Fortress Investment Group

Fortress Investment Group, LLC
Public
Traded as NYSE: FIG
Industry Investment Management Firm: Private Equity, Credit, Liquid Markets and Traditional Asset Management
Founded 1998 (1998)
Headquarters 1345 Avenue of the Americas
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 $182 million USD (2015)[1]
Number of employees
 979 (2011)
Subsidiaries Nationstar Mortgage
Brookdale Senior Living (former)
Intrawest
Aircastle (partial)
RailAmerica (formerly)
Railroad Acquisition Holdings
Newcastle Investment Corp. (REIT)
New Residential Investment Corp. (REIT)
New Senior Investment Group (REIT)
New Media Investment Group
Website www.fortress.com

Fortress Investment Group is an investment management firm based in New York City.[2] When, Fortress launched on the NYSE on February 9, 2007 with Goldman Sachs and Lehman Brothers underwriting the IPO, it was the first large private equity firm in the United States to be traded publicly.[3][4] As of June 30, 2016, the firm managed approximately $70.2 billion alternative assets in private equity, liquid hedge funds and credit funds.[5] 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.[6]

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.[7] 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.[8]

As of June 30, 2016, Fortress Investment Group had four core businesses totaling approximately $70.2 billion of assets under management: private equity, credit, liquid markets and traditional asset management (Logan Circle Partners was acquired in April 2010).

In autumn 2014, Fortress hired Jeff Feig, formerly the Global Head of Foreign Exchange at Citigroup to join Novogratz as co-CIO of the Fortress Macro Fund.[9] However, as of October 13, 2015, the company announced that the $2.3 billion Macro Fund was to close down and distribute its assets to investors. This development came after Feig stepped down as co-CIO of the fund in July 2015.[10] According to the firm, Novogratz, the remaining CIO, was expected to retire from the firm by the end of 2015.[11]

On February 14, 2017, SoftBank Group agreed to buy Fortress Investment Group LLC for $3.3 billion.[12]

Portfolio companies

In 2006, Fortress-managed Funds acquired Canadian ski resort operator Intrawest, North America's largest ski resort operator that also operated luxury adventure travel brands such as Abercrombie & Kent, which was sold in August, 2016.[13]

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.[14][15] 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.[16][17]

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.[18] The lawsuit was filed in New York state court, alleging Dechert issued a "false" legal opinion letter that Dreier used to defraud Fortress.[19]

Fortress's private equity investment portfolio includes Aircastle Limited, Alea Group Holdings (Bermuda) Ltd., AMRESCO, Boxclever, 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, RESG, Seacastle Inc., Simon Storage, Springleaf Financial and Umami Burger.[20]

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.[21] 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.[22] The sale was completed on 15 May 2014, for USD 15.85 million.[23]

In October 2014, it was reported by the Birmingham Business Journal that Fortress Investment Group had purchased the Inverness Corners retail center.[24]

Controversies

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.[25]

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.[26] Many of IPCom's patents have been invalidated by the courts and millions of dollars have been incurred in legal costs.[27]

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 Southeast False Creek, 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.[28] The village was completed in November 2009.[29]

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.[30] Fortress Investment became the owner of the village after the 2010 Winter Olympics.[31]

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".[32]

Fortress and its principals were featured in an April 2009 Vanity Fair article on the adverse economic conditions facing hedge funds.[33]

References

  1. ↑ "FIG Income Statement". shareholders.fortress.com. Retrieved 26 September 2016.
  2. ↑ "Company Profile for Fortress Investment Group LLC". Bloomberg. Retrieved 4 June 2013.
  3. ↑ "How Private Equity Found Power and Profit in State Capitols". 15 July 2016 – via The New York Times.
  4. ↑ Seymour, Dan (February 9, 2007). "In a First, Hedge Fund Launches on NYSE". Associated Press via Washington Post. Retrieved December 24, 2016.
  5. ↑ "Fortress Investment Group LLC (FIG.N)". Reuters. Retrieved 4 June 2013.
  6. ↑ "Fortress Investment Group Named Institutional Investor’s Hedge Fund Manager of the Year". Fortress Investment Group LLC. Retrieved 31 December 2014.
  7. ↑ "Company Overview of Fortress Investment Group LLC". Businessweek. Retrieved 4 June 2013.
  8. ↑ "Fortress Investment's Shares Soar After Initial Sale". Bloomberg. 2007-02-09. Retrieved 2007-02-10.
  9. ↑ "Citigroup FX chief Jeff Feig leaving bank for Fortress". Reuters. 17 June 2011. Retrieved 5 April 2017.
  10. ↑ "Fortress macro fund co-investment chief Jeff Feig leaving firm". Reuters. 6 July 2015. Retrieved 5 February 2017.
  11. ↑ "Fortress Announces Closing of Fortress Macro Fund". Fortress. Retrieved 2 December 2015.
  12. ↑ Hoffman, Liz; Jenny, Strasburg; Sarah, Krouse (February 14, 2017), SoftBank to Buy Fortress Investment Group for $3.3 Billion, The Wall Street Journal, retrieved February 15, 2017
  13. ↑ Ebner, David (March 2, 2010), "Fortress keeps grip on Intrawest", The Globe and Mail, Vancouver, archived from the original on November 21, 2013, retrieved December 24, 2016
  14. ↑ Stephen Todd Walker (7 January 2011). Wave Theory For Alternative Investments: Riding The Wave with Hedge Funds, Commodities, and Venture Capital. McGraw-Hill Professional. p. 365. ISBN 978-0-07-174286-3. Retrieved 2 August 2011.
  15. ↑ "Florida East Coast Industries to Be Acquired By Funds Managed By Fortress Investment Group LLC in an All-Cash Transaction Valued at $3.5 Billion" (Press release). Florida East Coast Industries. 2007-05-08. Retrieved 2007-05-11.
  16. ↑ "Penn National Gaming agrees to $6.1B deal - USATODAY.com". usatoday.com.
  17. ↑ "Penn National says takeover deal terminated". Reuters.
  18. ↑ "Fortress Files Suit Against Law Firm". The New York Times. December 22, 2009. Retrieved May 2, 2010.
  19. ↑ Opalesque (22 December 2009). "Fortress sues law firm Dechert over Dreier loss".
  20. ↑ Lacter, Mark (February 26, 2013). "Umami Burger shuts first store, picks up more investors for expansion". LAObserved.com. Archived from the original on June 7, 2013.
  21. ↑ "Lac-Mégantic disaster's MM&A sold to Florida Great Lakes Partners". CBC Montréal. 2014-01-21. Retrieved 2014-04-25.
  22. ↑ Le futur propriétaire de MMA veut maintenir un lien de confiance, Rémi Tremblay, L'Echo de Frontenac (March 20, 2014)
  23. ↑ "La vente de la MMA pour 17,24 M $ a été complétée aux États-Unis". La Presse.
  24. ↑ "Inverness Corners sold to New York investment group". Birmingham Business Journal. 21 October 2014.
  25. ↑ "Intrawest on the auction block". Montreal Gazette. January 20, 2010. Archived from the original on January 24, 2010. Retrieved 2010-02-15.
  26. ↑ Jane Lambert. "NIPC Law: Patents: Nokia GmbH and Others v IPCom GmbH & Co. [2011] EWCA Civ 6 (20 Jan 2011)". nipclaw.blogspot.com.
  27. ↑ Jan Wolfe. "Freshfields, Hogan Lovells Knock Out IPCom's Patent Claims". law.com.
  28. ↑ "home". The Globe and Mail. 2009.
  29. ↑ Joanne Blain (January 14, 2010). "Athletes' Village Getting New Life After Winter Games". The New York Times.
  30. ↑ "Olympic Funding". CBC News. 2008. Retrieved December 24, 2016. "By April 2014, the City of Vancouver had paid off the entire $630 million debt of the Olympic Village project at Southeast False Creek, with $91 million being recently recouped through the sale of 67 condos for $91 million to the Aquilini Group."
  31. ↑ Howell, Mike (April 28, 2014). "Updated: City of Vancouver sells final stake in Olympic Village City's revenue projections with developer fell short $130 million". Vancouver Courier. Retrieved December 24, 2016.
  32. ↑ Duncan Greenberg, "America's Biggest Billionaire Losers Of 2008, Forbes, December 16, 2008 (retrieved March 12, 2009).
  33. ↑ McLean, Bethany (April 2009). "Over the Hedge". Vanity Fair. Retrieved September 28, 2013.
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