Wednesday, October 21, 1998

Estate shifts Goldman Sachs
holdings to nonprofit corp

By Rick Daysog


Bishop Estate has transferred its $500 million investment in Goldman Sachs Group to a separate nonprofit corporation, in a restructuring it says would create significant tax savings and allow a major expansion of its educational programs.

In a court filing yesterday, the estate said it moved its investments in Goldman Sachs, Columbia/HCA Health Care Corp. and WCI Limited Partnership to an entity called Kamehameha Activities Association. That's a charitable organization founded in 1975 to provide scholarships, loans and grants to students of the estate-run Kamehameha Schools.

Previously, the investments were held by the estate's for-profit subsidiary, Pauahi Holdings Corp., and income from the investments was subject to federal, state and county taxes.

Sources say the move is expected to generate tens of millions of dollar each year in tax savings for the estate.

Estate holdings in Goldman Sachs, which represents a 10 percent stake in the Wall Street investment banking firm, was valued at $2 billion to $3 billion, prior to the recent stock market turmoil.

Last year, Goldman Sachs generated more than $100 million dollars in after-tax income for the estate.

Estate attorney Bruce Graham said in court papers the restructuring was done to help finance expansion of the GoForward educational programs which trustees adopted three years ago.

Graham said the estate is now considering adding high school programs to its neighbor island campuses, adding to its preschool programs and expanding its scholarship programs for native Hawaiian students and young adults.

Under the restructuring, which was completed in July, the estate split assets in its Pauahi Holdings subsidiary into two entities: Kamehameha Activities Association and Bishop Holding Corp., a new for-profit subsidiary.

Passive investments which don't require day-to-day management such as those in Goldman Sachs and Columbia/HCA were transferred to Kamehameha Activities Association, which is controlled by the estate's five trustees but is not technically a subsidiary of the estate. The estate's vast commercial real estate interests will be owned and managed by Bishop Holdings.

"It could be a wise move," said Beadie Dawson, attorney for Na Pua a Ke Ali'i Pauahi, which represents 2,700 Kamehameha Schools students, parents and staffers who have criticized trustees' management of the estate.

"Minimizing taxes is something that could be a wise thing. But hopefully, they are doing this very carefully."

The restructuring will allow the estate to shield its passive investments from lawsuits and other liabilities that may arise from its commercial real estate ventures. It also allows the estate's full board to gain more control over investments in Goldman Sachs and Columbia/HCA previously held by Pauahi Holdings and Royal Hawaiian Shopping Centers.

Bishop Estate Archive

Fee conversion closer
for two condos

By Star-Bulletin staff


The City Council's Policy Committee has moved closer to forcing lease-to-fee conversions on two more Oahu condominium complexes.

Resolutions calling for the condemnation of the Kahala Beach condominium and the Wailana at Waikiki were approved in committee yesterday, setting up final votes for Dec. 2.

The Kahala Beach case involves 24 of 34 owner-occupants in the 196-unit complex who want to purchase the fee interests of their dwellings from landowner Kamehameha Schools Bishop Estate.

In the Wailana case, 57 of about 100 owner-occupied units are in negotiations with landowner KDI Investments but have been unable to come to an agreeable price.

The resolutions are moving following a recent U.S. Supreme Court decision to not hear a challenge to the city's lease-to-fee law involving the Kuapa Isle condominium complex in Hawaii Kai.

The law is designed to help leasehold owners seeking to buy the fee interest of their properties from landowners who are either unwilling to sell or want to sell at prices deemed unreasonable to lessees. Under the law, 25 owner-occupants of a leasehold condominium complex, or 50 percent of all owner-occupants can petition the city to begin condemnation proceedings.

The action forces an unwilling landowner into court where a jury would decide a fair price.

Bishop Estate Archive

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