Richard Rainwater, the Texas investor who helped the Bass family turn a $50 million oil inheritance into a reputed $5 billion fortune, has died. He was 71.

He died Sunday at his home in Fort Worth, Texas, according to a statement from Rainwater Charitable Foundation, the group he founded. In 2009, he was diagnosed with progressive supranuclear palsy, a degenerative brain disease. PSP affects nerve cells that control walking, balance, vision, speech and swallowing, and has no known cause or cure.

Rainwater’s net worth was estimated at $3.5 billion by Forbes magazine in 2007. That was the year he sold Crescent Real Estate Equities Co., owner of office buildings in Houston and Dallas, and the Canyon Ranch spas in Arizona and Massachusetts, to Morgan Stanley for $4.43 billion near the height of the property bubble. This month Forbes estimated his net worth at $3 billion.

A gregarious man who enjoyed golf and drag racing, Rainwater looked for industries that were out of favor and sought out partners he could back to form companies to bet on a recovery.

His best-known investment while working for the Bass family from 1970 to 1986 was Walt Disney Co., where he endorsed the hiring of Michael Eisner to turn around the movie studio and theme park operator. Rainwater later helped former President George W. Bush earn about $16 million through an investment in the Texas Rangers baseball team while Bush was governor of Texas.

Buying Low

“He was able to see around corners,” said John Goff, his former investment partner, in a 2011 Bloomberg interview.

Rainwater spotted value in the consolidation of the U.S. hospital industry and formed what became the biggest hospital chain at the time to profit from it.

He bought Texas office buildings in the early 1990s after the oil-price decline and savings and loan crisis depressed property values in the state. One early purchase, the five-building Crescent office complex in downtown Dallas, formed the basis of the real estate investment trust that Rainwater took public in 1994 and was later acquired by Morgan Stanley.

At least twice -- after the oil bust of the late 1980s and before the commodities boom of the 2000s, he made large and profitable bets on a surge in crude prices.

Texas Upbringing

Richard Edward Rainwater was born on June 15, 1944, in Fort Worth, the second of two sons in a Lebanese-American family. His father owned a wholesale business and his mother was a sales clerk at J.C. Penney.

He majored in mathematics at the University of Texas, then attended Stanford University’s Graduate School of Business, where he met Sid Bass, the oldest of the four Bass brothers whose great-uncle Sid Williams Richardson had made millions drilling for oil and natural gas.

Bass helped start Rainwater’s career. In 1969, at the age of 27, Sid Bass was given charge of the family fortune by his father Perry and the following year Bass invited Rainwater to join him. Rainwater had spent two years working for Goldman, Sachs & Co., part of the time selling securities in Dallas. Bass eventually put Rainwater in charge of managing the family’s investments.

The two sank about $20 million into various investments and “all the early deals lost money,” wrote John Train in his 2000 book “Money Masters of Our Time.” To develop his investment skills, Rainwater sought the advice of investors including Warren Buffett, growth-investing pioneer Philip A. Fisher and Allen & Co. founder Charlie Allen, and studied the work of value-investing guru Benjamin Graham.

Buying Spree

Rainwater and Bass bought shares of Marathon Oil Co. in 1981 and made a $160 million profit, doubling their investment, when the company was later sold, according to the 2009 book “The Big Rich” by Bryan Burrough.

When Texaco Inc. became the object of takeover speculation in 1984, Bass and Rainwater accumulated a stake of almost 10 percent and ended up selling it back to the company for a profit of about $400 million.

Next Rainwater and Bass turned their attention to Disney, another hostile takeover target. To thwart corporate raider Saul Steinberg and get its stock into friendly hands, Disney bought a Florida real estate developer that Rainwater had purchased, Arvida Corp., for 2.9 million shares of Disney stock in May 1984. Bass and Rainwater increased their stake in Burbank, California-based Disney to almost 25 percent. By 1986, the Basses had a paper profit of $850 million on their Disney stake.

‘Always Fun’

“Richard was a great partner,” Sid Bass said in a statement. “We learned together and we invented as we went along. It was always fun and exciting.”

Rainwater often spent summers in Nantucket, Massachusetts, and was part owner of the Pebble Beach golf course and resort near Carmel, California.

In 1986, with an estimated net worth of about $100 million, he started his own investment firm, Rainwater Inc. He brought along Goff, his accountant when he worked for Sid Bass, to set up a finance department. Rainwater brought in partners and worked on deals.

Rainwater’s marriage to his first wife, Karen, his high school sweetheart with whom he had three children, ended in divorce in October 1991 after 25 years.

New Partner

Two months later, he married Darla Dee Moore, a banker whom he had met in 1990 while separated from Karen. Moore, who took charge of Rainwater’s investment firm, had worked at Chemical Bank in New York, specializing in lending to companies in bankruptcy. The South Carolina native was dubbed the “Queen of DIP,” for debtor-in-possession financing. Fortune magazine called her the “toughest babe in business.”

Rainwater and Moore became a power couple, jetting between their New York apartment, a vacation home in Montecito, California, adjacent to Santa Barbara, and Moore’s family farm in South Carolina.

Moore flanked Rainwater in 1996 when he helped Mesa Inc. Chairman T. Boone Pickens refinance part of the oil and gas exploration company’s $1 billion of debt. Pickens sold him a 33 percent stake in the company for $133 million. After the deal closed, Moore told Pickens to resign, saying he had lost shareholder confidence.

Moore also ousted Richard “Rick” Scott, who was a lawyer specializing in hospital acquisitions when he and Rainwater teamed up in 1987 to start Columbia Corp. The company later merged to become Columbia/HCA, once the largest hospital chain in the country. Rainwater and Scott, who was elected Florida governor in 2010, each put up $125,000 to start the business on Oct. 19, 1987, the day of the stock market crash.

Stock Movement

The company embarked on an acquisition spree and its stock soared before tumbling amid a federal investigation into billing fraud. Moore, who had joined Columbia/HCA’s board, fired Scott in 1997.

Questions of conflicts of interest dogged some Rainwater companies. In 1997, Crescent, Rainwater’s REIT, agreed to buy the real estate assets of Magellan Health Services Inc., where Moore was a board member, for $400 million. Crescent leased the Magellan facilities to Charter Behavioral Health Services -- a joint venture owned by Magellan and Crescent Operating Inc., a publicly traded company formed by Rainwater to bypass restrictions on REIT acquisitions.

‘60 Minutes’

Analysts criticized the fees Charter would pay as too high. The payments left Charter with an annual cash deficit of about $6 million, according to a 1998 report by Green Street Advisors Inc. a property research firm.

“They basically sucked all the operating income out of Charter,” John Robertson, an analyst at Rreef America LLC, told Bloomberg Markets magazine in 2000.

Charter’s problems grew in 1999. The CBS “60 Minutes” news program alleged that Charter had falsified medical records and that its cash-poor facilities created dangerous conditions for patients. Charter filed for bankruptcy protection from creditors in 2000 and Crescent Operating filed for bankruptcy protection in 2002.

Rainwater often made big profits, even from companies in which other investors ended up losing money, according to the 2000 Bloomberg Markets story. In 1986, he joined a group of investors buying Chicago-based Darling-Delaware Inc., which turned animal carcasses into grease, fertilizer, and chicken feed, for $96 million. The group put up $16 million in cash.

Selling Junk

Three years later, the investors paid themselves a cash dividend of $180 million, financed by selling $175 million of 14 percent junk bonds.

When Darling’s business declined, it was saddled with $300 million of debt it couldn’t pay. In 1991, bondholders filed a class-action suit against the company, which settled in 1993 by giving bondholders almost all of Darling’s equity and $5 million in cash.

Rainwater bankrolled an effort to find a cure for PSP and still enjoyed trips to sunny climates with a small group of friends, according to a November 2011 article in Fortune.

When Rainwater sold Crescent in 2007 to Morgan Stanley, he got out near the top. The global credit crisis the following year caused property values to plummet and shut down refinancing for real estate. Morgan Stanley surrendered Crescent to lender Barclays Capital in 2009 after taking almost $1 billion in losses.

His survivors include his wife; three children from his first marriage, Courtney Rainwater, Todd Rainwater and Matthew Rainwater; and brother Walter Rainwater.

(Source: Bloomberg – Photo credit: Fortune)