By LARRY KANTER
After watching his company’s stock price climb steadily for a year, Brian J. Farrell decided last fall to cash out a small portion of his options $1 million worth, to be exact.
So what did Farrell, president and chief executive of Calabasas-based video game developer THQ Inc., do with the cash?
He bought a used car.
Admittedly, it was a BMW, and it was only 2 years old. But why not simply drive a fresh Mercedes off the lot?
“That’s not why I’m doing this,” said Farrell. “Managing a high-growth company is exhilarating, and I’m having a ball. It’s nice to have some financial resources. But a lavish lifestyle is not why I’m in this.”
Farrell is hardly alone in that attitude. Thanks to the bull market and the expanding economy, executives, entrepreneurs and investors across L.A. are making money at a rate not seen in more than a decade. But unlike the boom of the ’80s, which sparked an orgy of conspicuous consumption, L.A.’s new rich this time seem to be putting the bulk of their time and money right back into their companies.
The vacations, mansions, luxury cars and other traditional trappings of wealth those will just have to wait until the current wave of prosperity finally breaks, and these hard-driving entrepreneurs and deal-makers have a chance to rest.
Call them the “working rich.”
“The train is going 100 miles an hour. People are not going to jump off at this speed,” said Jourdi de Werd, managing director of investment banking firm Grief & Co. “A lot of people have seen bad times, and no matter how good things get, they’re not going to slow down. They are going to ride this to the end.”
That’s certainly de Werd’s intention. Grief & Co., which de Werd co-founded with Lloyd Grief and Steve Cessinger in 1992, logged $1 billion worth of deals in 1997, its best year ever. This year is shaping up as another record-breaker, and de Werd often finds himself working 15 hours a day just to keep up.
Apparently, the long hours are paying off de Werd, 41, estimates that his personal net worth has tripled over the past three years.
But rather than go on a spending spree, de Werd is putting almost all of his new wealth into long-term investments. And when he decided to purchase a new home, he passed on Bel Air and Beverly Hills, opting instead for a modest house on a quiet cul de sac in family-oriented Pacific Palisades, largely because he wants his two young children to grow up with a semblance of normalcy.
“We could have bought almost any home we wanted,” he said. “But I didn’t want to burden my kids with that. We don’t want to insulate them any more than they would be anyway.”
Farrell is of like mind when it comes to external trappings, despite his soaring new wealth.
In 1997, THQ posted net income of $9.3 million, almost five times its 1996 level. The company’s stock was trading last week at about $23, up from less than $9 a year ago. Farrell’s options on 300,000 shares had a market value of about $5.5 million as of the company’s May 15 proxy filing. That doesn’t count the $1 million he pocketed from exercising options last fall or his $608,000 annual salary.
And yet Farrell, 44, still finds time to coach one son’s basketball team and lead another’s Indian Guides tribe. And when the family does take a vacation to Switzerland this summer, they’ll be flying coach.
“I try to keep some balance in my life,” Farrell said. “Fortunately, I’m kind of boring as an individual I have my work and my family. Things haven’t changed that much at all.”
Nearly everything has changed for Joshua Greer. In 1994, with an investment of $4,000, Greer launched Digital Planet, which grew into one of L.A.’s premier Web design firms. This year, he sold the company, for $4 million, to iXL Los Angeles, a large multimedia company. Greer now serves as that company’s chief operating officer.
So far, most of Greer’s new wealth is on paper. “But I will be beyond a paper millionaire in a few years,” he said. “Once the company goes public, then things will feel real.”
Until that happens, Greer, 29, does not plan to change his lifestyle much. He still lives in a rented townhouse with his wife though he did trade in his Nissan Sentra for a new Toyota Avalon.
“Money is not the first issue. None of us were in this for the quick exit,” Greer said. “All of us wanted to build an industry. And we’ve been able to invent an entirely new medium. How often in history do you get to do that?”
That sentiment is typical of L.A.’s young, entrepreneurial millionaires, said Jon P. Goodman, executive director of EC2, an incubator for high-tech start-ups at USC.
“It isn’t a question of money. I’ve never met an entrepreneur whose stated goal was to be rich who actually got there,” Goodman said. “All of the successful entrepreneurs I’ve known have been successful because they had a dream, a vision, an axe to grind. The money was just a by-product of being right.”
And it’s nice being right, said Dan Genter, president and chief executive of RNC Capital Management LLC, a Brentwood-based money management firm that specializes in high-net-worth individuals.
Genter, 40, is majority owner of RNC Capital, which industry sources value at about $40 million. He estimates that his personal net worth has doubled over the past three years.
“The only thing I ever wanted to do was be in the investment business,” Genter said. “It’s almost like a sport or a hobby. The making of the money is just a way of keeping score. The fact is, at a certain point, your lifestyle is not going to change if you make more money.”
Bear in mind, Genter boasts an unusually lavish lifestyle. He races motorcycles, hunts big game in Africa and Alaska and pilots his own plane, a Cheyenne III nine-passenger jet. During the winter, he flies 55 minutes to Mammoth Mountain for day trips on the slopes.
Nonetheless, Genter is hardly what you’d call a jet setter. He often works 14 hours a day, and entertains clients in the evenings. He’s lived in the same house for 14 years.
“I’d buy a bigger house if I had time,” Genter said. “But as my wife says, ‘Why buy a bigger house? You only come home to change clothes.’ ”
Genter is far from the only one who hasn’t seen much of his home lately. Consider Sabrina Kay, executive director of California Design College, a fashion technical school in the Wilshire Center district. Thanks to a strong marketing push and a surge in demand for high-skilled workers in the apparel industry, the number of students at the college jumped 300 percent in 1997. And the school’s revenues have followed suit.
“This year, my big goal is to get home before midnight, but it hasn’t really happened yet,” said Kay, 35, an immigrant from Korea who claims never to have taken off a Saturday since arriving here 17 years ago.
Although the school has been quite profitable, Kay is putting every penny back into the enterprise. “It’s really exciting to see the college grow,” she said. “I’m still young. I don’t need to cash out yet.”
But as any investment banker will tell you, more people than ever are cashing out these days. With the bull market producing 30 percent annual returns, the market has been flooded with capital and business owners are finding it an opportune time to sell their businesses, or sell pieces of their businesses, or take their companies public.
And while such an event can leave an entrepreneur holding a huge amount of cash, it can also lead to soul-searching and even depression particularly for those who have sold their businesses outright and suddenly have nowhere to go on Monday morning, said Jeffrey Ullmand, who leads seminars for successful entrepreneurs wondering what to do next.
“You’re neither fish nor foul,” said Ullmand. “What do you do now? Do you retire? It can be tremendously uprooting and unnerving.”
Many end up doing what Ullmand, 46, did after he sold Great Expectations Services for Singles in 1995 for “eight figures”: They launch new businesses.
Ullmand did take some time off to spend with his family. But more recently, his time has been taken up with two start-ups Computer Support Technologies, an Internet-based software company, and Hollyworlds, a producer of 3-D Internet games.
Both enterprises are right out of the box and have yet to turn a profit, and Ullmand says his net worth actually has decreased slightly since he sold Great Expectations. “There is no income yet,” he said. “But that’s the key word yet.”