Colony Capital's healthy real estate investment pipeline coincides with the rise to prominence of its founder and executive chairman, Thomas Barrack, writes Robin Marriott in his Private Equity Letter, published in the January edition of PropertyEU Magazine.
Colony Capital, the Los Angeles-based real estate investment firm, has been a smaller investor in Europe relative to other American private equity competitors for a few years. In 2014, for example it was ranked 10th most active buyer by Cushman & Wakefield’s Loans Market report behind the likes of Cerberus, Blackstone, and Lone Star.
However, since June's Brexit vote, it has enjoyed one of its best runs in the region by its standards. It has made various secured credit investments, special situation plays, and distressed mezzanine and NPL investments in different zones. Just two examples would be Ireland where it acquired € 1.5 bn of loans from NAMA in December and Berlin where it invested in a property near the market subject to the lorry terrorist attack.
This column isn’t an advert for Colony, of course. Instead it is worth highlighting the firm’s healthy investment pipeline because it coincides with such an interesting time for the company, not least because of the rise to prominence of its founder and executive chairman, Thomas Barrack.
TV commentator
If you watch CBS, CNBC or Bloomberg, you'd know that Barrack's profile has seldom been higher. He has hardly been off the TV since March 2016 when he became one of the most prominent US businessmen to publicly endorse Donald Trump for the Republican Presidential nomination. Google 'Trump' and 'Thomas Barrack' and you will discover the pair go back nearly 40 years to a time when Barrack was working at the Robert M. Bass Group and eventually sold Trump the Plaza Hotel in New York which the mogul so desperately wanted (and which subsequently went into bankruptcy protection).
Since March last year, 69-year-old Barrack has held fundraisers for Trump at his Santa Monica home, keynote speeches and numerous interviews espousing Trump's virtues as a leader that gets things done, and his prize since Trump won the election has been to lead the president-elect’s Inauguration Committee.
Now, my spies tell me that when Barrack initially went public with his support of Trump, staff at Colony Capital thought their leader had gone crazy. How could their chairman support a lunatic who talks about building a wall between the US and Mexico? However, since Trump won the election, they don’t think he is so crazy anymore.
The thing about Barrack is that he is a contrarian as evidenced by eclectic investments over the years such as French football team PSG, film company Miramax and Michael Jacskon’s Neverland ranch. I regret to say I have only spent a brief time in Barrack’s presence at a Beverley Hills hotel in 2015, but I can say one thing for sure: not only is he a consummate contrarian investor in terms of real estate, political allegiances and other walks of life – he also has charisma and bucket loads of charm.
Re-naming a name
Barracks' personal star has risen. Meanwhile in Europe as previously mentioned, his company is re-making a name for itself in real estate investing. While many firms are struggling to find compelling equity-side opportunistic deals, Colony is at last motoring thanks to its connections with banks. Since Brexit and other issues, European banks are generally scared and retrenching. They are discreetly selling foreign real estate exposure, which is playing into Colony's hands.
Colony has not been so active as this in a while. To me, the company seemed to lose its presence in Europe when its European head, Frenchman Sébastien Bazin, left in August 2013 after 16 years with the firm to join as chairman and CEO at hotel group Accor – a Colony Capital investment. Since Bazin left, another Frenchman, Nadra Moussalem, has been essentially heading up investments but he has understandably lent towards France, so contacts say. It is said that Barrack has been much more involved in the running of Europe, and I recall him saying in summer 2015 that Europe was for him the big opportunity.
With around $900 mln (€862 mln) raised for the latest fund - Colony Distressed Credit & Special Situations Fund IV – the clear challenge for them is to re-educate European investors about the firm. One can imagine a future real estate fund being Euro-denominated to help sell to these European investors.
When one factors in how Colony has just received shareholder approval to merge with Northstar Asset Management Group and Northstar Realty Finance Corp to create a new company with $58 bn AUM, these are interesting times for Colony and its activities in Europe will be closely watched.
Robin Marriott is the former editor of Private Equity Real Estate
