REPE Fund Profile Series - Part Twelve: Cerberus Capital Management

Welcome to Part Twelve of our Fund Profile Series. Each Fund Profile briefly summarizes each fund’s history as well as the more recent deals. And to help you prepare for your real estate private equity interview(s), we also outline a few of each firm’s notable real estate equity investments in recent years. 

Following on from our focus on CBRE Investment Management in Part Eleven of this series, the twelfth part of this series will investigate Cerberus Capital Management in more detail.

Key facts about Cerberus Capital Management

Cerberus is an alternative investment firm specializing in distressed investing. The firm was co-founded by Stephen Feinberg and William L. Richter in 1992—today, William serves as a senior managing director while Stephen acts as co-CEO alongside Frank W. Bruno. 

Cerberus takes its name from the three-headed hound (aka Hades’ pet in Greek mythology) that had the job of guarding the underworld so the dead couldn't escape. As you can imagine, the leadership team later admitted to regretting their creative approach to naming the investment company after the scary mythological dog—but, at that point, they were already heavily invested in keeping the brand name. 

Naming foibles aside, the firm also has strong governmental links with two prominent personalities on its leadership team. Dan Quayle—the former U.S. Vice President under the older President George H. W. Bush (1989–1993)—currently serves as the Chairman of Cerberus Global Investments. And John W. Snow—the 73rd Secretary of the U.S. Treasury under the younger President George W. Bush—serves as the current Chairman of Cerberus.

Zooming out, Cerberus’ HQ is based in New York City, but the firm also has several affiliate and advisory offices around the world. Cerberus’ global team comprises at least 785 team members (with 55 investment professionals specifically posted in its real estate team) dotted across the globe in 23 office locations, including the usual commercial hubs like São Paulo, London, Frankfurt, Sydney, and Singapore—as well as in less common locations such as Addis Ababa (Ethiopia), Tbilisi (Georgia), and Ulaanbaatar (Mongolia) for its Cerberus Frontier offering. 

In the U.S., its other office locations outside of New York City include Miami, Washington D.C., San Francisco, Los Angeles, and Chicago.

As of December 31, 2020, Cerberus holds approximately $55B worth of assets under management across its various credit, private equity, and real estate platforms. In real estate private equity specifically, the firm has invested around $29B across 575 deals since 1993.

Where does Cerberus focus its real estate equity investments?

As aforementioned, Cerberus’ speciality lies in investing in distressed debt markets in developed countries, particularly non-performing loans (NPL) and commercial/residential mortgage-backed securities—the former of which has seen approximately $21.3B invested in NPL, with total transaction values of approx. $72B. The firm also invests in corporate credit, recapitalizations, foreclosed real estate assets, and assets (or property portfolios) that need capital improvements and/or leasing solutions. 

Cerberus’ global real estate investment portfolio spans across all major asset classes including residential mortgages (via its FirstKey Mortgage business), REITs (see the CorePoint deal in the next section), retail developments, industrial and logistics assets, office properties, single family rental units, and hospitality and leisure properties.

Outside of this, the firm also looks for opportunities in developing markets across Africa and Asia as part of its Cerberus Frontier platform. Here, the company focuses their investments in sectors that encourage local economic growth and development (e.g., logistics and infrastructure).

A quick look at some of Cerberus’ notable deals

To get to grips with the details of a real estate private equity firms investment strategy, we always recommend you examine the fund’s track record, looking at both challenges and successes. 

To give you a head start, we’ve listed some of Cerberus’ recent notable deals below:

Projects Challenger & Coliseum, Spain

In 2018, Cerberus acquired EUR €9.1B worth (a gross value of just over $10.3B) of distressed real estate owned (REO) assets from the Spanish private banking group, Banco Sabadell, fighting off stiff competition from other interested parties including Blackstone, Oaktree, and the infamous Lone Star “vultures”.

The portfolio of REO assets included two foreclosed property portfolios named Challenger and Coliseum—altogether, these had a total net book value of EUR €3.9B (around $4.43B). 

600 & 601 Travis Street, Houston TX

In 2019, Cerberus joined forces with Hines, an international real estate firm, to purchase the former JPMorgan Chase Tower landmark in downtown Houston. The deal for the tallest tower in Texas completed for an undisclosed amount, but the portfolio was estimated to be worth at least $627M. The portfolio comprised two separate office buildings and included 2.1 million square feet of office and retail space—almost the same size as the Capitol Building in Washington D.C.

BR Properties, Brazil 

At the end of 2019, Cerberus teamed up with Alianza, a leading property asset management firm in Brazil, to swoop in on a portfolio consisting of 12 office buildings in Brazilian commercial hubs (seven properties in São Paulo and five in Rio de Janeiro) from BR Properties, the largest publicly traded office building owner in Brazil. The deal was valued at over BRL $R600M (approx. $169.9M). 

CorePoint Lodging, United States 

In 2021, the firm entered a joint venture with Highgate to purchase CorePoint Lodging, a US REIT, in a deal worth $1.5B. Once the deal closes in the first quarter of 2022, CorePoint will de-list from the NYSE and will become a private company.

CorePoint is a specialist hospitality REIT focused on mid- to upper-midscale hotels—the portfolio mainly comprises La Quinta properties.

Jaguar Portfolio, Spain

In 2021, Grupo Cooperativo Cajamar, a Spanish rural savings bank and credit union, sold a non-performing real estate portfolio to Cerberus in a deal worth EUR €500M (just under $567.4M). The portfolio, named Jaguar, was composed of 6,000 residential assets, commercial premises, offices, and land assets in the regions of Andalusia, Valencia, Catalonia, Murcia, and the Balearic Islands. 

The deal was Spain’s largest non-performing exposure (NPE) transaction since the beginning of the Covid-19 pandemic, and the largest divestment ever completed by the credit union. 

Over to you...

We hope you found this Cerberus Capital Management REPE fund profile helpful for broadening your industry knowledge to prepare for your upcoming real estate private equity interview. Now you have the theory in place, are you prepared with the right strategies to sell yourself well at the interview stage? 

Let us help you get set up for your new career in REPE: check out how we can support your career goals at Leveraged Breakdowns.

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About the Author: 

Melody Sadé Abeni is a London-based writer who specialises in commercial real estate content. As a generalist member of the Leveraged Breakdowns team, she crafts detailed posts geared towards those curious about the real estate private equity life. 

In her former professional life, Melody supported senior corporate executives as a global mobility consultant and did her time in both management consulting and specialist asset management firms.