Fortress asks LPs for money to pay down debt

Fortress Investment Group is seeking money from investors to shore up existing investments in companies from a co-investment fund raised in 2007.

Fortress is trying to raise $325 million for a follow-on fund called Fortress Florida Preferred Fund, which will allow the firm to pay down debt on existing investments and allow “Fortress to focus management’s efforts on the investment’s business plan and maximise the overall value of the underlying companies”, according to documents from the California State Teachers’ Retirement System. CalSTRS committed $21.3 million to the fund.

Wes Edens

Fortress raised $1.5 billion from 51 investors for a Florida Co-Investment Fund. The firm, founded by Wed Edens, started raising follow-on capital through the Florida Preferred Fund in January, and according to the US Securities and Exchange Commission, had collected about $74 million by February.

This is not the first time Fortress has approached existing investors to help recapitalise older portfolios. Last year, Fortress approached existing LPs in its $2 billion third fund asking for additional capital commitments to help the vehicle reduce its debt load. The Wisconsin State Investment Board committed an extra $10 million to the fund last May, after making a $100 million commitment in 2004.

Part of the firm’s move to recapitalise the fund included paying down $35 million of debt owed by Gagfah, Germany’s largest publicly traded apartment owner. Fortress III has a -1.21 percent internal rate of return as of 30 September, 2009, according to documents from the Oregon Investment Council.