I thought I would jump into the sometimes contentious dialogue regarding the decision-making process for OHA’s purchase of the classic and historic Gentry building (now called Nā Lama Kukui) on the mauka side of Nimitz Highway just Diamond Head of City Mill.
OHA’s purchase of a headquarters was a Trustee policy adopted years ago as a pre-requisite for OHA to pursue any direct investments. While OHA is able to invest in Wall Street type transactions and purchase culturally important properties like Waimea Valley, we were not allowed to pursue any opportunities to invest locally until we purchased a headquarters. It took all these years for OHA to finally connect with the right opportunity to purchase its own building.
The purchase decision was thoroughly vetted at several meetings of the Trustees between April 2010, and November 17, 2011, when we voted to authorize CEO Kamana‘o Crabbe to submit an initial offer for the Gentry property and to conduct due diligence fact finding. The Trustees present at the meeting voted unanimously to make an offer. Trustees Akana and Cataluna were absent. On June 7, 2012, the full board was present for a final vote and a majority voted to authorize the CEO to acquire Gentry at $21.37 million.
As required by our fiduciary duty to OHA’s beneficiaries, some of the best consultants, attorneys, and appraisers in Hawai‘i were retained to assist with the due diligence process. The consultants conducted legal, architectural, accessibility, structural, engineering, electrical, mechanical, and geotechnical reviews. A thorough financial analysis was also conducted. Aside from revenue generation, these premises can be used to benefit the trust and beneficiaries as a gathering place for Native Hawaiian organizations.
OHA also retained experts to assess the presence of asbestos and lead. We were advised that it was a common and manageable condition and not a significant concern based on OHA’s intended use. Gentry underwent significant renovation back in the mid 80’s. Interior walls and ceilings likely do not contain lead or asbestos.
The question was raised why OHA would purchase an office building when Kaka‘ako was touted as being the location of the future OHA headquarters. There is only one building that currently exists that could hold OHA, which is the AAFES building on Ala Moana. However, current tenants have leases through June, 2016. Once they moved out, the property would need significant structural renovation, which could easily take a year. But that’s assuming OHA wants to keep the AAFES building, and that has never been our intention. Instead, OHA wants to create a master plan for all of our parcels. The process of creating a plan, designing structures, obtaining permits, and constructing buildings will take many years. In the meantime, if OHA were to remain where it is now, we would be spending $1 million a year in rent.
The majority of the Board, under the leadership of Trustee Oswald Stender, felt it was preferable to pay ourselves rent, thus building equity in OHA’s own property and saving us (and our beneficiaries) millions of dollars.
The Trustees authorized the CEO to pursue the best financing available for OHA. Proposals from three banks were submitted and OHA negotiated with all three. Based on final terms submitted by each bank in July, Bank of Hawaii was selected because it submitted the most favorable terms.
This acquisition in Iwilei, one of Hawai‘i’s most explosive commercial growth districts on O‘ahu—already anchored by City Mill, Dole Cannery Complex, Costco, Best Buy, Zippy’s, Lowes, and Home Depot—makes it a smart investment acquisition.