Cerberus buys big in Germany

The New York firm investment firm has agreed to buy nine shopping centre from Wells Fargo helping the bank clear some of its legacy nonperforming loans from its balance sheet, and has struck a deal to buy 10 retail properties out of administration in an unrelated deal from a second party.

Cerberus Capital Management is buying a portfolio of nine shopping centres, helping US bank Wells Fargo clear up some of the $120 billion legacy nonperforming loan book it inherited when it took over Wachovia Financial in 2008.

New York-based Cerberus said not only had it entered an agreement to buy the Wells Fargo “Phoenix” portfolio, representing 920,000 square feet of property, but it also had agreed to invest in a second unconnected portfolio of 10 German retail properties called the Monsoon portfolio out of administration. The Wells Fargo sale was a competitive process, which America’s biggest commercial real estate lender initiated to remove the nonperforming loans associated with the shopping centers from its balance sheet, Cerberus noted.

Lee Millstein, senior managing director at Cerberus, said: “The acquisition of these portfolios further enhances Cerberus's footprint in the German real estate market.” He noted that the transactions enabled the sellers to obtain “fair value,” while “providing us with the opportunity to inject fresh capital and spearhead the turnaround of the properties.” ACREST Property Group, one of the biggest letting companies for asset management and development of retail real estate in Germany, is advising Cerberus on helping to repair the assets.

Cerberus has been an active investor in Germany since 2002, but it has ramped up investments of late. Just last year alone, it bought the 3 million-square-foot-plus Rebound portfolio of 47 retail and mixed-use properties from FMS Wertmanagement, which resulted in significant capital improvements to redevelop those assets. Earlier that year, Cerberus had acquired the distressed assets of Speymill Deutsche Immobilien in a transaction that injected capital for asset improvements and restructured the company's bank loans.

In 2011, Cerberus acquired almost 10 million square feet of assets via Metro Cash & Carry wholesale-retail properties located in urban centres throughout Germany. In Germany's largest initial public offering of 2011, Cerberus and investment partner Goldman Sachs also listed Berlin-based GSW Immobilien on the Frankfurt Stock Exchange following the restructuring of the company and improvement of its assets.

The firm did not disclose the value of its two most recent deals, however.