Fortress Prepares To Miss $2B Warehouse Bonds Payment Deadline

Fortress Investment Group is getting ready to face substantially increased interest on $2B worth of bonds backed by Amazon-leased warehouses as a key payment deadline approaches.

The corporate entity tied to Fortress warned in a note to bondholders that it will likely miss the July 15 deadline to refinance the bonds, Bloomberg reported.

The missed deadline won’t put the deal into default, but not refinancing the bonds would initiate the accrual of substantially increased interest, the outlet reported, citing deal documents. 

Fortress originally agreed to pay about 2% interest to bondholders, and it is now “actively working on a solution for refinancing.” Refinancing at current higher interest rates could exhaust cash flows from the properties, according to Bloomberg’s unnamed sources.

Fortress Investment Group declined to comment. 

In 2020, Fortress tapped asset-backed investors to finance the $2B in mortgage interests for 11 Amazon logistics centers it held or planned to construct under a leasing agreement, according to Asset Securitization Report.

Amazon had triple-net lease agreements with weighted average terms of nearly 20 years at the properties, which were all new builds or complete renovations in critical locations for logistics service providers. S&P Global cited those factors as strengths during the 2020 offering. 

But high-leverage deals structured five years ago “are not meant for today's rate environment,” said Scott Hofer, analyst for Income Research + Management, speaking generally to Bloomberg. 

New York City-based Fortress had about $50B of assets under management at the end of last year.