Fortress plans to go public

Move would free up money to invest in assets

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— The investment firm that is buying the Steamboat Ski Area plans to go public and hopes to raise nearly $750 million, which the firm could then invest in its assets.

Fortress Investment Group is a New York-based private equity firm and hedge-fund that most recently entered the ski resort business when it purchased Intrawest in October for $2.8 billion in cash. Intrawest manages 14 ski resorts in the United States and Canada including Copper Mountain and Winter Park Resort. Intrawest founder Joe Houssian announced his retirement a month after Fortress purchased the company. Intrawest's chief operating office took over, while reporting to Fortress executives.

Fortress is an asset manager with about $26 billion in assets.

Fortress manages about $9.4 billion in hedge funds. Hedge funds are typically formed by a group of wealthy investors who pool their money to invest in securities, commodities, currency and undervalued and distressed assets, including loans, assets and corporate securities.

The other major component of Fortress is management of a $13.6 billion private equity fund. The fund invests in North America and Western Europe and acquires asset-based businesses with significant cash flows. Fortress has offices worldwide.

The Fortress firm has more than 250 investment professionals on staff along with five principal owners. The firm collects a management fee based on the performance of its investments.

Fortress was founded in 1998 by Wesley Edens, Robert Kauffman and Randal Nardone, who formerly worked together at the New York-based BlackRock Asset Investors, according to Bloomberg financial news.

Edens runs private-equity investments, Kauffman handles European activities and Nardone heads the legal and structured finance unit, Bloomberg reported. The other principals in the company are former Goldman Sachs Group partner Peter Briger and Michael Novogratz. Briger heads the distressed-debt investments and Novogratz works in the firm's hedge fund unit.

Fortress started as a private equity firm and has since expanded into hedge funds, real estate and debt. Since March 2005 the company's assets have doubled, according to Bloomberg. The firm's assets have grown from about $1.2 billion in December 2001 to $26 billion as of September 2006, according to a Securities and Exchange filing.

When Fortress goes public, the five principals in the firm will retain 90 percent control. Investor analysts have noted that once Fortress becomes a publicly traded company, it will be subject to SEC disclosures that include information private equity firms would rather not disclose, like where fund managers are investing money. Bloomberg reported no U.S. firms comparable to Fortress have gone public, but others might follow its lead.

Fortress filed with the SEC on Nov. 8 to announce the company's intentions to have an initial public offering.

In the filing Fortress stated it was going public to offer incentives to its employees through stock options and to allow the firm to "more efficiently access capital."

Fortress also disclosed its earning and revenues. Distributable earnings grew from $54.8 million in 2003 to $240 million in 2005. The firm's net income for the first half of 2006 was $88 million, almost double what it was during the same period in 2005. Revenues during that time period were $877.5 million.

Comments

dogd 8 years ago

Santa or a bloodsucking mega-corporate Grinch? Let me tell you that it's a little early to call this a good deal for Ski Town. Hedge funds are as likely to prioritize the health and traditions of a community as pigs are likely to fly. You might wanna wait and see a little just what happens around here. The desire for short-term shareholder value might trump any other values we have around here.

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id04sp 8 years ago

Steamboat is pretty much a one-trick pony town. If skiing doesn't feed it, the pony will die, and that includes the real estate market.

Old Timers who remember how it was "back when" will complain, and locals still won't get a break on lift tickets, and all the rest. Whatever has to be done to make stock prices rise will be done, and we'll all live with the results.

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dogd 8 years ago

id04sp:

Spoken like a true outsider. One of the unique things about the boat is that the TOWN actually feeds skiing, as well. One of the reasons Steamboat has been credited with a mystique has been the global success of the snow sportspeople who have competed out of Steamboat and brought an unusual amount of prestige to the commercial proposition of skiing in Steamboat.

Intrawest will probably give that a lot of thought to that thought to that (zero).

By the way id, what is your point or do you have one?

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id04sp 8 years ago

Hmmm . . . well I guess my point is that the new owners will be in business to make money just like the old owners were, and despite the socialist agenda in the community at large, don't expect to see discounted lift tickets for locals. Don't expect to see wages soar. Don't expect to see them convert the Grand to low-income housing for ski bums.

If you take your Harvard MBA and read between the lines, you'll see that part of the attraction was the "value" created by ASC over the last five years. That means "equity" which can be pledged against a loan, which means the new owner can free up large amounts of cash for other purposes while showing a favorable financial position on the balance sheet. So, they pay $265M and then pull a large portion of that to invest in other things, and depend on the revenue from the skiing and real estate operations to service the debt. That's how we make money in America, and it's perfectly legal and honorable.

Steamboat has been a very popular destination for families for many reasons. The best one I can think of is that it's a big mountain (2nd largest in North America, I think?) with a variety of terrain that suits everyone from beginners to experts. You can split up at the Gondola, meet for lunch, split up again in the afternoon and meet at the base at closing time. Nobody is stuck waiting in the car for half a day if they get tired and cranky, or cold and wet. It's not that way in places like Snowbird, North Star, Mammoth, Squaw Valley, etc.

The only "mystique" Steamboat enjoys is the small-town atmosphere that's about to disappear under concrete and new development downtown. Pretty soon it will look like Copper and Breckenridge. Steamboat was always a town before it was a resort, unlike most of the others where the town came later.

International attention from "snow sportspeople?" Boy, that's a self-licking ice cream cone. Our locally famous "snow sportspeople" include a shoplifter and a sore loser, and if I didn't already live here, would not be an attraction to come here to ski.

Our little community sports a signficiant number of recreational drug users, alcohol abusers and paycheck-to-paycheck wage earners who create the only real social problems in our community. The ski industry is a huge contributor to those problems by generating cash flow sufficient to create low-wage jobs for people who would go elsewhere to live when winter sets in if not for the ski business.

Housing prices are averaging $500,000. People who can pay $500k for a house don't need a discount on season passes. Raising the price to keep the numbers down makes the experience better for everyone on the hill.

If I was in the shoes of the new owners, I'd eliminate passes for employees and hire people who want to work instead of ski. Sponsorship of "guest workers" to fill the seasonal jobs would do a lot to improve the quality of service and reduce the number of boarders on the hill.

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dogd 8 years ago

id most wordy one:

Your "knowledge" of financial mechanics is as superficial as your "knowledge" about this town, and your "knowledge" about the-ski-resort-as-a-business. You are pretty condescending and judgemental for someone who appears to be a blabbering fool. You are also Woxoff.

  1. ASC did not create "value". Probably diminished "value" with each sale of undeveloped real estate. (Which if you know anything about the subject you have just blabbed about- is often the main thing a group of investors looks at when sizing up a ski resort -the real estate portfolio which comes with it.

  2. These are some heavy-handed players. They must have a big picture view of things which goes beyond ticketing skiers and realizing the value of the relatively limited portfolio of real estate included. They will probably effectively remove locals from more places than just the ski area.

Look for them to move on such local relatively undeveloped attractions such as the Strawberry Park hot springs.

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id04sp 8 years ago

You don't like it. Okay.

Did you read the other articles about this transaction in the Pilot? You might want to do that.

Maybe you have not yet figured out that people with money do what they want, and the rest of us scavenge for scraps.

I did business with ASC. They also drove me out of business and then locked me out when I couldn't pay the rent. I think I understand a whole lot more about the "inside" than you can imagine.

As for my ID, well dogd, I'm always 5 minutes away from a new one when the Pilot locks me out. See you there!

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