NEW YORK CITY—Fortress Investment Group LLC has reached an agreement in principle with Mount Kellett Capital Management to become co-manager of Mount Kellett's investment funds and related accounts. Mount Kellett affiliates will continue to serve as general partner of the funds, while affiliates of Fortress will become special limited partners of the funds.
Deal terms were not disclosed; the Wall Street Journal reported that Fortress would invest $200 million in Mount Kellett's funds. Further, PERE reported Tuesday that Fortress would effectively acquire the funds and Mount Kellett's operating platform. The deal is set to close by June 30, subject to the approval of Mount Kellett's investors.
Between them, the two firms have more than $6 billion in commercial property assets under management, and the agreement brings together teams with extensive experience in special situations and sector-specific knowledge of credit and global real estate. Mount Kellett co-founder Mark McGoldrick and Fortress principal and co-chairman Peter Briger are both alumni of Goldman Sachs, and formed Goldman's special situations group in the 1990s. Briger left Goldman in 2002 to join Fortress, with McGoldrick departing five years later to launch Mount Kellett with fellow Goldman veteran Jason Maynard.
“Fortress has a world class credit business, with exceptional people, disciplined investment acumen, a deep understanding of our strategies and a strong institutional framework,” says McGoldrick, Mount Kellett's CIO. “Our investors will benefit from the access and support of a global operational platform and the combined asset management expertise of the Mount Kellett and Fortress teams across the distressed and special situations spectrum.”
The WSJ reported that Mount Kellett's soured bets on the energy sector led to the “unusual” alliance with Fortress. As oil prices have slumped over the past year, the $3 billion in energy investments that Mount Kellett has under management had fallen below the $1.5 billion that the firm had paid over time to establish the positions, according to the WSJ.
As of March 31, Fortress had $69.9 billion in total AUM; PERE reported that $13.8 billion of that total was invested in credit, with about a third of that total devoted to property. About half of Mount Kellett's $5 billion in AUM is in property investments, according to PERE.
In a separate but similar transaction, Philadelphia-based Aberdeen Asset Management said Wednesday it had agreed to acquire FLAG Capital Management LLC; deal terms were not disclosed. Headquartered in Stamford, CT, FLAG has about $6.3 billion in AUM, with a staretgy focusing on venture capital, small- to mid-cap private equity and real assets in the U.S., as well as private equity in the Asia-Pacific region, where FLAG also has offices.
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Paul Bubny
Paul Bubny is managing editor of Real Estate Forum and GlobeSt.com. He has been reporting on business since 1988 and on commercial real estate since 2007. He is based at ALM Real Estate Media Group's offices in New York City.
