Date
22 June 2017
The Rockefeller family sold 14 buildings of its Rockefeller Center, bought them back and then sold them again to take advantage of huge swings in market prices. Photo: Fordos
The Rockefeller family sold 14 buildings of its Rockefeller Center, bought them back and then sold them again to take advantage of huge swings in market prices. Photo: Fordos

How the Rockefeller family adapts to the changing times

John D. Rockefeller, the patriarch of the Rockefeller family and America’s first billionaire, founded Standard Oil in 1870. It was the largest oil refinery in the weed of its time.

As one of the world’s first and largest multinational corporations, Standard Oil was forced to break up in 1911 after the US Supreme Court ruled the company was an illegal monopoly.

Standard Oil was split into several dozen smaller companies, including ExxonMobil.

At about the same time, Rockefeller decided to hand over the empire to his 37-year-old son, John D. Rockefeller Jr, who soon embarked on a series of diversification moves away from high oil and steel into businesses such as property, railway and banking.

In fact, property turned out to be the biggest money spinner for the Rockefeller Family.

Visionary enough to foresee a shift in the US economy from industrial to financial and service industries from the 1920s, John D. Rockefeller Jr. began to invest heavily in real estate. He bought numerous sites in New York and developed them into high-rise buildings.

At its peak, the family owned more than 50 landmark buildings in the city.

The most famous is Rockefeller Center which began construction in 1930.

The center, a large complex consisting of 19 high-rise buildings, was completed in 1939. It has a floor area of 12 million square feet (about three times that of IFC), stretching from 48th to 51st Street.

In the 1980s, the family torch was passed to David Rockefeller.

Meanwhile the Rockefeller family shifted its focus from getting rich to staying rich.

One thing interesting about the family’s wealth management style is its flexibility. The Rockefeller Center is one example.

During Japan’s bubble economy, the family decided to sell to Japan’s Mitsubishi Estate, a real estate company of the Mitsubishi Group, 14 buildings of Rockefeller Center for US$1.37 billion in 1989.

Soon, Japan’s economic bubble burst and Mitsubishi Estate was driven to the brink of bankruptcy.

David organized a consortium including Goldman Sachs and repurchased the same 14 buildings for US$310 million in 1996.

In 2000, the consortium again sold these 14 buildings to Tishman Speyer for US$1.85 billion.

The Rockefeller family has no big attachments even to core assets, as long as the price is attractive and money can be more productively deployed elsewhere.

Also, in 2014, The Rockefeller Family Fund decided to withdraw from all fossil fuel business, citing climate change, and the rise of new energy have made the business unattractive, both morally or economically.

At present, the family has a net worth of about US$11 billion, mostly in stock holdings managed by professional fund managers. The family holds as many as 525 stocks, worth a total of US$5.2 billion as of the end of 2016. The family has heavy holdings in internet firms such as Facebook, Google and Oracle.

From oil to property and then to internet stocks, the Rockefeller legacy is built on the family’s capability to adapt to the changing times and make the bold move at the right moment.

This article appeared in the Hong Kong Economic Journal on Mar. 22

Translation by Julie Zhu

[Chinese version 中文版]

– Contact us at english@hkej.com

RT/RA

Hong Kong Economic Journal columnist

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