The $47.8 billion Oregon Investment Council is considering investing an additional $10 million into a Fortress property fund, as the investment firm attempts to pay down debt on its German residential business, Gagfah.
According to a spokesman for the US pension, Fortress has asked its limited partners to inject additional capital into Fortress Investment Fund III, a $2 billion vehicle raised in 2004, as the firm attempts to recapitalise its portfolio.
“They are paying down margin debt with more long-term financing. Fortress asked whether LPs would consider providing funding rather than them go to outside sources,” the spokesman told PERE.
OIC agreed at its latest board meeting to give preliminary approval to the investment, contingent on further negotiations between Oregon investment officials and Fortress. The injection is expected to return upwards of 20 percent.
Fortress needs to pay down $35 million of 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, according to media reports.
Fortress acquired Gagfah in 2004 for €3.5 billion. At the time, the New York-based investment firm said it had assumed €1.4 billion of existing debt, taken out a €1.4 billion loan and provided €700 million of equity.
Oregon’s real estate portfolio was valued at $5.3 billion as of the end of December last year. The pension has a target allocation of 11 percent to the asset class and an actual allocation of 11.7 percent.