Schwarzenegger Built a Vast Business Empire
Some three decades back, young Arnold Schwarzenegger and a bodybuilder friend, Franco Columbu, came up with a get-rich-quick scheme.
Tipped by an acquaintance that a planned new international airport and freeways were about to trigger a land rush in the Antelope Valley, the two scraped together cash from their joint bricklaying business and bought parcels in the desert.
For the record:
12:00 AM, Aug. 20, 2003 For The Record
Los Angeles Times Wednesday August 20, 2003 Home Edition Main News Part A Page 2 National Desk 1 inches; 51 words Type of Material: Correction
Warren Buffett -- The last name of investor Warren Buffett, financial advisor to gubernatorial candidate Arnold Schwarzenegger, was misspelled as “Buffet” in James Flanigan’s column in Sunday’s Business section. Two previous articles about the campaign, in the California section on Friday and Section A on Aug. 10, also used the misspelling.
But the jets never came, nor did the real estate stampede. In fact, the promised land turned out to be nothing more than dirt.
Still, Schwarzenegger was undaunted. “You know what?” Columbu quoted his buddy as saying. “We’re going to start buying.”
Since then, Schwarzenegger has indeed bought a lot, a bounty thrown open to public inspection Saturday in financial disclosure statements the gubernatorial candidate filed with the Los Angeles County registrar-recorder.
While many celebrities prefer passive and extremely conservative investments, Schwarzenegger’s 100-plus ventures -- 19 of which are valued at more than $1 million -- include individual stocks, managed stock accounts, private investment funds, venture funds, bonds, a number of direct stakes in operating businesses, and even a high-end mutual fund company overseen by Nobel laureates.
“In my opinion, it’s very different from the normal Hollywood portfolio,” said Paul Wachter, co-owner of Main Street Advisors, which manages Schwarzenegger’s investments.
Saturday’s disclosure also lists dozens of assets in a family trust set up by the mother of his wife, Maria Shriver, who is a member of the Kennedy family.
Schwarzenegger’s business acumen and history are likely to move center stage in the campaign because of the state’s deep budget crisis and his own minimalist political resume.
Already, his campaign is working to downplay Schwarzenegger’s acting career while touting his business skills.
In the process, he’s scrambling to tap the expertise and cachet of his most prominent friends in the corporate world.
“He was on the phone yesterday with Warren Buffet,” said Bonnie Reiss, chief executive of the Inner City Games Foundation, with which the actor has been closely associated.
Speaking in an interview Friday, Reiss said the legendary investor was one of several business contacts whom Schwarzenegger is trying to enlist.
Under state law, Schwarzenegger isn’t required to reveal his net worth or even the precise percentage he owns in various ventures.
But the 63-page disclosure form, interviews and a review of the public record reveal an unusually wide range of business interests that extend far beyond passion projects, such as his highly profitable annual Fitness Expo in Columbus, Ohio, or the far-flung real estate ventures for which he has long been known.
In addition to Schwarzenegger’s widely publicized fitness industry interests and his personal jet-leasing business -- the actor for years has leased a Boeing 747 to Singapore Airlines -- the form shows that he owns stakes in movie theaters and an Internet software business, and stocks in companies as varied as media giant Gannett Co., IBM, International Speedways, Roto-Rooter Inc. and Weight Watchers International.
Throughout his career, Schwarzenegger has displayed a powerful urge to make money. In 1968, the 21-year-old Austrian-born bodybuilder already was peddling fitness products by mail under the brand name “Arnold Strong.”
Later, real estate magnate Albert Ehringer took Schwarzenegger under his wing, helping the actor invest in commercial properties along Santa Monica’s Main Street, where the film star’s ventures remain largely centered.
At times, the restless entrepreneur made spectacular mistakes: In the mid-1990s, he and Ehringer were badly beaten in a showdown with Agoura Hills-based developer Bill Denton over dueling projects in Denver’s trendy “Lo-Do” section.
“We were adversaries,” said Denton, who headed off an attempt by the Schwarzenegger-Ehringer group to poach his tenants.
Denton ultimately wound up with a thriving entertainment and retail center, while the actor’s project languished.
Schwarzenegger has prospered, on balance, thanks sometimes to his own gut calls and frequently to the counsel of advisors and associates, who, like Ehringer, have often worked with him for decades.
“Arnold’s one of the greatest instinctive businessmen I’ve ever met,” said Wachter, a former investment banker with Wertheim Schroder & Co., who has known the actor for 25 years and expects to oversee his assets in a blind trust should Schwarzenegger be elected.
Schwarzenegger’s financial disclosure form shows a number of sophisticated investment ventures initiated in the last 10 years.
Those occurred as the actor began to shift away from his more visible enterprises -- including his involvement with Planet Hollywood, with which he cut ties after the restaurant chain’s Chapter 11 reorganization -- toward quieter but far richer investments.
Schwarzenegger also holds a significant ownership stake in Dimensional Fund Advisors, a Santa Monica-based mutual fund company that manages about $40 billion.
The highly rated fund management is unusual in that it is overseen by academic theorists, including University of Chicago economist Eugene Fama and two Nobel Prize-winning economists, Myron Scholes and Robert Merton.
The majority of Dimensional’s clients are corporate pension plans, state and local governments, universities and charitable organizations -- including the California Public Employees Retirement System.
Reached at home Saturday, Michael Scardina, the company’s chief financial officer, declined to discuss the actor’s involvement.
Another major investment is Schwarzenegger’s better-known involvement with Columbus’ Easton Town Center, a million-square-foot mall in which the actor is partnered with retailing giant the Limited and developer Georgetown Co.
A person close to the actor said that investment has prospered, although not without a momentary public relations hitch: It originally featured a Planet Hollywood restaurant and a group of theaters called Planet Movies, since renamed.
To calculate the net worth of Schwarzenegger and his Kennedy heir wife is virtually impossible based on Saturday’s disclosure.
The state only requires that candidates check boxes that provide a range to the amount of their investment, with the highest being “Over $1,000,000.”
The unexpectedly wide range of holdings makes previously published estimates of a fortune in the $200-million range seem conservative.
Clearly, the primary engine behind Schwarzenegger’s fortune, whatever its size, was a huge upswing in his movie earnings, beginning with “Twins,” released by Universal Pictures in 1988. The comedy, the action star’s first, is a testament to his business instinct.
In what was then a highly unusual deal, he decided to forgo any upfront fee in return for 15% of the studio’s receipts -- an arrangement that boosted his take to an enormous $30 million when the audiences bought in.
“Arnold bet on himself,” said producer Tom Pollock, who ran Universal at the time. “If the movie went out and bombed, he would have made much less.”
Schwarzenegger appears to have received a total of at least $300 million from his next 13 films, culminating with this year’s “Terminator 3: Rise of the Machines.”
If much of that money went to taxes and agents’ and lawyers’ cuts, the balance nonetheless provided capital for the investments that have become a growing preoccupation.
Among Schwarzenegger’s business credentials, according to his official Web site, is a degree in “business and international economics” from the University of Wisconsin, Superior.
Beth George, a spokeswoman for the university, said the star graduated through the school’s extended degree program, in which he completed correspondence courses and some on-campus work in what she identified as a tailor-made major -- “international marketing of fitness and business administration.”
Under the program’s rules, he was given credit (George declined to say how much) for prior life experience.
Some who have done business with Schwarzenegger maintain that his grasp of complex numbers and deal points is impressive.
“He’s not a Terminator when it comes to how he handles complex situations. He’s more an analyzer than a Terminator,” said Cox Castle and Nicholson’s Mario Camara, a Los Angeles real estate attorney who has negotiated with Schwarzenegger several times on behalf of developers with properties for sale.
Camara is one of several people who said Schwarzenegger tends to restrict his non-Hollywood dealings to those with whom he is familiar.
In Camara’s words: “Arnold only does business with people that he’s known for a while. It’s a form of due diligence.”
Thus, Schwarzenegger has remained involved with Jim Lorimer, a decades-long associate, with whom he operates Columbus’ Fitness Expo.
“Our 28-year partnership was made on a handshake, and we’ve never had a contract,” Lorimer said.
Schwarzenegger also has continued to rely on a longtime Pasadena business and personal attorney, Leonard Marangi, even while spinning through several Hollywood agents and publicists as his film career has cooled in recent years.
Whether the candidate would take any of his longtime friends and advisors to Sacramento is likely be among many questions raised about his future.
Asked whether they had considered joining a Schwarzenegger administration, both Reiss and Wachter, among the star’s closest advisors, said they had not.
But Reiss, a self-described liberal Democrat, was quick to add that for herself and fellow Democrat Shriver: “He’ll probably be the first Republican we’ll ever vote for.”
Times researcher John L. Jackson also contributed to this report.