Kamehameha Schools plans to spend $9 million to renovate HECO's headquarters in downtown Honolulu.

Trust plans $9M
in HECO office repairs

The utility leases the downtown
space from Kamehameha Schools

Kamehameha Schools plans to spend $9 million to renovate Hawaiian Electric Co.'s downtown headquarters.

Under the terms of a proposed 20-year lease, Kamehameha Schools will spend $5 million over the next year to upgrade the historic Richards Street building, people familiar with the negotiations said.

The $6 billion charitable trust -- which owns the 40,000-square-foot structure and the land beneath it -- will add $2 million in tenant improvements in the next several years and another $2 million in the 11th year of the lease.

The deal underscores the interlocking relationships between the two organizations, but Kamehameha Schools officials said that trustees who also hold positions at HECO and its affiliated companies are playing no role in the lease negotiations.

Kamehameha Schools trustee Constance Lau heads HECO's sister company American Savings Bank, and trustee Diane Plotts is a director of HECO's parent Hawaiian Electric Industries Inc.

A third Kamehameha Schools trustee, attorney Douglas Ing, is a partner in the Watanabe Ing Kawashima & Komeiji law firm, which represents HECO on regulatory matters.

Kamehameha Schools' internal policies require board approval on all construction projects valued at $1 million or more. But people familiar with the deal said the HECO lease has not yet gone to Kamehameha Schools' board for review.

Under the Probate Court-mandated conflict-of-interest policy for the estate, trustees Ing, Lau and Plotts may have to recuse themselves if the lease goes to the board, leaving the five-member board without a quorum, people familiar with the trust said. The estate's board will then have to petition the Probate Court for instructions on handling the matter.

HECO, which has occupied the Richards Street offices since 1927, said its current lease will expire in November.

Lynne Unemori, HECO's director of corporate communications, said HEI's board played no role in the negotiations. One person familiar with the talks said Lau, Ing and Plotts were not involved in any of HEI's discussions on the matter.

Unemori declined to discuss the specific terms of the lease, saying the deal is not final. But she said the proposed deal makes business sense for both the estate and HECO.

People familiar with the negotiations said HECO's rent payments, currently set at $650,000 a year, will increase to $775,000 a year during the first five years of the lease. That annual rent will increase every five years to about $1.3 million during the final five-year period covered by the lease.

During the next 20 years, Kamehameha Schools stands to receive about $18 million in rent payments, or double the amount in planned tenant improvements.

HECO said its building requires significant repairs to its ventilation system and elevators. The building also requires major construction to comply with federal guidelines of the Americans with Disabilities Act, according to one person familiar with the discussions.

Unemori said HECO has looked at other downtown sites for possible relocation.

Kamehameha Schools' links to HEI are not limited to the boardroom.

HEI Chief Executive Robert Clarke's wife, Edwina, is Kamehameha Schools' treasurer, and HEI Chief Financial Officer Eric Yeaman previously served as Kamehameha Schools' chief financial officer.

HEI board member Oswald Stender is a former Kamehameha Schools trustee, while Ing's law partner Jeffrey Watanabe is an HEI director. Watanabe also is a board member of Oahu Publications Inc., the parent company of the Honolulu Star-Bulletin.


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