Cerberus raises $1.4bn for distressed property fund

The New York-based firm has beaten its $1 billion fundraising target as it goes about putting meaningful amounts of equity to work, particularly in Europe.

New York-based Cerberus Capital Management has closed its latest distressed real estate fund on $1.4 billion of commitments, surpassing its original target of around $1 billion. Cerberus did not comment on its fundraising activities, but the firm reportedly embarked on the capital-raising trail early last year and held a first close on more than $200 million in July 2012, according to a report on Bloomberg last August. Greenhill & Co is said to be the placement agent.

Cerberus has been very active of late on behalf of its latest offering, Cerberus Institutional Real Estate Partners III. Though it has flexibility and interest in the US market, the firm has been visibly active in European markets in recent months as the pendulum swings in favor of the region among some global investors seeking opportunistic returns.

Eye-catching deals include the purchase of nine shopping centers in Germany, helping US bank Wells Fargo clear up some of the $120 billion nonperforming loan book it inherited when it took over Wachovia Financial in 2008. 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 acquire 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 nonperforming loans associated with the shopping centers from its balance sheet, Cerberus noted. More recently, it is said to have secured a portfolio of European commercial real estate loans from Lloyds Banking Group for €312 million.    

Cerberus’ success in fundraising and its leaning towards investments in Europe are matched by separate developments among a number of other companies. For example, Los Angeles-based Ares Management has raised at least €315 million in a first close for Ares European Real Estate Fund IV, formerly AREA European Real Estate Fund IV, according to a SEC filing.  Though there was a lull over the summer amid AREA’s takeover, sources said the fund has gathered momentum and is aiming for a total of €1 billion.

In another sign of growing interest in Europe, Angelo, Gordon & Co has launched the AG Europe Realty Fund, its first real estate fund outside of the US market. It is seeking a reported $300 million to $500 million of commitments.

One Europe-based opportunistic fund manager currently out raising its next-generation fund, noted: “There is much demand now for Europe from North American investors.”