By The Last Tear (Lou)
In 2012 and the beginning of 2013, I posted three blogs – Some dates and names: Review 1, 2, 3 – where my blog friend and I studied the relationship between Michael Jackson and the pair Tohme Tohme – Thomas Barrack (Colony Capital). One of the points that we discussed was the joint venture between MJ and Colony Capital. At that time we have not seen the deal between the two partners. All we knew was that they were co-owners and MJ had 87.5% of the interests while CC had 12.5%.
Based on the limited information we had, me and the others as well concluded that MJ did not give the decision power to Colony Capital. Now we have access to the deal document. Ivy of MJJC studied it and wrote a post about it Inside Michael Jackson – Colony Capital Neverland deal: What we learned over time
From the extracts of the contract (in Ivy’s post) we learn that MJ had no managing power only consultation right. His approval was not necessary in most decisions. We also learn that Colony Capital had the right to sell the ranch without MJ’s consent (now MJ Estate). Our blog is based on research. However, we do not have access to confidential documents and information! But as soon as new information comes up, we update our posts.
Here is the link to Neverland deal between Jackson and Colony Capital http://www.scribd.com/doc/255769393/Colony-Capital-MJ-Neverland-Deal
Even though we did not know the content of the deal between MJ and CC, the way Barrack and his right hand Tohme approached MJ looked suspicious. In our opinion, in 2007-08 MJ was considered “damaged goods” among the moguls of the industry although he owned several major music catalogs. As we said in our posts, most of “the well-wishers” who approached Jackson in his last years and wanted to “re-launch” Michael’s career, were mostly after his assets. The details of the deal between CC and MJ are a confirmation of this observation.
We share here Estate’s latest announcements about Neverland, the extracts that Ivy posted and Zack O’Malley’s article published in 2014 in Forbes.
From the Estate:
Over the past week, the Estate has received inquiries from members of the fan community about the sale of Neverland. It has also been brought to the Estate’s attention that there are members of the fan community who intend to boycott future products until Neverland is in the possession of Michael’s children with the hope that this action will persuade the Executors to do something that they are powerless to do. As has been said in previous statements from the Estate, both to the media and to the fan community, the Estate is very disappointed over the decision by Colony Capital to sell Neverland. Unfortunately, that does not change the reality that it the Estate is not in a position to stop the sale of the property. As was also stated in a previous statement that we shared with you last July, under the terms of the agreement that Michael himself signed with Colony Capital, Colony has the right to sell. The statement continued:
UNFORTUNATELY, THE ESTATE HAS NO LEGAL STANDING IN THIS DECISION. The Estate will maintain Michael’s family home in Encino, including its iconic recording studio. We continue to build upon Michael’s legacy as an artistic genius and humanitarian through his music and new projects such as the Michael Jackson ONE show in Las Vegas. We hope and trust that any new owners of Neverland will respect the historical importance and special nature of this wonderful property. Michael’s memory lives on in the hearts of his fans worldwide.
No matter how many requests or notices of boycott the Estate receives, it cannot prevent the sale of Neverland, nor would it be fiscally responsible for the Estate to spend Michael’s children’s money on purchasing the property again.
The Estate is very saddened by the thought of the sale and hope that the fan community can understand and appreciate that the Executors worked with Colony to try to find an alternative to the sale of the property but were unsuccessful in doing so and Colony ultimately determined that it needed to proceed with the sale – something that they have the legal right to do.
The Official Online Team of The Michael Jackson Estate™
Inside Michael Jackson – Colony Capital Neverland deal: What we learned over time
7/31/2014 @ 3:13fm 25 771 views
Michael Jackson’s Neverland Is About To Be Sold
Though Michael Jackson moved out of Neverland years before his untimely passing, the 2,700-acre property remains indelibly associated with the King of Pop to this day. Soon, however, the connection will be only in thought, not deed: Neverland is set to be sold.
According to sources familiar with the matter, billionaire Tom Barrack’s Colony Capital is preparing to put the Los Olivos, Calif. property on the market. The firm became Neverland’s managing partner after Barrack struck a deal with Jackson in late 2007 to take over the $23 million note held by private equity fund Fortress.
“We are frustrated, bitterly disappointed and saddened that it has come to this,” said a representative for Jackson’s estate in an electronic message to FORBES. “Sadly, Michael lost control of Neverland during his life as a result of advice from a former manager.”
Representatives for Colony Capital could not immediately be reached for comment.
As I reported in Michael Jackson, Inc: The Rise, Fall and Rebirth of a Billion-Dollar Empire , the agreement between Jackson and Colony was a complex one. Barrack himself said he only took on the note as a favor to Jackson (in an interview for the book, he recalled his words to the singer: “Don’t have me do this … unless you’re really interested in building a program going forward to create some revenue for yourself.”)
The agreement, which took effect in early 2008, called for Colony to manage Neverland as a sort of joint venture with Jackson. For every dollar the company invested in the property, its equity would increase. This meant that while Jackson—and, later, his estate—retained a stake in the property, it decreased on paper as time went on.
Over the past six years, Colony has continued to fund the upkeep of Neverland. That cost, if it’s anything like it was in Jackson’s day, is likely in the neighborhood of $5 million per year. Add in the $23 million note, and back-of-the-envelope math suggests the firm may have invested more than $50 million in the property to date. It also retains the right to sell the property at will.
Still, many options were explored over the years. Toward the end of his life, Jackson himself is said to have been intrigued by the idea of turning Neverland into a school for the performing arts; after his death, many have suggested that the property be turned into an attraction like Elvis Presley’s Graceland.
But as anyone who’s been to Neverland (this writer included) can tell you, Los Olivos isn’t exactly Memphis. The area is nowhere near an interstate, and its narrow mountain roads aren’t conducive to accommodating hundreds of thousands of visitors a year.
“The Estate explored numerous options, including a purchase,” continued the aforementioned representative’s statement. “But financial, land use and zoning restrictions have made all of the proposed options prohibitive given our duty as Executors to be fiscally responsible in protecting and growing the assets of the Estate for Michael’s children.”
Indeed, Jackson’s estate has pulled in more than three quarters of a billion dollars in a little over five years since his death. But that’s before taxes and expenses, not to mention the specter of a $702 million IRS bill that the estate is currently appealing.
Buying back Colony’s share of Neverland—not to mention footing a multimillion-dollar annual upkeep bill for a property that does not generate income—would seem to be an imprudent financial choice.
And so, Neverland may soon have a new owner on paper. But any buyer will have to understand the property will always be the King of Pop’s realm in the minds of millions.