Fortress Investment Group

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Fortress Investment Group LLC
Type Public
Traded as NYSEFIG
Industry Investment Management Firm: Private Equity, Credit, Liquid Markets and Traditional Asset Management
Founded 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
Net income Increase $14.3 million USD (June 2012)[1]
Employees 979 (2011)
Subsidiaries Brookdale Senior Living (51%)
Intrawest
Aircastle (partial)
RailAmerica (formerly)
Railroad Acquisition Holdings
Website www.fortress.com

Fortress Investment Group LLC is an American investment management firm based in New York City.[2] The company went public on February 9, 2007.[3] As of December 2012, the firm managed alternative assets in private equity, liquid hedge funds and credit funds.[4]

History[edit]

Fortress Investment Group LLC was founded as a private equity firm in 1998[5] by Wesley R. Edens, a former partner at BlackRock Financial Management, Inc.; Robert Kauffman, a managing director of UBS; and Randal A. Nardone, also a managing director of UBS. 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.[6]

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.[7]

Portfolio companies[edit]

In 2006, Fortress-managed Funds acquired Canadian ski resort operator Intrawest. Intrawest is North America's largest operator of ski resorts and also operates luxury adventure travel brands, including 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.[8] [9] 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 it would partner with Centerbridge Partners to acquire Penn National Gaming (NASDAQPENN), an operator of casinos and horse racing venues, for $6.1 billion. Penn National shareholders were to receive $67 cash for each share. It was announced on July 3, 2008, that Fortress had backed away from the agreement amid weakness in the economy and financial markets. Under the termination agreement, Penn National receives $1.475 billion, consisting of a break-up 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. [10][11]

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 fraudster Marc Drier who was operating a Ponzi scheme. Fortress has filed a lawsuit against lawfirm Dechert in an attempt to recover the loss.[12] The lawsuit was filed in New York state court, alleging Dechert issued a "false" legal opinion letter that Mr. Dreier used to defraud Fortress.[13]

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, and Umami Burger.[14]

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 alive.[15]

Controversies[edit]

In 2006, Fortress paid Sen. John Edwards, 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. [1] 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 Olympics, 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.[16]

Fortress loaned the controversial animal testing company Huntingdon Life Sciences around $70 million in 2006. 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.[2]

During the RailAmerica ownership, railfans criticized both RailAmerica and Fortress Investment Group for an increased number of abandonments on several shortlines. The most notorious example, the Central Oregon and Pacific's Coos Bay line, is saved from abandonment unlike other lines.

Fortress Investment Group has backed a German patent holding firm IPCom GmbH & Co. KG. This firm is now suing Nokia for patent infringement for $17.77 billion.[17]

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.[3]. The village was completed in November 2009 and may yet realize its potential after the Olympics. [4]

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. [5] Anti-Olympic groups have spoken out against the legislative change because they believe that Fortress Investment will remain the owner of the village after the 2010 Winter Olympics.[6]

Response to 2008 economic crisis[edit]

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."[18]

Fortress and its principals were featured in an April 2009 Vanity Fair article on the adverse economic conditions facing hedge funds.[19]

References[edit]

  1. ^ "FIG Income Statement". finance.yahoo.com. Retrieved 1 March 2011. 
  2. ^ "Company Profile for Fortress Investment Group LLC". Bloomberg. Retrieved 4 June 2013. 
  3. ^ Seymour, Dan (2007-02-10). "In a First, Hedge Fund Launches on NYSE". Associated Press via Washington Post. Retrieved 2007-02-10. 
  4. ^ "Fortress Investment Group LLC (FIG.N)". Reuters. Retrieved 4 June 2013. 
  5. ^ "Company Overview of Fortress Investment Group LLC". Businessweek. Retrieved 4 June 2013. 
  6. ^ "Fortress Investment's Shares Soar After Initial Sale". Bloomberg. 2007-02-09. Retrieved 2007-02-10. 
  7. ^ "Forbes Earnings Preview: Fortress Investment Group". Forbes. Retrieved 4 June 2013. 
  8. ^ Stephen Todd Walker (7 January 2011). Wave Theory For Alternative Investments: Riding The Wave with Hedge Funds, Commodities, and Venture Capital. McGraw-Hill Professional. pp. 365–. ISBN 978-0-07-174286-3. Retrieved 2 August 2011. 
  9. ^ "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. 
  10. ^ USA Today: Penn National Gaming agrees to $6.1B deal. Retrieved June 15, 2007
  11. ^ Reuters: Penn National says takeover deal terminated. Retrieved July 10, 2008
  12. ^ "Fortress Files Suit Against Law Firm". The New York Times. December 22, 2009. Retrieved May 2, 2010. 
  13. ^ Opalesque (22 December 2009). "Fortress sues law firm Dechert over Dreier loss". 
  14. ^ 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. 
  15. ^ http://www.cbc.ca/news/canada/montreal/lac-m%C3%A9gantic-disaster-s-mm-a-sold-to-florida-great-lakes-partners-1.2504711
  16. ^ "Intrawest on the auction block". montrealgazette.com (Canwest Publishing). January 20, 2010. Retrieved 2010-02-15. [dead link]
  17. ^ "IP.com is NOT suing Nokia for $17.7 Billion". February 2, 2008. Retrieved 2010-10-02. 
  18. ^ Duncan Greenberg, "America's Biggest Billionaire Losers Of 2008, Forbes, December 16, 2008 (retrieved March 12, 2009).
  19. ^ Bethany McLean, "Over the Hedge", Vanity Fair, April 2009 (retrieved March 07, 2011).

External links[edit]