HOW TO PLAY IT
When times are tough, having capital that can’t be redeemed from flighty investors is critical. A permanent war chest is the ballast of Wes Edens’ new industrialist vision in infrastructure. He’s up against billionaire Bruce Flatt of Canada’s who oversees an empire with $60 billion in cash to invest in Covidcrushed markets and permanent capital vehicles worth $100 billion, including infrastructure, where Brookfield recently closed on a dedicated $20 billion fund. The cash will help it add bargains to a portfolio with 16,500 kilometers of natural-gas pipelines and 6.6 million electricity and gas connections, 22,000 kilometers of railroad tracks, 13 port terminals and 51 data centers. “The one thing that really matters is that a business can make it through this period intact and without undue harm,” Flatt says. “It’s usually a function of having made preparations before the tide went out.” embarking on a 12-year odyssey to make his investors whole, leaning on his skill for making money in lowbrow areas of finance such as subprime lending. He repositioned failing bets like Nationstar Mortgage, which became a servicer of subprime mortgages as banks exited the troubled business, eventually selling it for over $1 billion in 2018. Fortress pressed this idea, opportunistically buying large portfolios of ailing subprime mortgages to service from AIG and Citigroup, which it also exited in 2018 at a $3 billion–plus profit.
“We went into the financial crisis high on helium,” says investor Michael Novogratz, Edens’ former partner, who went on to make a fortune betting on cryptocurrencies. “Wes did a lot of really crafty things” to claw his way back, he adds. “He kind of salvaged what would have been a real disaster for investors and his reputation.”
Unable to corral large amounts of money for buyouts from pensions, Edens found the cash by turning Fortress into a financial alchemist, shuffling assets around and conjuring six public companies in a six-year stretch. He spun out four new listed firms between 2013 and 2015 that manage assets in media, mortgages, senior housing facilities and golf courses—and which pay Fortress hefty fees. Edens also shifted a large infrastructure fund into a vehicle called Fortress Transportation and Infrastructure, which houses rail facilities and aircraft leasing operations and was listed in 2015. In 2019, he created yet another public concern, New Fortress Energy, with a burgeoning liquefied natural gas business and a goal to supply hydrogen for electric-power generation.
The moves yielded Edens unheralded windfalls and new fee streams. When Fortress sold itself to Softbank in 2017, earning Edens and his partners a pretax $1.4 billion, 40% of the fees it earned that year were paid to Fortress by the companies Edens had devised. The pandemic hit many of them hard because of their heavy exposure to mortgages, real estate, newspapers and aircraft leases. But the newer ones, particularly the rail and energy business, are now his focus.
“At this point in my life, I’m more of a builder,” Edens says, adding, “upgrading our nation’s infrastructure and building high-speed trains can be this generation’s Hoover Dam and Tennessee Valley Authority.”