A new high-rise in Downtown Honolulu is set for construction that turns a small parking lot into a tower filled with micro- sized rental apartments for seniors with low incomes.

The lot, which at 12,591 square feet is not much bigger than the once-traditional 10,000- square-foot plot for suburban Oahu single-family homes, will feature 224 studios and was the site of a blessing ceremony Thursday hosted by development team principals and state officials including Gov. David Ige.

The $88 million project mainly backed by state financing is scheduled to take two years to build after more than two years of planning and regulatory approval work that included a City Council hearing last year where some neighbors in the adjacent 36-story Pinnacle Honolulu condominium objected to the planned 20-story Kokua Senior Living project on a corner of Alakea and Beretania streets.

Mohannad Mohanna, president of the project’s lead development partner, California-based Highridge Costa, described Kokua during a meeting last month as “a difficult project to say the least” with many hoops to jump through amid considerable state and city government support.

On Thursday at the project site, Mohanna said the development team was proud to start building the tower where monthly rental rates for a dozen units could be around $630 if there is little change in Honolulu’s median income two years from now.

“We’re glad to be here today to continue serving the community — to continue serving our seniors in Oahu,” he said.

Ige said the project reflects a continuing state commitment to support development of affordable housing, especially at the most challenging level for low-income households where such projects typically rely on government financing.

“This is a great project,” he said. “We clearly are committed as a community to providing affordable housing for the seniors here in our community.”

Ige, whose career included working 18 years at what is now Hawaiian Telcom, recalled that he used to walk often through the Kokua site, which is adjacent to Hawaiian Telcom’s office tower and includes some parking spaces for the company.

The lot was also once home to Alakea Bar &Grill and Players Sports Bar, which closed in 2002.

Alakea Senior LP, Kokua’s development partnership that also includes Coastal Rim Properties and the nonprofit Affordable Housing and Economic Development Foundation, bought the lot for $6.5 million early last year from an affiliate of Illinois-based Next Realty after receiving a committment in 2019 for financing from the Hawaii Housing Finance and Development Corp., a state agency.

The City Council also helped support the project last year by allowing the developer to avoid paying about $6 million in fees, to exceed a building density limit by roughly 100% and to have upper levels of the tower closer to adjacent streets than typically permitted.

The Council’s vote was 7-2, which included three supportive votes with reservations.

HHFDC provided federal and state tax credits worth about $34 million, a $36 million loan and about $50 million in bonds, with the bonds largely being repaid using the two other contributions.

In return for the government financing, the developer must maintain affordable rents for 61 years and reserve apartments for seniors who are at least 55 years old and have household incomes no more than 60% of the median for Honolulu.

This limit equates to $50,760 for a single person or $58,020 for a couple.

Of the 224 units, 210 are reserved for such tenants and could be rented for $1,269 a month at current income levels.

Another 12 units are reserved for seniors with 30% of the median income, which would make the monthly rent $634.

Apartment sizes are to range from 260 square feet to 330 square feet. The tower also is slated to have two units for managers, a common laundry room and a landscaped 6th-floor deck atop five stories of parking with 34 stalls for residents and 15 for Hawaiian Telcom.

Mohanna said the developer anticipates seeking applications a few months or so before the tower is complete to enter qualified applicants in a lottery for selecting tenants.