Jonathan Gray of Blackstone, Peter Briger of Fortress Investment, Harry Macklowe and Donald Trump (Blackstone, Long Arc Capital, Getty Images)
Fortress Investment Group has played a key role in some of the biggest — and boldest — real estate deals.
From Harry Macklowe’s infamous $7 billion purchase of part of the Equity Office Properties portfolio, to the $5.5 billion sale of Stuyvesant Town–Peter Cooper Village, to backing Trump Tower Chicago, the private equity firm has developed a reputation for being involved in hairy projects that scare others.
Now, with SoftBank considering a sale of the company, a new chapter could await Fortress, which was founded in 1998 by Wes Edens, Rob Kauffman and Randal Nardone and has $53 billion in assets under management.
Masa Son’s SoftBank privatized the publicly listed private equity firm in 2017 in an all-cash deal valued at $3.3 billion with the aim of integrating the company into its Vision Fund. But as early as 2021, SoftBank was reportedly open to selling the company, which is run as a fully independent subsidiary under an agreement with the US Board of Foreign Investment.
Here’s a look at some of Fortress’ biggest real estate hits:
Equity Office Properties
When Macklowe made a whirlwind play to buy 7 million square feet of office space from the Blackstone Group in 2007, he put up just $50 million of his own money and borrowed $5. To see also : Google pauses hiring, Netflix loses nearly a million customers, and Slack raises prices.8 billion from Deutsche Bank.
As a result, it fell short of the $1.2 billion it was supposed to raise in two weeks.
“It was an absurd amount of money to get to her so quickly. Even in the high-flying world of metropolitan real estate, this was shy territory,” author Adam Piore wrote in his book The New Kings of New York. “But both [Steve] Stuart of Fortress and Macklowe knew that Fortress was one of the few players who might consider it.”
Fortress agreed to lend the money at an incredibly high rate of interest – about 15 percent – and with personal guarantees from Macklowe. When Lehman Brothers collapsed and the market foreclosed, Macklowe defaulted on his loans and lost most of his office properties, including his beloved GM building.
Most recently, Fortress loaned Macklowe $192 million to refinance his “Tower Fifth” development site, where he plans to build a 1 million-square-foot office tower that would rise 1,500 feet into the sky.
Stuy Town
When Tishman Speyer and BlackRock defaulted on a $3 billion mortgage in 2010, the massive complex, which has more than 11,000 apartments, fell into the hands of CWCapital, a special service that went to work preparing a foreclosure auction. See the article : $ 450 Million New US Aid to Ukraine – US State Department.
Fortress, looking to expand its reach into real estate, acquired CWCapital later that year for an undisclosed price. CWCapital and Fortress reportedly collected more than $45 million in fees over six years and $566 million in late interest by the time Blackstone bought Stuy Town in 2015.
Times Square
The private equity group is backing two transformative development projects at the crossroads of the world. To see also : So ILL sells everything for climbing, from equipment to lifestyle fashion.
Fortress has partnered with L&L Holding on the $2.5 billion TSX Broadway (aka 1568 Broadway), where the developers raised the landmark Palace Theater 30 feet to make way for their retail and hotel development. The 470-foot-tall, 669-key tower is slated to open next year.
Nearby, Fortress also partnered with Maefield Development on the $1.5 billion Edition Hotel project at 20 Times Square. That tower has been mired in controversy, as lender Natixis took over Maefield and Fortress’ ownership of the property this year. (The developers still own the ground below.)
Trump Tower Chicago
Long before Donald Trump became president, Fortress made him a $130 million mezzanine loan in 2005 to build his Trump International Hotel & Tower in Chicago.
By 2012, Fortress had reportedly forgiven more than $100 million in debt — a move that caught the attention of then-Manhattan District Attorney Cyrus Vance, who reportedly subpoenaed the company in 2020 as part of an investigation into the former president and his company.
The Sheffield
When Kent Swig’s planned condominium conversion in Sheffield’s 845-unit rental tower south of Columbus Circle began to fall apart around 2008, he turned to Fortress to bail him out.
The investor devised a scheme whereby Fortress would buy a stake in the project’s mezzanine debt and foreclose on the assets. Swig agreed not to put the project into bankruptcy and surrender its plan for the condo — giving Fortress a clear path to completing the project.
“I’m going to let you be rough on me and push me,” Swig told Fortress executives, according to The New Kings of New York . “I know you like to play rough. You can get me out of the way and you’ll make a ton of money.”
At the foreclosure auction, Fortress paid less than $100 million for the building — which Swig bought three years earlier for $418 million, predicting it would fetch more than $800 million.
“We stole a building in broad daylight,” a top Fortress executive later said of the deal.
