Combined Net Worth Rose Despite Recession And Some Big Flame Outs
Never mind the economy, the rich are still getting richer.
The 50 wealthiest people in Los Angeles, as estimated by the Business Journal, have a total net worth of $76 billion, up slightly from $75 billion last year. Of the 45 super-wealthy who appeared on last year’s list, 32 saw their net worth increase. Only 12 saw a decline and one held even.
In addition, Los Angeles now has bragging rights to 25 billionaires, up from 24 last year and only eight in 1997.
With a substantial representation in the entertainment and real estate industries, it’s not surprising that those locals worth hundreds of millions of dollars fared well in the last year.
“If you look at the overall economy in Los Angeles it’s actually quite strong,” said Christopher Thornberg, a senior economist with UCLA’s Anderson Forecast. “It doesn’t surprise me one bit that the people with business holdings in Southern California have done well.”
Again topping the list is financier Kirk Kerkorian, with a personal net worth estimated at $8 billion, based largely on his $6.1 billion stake in film studio Metro-Goldwyn-Mayer Inc. and casino MGM Mirage. Like many on the list, Kerkorian began amassing his fortune decades ago. Nos. 2 and 3 are oil magnate Marvin Davis ($6.4 billion) and homebuilder cum insurance giant Eli Broad ($6.3 billion). Those top three are up there in other ways: Kerkorian is 84 years old, Davis 76 and Broad the kid in the bunch, at 67.
But pulling out the most notable examples of rising and falling net worth, many of the 50 fell within a fairly narrow window of percentage ups and downs. Either way, the stock market played an important role.
In 2001, Broad was worth an estimated $6.5 billion, with 35 million shares of insurance giant American International Group, which had fallen from $82 a year ago to $67 last week. Steven Ferencz Udvar-Hazy ($2.3 billion), Louis Gonda ($2.1 billion) and Leslie Gonda ($1.7 billion), founders of Century City-based aircraft leasing company International Lease Finance Corp., also own millions of shares of AIG stock, and their net worths have taken a hit.
Over the hill, the stock market also has had an effect on shareholders of Burbank-based Walt Disney Co., among them Roy E. Disney ($900 million), nephew of company founder Walt, and Chairman and Chief Executive Michael Eisner ($550 million). Disney and Eisner saw their net worths decline by 9 percent and 6 percent, respectively.
Selim Zilkha, whose net worth is largely tied up in El Paso Corp., has seen his net worth tumble an estimated 45 percent as the stock has fallen by almost 50 percent since last May.
Not all stocks have done poorly.
David Gold, patriarch of family-run 99 Cents Only Stores, saw his personal net worth jump by more than 60 percent. In the past year the discount retailer’s shares have climbed, split, then continued to climb.
Shares of Dole Food Co. have more than doubled in the last 12 months, boosting the personal net worth of David Murdock ($2.1 billion), the company’s chief executive and largest shareholder. Murdock, in fact, was the biggest winner from a year ago.
George Joseph ($1 billion), chairman of Mercury General Corp., jumped several spots on the list as shares in the insurance company he founded have climbed by almost 40 percent in the last 12 months. Mercury’s jump also landed Joseph’s former wife, Gloria Joseph ($500 million), on the list for the first time.
But as making money is (usually) the result of hard work, market timing can also be a big help. Just three years ago, Gary Winnick, chairman of Global Crossing Inc., was named by the Business Journal as the wealthiest Angeleno, with a net worth of more than $6 billion. But that seems long ago. The telecommunications firm he founded is now operating in bankruptcy protection and trading for pennies although not before Winnick sold at least $750 million worth of Global Crossing stock. That, plus his holdings in Pacific Capital Group, put his net worth at $900 million.
L.A.’s wealthiest people are mostly entrepreneurs, and as such reflect the diverse economy of the region. A dozen made their fortunes in the entertainment industry, nine from investments, seven in real estate, three from retail and two from energy. The rest are scattered in areas ranging from cosmetics to mail-order merchandise and aircraft leasing.
“If you looked at this list in a place like Seattle, you’d probably see a bunch of Microsoft executives,” Thornberg said. “But in Los Angeles you’re seeing more of an entrepreneurial group.”
For the most part, the list affirms L.A.’s status as a largely, self-made town. Only four members of the Business Journal list received the bulk of their fortunes from inheritance, and only one, Eisner, generated his fortune as an employee rather than entrepreneur.
If there is one way that the richest do not reflect youth-oriented Los Angeles, it is in the substantial representation of the old guard. Really big money takes time to accumulate.
Still, new fortunes are being made, even in unlikely places. Of the list’s four newcomers, three came from the tech industry. Brothers Tom Gores ($2 billion) and Alec Gores ($1.5 billion) both found fortune in technology leveraged buyouts, Neil Kadisha ($700 million) in telecommunications.
And like L.A.’s broader population, many of the richest are transplants that have either come here to seek their fortunes or settle here to enjoy them.
Once here, they don’t tend to leave voluntarily. Stock prices, company valuations and real estate values all go up and down, but in most cases, rich people tend to stay rich. Once the money starts rolling, scads of lucrative investment opportunities begin popping up, yet another way the rich get richer, despite fluctuations in the economy.
“Clearly the very affluent have access to a larger number of private, quality deals that the average person doesn’t,” said Vernon Kozlen, executive vice president and director of City National Investments. “The fund managers that are raising capital will often focus on that list of the most significantly able investors when they’re out raising capital.”
When it comes to direct investments, though, the rich shouldn’t stray too far from their original money track.
“What we often see is individuals who have been most successful in (private equity deals) have done so in those industries they’re most familiar with,” Kozlen said. “A guy that’s been in clothing manufacturing has traditionally done better investing in similar companies as opposed to a dot-com.”
It’s not unusual for many of those on the Business Journal list to see deals come their way every week of the year. And while it’s somewhat of a generalization, L.A.’s very wealthy tend to know each other even spend time together creating social connections that result in business opportunities.
Among public pairings are Ron Burkle and Ed Roski Jr., who have banded together recently as part of the proposed plan to build a football stadium near the Staples Center downtown. And billionaire Franklin Otis Booth Jr.’s fortune came largely because of his friendship with Charles Munger and their shared interest in Berkshire Hathaway Inc.