Olympic Village financier Fortress Investment Group speaks out

Post by Daniel Fontaine in ,

1 comment

An interesting story came across our desks at CityCaucus Tower today. It's a Bloomberg.com interview done with Wesley Edens of Fortress Investment Group, the folks financing Vancouver's Olympic Village project. The headline reads "Fortress Blocks Redemptions as Shareholders Lose 96% Since IPO".

The Bloomberg.com story makes for an interesting read and gives you an American perspective regarding the recent headlines about the Olympic Village controversy.

Bloomberg delves into the financial future of Fortress and provides some excellent analysis:

“The more I’ve learned about Fortress, the less comfortable I’ve become,” says Jackson Turner, who follows the company at New York-based Argus Research Co. “There’s just this drip, drip, drip of bad news.”

They also reveal a bit more about the operation of the company:

Fortress is a prime example of what happens when the secretive world of hedge funds collides with the public disclosure required of listed companies. Two years after its initial public offering, Fortress remains a tangled web of subsidiaries and partnerships that analyst Turner says is anything but transparent.

Needless to say, the article will be of interest to those folks who just haven't read enough about the complicated financing arrangement for the Olympic Village development.

As for the future prospects of Fortress, here is what their exec had to say:

Edens, who cut his financial teeth buying bad debt during the savings and loan crisis of the 1980s, says he’s optimistic his company will make it through the crisis. Bad times are good for his style of investing, he says.

“From 2003 to 2006, there was no distress,” he says. “Now everything is distressed. This should be the golden age.”

FAST FACTS about Fortress:

  • They were established in 1998 by Edens and his two partners
  • Fortress has about 900 employees raising money and investing it.
  • Fortress indirectly employs tens of thousands of additional people in its various private equity investments, with 22,000 at Intrawest alone.

1 Comment

Having read the clippings from the Bloomberg article, it is completely beyond my understanding why the City has felt compelled to consider bailing out Fortress.

Why should they get their money out first?

If the City owns the land and has a developer responsible for the completion and sale of the units, where is the need? I understood the protective advances...They were necessary to alleviate some cash flow issues. We loan the developer money with interest and project stays on time. This seemed like a "no-brainer" to me.

But intending to buy the lender outright seems ludicrous. Why should Fortress get to walk away with a ton of cash, while everyone else stays at the table to play on? Is the only reason because we feel bad they are having financial difficulties?

The City should have not jumped the gun and pursued the Charter change. It hasn't given them the kind of latitude you would hope. Instead it has diminished its ability to negotiate by letting Fortress know its bottom line, and has eliminated the only heavy bargaining tool it had with the developer which was to say if you don't sort your cash flow issues out, Fortress could call the loan.

Now we've said basically to the entire planet... "Well, if either party gets into trouble we'll just right a big fat cheque and go into debt ourselves". Instead, we should have continued to be the "bad cop" and said... "Look here, you folks sort out your contractual problems yourselves, we'll provide you with enough rope to either pull yourselves out or make a great big noose. Your choice take it our leave it...either way the Village gets done in time for the Olympics and the units get sold at the best price possible, so get busy!"

I think that Vancouverites should not make the assumption that fixing risky debt with more debt is a good choice, but then we didn't get to vote on that the legislature did, thanks to VV forcing everyone's hand on the eve of the Provincial election.

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