Bishop Street

The Catholic Church ascends onto the list

November, 2003

When Planned Parenthood of Hawaii announced in 1987 that it would provide abortions at its 1164 Bishop St. clinic in downtown Honolulu, alarm bells chimed at the Roman Catholic Diocese of Honolulu – which owns 55 percent of the land beneath the clinic. Not only does abortion violate the church’s teachings, but the clinic would be next door to the Our Lady of Peace Cathedral, the oldest operating cathedral in the nation.

The topic became a battle of morals and modern-day medicine, a debate about religion and real estate. It landed in the Hawaii State Supreme Court in a two-year case involving Planned Parenthood, the Catholic diocese, the building’s other landlord 1164 Partners, the State Health Planning and Development Agency and the state Department of Health.

All parties finally agreed to an out-of-court settlement in 1989, and Planned Parenthood packed up and moved to an Ala Moana location. “After that, we included in our leases that [Catholic-church-owned] property will not be used for purposes that are inconsistent with the Catholic law,” recalls Bruce Graham Jr., attorney with the law firm Ashford & Wriston. “Not just abortion, but euthanasia, prostitution, gambling, drugs … frankly, a lot of things that other landlords prohibit.”

Perhaps so, but the Roman Catholic Diocese of Honolulu is not a typical landlord, to begin with. It is a centuries-old institution bound by Canon Law, the official body of laws approved by bishops and the Vatican.

This year, the Roman Catholic Diocese of Honolulu ranks No. 20 in our annual list of Wealthiest Landowners in Hawaii. The diocese owns roughly 525 parcels of land in the state, with a tax-assessed value of $240 million.

The diocese has an annual operating budget of $8 million, according to William Burton Jr., business manager for the diocese. The following is a breakdown:

  • $2.5 million from parish assessments (Catholic parishes in Hawaii generate $27 million annually; the majority comes from monetary donations)
  • 2.5 million from department revenues (grants, income from social ministries and advertising and subscription sales from the Hawaii Catholic Herald)
  • $1.5 million from rental income (rental activities on church-owned property)
  • $1 million from investments (diocese-owned stocks, bonds and real estate)
  • Roughly $500,000 from interest on loans to parishes

The diocese sends $50,000 in combined annual dues to the Vatican and to the National Conference of Bishops on the U.S. mainland. Like other nonprofit organizations, it is exempt from real property taxes on land used for charitable, religious purposes. Of course, it must pay taxes on land used for investments and other commercial purposes.

Money-making is not the primary purpose of the diocese, however. “The reason for having our land is to stabilize ourselves to do our mission, which is basically evangelization, health, education and social services,” says the Most Rev. Francis X. DiLorenzo, bishop of Honolulu since 1994.

DiLorenzo ultimately has the final say on every land transaction in the state, although Canon Law requires him to seek advice from the Presbyteral Council, comprised of the vicar general and 15 priests. Other groups that work closely with the bishop are the Diocesan Finance Committee and the Bishop’s Administrative Advisory Council.

The bishop does not always need the Vatican’s approval – unless it involves a sale of more than $3 million. Canon Law clearly states: “The permission of the Holy Sea is required for valid alien nation [translation: a land sale] when it is the case of goods whose value exceeds the maximum amount [translation: $3 million].” Members of the National Conference of Bishops of the United States set that $3 million amount.

Three years ago, the diocese sought the Vatican’s approval for the $183 million Kahala Nui retirement community in Kahala, adjacent to the Star of the Sea parish and school. Catholic officials purchased the land from Bishop Estate in 1951. Today, the tax-assessed value of that 6.62-acres is about $15,076,200. Construction is under way, and residents will be able to move into the community as early as November 2004. The developer, Kahala Senior Living, has a 60-year lease with the diocese, which will collect annual payments for use of the land.

“At the civil law level, we’re a corporation, and like any corporation, we can do anything that the office of directors approves,” says Attorney Graham. “We are a Hawaii corporation. We can buy and sell land,” he says.

On the other hand, DiLorenzo is extremely careful about letting go of property. “My advisors and the people of the diocese are very reluctant to sell our land,” the bishop says. “We should stay within an existing budget that is balanced and use the land as equity to do our mission.”

No doubt that conservative philosophy stems from questionable sales involving the church in 1988. That year, the diocese sold 4.5 acres of beachfront land in Hauula for $2.5 million. It also sold former Bishop John Joseph Scanlan’s residence to Noram Inc. Japan Co. for $5 million. The address: 3735 Diamond Head Road.

That year, the diocese almost sold the historic St. Augustine Church in Waikiki for $45 million to Japanese investor Hama Kikaku Co. of Tokyo. The 0.79-acre land beneath the church is beachfront property in the heart of Waikiki, and the Catholics have owned the land since the mid-1800s.

In addition to $45 million for the land, the Japanese investor offered the diocese an empty lot on Aloha Drive, between Ala Wai Boulevard and Kuhio Avenue in Waikiki. It was not beachfront, but it was large enough to house a new church, residences and offices. The diocese had planned to build the facility for $20 million and allocate the remaining $25 million for scholarships. Hama Kikako also offered the diocese use of the St. Augustine land rent-free for 28 months, pending construction of the new facility.

The Vatican rejected the sale in November 1989. “It’s one thing to sell a church, because a church is a sacred building,” says Patrick Downes, spokesperson for the diocese and editor of the Hawaii Catholic Herald. “It’s another thing to sell a parish hall or a school. There are different rules.”

Today, the combined value of the building and land in Waikiki has plunged to $12,568,900. “The diocese would have been able to make wise investments with that money and have a new parish in Waikiki,” Graham reflects. “The church would have had a lot of scholarship money for the schools. But we would have been minus a very beautiful building.” The incident put the Hawaii diocese in the line of fire, with former Bishop Joseph Anthony Ferrario caught in the middle. (He preceded Bishop DiLorenzo from 1982 to1993.) “There was even national press saying that the Catholic church was cashing in, selling church sites to Japanese investors,” Graham says.

How does the current bishop feel about the sale? “Let the past be buried,” he says. He says he is in no position to speculate. The diocese today would find other ways to generate income. “Our needs are very modest. My goal is to fill the pews and fill the pulpits, so if we can keep the existing structure, that’s fine.” He adds, “I’m not an expansionist.”


King Street Cemetery, Kakaako 
Location: 839 S. King St. 
Area: 2.65 acres
Commercial building value: $1,900 
Commercial land value: $10,968,100
Total assessed value: $10,970,000

One Archer Lane units, Kakaako
Location: 801 S. King St. 
Area: 11 condominium units 
Commercial building value: $2,319,700
Commercial land value: $442,800
Total assessed value: $2,762,500

This 2-acre cemetery, located between TGI Friday’s and the One Archer Lane condominium on King Street, was the burial site for Honolulu Catholics as early as 1827, according to records. Among the buried are former bishops, a Tahitian princess and Catholic missionaries. The Board of Health ordered the cemetery closed in 1927, after all the plots were filled. In 1981, a fire killed the cemetery’s caretaker and burned his cottage.

Exactly who owned the cemetery at what point is sketchy. The Honolulu Star-Bulletin (March 31, 1989) reported that the Catholic church received the land as a gift in 1827 but did not document the transfer. When Hawaii went through a land reform from 1846 to 1848, the Catholic church failed to file a title, so the land was given to the Kamakee-Piikoi, the Calvert Chun and the Florence Desky families. Historic files at the diocese parallel that story: The church did receive the land as a gift in 1827 but (for an unspecified reason) purchased it from Manuel Paiko in 1866 and from W.C. Achi sometime after 1912.

When developer Meyers Corp. announced in 1998 that it would build the 40-story One Archer Lane adjacent to the King Street Cemetery, family members protested. A pact was made. Meyers agreed to include the cemetery in the new building’s land space, and, in exchange, give the diocese nine units in One Archer Lane.

The agreement was a win-win for both parties. The cemetery remained, and Meyers built its high-rise condominium. The diocese bought two additional units and today, it owns the 10th floor of One Archer Lane. Retired diocesan priests live on that floor.
The Kahala Nui retirement community, Kahala 
Location: 4425 Malia St.
Area: 6.624 acres
Commercial building value: $168,400 
Commercial land value: $15,076,200
Total assessed value: $15,244,600

Construction began early this year on the six-story Kahala Nui retirement community, adjacent to the Star of the Sea parish and school. The largest continuing-care facility in Hawaii, it will boast 271 independent apartments, 62 assisted-living units (including 22 memory-support units) and 60 beds for intensive-care residents, says Chuck Swanson, chairman of the developer, Kahala Senior Living (KSL).

Once residents move in as early as November 2004, they will pay monthly fees of between $1,695 and $4,590, and entry fees that range from $308,000 to $745,000. They also will receive a 90 percent reimbursement of that entry fee, upon leaving or death.

Dallas-based Greystone Communities Inc. is the project manager. Nordic/PCL Construction and Architects Hawaii are designing and constructing it for $110 million. Total financing for the Kahala Nui project is $182.75 million, comprised of $40.75 million in taxable revenue bonds issued by Kahala Nui, and a $142 million, tax-exempt bond issued by the Hawaii state government. The bond yields will top out at 8.17 percent in 2033.

Episcopal Homes of Hawaii Inc. was the project’s original developer in the 1990s. However, plans stalled after the Episcopal group filed for Chapter 11 bankruptcy in 1999. The Catholic diocese resumed plans with KSL, which is unaffiliated with the Episcopal Church.


St. Augustine Church, Waikiki
Location: 130 Ohua St. and 137 Kealohilani Ave. 
(two parcels that belong to the church)
Area: 0.797 acres (130 Ohua St.), and 0.352 acres (137 Kealohilani Ave.)
Commercial building values: $1,288,500 and $304,600
Commercial land values: $11,280,400 and $4,989,100
Total assessed values: $12,568,900 and $5,293,700

This prime, beachfront property in Waikiki became the subject of controversy in 1988, after Japanese investor Hama Kikaku Co. offered to buy the land for $45 million and demolish the church. Vatican officials did not approve the sale, and the historic St. Augustine church remains on Ohua Avenue, sandwiched between high-rise resorts and tourist attractions.

In 1883 and 1901, the Catholics had received small portions of the Waikiki land as deeds from Queen Liliuokalani, according to diocese files. The church acquired the majority of the land in 1922 from the Queen Liliuokalani Trust, and in 1969, exchanged the remainder of the land with the queen’s trust and the Scottish Rite (Masons).

A Catholic priest named Father Modestus Favens built the original church from lumber from a vessel wreck, according to files. Throughout the 1860s, the wooden church served Catholics in Waikiki, including American troops near Diamond Head. The church received upgrades in 1901 and then expanded in 1910 and 1925 to accommodate the growing number of Catholics.

A kindergarten opened on church grounds in 1929 and later included eighth-grade students. In the early 1980s, the Catholic diocese sold the school’s land to the government at a deeply discounted price. In its place today is the Waikiki Community Center.


Century Square, downtown Honolulu
Location: 1188 Bishop St. 
Area: 0.732 acres
Commercial building value: $6,936,200
Commercial land value: $15,360,900
Total assessed value: $22,297,100

Cathedral of Our Lady Of Peace, downtown Honolulu
Location: 1175 Fort Street Mall 
Area: 0.325 acres 
Commercial building value: $264,800
Commercial land value: $2,124,500
Total assessed value: $2,389,300

Nestled between the Century Square and Finance Factors buildings in downtown Honolulu is the Roman Catholic diocese’s local headquarters and the Cathedral of Our Lady of Peace, which was built in 1843. King Kamehameha III (then 13 years old) gave this original parcel of land to the first Catholic missionaries, who arrived in 1827. These missionaries transformed the area into a hub of religious activity. They built residential quarters and planted gardens. They even dug a 12-foot stone well in what is now a parking lot on the east corner of Bishop and Beretania streets.

In the 1840s, Kamahemaha III gave more land to the church. Over the next 40 years, the church purchased adjacent lots from local private landowners Charles Brewer, Charles Bishop, Julius Anthon, Joseph Carter, Alexander Muir, James Makee and Romila Whiting. One of those purchases was the land beneath what is now the Century Square building on Bishop Street.

The church continued to purchase additional parcels from the Territory of Hawaii in the 1920s, according to files. Eventually, it sold some of the land to private investors and gave the land beneath Damian Plaza to the city of Honolulu. Damian Plaza originally belonged to landowner C. Brewer.

In 1858, the church opened a boarding and day school on Fort Street and eventually moved to a new location in Kaimuki. The Sacred Hearts Convent and St. Louis College (now River Street) also served students downtown for many years. Today, church-owned land in downtown Honolulu comprises a little less than 2 acres and is concentrated on the northwest corner of Beretania and Bishop streets.

The Finance Factors building at 1164 Bishop St. is partially owned by the church. According to tax files, the Roman Catholic diocese owns 55 percent of the land, and Finance Holdings Ltd. and Finance Investment Co. Ltd. own 45 percent.


History: The Roman Catholic Diocese of Honolulu

The first Catholic missionaries came to Hawaii in 1827 from the Sacred Hearts order in France. Eventually, they were followed by other Catholic orders that operated their own parishes, schools and charity groups in the Islands. The Dominican Sisters from the Philippines, for instance, taught in elementary schools. The Daughters of St. Paul opened the Pauline Book and Media Center in downtown Honolulu.

In 1941, Hawaii became its own diocese – a geographic area headed by a Vatican-appointed bishop. (Bishops existed in Hawaii before 1941, but they were from the various orders.) As part of the newly formed Roman Catholic Diocese of Honolulu, all Catholic orders were required to give their land to the diocese. The Sacred Hearts order, however, kept its own land.

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