Fortress Investment Group wants to raise $80 million to pay down debt used to acquire German residential property company, Gagfah, as well as service the debt of its other real estate investments.
According to Bloomberg, documents prepared for investor in the fund, Oregon Investment Council, say Fortress is in talks with a lender to pay down margin debt on Gagfah shares and replace it with term financing.
The firm needs $35 million to pay down the margin debt on Gagfah, Germany’s largest publicly traded apartment owner. It also needs another $20 million to bolster Eurocastle and Nationstar Mortgage LLC, a residential loan-servicing company acquired in 2006.
Bloomberg says Fortress went back to investors because the firm already committed all of the capital from Fortress Investment Fund III, a $2 billion vehicle raised in 2004 to buy control of real estate and related companies in the US and Western Europe. As the value of its assets declined, Fortress has had to advance the fund money to meet margin calls, which are demands for more collateral on loans.
Fortress, which has already distributed about $1.3 billion to investors in Fund III, has said the fund’s remaining net assets exceed $1 billion, providing a 12.5 times coverage for the new $80 million recapitalization, according to Oregon. Bloomberg also says the firm expects the $80 million will allow the fund to hold investments until prices rebound, potentially yielding a three to five times return on the new capital invested.
Fortress acquired Gagfah in 2004 for €3.5 billion. At the time, it said it had assumed €1.4 billion of existing debt, taken out a €1.4 billion loan and provided €700 million of equity.