Trustees misled on loan to purchase Gentry Building

`Ano`ai kakou…  On April 15, 2010, OHA established the “Hawaii Direct Investment Policy” (HDIP).  This allows OHA to spend the lesser of $25 million or 10% of the current value of the Trust Fund for investments in Hawaii.

This policy was created to allow OHA to purchase an office building that would serve as our corporate headquarters.  The policy also allows OHA to:  (1) Make equity investments in Hawaii-based companies, (2) Invest in lending programs for Native Hawaiians, and (3) Invest in other Hawaii real estate.

On April 12, 2013, OHA Trustees were surprised to learn that the loan we got from Bank of Hawaii was not a secured loan and that it had to be backed by Trust dollars.  OHA’s Hawaii Direct Investment Policy requires that any “recourse” in connection with a loan be counted towards the $25 million maximum allocation.  As a result, we can’t make any more investments in Hawaii until the acquisition of OHA’s corporate headquarters is complete.

Under the current financing terms with Bank of Hawaii, OHA has to put up the following collateral:

(1) GENTRY MORTGAGE – 100% liability against the Native Hawaiian Trust Fund assets for a total of $21,370,000 required collateral; and

(2) GENTRY RETROFIT LOAN – An additional $6,758,000 loan to retrofit Gentry into an office building at a “75% rate.”  Calculation: $6,758,000 loan / 75% = $9,010,667 required collateral.

Therefore, the combined collateral required for the Gentry Mortgage ($21,370,000) and the Retrofit Loan ($9,010,667) is $30,380,667.  This is -$5,380,667 over our $25 million Hawaii Direct Investment Policy limit.  After doing the math, you have to ask the question, “Who is going to benefit from this sweet deal?”  Certainly not OHA!

The Trustees were misled by OHA’s financial department officers when they repeatedly emphasized that the loan was the best deal we could hope to get.  If it was such a great deal, why do we have to back the loan with our own Trust dollars?  It would have been better to have bought the building in cash.  Why did we even need Bank of Hawaii?


It never made sense for OHA to spend $21,370,000 to purchase the 80-year-old Design Center, with some existing tenants, and spend an additional $6,758,000 to convert parts of it into a temporary office spaces to house OHA’s headquarters.  Oh, and did I mention that the number of building vacancies are a clear indication that it is even wrong for businesses to move into?

Now add to that the fact that: (1) OHA’s can’t make any more investments using the Hawaii Direct Investment Policy unless we can renegotiate our loan terms with Bank of Hawaii and completed the relocation of our offices to Gentry; and (2) OHA has until February 2014, when our current lease expires, to move into a “design center” that wasn’t meant to be an office building.  What a complete boondoggle!

We could have saved ourselves all of this aggravation and move our headquarters to the AAFES building that OHA now owns in Kakaako, paying no rent, and spending this time drawing up plans for our new property instead of spending trust money trying to make an old building fit OHA’s needs.  Aloha Ke Akua.