11/17/2025
Subject: Action Toward Lease Extension — Kahala Beach Apartments & KS
Dear Stakeholders:
I want to bring to your attention historical background, legal points and fiduciary considerations. The following merit immediate planning for lease extension of Kahala Beach Apartments condo (KBA) by Kamehameha Schools (KS).
1. Historical and Precedent for Lease Extensions
There is clear and consistent practice/ precedent for extending ground leases of comparable or even lesser financial magnitude than KBA. Notably:
o The Waialae Country Club and Kahala Hotel have both received multiple lease extensions from KS.
o During the 1992 Weinberg foreclosure and renegotiation, the Kahala Hotel’s remaining 10-year term was extended to 40 years, with a base payment of $1.2 million plus 5% of gross receipts (and property tax reductions). Later, an additional 30-year extension was granted, extending the term to 2062. The Hotel twice has been in foreclosure.
o The Hotel should be more concerning versus KBA ( both were built by Charles Pietsch).
By comparison, KBA’s aggregate lease payments to KS exceed those of both the 1400-member nonprofit Country Club (encompassing 168 acres) and the Kahala Hotel, whose publicly reported gross annual receipts approach $100 million USD (≈15 billion yen yielding $6.2M/ yr including real property taxes).
This raises a question of equitable treatment and consistency. Why have comparable or more privileged leaseholders received repeated extensions, while KBA — a residential community with higher cumulative payments — has not been afforded the same consideration.
2. Implied Waiver and Policy Consistency
Documented lease policy from Bishop Estate archives establish a long-standing institutional practice of extending leases upon expiration. Beyond written policy, KS’s consistent conduct over decades reinforces an implied waiver of the right to deny a lease renewal. The "law of waivers" refers to legal principles of voluntarily and intentionally giving up a known right or claim. A waiver is granted through writing , or implied by a party's consistent action & conduct.
Of particular relevance, nine (9) Kahala condominium projects were either extended or offered fee simple conversion. The most recent, Kahala Gardens (16-unit cooperative), was granted such an opportunity in 2007. KS offered the fee to the Executive Centre at 1088 Bishop Street in 2014. This pattern supports the position that denial of extension to KBA would constitute a deviation from historic KS policy and could potentially raise issues of capricious KS action under Hawai‘i law.
3. The Aloha Spirit Law – Legal Principle of Conduct
Pursuant to HRS §5-7.5, all individuals and entities operating within the State of Hawai‘i are obligated to conduct themselves in accordance with the Aloha Spirit Law. This doctrine embodies fairness, compassion, and mutual respect as binding principles on public policy. “Aloha Spirit”. “Aloha” is the essence of relationships in which each person is important to every other person for collective existence.
This principle has been cited in judicial proceedings (Gun-Rights case) and remains applicable to KS and KBA. Upholding the Aloha Spirit requires equitable, good-faith engagement with KBA residents. If the ground lease is terminated in 2027 there would be no collective existence.
4. Unjust Enrichment and Historical Contribution
Historical records and photographic evidence confirm that, prior to the construction of the Kahala Hotel’s parking structure, KBA land was utilized by the Hotel for parking operations, including the area now comprising certain ground-floor units (e.g., under my unit #163). Furthermore, approximately 12 feet of the entire beach is on KBA’s lot, namely the public sidewalk area along the shorefront has been used by the public for the past 58 years; and, over 1.2 acres of KBA’s lot has been used as an easement along the extension of Kahala Avenue by the public, Waiaiae Country Club, and the Hotel.
The Charles Pietsch entities, which included both the Hotel and KBA development company, financed and executed beachfront improvements extending approximately 2,100 feet from Kahala Beach Park to the Hotel’s eastern boundary. Later, a new State-owned beachfront lot was created of approx. 1.3 acres and its own TMK. The Hotel, KS and the public remain ongoing beneficiaries of these improvements. This arrangement constitutes unjust enrichment from KBA. Photo old rocky oceanfront along the shore- https://digitalarchives.hawaii.gov/item/ark:70111/1Bx0
5. Fiduciary and Financial Implications of Non-Extension
From a fiduciary standpoint, KS’s refusal to extend KBA’s lease would produce adverse financial consequences for the Trust:
o Upon expiration, KS would be liable for real property taxes est at $2 million annually.
o Conversion to rental operations post-2027 would yield substantially reduced net revenues, compared with the $7 million currently derived from KBA lease payments.
Given the obligations of prudent trust management, the extension of KBA’s lease term constitutes the financially and legally responsible course of action consistent with KS’s fiduciary duties under Hawai‘i trust law.
The Board of KBA has also violated fiduciary responsibilities from KBA condo unit owners. The Board has ongoingly been coerced by KS employees to share proprietary and confidential information- complex’s non public trade secrets. KS employees have burdened and coerced the staff to maintain the buildings beyond norms; namely various plumbing, HVAC and other high priced improvements useful life extends substantially past the 2027 lease expiration. KS has not funded any KBA improvements and repairs, for which they have had direct input of. KS has an agreement with condo leasehold owners and no such agreement exists with the board of directors or staff of KBA.
Furthermore, KBA management staff seems to have adopted different improvement rules for current condo owners versus KS (9+/- condos foreclosed upon by KS). KS has NEVER once obtained a permit for any of their improvements for those nice rental condo units. Lastly, KBA “budget difficulty” has resulted in some unit owners falling behind on monthly HOAs, in conjunction with various overimprovements beyond 2027 useful life.
6. Administrative Misclassification and Consumer Protections
KBA is presently administered under KS’s Commercial Portfolio Division, though the property is a residential complex. This misclassification is inconsistent with the project’s nature and may inadvertently place KS in violation of federal consumer protection provisions & or under the Dodd-Frank Act, which governs “housing providers” in a residential context. For accuracy, compliance, and fairness, KBA should be repositioned within the Residential Property Management portfolio. This realignment would better reflect the project’s character and ensure appropriate regulatory oversight.
Conclusion. Given the above - KS and KBA should immediately discuss an equitable lease extension.
Thank you for your time, attention, and stewardship.
Respectfully,
Lisbeth & Ed Dervisevic
S&C INVS LLC, Unit Owners - 4999 Kahala Avenue, Honolulu Hi 96816.
Email: [email protected] Email: [email protected] Phone: 718-216-9398
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CC: All stakeholders, condo owners, KS executive and other interest parties
Digital Archives of Hawaiʻi
