 Aloha, and welcome to Hawaii Together on the Think Tech Hawaii broadcast network. I'm Kaley Ikeena, just delighted to be with you today. And although I'm a trustee at the Office of Hawaiian Affairs, everything I say today is just from me personally and doesn't necessarily represent the views of that government agency. We're going to have a great time. My guest today is a brilliant man. You can ask about him all over town and people will be singing his praises, or not. But in any case, they will have to deal with the fact that he has had a major impact upon the Hawaiian Islands and he continues to do so. He's the producer, the largest producer in private of affordable homes here in the islands. He started off as a realtor, has enabled many, many people to build wealth. Today he's a developer. And more than that he's on this program today because he's an innovator of new ideas, whether it has to do with the Honolulu Rail or affordable housing or anything else that deals with life and wealth in these islands. Peter Savio is a smart thinker. He comes up with new ways of looking at old problems. And today what I've invited him to do is to chat with me about solutions that he has in mind for the problem of the 27,000 people on the waiting list for Hawaiian homelands. But first I'm going to talk with him about some other things. Please welcome to the program developer Peter Savio. Peter, welcome today. Did I get it right? Yes, you did. And thanks for having me on the show. You're a creative person. I just enjoy all of the different things that you do. In fact, you're so into giving housing to people right behind us, the Ilani Palace. There was a cartoon once and there once about you. Correct. I was doing dorms at that point and they had a little cartoon in the editor's page about me buying the palace and converting it to a dorm. Ouch. Some of your projects have been a little bit controversial like those with Bishop Estate and Leesold Conversion. How do you handle the notoriety? I don't think it's a question of notoriety. We were trying to explain to the lessees that they have an opportunity to buy. I think it was a positive thing. A lot of it is education. People don't really understand real estate and the relationship it has to being here in Hawaii because we have such a restriction on the assets. So to me, it's just I'm a teacher. I'm trying to teach people about why they should buy the lease fee, why they shouldn't, what the advantages disadvantages are. Well, one of the things that you're doing now is working with a group of leaders in our community on trying to solve the problem of getting people onto the Hawaiian homelands and being able to afford that. And we're going to come back and talk about that. But if you don't mind, can I ask you about a few of your more recent ideas in your projects? Honolulu Rail. If it were up to you, how would it have been kicked off in the first place? I think the big mistake we made on rail is we weren't thinking big enough. I am not a supporter of rail. I think what we did was actually kind of foolish. But for rail to work, I think it has to be island wide. You have to be able to have people in Kailua, Kanoi, North Shore, and everything in between using it because that's where a lot of the vehicles come from. Now, when you're talking about rail island wide, you're not saying the rail cars themselves need to go up to the North Shore. You're talking about a single system. You want to explain that? Okay. Basically, I would have done it as a bus-based system. So buses would be going through every community every 15 minutes or every half hour. If buses were to go around the island, they'd only have maybe 30 stops. And so a bus would travel four or five miles before it had a stop. And it was a mass transit bus. So right now where we have the present system, when it ends, if it ends in Waikiki or if it ends at university, you then would get off the mass transit, get on an express bus, and it would take you the rest of the way around the island. In other words, there'd be a straight pathway from Laiea up on the north of the island, all the way to Waikiki, and people would be able to use that single system, and wouldn't have to bring their car just in case. Yeah. I think part of the problem with Hawaii is you've got to look at a system that matches how we live and how we work, and because we have so many private schools, parents in a private school are not going to take mass transit, because if the child's sick or needs to be picked up, they have to go pick the child up, then they're not going to take the child home. They're going to take the child to grandma's house or uncle's house to babysit, and I mean, that's just how it is. Well, so why didn't they listen to Peter Savio in the first place? Well, they never asked me. Well, there's something that I hope you get asked about, and that is the fact that you are the largest private producer here on the island of Oahu, and probably in the state of affordable housing. Now, you make a lot of units. How many have you built so far? I would think I'm somewhere around 6,000 units. I've never kept track. Okay. But probably 6,000 to 7,000 units. Now, going with those kinds of numbers, you're not necessarily raking in the biggest bucks you could. No. Well, I also work on the thinnest of margins. Okay. So I'm the poorest of the developers. If I break even on a project, I'm happy. If I make a small profit project, I'm really happy. Most of my projects, I actually might lose a little, but I think what we're trying to accomplish in terms of getting people into housing is so important. And I do this with no government funds, no government funds. No federal. All private. County, city. All private. State. I'm a capitalist. Business. No government. It's all private. And lower margin, but you have a higher quantity that you produce. But why? Why? I mean, if you wanted to, you could go after federally funded projects and so forth. You could play the game. Part of it could get involved in the bigger numbers. No. Part of it was to prove to the community you can build affordable housing. You can create affordable opportunities. You don't need governments to tell us what to do. You need people just to be innovative and creative. I could not have done it if the banks did not support me. So, you know, First Hawaiian Bank, American Savings, they were two of the banks that really supported me in the beginning. And that made the difference. So you like to hear it can't be done. I love to hear it can't be done because I go out and do it. You like to do it without government help. Correct. Well, we're going to talk a little bit about government. And sometimes people don't really realize that it is government. And that is the Hawaiian homelands, the third largest land estate here in the islands. I think most of us know that it was set aside in the 1920s so that Hawaiians could have a piece of the rock, so to speak. They could start a homestead and raise their families and pass on generational wealth. But somehow today, it doesn't seem to be working the way Prince Kuhio back then envisioned it. But before we dive into it, I think you've got a personal engagement to this that goes back to your mother. Yes, well, when I was probably in the late 50s, early 60s, I remember my mom came home and was really upset that she was unable to convince Hawaiian families to buy real estate. They were policemen, firemen, teachers. They had jobs, but they didn't want to buy real estate because they were waiting for Hawaiian homelands. And Hawaiian homes had a provision that said if you owned real estate, you couldn't get a Hawaiian home's lease. And so let me cut you off there before you go on to the rest of the story. When I'm hearing you say that, to me, it just sounds so backward because you don't build wealth for your families simply by renting. And if you're waiting for something to happen, like getting your number called on the Hawaiian home's waiting list, you just spend those years and those decades renting property and never actually using your money to build wealth. Is that what was going on at that time? Part of it was the Hawaiians. It wasn't about money. It was about culture. It was about language. It was about their people living together, et cetera. But you also got to remember in the 50s and 60s, Hawaii had not experienced a real estate boom. Prices were much more stable. Prices went up much slower between the 20s and, let's say, the 50s. So from their perspective, waiting was an acceptable alternative. Of course, then the 60s came and that changed. Right. And that culture of waiting, however, has remained. But your mother got angry at something. Well, she got upset. She was upset. I have imagined you very angry, but I can't imagine your mother. My mother was a champion for people that were being prohibited from buying real estate or doing something. But she was upset that they had this rule. So she tried to get the rule changed. But before she did that, she went to speak to someone. And unfortunately, I don't remember. But I remember at the time I thought, oh, wow, she's going to talk to him. Oh, he's really a big important person. I don't remember who it was. But he basically told my mother, don't rock the boat. We want it that way. We don't want the Hawaiian community to be on the land. We don't want them to create wealth. We don't want them to preserve the culture. Who is saying this? Not necessarily a name, but what kind of people are actually saying, we want Hawaiians to remain poor? He was Hawley. I don't remember. My recollection is he was head of one of the big five or he was one of the top bankers or might have been a politician. I don't know. But part of it was the monarchy had only been overthrown maybe 50, 60 years earlier. And so there was this concern. They didn't want the Hawaiian community to become too strong. Peter, you know, I also lead a think tank. So I always want to check my facts. So I'll go home and try to check those. But here's what I'm hearing you say. And it may be true at least for part of the business community, perhaps not all of the business community. And that is that there may have been some business interests and government interests at that time who were saying, we know the secret of real estate. Land is power. Land is wealth. And we don't want the Hawaiians to get a hold of that. And we don't want them to be using their real estate to build wealth. Is that basically what was suggested? I don't know if they were that sinister, if that's the term, or they really gave it that much thought. I think it was more, we don't want the Hawaiian community. I took it as being organized. We don't want the Hawaiian community working and thinking as one. We don't want them to be too successful. I suspect back then, if you look, there were probably more native Hawaiians than there were of other groups. There was probably a much bigger percentage than today. But the idea was that the power, whatever the power to be was at that point, did not want the Hawaiian community to preserve the language, to preserve the culture, to succeed. It had to do with wealth. This kind of reflects the thesis of Gavin Dawes and Cooper in the book, Land and Power in Hawaii. In other words, who has the land has the power. So I can see what you're saying that some parties may have been afraid of Hawaiians getting land. And this raises a conception that it's a little different for some people. And that is what land means. The land is many things to us native Hawaiians. The aina is something with which we have a very special sacred relationship. It's far more than a domicile or a place to live. It's part of the living environment. And we have to malama take care of the aina and so forth. You build families. You build communities and so forth. All of those concepts are part of the Hawaiian thinking. But I don't often hear Hawaiians talking a lot about land as being the basis for building generational wealth. But I hear a lot of people seem to know that that's what that is. What are your thoughts about that? No, I think that's very true. The ownership of land is the first step in creating wealth for your family but also to create the opportunity for your children because you can refinance to send them to college. You can refinance to start a business. You can refinance to buy another investment property. So when you talk about Hawaiians owning land so they can raise their families and keep their culture alive, the Western concept of creating wealth is what I think the Hawaiian didn't necessarily see. The land is a vehicle to create wealth, to create future. There's nothing wrong with wealth. There's nothing wrong with creating wealth, especially if you're using it to help your family succeed, get educations, create value for you and your family going forward. Now this takes us back to the origins of the concept of the Hawaiian homelands. At least in 1921, although it had actually been around prior to that, Prince Kuhio, Hawaii's delegate to Congress, he looked at the mainland America and he said, one of the things that has made the American people great is that their families are able to acquire land. He saw the great westward homestead movement and he said, we need that in Hawaii. We need to let Hawaiians acquire land in order to develop wealth that goes from generation to generation. And his original concept was actually not leasehold land, as it is in the Hawaiian homelands now. His original concept was putting fee-simple land into the hands of Hawaiians. What are your thoughts about that? I think it was a great, great concept and in some respect, we're probably lucky that they opted for lease rather than fee because I suspected the 20s and 30s, especially the Depression years, a lot of the land would have been lost. So going leasehold may have actually been a blessing. That may have reflected what had happened under the great Mahelei, the earlier division of land. But let me let you continue. But I think today the native Hawaiian community is much more aware, probably much more westernized in understanding values that can be created. I think they also now have a history of 50, 60 years looking back going, wow, real estate really is a stable investment, it created wealth, it can make a difference. So the part about not going fee-simple originally probably is a blessing. Today the leasehold has not worked, but that's because of structural defects within how they do. And we're going to talk about that. I'm going to ask you a bit about the problem of the leasehold, the situation with Hawaiian homelands today when we return from a break, and how we can get this concept of Hawaiians back onto the Hawaiian homelands and into a situation where they're building wealth. I'm looking forward to hearing your ideas when we come back. We'll be back with Peter Savio bringing some of his innovation to dealing with the problem that we have tens of thousands of people who every decade are not able to acquire the Hawaiian homelands and are simply on the waiting list. I'm Kili Iakina with Hawaii Together. Don't go away, we'll be right back. Aloha, my name is Mark Shklav. I am the host of Think Tech Hawaii's Law Across the Sea. The Law Across the Sea is on Think Tech Hawaii every other Monday at 11 a.m. Please join me where my guests talk about law topics and ideas and music and Hawaiiana all across the sea from Hawaii and back again. Aloha. Aloha, I'm Wendy Lo and I'm coming to you every other Tuesday at 2 o'clock live from Think Tech Hawaii. And on our show, we talk about taking your health back. And what does that mean? It means mind, body and soul. Anything you can do that makes your body healthier and happier is what we're going to be talking about. Whether it's spiritual health, mental health, fascia health, beautiful smile health, whatever it means, let's take healthy back. Aloha. Welcome back to Hawaii Together. We're on the Think Tech Hawaii Broadcast Network and my name is Kili Ikeena. My guest today, Peter Savio, is a brilliant thinker who can apply his experience and a great way of solving problems to a real problem for the native Hawaiian people today and for all the people in the state of Hawaii. And that is that there seems to be a disconnect between the need to get housing for Hawaiians and the availability of the third largest land estate, Hawaiian homelands. Being able to bring the two together in feasible and financeable ways is one of the things Peter has thought long and hard about and so we're going to go back to him. Peter, before we dive into that, why do you care? But why is it your kuleana? First of all, you're not currently going to be eligible for any part of native Hawaiian homelands because of the blood requirement. But you are a kama'ina. You've lived here and raised your family in the islands. Why do you care? You know, I think part of it has to do when my mom was discussing Hawaiian homes and I was a young kid then probably 12, 13 years old and I remember thinking it's not fair. This is absolutely an injustice and I've always remembered that. It's always bothered me. I've always been very supportive of the local community. My whole life in real estate has been creating affordable opportunities for the less fortunate to buy. My projects go as low as 20% of medium income and the whole purpose is to give these families stability, give them a chance to succeed, a chance to improve their lives. The Hawaiian community is no different. They have another vehicle, which is Hawaiian homes, which has not really worked well but it has huge potential and that's what we have to unlock. Well, first of all, you've already benefited many native Hawaiians who've been able to buy into your affordable home, private affordable homes and do so feasibly. But now I want to ask you to put your thinking cap on as a realtor, as a developer and take a look at the Hawaiian homelands waiting list. 27,000 are waiting for homes or for lots right now. That list isn't going down. Many people are dying on the list. Land just sits there and in some recent years we haven't even built homes on that land. You look at that problem. What's wrong in your eyes with that situation? What's the structure that's amiss? I think one of the problems, and again, I'm not an expert on Hawaiian homes. I'm not that familiar with all of the legal requirements and everything, but just looking at the structure they have, the first thing I think that's wrong is the lease. The lease does not, you know, first of all, Howley Lessie buying for Bishop Estate gets certain rights and privileges as a Lessie. A native Hawaiian getting a lease from Hawaiian homes has certain privileges and rights. Okay, I'm just going to stop there for a second so that our audience is following you. We're talking about the fact that acquiring a home on Hawaiian homelands is by lease, and the leases are conventionally 99 years, and those leases go to people who are at least 50% Hawaiian. But you're saying this isn't like getting a lease on the open commercial market. There's something about this lease that is different, and what is that? It's not just the lease. I think it's the whole attitude of Hawaiian homes that they really don't own the land, or they don't have the rights to the land, or the land needs to be restricted, and it's absolutely true. You do not own the land, but you own the right to use it for 99 years. Okay, so let me just ask you as you continue. In a typical lease in the commercial market, if you, or residential market, if you are leased a piece of land, you have the right to use the value of that land. You have the right to, perhaps, get a loan based upon that land, and you're saying that when it comes to Hawaiian homelands, that value stays locked up. The value is locked. The lease, he doesn't have it. Yeah, the outside, or non-Hawaiian who has a lease, can finance it. He can build a house on it. The equity in the land counts as his down payment, or his equity in the transaction. The native Hawaiian, every time you get a lease from Hawaiian homes for $1, they're giving you land worth $100,000, $200,000, $300,000. That lease has a value, but you can't use the value. In other words, if I acquire a piece of Hawaiian homelands, I can't go to the bank and say, I'm sitting on top of $200,000 in value in land. Can you loan me $185 so I can build a structure on it? I can't do that because I don't have access to it. Who does have access to it? Who's using it? What's happening to it? It's wasted. It just sits there. Even it's wasted? Yeah. Nobody uses it. It can't be used. The cumulative value of being able to use the worth of that land year after year, decade after decade, billions of dollars is simply going down the drain. It's just unrealized. I think the key is a lot of data for Hawaiians even when they get the lease, they don't have the money to build the house. They have trouble borrowing the money to build the house. Very difficult to get financing on a Hawaiian home lease. But if you go to the residential market, well, we've kind of killed the leasehold on the residential side, but originally leasehold financing was relatively easy to obtain. The leases were standardized. The difference between a residential lease and a Hawaiian home lease, I think is one of the problems. They need to change how they approach and how they think of the native Hawaiian. They should be treated the same as a non-native buyer of real estate. I'm hearing from you this is an equity issue. I think it's a big equity. To me, when I look at Hawaiian homes, it's like, well, you're Hawaiian, but we're going to control the land for you. We're going to control the value. We don't want you to lose it. We don't want you to make a mistake. They're just as good as anyone else. They can figure it out. So you're not talking about taking the land out of the Hawaiian home's estate at the end of that 99th year. You're not talking about that. You're saying while the less he has it, while his or her family is on that plot of land, let them use the financial value of that land. Let them build wealth. In the class I teach about creating value in real estate, I tell people if you have a leasehold property and you have a 99-year lease, and let's say in this case your rent is a dollar, it's almost as good as fee simple. You don't need to own the land to create value. Nothing is wrong with Hawaiian homes being leasehold. Hawaiians can build millions and millions of dollars in value if they have the ability to use that asset during the 99 years to refinance, start a business, refinance the property at some point, to buy an investment property, a small apartment building, stocks and bonds, etc. Real estate is a way to create wealth going into the future. So let me see if this is right. Under your corrected vision of what could be taking place, Native Hawaiians could lease the land and have access to the value of the land so they could go to the bank, get a loan on it, start a business, make some more money and maybe buy real estate outside of Hawaiian homes. Yes and no. To start, you're going to use the value of the land as the down payment to build a house. Okay, yes. Then you build the house and after 20 or 30 years you've paid your loan down, kids are going to college, now you're in a position to refinance and pull some of the value out to pay for the education or if you want to start a business, start a business or something. But as you go through life, I'm 70 years old now and I think I've refinanced my home probably seven, eight times during my life and usually I'm refinancing because I want to take money out to invest, take money out and to do something. As you get older, now the house pays for your retirement, it pays for your medical, but you have to understand real estate and in this case a Hawaiian home's lease is the anchor that will hold the family together. It is the anchor that will create the foundation for future wealth. It will be your children's college education. It's the money to start a business. It's the money to give your kids a loan so they can buy a house or build a house. I don't think people necessarily appreciate the value and the difference it would make if Hawaiian homes would become more like Bishop Estate type lease, a regular residential type lease where they can finance it, they can control their destiny. The only requirement is you've got to meet the blood quantum and I know the group we're working on now wants to remove the quantum so that it's even more available to Native Hawaiians. But the concept is if you come up with a lease that can be financed and Hawaiian homes encourages the Native population to take these leases and to build their homes and after they've paid the loan down and the market's gone up, if they want to refinance, encourage it. You know, you may want an educational process to make sure they're not getting some of these mortgage scams they have today but that's something that can be structured into the property. The key is the real estate, the 99-year lease is a wealth creator. We're talking about a paradigm shift. Correct. We're talking about seeing the home you live in as a means to an end and not merely the end. Correct. We're talking about generational wealth and I know that a great many of Native Hawaiians care deeply about self-determinism but what you're talking about is not self-determinism merely on the community level or the corporate level or the nationhood level but first and foremost every individual and each individual's ohana being able to build wealth and what I love about what you're suggesting is that if we could somehow fix this lease situation and let Native Hawaiians have the same rights with their leases that anyone else in the open market has you're not taking away the equity from the Hawaiian homeland. You're not giving it away. You are just letting the tenants actually use it and build wealth because otherwise it would go to waste. You're leaving the trust in place. You're leaving the value of the land in place. You're leaving the real estate in place but you are allowing them to get lease home mortgages. Remember now the the debt is not on the land the debt is on the lease right so even if the bank foreclosed on it they don't get the land they would get the 99 year lease but a Hawaiian home's lease requires it be sold to another Native Hawaiian who meets the blood quantum requirements. Well Peter this has been fascinating and in addition to explaining a brilliant concept we probably opened up more questions and we can answer and this is a good place to stop however while people may be asking those questions. I want to thank you first of all for being on the program but secondly for caring for the Native Hawaiians and coming up with a solution. I'd love to see how this develops. You and I are part of a working group started by Senator Representative Gene Ward and we're trying to put different people together to solve the problem. We're just at the early stages but this idea sounds good. Well thank you. Any closing thought for people before we leave? Well I think the fact is we have 20, 30,000 people on a waiting list and my first comment at the meeting is why don't we have them on homes within five years? What's the reason? What a vision. What's the excuse? Because there is no excuse. It can be done. You just have to do it. Let's meet back here in five years. There you go. Peter thank you for being on the program. Thank you for having me. Well I told you you'd find him brilliant. Peter Savio one of the great thinkers here in Hawaii trying to apply some of the experience and innovative thinking that he's had with real estate to the problem of the Hawaiian homelands. Until next time I'm Kili Iakina on Think Tech Hawaii's Hawaii Together. Aloha.