Page 15 - Bloomberg Businessweek-October 29, 2018

Bloomberg Businessweek October 29, 2018

only half the debt fund’s target, and entered into an ill- rumored to cost $100 million; and making political connec-
fated merger. Its shares have fallen about 60 percent since tions. With an estimated $335 billion under management, the
Trump’s inauguration, even as U.S. market indexes have Qatar Investment Authority is one of the shrewder funds in
risen more than 20 percent. the Gulf, and its support for some of Barrack’s oddball pur-
This story about Barrack’s misadventures in politics is chases indicated to other investors that there was a method
based on interviews with more than a dozen current and for- to his madness. After jointly holding assets for a few years,
mer Colony employees, lobbyists, business partners, and cam- Qatari companies would buy out Colony for an impressive
paign officials, most of whom requested anonymity to speak profit. The Miramax deal returned 350 percent, a person with
about private dealings. Barrack declined to be interviewed knowledge of the transaction told Bloomberg when it closed
for this story, but his representatives dispute parts of this in March 2016.
account. They say he remained engaged with the company, Things weren’t going as well in other corners of the Colony
didn’t expect anything in return for making introductions to empire—by then shares of the company had fallen a third
Middle East leaders, and continues to have excellent relations from a year earlier. The Trump campaign was a bright spot.
with rulers of Gulf countries despite increased feuding among On the last day of February, Barrack went public with his sup-
some royal families. port for Trump, the first prominent Wall Street moneyman
“Barrack as chairman is responsible for creating a macro to do so, praising the candidate for his “mastery of financial,
vision and expanding the global brand,” said Owen Blicksilver, political, and economic intellectual complexity combined
a spokesman for Barrack, in a statement. “Politics around the with his charm and emotional intelligence.” The next day was
world is an integral part of developing a vision.” Super Tuesday, with primaries in 11 states. Trump won seven,
cementing his status not just as one to take seriously, but as
To the extent that he holds political beliefs, Barrack the one to beat.
believes in Trump. He experiences politics largely on an
emotional level, according to people who know him. A life- How Trump’s and Barrack’s business histories yielded a
long Republican, he’s nevertheless given money to California friendship is something of a mystery. Their relationship
Democratic Senator Dianne Feinstein, whose husband is a began with Barrack helping to sell Trump two assets the lat-

58 business partner. He briefly worked in the administration of ter couldn’t afford. The first was Alexander’s, a struggling
President Ronald Reagan, whose Santa Barbara, Calif., ranch department-store chain. In 1986, Barrack’s boss, Texas inves-
was near one of Barrack’s properties. Trump is just another tor Robert Bass, sold Trump a 20 percent stake in the com-
rich friend, his rich friends say. pany, which Trump pledged as collateral for a bank loan and
At first, Barrack’s campaign involvement was limited mainly later had to forfeit to pay off the debt.
to strategy calls with Trump. He’d long maintained a robust The following year, the Plaza Hotel was on the market.
travel schedule, visiting company offices and attending inves- Barrack led negotiations for Bass and won the prize—then
tor meetings around the world while still finding time for polo resold it to Trump, who coveted the landmark visible from
and winemaking. Employees assumed he’d have no trouble his New York office. After months of bargaining, Barrack got
balancing the campaign with everything else. Nevertheless, Trump to pay about $400 million for the hotel, yielding Bass
to his friends, it was clear he was becoming invested. “For an estimated profit of more than $50 million in less than a year.
anybody around him, you’d have to live inside a freezer not Interest payments on the money Trump borrowed to finance
to realize he was getting more involved,” says Nacho Figueras, the deal eclipsed the Plaza’s revenue, and by 1992 the hotel
the Argentine model and professional polo star who frequently was forced into bankruptcy.
plays with Barrack. The two continued flirting with other investments. Colony
By early 2016, Barrack’s agenda also included finalizing the considered refinancing a loan for Trump’s Manhattan West
sale of Colony’s stake in Miramax to the government of Qatar. Side rail yards project but couldn’t make the numbers work.
The Gulf nation was already part owner of the Hollywood Barrack weighed buying a controlling stake in Trump’s casi-
studio, having teamed up with Colony to buy it from Walt nos but acquired a competing Atlantic City venue instead, then
Disney Co. for $660 million in 2010. It was a typical deal for hired a former Trump executive to run it. In 2012, when Trump
Barrack and Qatar. For years, when Colony bought an exotic won approval to convert Washington’s Old Post Office building
asset—a French soccer team, a sprawling Sardinian resort—it into a hotel, Colony was initially named as the financier, until
was usually with Qatari backing. Those deals led to a friend- Deutsche Bank AG stepped in.
ship with Hamad bin Jassim bin Jaber Al Thani, better known Still, the two remained friendly. Both have been married
as HBJ, who ruled Qatar from 2007 to 2013 and oversaw its three times and have talked each other through divorces.
wealth fund. They’ve been kind to each other in the business press, a venue
Barrack would do favors for the Qataris, including helping of special importance to Trump.
them wrest a controlling stake in London’s Claridge’s hotel The Plaza deal made Barrack’s career, launching him into
from a pair of tenacious British billionaires; coordinating the the upper echelons of finance. But years later, when Barrack
construction of a 77,000-square-foot Bel Air mansion for HBJ, told the story of the transaction at the Republican National