Capital Investments
opts for private status

The isle firm wants more
freedom to conduct operations

By Russ Lynch
Star-Bulletin

Capital Investment of Hawaii Inc., a 55-year-old local real estate investor, property manager and business owner, is going private.

It has chosen to buy out minority shareholders to save the expense and complication that a small public company lives with to comply with Securities & Exchange Commission requirements. It is a process similar to that completed late last year by a much larger company, Hawaii National Bancshares Inc., which is now a private company no longer subject to SEC jurisdiction.

Both companies, part of Hawaii's 20th-century business history, say they want to be ready to be entrepreneurs again, able to take on new challenges and meet the future without always having to go to outside shareholders for approval.

Capital Investment, founded by stockbroker, financier and entrepreneur Chinn Ho in 1944, has filed a statement with the SEC saying it has asked shareholders who own less than 300 shares to accept 25 cents a share for their holdings.

That will leave survivors of Chinn Ho, who died in 1987, and other major holders owning a private company with about $4.1 million in assets, mostly in real estate loans and other investments.

Capital Investment's Dec. 21 filing says it will cost the company less than $25,000 to buy out the minority shareholders, compared to SEC-compliance costs of about $130,000 a year.

In its heyday, when it owned properties such as hotel-golf course acreage in Makaha Valley and the Ilikai Hotel, as well as land on the mainland and share holdings in many companies, Capital Investment had profits as high as $5 million a year.

But for fiscal 1999, which ended July 31, the slimmed-down business had revenues of $798,000 million and a loss of nearly $1.09 million.

A company that small, with fewer than 600 shareholders, can't justify the cost of SEC compliance, said Stuart T.K. Ho, board chairman and president of the 22-employee company and Chinn Ho's son.

"You have to address the same compliance as Microsoft," Ho said yesterday.

Capital Investment has scheduled a Jan. 31 meeting of shareholders, where they will be asked to approve a 1-for-300 reverse stock split where holders of fewer than 300 shares will be paid cash. The various family trusts and other Ho family insiders are the only ones with more than 300 shares so it will be a cash buyout.

At Hawaii National, Warren K.K. Luke, president and chief executive officer, said the cost of SEC compliance got so high, the bank was faced with a choice of "laying off employees or laying off the SEC."

Hawaii National, which has assets of more than $300 million, spent about $4 million to buy 90,000 shares held by minority shareholders. As soon as the 1-for-200 reverse stock split was completed in August, the Luke family and other insiders bought those shares from the company through a private placement. In other words, Hawaii National itself didn't pay for the shares.

Like Ho, Luke said companies can plan their futures better if they don't have to tell public shareholders, and therefore the public and their competition, in advance of every move they plan to make.

The company was formed in 1986 as a holding company for Hawaii National Bank, which first opened in 1960.