Last Wednesday, Colony Capital emailed a flyer to LPs that it might have considered innocuous. It read: “SAVE THE DATE – Colony 2011 Partners Conference. Colony Capital’s 20th Anniversary 2011 Partners Conference will be held at The Fairmont Orchid on the Big Island of Hawaii.”
However, as soon as Colony made the announcement, some LPs emailed founder Tom Barrack, kicking up a fuss. Very shortly after, the two-day annual investor event – and a special one, given the firm’s 20th anniversary – was scrapped. Instead, the firm quickly swapped locations to Colony’s hometown of Los Angeles.
The problem, you see, is that times have changed for many LPs. For public sector pension plans in particular, travel policies preclude certain trips. Indeed, some investors told Colony their travel policies no longer permitted travel to Hawaii, given the time and distance involved. Other investment professional no longer feel comfortable going to certain destinations, especially those that can be perceived as junkets.
One can blame a host of issues: the US pay-to-play scandal, poor performance of opportunity funds or even the way US taxpayers had to bail out financial institutions. Whatever the reason, there is a spotlight on anything that involves public servants and the slightest whiff of frivolity, arrogance or hypocrisy. In short, there is perception problem with John Doe from X state’s public teachers’ plan spending two days in Hawaii at a five-star resort that describes itself as “paradise”.
Still, there is something sad about the whole situation. Barrack, who has already come under pressure recently for comments about how hard it is to invest in real estate and whose recent performance has been questioned by some, has been holding these annual investor meetings for nearly two decades. The firm has held them all over the world – in England, in Spain, in Canada and, tellingly, even Hawaii before.
In addition, Colony chooses locations it feels are productive and where it can showcase opportunity for distressed investment. In an article this summer, Pacific Business News reported that Barrack was in Hawaii scouting potential property deals, as the market has reached the bottom. Indeed, according to PERE’s sources, Colony is looking to acquire resorts, making a Hawaii meeting the perfect venue to showcase the opportunity.
The problem for Barrack is that the situation raises the question of whether he is in touch with investors, despite those seemingly valid reasons. He and Colony are hoping the gaffe will be remembered as just a sign of the times for LPs.