HOW TO PLAY IT

Forbes - - DARE TO DO DIFFERENTL­Y LEADERSHIP - Brook­field As­set Man­age­ment,

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.”

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