An unidentified public company has agreed to buy about half of downtown Kailua and other Hawaii real estate assets of Kaneohe Ranch Co. and the Harold K.L. Castle Foundation for $262 million.
The deal would produce big payouts for many local families who are beneficiaries of Kaneohe Ranch subsidiaries, as well as for Kaneohe Ranch employees.
A new owner for the portfolio of roughly 600 acres that includes the 38-acre retail center of Kailua also would potentially reshape the vision and future for much of the Windward town.
But not all beneficiaries who stand to gain financially in the deal are sure the sale agreement is a good one.
One beneficiary, Jeremy C. Baldwin, filed a petition in Circuit Court on Friday asking a judge to postpone a vote scheduled for next week to approve or reject the proposed sale.
Baldwin’s petition alleges that Bank of Hawaii, as the trustee for 26 trusts with interests in the assets to be sold, has not done enough independent analysis on the merits of the proposed sale.
The petition says the bank relied too heavily on an analysis by Kaneohe Ranch, whose employees stand to be rewarded greatly in the sale.
Mitch D’Olier, president and chief executive officer of Kaneohe Ranch Management Ltd., would receive $13.2 million through the sale, according to a summary of the transaction. Other company employees would share $1.8 million. Carlton Au, the firm’s chief financial officer, would receive $298,122, the summary said.
"(Kaneohe Ranch) has a great incentive for this sales transaction to proceed," Baldwin’s petition said.
D’Olier could not immediately be reached Friday for comment.
Kaneohe Ranch recommends going through with the sale, which has a deadline of Dec. 31 to close.
More than half of the shareholders in the company have to approve the sale for it to be realized.
As the trustee for most shareholders, Bank of Hawaii recommends that shareholders approve the sale.
But Baldwin has raised a concern over the bank disclosing that its analysis was made under significant time constraints imposed by Kaneohe Ranch, and that it relied on information provided by Kaneohe Ranch and has not otherwise independently verified terms of the transaction.
"Bank of Hawaii is essentially rubber-stamping (Kaneohe Ranch’s) analysis of the sale," Baldwin’s petition said.
Baldwin said the bank sent out its notice of the sale and recommendation on Tuesday, that he received it on Thursday and that the bank required a response by Monday — essentially giving him four or five days to decide.
The bank said in its notice that it will submit "yes" votes for trust beneficiaries who don’t make written objections by Monday. The bank has to submit its votes Wednesday.
"A sale of this magnitude should not be decided in haste," Baldwin said in the petition.
Bank of Hawaii declined to comment.
The summary of the sale transaction said shareholders would receive nearly three times the fair market value of their stakes before taxes and nearly two times the fair market value after taxes based on a preliminary appraisal of the real estate.
Bank of Hawaii in a disclosure noted that D’Olier and other Kaneohe Ranch employees have an incentive to maximize the sale price because their payouts are tied to the price.
The properties being sold include about half of downtown Kailua, agricultural land and land under Kaimuki Shopping Center, Windward City Shopping Center and Pali Palms Plaza.
A collection of mainland real estate also marketed for sale is not part of the $262 million deal. The transaction summary said Kaneohe Ranch is retaining the mainland portfolio valued at
$160 million at this time.
The transaction summary said the buyer is a public company, but did not otherwise identify the firm.
Local real estate observers have speculated that Honolulu-based Alexander & Baldwin Inc. has the financial capacity and desire to increase its Hawaii real estate assets. But the company has declined to say whether it is the buyer.
