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Donald Sterling has gotten rich buying Beverly Hills apartment buildings. But he just can't seem to buy respect. Poor little rich man By Dana Wechsler THE IULY ISSUE of California magazine was one of the bestselling in recent history. No, Princess Di wasn't on the cover, or Jackie O, A handsome face beamed at the reader and the caption read "The man who would be Trump." Who's this other Donald? He's Donald T. Sterling, successful Beverly Hills real estate speculator, owner of the Los Angeles Clippers—and, if one can believe his flacks, a billionaire. His press agents tell reporters that Sterling's net worth increases by $190 a minute—$100 miUion per year. "That's right," confirms Michael Selsman, who describes himself as Marilyn Monroe's former press agent and is now Sterling's vice president and director of corporate affairs. "While we've been talking on the phone, his properties have probahly gone up about $50,000." Since we've been on the phone about ten minutes, one of those numbers is off by a factor of 25, at least. But who cares? Appar- ently the line impresses people, so Selsman uses it often. FORBES' careful research on Ster- ling's holdings did not tum up any- where near a billion dollars of equity, or even a billion dollars of total assets. By our count, there are 55 billionaires in America. Sterling, his press agents to the contrary, is not one of them. He's not poor, mind you. We figure his net worth today at something over $300 million. That's more than enough to satisfy Sterling's not incon- siderahle phv,'iical ni-cds and wants. Beverly I lilb real estate.^ ... More than enoughfor his needs, but not enoughfor his ego. 196 FORBES, NOVEMBER 27, 1989

Poor Little Rich Man

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Page 1: Poor Little Rich Man

Donald Sterling has gotten rich buyingBeverly Hills apartment buildings. But hejust can't seem to buy respect.

Poor littlerich man

By Dana WechslerTHE IULY ISSUE of California magazinewas one of the bestselling in recenthistory. No, Princess Di wasn't on thecover, or Jackie O, A handsome facebeamed at the reader and the caption

read "The man who would beTrump."

Who's this other Donald? He'sDonald T. Sterling, successful BeverlyHills real estate speculator, owner ofthe Los Angeles Clippers—and, if onecan believe his flacks, a billionaire.

His press agents tell reporters thatSterling's net worth increases by $190a minute—$100 miUion per year."That's right," confirms MichaelSelsman, who describes himself asMarilyn Monroe's former press agentand is now Sterling's vice presidentand director of corporate affairs."While we've been talking on thephone, his properties have probahlygone up about $50,000." Since we'vebeen on the phone about ten minutes,one of those numbers is off by a factorof 25, at least. But who cares? Appar-ently the line impresses people, soSelsman uses it often.

FORBES' careful research on Ster-ling's holdings did not tum up any-where near a billion dollars of equity,or even a billion dollars of total assets.By our count, there are 55 billionairesin America. Sterling, his press agentsto the contrary, is not one of them.

He's not poor, mind you. We figurehis net worth today at something over$300 million. That's more thanenough to satisfy Sterling's not incon-siderahle phv,'iical ni-cds and wants.

Beverly I lilb real estate.^ ...More than enoughfor his needs, but not enoughfor his ego.

196 FORBES, NOVEMBER 27, 1989

Page 2: Poor Little Rich Man

but it isn't enough, apparently, to sat-isfy his ego. He craves, nay, lusts to bea celebrity. In the last year scores ofjoumalists across the country havereceived "personal" notes from himpraising one of their recent articlesand offering them tickets to Clippersgames. At one Califomia newspaper,so many reporters received the lettersthat the office joke became displayingthem on the bulletin board.

If the reporters won't bite, the ad-vertising departments of the mediawill oblige. Two-page spreads filledwith society photographs of Sterlingappeared in a Beverly Hills newspaperin July. "Mr. and Mrs. Donald T. Ster-ling greet television star BarbaraEden," read one caption. "Mr. andMrs. Donald Sterling share a momentwith Senator and Mrs. Pete Wil-son," went another. At the top ofthe page were two tiny words:"paid advertisement."

Smart folks snickered, but Ster-ling loved it. He proudly shows aFORBES reporter an advertisementthat California magazine is con-sidering running throughout thestate. It shows the cover of thatbestselling issue with a tag line atthe top, in big letters: "The ques-tion isn't will the Japanese buyCalifomia, it's will Donald Ster-ling buy Japan."

The answer, of course, is thathe could scarcely afford a squareblock of the best Tokyo real es-tate, but never mind. He doesown a six-story, art deco edificebuilt by Louis B. Mayer on thecomer of Beverly Drive and Wil-shire Boulevard. He bought it in1976 for $1 million, only $50,000of that cash. Why so cheap?"Most people saw the building'sterrible condition and all the as-bestos that had to be removed,"says Sterling's chief aide. "Ster-ling saw gold." —

After a $10 million renovation ofthe building is completed. Sterlingplans to rent it out as retail and officespace. On the basis of several offers hehas rejeeted, he claims the building isnow worth over $40 million. Big mon-ey for Donald Sterling. Peanuts for theother Donald.

But this is one mighty big ego. Visitthe headquarters of the Donald T.Sterling Corp. on Wilshire Boulevardin downtown Beverly Hills. Senior ex-eeutives, including Chief ExecutiveOfficer Robert Steele, work incramped, windowless cubbyholes. Afew steps down the hall is Sterling'soffice: a palatial room with wrap-around views and deeorations worthyof Versailles. Tanned, and generally

swathed in an elegantly tailored Ital-ian suit. Sterling presides there frombehind an ornate Louis XIV desk.

And what does Don Sterling do for aliving? The son of poor Jewish immi-grants, he started his career in LosAngeles as a moderately successfultrial lawyer, and switched to real es-tate after 1963 when the purchase of aWest Hollywood apartment housegave him a handsome retum.

From there on he followed the samesimple but effective strategy that hasenriched so many others in real estatein recent deeades: Identify a few desir-able areaS; buy when the market issoft; refinance every few years as theproperties appreciate; reinvest theproceeds; and avoid paying taxes andtransaction costs by buying but never

Sterling's Los Angeles ClippersHow lutt to woojoumalists.

selling. It helped greatly that he chosefor his chief area of concentrationBeverly Hills.

Now, with 22 buildings there, in-cluding the Beverly Hills ComstockHotel, he is one of Beverly Hills' big-gest landowners. He also picked up acouple dozen apartment buildings inSanta Monica and a few scatteredelsewhere in southern California.

Beverly Hills apartment buildingsfor which he paid $20,000 a unit inthe Sixties, today are worth five to tentimes that. He recently lined up froma group of loeal banks a $200 millionline of eredit; he plans to use it asdown payment on about $1 billionworth of property when the time isright, probably in 12 to 18 months.

when he expects the s til! strongsouthern California real estate mar-ket to tum down.

Sterling's principal foray outsidereal estate is the Clippers, for whichhe paid $11.5 million in 1981, muchof that in deferred player compensa-tion. Thanks to increasingly lucrativetelevision sponsorships benefiting allthe National Basketball Associationteams, even a losing one like the Clip-pers has appreciated manyfold in val-ue. Today experts estimate that theClippers franchise would fetch up-wards of $80 million,

Not bad, but a long way from beingin the same league as Donald Trump,either as a landlord or as a celebrity.Which clearly irks Sterling. To makehimself more visible, he says he plans

to go into publishing, investingup to $15 million in as many asthree new magazines. He mightcall one magazine "Sterling's LosAngeles."

"He looks at guys like [Rupert]Murdoch and [Robert] Maxwelland feels the place to be is inmedia," says Selsman, Sterling'sflack-in-chief, "It isn't the mon-ey. The issue is influencing pub-lic opinion, having an impact onsocial direction. And enlargingyour social circle." Social climb-ing, it's called.

But, for all his wealth. Sterlingean't seem to get what he reallycraves: respect. One reason is hissusceptibility to foot-in-mouth.There was the 1982 press confer-ence at which he stunned fans byannouncing that the Clipperswould henceforth tr}' to losegames to get the first draft pickthe following year. Unamused,the NBA fined him $10,000.

Then there were the well-pub-licized reports about not payingplayers deferred compensation,

— and paying bills so late that theHyatt of Oakland turned the Clippersaway. Then, just this year, two of theClippers' draft picks opted to play inItaly rather than have to play for theClippers. (One of them got homesiekand may retum to the Clippers.)

Landlords are rarely loved, but Ster-ling is a genius at ticking off the peo-ple who rent from him. In 1986 heinstituted such sudden massive (30%to 50%) rent hikes in many of hisBeverly Hills apartments that iratetenants marched on City Hall. Result:an "antigouging" law subjecting alllandlords to new controls on rents.

Sterling clearly has a talent formaking money. As a public figure heonly succeeds in making himself lookridiculous. •

200 FORBES, NOVEMBER 27, 1989