Family builds impressive empire
Future Shop founder has moved into music, medicine royalty sector
In the spot on the National Gallery of Canada’s website on which Nezhat Khosrowshahi’s picture is supposed to go, there’s a generic placeholder image instead — a silhouette of a woman’s head.
Next to the silhouette, a biography outlines her many impressive achievements. A successful entrepreneur in Iran, she and her husband, Hassan, fled during the revolution in the late ’70s and settled in Vancouver, cofounding the holding company that would launch Future Shop.
Last week, Best Buy Co. announced it was shutting down Future Shop, adding it to a growing list of failed electronics retail brands. But Future Shop was anything but a failure for the Khosrowshahis, who solidified their position as one of Canada’s wealthiest and most successful families when they sold the then-successful chain to Best Buy for $580 million in 2001.
Nezhat and Hassan Khosrowshahi’s two children, Behzad and Golnar, have turned the focus of the family business from retail to royalties. Behzad is president and chief executive of DRI Capital, a multibilliondollar subsidiary of the family holding company that invests in pharmaceutical royalties; Golnar is founder and president of Reservoir Media, which owns the licensing rights to a catalogue of popular music ranging from Bananarama’s Cruel Summer to Beyonce’s Naughty Girl.
As the missing photo on the National Gallery of Canada’s website suggests, however, the Khosrowshahis have gone to great lengths to stay out of the spotlight.
Members of the family and representatives from the various subsidiaries of their holding company, Persis Ltd., all ignored or declined repeated requests for interviews.
Hassan reportedly once told the media that “I don’t see (answering reporters’ questions) as part of my job.”
Behzad and Golnar have given a handful of interviews about their business ventures, but one Financial Post story from 2003 mentions that Behzad agreed to be interviewed only on the condition that he would not discuss his family. Canadian businessman Thomas d’Aquino, who considers Hassan Khosrowshahi a good friend, said seeking publicity is just not his style.
“He’s really quite shy, softspoken and low key,” d’Aquino said. “Sometimes people say in order to be a great entrepreneurial success you have to be a great extrovert. Well, I think he proves the contrary.”
Persis and its subsidiaries are private companies, making it impossible to accurately tally the Khosrowshahi family’s total worth. But every indication suggests it’s grown considerably since the sale of Future Shop.
Canadian Business magazine estimates 75-year-old Hassan Khosrowshahi is worth $1.08 billion, putting him at No. 81 on its annual list of the 100 richest Canadians — a list he would prefer to be left off of, as he reportedly once protested in an angry letter. Assessment records show he and Nezhat own a $31.5-million home in Vancouver’s West Point Grey neighbourhood, making it the third-most expensive house in a city of very expensive houses.
In addition to DRI and Reservoir, Persis also has a real estate subsidiary called Wesbild. Wesbild owns a diverse portfolio of real estate including a Calgary shopping mall, an Okanagan golf resort and several residential developments.
Ross Moore, director of CBRE Canada Research, said holding a real estate portfolio like this is common for wealthy families.
Investing in the pharmaceutical and music royalty business is much less common. But less than a year after selling Future Shop, the Khosrowshahis acquired Drug Royalty Corp. for $133 million, with Behzad put in charge of the subsidiary that was later renamed DRI.
The $35-billion US pharmaceutical royalty industry works by identifying promising drugs and paying a lump sum in exchange for all or part of their future royalties. DRI closed a fundraising round in 2013 that brought its total purchasing power to $3 billion and owns royalty rights to drugs made by such pharmaceutical giants as Baxter International Inc. and Merck & Co. Inc.
David Weiler, managing director of Royalty-Source, a firm that maintains a database of licensing agreements for royalty-paying intellectual properties ranging from pharmaceuticals to celebrity branding, said he had never heard of a private family- run business getting involved in the sector. However, he said it makes a lot of sense.
“Everybody can invest in stocks, or bonds, or real estate. Those investments move in certain directions with the market,” he said. “Your goal, always, is to find an investment that offsets the risk of those other assets. And one such asset is a (pharmaceutical) royalty stream. Or Jimi Hendrix’s music catalogue.”
The Khosrowshahis may not own Jimi Hendrix’s music catalogue, but if you hear a song by the rapper 2Chainz, singer-songwriter John Denver or R&B artist Usher, they’re likely making money. Persis subsidiary Reservoir became a significant player in the music-publishing business after acquiring the U.K.’s Reverb Music in 2012 and now owns the rights to more than 100 No. 1 songs worldwide.
In a 2012 interview with CelebrityAccess.com, Reservoir founder Golnar Khosrowshahi said the family was inspired to get into music publishing by the success of DRI.
“We started looking at how the DRI business model could be applied to other areas of intellectual property,” she was quoted as saying. “We liked the fact that royalty rates are regulated by the government. We also liked the fact that there is financial sophistication in this area; in that people had done these types of transactions before.”
While the junior Khosrowshahis have been making their own mark in business, the senior Khosrowshahis continue to sit on the board of Persis, in addition to seats on the boards of many other prominent organizations. Hassan is a member of the Canadian Council of Chief Executives and a director of both the Bank of Canada and the Fraser Institute.
(Hassan Khosrowshahi is) really quite shy, softspoken and lowkey.
THOMAS D’AQUINO
B.C. BUSINESSMAN AND FRIEND