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Monetizing the Celebrity Meltdown

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Not long after Jackson’s death, Barrack read that Annie Leibovitz had taken out a $24 million loan from Art Capital, putting up four homes and the rights to her catalogue as collateral, and that Art Capital had sued her after a series of missed payments. It was 7 a.m. in Los Angeles, and Richard Nanula, a Colony principal, was playing golf at the Malibu Country Club when Barrack e-mailed: “Can we help her?” Nanula met with Leibovitz in New York, and Colony ended up buying out Leibovitz’s debt for $40 million. Leibovitz got the rights to her photographs back; in typical Colony fashion, her real estate would serve as the collateral on the new loan. And Barrack’s firm would work with her to generate new revenue through exhibits of her work and the sale of limited-edition archival prints.

“The very first thing Tom said to me was that he wasn’t interested in my real estate or my archive,” Leibovitz says. “He was interested in me.” Whereas her previous lender was set to make money foreclosing on a loan gone bad, Barrack saw profit potential in facilitating a longer-term turnaround. Comparing Colony with Art Capital, Leibovitz says only: “There are no equivalences. None.”

Barrack says he no longer believes real-estate investing can deliver more than “singles and doubles.” In fact, it has yielded some strikeouts: A $4 billion Colony fund raised in 2007 showed 60 percent losses as of the first quarter of 2010. Meanwhile, Barrack says Colony is fielding “hundreds” of inquiries by cash-squeezed artists and celebrities who hope he can do for them what he did for Jackson and Leibovitz. “It’s the most inefficient quagmire of opportunities I’ve ever seen, financially.”

In flirting with pop culture, Barrack is navigating a world that has tripped up many an otherwise savvy investor, and the next few years will test whether he’s a Hollywood savant or just its latest victim. In early July, he wrote a rhapsodic memo to his employees announcing a “personal breakthrough.” After a meeting scheduled to take place on a yacht in Turkey was canceled, he found himself twiddling his thumbs at sea. “I didn’t know what to do, and I’m not good at being alone,” he says. He ended up reluctantly reading the only book on the boat—Twilight—and then the next two books in the series. In his letter, loaded with disclaimers about how almost disgusting he had found it to contemplate reading a book for teenage girls, he chalked up the book’s broad appeal to Edward’s canny grasp of gender. “Every woman longs for the anticipation, the romance, the journey, the taboo, the patience, and the attentiveness,” Barrack wrote. “Men, however, are all about the destination, the result, the speed, and the outcome.”

Barrack meant his essay as a small parable about the value of exposing oneself to new ways of looking at things, but after it was accidentally posted online and blogged about by The Wall Street Journal, Bella’s legions seized on it as a tribute to their heroine. Twilight blogs went crazy, and mail started flooding in from appreciative teenyboppers everywhere, from Sweden to China. “I swear to God,” Barrack says, “it’s the most embarrassing moment of my life, because you know, for a man, I didn’t mean it as a sensitive moment. I meant it because what I realized about myself was these things that I was sure of—these points of view that I had held that I was so rock-solid about—when I took the time to go to the other side, it unwrapped me.”

At the same time that vampires were eating his brain, Barrack was wondering what his putative media-entertainment fund’s first deal should be. Disney had been looking to sell Miramax for months, and until recently, it had looked as if founders Bob and Harvey Weinstein were going to buy it back with the help of investor Ron Burkle. Then, suddenly, Disney terminated talks, after the Weinstein-Burkle group dropped their bid from $625 million to $575 million. “You don’t hondle Disney,” explains someone close to the negotiations.

Colony’s Nanula, who had been Disney’s CFO when the company first acquired Miramax, liked the deal: It was a library to exploit, a hard asset immune to the vagaries of Hollywood egos. And as it happened, Disney was now in exclusive talks with another Barrack friend, construction tycoon Ron Tutor, who was looking for a co-investor. Nanula took charge of the negotiations for Colony-Tutor, since he had literally hired the people at Disney he would be across the table from. The Colony-Tutor team ended up agreeing to pay $610 million ($662 million before adjustments), with a conservative one third in equity. That represented only four times cash flow, and Miramax came with $250 million in blue-chip receivables. Best of all, there was no money-sucking, roll-the-dice studio attached. Nor were there any Weinsteins. “We saw value where others did not,” Barrack says.


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