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Trump ally Tom Barrack faces activist pressure at Colony Capital

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Via Financial Times

Tom Barrack, the real estate investor and close friend of President Donald Trump, faces an attempt to unseat him from the board of his Colony Capital investment firm after an activist shareholder lambasted his “abysmal” record.

Jason Aintabi, who owns nearly 2 per cent of Mr Barrack’s company via his investment vehicle Blackwells Capital, has demanded the veteran dealmaker’s immediate removal from the board. Blackwells on Tuesday announced its intention to nominate five “exceptional professionals” to the Colony board to press for change.

Founded by Mr Barrack in the 1990s to capitalise on investment opportunities thrown up by the savings and loans crisis, Colony made its name investing in iconic real estate including London’s Savoy Hotel and Michael Jackson’s Neverland ranch.

But the company has lost 60 per cent of its value since a 2017 merger with rival NorthStar, which Mr Barrack admitted was ill-judged. It is trying to reposition itself as an owner of data centres, mobile phone masts and other digital infrastructure. 

Mr Aintabi has been pressuring Colony for most of this year and has been unhappy with governance changes made. He wrote to Colony’s board in August demanding that Mr Barrack “should resign or be fired”, and published the letter on Tuesday alongside the names of his proposed new directors, in a dramatic escalation of his campaign. 

“We know of no public company board that would continue to employ a CEO who lived 900 miles from headquarters, has been persistently mired in investigations and scandals, appeared to put friendships above objective business evaluations and who had destroyed so much shareholder value,” Mr Aintabi wrote.

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Mr Barrack, who lives in Colorado, said in July he planned to step down as chief executive of Los Angeles-based Colony by 2021. Mr Aintabi called that pledge insufficient, adding that he was “outraged” that Mr Barrack had been allowed to hand-pick a friend, Marc Ganzi, as his successor.

Colony said in a response to Blackwells on Tuesday that it had “taken significant actions to position the company to deliver long-term value for stockholders”, including the acquisition of Mr Ganzi’s infrastructure investment platform Digital Bridge.

Since Mr Barrack reinstalled himself as chief executive at Colony last year, the investment group’s shares have fallen by about a fifth, even as other investment firms and the broader stock market notched up gains.

The new assault on the board comes seven months after the Financial Times unearthed data suggesting that investors lost about 3.7 cents for every dollar they invested in 18 Colony funds raised between 1991 and 2015. 

Colony disputed the report, stating at the time that the FT’s information reflected net returns rather than gross returns — returns before fees — which it believes are a more accurate representation of performance. The firm also contested the FT’s methodology and the conclusion that investors lost money.

The Colony boss has also been embroiled in political controversy. He faces accusations that he tried to influence US policy in the Middle East in ways that could have advanced his business interests, including by seeking his appointment to a senior Trump administration role.

Correspondence released by the US House of Representatives oversight committee this year showed Mr Barrack collaborating with the Wall Street groups Apollo and Blackstone on a plan to use Middle Eastern money to buy the nuclear reactor maker Westinghouse, lawmakers said. Apollo and Blackstone have denied the claim.

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