Mark Development CEO tells HCDA of accounting problems, outlines fixes at Honuakaha senior housing

Craig Watase, chief executive officer of Mark Development Inc., told the Hawaiʻi Community Development Authority on Dec. 3 that MDI inherited an inaccurate rent roll and documentation gaps when it took over management of the Honuakaha Senior Housing project and that a migration to RealPage OneSite introduced mapping errors that distorted accounts receivable.

Watase said MDI found missing tenant files, incomplete income certifications and units that were incorrectly recorded as occupied. Those baseline data problems, combined with software mapping issues, produced what he described as an overstated operating loss in the initially provided financials. After adjusting for mapping errors and excluding noncash depreciation, Watase said the better estimate of operating loss over a 12‑month period is roughly $300,000.

MDI described several remedies: scanning and uploading legacy paper files; rebuilding unit‑by‑unit revenue histories and journal entries to correct prior accounting; repairing the RealPage mapping with vendor support; and improving marketing and tenant application processing through RealPage tenant portals when the system goes live. Watase said roughly 29 units were under HCDA‑funded rehab and that bringing those units back online could recover an estimated $370,000–$380,000 in annual revenue.

Board members asked for timelines. MDI’s accounting team told the board they expect corrected accounts receivable reports and reconciled financials by the end of the calendar year. HCDA staff said HCDA‑funded renovations are targeted to be complete by the end of the first quarter, after which units will be turned over to MDI for leasing. Watase estimated a conservative absorption rate of about three to four leased units per two months under current market conditions.

During public comment, resident Penny Soule said she received a 10% rent increase and asked whether future increases could be larger; staff said rent adjustments are tied to projected expenses and that the 10% figure reflected the projected 2026 budget and that the annual notice process begins in October with at least 45 days’ notice. Eric Clark, CFO of JN Group, questioned whether adding back depreciation to the operating result was appropriate and said the project’s finances raise concerns for taxpayers; staff and MDI said they will provide reconciled financials to the board for further review.

The board asked MDI and staff to deliver reconciled rental receipts, a corrected accounts‑receivable report and a written internal occupancy process by the end of the calendar year, and to return to report progress at a future meeting.