As the world grapples with how to make travel safe in the age of coronavirus, private equity billionaire Wes Edens is betting $9 billion that America’s transportation future is a passenger rail
As the world grapples with how to make travel safe in the age of coronavirus, private equity billionairehouting over the noise of diners at a Mexican restaurant on the floor of a casino, buyout billionaire Wes Edens has come to Las Vegas, one of the cities least friendly to mass transit, to talk about passenger rail. “It’s not like I had Lionel train sets in my basement,” he says. “I wasn’t a train nut, but I love riding on trains. It’s my favorite form of travel.
“Great fortunes are generally made by solving the most obvious problems,” Edens says, woven leather bracelets on his right wrist jiggling each time he lightly thumps the table. “Drive from Miami to Orlando with your family; drive from Los Angeles to Las Vegas. It’s a bad experience.” He secured tax-exempt bonds over the last two years to expand his Brightline rail service from Miami north to Orlando, a project with total construction costs of $4.2 billion. In April, he won a $600 million private-activity allocation from California. Up to $2.4 billion worth of bonds from that award, provided to California by the federal government, can in turn be sold to private investors.
After owning Flagler’s railroad for a dozen years, the return for Edens and Fortress investors remains uncertain. According toanalysis of public pension and securities filings, Edens and Fortress plowed about $2 billion of equity into their rail bet, struck at the apex of the 2007 real estate and buyout bubble, and they’ve yet to recoup all that cash.
“Wes is a spirited investor and has a true pioneering spirit with these major investments in U.S. infrastructure and, in the case of Miami, real urban regeneration,” Branson tellsMarkets have been more skeptical. After raising $1.75 billion in high-yield tax-exempt bonds at a whopping 6%-plus coupon in April 2019, Brightline’s debt trades below par.
Entering 2002, Fortress was mite-sized, with just $1.2 billion in assets, but it grew quickly. Edens’ first two buyout funds, raised amid the dot-com bust, were among Wall Street’s best performers, and Fortress became a giant in hedge funds and managing complex pools of debt. Assets soared 25-fold over a five-year stretch. Edens outraced billionaires such as Blackstone’s Stephen Schwarzman and Henry Kravis of KKR by taking Fortress public in February 2007.
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