Los Angeles Business Journal  August 11, 2003  Page 1

Schwarzenegger’s Success No Act

By RISHAWN BIDDLE
Staff Reporter

Denver architect David Tryba has worked with his share of savvy customers, but few proved to be as sharp as Arnold Schwarzenegger.

The actor-turned-gubernatorial candidate had teamed up with Universal Studios to develop a mixed-use project two blocks from Denver’s Coors Field. But instead of sending his minions to interview Tryba for the job of designing the project, Schwarzenegger met with the architect and his team at Santa Monica’s Schatzi on Main restaurant, firing a series of questions about every aspect of the design.

“We went head to head with him and it was tough. Arnold really went through the details and knew his stuff,” said Tryba, whose design was picked for the project. “He’s a strong guy and not just physically. But I was surprised at how smart he was for an actor.”

Schwarzenegger, who declared his candidacy in October’s recall election, has built a substantial fortune outside of his film work, primarily in real estate deals, succeeding where so many other entertainers have failed in maintaining and expanding their wealth.

At the core of his success, according to those who have dealt with him, is both a keen business mind and a small group of trusted advisors who have been with him since well before he became a superstar.

Shortly after his arrival from Austria in 1969, Schwarzenegger began developing relationships with people who would emerge as his most trusted advisors. The group included Hollywood attorney Len Marangi and Rhonda Columbu, wife of one of Schwarzenegger’s bodybuilding pals, who would sift through business proposals and come-ons.

Columbu, since deceased, introduced Schwarzenegger over a glass of beer to one of his mentors, Santa Monica restaurateur Albert Ehringer Jr., whose holdings include the Saddle Peak Lodge in Calabasas.

The two began buying up dilapidated buildings along Santa Monica’s Main Street, fixing them up and luring restaurants and shops to fill the space.

“It was just me and him making decisions on real estate. Rhonda would keep out the hangers-on and Len was his attorney,” said Ehringer.

Over a decade ago, Schwarzenegger met Paul Wachter, a former tax attorney who was then the head of now-defunct investment bank Wertheim Schroeder’s Los Angeles office. Together they formed asset manager Main Street Advisors. With Ehringer in the midst of liquidating his investments with Schwarzenegger as he heads into retirement, Wachter has become the actor’s key business advisor.

“Arnold never thought that he should spend a dollar every time he made one,” said Wachter. “He realized that you’d only keep 50 cents of that and that instead of spending all of that, you should save 40 cents of it.”

Long history
Since first gaining fame as a champion bodybuilder during the 1970s, he has bought and sold properties in Santa Monica, Pasadena and Denver as well as owning a piece of the World Gym chain of muscle fitness centers.

For the most part, Schwarzenegger’s finances haven’t yet been made public and he has done a fairly good job of keeping private what he owns – or doesn’t. For years, he played off rumors that he was the co-owner of Schatzi on Main even though he was only the landlord. The true owner: Ice cream entrepreneur Charly Temmel.

Having effectively sheltered his wealth from public view, it’s been decades since an estimate was done. During the 1980s, his worth was estimated at $50 million, but it has at least doubled since then.

Bits of information about his holdings, however, have come out.

Besides movie earnings, including a reported $30 million plus a cut of the gross receipts for starring in the recently-released “T3: Rise of the Machines,” Schwarzenegger still owns a string of commercial properties like his offices on Main and Marine Streets in Santa Monica, assessed at $8.5 million, according to the Los Angeles County Assessor’s office.

He teamed up with retail magnate Leslie Wexner and a group led by New York developer Marshall Rose to build the Easton Town Center mall in Columbus, Ohio. His 20 percent stake in the deal is worth at least $40 million.

Among the holdings of Main Street Advisors is a stake it controls in the ski resort outfit American Skiing.

His associates have long touted Schwarzenegger’s MBA degree from University of Wisconsin-Superior as a point of pride, but much of his success in wealth preservation has to do with his hands-on manner.

When Schwarzenegger took over World Gym from its founder, the namesake of rival Gold’s Gym, in 1991, he personally worked with franchisees in developing a consolidated ad campaign. He also ordered up programs to educate franchisees on such business techniques as marketing and cost controls.

“He had so many things going on, ‘Terminator II,’ and he still was a dynamo. It wasn’t like he was going to make a significant dime from this place,” said Mike Uretz, president of World Gym who had known Schwarzenegger since working out at Gold’s during the early 1970s.

Between movie roles, Schwarzenegger will usually sit through a meeting – such as one where he considered leasing a 747 to Singapore Airlines – and discuss such matters as rates of returns and depreciation costs.

While he will seek Wachter’s advice on a potential investment, Schwarzenegger ultimately makes the decision himself. “He can cut through crap. He’s very strong with numbers, which is something I can’t really say for most professional investors,” said Wachter.

One investment reject was the acquisition of 433 South Spring St. in downtown L.A., which was picked up by a group led by one of Schwarzenegger’s partners for $10 million in 1988. He took a look at the deal, which appeared lucrative because of a four-year contract to store the books once housed in the fire-damaged main branch of the Los Angeles Public Library, but finally rejected it, according to Kirk Van Meeteren, an investor in the deal.

“Arnold had a better idea of how bad it would go than we did,” said Van Meeteren, who along with the other investors, handed the building over to insurance giant John Hancock during the real estate recession of the early 1990s.

Even when Schwarzenegger’s savvy and Wachter’s advice stumble, the movie star manages to eke out a profit.

The Denver development, which would have included 150 loft-style apartments, went sideways when the overbuilding of movie theaters caused Universal to back out. Even in the collapse, Schwarzenegger would eventually sell out for a slight profit.

Indeed, the weakest spot lately has been on the screen. Until the successful premiere of “T3,” Schwarzenegger suffered through a string of flops, including “Collateral Damage” and “End of Days.”

During that period, he had sacked two of his agents, including Lou Pitt, who helped Schwarzenegger ink multi-million dollar deals during his heyday.

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