Fortress Investment Group

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Fortress Investment Group, LLC
Public
Traded as NYSE: FIG
Industry Investment Management Firm: Private Equity, Credit, Liquid Markets and Traditional Asset Management
Founded 1998; 26 years ago (1998)
Headquarters Burlington House
New York City, United States
Key people
 Randal A. Nardone: interim CEO; Wesley R. Edens: Co-Founder, Principal and Co-Chairman of the Board of Directors;
Peter L. Briger: Principal and Co-Chairman of the Board of Directors
Products Investment Management Firm: Private Equity, Credit Funds, Railroads, Hedge Funds and Traditional Asset Management
Increase $200.45 million USD (2013)[1]
Number of employees
 979 (2011)
Subsidiaries Brookdale Senior Living (51%)
Intrawest
Aircastle (partial)
RailAmerica (formerly)
Railroad Acquisition Holdings
Newcastle Investment Corp. (REIT)
New Residential Investment Corp. (REIT)
New Senior Investment Group (REIT)
Website www.fortress.com

Fortress Investment Group, LLC is a leading global investment management firm based in New York City.[2] The company went public on February 9, 2007.[3] As of September 30, 2014, the firm managed approximately $66.0 billion alternative assets in private equity, liquid hedge funds and credit funds.[4] In 2014, Fortress Investment Group was named "Hedge Fund Manager of the Year" by Institutional Investor and "Management Firm of the Year" by HFMWeek. Fortress has previously been recognized by Institutional Investor as “Discretionary Macro-Focused Hedge Fund of the Year” for 2012, and “Credit-Focused Fund of the Year” for both 2011 and 2010.[5]

History

Fortress Investment Group LLC was founded as a private equity firm in 1998 by Wesley R. Edens, a former partner at BlackRock Financial Management, Inc.; Rob Kauffman (businessman), a managing director of UBS; and Randal A. Nardone, also a managing director of UBS.[6] Fortress quickly expanded into hedge funds, real estate-related investments and debt securities, run by Michael Novogratz and Pete Briger, both former partners at Goldman Sachs.

Fortress Investment Group's investments grew rapidly, with its private equity funds netting 39.7% between 1999 and 2006.[7]

As of July 16, 2013, Fortress Investment Group had four core businesses totaling approximately $55.6 billion of assets under management: Private equity, credit, liquid markets and traditional asset management (Logan Circle Partners was acquired in April 2010).

In 2012, revenue rose in each of the last three quarters. In fourth quarter of the same year, revenue rose 51.2% to $441.1 million while the figure rose 99.5% in the third quarter of that year from the year earlier (2011) and 13.8% in the second quarter of 2012.[8]

As of October 13, 2015, Fortress Investment Group announced that the $2.3 billion Fortress Macro hedge fund was to close down and distribute its assets to investors. Michael Novogratz the CIO of the fund was said to retire from the firm by the end of 2015.[9]

Portfolio companies

In 2006, Fortress-managed Funds acquired Canadian ski resort operator Intrawest, North America's largest ski resort operator that also operates luxury adventure travel brands such as Abercrombie & Kent.[citation needed]

On November 15, 2006, RailAmerica Inc. announced that a Fortress-managed fund would acquire the company, offering $16.35 per share (a 32% premium). The transaction was completed in February 2007. Fortress later sold RailAmerica via initial public offering in October 2009.

On May 8, 2007, Florida East Coast Industries (FECI), parent company of Florida East Coast Railway, announced that following a unanimous vote of the FECI Board of Directors, a Fortress-managed fund would acquire FECI in a transaction valued at $3.5 billion.[10][11] The Surface Transportation Board approved the transaction in September 2007. Although RailAmerica operated FEC for a time, the two were never merged, and after the RailAmerica IPO Fortress retained FEC (and still does).

On June 15, 2007, Fortress announced that it would partner with Centerbridge Partners to acquire Penn National Gaming (NASDAQ: PENN), an operator of casinos and horse racing venues, for $6.1 billion. Penn National shareholders were to receive $67 cash for each share. On July 3, 2008, Fortress backed away from the agreement amidst the uncertain economic climate. Under the termination agreement, Penn National receives $1.475 billion, consisting of a breakup fee of $225 million and an interest-free $1.25 billion loan from Fortress, Centerbridge, Wachovia and Deutsche Bank. Fortress co-chairman Wesley Edens assumes a seat on the board of Penn National as part of the agreement.[12][13]

Fortress has taken several of its portfolio companies public such as Aircastle Ltd., Brookdale Senior Living Inc., GAGFAH and RailAmerica, Inc.

Fortress has said it lost $125 million purchasing fraudulent promissory notes from Marc Dreier, who had been operating a Ponzi scheme. Fortress filed a lawsuit against the law firm Dechert in an attempt to recover the loss.[14] The lawsuit was filed in New York state court, alleging Dechert issued a "false" legal opinion letter that Dreier used to defraud Fortress.[15]

Fortress's private equity investment portfolio includes Aircastle Limited, Alea Group Holdings (Bermuda) Ltd., AMRESCO, Boxclever, Brookdale Senior Living Inc., Capstead Mortgage Corporation, CW Financial Services, Eurocastle Investment Limited, Flagler, Florida East Coast Railway, GAGFAH, GateHouse Media, Inc., Global Signal, Inc., Green Tree Servicing LLC, Holiday Retirement, Intrawest, Italfondiario, Kramer Junction, Mapeley Limited, MBS Holdings, MS Hub, Nationstar Mortgage LLC, Penn National Gaming, Inc., Prime Retail, RailAmerica, Inc., RESG, Seacastle Inc., Simon Storage, Springleaf Financial and Umami Burger.[16]

On January 21, 2014, Fortress Investment Group was the winning bidder for the assets of the Montreal, Maine and Atlantic Railway, a line bankrupted after the July 6, 2013 Lac-Mégantic derailment of a runaway train loaded with crude oil obliterated much of historic downtown Lac-Mégantic, Quebec, and incinerated forty-seven of the local townfolk.[17] In March 2014, John E. Giles of Great Lakes Partners estimated a $10–$20 million investment would be needed over three years to repair the line, which Fortress brands as the Central Maine and Quebec Railway, as it is in poor condition and currently not safe for the transport of oil or dangerous goods.[18] The sale was completed on 15 May 2014, for US$15.85 million.[19]

In October 2014, it was reported by the Birmingham Business Journal that Fortress Investment Group had purchased the Inverness Corners retail center.[20]

Controversies

In 2006, Fortress paid Sen. John Edwards, a candidate for the 2008 Democratic Party nomination for president, and the 2004 nominee for vice president, $479,512 for his consulting services, a part-time job.[21] The November 19, 2007 edition of the Wall Street Journal reported Edwards had invested $16 million in Fortress.

Also in 2006, Fortress acquired Intrawest in a leveraged buyout. Three weeks before the opening of the 2010 Winter Olympics in Vancouver, Fortress failed to make payment on its loan used to buy out Intrawest. This caused its creditors to force Intrawest to divest itself of several of its resort holdings in 2009 and 2010, which includes Whistler Blackcomb, in order to reduce its debt load.[22]

In 2006 Fortress lent around $70 million to the controversial animal testing company Huntingdon Life Sciences (HLS). This was later discovered by the animal rights group SHAC, which exists to exert pressure on and close HLS. In 2011 Fortress dropped all ties with HLS.[23]

Fortress Investment Group backed a German patent troll, non-manufacturing entity IPCom GmbH & Co. KG, notorious for suing Nokia for patent infringement for $17.77 billion in 2008.[24] Many of IPCom's patents have been invalidated by the courts and millions of dollars have been incurred in legal costs.[25]

Fortress Investment Group was the primary lender to Millennium Development Group for building the $875 million (CAD) athlete's village for the 2010 Winter Olympics in Vancouver, British Columbia. Financial instability in September 2008 saw Fortress Investment Group reportedly at the brink of bankruptcy. Consequently, Fortress was unable to provide further financing to Millennium forcing the City of Vancouver to pay approximately $450 million (CAD) to complete the project in time for the Winter Olympic Games.[26] The village was completed in November 2009 and may yet realize its potential after the Olympics.[27]

The City of Vancouver applied for and received legislative approval from the Province of BC to borrow as much money as required to enable the project to complete.[28] Anti-Olympic groups had spoken out against the legislative change because they believed that Fortress Investment would remain the owner of the village after the 2010 Winter Olympics.[28][needs update]

Response to 2008 economic crisis

In the wake of the economic downturn of 2008, Forbes included Wesley Edens (and two other Fortress principals) among its "biggest billionaire losers of 2008", noting that Edens had "watched his fortune dwindle as investor redemption soared at the company's flagship fund".[29]

Fortress and its principals were featured in an April 2009 Vanity Fair article on the adverse economic conditions facing hedge funds.[30]

References

  1. ↑ Lua error in package.lua at line 80: module 'strict' not found.
  2. ↑ Lua error in package.lua at line 80: module 'strict' not found.
  3. ↑ Lua error in package.lua at line 80: module 'strict' not found.
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  6. ↑ Lua error in package.lua at line 80: module 'strict' not found.
  7. ↑ Lua error in package.lua at line 80: module 'strict' not found.
  8. ↑ Lua error in package.lua at line 80: module 'strict' not found.
  9. ↑ Lua error in package.lua at line 80: module 'strict' not found.
  10. ↑ Lua error in package.lua at line 80: module 'strict' not found.
  11. ↑ Lua error in package.lua at line 80: module 'strict' not found.
  12. ↑ Lua error in package.lua at line 80: module 'strict' not found.
  13. ↑ Lua error in package.lua at line 80: module 'strict' not found.
  14. ↑ Lua error in package.lua at line 80: module 'strict' not found.
  15. ↑ Lua error in package.lua at line 80: module 'strict' not found.
  16. ↑ Lua error in package.lua at line 80: module 'strict' not found.
  17. ↑ Lua error in package.lua at line 80: module 'strict' not found.
  18. ↑ Le futur propriétaire de MMA veut maintenir un lien de confiance, Rémi Tremblay, L'Echo de Frontenac (March 20, 2014)
  19. ↑ Lua error in package.lua at line 80: module 'strict' not found.
  20. ↑ Lua error in package.lua at line 80: module 'strict' not found.
  21. ↑ Lua error in package.lua at line 80: module 'strict' not found.
  22. ↑ Lua error in package.lua at line 80: module 'strict' not found.[dead link]
  23. ↑ http://www.shac.net/news/2011/july/10.html
  24. ↑ Lua error in package.lua at line 80: module 'strict' not found.
  25. ↑ Lua error in package.lua at line 80: module 'strict' not found.
  26. ↑ http://www.theglobeandmail.com/servlet/story/RTGAM.20090112.wvanoc0112/BNStory/National/home
  27. ↑ Lua error in package.lua at line 80: module 'strict' not found.
  28. ↑ 28.0 28.1 http://www.cbc.ca/canada/british-columbia/story/2009/01/18/olympic-funding.html
  29. ↑ Duncan Greenberg, "America's Biggest Billionaire Losers Of 2008, Forbes, December 16, 2008 (retrieved March 12, 2009).
  30. ↑ Bethany McLean, "Over the Hedge", Vanity Fair, April 2009 (retrieved March 07, 2011).

External links

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