JFK Slept Here

The mattress is uncomfortably firm, just what the doctor would have ordered for a middle-aged guy with a bad back and a world of stress. On a starry Palm Beach night, I settle in between the sheets, hoping to dream as large as the man who once tumbled into this same sack.

John F. Kennedy slept here--precisely here in this twin-size bed, from his teenage years until the weekend before he went to Dallas 40 years ago this month. His older brother Joe slept in the same room, in a matching bed with identical mahogany headboard. For a time, so did Jackie.

On this sultry summer evening, I am here as the guest of John K. Castle, chairman and CEO of Castle Harlan Inc., a New York-based investment firm. Castle fell in love with this piece of Camelot in 1995, and he bought JFK's Winter White House from the Kennedy family for $4.9 million. For a major player in the often mysterious and secretive world of private equity, the Kennedy property seemed the ideal purchase: a rambling house filled with a celebrated family's secrets--and, not incidentally, a terrific deal.

Almost everyone Castle knew, including his wife, Marianne, thought he was nuts to buy the place. The Mediterranean-style house with a red-tile roof had been on the market for 18 months without a buyer. It was in severe disrepair, still without central heating or air-conditioning. "Everyone in Palm Beach considered it a teardown," recalls Castle. "They said the house was ugly and awful, beyond saving. If one of the few gas-fired heaters exploded, I wouldn't have been surprised."

"Everyone in Palm Beach considered it a teardown. No one focused on the historical significance. I think it's a national sanctuary."

Yet Castle, who has fashioned a highly successful career by investing in undervalued and less-than-glamorous companies, quickly grasped the home's potential. It had solid fundamentals and, if turned around, tremendous upside. "Basically, what I saw was a house that needed a huge amount of work, but it was on a fantastic piece of property with enormous history," says Castle. "No one focused on the historical significance of the place. I think it's a national sanctuary."

No question, the 1.6-acre property is strikingly idyllic. In the morning, the sun peeks over the horizon onto a glassy ocean. Palm trees cast long, thin shadows on a lawn as soft as plush carpeting, the same expanse where the Kennedy men famously played football on many afternoons. Kennedys dived into the surf from a 204-foot stretch of beach.

Family patriarch Joseph Kennedy bought the Addison Mizner-designed house for about $100,000 from the family of re-tailer John Wanamaker in 1933, a decade after it was built. Castle points out that for all the talk about the Kennedy compound in Hyannis Port, Massachusetts, both Joe and Rose Kennedy were legal residents of 1095 North Ocean Boulevard, in Palm Beach, Florida.

Jack Kennedy went off to World War II from the house, and there he returned when his military service was done. It is where he eventually wrote his inaugural address, where he worked on the Pulitzer Prize-winning Profiles in Courage, and where he met and interviewed most of his Cabinet members. Sadly, it is also where Joe Kennedy, confined to the house after suffering a stroke, first learned of his son's assassination.

A Nose for Deals

History infuses every corner of the place. Yet, like the vast majority of the companies that Castle has acquired, managed, and sold, the house represented a perfect opportunity--faded, beaten down, and overlooked. In other words, it was a deal he couldn't refuse, a bargain that played to his strengths as a consummate financier. For if there's one thing Castle knows better than almost anyone, it's what to buy and when to buy it--and, most important, how much to pay.

An Eagle Scout at 13 and a Harvard MBA at 24, Castle was lured to the Wall Street firm of Donaldson Lufkin & Jenrette by Bill Donaldson, one of the firm's found-ers and now chairman of the SEC. He is a physically imposing man, tall and big-boned, who looks as earnest and stern as a Presbyterian minister. Part of it is his nose. It's prominent. It's exceptionally good at sniffing out deals.

Over his lifetime, Castle has bought more than 150 companies that make everything from synthetic diamond drill bits to brake components for 18-wheeler trucks. Most of them are companies you've never heard of. There was Associated Packaging Technologies, which makes packaging for microwavable frozen food. And StackTeck Systems Inc., which makes plastic injection molds for cups, lids, and cutlery.

At Donaldson Lufkin & Jenrette, Castle became an early pioneer in private equity, the business of pooling cash from well-heeled investors and buying companies with an eye to running them better and realizing higher value. During his 21 years at DLJ, he rose to become president in 1979, engineering the company's turnaround and 28 consecutive quarters of improved performance. Then in 1986, he left to found Castle Harlan with Leonard Harlan, a fellow DLJ alum.