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Fl O:!JOLiJLU AFFOR1]’ABLJ El OUSING PAR1NI
LLC
745 Fort Street, Suite 1400
Honolulu, Hawaii 96813
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January 6, 2014
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VIA HAND-DELIVERY AND CERTIFIED MAIL
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RETURNRECEIPTREQUêED
#7012 3460 0000 3130 4354
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Mr. Nelson H. Koyanagi Jr., Director
Department ofBudget and Fiscal Services
Honolulu Hale
530 South King Street, Suite 208
Honolulu, Hawaii 96813
Re:
Honolulu Affordable Housing Preservation Initiative
Dear Director Koyanagi:
Thank you for your letter ofJanuary 2, 2014, in response to the Protective
Notice and Request, dated December 3 1 201 3 that we submitted to the City and County in
accordance with Sections 5.14, 6.1(f), and 6.3 ofthe Purchase And Sale Agreement, dated
October 1 8, 2012, by and between the City and County, as Seller, and our company, Honolulu
Affordable Housing Partners, LLC, as Buyer, as amended by that certain Restated First
Amendment to Purchase and Sale Agreement, dated effective June 28, 2013. HAHP LLC’s
letter to the City and County of December 3 1 20 1 3 notified the City and County that, as of
st
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HAHP LLC had been unable to obtain all ofthe various components of the
December
New Financing required to close the transactions described in the Purchase And Sale
Agreement by March 3 1, 2014. HAHP LLC therefore requested that the City and County
agree to extend the Financing Contingency Date until March 3 1, 2014, in order permit
HAHP LLC to continue to work on HAHP LLC’s financing for the transaction and for the
transaction to move forward as contemplated by and subj ect to the terms and conditions of the
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Purchase And Sale Agreement.
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By your letter of January 2”’, you have indicated that, despite the introduction
and consideration by the City Council of two proposed Resolutions to rescind or cancel the
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Capitalized terms not defined in this letter shall have the respective meanings ascribed to them in the Purchase
And Sale Agreement.

2. HONOLULU A]pfQRDAJLF: HOUSING PARThIERS, LLC
Mr. Nelson H. Koyanagi Jr., Director
Department of Budget and Fiscal Services
January 6, 2014
Page 2
Purchase And Sale Agreement, the City and County nonetheless remains committed to
working toward the goal of closing the transactions contemplated by the Purchase And Sale
Agreement by March 3 1, 2014. In this regard, and in response to HAHP LLC’s request for an
extension of the Financing Contingency Date until March 3 1 2014, you have also advised us
that, in order for the City and County to consider granting the requested extension, the City
and County would like to know if, assuming that the extension is granted, there is a
reasonable possibility that the extension will enable HAHP LLC to close the transactions
contemplated by the Purchase And Sale Agreement by March 3 1, 2014, and also whether, if
the City and County were to consent to the requested extension, HAHP LLC remains
committed to using its good faith efforts to proceed towards closing.
,
As you no doubt know, in connection with the delivery of your letter to
HAHP LLC of January 2w’, various officials of the City and County, including Ember Shinn,
the Managing Director, and Pamela Witty-Oakland, the Director of the Department of
Community Services, contacted representatives ofHAHP LLC’s principals and suggested
that, in order for HAHP LLC to meet the targeted closing date of March 3 1 2014, the City
and County might be willing to provide seller-financing for the Purchase Price as a means of
“bridging” part of the financing for the transactions and in order to give HAHP LLC the time
to finish the work necessary to secure and put in place the various components of
HAHP LLC’s long-term/permanent financing for the transactions work that, as you know,
HAHP LLC was required to put on hold in light of the introduction of the two proposed
Resolutions to rescind or cancel the Purchase And Sale Agreement. We understand that, at
the City Council meeting last Friday, January 3rd, Ms. Shinn and Ms. Witty-Oakland also
advised the City Council that the City Administration was contemplating providing
seller-financing for transactions in order to permit a closing by March 3 1, 2014.
,
—
If the City and County were willing to provide the seller-financing necessary to
close the transactions by March 3 1 2014, there would obviously be a number of details that
would need to be worked out between the City and County and HAHP LLC.
,
While acknowledging that that is the case, but at the same time in order to
nd
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HAHP LLC believes that, if the
respond to the specific inquiries in your letter of January
City and County were to provide “bridge” financing to cover the Purchase Price on terms and
and thereby allow
conditions agreeable to the City and County and HAHP LLC
—

3. F1ONO1LJLLJ AFFO1U)AJBIJ IHOUSING PARTNI;RS, LLC
Mr. Nelson H. Koyanagi Jr., Director
Department ofBudget and Fiscal Services
January 6, 2014
Page 3
HAHP LLC the opportunity and time to do what is necessary to obtain commitments for and
there would be a
to close HAHP LLC’s long-term/permanent financing for the transactions
reasonable possibility that the requested extension ofthe Financing Contingency Date would
enable HAHP LLC to close the transactions by March 3 1, 2014. Further, if the City and
County were to grant the requested extension under such circumstances, HAHP LLC would
remain committed, as it has all along, to using its good faith efforts to proceed towards a
closing by that date. Ifthe City and County were to grant HAHP LLC the requested
extension in order to permit the City and County and HAHP LLC to discuss and work out the
terms for the seller-financing that the City and County has suggested, we would obviously be
anxious to meet with the responsible officials of the City and County to discuss these matters
in more detail.
—
So that there is no misunderstanding regarding these matters, and especially in
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light ofthe recent correspondence between HAHP LLC and the City and County, we think
that the City and
that it would be helpful to mention, at least in passing, some of issues
County and HAHP LLC will need to address and resolve fairly promptly if the City and
County grants the requested extension of the Financing Contingency Date.
First, aside from the general (and helpful) suggestion that the City and County
would be willing to provide seller-financing to facilitate a closing by March 3 1 2014, both
HAHP LLC and presumably the City and County as well will need to know what specifically
the City and County has in mind regarding the financing that the City and County would
provide, which will obviously have an impact on the “economics” ofthe transactions.
,
Second, while we would assume that, ifthe extension were granted so that
HAHP LLC and the City and County could then work together to negotiate the terms of the
seller-financing that the City and County has proposed as a possibility, HAHP LLC would not
thereby be deemed to waive any of the claims that it has made, nor would the City and County
be deemed to waive any ofthe defenses that it has raised, relating to the introduction of the
two proposed Resolutions to rescind or cancel the Purchase And Sale Agreement (the
“Resolutions”). Obviously, ifthe parties “get to” a closing by March 3 1 2014, HAHP LLC’s
claims and the City and County’s defenses will become moot. But pending working out the
,
We refer here to HAHP LLC’s letter to the City and County ofDecember 10, 2013, and December 31, 2013,
and the City and County’s letter to HAHP LLC of December 18, 2013.
2

4. HONOLUUJ AFFOThIL] HO1’JSING 1ARTM:RS ]iLc
Mr. Nelson H. Koyanagi Jr., Director
Department of Budget and Fiscal Services
January 6, 2014
Page 4
terms ofthe seller-financing that the City and Countyhas proposed and other necessary
details, HAHP LLC would reserve its claims and the City and County would reserve its
defenses. HAHP LLC is open to discussing formal releases and waivers of these claims and
defenses as part of the closing of the financing that the City and County would provide.
Third, as part of HAHP LLC’ s letter to the City and County of December 3 1,
20 1 3 we advised the City and County that HAHP LLC had not been able to obtain all of the
various components of the New Financing required to close the transactions by March 3 1,
2013. As you know, the Purchase And Sale Agreement contains Financing Contingencies in
favor of HAHP LLC providing that, if any of the various components of the New Financing
were not obtained by the applicable deadline, and the deadline were not extended, the
Purchase And Sale Agreement would be terminated and the Deposit returned with interest to
HAHP LLC. Accordingly, HAHP LLC notified the City and County that, in the absence of
an extension of the Financing Contingency Date, HAHP LLC was entitled to the immediate
return ofHAHP LLC’s Deposit in accordance with the terms ofthe Purchase And Sale
Agreement. As indicated in this letter, if the City and County grants the requested extension
of the Financing Contingency Date and is willing to provide seller-financing to cover the
Purchase Price and “bridge” the financing for the transactions, HAHP LLC is committed to
working in good faith with the City and County to close the transactions by March 3 1 2014
with the understanding that HAHP LLC would then have time to obtain commitments for and
close its long-term/permanent financing, etc. If, however, HAHP LLC and the City and
County, notwithstanding their respective good-faith efforts, are unable to reach agreement on
the terms of the seller-financing provided by the City and County or any other related
arrangements necessary for the transactions to close by March 3 1 2014, the City and County
would need to agree and acknowledge that, in such event, HAHP LLC would then be entitled
to the immediate return ofHAHP LLC’s Deposit. To be clear about this, we are not asking
the City and County to waive any of its defenses under the Purchase And Sale Agreement
relating to the claims that HAHP LLC has made relating to the infroduction of the two
proposed Resolutions to rescind or cancel the Purchase And Sale Agreement. But, as
discussed in HAHP LLC’s letter ofDecember 1 8, 2013, aside from any claims that
HAHP LLC has and any defenses available to the City and County regarding the introduction
and consideration of the two proposed Resolutions, HAHP LLC is otherwise entitled to the
return of HAHP LLC s Deposit under the Financing Contingencies provisions of the Purchase
,
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Mr. Nelson H. Koyanagi Jr., Director
Department ofBudget and Fiscal Services
January 6, 2014
Page 5
And Sale Agreement. HAHP LLC is committed to working in good faith with the City and
County, but, in doing so and accommodating the City and County’s interest in closing the
transaction by March 3 1 , 2014, HAHP LLC does not want to be put in a worse position than
would otherwise be the case under the Purchase And Sale Agreement.
We are appreciative of the City and County’ s proposal to consider making
seller-financing available as a means of overcoming the problems posed by the introduction
and consideration of the two proposed Resolutions to rescind or cancel the Purchase And Sale
Agreement. As we have outlined in this letter, we will look forward to working with the City
and County in this regard.
Sincerely,
HONOLULU AFFORDABLE HOUSING PARTNERS, LLC
a Hawaii limited liability company
By Highland Property Development LLC
A California limited liability company
Its Manager and Member
aL:
By:William E. Rice
Its Authorized Manager
cc:
Department of Community Services
715 South King Street, Suite 311
Honolulu, Hawaii 96813
Attention: Director
Department of Corporation Counsel
530 South King Street, Room 100
Honolulu, Hawaii 96813
Attention: Gordon Nelson, Esq.

6. HONOLULU AFFORDABLE HOUSING PARTNERS, L]LC
Mr. Nelson H. Koyanagi Jr., Director
Department of Budget and Fiscal Services
January 6, 2014
Page 6
Schiack Ito, LLLC
Topa Financial Center
745 Fort Street, Suite 1500
Honolulu, Hawaii 96813
Attention: Carl J. Schlack, Jr., Esq.
Via Email:
b. riceJiighlandcompanies. corn
Honolulu Affordable Housing
Partners, LLC
do Highland Property Development,
LLC
250 W. Colorado Boulevard, Suite 210
Arcadia, California 91007
2304002b.doc
CBRE, Inc.
Pauahi Tower, Suite 1800
1003 Bishop Street
Honolulu, Hawaii 96813-3544
Attention: Scott B. Gomes