You’ll see why Michael called this place Neverland,” says Tom Barrack, the newest owner of Michael Jackson’s Neverland Valley Ranch. Barrack is a 63-year-old billionaire with a gleaming shaved head, summer-in-Sardinia tan, personally trained muscles, and sockless tasseled loafers. He is sitting on the lawn beside the Tudor-style, panic-room-equipped main house, near a gnarled oak tree with steps winding up to the perch where Jackson wrote Bad.
This, the manicured park with the giant floral clock and movie theater featuring isolation boxes for immunocompromised children—default B-roll for all TV coverage of Jackson—comprises just 32 acres. It scarcely hints at the grandeur of the full property, which is nearly ten times that size, with 67,000 oaks and sycamores, the odd rattlesnake and mountain lion, and a former Chumash Indian worship site overlooking a savannah-like plain. “You’ll feel something, which I think was what drove him,” Barrack says of the Chumash site. “And I don’t mean that—I’m not coming from outer space—but you will actually feel it, I promise.”
When Barrack’s private-equity firm, Colony Capital, took over Neverland in November 2008, averting foreclosure, even the groomed portion was going to seed. Jackson, self-exiled after his child-molestation acquittal to places like Bahrain and Las Vegas, hadn’t been home since early 2005. His 275 employees had dwindled to four. The amusement-park rides and steam train—operable only by California’s single licensed steam-train engineer—had been sold off to raise money. The petting zoo’s animals had been removed by animal-rescue groups; the snakes from the reptile barn were, um, released into the wild.
Since then, Barrack’s team has worked steadily to rehabilitate the estate, refinishing the wood floors, relandscaping acres of grass, introducing more swans into the lakes, and repositioning Jackson’s statue of a long-gun-brandishing pirate to scare off coyotes. In the dance studio, a solitary bulb lights a spot worn down by Jackson’s spinning. The elephant barn now houses a labyrinth of walls filled with effusive notes penned by visitors from around the world. The only obvious reminders of Jackson’s complicated legacy are the bronze statues of children at play that dot the estate.
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.
Earlier this year, two financial firms, Cantor Fitzgerald and Media Derivatives, moved to create futures exchanges devoted to betting on film box-office receipts. Neither plan made it through Congress, which was heavily lobbied by Hollywood studios, but these would-be speculators weren’t alone in seeking a new way for Wall Street to enter the cultural marketplace. Earlier this fall, CAA sold a 35 percent stake of its agency to the private-equity firm TPG, modeling the deal on Ted Forstmann’s purchase of IMG in 2004. And while there have always been moneymen willing to buy a stake in the big studios, along with a deep bench of bored tycoons eager to “executive produce” their way into hanging out on set, Hollywood is now luring harder-nosed investors backing individual movies in the full expectation of an attractive return on equity.
Other investors have sought ways to take positions in celebrities themselves. Thirteen years ago, David Bowie famously raised $55 million by issuing so-called Bowie Bonds, paying 7.9 percent interest through album royalties and introducing the concept of securitized intellectual property. Now the model is proliferating. In 2007, Mark Cuban co-founded Content Partners to do for celebrities what structured-settlement firms do for winners of lotteries and lawsuits: pay an up-front lump sum in return for the right to future revenue. (Cuban won’t name names but claims the venture has been “highly profitable.”) Art Capital Group, a high-end pawnshop, lends money to brand-name artists who pledge their paintings and photographs as collateral.
Over the past two years, Barrack has been lining up deals that target celebrities and entertainment properties whose value he believes to be artificially depressed. In some cases, that’s because they haven’t yet figured out a way to monetize their assets. But mostly it’s because the investment is, in the classic sense, distressed—individuals like Jackson or Annie Leibovitz whose financial mismanagement has obscured their future revenue potential, or properties like the Miramax film library, which Disney is unloading at a time when no one can agree on what a studio archive is worth. 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. In one TMZ appearance, a paparazzo’s telephoto captured Lowe and Barrack, shirtless, checking their BlackBerrys on a yacht in the Mediterranean. In a second, the two men were video-ambushed as they entered the Mayfair restaurant C London for dinner with owner Giuseppe Cipriani and Formula One’s Flavio Briatore.