Michael Jackson was a citizen of the world who touched generations of music lovers with the thrill of his creative genius. He also was a troubled borrower and a man in financial crisis.
The King of Pop reportedly called home just one place, his estate in California, valued at $33 million, on which he took a single home-equity line of credit.
All his life Mr. Jackson took only one mortgage under his name, DaRayl D. Davis, CEO of wealth management and investment advisory firm Financial Assurance Corp., Washington, who has observed the star's financial profile over the years, told this publication. Mr. Jackson took out a $23 million mortgage against the property, which is one gigantic home-equity line of credit given his spectacular debts.
"Financial records suggest that Mr. Jackson may have paid for the ranch without a mortgage, when he purchased it in 1988," he said, so his one mortgage "would likely be seen" as a HELOC against the property. "Based on all the records I've been able to find and review and financial documents obtained by the Associated Press, Mr. Jackson had one mortgage for his primary residence, the nearly 3,000-acre Neverland Ranch in Santa Barbara County."
Despite his many debts the King of Pop managed to remain current on his mortgage. He had a number of wealthy benefactors who were there to bail him out of financial troubles, the advisor explained.
"When Neverland faced foreclosure in March 2009, Thomas Barrack, the founder of Colony Capital, a Los Angeles-based real estate investment firm, purchased the defaulted loan to prevent public auction of the property. The two parties formed a joint venture Sycamore Valley Ranch Co. LLC and Mr. Jackson transferred the title. Mr. Jackson sold a portion of his property rights for $35 million in cash."
As to where did he bank, the list consists of a number of financial firms that over the years provided tens of millions of dollars to finance Mr. Jackson's lifestyle. Included are Colony Capital LLC, Bank of America, Fortress Investment Group and Barclays Bank PLC.
"There was a point when Mr. Jackson owed Bank of America $270 million," Mr. Davis said. "According to BusinessWeek, Bank of America sold that debt to Fortress Investment Group for a discounted amount. A $23 million loan from Fortress that Jackson defaulted on is what nearly led to the auction of Neverland before Colony Capital stepped in to purchase that defaulted loan which represents the $23 million mortgage. Mr. Jackson's most valuable asset is his share of a music catalog with publishing rights that include Beatles songs. He used the catalog as collateral for a number of loans and he had $300 million in debt to Barclays Bank alone."
It has not yet been determined who will take care of Mr. Jackson's real estate assets and how. Contenders named in his will are John Branca, John McClain and Barry Siegel as co-executors. Mr. Davis recalled that Mr. Branca was an attorney for Mr. Jackson, Mr. McClain is a music executive and was long-time friend of Mr. Jackson and Mr. Siegel was his accountant. "Mr. Siegel actually resigned from his role as co-executor in 2003 which leaves Messrs. Branca and McClain with the authority to buy and sell assets, continue business enterprises and to buy, sell and lease or mortgage property, pay mortgages, etc., on behalf of the estate. As co-executors, the will gives them full power over financial matters pertaining to Jackson's estate."
There is speculation that Neverland will be turned into a museum. The question remains: Is it financially viable?
"That desire to initiate such a museum would have to be mutually shared by the trustee or trustees of the Michael Jackson Family Trust and the joint venture partners of the Sycamore Valley Ranch Co. that includes an affiliate of Colony Capital. The capital for such a development would be provided in part by these partners. However, it seems unlikely that a museum in the similitude of Elvis' Graceland will be welcomed by neighbors of Neverland. There is a long-time resident of the area and local real estate broker, William Etling, who blogged about some of the challenges facing this type of effort. He noted that the ranch is zoned for agricultural use and not commercial use." The advisor says the community is concerned that the traffic a museum might bring would harm the property values in the area.
According to Mr. Davis, Mr. Jackson's childhood hometown of Gary, Ind., on the other hand, would love to be host to such a memorial and might help foot the bill if an agreement were reached.
A museum remains a possibility despite the star's mutch publicized debt. "It appears that Mr. Jackson's assets are greater than his liabilities so there should be no need to file bankruptcy," the advisor says.
The King of Pop reportedly called home just one place, his estate in California, valued at $33 million, on which he took a single home-equity line of credit.
All his life Mr. Jackson took only one mortgage under his name, DaRayl D. Davis, CEO of wealth management and investment advisory firm Financial Assurance Corp., Washington, who has observed the star's financial profile over the years, told this publication. Mr. Jackson took out a $23 million mortgage against the property, which is one gigantic home-equity line of credit given his spectacular debts.
"Financial records suggest that Mr. Jackson may have paid for the ranch without a mortgage, when he purchased it in 1988," he said, so his one mortgage "would likely be seen" as a HELOC against the property. "Based on all the records I've been able to find and review and financial documents obtained by the Associated Press, Mr. Jackson had one mortgage for his primary residence, the nearly 3,000-acre Neverland Ranch in Santa Barbara County."
Despite his many debts the King of Pop managed to remain current on his mortgage. He had a number of wealthy benefactors who were there to bail him out of financial troubles, the advisor explained.
"When Neverland faced foreclosure in March 2009, Thomas Barrack, the founder of Colony Capital, a Los Angeles-based real estate investment firm, purchased the defaulted loan to prevent public auction of the property. The two parties formed a joint venture Sycamore Valley Ranch Co. LLC and Mr. Jackson transferred the title. Mr. Jackson sold a portion of his property rights for $35 million in cash."
As to where did he bank, the list consists of a number of financial firms that over the years provided tens of millions of dollars to finance Mr. Jackson's lifestyle. Included are Colony Capital LLC, Bank of America, Fortress Investment Group and Barclays Bank PLC.
"There was a point when Mr. Jackson owed Bank of America $270 million," Mr. Davis said. "According to BusinessWeek, Bank of America sold that debt to Fortress Investment Group for a discounted amount. A $23 million loan from Fortress that Jackson defaulted on is what nearly led to the auction of Neverland before Colony Capital stepped in to purchase that defaulted loan which represents the $23 million mortgage. Mr. Jackson's most valuable asset is his share of a music catalog with publishing rights that include Beatles songs. He used the catalog as collateral for a number of loans and he had $300 million in debt to Barclays Bank alone."
It has not yet been determined who will take care of Mr. Jackson's real estate assets and how. Contenders named in his will are John Branca, John McClain and Barry Siegel as co-executors. Mr. Davis recalled that Mr. Branca was an attorney for Mr. Jackson, Mr. McClain is a music executive and was long-time friend of Mr. Jackson and Mr. Siegel was his accountant. "Mr. Siegel actually resigned from his role as co-executor in 2003 which leaves Messrs. Branca and McClain with the authority to buy and sell assets, continue business enterprises and to buy, sell and lease or mortgage property, pay mortgages, etc., on behalf of the estate. As co-executors, the will gives them full power over financial matters pertaining to Jackson's estate."
There is speculation that Neverland will be turned into a museum. The question remains: Is it financially viable?
"That desire to initiate such a museum would have to be mutually shared by the trustee or trustees of the Michael Jackson Family Trust and the joint venture partners of the Sycamore Valley Ranch Co. that includes an affiliate of Colony Capital. The capital for such a development would be provided in part by these partners. However, it seems unlikely that a museum in the similitude of Elvis' Graceland will be welcomed by neighbors of Neverland. There is a long-time resident of the area and local real estate broker, William Etling, who blogged about some of the challenges facing this type of effort. He noted that the ranch is zoned for agricultural use and not commercial use." The advisor says the community is concerned that the traffic a museum might bring would harm the property values in the area.
According to Mr. Davis, Mr. Jackson's childhood hometown of Gary, Ind., on the other hand, would love to be host to such a memorial and might help foot the bill if an agreement were reached.
A museum remains a possibility despite the star's mutch publicized debt. "It appears that Mr. Jackson's assets are greater than his liabilities so there should be no need to file bankruptcy," the advisor says.
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