Sunday, April 11, 2004

Damon Estate
trustees gain millions
from land sales

The Damon Estate's $500 million sale of its Hawaii and mainland properties has generated hefty commissions for its four trustees.

The Estate of Samuel Mills Damon

Founded: 1924
Assets: $895 million
Trustees: David Haig, Walter Dods, Paul Mullin Ganley, Fred Weyand
Trustee 2003 commissions: $680,218

The estate paid trustees David Haig, retired Gen. Fred Weyand, local attorney Paul Mullin Ganley and BancWest Corp. Chief Executive Walter Dods about $3.1 million each in January as a result of the sales of its Mapunapuna and mainland real estate last year.

The commissions are on top of $680,218 that the estate paid each of its four trustees in 2003 and the $702,442 that it paid in 2002.

Tim Johns, the estate's chief operating officer, declined comment. But in its consolidated financial statements, the estate's auditor KPMG LLP noted that the January payments are for a 2.5 percent commission on the sale of the estate's real estate holdings. That commission rate is set under state probate law.

Last year, the estate sold 220 acres of light industrial and commercial properties in Mapunapuna and Sand Island to Massachussets-based HRPT Properties Trust for $466.1 million. The deal was completed about the same time that the estate sold its mainland ranches in Wheatland, Calif., and Chico, Calif., to Sacramento developer Angelo Tsakapoulos for about $24.6 million.

One beneficiary who declined to be named defended the trustees' commissions, saying the Mapunapuna property sold for $100 million more than its appraised value.

He added that the $12.4 million paid to all four trustees, combined with the $4.1 million in fees charged by the trust's real estate broker, was less than 3.5 percent of the overall transaction.

The Mapunapuna and mainland sales, together with other recent asset sales, have generated $800 million in liquid, tax-free assets to beneficiaries of the once land-rich, cash-poor trust, said another person familiar with the Damon Estate's operations.

Founded in 1924 by the will of First Hawaiian Bank pioneer Samuel Mills Damon, the estate operates for the benefit of Damon's heirs. Prior to its recent land sales, the estate was the state's fourth-largest private landowner with more than 121,000 acres in Hawaii.

It also was one of the largest shareholders in First Hawaiian's parent, BancWest Corp., before it sold its stake to BNP Paribas for more than $500 million in 2001. Three Damon Estate trustees -- Dods, Ganley and Haig -- serve on BancWest's board and Dods continues to serve as the bank's chairman and chief executive.

Last year, Dods earned more than $2.5 million as head of BancWest in addition to his Damon Estate compensation.

Under Damon's will, the trust will terminate with the death of Samuel Damon's last grandchild, which will likely occur in the next 10 years. When that happens, state law allows the trustees to receive a termination fee of 1 percent of the estate's assets. Based on the trust's current value of about $895 million, each of the four trustees will receive more than $2.2 million at termination.

Trust financial records obtained by the Star-Bulletin show the Damon Estate earned $54.4 million last year, largely from lease rents and investment income. That's slightly down from 2002's $56.2 million.

Of that, the trust distributed about $39.6 million of its total income to its beneficiaries last year.

Expenses were $14.6 million in 2003, which is about the same as the year-earlier's figure. Those costs included $4.2 million paid to Eastdil Realty Co., which handled the Mapunapuna land sale, and nearly $2 million in legal billings by Carlsmith Ball L.L.P.

Goldman Sachs & Co., which manages the estate's investment portfolio, received nearly $1.4 million in fees last year.


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