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Monetizing the Celebrity Meltdown

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Barrack has explained the timing of his new direction by musing publicly that some of the investment sectors in which he amassed his wealth can no longer generate extraordinary returns. The world right now is “an environment that has very little visibility, and whatever you guess will surely be wrong the next day,” he says, glancing at his BlackBerry. “Everybody has been abjectly wrong if they’re trying to make macro bets.” The only thing to do is position yourself for opportunities—stand in the stream and wait for fish to swim between your legs. That’s how the Neverland—

“Face!” Barrack yells suddenly, looking in the direction of Neverland’s front gate. “Face!”

Rob Lowe, 46 years old and agelessly pretty in Chrome Hearts sunglasses and a light-blue Zegna polo, is walking toward us. Barrack awarded Lowe his nickname after they entered a Starbucks in London this past summer and were greeted by a swooning Croatian fan: “Ze face! It’s ze face!”

“We needed some star power,” Barrack says, as Lowe reaches us, grinning.

“How’s the hand?” Lowe asks.

Barrack is wearing a red cast on his left hand. Three days ago, he was playing polo at the Santa Barbara Polo and Racquet Club against a team that included Adolfo Cambiaso, the best player in the world, when his horse went down. Barrack broke his thumb and tore his rotator cuff.

“I’m great,” he answers.

Barrack is almost comically stoic in the face of injury. He reentered the match. In college at USC, where he played on the rugby team, he went into the finals against Stanford with a broken nose; by the end of the game, he also had a broken left ankle, separated shoulder, and torn right knee. In the years since, he has continued to rack up injuries. He has separated his clavicle more than once, and his right bicep hangs balled near the elbow, from a tendon severed in a different polo incident. “I don’t view it as recklessness,” Barrack says. “I view it as the mental discipline to practice pushing through comfort barriers.”

In 2005, Barrack’s grin appeared on the cover of Fortune, beside THE WORLD’S GREATEST REAL-ESTATE INVESTOR, and he got there largely by relying on this maniacal stamina. He launched Colony Capital in 1990, and for fifteen years, it averaged an annual return of 21 percent for its investors. The inaugural Colony transactions mined the S&L crisis by buying packages of bad loans from the FDIC at bargain prices. These deals possessed several of the elements that would characterize Barrack’s deals over the next two decades: They used real estate as collateral; they required intensive hands-on management; and, most important, they ran toward, rather than away from, regulatory complexity. Colony was the first private-equity firm to get a gaming license, for instance. “No one—no one—would go through that Bataan death march,” Barrack says. “So for four years, we had a monopoly, because there’s no other private-equity firm that would go through the licensing process, which is hell.”

When Barrack and Lowe announced this past summer that they were joining forces to start their entertainment-investment fund, it seemed an unlikely May-December bromance. But the two have been friends for a decade. Lowe’s and Barrack’s children attended the same grammar school. Since meeting as parents, the two have surfed in Indonesia and spent Christmas together in Hawaii; Barrack is the only person Lowe has allowed to read portions of the memoir he’s writing, Stories I Only Tell My Friends.

To be a billionaire in California is to have some relationship to Hollywood, and Barrack’s appears particularly freighted. The son of a grocer, he grew up in Culver City in the shadow of MGM Studios. By fourth grade, he had made a deal with the lady overseeing the Red Riding Stable, which served as MGM’s barn; if he cleaned eight stalls a day, he could ride one of the rental horses for three hours. “I became very good at mucking stalls of the horses of the stars,” he says.

Though an investment banker on the losing end of one of Barrack’s deals snarks that “he’s a star-fucker,” Barrack dismisses the suggestion that his childhood shovel work might somehow explain his current forays into entertainment. If anything, his friendship with Lowe has been good business. Barrack had been present on several occasions when Lowe was on the phone negotiating final points of contracts, and was perplexed by the irrationality of Hollywood. He and Lowe started talking about whether the inefficiencies of show business presented an investment opportunity.

“In my business, nobody ever tells you what the numbers are,” says Lowe. “There can be 50 different numbers, and I’ve never been part of a deal in the last ten years, for any project I’ve done, that didn’t come down to the one-yard line and then somebody going ‘Fuck you’ and the other side going ‘Hey, fuck you’ and then overturning the table, and then maybe one of the parties comes back and then the deal happens. And Tom just can’t believe this. And so when it gets to the one-yard line, inevitably they call me, and then at that point, the real negotiation begins.”


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