Fortress Caps Japan Fund at $1.7B

NEW YORK CITY-Two-and-a-half years after closing its $800-million Fortress Japan Opportunity Domestic Fund, Fortress Investment Group LLC said Tuesday that it has capped a successor fund at twice that amount. The locally based global investment manager has closed Fortress Japan Opportunity Fund II at 130 billion yen, or approximately $1.65 billion. In common with its predecessor, FJOF II will focus on real estate-related debt and other assets in Japan.

In a release, Thomas Pulley, CIO of Fortress Japan, says the environment remains “historically attractive for disciplined, opportunistic investments in Japanese real estate-related debt and other assets. We anticipate that deleveraging and the disposition of non-core assets will remain at heightened levels in the coming years, and that significant opportunities will result for select managers.” He adds that the Fortress team “is well-positioned to capitalize on these opportunities on behalf of our investors.”

As of this past Sept. 30, the first Fortress Japan opportunity fund made 23 investments, and Fortress estimated that the fund's portfolio would achieve a gross IRR of over 34%. As of the same date, FJOF II had already made 10 investments with approximately 30 billion yen of net invested capital, or more than $350 million. The fund is expected to be fully invested over the next 24 months, according to Fortress.

This past summer, Patrick Crandall, a senior managing director in the Los Angeles office of Cushman & Wakefield, told GlobeSt.com that despite potential pitfalls, it remains an interesting time to be looking at investment in Japan. “There has obviously been tremendous upheaval in the country following the earthquake, tsunami and nuclear power plant disasters,” Crandall said. “As a result, there appears to be significant movement of capital out of Japan looking to invest in the US and elsewhere.”