From left: DigitalBridge CEO Marc Ganzi, Donald Trump and Tom Barrack (Getty, Ganzi from Sonya Revell)
In the fall of 2018, and after political mishaps that led to his arrest on federal charges on Tuesday, Thomas Barrack returned from a four-year hiatus to take the reins at Colony Capital again.
While Barrack was preoccupied with Donald Trump’s first presidential campaign and intrigue in the Middle East, the real estate company he founded had tough times following its $ 19.9 billion merger with NorthStar.
“That was a bad deal. It was a terrible deal, ”Barrack said in an interview with Bloomberg last week. “I take on the responsibility to let the ball out of sight.”
But a new opportunity soon arose. Nine months after Barrack’s return as CEO, Colony announced a $ 325 million deal to acquire digital infrastructure investment firm Digital Bridge Holdings, with chairman Marc Ganzi assuming the role of CEO of Colony through 2021.
The subsequent transformation of Colony’s business was dramatic. In just a few years, the portfolio has grown from 80 percent hotel, office, warehouse and retail properties to around 70 percent digital assets, including data centers, cell towers and fiber optic network properties.
Colony also relocated its headquarters from Los Angeles to Boca Raton, Florida in January and renamed it DigitalBridge last month.
Despite the new leadership, portfolio, location and name, Ganzi has insisted that there is continuity between past and present, anchored in fundamental real estate principles.
“A lot of people have stayed from the old colony,” he said in an interview with The Real Deal in the spring. “The principles that have existed at Colony Capital for 30 years are no different from those at DigitalBridge for 27 years: We have great customers, we have to serve them, we want long-term leases and we want to be the landlord of choice. ”
What it no longer has is barrack. And the company can breathe a sigh of relief.
The founder and ex-CEO was charged on seven counts with acting as an agent for the United Arab Emirates to influence former President Donald Trump in foreign policy. He was also charged with obstruction of justice and giving false testimony during an interview with federal police officers in June 2019. Also changed was Matthew Grimes, a former Colony employee who reportedly reported directly to Barrack.
The company’s separation from its creator can be seen in the reaction of investors: They hardly blinked.
DigitalBridge’s share price has fallen a modest 5.1 percent to $ 6.85 since the Justice Department announced against Barrack by Thursday morning.
“If he were still CEO, that would be a different story,” said Tom Hazen, a longtime professor of securities law at the University of North Carolina at Chapel Hill. “I just don’t see them [DigitalBridge] have a problem. “
DigitalBridge declined to comment.
Barrack, who founded Colony in 1991, stepped down as CEO in 2020 and resigned from his position as Executive Chairman in April. At the time, he owned 5.6 percent of the company’s total common stock, according to the proxy statement.
On Tuesday, Barrack also stepped down from his seat on DigitalBridge’s board of directors, according to a filing with the Securities and Exchange Commission. Separately, he discussed future investment plans with his family office and club investors.
And last week, he converted nearly 68,000 common shares from Class B to Class A – a move that reduced his influence as Class B shares have oversized voting rights, according to an SEC filing.
Neither Colony nor DigitalBridge have been charged with a crime. Despite the recent firewall that DigitalBridge appears to have created, it will likely conduct an internal investigation to see if it has been subject to any wrongdoing, attorney Andrew Ittleman said. That included searching all communications between Barrack and Grimes, added Ittleman, a money laundering specialist at Fuerst Ittleman David & Joseph.
“There’s a lot of shit these guys have to look at,” he said.
“Old” asset sale
While the former real estate company had already started winding down its real estate portfolio at the time of the coronavirus, the surge in remote work could have accelerated the transition from Colony to DigitalBridge.
Colony defaulted on $ 3.2 billion in hotel loans last May and had reached an agreement by September to sell the majority of its 29,000-key portfolio to Highgate Hotels for $ 2.8 billion.
In recent months, the company also sold two Dublin office buildings for $ 351 million to Blackstone Group and the majority of its other equity and debt holdings to Fortress Investment Group for $ 535 million. It sold its 27.2 percent stake in New York real estate firm RXR Realty for an undisclosed amount to Dyal Capital Partners. In parallel with the sale of these “old” assets, the company has set up new technology-oriented companies such as data centers in Europe and cell towers in Asia.
Fear and agony
Days after Colony announced its merger with DigitalBridge in July 2019, the New York Times reported that Barrack was the subject of an investigation into lobbying violations – and that he was recently interviewed by prosecutors for the US Attorney’s Office in Brooklyn.
Soon after, Bloomberg News reported that a Saudi sovereign wealth fund had invested a nine-figure sum in Colony and DigitalBridge’s $ 4 billion digital infrastructure fund. The reports shed light on Barrack’s business relationships with the Middle East dating back to the 1970s – when he began playing squash with a Saudi prince while working in the law firm of President Richard Nixon’s personal attorney.
“I am simply a grateful recipient of both the ancient Levant civilization that I inherited from my Lebanese parents and the beauty of the free and inspiring opportunity and sanctuary of a free America,” said Barrack, who speaks fluent Arabic on TRD in the year 2017.
While the indictments on Tuesday focus on Barrack’s ties to the UAE, his network in the region spans several Gulf states.
In 2017, he was revealed as the front man for a mega villa project in Bel Air sponsored by the Qatari royal family Al Thani. In the same year, he was charged with tax evasion by Italian prosecutors for selling several luxury properties in Sardinia to the Qatar State Fund.
The period when Barrack allegedly lobbied for the United Arab Emirates was a difficult time for Gulf policy when Saudi Arabia and the Emirates staged a blockade of Qatar that would last until early this year.
“It’s confusing for all of us,” he said in 2017, referring to then-President Trump’s visit to the Middle East. “And we have chaos on our heels. This mess is probably a good thing. “
His assessment of these years seems to have changed. In his most recent interview last week, Barrack characterized his time in Trump’s campaign and early presidency as full of “fear” and “agony”.
“When you look back on that process, it wasn’t fun, it wasn’t rewarding, it wasn’t any of those things,” he said. “There are very few business people who ever survive in the Washington political environment.”
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Keith Larsen