Fortress Investment Group: A Look Back on 2020

From the moment Fortress Investment Group LLC was established in 1998, the private equity firm has been recognized as an industry leader.

Fortress Investment Group has built a $41.5 billion portfolio of assets under management on behalf of over 1,750 clients globally. The firm employs over 900 professionals with multifaceted experiences and unique industry know-how to help clients achieve their investment goals.

2019 was a year of continued growth and significant investment activity for the company, its investors, and other stakeholders. Here is a look back at seven transactions that added to the Fortress story these past few years.

Getting More With Majestic Wines

The acquisition of U.K. retail specialist Majestic Wines by funds managed by Fortress was premised on strengthening and repositioning an organization that was planning to close all 140 of its stores. Under its new ownership by funds managed by Fortress, Majestic moved forward with a “unique position and leading proposition,” opening a new store shortly after the sale was finalized.

Fortress plans to take the company into the future with a fresh look at the way the store operates, including reshaping its public presence with a brick-and-mortar retail structure, while adding modern technology and leaning into the future for continued growth.

Expanded Litigation Finance Portfolio With Vannin Capital

Another 2019 acquisition landed global litigation financier Vannin Capital under Fortress control with the acquisition of 100 percent of the firm’s equity by funds managed by Fortress. “We believe this acquisition is a logical next step and natural fit for our business, and it will complement the breadth of our relationships and leadership in the space,” said Gordon Runté of Fortress.

While details of the transaction were not made public, the founder and managing director of former majority owner Bramden Investments said that Fortress was chosen as the buyer because the two organizations have a longstanding relationship and because of Fortress' leadership in the litigation finance space.

A First of its Kind Destination in New York’s Times Square

In partnership with L&L Holding Company and Maefield Development, Fortress Investment Group committed to TSX Broadway, a $2.5 billion project on New York's Times Square—the most trafficked location in the Western hemisphere. The project will include a brand new 669-room luxury hotel, a permanent outdoor performance stage overlooking Times Square, a towering 18,000 square foot high resolution LED sign wrapped around the building, ten stories of retail experiential space, and a newly renovated and refurbished Palace Theater, which will be physically lifted more than 30 feet and given a new home within TSX Broadway.

Construction is expected to be completed in 2022.

Bringing New Luxury to Worth Avenue

Because enhancing property performance is something that Fortress asset managers are very good at, Fortress Investment Group’s Kean Development Co. and Hyde Retail Partners sought permission to convert the second floor of Tiffany's on Palm Beach's Worth Avenue.

With Tiffany's planning to downsize and the city council willing to waive certain building restrictions, Fortress and company aim to convert the 16,374-square-foot building into a mixed-use property with retail space on the ground floor, a 10,000-square-foot luxury condo on the second floor, and a private terrace on the roof.

Reshaping the News Industry

In November 2019, shareholders voted in favor of the merger of New Media, which is externally managed by Fortress, and Gannett Co., Inc., a news organization established by Frank E. Gannett near the turn of the last century. The new company retained the Gannett name and began trading on the New York Stock Exchange on November 20 under the ticker “GCI.”

The merger between New Media and Gannett created the “leading U.S. print and digital news organization with deep local roots and national scale,” said New Media Chairman and CEO Michael Reed at the time of the acquisition’s closing. Reed also pointed to the benefits the merger is expected to bring to readers and local markets, “sustaining local journalism in hundreds of markets across the country and [enhancing] services provided to small and mid-sized businesses nationally.”

Gannett CEO Paul Bascobert shared Reed’s enthusiasm, highlighting the companies’ “bright future together, grounded in our shared commitment to our local communities and our goal; of building an enduring model that supports local journalism.”

Becoming the Largest Private Rental Property Owner in Japan

In 2017, Fortress became the largest owner of rental apartments, with its acquisition of more than 100,000 affordable housing units from the Japanese government. After decades of deterioration and the construction over time of new buildings featuring more amenities, the complexes acquired by Fortress had seen occupancy rates decline dramatically. Through an aggressive plan to better position the properties for today’s housing needs in Japan, Fortress pursued a significant refurbishment and upgrade of the properties, which attracted many new residents, including foreign nationals in need of affordable housing.

Today, occupancy rates in the Fortress properties has increased to nearly 60%--nearly double where it stood at the time of acquisition. Roughly 20-25% of new residents are non-Japanese, reflecting a key objective of Fortress’s marketing plan for the refurbished properties. In some cases, the affordable units are leased in bulk to Japanese employers dependent upon foreign workers, underscoring the importance of Fortress’s stewardship of the properties in addressing evolving needs of a very important housing market.

The company has allocated $500 million for renovations and modernization, with an eye on future growth and long-term success.

Tackling 21st Century Transportation Challenges

Fortress Investment Group subsidiary Brightline USA sought approval to build a high-speed electric train that would connect Las Vegas, Nevada, with Southern California sometime in 2023.

The proposal included a rail link between Victorville, California, and Las Vegas, made of roughly 170 miles of track.

At the time of this publication, start dates are still pending approval from California authorities and the U.S. Federal Railroad Administration (USFRA). California has approved a £2.48 billion ($3.25 billion) bond request. The rail line project budget is approximately £3.66 billion ($4.8 billion), and riders can expect a 90-minute commute from start to finish.

Update 2020

Although 2020 has certainly had its ups and downs, it was an eventful year for Fortress Investment Group. Key 2019 projects developed further in 2020, and new ventures were also a focus for the investment group.

Palm Beach Tiffany & Co. Building: A Luxury Investment

Fortress Investment Group, along with Hyde Retail Partners and Kean Development, purchased the Tiffany & Co. building in 2018 after it sat on the market for roughly two years. The purchase price at that time was $20 million. As the primary tenant, Tiffany has occupied the property since 1991 and invested significant updates into the building, including marble floors and steel doors.
In 2019, Fortress got approval to convert the second floor of the building into luxury condos. The third floor was also converted into a spa. The project is now complete, and the property has again been sold for $26.5 million.

The Link Between Cities: Expanding Brightline

Brightline is a subsidiary of Fortress Investment Group. The Brightline rail is moving forward with plans to connect Orlando to Tampa with high-speed rail. It has already seen success with its West Palm Beach to Miami services, and lines are expected to continue expansion. A line between Orlando International Airport and Miami, which would include a stop at Walt Disney World, is set to open in 2022.

Plans with expansion into the West Coast will eventually connect Las Vegas to the outskirts of Los Angeles.

Work Continues in Times Square

Despite challenges due to COVID-19, Fortress Investment Group has continued its development project in New York City’s Times Square. In fact, the $2.5 billion project has attracted an additional $100 million from foreign investors who back real estate ventures in the United States, and that spike occurred over a period of just one week.

The project, dubbed TSX Broadway, is two years away from completion.

Krystal Acquired Out of Bankruptcy

In May 2020, Fortress Investment Group announced that it would purchase substantially all of The Krystal Company’s assets out of bankruptcy. The purchase includes its roughly 300 corporate-owned and franchise restaurant locations.

Fortress Investment Group Provides $100 Million to Covered Care

Amid COVID-19 concerns, Fortress Investment Group provided $100 million to Covered Care, a healthcare financing solutions provider for underserved Americans. As a financing partner, Fortress Investment Group will help Covered Care make strides toward its goal of providing healthcare financing options to those who may otherwise be declined.

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