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 Clippersand, 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
but it isn't enough, apparently, to sat-
isfy his ego. He craves, nay, lusts to be
a celebrity. In the last year scores of
joumalists across the country have
received "personal" notes from him
praising one of their recent articles
and offering them tickets to Clippers
games. At one Califomia newspaper,
so many reporters received the letters
that the office joke became displaying
them on the bulletin board.
If the reporters won't bite, the ad-
vertising departments of the media
will oblige. Two-page spreads filled
with society photographs of Sterling
appeared in a Beverly Hills newspaper
in July. "Mr. and Mrs. Donald T. Ster-
ling greet television star Barbara
Eden," read one caption. "Mr. and
Mrs. Donald Sterling share a moment
with Senator and Mrs. Pete Wil-
son," went another. At the top of
the page were two tiny words:
"paid advertisement."
Smart folks snickered, but Ster-
ling loved it. He proudly shows a
FORBES reporter an advertisement
that California magazine is con-
sidering running throughout the
state. It shows the cover of that
bestselling issue with a tag line at
the top, in big letters: "The ques-
tion isn't will the Japanese buy
Califomia, it's will Donald Ster-
ling buy Japan."
The answer, of course, is that
he could scarcely afford a square
block of the best Tokyo real es-
tate, but never mind. He does
own a six-story, art deco edifice
built by Louis B. Mayer on the
comer of Beverly Drive and Wil-
shire Boulevard. He bought it in
1976 for $1 million, only $50,000
of that cash. Why so cheap?
"Most people saw the building's
terrible 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 of
the building is completed. Sterling
plans to rent it out as retail and office
space. On the basis of several offers he
has rejeeted, he claims the building is
now worth over $40 million. Big mon-
ey for Donald Sterling. Peanuts for the
other Donald.
But this is one mighty big ego. Visit
the headquarters of the Donald T.
Sterling Corp. on Wilshire Boulevard
in downtown Beverly Hills. Senior ex-
eeutives, including Chief Executive
Officer Robert Steele, work in
cramped, windowless cubbyholes. A
few steps down the hall is Sterling's
office: a palatial room with wrap-
around views and deeorations worthy
of Versailles. Tanned, and generally
swathed in an elegantly tailored Ital-
ian suit. Sterling presides there from
behind an ornate Louis XIV desk.
And what does Don Sterling do for a
living? The son of poor Jewish immi-
grants, he started his career in Los
Angeles as a moderately successful
trial lawyer, and switched to real es-
tate after 1963 when the purchase of a
West Hollywood apartment house
gave him a handsome retum.
From there on he followed the same
simple but effective strategy that has
enriched so many others in real estate
in recent deeades: Identify a few desir-
able areaS; buy when the market is
soft; refinance every few years as the
properties appreciate; reinvest the
proceeds; and avoid paying taxes and
transaction costs by buying but never
Sterling's Los Angeles Clippers
How lutt to woojoumalists.
selling. It helped greatly that he chose
for his chief area of concentration
Beverly Hills.
Now, with 22 buildings there, in-
cluding the Beverly Hills Comstock
Hotel, he is one of Beverly Hills' big-
gest landowners. He also picked up a
couple dozen apartment buildings in
Santa Monica and a few scattered
elsewhere in southern California.
Beverly Hills apartment buildings
for which he paid $20,000 a unit in
the Sixties, today are worth five to ten
times that. He recently lined up from
a group of loeal banks a $200 million
line of eredit; he plans to use it as
down payment on about $1 billion
worth of property when the time is
right, probably in 12 to 18 months.
when he expects the s til! strong
southern California real estate mar-
ket to tum down.
Sterling's principal foray outside
real estate is the Clippers, for which
he paid $11.5 million in 1981, much
of that in deferred player compensa-
tion. Thanks to increasingly lucrative
television sponsorships benefiting all
the National Basketball Association
teams, even a losing one like the Clip-
pers has appreciated manyfold in val-
ue. Today experts estimate that the
Clippers franchise would fetch up-
wards of $80 million,
Not bad, but a long way from being
in the same league as Donald Trump,
either as a landlord or as a celebrity.
Which clearly irks Sterling. To make
himself more visible, he says he plans
to go into publishing, investing
up to $15 million in as many as
three new magazines. He might
call one magazine "Sterling's Los
Angeles."
"He looks at guys like [Rupert]
Murdoch and [Robert] Maxwell
and feels the place to be is in
media," says Selsman, Sterling's
flack-in-chief, "It isn't the mon-
ey. The issue is influencing pub-
lic opinion, having an impact on
social direction. And enlarging
your social circle." Social climb-
ing, it's called.
But, for all his wealth. Sterling
ean't seem to get what he really
craves: respect. One reason is his
susceptibility to foot-in-mouth.
There was the 1982 press confer-
ence at which he stunned fans by
announcing that the Clippers
would henceforth tr}' to lose
games to get the first draft pick
the following year. Unamused,
the NBA fined him $10,000.
Then there were the well-pub-
licized reports about not paying
players deferred compensation,
and paying bills so late that the
Hyatt of Oakland turned the Clippers
away. Then, just this year, two of the
Clippers' draft picks opted to play in
Italy rather than have to play for the
Clippers. (One of them got homesiek
and 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 he
instituted such sudden massive (30%
to 50%) rent hikes in many of his
Beverly Hills apartments that irate
tenants marched on City Hall. Result:
an "antigouging" law subjecting all
landlords to new controls on rents.
Sterling clearly has a talent for
making money. As a public figure he
only succeeds in making himself look
ridiculous.
200
FORBES, NOVEMBER 27, 1989