Fortress Investment Group

Fortress Investment Group, LLC is an American investment management firm based in New York City. It was founded as a private equity firm in 1998 by Wes Edens, Rob Kauffman, Pete Briger, Michael Novogratz, and Randal Nardone.

Overview

When Fortress launched on the NYSE in February 2007, the firm was the first large private equity firm in the US to be traded publicly. In December 2017, Fortress was fully acquired by SoftBank Group, was delisted, and returned to being a privately held company.

Fortress manages $44.7 billion of assets under management as of June 30, 2023, on behalf of over 1,900 institutional clients and private investors worldwide across a range of credit and real estate, private equity and permanent capital investment strategies.

In May 2023, Mubadala Investment Company agreed to acquire a majority stake in Fortress from Softbank for an undisclosed sum. The following year, in partnership with Fortress management, Mubadala completed the acquisition of the company.

History

1998–2010

Fortress Investment Group LLC was founded in 1998 in New York City as a private equity firm in 1998 by Wesley R. Edens, a former partner at BlackRock; Rob Kauffman, a managing director at UBS; Randal A. Nardone, also a managing director at UBS; Michael Novogratz, a former partner at Goldman Sachs; and Pete Briger, also a former partner at Goldman Sachs. The firm quickly expanded into hedge funds, real estate-related investments and debt securities, with Michael Novogratz leading the hedge fund strategy and Peter Briger, also a former Goldman Sachs partner, overseeing the credit and real estate-related investments.

Fortress's investments grew rapidly, with its private equity funds netting 39.7% between 1999 and 2006. 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. 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". Fortress and its principals were subsequently featured in an April 2009 '' Vanity Fair'' article on the adverse economic conditions facing hedge funds.

2010–present

In 2014, Fortress 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. 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. 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. According to the firm, Novogratz, the remaining CIO, was expected to retire from the firm by the end of 2015. 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).

On February 14, 2017, SoftBank Group agreed that it would buy Fortress Investment Group LLC for $3.3 billion. The SoftBank acquisition was completed in the last week of December, with Fortress being delisted from the New York Stock Exchange, and returned to being a privately held company.

In the wake of the Harvey Weinstein sexual assault scandal, in late October 2017, it was reported that Fortress Investment Group was in talks to provide a loan to Weinstein Co. In December 2017, Fortress Investment Group loaned $100 million to the medical startup Theranos. Theranos had reportedly been on the verge of bankruptcy, with the loan to keep them solvent through 2018. At the time, Fortress also had "underdog" bets in a private passenger rail line in Florida. By January 3, 2018, the company had divested itself of Florida East Coast Railway and Logan Circle Partners. It remained the parent company of the Brightline passenger rail in Florida, which is the only privately owned and operated passenger railroad in the United States. Fortress Investment Group is also investing in the construction of Brightline West, a high speed rail route between Las Vegas and Southern California. The route is being advertised as “A Brightline Company.” On January 3, 2018, it was reported that Fortress was nearing a deal to sell its stake on OneMain to Apollo Global Management. The agreement was announced on January 5, with Varde Partners also taking part in the purchase.

In 2020, Fortress Investment increased its bid for Japanese company Unizo to roughly $1.6 billion. In 2021, Fortress failed in a takeover bid for UK supermarket chain Morrisons.

In 2023, Mubadala Investment Company announced that it would acquire majority of stake in Fortress. Mubadala was to acquire 60% stakes for $3 billion from the SoftBank Group. The deal was expected to close by early 2024, and would leave Mubadala with total 70% stakes in Fortress. However, the investment deal was being scrutinized by the Committee on Foreign Investment in the United States (CFIUS). Mubadala's intended investment was a concern for the US over the UAE's growing relations with China. In early 2019, Mubadala took 10% percent stake of Fortress, which had gotten clearance for purchase from CFIUS.

On May 10, 2024, the Financial Times reported the Abu Dhabi sovereign investor Mubadala Capital's $3 billion bid for New York-based Fortress Investment Group has cleared significant U.S. regulatory hurdle after the parties agreed to important concessions. The Committee on Foreign Investment in the United States (CFIUS) approved Fortress' sale of a majority equity interest to Mubadala, the newspaper said, citing three people familiar with the matter.

The approval comes as Mubadala agreed to let Fortress commit to keeping technology and data in the U.S. after it earlier pledged to waive day to day control over the investment group, the report said, adding that the concession comes amid Washington's increased focus on protecting US intellectual property.

CFIUS and Mubadala did not immediately respond to a Reuters request for comment, while Fortress declined to comment on the report. After the deal is completed, Fortress' management will own a 30% stake, with Mubadala owning 70%.

On May 15, 2024, it was announced that Mubadala and Fortress management had completed the purchase of the company.

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.

In November 2006, RailAmerica 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.

In May 2007, Florida East Coast Industries (FECI), parent company of Florida East Coast Railway (FEC), 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. 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. Florida East Coast Railway was sold to Mexican transportation company GMéxico Transportes S.A. de C.V. (GMXT), a unit of Grupo Mexico in 2017.

In June 2007, Fortress announced that it would partner with Centerbridge Partners to acquire Penn National Gaming, an operator of casinos and horse racing venues, for $6.1 billion. Penn National shareholders were to receive $67 cash for each share. In July 2008, Fortress backed away from the agreement amidst the uncertain economic climate. Under the termination agreement, Penn National received $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 assumed a seat on the board of Penn National as part of the agreement.

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

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, Umami Burger, and IPCom GmbH & Co. KG.

In January 2014, Fortress 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, causing 47 fatalities. 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. The sale was completed in May 2014, for US$15.85 million.

In October 2014, it was reported by the '' Birmingham Business Journal'' that Fortress had purchased the Inverness Corners retail center. Fortress Investment Group is also the parent company to Mystays hotels and resorts in Japan.

In April 2024, Fortress purchased the UK discount retailer Poundstretcher, which also included its 60 store sister discount chain Bargain Buys. This added to their other UK businesses Majestic Wine and Punch Pubs.

In early 2024, Fortress sued Businessman Charles Cohen for a default on a $534mn loan made in 2019. In August a New York Supreme Court judge approved proceeding with a foreclosure auction against properties owned by Cohen to recoup part of the value of the loans. Cohen disputed the claim, alleging that a restructuring agreement had been reached with Fortress. The court rejected Cohen's motion to postpone the auction. In November 2024, Fortress seized control of cinema chain Curzon for $5mn as part of the auction.

Controversies

Intrawest late payment and Olympic village funds

Fortress Investment Group was the primary lender to Millennium Development Group for building the C$875 million 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 C$450 million to complete the project in time for the Winter Olympic Games. The City applied for and received legislative approval from the province to borrow as much money as required to complete the project. "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." The village was completed in November 2009. 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 to reduce its debt load. Fortress Investment became the owner of the village after the 2010 Winter Olympics.

VLSI Technology LLC and INVT SPE LLC

VLSI Technology LLC and INVT SPE LLC, portfolio companies owned by investment funds managed by Fortress, have filed several lawsuits against Apple, Intel, HTC, ZTE and other telecommunications companies. In 2019, VLSI alleged Intel's SpeedStep technology introduced in 2005 infringes on its patent purchased. During this same time, VLSI asserted its patents against several other Intel products and obtained two jury verdicts totaling over $3 billion. INVT SPE LLC was assigned 740 telecommunications patents originally filed by Panasonic after funds managed by Fortress acquired assets previously belonging to Inventergy Global, Inc.

Labrador Diagnostics

On March 9, 2020, an LLC owned by funds managed by Fortress through its non-operating subsidiary Labrador Diagnostics (which holds patents previously owned by Theranos), alleged that BioFire's FilmArray technology infringed some of its patents. On March 3, 2020, the ''Wall Street Journal'' published an article identifying that bioMérieux was working on two diagnostic tests for COVID-19. After the patent infringement lawsuit was filed, bioMérieux announced that BioFire was developing tests to detect SARS-CoV-2. After the announcement, Labrador claimed that when it filed the lawsuit against BioFire it had no idea BioFire was developing COVID-19 testing kits. Fortress subsequently offered to grant both the defendants and anyone else a royalty-free license for its technology for use in COVID-19 tests.

Manwin Investment

Fortress invested in Manwin Company.

Key people

*Randal A. Nardone: CEO, co-founder, principal
* Wesley R. Edens: co-founder, principal
*Peter L. Briger: principal

See also

* List of asset management firms
*List of hedge funds

References

External links

*

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Companies formerly listed on the New York Stock Exchange
Investment management companies of the United States
Hedge fund firms in New York City
American companies established in 1998
Financial services companies established in 1998
1998 establishments in New York City
Private equity firms of the United States
SoftBank Group
2017 mergers and acquisitions
2024 mergers and acquisitions
2007 initial public offerings
American subsidiaries of foreign companies