condo lease price
Kamehameha Schools' new
investment plan could drop the
asking price on 5,000 leases
A talk with the currentBy Tim Ruel
After unsuccessfully trying to sell off its remaining 5,000 leasehold condominiums for several years, Kamehameha Schools is looking at lowering the prices.
"I think we're in the process of trying to ... resolve the residential leasehold situation by selling the residential leasehold," interim trustee and lawyer Ronald Libkuman told the Star-Bulletin yesterday.
Kamehameha Schools, formerly known as Kamehameha Schools/Bishop Estate, began offering its 13,000 leases on condominium properties to buyers in 1992, but sales stalled for about 5,000 remaining units when the real estate market crashed, said spokesman Kekoa Paulsen.
Real estate agents say the only way the estate can sell its leasehold interest is to lower the prices to appease buyers.
"It's simply a matter that their asking prices are two to four times what they're worth," said Mike Sklarz, research director of local real estate company Prudential Locations Inc.
Sklarz noted prices vary with the locations of the estate's residential properties, which include Kailua, Pearlridge and Hawaii Kai.
In leasehold properties, homeowners lease the land under their home or condo from a landowner, as opposed to fee-simple properties where homeowners have control of both the home and the land. Kamehameha Schools has been heavily criticized by many lessees who say the estate's asking prices have been too high.
Paulsen confirmed that there are some estate properties overvalued by two to four times, but in many instances, the prices were set with the approval of condo owners.
The Star-Bulletin Editorial Board met yesterday with the current Kamehameha Schools trustees in the Star-Bulletin conference room to discuss their past year in office and their future plans for the estate.
A talk with the currentOnline Audio
Recorded Thursday, May 18, 2000, 10:00 a.m.
Star-Bulletin conference room
They discuss yesterday's court-appointed master's report -- revealing a campaign by former trustees to "destroy the opposition" -- along with other topics in this 55-minute unedited audio recording.
In attendance were trustees Robert Kihune, Ronald Libkuman, Francis Keala and Rev. David Coon. Also attending were Kamehameha President Dr. Michael Chun and Kamehameha CEO Hamilton McCubbin. Trustee Constance Lau was not present
Kamehameha Schools Public Relations Specialist Kekoa Paulsen also sat in.
Click here for Streaming MP3
Click here for MP3 Download
55 Minutes, 12 Megabytes
Quicktime | RealPlayer
WEBMASTERS: YOU MAY LINK TO THIS PAGE
BUT NOT DIRECTLY TO OUR AUDIO CLIPS.
"I guess the simple answer would be to lower prices, but the trustees also have a fiduciary responsibility to make sure they're not giving the asset away," Paulsen said.
The estate's interim trustees are working on a new strategic plan that will reorganize its investment portfolio, including leasehold properties.
"There are a lot of residential leaseholds, so it's difficult," Libkuman said.
The trustees have no new policy yet regarding leasehold prices, Paulsen stressed. They are handling each sale case by case.
"They have not aggressively cut prices, that's for sure," Paulsen said.
Sklarz said the estate would have to cut many condominium leasehold prices in half to sell them, but that would benefit the school's portfolio in the long run.
Mike Pang, a leasehold specialist and principal broker for Monarch Properties Inc., agreed.
"The fact is, Kamehameha Schools could sell at a lower price, and profit in reinvestment, vs. keeping these 5,000 leases any longer," he said. "I'm confident Kamehameha Schools will do the right thing."
Paulsen could not estimate how much the estate could make from selling the properties. He expected the estate to sell all leasehold residential properties within a decade.
"It's not something you can do overnight, or even in one year," Libkuman said.
The estate, the state's largest private landowner, was founded in 1884 by the will of Princess Bernice Pauahi Bishop to finance the education of Hawaiian children.
Bishop Estate Archive