserved Housing Units, Section ( Conditions on Transfer of Reserved Housing Units ). 1. Sale During Regulated Term a. The original purchaser must comply with certain restrictions to sell the Reserved Housing Unit for a term of years based on unit affordability (the Regulated Term ). The Regulated Term for the Reserved Housing Units in the Project is as follows: (i) Reserved Housing Units affordable to qualified persons with adjusted household incomes of 100% to 119% of the 2015 HUD median income shall be subject to a five-year Regulated Term; (ii) Reserved Housing Units affordable to qualified persons with adjusted household incomes of 120% to 140% of the 2015 HUD median income shall be subject to a two-year Regulated Term. b. If the original purchaser wishes to transfer title to the unit, HCDA shall have the first option to purchase the unit at a sales price based on the lower of the following two (2) methods of valuation: (i) Method A Fair Market Approach The current fair market value less HCDA s share of the equity in the Reserved Housing Unit as determined by Section of the Mauka Area Rules; or (ii) Method B Median Income Approach The original sales price of the Reserved Housing Unit adjusted proportionately to the change in median income computed from the date of purchase to the date of sale. 2. Sale After The Regulated Term Or Waiver of HCDA Right of First Option After the end of the Regulated Term or if HCDA decides not to exercise its first option to purchase the Reserved Housing Unit during the Regulated Term, the original purchaser may sell the Reserved Housing Unit without restrictions; provided that the equity-sharing amount must be paid to HCDA. C. RENTAL OF RESERVED HOUSING UNITS. Mauka Area Rules, Subchapter 7 Sales and Rental of Reserved Housing Units, Section ( Conditions on Transfer of Reserved Housing Units ). Page 8 of 9

9 The prospective purchaser will be purchasing the Reserved Housing Unit as an owner-occupant and, therefore, must occupy the Reserved Housing Unit at all times during the Regulated Term. After the Regulated Term, the rental of the Reserved Housing Unit shall not be allowed prior to the satisfaction of the equity sharing requirements listed above unless the purchaser, with the prior review and approval of HCDA, converts the Reserved Housing Unit to a rental. If converted to a rental, the purchaser may only rent the Reserved Housing Unit to qualified persons and households and charge such rent amounts as are in accordance with the Mauka Area Rules and as approved by HCDA. After the Regulated Term and payment to HCDA of the equity sharing amount as determined by the Mauka Area Rules, the rental of the Reserved Housing Unit shall not be subject to any restrictions under the Mauka Area Rules or by HCDA. IV. TIMELINE The estimated timeline for the sale of the 85 Reserved Housing Units is as follows: Event Date First Presale Announcement Friday, March 27, 2015 Begin Distributing Applications Saturday, March 28, 2015 Application Pick-Up Period March 28 to April 3, 2015 Second Presale Announcement Sunday, March 29, 2015 Begin Accepting Completed Applications Friday, April 10, 2015 Application Deadline to be Considered for Lottery Thursday, April 16, 2015 Lottery Event for 85 Reserved Housing Units Saturday, April 18, 2015 Unit Selection Event for 85 Reserved Housing Units Sunday, April 19, 2015 Page 9 of 9