Kamehameha Schools has sold the land under downtown Honolulu’s mixed-use condominium tower Executive Centre in a $75 million deal that allows individual unit owners to acquire fee-simple title to their residential and commercial condos.
The move by Hawaii’s largest private landowner represents a change from past decisions not to sell the land under the 41-story tower on Bishop Street, but is in line with a broader push by the trust in recent years to sell most of its remaining land leased to homeowners.
The buyer of the fee interest in Executive Centre was the building’s association of apartment owners, which borrowed to finance the purchase and is offering the fee for each unit to individual condo owners.
Glenn Woo, president of the association’s board of directors, said the acquisition followed previous unsuccessful attempts to acquire the fee from Kamehameha Schools.
"The owners have reacted quite favorably to it," he said. "We had been turned down many times."
The $75 million price was fair to both sides, according to Woo, who said he expects most unit owners will acquire the fee.
By acquiring the fee, unit owners eliminate leasehold payments that amount to a few hundred dollars a month now but would have been renegotiated in 2018. The lease with Kamehameha Schools would have expired in 2053, at which time the trust could have taken back the entire property.
Several years ago Kamehameha Schools pushed to sell its leased fee interests in most of its remaining residential property, which was largely land under single-family homes, but decided against offering the land under Executive Centre.
At the time, the trust said part of the reason was the property’s long-term redevelopment potential.
Trust spokesman Kekoa Paulsen said the decision to sell was in part due to the value of the lease, the lease’s length and the property’s location outside the trust’s strategic redevelopment areas, which include Kakaako and Moiliili.
Paulsen said proceeds from the sale, which closed in November, will be reinvested to support the trust’s mission of educating children of Hawaiian ancestry.
At one time Kamehameha Schools owned leased fees in about 15,000 single-family homes and nearly 13,000 condos, mostly on Oahu.
In 1984 a state law was upheld after lengthy court appeals and enabled owners of leasehold single-family homes to force lessors including Kamehameha Schools to sell the land under homes. That prompted Kamehameha Schools to offer such fees, which in turn transformed a land-rich, cash-poor nonprofit into one of the nation’s wealthiest charitable organizations.
A similar selloff was repeated for condos after a city lease-to-fee condo condemnation ordinance was passed in 1991. The trust continued to sell many, but not all, leasehold condo fees after the condo conversion law was repealed in 2005.
Today the trust owns 335 residential leased fees, all but five of which are condos. Some of those leases are not available for purchase by homeowners, including the land under the waterfront Kahala Beach Apartments, where the lease expires in 2027.
Executive Centre was developed with 1,375 units by Leroy Robert Allen in 1984 but struggled with sales. Another developer, Sukamto Sia, acquired the project in 1987 for $50 million and later converted more than 100 units to hotel suites as part of a turnaround effort. However, Sia lost the unsold portions of the property to lender Citibank through foreclosure in 1999 as a slow economy hampered occupancy.
In 2001 and 2002, Citibank began selling 116 hotel units and 276 nonhotel units in Executive Centre.
Today the tower is a mix of residences, offices and hotel units along with ground-floor retail space. Aston Hotels & Resorts manages 95 units in a hotel rental pool for individual unit owners.
Prices for units sold over the last two years without the fee have ranged from $43,750 for a 525-square-foot unit to $365,000 for a 1,217-square-foot unit. Monthly lease rent for those units is $257 and $638, respectively.
Woo said the association has offered the fee in each unit to individual owners at cost for several months. For those who decline to buy the fee, it will be offered to investors.
Prices for units on the market now range from $96,500 leasehold plus $110,878 for the fee on a 450-square-foot unit to $279,000 leasehold plus $194,300 for the fee on a 798-square-foot unit.
