L.A. Rainmaker
Billionaire Eli Broad wants nothing less than to remake his adopted city
Eli Broad never met a schedule he couldn't love. Although he is a world-class art collector, he moves through even the best museums as if he's fleeing a burning building. His regular Sunday hikes in the Santa Monica Mountains with good friend and former Los Angeles Mayor Richard Riordan consist of Broad charging up the trail, taking in the view for five seconds, then barreling back to the bottom. A newshound who built two Fortune 500 companies and a multibillion-dollar fortune, Broad (rhymes with road) whizzes through the Wall Street Journal, the New York Times, and the Los Angeles Times each morning before most people can conquer a double cappuccino. He rarely slows down to finish a story, unless, as someone close to him puts it, "it's about him."
But it's "about him" so often these days that just keeping up with himself threatens to throw Broad completely off schedule. One of the richest (net worth $5.8 billion), most powerful (as much clout as the mayor), and most philanthropic men in Los Angeles (and the nation), Broad is a blunt force in business, the arts, education reform, and politics. He is the city's leading cultural rainmaker, the major mover behind its $1.8 billion downtown redevelopment, and a powerful liberal Democrat who really can make things happen simply by picking up the phone. For those reasons alone, he has long been a familiar face in the press, particularly the Los Angeles Times, his hometown paper. And, if he has his way, it could be covering him from a different angle as well: as its owner.
Last month, Broad, who made his billions in real estate and insurance, and Ron Burkle, who made his in supermarkets, together joined a small group of suitors making bids for the Tribune Co., which owns the Los Angeles Times and the Chicago Tribune, among other newspapers, several television stations, and the Chicago Cubs baseball team. Under pressure from California's Chandler family, which owned the L.A. Times for decades and holds 20 percent of the company's shares, Tribune Co. put itself on the block in late September. Broad, whose bid calls for a debt-heavy recapitalization of the company, is said to be vying for Tribune with at least two private-equity firms, including one that represents the Chandlers and News Corp. CEO Rupert Murdoch. None of the parties would comment on the confidential auction, which could drag on for months. Entertainment billionaire David Geffen (the "G" in DreamWorks SKG) also has offered $2 billion solely for the L.A. Times.
Broad has said that if he and Burkle get the company, which is valued at roughly $14 billion, they may sell off most of the assets, keeping only the L.A. Times, which could be managed by a public trust. "I believe that a newspaper is a great civic asset and that ownership is best in the hands of foundations or wealthy families that want to own it for reasons other than maximizing profits," Broad, 73, said in an interview in the art-filled Los Angeles headquarters of the Broad Foundation. "I also believe newspapers should remain in local hands."
While that sentiment is widely shared, not everyone thinks those hands should be Broad's. "You have to admire Eli Broad's ability to make billions of dollars. He's obviously very intelligent and has great capabilities," says Hal Vogel, a longtime media industry analyst in New York. "But neither he nor Burkle comesto mind as tremendous operating managers, and neither one of them knows the media business."
There are other concerns as well: namely, that Broad and Burkle-not to mention Geffen-with their megafortunes and egos to match, would not be able to keep from meddling in the paper's coverage, particularly when it was directed at them. Broad, who has a reputation as a control freak's control freak, has said that he would not assume an active role in management and that he would stay out of the newsroom. "I've got enough other things going on right now to take a publishing role," says Broad, in the flat midwestern accent he acquired during his childhood in Detroit. "I'm too busy for that."
Those who know Broad well aren't buying it. "I'm not saying Eli's lying, but that's not him. Eli doesn't just write a check and get out of the way," says a close friend. "When you're trying to do the things he's doing, there's no reason to buy the Times unless there's some intent to shape people's thinking."
Big checks. That said, Broad's claims of being oversubscribed are hard to dispute. He has been building his legacy and throwing his financial weight around lately at a rate that makes his hiking pace look sluggish. In the past year alone, the former CEO of tract-home giant KB Home and annuities empire SunAmerica (now part of AIG) sank $100 million more into the recently established Eli and Edythe Broad Institute for Biomedical Research in Cambridge, Mass. He also pledged $25 million to the University of Southern California for new stem cell research laboratories and nearly $9 million to establish the Broad Fellows Program in Brain Circuitry at the California Institute of Technology. Furthering his efforts to reform public education, he gave $10.5 million to open 21 small charter high schools in L.A. and bestowed the annual $500,000 Broad Prize for Urban Education on the Boston public schools. On the cultural front, Broad donated $6 million to the Los Angeles Opera to stage Wagner's Ring cycle; christened the $23 million Eli and Edythe Broad Art Center at UCLA, and broke ground on the $60 million (all from Broad) Broad Contemporary Art Museum at the Los Angeles County Museum of Art. When it is completed, it will be a home for Broad's $1 billion-plus collection of contemporary art.
"He's a superdoer," says former Mayor Riordan, who with his gregarious nature and Republican politics plays Oscar to Broad's circumspect and left-leaning Felix. "If I had any genius when I was mayor, it was getting people like Eli to implement major projects. All I had to do was call him, and that was the beginning and the end of my work." A tireless cheerleader for the city, Broad was instrumental in creating the Museum of Contemporary Art (MOCA) in 1979 and spearheaded the $135 million fundraising drive in 1996 that rescued Walt Disney Concert Hall after missteps nearly sank architect Frank Gehry's glistening landmark. Now, as chairman of the $1.8 billion Grand Avenue Project, Broad is out to manufacture the "downtown" he believes L.A. is missing. The Gehry-designed project, with its wide sidewalks, shops, theaters, restaurants, office towers, five-star hotel, and 16-acre park, is intended to be to the city what the Champs-Elysées (aka the Champs Eli) is to Paris. "Los Angeles is divided culturally and geographically, and it needs a vibrant center where everyone can come together," says Broad, who adds that L.A.'s vastness unnerved him when he first moved here in the 1960s because he didn't understand it. Some critics think he still doesn't.
"Eli has this notion that a great city must have a dynamic downtown, and that's what a city lives by," says Joel Kotkin of the New America Foundation in Washington, D.C., and author of The City: A Global History. "Yet he has been living in one of the greatest cities in the world, and it's the exact opposite. L.A. is a multipolar city, and the notion that you can create New York in the middle of it without understanding the context is a mistake. He's in denial."
Egos. Actually, it's more like he won't be denied. Disciplined and driven, Broad isn't fazed by his critics. He is accustomed to being perceived as a prickly, impatient, and controlling boss, and he's fine with it. "I'd rather be respected than loved," he says. As for big egos, he believes in them. He once told former MOCA Director Richard Koshalek that egomania should be a condition of employment for high-profile job candidates, because "there's too much at risk for them to fail."
Not that failure is something Broad knows a whole lot about. Born in the Bronx to Lithuanian immigrants, he was raised in Detroit, where his father owned two five-and-dime stores. He earned an accounting degree and at 20 became the youngest person ever to pass Michigan's CPA exam. Soon thereafter, he went to work for home builder Donald Kaufman.
Broad surveyed the real-estate business (about which he knew nothing) and decided he and Kaufman could do better. They lowered costs (and sales prices) by eliminating basements and garages in favor of slabs and carports, and by the late 1950s Kaufman & Broad Building Co. (later KB Home) had mastered the market in Detroit's burgeoning suburbs. The company went public in 1961 (the first home builder on the New York Stock Exchange) and moved to Los Angeles two years later, where its business exploded.
With Broad now in charge, KB acquired Sun Life Insurance of America. Broad shifted the company's focus from death benefits to retirement savings, and it went on to be one of the best-performing stocks on the NYSE for more than a decade. In 1999, AIG paid $18 billion for the renamed SunAmerica, and Broad, a fierce negotiator, cashed in his 19 percent stake for $3.4 billion.
Although he is the third-richest man in Los Angeles (behind Sumner Redstone and Kirk Kerkorian), Broad's persona is still more chamber of commerce than corporate celebrity. Semiretired, he still comes into the office every day, always in a suit. The Broads avoid the social limelight; they are the last people to be found at a movie première, and their home phone number was listed until just a few years ago. Broad jets around on his Gulfstream, taking coffee orders and serving lunch himself. At the Broad Foundation, which is decorated with contemporary masterpieces by the likes of Jasper Johns, he often eats at his desk and drinks inexpensive bottled water-out of the bottle. "If you described someone as the typical L.A. mogul, you'd be 180 degrees from Eli," says Barry Munitz, the former president and CEO of the J. Paul Getty Trust.
Broad defines himself as a venture philanthropist, meaning he expects more than a psychic return on his money. His foundation has spent $1.4 billion since 2000 to fund biomedical research, the arts, and especially education. Broad believes in training the good teachers like corporate managers, tossing the weak ones in favor of smart outsiders, and managing the whole enterprise Fortune 500 style from the top down. His foundation runs programs that teach new school-board members how to govern big organizations. Broad even woos unions, trying to get them to embrace pay scales tied to student performance. The L.A. schools, however, have largely resisted his reforms.
Overcoming the status quo is rarely easy, even in small ways. Broad, for instance, dines several times a month at the same Italian restaurant in Santa Monica. Every time he asks the waiter to read the specials, and every time he orders veal Parmesan. "I ask him why he puts the waiter through it, and he says he might hear something new that interests him," says Munitz, a frequent dinner companion. "But you can bet your life savings that he's going to order veal Parmesan."
Born: June 6, 1933
Family: Wife Edythe and two sons
Education: B.A., Michigan State University
Making it: Amassed his first million in his early 20s, his first billion in his mid-60s
Giving back: The Broad Foundation has spent more than $1 billion to fund medical research, education, and the arts.
This story appears in the February 12, 2007 print edition of U.S. News & World Report.