THE ROCKEFELLERS: A Civic Commitment
The Rockefellers’ vast fortune was founded on oil. But real estate—specifically the bustling plot of iconic skyscrapers in Midtown Manhattan—has been the engine driving its more recent growth. As Daniel Okrent reports in his masterful history of Rockefeller Center, Great Fortune, long-time associates deemed the multigenerational development “by far the largest single repository of wealth” for the storied family.

The Rockefellers became involved in real estate in the 1890s—but not for profit. In 1893, patriarch John D. Rockefeller bought 400 acres in the Pocantico Hills in Westchester County, N.Y. The spread would ultimately expand to 3,400 acres. The family’s other holdings eventually included townhouses in Midtown Manhattan and retreats in Maine (for the summer), Florida (for the winter) and New Jersey (for better golf).

It fell to John D. Rockefeller Jr., known as Junior, to give away the vast fortune his father amassed, and land was a central part of his philanthropic strategy. Functioning as a type of one-man Interior Department, Junior donated thousands of acres of wilderness on Mt. Desert Island in Maine to help form Acadia National Park. He bought 33,562 acres in Jackson Hole, Wyo., and presented them to President Franklin Delano Roosevelt as another park in 1943. In Manhattan, the family’s home base, Junior donated the land on which his grand townhouse sat to the Museum of Modern Art.

A similar civic commitment lay behind the origin of Rockefeller Center. In 1928, Junior signed on to a scheme to build a new home for the Metropolitan Opera Company. The opera house was to be the centerpiece of a larger complex that would cover 12 acres in Midtown Manhattan on land owned by Columbia University. Junior agreed to rent the land for $3.6 million a year for 24 years. But when then the stock market crashed, the opera pulled out of the deal, and Rockefeller was left exposed to $124 million in lease payments—a significant sum, even to a Rockefeller. “It was clear that there were only two courses open to me,” Junior said. “One was to abandon the entire development. The other was to go forward with it in the definite knowledge that I myself would have to build it and finance it alone.”

Junior poured a large portion of his family’s fortune into the complex, financing the balance with a $65-million loan from Metropolitan Life Insurance. In July 1931, RCA agreed to become an anchor tenant for a 56-story office building. Next came the 6,000-seat Radio City Music Hall. Meanwhile, companies and charities associated with the Rockefellers and Standard Oil filled the satellite buildings in the complex. By 1939, when Junior punched in the last of the rivets, he had spent $125 million—and provided 75,000 jobs in the teeth of the Depression.

Of all the family’s assets, Junior’s five sons latched onto Rockefeller Center as the one with the most commercial promise. “My brothers and I would like to keep it in the family as a living symbol of the great tradition which you, and Grandfather before you, have built,” Nelson Rockefeller wrote to his father after World War II. Junior, who never had much of a head for business, sold the project to his sons for $2.2 million plus $80 million in assumed debt. In the end, he lost about $110 million on the project.
Many of us who own valuable property are tempted to simply collect the rent and move on. By contrast, the third generation of Rockefellers sought to build the family fortune, rather than merely spend or preserve it. Real estate development in Manhattan offered an appealing means of doing so.

In the 1950s and 1960s, the brothers—who were separately involved in banking, politics, venture capital and philanthropy—built a series of modernist skyscrapers on the Avenue of the Americas, thus establishing a new corridor of office buildings.

In 1990, the Rockefellers cashed out by selling 80 percent of the complex to Mitsubishi for $1.37 billion. David Rockefeller’s trust received $171.3 million. “Not a bad return considering that I bought my original 20 percent interest in Rockefeller Center from Father in 1948 for $442,000!” he cheerily recalled in his Memoirs, published in 2002. After a series of moves that saw David join a consortium to repurchase Rockefeller Center, the complex was sold in 2000 for $1.85 billion. In the end, of all the commercial ventures launched by the family in the 20th century, Rockefeller Center may have proved the most successful.

THE HEARSTS: Emotional Assets
For five generations, the vast San Simeon ranch, which spreads from the Pacific Ocean into the foothills of the Santa Lucia mountains, has been a haven for members of the Hearst family. Stephen Hearst, a Hearst Corp. vice president who was married there, has called it “the most emotional asset in the Hearst family trust.” And for more than a century, the land’s ability to produce income took a back seat to that visceral value. But as open spaces dwindled, the value of the Hearst ranch as a development prospect rose—and turned the land’s future into a subject of debate in California, and occasionally within the Hearst family.

George Hearst struck out for California from Missouri in 1850 and prospered in the gold fields. He settled his family—wife Phoebe and son William Randolph, born in 1863—in San Francisco. George started to diversify in the 1860s, first into real estate and then publishing. He spent $30,000 to buy about 40,000 acres of land in the largely unsettled wilderness along the Pacific Ocean at San Simeon, about 200 miles south of San Francisco.

George built a ranch house here in 1878 and began stocking the land with cattle. As a young publisher, William inherited his father’s love for the spread, which grew to encompass more than 80,000 acres. “Over his mother’s protest, he would take his wife and sometimes the children there during the busy ranching season, order horses and tents, summon cowboys from their work, and generally demoralize the establishment,” wrote Hearst biographer W.A. Swanberg.

Upon the death of his mother in 1919, William finally had the means to construct a permanent house at San Simeon. Hearst channeled most of his energy—and cash—into the construction of a massive castle atop a hill. Planning began in 1919 and continued for nearly two decades. Hearst bought boatloads of European treasures—fragments from Roman temples, church altar pieces—and continually fussed with the building’s design. By 1928, he had amassed 3,000 animals for a private zoo.

In the mid-1930s, Hearst’s penchant for taking on debt caught up with him. But as his empire crumbled, he nonetheless managed to keep the ranch. Upon his death in 1951 at the age of 88, Hearst’s possessions were left to a series of trusts that in turn controlled Hearst Corp. “To prevent his sons from breaking the empire apart, he gave them—and their heirs after them—only five of the seats on the [trusts’] 13-member board,” wrote David Nasaw, author of the authoritative Hearst biography Chief.

The family donated Hearst Castle, which was enormously expensive to maintain, to the state of California in 1958. But the surrounding property remained central to Hearst’s five sons, and to their children. Starting in the 1960s, they made periodic efforts to develop the area. None succeeded. In 1998, a plan to build a 650-room resort golf course was stymied by local authorities. It also created tensions within the family. “The soul of humanity needs the quiet reference of contact with the balance and beauty of the natural world,” William R. Hearst II wrote in a letter to local officials.
 
The current generation of Hearsts has tried to strike a balance between preservation, development, public access and a desire to gain some liquidity. For the past two years, Stephen Hearst has been working to forge a deal with conservation groups and the state of California. The contours of a February 2004 agreement, negotiated principally by the San Francisco-based nonprofit, the American Land Conservancy, provide for the Hearsts to receive $80 million and a $15 million state tax credit in exchange for a 1.75-square-mile seaside parcel. The remainder of the ranch would be subject to an easement that would place significant constraints on development, though it would permit the construction of some homes and an inn.

Selling or subdividing the Hearst ranch could have yielded massive returns. However, it is difficult to place a value on a property that has been a family haven for 130 years. When real estate is part of a broader portfolio of businesses—most of the Hearst fortune today lies in media—the option that maximizes profits is not always the most appealing.

THE PINGREES: The Business of Preservation
Families for whom land is the entire business generally have a diffident attitude toward preservation—which is often code for no economic activity. But for members of the Pingree family, for whom some 975,000 acres of wild forest land in Maine represents both the past and the future, preservation has meant something else entirely.

David Pingree, born in 1795, settled in Salem, Mass., and worked for his uncle, Thomas Perkins, a well-known trader. Pingree inherited Perkins’ assets when the latter died in 1830, and, sensing that Salem was losing ground to larger ports, began to diversify away from shipping. He formed a bank in 1832, a cotton factory in 1839 and, in 1841, when son David Jr., was born, he began buying timberland. Maine, which had just become a state in 1820, had far more moose than people, and was selling off big areas of wooded land to raise funds. After his father’s death, David Pingree Jr., continued to acquire large swaths of the vast North Woods, ultimately bringing the total to about 1 million acres. And for the past century, even as much of New England’s forest was cleared, first for farming, then for suburbs, the holdings have remained essentially intact. The land—and the trees that grow on it—has sustained the family for six generations. Mindful of the area’s appeal to sportsmen, the Pingrees have also leased property to camps and guides. Today, Pingree Associates and Seven Island Land Co., which run the holdings on behalf of some 70 family members, manage the slow and steady business. In testimony before the Senate Finance Committee in June 2001, Pingree Associates president Steven Schley, a descendant of David Pingree, estimated that “we have managed to eke out a 2.5 percent return on our timberland investment over the last 50 years, on average.”

In the 1990s, as the stock market and the economy boomed, the potential for development, even in remote regions, raised tough questions for the family. And it also meant that the IRS might place a high value on the land when its ownership would be transferred, thus triggering onerous estate taxes. “We needed a solution that would ensure long-term protection of our forestland while simultaneously providing immediate economic returns and relief from estate taxes,” Schley told Congress.

In 1996, the New England Forestry Foundation, a nonprofit foundation based in Littleton, Mass., approached Pingree Associates with a potentially elegant solution. By creating a conservation easement—a legal means through which landowners sell development rights to the government or a conservation group, but not the land itself—the family could gain liquidity and ensure the future of its timber business for at least several more generations. Additionally, selling the development rights would lower the market value of the land, thus slashing potential estate-tax liability.

Despite differences of opinion within the family, the Pingree descendants reached a consensus. Under a deal crafted in 1998 and completed in 2001, some 762,192 acres of the Pingree holdings—a tract bigger than Rhode Island—have been placed out of the reach of development. In exchange, the Pingrees received $28 million, or $37.10 an acre. The transaction is the largest ever of its type, and has been chronicled in a 110-page Harvard Kennedy School of Government case study.

The area covers the Allagash lakes, and lengthy stretches of the St. John River. In all, it includes more than 100 lakes and substantial bald eagle and peregrine falcon habitats. On a dollars-per-acre basis, the transaction does not seem very generous. But the easement, which affords the Pingrees a large measure of independence in managing the forests, provides something potentially more valuable: the peace of mind in knowing that the family’s 160-year-old timber business will be free to continue for as long as future generations desire.