Cerberus collects $640m for global RE fund – exclusive

The New York-based private equity firm is expected to close its fourth property fund at its hard cap early next year.

Cerberus Capital Management is approaching the halfway mark of a targeted $1.5 billion fundraise for its fourth global opportunistic real estate fund, Cerberus Institutional Real Estate Partners (CIREP) IV. The New York-based private equity firm has collected $640 million to date following a first close of slightly under $600 million last month.

The firm is expected to hold additional closes that would bring the equity haul up to $840 million by year-end, according to a person familiar with the fund. Moreover, Cerberus is expected to hit the $2 billion hard cap for CIREP IV at the fund’s final close, which is expected during the late first quarter or early second quarter of next year, the person said. Cerberus declined to comment.

The firm is said to have formally launched CIREP IV during the second quarter, though it did not register the fund with the US Securities and Exchange Commission until October. Limited partners in the fund include the San Francisco Employees’ Retirement System (SFERS), which earmarked up to $100 million to the vehicle in September — its first commitment to Cerberus’ real estate platform.

Similar to its predecessor funds, CIREP IV will be focused on highly complex or distressed debt and equity real estate transactions where competition is limited, according to SFERS documents. Cerberus’ real estate investments have included individual distressed collateralized bank loans; US, Asian and European non-performing loan pools; distressed securities; gap capital for asset recapitalizations, rescue financing, and joint venture with firms in need of capital; distressed real estate assets in foreclosure; and real estate held by banks or corporation with liquidity issues.

The fund will target gross returns between 17-20 percent. Roughly half of the capital will be allocated to the US while the remainder will be deployed in Western Europe. Cerberus’ investment activity in the latter region is believed to be a key driver of its current fundraising momentum: the firm topped the list of NPL investors in Europe in a recent Cushman & Wakefield report, accounting for €7.69 billion, or 17 percent, of all closed European real estate loan sales in 2015 to date.

Just last week, Cerberus announced an agreement to acquire a £13 billion (€18.4 billion; $19.8 billion) portfolio of mortgages and other loan assets from the UK Asset Resolution Limited. The loan book included £12 billion of loans in the securitization vehicle known as Granite and other legacy mortgages of NRAM, the former Northern Rock mortgage business.

Hodes Weill & Associates is acting as placement agent for US-based investors, while Axius Partners will focus on non-US institutions, according to an SEC filing.

Cerberus, which launched its real estate business in 2004, previously raised $1.25 billion for CIREP I in 2004, $1.25 billion for CIREP II in 2008 and $1.4 billion for CIREP III in 2012, according to PERE Research & Analytics and SFERS documents.