The hot stock market has electrified a lot of investment portfolios, but few have been charged up like Elon Musk’s.
The tech entrepreneur’s personal shares in his two publicly traded companies – electric carmaker Tesla Motors Inc. and solar panel installer SolarCity Corp. – have risen in value by more than $2 billion in the last month alone, fueled by investor good will and sunny growth prospects.
Add to that his majority stake in rapidly growing Hawthorne space transport company Space Exploration Technologies Corp., or SpaceX, and the Business Journal calculates Musk’s net worth has nearly tripled in the last year to $5.7 billion, placing him No. 3 on the list of Wealthiest Angelenos.
Musk represents the biggest gainer in a year of big gains for L.A’s 50 wealthiest residents. Cumulatively, the Business Journal calculated that their net worth rose to $127 billion, blowing past the previous record of $114 billion set in 2008. The average gain in net worth was 16 percent, up from last year’s average gain of 2.5 percent.
Like Musk, many of those making the biggest jumps had substantial stakes in publicly traded companies, taking advantage of a historic year in the stock market.
A 16 percent gain is impressive, but if the members of the list had been fully invested in the S&P 500 index, they would have seen a 28 percent increase in the same period.
Media magnate Sumner Redstone saw his net worth rise by $900 million, to $5.3 billion, driven by year-over-year gains in the value of his large holdings in CBS Corp., up 72 percent, and Viacom Inc., up 36 percent.
Tamara Gustavson, daughter of Public Storage Inc. founder B. Wayne Hughes, enjoyed the company’s 28 percent jump in stock price as its single largest shareholder. Her net worth is up nearly $700 million to $3.6 billion.
And despite 89-year-old Charlie Munger’s best efforts to give away money, typified by a recent $110 million donation to the University of Michigan, the investment titan rode a 40 percent gain in Berkshire Hathaway Inc. shares to see his net worth rise by nearly $400 million to $1.4 billion.
“The equity markets have been strong this year,” said Bruce Simon, chief investment officer at City National Bank. “I think for those people that were willing to ride through the downturn, most of them are feeling pretty good right now because the market more than doubled off the bottom, so they’re back to or above their highs.”
Biotech entrepreneur Dr. Patrick Soon-Shiong, whose net worth is estimated to have risen more than 11 percent to $8.9 billion, topped the list for the fifth straight year.
Gains outside stocks
Gains seen by L.A.’s wealthiest residents last year were driven largely by strong bond returns, which made up for a sluggish stock market. The reverse was true this year. While the S&P 500 was up 28 percent year over year as of May 17, the Barclays Capital Aggregate Bond Index was up a paltry 2 percent.
Nevertheless, there was money to be made outside of stocks. One exception in the otherwise slow bond market was the performance of high-yield bonds – bonds that are at higher risk of default but pay higher yields. The Bank of America Merrill Lynch High Yield Master II index was up 15 percent for the year.
Investor Lowell Milken, who made a fortune pioneering the high-yield bond market with his brother Michael in the 1980s, told the Business Journal through a spokeswoman that his substantial investments in high-yield bonds had never performed better. The Business Journal estimated those returns helped boost his net worth 4 percent to about $940 million, making up for financial struggles at his privately held education firm, Knowledge Universe.
“Last year’s story was high-yield bonds,” said Paul Miller, managing director at the West L.A. office of First Foundation Advisors. “There’s also been an increased direct investment in real estate.”
Indeed, the broad gains in wealth also included a broad recovery in real estate. CoStar’s Commercial Repeat Sales Index was up 8 percent in the last year, up from a 4 percent gain during the previous year.
Values of industrial properties in the L.A. area, meanwhile, rose by double-digit percentages, helping boost the net worth of Edward Roski Jr., chairman of industrial developer Majestic Realty Co., by 54 percent to $3.55 billion.
Apartment holdings, which have been the strongest real estate sector through the downturn, continued to appreciate, though at a slower pace. Donald Sterling, who owns roughly 160 apartment buildings in Southern California, was up 3 percent this year to $3.35 billion, after seeing a 25 percent increase in his net worth the year before.
Though nearly everyone on the Business Journal’s list rose in net worth since last year, two of the biggest falls from grace were in real estate. Apartment developer Alan Casden, estimated to be worth $1.3 billion last year, and office developer Robert Maguire, estimated at $850 million last year, both dropped off the list amid battles with lenders and the sell-off of some assets. Casden lost control of several properties after a nasty partnership breakup stemming from failed developments, including his headquarters building to foreclosure last year. Maguire, meanwhile, has struggled with debt, losing a 1.8 million-square-foot office park in Dallas to foreclosure.
Reinvesting and giving
As L.A.’s wealthiest residents reinvest, many are making big bets overseas.
“The trend is to find high-quality international companies in developed countries,” Miller said.
Thomas Barrack Jr.’s private equity firm, Colony Capital, announced plans this month to invest up to $2 billion in France, Italy and Spain. Media titan Haim Saban’s private equity firm, Saban Capital, took a controlling interest in Israeli telecommunications firm Partner Communications for $65 million in cash and the assumption of $300 million in debt.
DreamWorks Animation studio chief Jeffrey Katzenberg, meanwhile, has unveiled a plan to develop a $3.1 billion theme park in Shanghai with Chinese partners, and recently made a trip to China to promote a made-for-China release.
Investors also are taking advantage of an unprecedented boom in the contemporary art market. Eli Broad saw a double-digit percentage increase in the value of his art collection, now worth $2.2 billion, and purchased more than $100 million in new work. His net worth is $7.1 billion, placing him No. 2 on the Business Journal’s list. Retired music mogul David Geffen and Marc Nathanson also saw significant appreciations of their contemporary art collections.
It was also another year of significant charitable giving for many on the list. In addition to Munger’s $110 million gift to Michigan, Geffen donated $100 million to UCLA’s medical school and $25 million for a new museum for the Academy of Motion Picture Arts and Sciences. Redstone donated $10 million to the USC School of Cinematic Arts in January. And 85-year-old former hotelier William Barron Hilton reiterated his pledge to donate 97 percent of his personal wealth to the Conrad N. Hilton Foundation when he dies, prompting plans by the foundation to move into four new buildings.
