Trust cuts fee prices on most properties
By Andrew Gomes
Advertiser Staff Writer
Kamehameha Schools has begun notifying nearly 5,500 Hawai'i homeowners of new, generally lower, prices for their leasehold properties in the trust's first comprehensive update of its residential fee prices in more than a decade.
The trust said yesterday that it sent letters to about 100 homeowners last week and another 300 on Monday, notifying them that a nearly one-year moratorium on selling fee-interests had been lifted at the adjusted prices.
It marks the first time the trust, formerly known as Bishop Estate, has appraised its entire portfolio of residential properties since 1991, when land values generally were much higher. Yesterday the trust said the repricing — mandated by Probate Court as part of a requirement to keep updated values for the trust's entire asset portfolio — will vary, but prices generally will be lower.
Sydney Keli'ipule'ole, residential assets division director for Kamehameha Schools, said that reaction from notified lessees so far has been mixed, with some now eager to buy and others disappointed at little change in price.
Keli'ipule'ole said it wasn't immediately possible to total the average change in prices for the 400 leased-fees repriced so far, but noted that prices will vary. Some drops have been greater than 10 percent; others, less than 10 percent.
"A fire sale is not what we fiduciarily and responsibly can go out with," he said.
Hamilton McCubbin, Kamehameha Schools chief executive officer, added in a written statement: "Our efforts reflect our fiduciary responsibilities to the trust and our desire to be responsive to our lessees and current market conditions."
Two multi-family projects in Hawai'i Kai where the trust still owns the fee in 38 units had price decreases around 10 percent.
At one, Heritage House, the average fee price is $58,400, compared to the most recent offer of $65,900. In 1991, when the fee was first offered for sale, it was $61,000.
At Koko Head Villa, the average fee price is $82,600, compared to the previous price of $96,300. In 1991, it was priced at $89,600.
The 400 repriced fees so far have covered 15 multi-family properties around the island, including East O'ahu, downtown, the Windward side and Central/Leeward O'ahu.
Other residential lessees of Kamehameha Schools should be getting letters with new leased-fee prices over the next three months as pricing information is prepared.
In the past, critics have said the trust was charging exorbitant prices for its lease-to-fee conversions. Residential real estate prices have plunged 25 percent or more in the past decade, and many homeowners demanded lower prices.
Land values, however, were only one factor used to reprice fees, Keli'ipule'ole said. Other factors included the number of sales at previous prices.
New prices generally should not increase for lessees, Keli'ipule'ole said.
Kamehameha Schools hired three independent real estate appraisal firms to update prices, which have been adjusted from time to time since 1991.
Real estate appraiser Peter Takasaki said the new fee prices could spur more homeowners to buy their leases.
"I think the market will be energized somewhat with the lower interest rates and the market being strong," Takasaki said. "Any reduction will help."
Lessees have been anticipating the new fee prices and one Windward homeowner bought his fee three months ago because he worried it might go up, said residential appraiser Brian Hanamura.
"I'm happy just as a fellow citizen that they're lowering the rates," Hanamura said. "There was negative publicity about the fee prices in the past."
Until the fee prices become widely known, it will be difficult for appraisers to make consistent estimates, Hanamura said.
"Just knowing what the going rate is for a lease fee is not that easy to determine," he said. "Eventually you can find a trend, but starting out it can be difficult finding out what that price is."
The trust imposed a moratorium on fee sales last May, and began work on repricing fees as part of a requirement to keep updated values for the trust's entire asset portfolio as mandated by Probate Court.
Keli'ipule'ole said there will not be a push to sell the fees, and that Kamehameha Schools is also no longer offering in-house financing to purchasers.
"We hope that this decrease in prices and a much more favorable lending environment will be a benefit to those lessees so they can go ahead and purchase this time around," he said.
Kamehameha Schools used to own the land under about 15,000 single-family homes and the leased-fee interest in nearly 13,000 multi-family units, mostly on O'ahu.
Advertiser Staff Writer Dan Nakaso contributed to this report.
Reach Andrew Gomes at agomes@honoluluadvertiser.com or 525-8065.
