Wisconsin re-ups with Fortress to help delever fund

Wisconsin State Investment Board has committed an extra $10 million to Fortress Investment Group’s third fund in an effort to help the vehicle reduce its debt load.

The $67.6 billion pension plan committed $100 million to Fortress Investment Fund III in 2004, and last month agreed to provide another $10 million.

A spokeswoman confirmed the additional capital was used to “delever the fund”. Fortress has been asking LPs to contribute extra money to the fund in an effort to pay down debt on the vehicle. According to Oregon Investment Council, Fortress was trying to recapitalise the $2 billion fund’s portfolio, including paying down $35 million of debt owed on Gagfah, Germany’s largest publicly traded apartment owner.

Fortress funds make a range of private equity and real estate investments.

“They are paying down margin debt with more long-term financing,” an Oregon spokesman told PERE in February. “Fortress asked whether LPs would consider providing funding rather than them go to outside sources.”

Fund performance data on Oregon Public Employees Retirement Fund website reveal that Fortress Fund III has made -0.09 percent IRRs since inception. The pension has also invested in Fund IV and Fund V, which made IRRs of -6.35 percent and -69.5 percent respectively since inception in around 2006 and 2007. The figures were as of 30 September, 2008.

Wisconsin confirmed it had also committed an extra $30 million to REIT Centerline to help pay down debt on its Centerline High Yield CMBS Fund III Bridge Loan vehicle. The pension originally invested $50 million to the fund in 2007.

According to fund documents from Pennsylvania Public School Employees' Retirement System, the Centerline fund was targeting “CMBS and CRE-CDO paper rated BB+ and below or not rated”. Run by chairman Leonard Cotton and chief executive officer Marc Schnitzer, the fund raised $695 million in commitments from investors, including $200 million from PSERS.