Foreclosure was front page news again today, but not the kind based on subprime loans to people who can’t afford them.
In this case, the foreclosure (almost) happened to ’80s pop star and (alleged) child rapist Michael Jackson. The property is Jackson’s famous 2,500 acre Neverland Ranch, just outside of Santa Barbara, California.
According to press reports, Jackson owes $24.5 million on Neverland to Financial Title Company, and can’t pay. The foreclosure auction for the ranch was scheduled for this week.
Jackson was bailed out today by an investment company that purchased the loan.
We think that the company that bailed out Jackson by purchasing the loan — Colony Capital LLC — made an excellent deal.
The folks who run Colony Capital are exceptionally smart investors, and the Neverland deal fits perfectly with Colony Capital’s philosophy of “cautious contrarianism.”
As they explain on their website, Colony Capital “employs the entrepreneurial investment strategy which has been successfully executed over the past sixteen years. This strategy is designed to consistently achieve attractive risk-adjusted returns by minimizing competition with other capital sources, while maximizing value through intensive post-acquisition management.”
“Three themes define this strategic approach:
- Cautious Contrarianism during downturns or secular changes, investing in out-of-favor sectors or markets to exploit capital or product misalignments
- Exploitation of Inefficiencies capitalizing on information advantages to identify micro-market imbalances and secure investments on favorable terms
- Value-added Management to Optimal Exits creating capital appreciation opportunities through repositioning, restructuring, development, and intensive management.”
Both Jackson and Neverland will no doubt benefit from Colony Capital’s “repositioning, restructuring, development, and intensive management” efforts.
Michael Jackson himself is certainly improperly managed and “out of favor.”
And no doubt misaligned as well.
For those of you who haven’t been to the Neverland Ranch area, take it from us that it is amazingly beautiful, and is certainly worth far more than Jackson owes, especially with proper management.
We also like this remark from Colony Capital’s Founder, Chairman, and CEO Thomas J. Barrack, Jr.
In an interview with the French magazine Paris Match, Barrack explained the financial crisis that has followed the bursting of the U.S. housing bubble as follows: “Confidence has disappeared because no one knows any longer who owes what to whom, or what it’s worth. It’s as if toxic waste had been sold in cans with ‘gold’ printed on the lid.”
We wish we’d said that.