Private Equity investment performance in the second quarter was again strong, with valuations in underlying investments increasing by 5.4%, outpacing major indices including the S&P 500 and the MSCI World Index, which declined by approximately 3% and 6%, respectively, in the second quarter. Year-to-date through June 30, 2012, Private Equity fund investments appreciated by 10.5%. Aggregate public company investments appreciated 18% in the second quarter, highlighted by a 50% increase for Nationstar Mortgage Holdings LLC (NYSE: NSM), one of the nation’s leading mortgage servicers. Nationstar completed an IPO in March of this year. In addition, investments in GAFGAH (Xetra: GFJ) and RailAmerica (NYSE: RA) both appreciated by 13% during the second quarter. In July 2012, Fortress entered into an agreement to sell RailAmerica to Genesee & Wyoming Inc. for an all cash purchase price of $1.4 billion, or $27.50 per share. The proposed sale would generate $835 million of proceeds to Fortress funds and reflect a 2.2 times multiple of cumulative proceeds to invested capital.
During the quarter, fundraising activity was highlighted by the continuation of equity offerings by Newcastle Investment Corp. (NYSE: NCT), a publicly-traded REIT managed by Fortress. Newcastle raised $267 million of permanent capital in the second quarter and an additional $167 million in July, bringing total equity capital raised since the beginning of 2011 to over $645 million. Newcastle has used this capital to make investments in excess mortgage servicing rights, as well as real estate securities and other real estate related assets.
Subsequent to quarter end, the Private Equity business launched a dedicated fund for investments in mortgage servicing rights. Fortress anticipates this fund will close in August with over $500 million in total commitments.
“We followed a strong first quarter with more consistently positive developments—continued valuation gains, strong operating performance at many of our large portfolio companies, a significant pending realization, and substantial new capital commitments to invest in what we believe to be one of the largest and most attractive investment opportunities in the financial services industry today,” said Wes Edens, Fortress co-Chairman and Private Equity CIO. “In each of our main sectors of focus—financial services, senior living, and transportation and infrastructure—we believe prospects are terrific for new and existing investments.”