Kamehameha schools earns $1 billion
By Jennifer Hiller
Advertiser Education Writer
Revenues for Kamehameha Schools reached $1 billion last year, ushering in a new era of expansion in educational programs and marking a banner year financially for the trust.
Boosted by the sale of 16.5 million shares of Goldman Sachs stock, the net assets of Kamehameha Schools increased 21 percent, according to an annual report released this week.
Revenues grew to $1.01 billion for the fiscal year ended June 2001, compared with $936 million the previous year.
Hamilton I. McCubbin, chief executive officer of Kamehameha Schools, said the estate had completed a major shift in philosophy that remade Kamehameha Schools into an educational group supported by an endowment, not simply a powerhouse private foundation.
Following the establishment of a new foundation to improve education for students of Hawaiian ancestry, increased educational spending and plans for more community outreach programs, McCubbin said the estate will continue with its expansion plans in 2002.
"Today, our strategic focus has shifted, bearing witness to the extent of Kamehameha's push to serve more and more students of Hawaiian ancestry," McCubbin said.
Kamehameha Schools was created in 1884 by the will of Princess Bernice Pauahi Bishop, the great-granddaughter of King Kamehameha I, to educate the children of Hawai'i.
Revenue from more than 300,000 acres of Hawai'i land and other investments around the world are used to finance the Kamehameha Schools 600-acre Kapalama campus in Honolulu and smaller campuses around the state.
The annual report covers July 1, 2000, to June 30, 2001. During that time, trust spending increased by $73 million, to $206 million. The trust spent $133 million during the previous fiscal year.
Next year the trust expects to spend between $210 million and $215 million, said Eric Yeaman, chief financial officer.
Most of what was spent last fiscal year — $78.2 million — was for campus-based programs at Kapalama Heights on O'ahu, at Pukalani, Maui, and Kea'au on the Big Island.
Kamehameha Schools spent $5.4 million on summer programs, $14.5 million on early education and $22.1 million on college scholarships and financial aid for 3,800 students. Nearly $54 million was spent on capital and major repair projects.
Kamehameha Schools received $8.4 million in tuition, fees and other educational income.
Goldman Sachs stake sold
On Monday, Kamehameha Activities Association, the investment arm of Kamehameha Schools, sold its remaining stake in Goldman Sachs Group Inc., closing out an investment that earned the charity more than $2 billion on an initial outlay of $500 million.
Kamehameha Schools bought shares in the Wall Street investment bank in the early 1990s when the estate had cash from real estate sales and Goldman was looking for private investors to pay for business expansion.
"This is the end point of this investment," said Kamehameha Activities President Wallace Chin.
He said the target return on all Kamehameha Activities' investments is 8 percent. The Goldman Sachs shares were sold at a 400 percent gain.
"In managing the overall endowment, there are home runs and there are strikeouts," Chin said. This one could be called a grand slam, he said.
The last 5.45 million shares were sold for $93 a share in a sale arranged by Goldman. After the 1.5 percent underwriting fee, Kamehameha's take was about $500 million. That's on top of the $2.05 billion the estate already had earned on four earlier sales of Goldman stock.
The $500 million will be reinvested, although Yeaman could not say in which specific areas. McCubbin met with trustees yesterday afternoon to discuss what direction — stocks or real estate — the trustees are interested in pursuing. McCubbin said major development is planned on the trust's property in Kaka'ako and Kea'au.
Also, the trust is still looking for a chief investment officer, a position it expects to fill within the next two months.
The trust is continuing to assess the impact of Sept. 11 on its real estate holdings, including homeowners' ability to pay on their leasehold agreements, McCubbin said.
Record enrollment
The total full-time enrollment was the largest ever for the schools: 3,534 students in the K-12 program and 1,057 students in the early childhood program.
The trust's summer programs also reached an all-time high of 7,928 students enrolled.
McCubbin said those numbers should continue to grow as the trust works to reach more Native Hawaiian children by working with other childcare providers and the public school system.
Kamehameha preschools is already the state's second-largest provider of preschool services, after Head Start. Now the trust plans to expand to reach 11,000 children within five years and all 30,000 Native Hawaiian children in 15 years.
Former trustees for Kamehameha, then known as Kamehameha Schools Bishop Estate, had been criticized for pulling back outreach programs and focusing spending on the school campuses.
Staff writers David Butts and Mike Gordon contributed to this report. Reach Jennifer Hiller at jhiller@honoluluadvertiser.com or 525-8084.
