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SoftBank’s $3B Fortress sale under scrutiny

Agency probes UAE ties to China as Abu Dhabi sovereign wealth fund awaits deal

Mubadala's Khalifa Al Mubarak, Fortress Investment Group's Peter Briger and SoftBank's Masayoshi Son
Mubadala's Khalifa Al Mubarak, Fortress Investment Group's Peter Briger and SoftBank's Masayoshi Son (Mubadala Investment Company, Long Arc Capital, Getty)

SoftBank’s path to offload Fortress Investment Group is facing a significant obstacle: the Committee on Foreign Investment in the United States.

The intergovernmental agency is probing ties between the United Arab Emirates and China, the Financial Times reported months after Mubadala, the sovereign wealth fund of Abu Dhabi, was announced as in agreement with Masayoshi Son’s firm to take over Fortress at a $3 billion valuation.

CFIUS has the power to review, prompt to alter or wholly block deals that could harm national security. The agency is early into its review and isn’t expected to make a decision for several months; Mubadala aims to close the deal by the first quarter.

SoftBank put Fortress on the chopping block a year ago as the firm was dealing with massive quarterly losses. SoftBank acquired Fortress, one of the more active lenders in New York real estate, in a $3.3 billion deal in 2017. CFIUS intervened in that deal, forcing SoftBank to give up day-to-day control over Fortress before allowing the deal to proceed.

CFIUS cleared Mubadala to acquire a 10 percent stake in Fortress in 2019. Another review is needed, however, as Mudabala looks to increase its stake to 70 percent, leaving Fortress insiders with the remaining 30 percent.

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None of the parties involved commented on specifics. President Joe Biden’s administration is known to be concerned over indications that China is building a military facility in the UAE.

Fortress made its name in New York real estate in the late 2000s, when it financed Harry Macklowe’s purchase of the Equity Office portfolio. It also stepped in as a rescue lender for Kent Swig.

As of the end of the first quarter, Fortress counted approximately $44.2 billion assets under management and employed more than 900 people. The firm also operates in the fields of credit, private equity and permanent capital investment strategies.

Fortress and Metro Loft Management have reportedly partnered on an attempt to buy a stake of 85 Broad Street in New York’s Financial District and convert the office property for residential use.

— Holden Walter-Warner

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Fortress Investment GroupMasayoshi SonSoftbank