Posted on: Friday, September 5, 2003

Kamehameha outsourcing to eliminate jobs

By Andrew Gomes
Advertiser Staff Writer

Kamehameha Schools has informed employees of a plan to outsource the management of its properties as part of a restructuring that involves laying off more than 100 people at the nonprofit trust.

Pauahi Management Corp., a Kamehameha Schools for-profit subsidiary, informed the state earlier this week that on Oct. 31 it expects to lay off 37 janitorial and landscaping staff who work at Royal Hawaiian Shopping Center and Windward Mall.

But more than one manager within the Kamehameha organization said the plan is to outsource substantially all property management functions, a move that one manager said would dissolve Pauahi Management and eliminate its 126-member staff operating the trust's two O'ahu malls within a year.

At least a few managers in the Kamehameha Schools endowment group, which at the end of last year had 66 employees, also will be leaving, according to employees.

The shakeup at Hawai'i's largest private landowner is a sensitive one for longtime employees who consider themselves land stewards preserving the legacy of Bernice Pauahi Bishop, who in 1884 established a real estate endowment to help educate children of Hawaiian ancestry.

Trust spokesman Kekoa Paulsen could not be reached for comment yesterday.

Strategic planning in works

Sanford Murata, Kamehameha Schools commercial assets division director, said the trust's endowment group is going through a strategic planning process, but he said it would be inappropriate for him to comment on personnel matters, including whether he will continue in his job.

"All activities we have done internally and what we have done externally are being evaluated," Murata said. "A lot of it is streamlining how we operate."

Murata said the plan will not be complete for some months. He also said there has been no change in the trust's commitment to retaining ownership of its Hawai'i real estate.

Murata also said ongoing key initiatives such as a major renovation planned for Royal Hawaiian Shopping Center will continue.

The strategic planning, Murata said, has been in the works for more than a year and has become more intensive under the leadership of Kirk Belsby, a former Arthur Andersen partner who in January became endowment vice president for the $5 billion trust.

Belsby, who has also worked as a financial analyst, stockbroker and real estate appraiser, took over from Wendell Brooks Jr., a local real estate veteran who resigned from Kamehameha Schools in late 2001.

As chief investment officer, Belsby inherited a mission to earn 5 percent-plus-inflation for the trust, which uses proceeds primarily for educational programs, student financial aid and school construction.

During the fiscal year ended June 30, 2002, the trust posted a negative 0.65 percent return, or $89 million loss, on its investments, including financial assets and Mainland and Hawai'i real estate.

The trust's revenue-producing Hawai'i land, valued at $1.5 billion, posted a negative 2 percent return for the same period.

A Kamehameha Schools financial report for the most recent fiscal year that ended three months ago has not yet been made public.

Mostly conservation land

Kamehameha Schools owns 366,000 acres of mostly conservation land on O'ahu, the Big Island, Kaua'i, Maui and Moloka'i.

About 900 acres are commercial with uses including shopping centers, hotels, industrial complexes, office space and agricultural lots. Most of the trust's land and buildings are leased to others under long-term arrangements.

Windward Mall, Royal Hawaiian Shopping Center and some other commercial centers are owned and operated by the trust.

Local real estate industry executives said they are not surprised that Kamehameha Schools would outsource property management, because it reduces employee-related expenses such as office space, salary and benefits.

Campbell Estate, Hawai'i's second-wealthiest private trust, is pursuing a similar strategy and last month announced it would eliminate about 32 of its 100 positions in October.

Campbell Estate, which owns 70,700 acres of Hawai'i land and is the master developer of Kapolei, is preparing to transition into a limited liability company in 2007 and divide $2.3 billion in assets among heirs of James Campbell.

Reach Andrew Gomes at agomes@honoluluadvertiser.com or 525-8065.