Fortress Investment Group: Wikis

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Fortress Investment Group LLC
Type Public
(NYSEFIG)
Founded 1998
Headquarters New York, New York
Key people Wesley R. Edens: CEO, Chairman of the Board of Directors, and co-founder;
Robert Kauffman: President - Europe, Director, and co-founder;
Randal A. Nardone: COO, Director, and co-founder
Industry Alternative Asset Management: Private Equity, Hedge Fund, Real Estate, and Railroad
Products Alternative Asset Management: Private Equity Funds, Hedge Funds
Net income $322.3 million USD (2008)
Employees 840 (2008)
Website www.fortress.com

Fortress Investment Group LLC (Fortress Investment Group) (NYSEFIG) is a New York, New York-based alternative asset management firm that manages private equity funds, hedge funds, real estate funds, and railroad-related investments, with announced plans to move into casinos and horse racing. The company went public on February 9, 2007.[1]

Contents

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.; 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.[2]

As of September 30, 2006, the most recent date for which figures were available before Fortress Investment Group's IPO the firm held around $17.5 billion in private equity, around $9.4 billion in hedge funds and managed two publicly-traded investment companies:

Portfolio Companies

In 2005, Fortress-managed Funds acquired Canadian ski resort operator Intrawest, although that investment is now considered worthless.[3]

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.

On May 8, 2007, Florida East Coast Industries (FECI), parent company of Florida East Coast Railroad, 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.[4] The Surface Transportation Board approved the transaction in September 2007.

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 CEO Wesley Edens assumes a seat on the board of Penn National as part of the agreement. [5][6]

Fortress has returned several of its private equity investments to public trading, including Aircastle Ltd., Brookdale Senior Living Inc. and GateHouse Media (which was since de-liseted in 2008).

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.[7]

Controversies

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. Fortress had purchased poorly-performing New Orleans mortgages with the intention of foreclosing on properties in the Hurricane Katrina affected area through affiliates. Edwards' relationship with Fortress hurt his presidential campaign as he claimed to be a supporter of average Americans.

Fortress Investment Group has backed a patent holding firm IP-Com. This firm is now suing Nokia for patent infringement for $17.77 billion.

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 refused further financing to Millennium due to rising project costs, forcing the City of Vancouver to pay approximately $450 million (CAD) to attempt to complete the project in time for the Winter Olympic Games.[2].

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. [3] Anti-Olympic groups have spoken out against the legislative change because Fortress Investment will still contractually remain the owner of the village after the 2010 Winter Olympics.[4]

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."[8]

Fortress and its principals were featured in an April 2009 Vanity Fair article on the adverse economic conditions facing hedge funds.[9]

References

External links

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