November 24, 2013
Sharing the wealth
Alexander
& Baldwin's purchase of land in Kailua gives millions to heirs of
the man who transformed the town and ends an era of ownership
Castle Junction. Castle High School. Castle Medical Center.
The
Castle family that integrally transformed Kailua from an agrarian
outpost to a residential community over the past century has left
lasting reminders of its work.
"Castle
was always part of the community," said James W.Y. Wong, a 91-year-old
local businessman who developed grocery stores and a post office in
Kailua on land leased from the Castle family.
Now the
sale of most of the Windward Oahu town's commercial core to Alexander
& Baldwin Inc. will end the kamaaina family's concentrated
ownership in the area after several generations of stewardship.
Roughly
40 descendants of Harold Kainalu Long Castle will share most of $260
million in proceeds from land being sold by Kaneohe Ranch Co. in
the $373 million deal announced Wednesday and scheduled to close next
month.
Another $113 million is going to the Harold K.L. Castle Foundation, a charitable grant-making organization.
Castle
died in 1967 and his will called for 25 percent of his assets to go to
his charitable foundation, 30 percent to his children through a
trust and 45 percent to his wife, Alice Hedemann Castle.
When
Alice Castle died in 1980, her assets were passed down through three
more trusts — one for each of three children — managed by Kaneohe
Ranch.
It's not
been publicly disclosed how much each Castle family member will
receive in the sale. However, Bank of Hawaii, one of three trustees,
estimated that sale proceeds for one trust established for John C.
Baldwin, a late grandson of Harold and Alice Castle, would be $11.3
million before taxes, according to a recent lawsuit that questioned the
sale but was settled.
Of the
roughly 40 Castle family descendants, more than half are minor children —
mostly great-great-grandchildren of Harold Castle, according to
other recent court filings.
If the
proceeds of the sale were divided equally among the adult descendants,
the estimated payout after selling costs would be about $14 million
per person.
The
decision to sell nearly all the assets of the company and the foundation
was prompted by an unsolicited purchase inquiry, according to Mitch
D'Olier, Kaneohe Ranch president and CEO.
D'Olier
said the trustees had a responsibility to consider the unsolicited bid,
and did so by retaining real estate brokerage and investment banking
firm Eastdil Secured to determine the value of the assets and solicit
potential competing bids.
At least 10 offers emerged, and the trustees elected to sell to A&B.
D'Olier
believes there was no better buyer than A&B, given what he said are
the company's deep kamaaina roots, understanding of island culture and
long-term commitment to improving Hawaii.
D'Olier
also has great respect for Harold Castle, who he said had the intellect
and generosity to seed Kailua with various cornerstones that make it a
special place.
"Every
day that I sit in my office I am more staggered by the things he
did," D'Olier said. "He's done a great thing for this community."
Harold
Castle had a vision that the farming and ranching town of Kailua would
be a nice place for people to live. So he began making pieces of
ranch land and farm land available for housing and commercial
development.
To help
facilitate community development, Castle donated millions of dollars
worth of land for uses including several churches that line part of
Kailua Road, the hospital, parks, Pali Golf Course, Kainalu Elementary
School, the high school named after his father and Hawaii Loa
College, which later merged with Hawaii Pacific University.
Land for
the Marine Corps base in Kaneohe was sold by Castle in 1943 in
conjunction with World War II efforts, but after the war Castle
rebuffed an offer to take back the land because he viewed continued
military use as a benefit.
The
schools, churches, golf course and retail development along with
Kailua's beaches were used to attract homebuyers to the area.
"Far-lying hamlets have become thriving modern communities," said a 1951
ad by Kaneohe Ranch reproduced in the book "Kailua" by the Kailua
Historical Society. "Windward Oahu is truly the Land With A Future!"
Outside
Kailua and Kaneohe, Harold Castle isn't too much of a household name,
in part because many longtime local residents associate the Castle
moniker with Castle & Cooke.
Castle
& Cooke is one of Hawaii's historic Big Five companies that
dominated commerce in the islands with the rise of sugar plantations,
and still operates today mainly as a developer of master-planned
communities that include Mililani, Royal Kunia and Koa Ridge. Castle
& Cooke also owned the island of Lanai until selling it last year to
billionaire Larry Ellison for a reported $300 million.
Harold
Castle's grandfather, Samuel Northrup Castle, was a missionary settler
who arrived in Hawaii in 1837 and co-founded Castle & Cooke in
1851.
But it
was Harold Castle's father, James Bicknell Castle, who put down
expansive roots throughout Windward Oahu as part of establishing
sugar plantations stretching from Waimanalo to Kahuku.
In
Kailua, James B. Castle bought a big piece of a 20,000-acre ahupuaa, or
mountain-to-sea tract of land, once belonging to Queen Kalama, wife
of King Kamehameha III.
Harold
Castle, born in 1886, later added to the family land holdings with a
purchase in 1917 of 9,500 acres in Kailua and Kaneohe. At that time,
the area was expansively agrarian with fields of pineapple, rice, taro
and other crops along with ranching.
But with
Harold Castle's vision and efforts to attract more residents, Kailua
began to grow. By the early 1950s, Kailua's population reached 7,740.
After another decade and a residential development boom led by Castle
and partners, the community swelled to 25,622 residents.
Castle had fulfilled his vision.
In a 1964
newspaper interview, he was quoted as saying: "My original feeling
toward this general area has stayed with me through many years and is
still with me today. I feel we have a combination of beneficial
elements that are unequal anywhere in the islands."
Three years later, in 1967 at age 81, Castle died.
At the
time of his death, Castle solely owned Kaneohe Ranch. His estate
included more than 8,500 acres of land, including thousands of
parcels under homes, along with roughly $12 million in stocks and bonds,
according to media reports at the time.
Kaneohe
Ranch continued operations initially under trustees who included family
members and later under a corporate structure, all the while managing
company assets for the benefit of Castle heirs. The company also
managed the assets of the foundation.
Under the
latest trust setup, management decisions for the assets are left to
three trustees. Initially the trustees were Alice's son, James C.
Castle; one of two sons-in-law, James Gordon McIntosh; and Hawaiian
Trust Co. (now known as Bank of Hawaii).
Today, the trustees are Bankoh, D'Olier and a grandson of Harold and Alice Castle, James C. McIntosh.
Interestingly,
A&B also has a family tie to Harold and Alice Castle. One daughter,
Virginia "Tootie" Castle, married Asa Baldwin, a descendant of the
family who established A&B as a sugar cane plantation on Maui.
Asa
Baldwin was manager of the plantation and grandson of A&B co-founder
Henry Perrine Baldwin. Today, there are close to 20 Baldwins
descended from Harold and Alice Castle, representing about half of all
the family heirs.
After the
sale, Kaneohe Ranch will still exist. The company is retaining a
portfolio of commercial real estate on the mainland roughly valued at
$160 million, according to the Bankoh report disclosed in the lawsuit.
Kaneohe
Ranch also is retaining a few Kailua properties: its headquarters at
Castle Junction, Kapaa Quarry, some leased-fee parcels under homes
and the land under the Koolau Farmers store on Kailua Road.
For the
Harold K.L. Castle Foundation, sale proceeds boost its endowment value
by about $30 million to $200 million, thus enhancing its power to
award grants benefiting education, marine ecosystems and other causes
largely for Windward Oahu communities.
The
foundation, described as the largest private foundation in Hawaii,
awards about $6 million a year in grants. Since it was created, grant
awards have totaled about $180 million.
D'Olier
said that while an era for Kailua under Castle influence is ending,
he prefers to view it as a new era for the legacy of Harold Castle.
"Here comes Harold Castle phase two."
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