On Oct. 1, 2021, the Office of Hawaiian Affairs (OHA) announced it has finalized the purchase of two properties, one at 500 N. Nimitz Highway and the other at 501 Sumner Street. They are both adjacent to Nā Lama Kukui, OHA’s headquarters at 560 N. Nimitz Highway.
The Board of Trustees voted to purchase the properties for $47 million.
OHA’s acquisition of these commercial properties represents a long-term investment that is expected to generate more than $1 million per year in net income as well as provide a larger presence in the Iwilei area. All funds generated by OHA are directed toward the betterment of conditions for Native Hawaiians and spending is guided by OHA’s strategic plan and related investment and spending policies.
500 N. Nimitz currently houses popular national retail chains Ross Dress for Less, Long’s (CVS Pharmacy) and PetSmart. 501 Sumner Street is an industrial property that also houses a host of small businesses.
The purchase follows OHA’s 15-year strategic plan which calls for increasing the value of investments and the value from financial, commercial, and land resources.
“The decision by our trustees to invest in these two properties was ultimately based on what is best for our Native Hawaiian beneficiaries. These properties are a long-term investment for our people and the due diligence accomplished by our team was extensive,” said OHA Board Chair Carmen “Hulu” Lindsey, who has owned her own real estate company for more than 40 years.
“Our Mana i Mauli Ola Strategic Plan calls for us to increase the value of our commercial and land resources and to steward our financial and commercial resources. We feel that acquiring these two properties provides us with another revenue stream and increases our ability to deliver programs and services to more Native Hawaiians.”
OHA has seen its 2012 purchase of Nā Lama Kukui (NLK) more than double in value. The net income generated from lease rent at NLK has provided additional funding for OHA, and a similar outcome is anticipated for these new properties.
OHA’s revenue generating commercial properties are comprised of Nā Lama Kukui and 30-acres in Kakaʻako Makai.
OHA has a decades-long track record of responsible land management beginning with the legacy lands acquired in 1988 when Pahua Heiau in Maunalua was deeded to the organization.
Since then, OHA has acquired, and currently manages, over 26,000 acres of legacy lands to protect Hawaiʻi’s natural and cultural resources making OHA the 13th largest landowner in Hawaiʻi. These legacy properties include the Wahiawā lands surrounding the Kūkaniloko Birthstones, Wao Kele o Puna on Hawai‘i Island, and the Palauea Cultural Preserve on Maui.
Land Acquisition FAQs
What prompted the Iwilei acquisition? Why not use those funds to protect legacy lands or put that money into beneficiary programs? How do OHA’s beneficiaries benefit from this acquisition?
OHA takes pride in properly stewarding its real estate portfolio and part of that stewardship is to occasionally scan the market for opportunity. This was a rare opportunity in that it was an adjacent property that already was generating income, so OHA Trustees decided to explore it, analyze it and eventually acquire it. The monies generated by OHA’s commercial real estate holdings fund operations and maintenance of our legacy lands and the added income from this property could also be used to fund areas beyond legacy lands as well.
$47 million seems like a high price to pay for property that’s expected to generate only about $1 million a year. Are there plans to expand the number of tenants in this space? Will there be any opportunity for Native Hawaiian entrepreneurs or small business owners to take part?
Actually, its not a high price. The expected rates of return are average based on the price tag, but in OHA’s case they are well above average because of our use of leverage (debt). Our rates of leveraged return on this property are expected to very much outperform most other asset classes that OHA can choose to invest its money in. OHA has a huge kuleana and must put its money to work in the best of ways. For our investments that means selecting the best assets based on projected performance.
The future possibilities of the property are many, but OHA is happy with the tenants and income it will generate for our people as it is today. For our Native Hawaiian entrepreneurs and business owners we have plans to provide the kinds of opportunity they seek in other OHA projects on-deck, and we’re equally excited for those.
Are there any future land acquisitions on the table for OHA? Perhaps on the neighbor islands?
Only if it makes sense. To ensure it makes sense, OHA turns first to its strategic plan and next to its investment policy. Then we would study the investment (whether land or anything else) to understand its individual merits, and its merits from a portfolio perspective.