Is today's Lindsay Lohan like the early-'90s Apple Computer, an entity that while distressed could potentially bring in boatloads of cash? Possibly, and Tom Barrack--with his formerly-distressed BFF Rob Lowe--might be just the guy to make that bet, Benjamin Wallace explains in New York magazine.Barrack is now the proud owner of Michael Jackson's Neverland ranch. This is not because Barrack is lifelong lover of MJ whose fandom has taken a turn for the morbid. Two years ago, Barrack and his company Colony Capital agreed to bail out the King of Pop.
Barrack built his fortune making deals, and in some ways, Neverland began as just another one—a contrarian bet on a troubled asset, an operating business backed by real estate. Only in this case, the operating business was a person. Colony would bail Jackson out of his substantial debt; in return, the firm would assume ownership of Neverland, and Jackson, after a thirteen-year hiatus, would go back to work to generate new revenue. Jackson’s death, before he could carry out a planned comeback tour, turned the transaction into more of a straightforward real-estate play: Colony is fixing up Neverland and plans to sell it, at some point, for a profit. But after doing the Jackson deal, Barrack and his team began to wonder whether they might have stumbled on a whole new class of investment: the distressed celebrity. ...After Jackson's death, his songs were playing on every radio station. A documentary about his last tour grossed $261 million. His estate has signed several more lucrative deals.
This summer, Barrack created a new $500 million media-and-entertainment investment fund, working with his friend Rob Lowe, who is a partner in the fund. Together they have been on something of a shopping spree—and generating a little tabloid coverage while they’re at it. ...
Colony agreed to bail out Jackson; in return, the firm would take ownership of Neverland and arrange for AEG, the concert promoter owned by Barrack’s friend Phil Anschutz, to stage a comeback. An unforeseen complication arose when Barrack received a call from the King of Bahrain, whom he knew from Sardinia, where Barrack owns much of the Costa Smeralda; astonishingly, Jackson had apparently forgotten that while being hosted in Bahrain, he had signed over a number of recording and performance rights to the king's son. Colony had to buy out that interest. Jackson moved into a gated $100,000-a-month mansion in Bel-Air to prepare for a run of 50 concerts in London that would relaunch his career. Instead, it ended it. He was struggling physically and heavily medicated by a live-in doctor. He died, from a sedative overdose, eighteen days before the first concert.
“What’s amazing,” Barrack says, “is he attained in death what he could never attain in life.” It may be an obvious observation, but it’s one with huge financial implications for a long-term investor.