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Research and Methodology

To identify landowners with holdings of the highest values, MN Capital Partners used a database of real property tax-assessed values for four counties (Honolulu, Maui, Kauai and Hawaii). The assessments from these counties (with values as of Oct. 1, 2002) were downloaded into a database-management program.

The researchers also reviewed annual reports, SEC filings, DCCA Business Registration records, assessment office tax maps and records, Bureau of Conveyances documents and other publications. MN Capital confirmed the information with company representatives when applicable.

The list was finalized in August 2003. The final database is the only consistent, comprehensive and publicly available measure of value for all Hawaii real estate, including government holdings.

For real property tax purposes, assessors estimated the value of every real estate parcel in the state. Assessments are derived in a consistent manner and as of a common point in time. Given the large number of properties involved, the assessors applied a mass appraisal approach using standard methodology, cost and market valuation models, common reference data and statistical testing.

One drawback to the database is that assessments represent a proxy for fee-simple values; there is no division of value between leased fee (lessor's interest) and leasehold (lessee's interest) interests. This is significant in a market where long-term ground leases are prevalent. Therefore, 100 percent of value is assigned to the fee owner of record. This allocation tends to inflate values associated with many top Hawaii landowners, who lease the majority of their properties in the short term. That said, the attribution of value to the lessor more accurately reflects long-term ownership and control of the asset.

Although the obvious adjustment is to divide land and building values between lessor and lessee, consider the scenario where a ground lease expires in less than a year. There would be nominal, zero or possibly negative values associated with the leasehold position.

Another obstacle is that ownership is often held in different entity names. In some cases, database entries were simply misspelled. Best efforts were made to research corporate subsidiaries and refine the database information. Partial or partnership interests also added another level of complication. Unless clearly denoted, partial interests were typically assigned to the dominant owner.

Special-use properties, such as power plants, churches and schools, are difficult to evaluate. These assessments are typically exempt from property taxes. Hawaiian Electric Industry's ranking may change in the future as certain assessments continue to be reviewed.

Another clarification, relevant to owners of large tracts of agricultural land, is that tax-assessed values for properties dedicated to agriculture use are lower than "market-value" assessments. Assessed values depend upon the type of agricultural land use and the term of the dedication period.

Also note that the figures represent total value before consideration of debt or other encumbrances on the properties.

In addition to thanking MN Capital Partners for their research, Hawaii Business thanks the heads of the county assessment offices: Gary Kurokawa (Honolulu), Wes Takai (Big Island), Lance Okumura (Maui) and Les Brown (Kauai) for their ongoing assistance.

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