Whether he likes it or not, Donald Sterling is poised to sell the Los Angeles Clippers to Steve Ballmer, the former Microsoft chief executive. And, for $2 billion, what’s not to like about it? Sterling bought the Clippers for $12.5 million in June 1981, according to some reports, and he’ll get a tidy 15,900 percent return over 33 years, an annualized rate of 16.6 percent. In fact, he’s probably done even better than that, because of the distributions of profits during the years of ownership.
To say the least, the rate of return is very impressive. It’s a much better performance than most of the ways Sterling could have invested his money.
For example, it’s about four and a half times the return he would have gotten by putting his money in the stocks of the S&P 500 index and reinvesting the dividends.
The Clippers were probably about twice as lucrative an investment as Mr. Sterling’s primary business: residential rental real estate. We don’t know the performance of Mr. Sterling’s real estate holdings (the portfolio of apartments that led to his payment of $2.725 million to settle claims of racial discrimination), but we do know that BRE Properties, a real estate investment trust that mostly owns California apartment buildings, returned 6,259 percent over the period Sterling has owned the Clippers.
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SOURCE: Josh Barro
The New York Times