Fortress’ Q3 RE earnings down 20%

The firm’s real estate vehicles generated earnings of $4m, down 20% from last year. It compares to a 78% drop in private equity earnings. The firm's real estate management fees increased 8% over the past year.

Fortress Investment Group, the publicly listed US private equity, real estate and hedge fund manager, reported a 20 percent drop in earnings from its real estate vehicles in the third quarter, despite seeing management fees increase.

It came as the firm reported an overall loss for the three months to the end of September of $57 million.

The firm's public real estate affilates, referred to as castles – Newcastle and Eurocastle – generated earnings of $4 million in the most recent quarter, down a fifth from the same period last year.

Assets under management in the castle vehicles remained stable at $3.3 billion during the past year, with management fee income increasing by 8 percent from $12 million to $13 million.

Founder and chief executive officer Wes Edens said the firm had a strong earnings base as much of its capital was locked up long-term adding that the current market dislocation would present “tremendous” opportunities for investment.

Fortress' private equity pre-tax earnings fell 78 percent to $18 million in the third quarter, compared to the $82 million earned during the same period in 2007. The firm’s management fee income from its private equity funds grew by 26 percent to $44 million. Meanwhile, incentive fees for the quarter were in the red by $16 million relative to a gain of $84 million last year.

The firm’s private equity portfolio companies have $118 million of remaining debt coming to maturity this year and $3 billion coming to maturity in 2009. Of the debt maturing in 2009, more than half is held by a single undisclosed portfolio company.