I remember warning everyone here about the insane valuation placed on FIG at the inception of its IPO and having a particular member here tell me I was insane, that it would go much higher, and that he personally knew the people that worked and even ran FIG, and what a stellar investment it would turn out to be. http://www.bloomberg.com/apps/news?pid=20601109&sid=a7rJVe6G62rA&refer=home Fortress Blocks Redemptions as Shareholders Lose 96% Since IPO Jan. 30 (Bloomberg) -- One of the things Wesley Edens did soon after his company bought Canadian ski-resort conglomerate Intrawest Corp. in October 2006 was to finance construction of a $43 million gondola at Whistler, British Columbia. The new lift, completed in December 2008, is the longest unsupported span for any gondola, stretching 2.73 miles (4.4 kilometers). Itâs also the highest, dangling 1,427 feet (435 meters) over Fitzsimmons Creek between Whistler mountain and its sister peak, Blackcomb. Visitors to the 2010 Winter Olympics, for which Intrawestâs Whistler Blackcomb resort is a venue, are likely to ride it just for thrills: Two of the 28 cars have glass bottoms. Two years after commissioning the ski lift, Edens, 47, finds himself staring into an abyss of a different sort. Heâs the chief executive officer of money manager Fortress Investment Group LLC. Edens and his partners became instant billionaires when the company, which manages $34.3 billion in private equity and hedge fund holdings, went public in 2007. The Montana-born Edens, who ski-raced in high school, could have paid for the gondola himself. In the past four months the shares of Fortress have lost most of their value, falling 96 percent to $1.34 from $31 on Feb. 9, 2007, their first trading day. âThereâs been a lot of hardship in the world since then,â says Edens in a rare interview. The stock prices of a half dozen other publicly traded companies controlled by Fortress have also plunged. Analysts are bearish on Fortress, even at a rock-bottom price. Drips of Bad News âThe more Iâve learned about Fortress, the less comfortable Iâve become,â says Jackson Turner, who follows the company at New York-based Argus Research Co. âThereâs just this drip, drip, drip of bad news.â He recommends selling the shares. Only one of nine Fortress analysts tracked by Bloomberg rates them a buy. 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. The New York-based firm buys stocks and bonds through its hedge funds and whole companies through private equity funds. Last year, it started a fund that trades commodities. Fortress owns assisted living facilities for seniors, short-line railroads, newspapers and an array of distressed debt. Many of the companyâs hedge and private equity funds are based in the Cayman Islands. Fortress itself is structured as a partnership, which reduces its U.S. taxes and requires the company to use a diagram with five footnotes to lay out the corporate structure in disclosure documents. Keep it Simple Edens manages his sprawling company with a minimum of paperwork. He insists subordinates present plans for asset sales and other complex actions on a single sheet, according to a person who worked with him. âWe all got creative with the font sizes we used,â the person says. The credit crunch has forced Fortress into the unwanted glare of publicity. Fortress bought its trove of assets with money from wealthy individuals, endowments and pension funds, augmented with debt. Now, investors are asking for their money back and banks arenât making the loans that financial wizards like Edens used for a decade to double and triple returns on investorsâ cash. Blackstone Group LP, the $116 billion private equity and hedge fund firm that sold shares to the public four months after Fortress, is facing the same dilemma. Money Held In December, Edens cut off disbursements from the companyâs $8 billion flagship Drawbridge Global Macro hedge funds after investors asked for $3.5 billion back, Fortress said in a December regulatory filing. Earlier this month, Fortress told Drawbridge investors they could have about 70 percent of the money they requested, according to a person familiar with the plan. Investors will get the rest during the next 18 months, the person said. Since the financial system went haywire in September, other hedge funds, including Chicago-based Citadel Investment Group LLC, run by Kenneth Griffin, and D.E. Shaw & Co., based in New York, also have told investors to wait. Edens is bailing water in private equity too. In July, Fortress abandoned a $6.1 billion purchase of Penn National Gaming Inc., a racetrack-and-casino company, after borrowing costs jumped and the U.S. economy faltered. Fortress and its partners had to fork over $1.475 billion to terminate the purchase. They paid Penn $225 million in cash and agreed to buy $1.25 billion of preferred Penn stock. The shares pay no dividend, and Penn doesnât have to buy them back until 2015. In essence, itâs a seven-year $1.25 billion no-interest loan. Debt Deadline Fortress made headlines again in October when it had difficulty refinancing $1.7 billion of two-year debt it took on in 2006 to buy Intrawest, which runs ski and golf resorts. The company didnât announce the refinancing until the Oct. 23 deadline, spurring concern that Intrawest would run out of cash. âGetting that thing done was challenging,â Edens says. Fortressâs deal-making roiled Canada in January when the mayor of Vancouver disclosed that Fortress had stopped disbursing a C$750 million ($616 million) loan to the builder of a C$1.1 billion village to house Olympic athletes. The developer, Millennium Development Corp., is erecting 16 buildings that are to become condominiums after the Games. The terms of the loan, negotiated by Fortress, are that if Millennium defaults, the city will complete the project at taxpayer expense, sell the condos and repay Edensâs company. âThe Olympic village is a billion-dollar project, and the cityâs taxpayers are on the hook for all of it,â Mayor Gregor Robertson, 44, said at a news conference. On the hook, that is, to Fortress. Millennium declined to comment on the matter. Best of Times? Edens, who cut his financial teeth buying bad debt during the savings and loan crisis of the 1980s, says heâs optimistic his company will make it through the crisis. Bad times are good for his style of investing, he says. âFrom 2003 to 2006, there was no distress,â he says. âNow everything is distressed. This should be the golden age.â Founded in 1998 by Edens and 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. Edens is an eclectic investor. In 2005, for example, he refinanced $272.5 million of debt that pop singer Michael Jackson owed to Bank of America Corp., according to documents from a legal dispute over the deal. Jackson was a sketchy bet at the time. He was under indictment for allegedly plying a teenage boy with liquor and molesting him. Neverland, Beatles Still, Jackson had good collateral: his 2,700-acre (1,093- hectare) Neverland Ranch near Santa Barbara, California -- complete with amusement park -- and a 50 percent stake in the rights to a collection of Beatles songs. Jackson was acquitted by a jury in June 2005, the same month that Fortress made the loan. Fortress offered to lend Jackson a total of $537.5 million so he could buy the remaining 50 percent of the Beatles catalogue, according to court documents. That deal didnât happen. Fortress filed a notice of default on Neverland on Oct. 16, 2007, after Jackson fell behind in payments. Colony Capital LLC, another private equity firm, bought $23.5 million of the debt in May 2008. Fortress spokeswoman Lilly Donohue declined to comment on what happened to the rest of the loan. Railroads, Rest Homes Fortressâs other investments are humdrum compared with financing the King of Pop. It owns 60 percent of Brookdale Senior Living Inc., a network of 550 assisted living centers and retirement communities based in Tennessee, and RailAmerica Inc., an operator of short-line railroads. RailAmericaâs Bauxite & Northern Railway Co., for one, hauls alumina, the raw material for aluminum, three miles from Bauxite Junction, Arkansas, to Bauxite, Arkansas, where itâs refined. Brookdale shares fell 80 percent in 2008. RailAmerica is closely held. In addition to its funds and private equity investments, Fortress controls a batch of public companies that all carry the suffix âcastle.â Lately, the castles have been under siege. Aircastle Ltd. buys jetliners and leases them. Its shares fell 82 percent in 2008. Newcastle Investment Corp. buys real estate loans, financing the purchases by selling collateralized- debt obligations -- bonds that are sliced into tranches, each of which carries a different credit rating and risk of default. The stock last year was down 94 percent. Eurocastle Investment Ltd. is an owner of malls and office buildings in Germany. Its stock fell 99 percent in 2008. Seacastle Inc., which rents out shipping containers, remains private after postponing a public offering in January 2008.