Hawaii Kai Farmers Face 25-Fold Rent Hike

Landowner Kamehameha Schools says rents have not risen for decades; tenants fear they will be put out of business

By Andrew Gomes

POSTED: 01:30 a.m. HST, Aug 11, 2010

Old age caught up long ago with a group of farmers working 87 acres in East Honolulu's Kamilo Nui Valley, and now the rent they pay to lease the land is about to catch up after four decades.

Kamehameha Schools recently notified its 13 farm tenants in the agrarian Hawaii Kai neighborhood that it is seeking a roughly 25-fold increase in rent.

The trust, Hawaii's largest private landowner, believes the offer is fair given that the farmers have to date been paying rent set in the early 1970s, and that the farm leases call for rent to be reset now for the 15 years remaining on the leases.

But many of the farmers, some of whom are in their 80s, say they cannot handle such a drastic hike, especially at their age and with the economy the way it is.

"If I had to sign (the new lease offer) today, I'd be going out of business," said nursery operator Glenn T. Nii.

The situation stands to drastically change the lives of farming families who were relocated to the area by developer Henry J. Kaiser to make way for his vision of Hawaii Kai that began to take shape in the 1950s.

Whether farmers remain on the site could influence the future use of the last valley in East Honolulu not built up with homes.

Kamehameha Schools spokesman Kekoa Paulsen said the trust wants farming to continue on the land but also wants to receive fair market rent based on agricultural use.

"We feel we're presenting fair values for the time and the area," he said. "They've been paying 1970s rents for 40 years."

It was about 40 years ago that more than a dozen farmers were moved to Kamilo Nui Valley and formed a cooperative to pay for necessary infrastructure, including roads and water.

The farmers now face a rent increase from around $200 an acre per year to around $5,000 an acre per year, according to tenant and landlord representatives.

Paulsen said the proposed rent is based on appraisals for farmland in the broader area. He added that similar lease rent increases were proposed for seven farms about a mile away behind Kaiser High School and that five tenants agreed on new lease rents within the last 18 months.

Two of the 13 Kamilo Nui Valley farmers have agreed to new lease rents since the trust made its opening offer in a June 9 letter, Paulsen said.

"This is not a take-it-or-leave-it proposition," he said. "This is the beginning of the (rent negotiation) process."

Still, many Kamilo Nui farmers fear they will not be able to pay the proposed rent or negotiate a more favorable rate. If they cannot reach an agreement with the trust, an arbitrator would decide.

"They got us over a barrel," said Francis Yamaoka, owner of Yamaoka Nursery.

Nii, who operates the nursery started by his father, Charles Nii Nursery Inc., said he cannot invest significantly in the business to boost revenue enough to pay what Kamehameha Schools is asking given that only 15 years remain on the lease.

"There's just no way," said Nii, who is 62 and takes care of his 94-year-old father and 92-year-old mother on the property with his wife. "I'm worried about my parents. They got no place to go."

Two farms away, Nii's cousin, Richard, operates R&S Nii Nursery on six acres with his wife, his parents who founded the business and five employees.

"It's our family legacy," said Richard's wife, Judy. "We're not asking that (Kamehameha Schools) not increase the rent at all, but we need to have rent that is affordable to us."

The Nii nurseries are working with local attorney Terry Lee to help them negotiate with the trust collectively with six other farms. A few other farms are considering their own options.

Lee said many of the farmers were shocked by the proposed rent. "These are just humble farmers and they are overwhelmed," he said.

The old rental rate expired July 1, so the revised rate will be retroactive.

Other new terms being proposed by Kamehameha Schools include allowing farmers to sublease parts of their farm, which would help older farmers generate more income, and receiving half of any proceeds if farmers sell their leasehold interest in the property.

The trust, however, is not offering to extend the term of the lease beyond 15 years or sell the land to its tenants.

To be sure, it was no surprise that Kamehameha Schools would seek to raise rents to some extent. Kamilo Nui farmers have been dreading the day for years.

In fact, one of Kamilo Nui Valley's charter tenants, Lillie Wong, conceived an idea about a decade ago to avoid the rent hike by having the land sold for residential development.

The idea involved Kamehameha Schools selling the land to a developer, who also would have paid the farmers for their leases. Farmers had an option to retire or pursue farming on other land owned by the trust.

Wong interested local developer Stanford Carr, who drafted preliminary plans for 200 homes about six years ago and presented estimates of what rent might jump to in 2010.

"She saw this crossroads coming," said Jim Stone, a local attorney who helped advance the buyout plan on behalf of the farmers cooperative then-led by Wong. "She kind of led the people into the valley, and she wanted to make sure everyone was taken care of."

But the deal was contingent on support from all tenants, and because a few were not interested, the deal died. Some leaders in the community strongly opposed homes being developed. Wong died earlier this year.

Paulsen said Kamehameha Schools is not trying to push farmers off the land before their lease ends.

"We want farmers to be there," he said. "We want farming to continue on that land."

Beyond 15 years, Paulsen said it is uncertain what the trust would see fit to do with the property.