Cerberus moves ahead on retail IPO, bullish on distressed

A number of reports in the business press in Germany say that private equity investor Cerberus is well-progressed in its plans to spin off its German retail property interests through a separate stock exchange listing, probably in the first half of 2014.

Cerberus Capital Management LP's German holdings could have an initial market value of about €1bn, which would leapfrog it into second place on German's listed property company rankings, with Cerberus still retaining 50% of the portfolio, according to some analystst. (Deutsche Euroshop AG is the leading publicly-listed commercial property company, with a market capo of about €1.7bn)

The reports also suggest that the IPO would also include a share sale by Acrest Property Group Ltd, the Berlin-based asset management company that manages Cerberus' retail property assets, along with managing €1.7bn of further assets owned by investors such as Apollo Global Managment LLC. Cerberus owns retail assets including big-box assets and department store properties rented to retails such as the listed Metro AG and Woolworths.

Among those advising Cerberus on its route to the public markets are bankers Goldman Sachs, Bank of America Merrill Lynch and JP Morgan.

Meanwhile Cerberus has been among those fundraisers tapping into investors' seeming unbridled enthusiasm for accessing distressed property deals in Europe and the US. It exceeded its own target of raising $1bn in equity commitment to its third and largest fund when it raised $1.4bn for its mixed Cerberus Institutional Real Estate Partners III, easily outstripping the $900m raised for its second fund.

The new fund will invest in CMBS and RMBS distressed securities, non-performing loan pools, individual distressed bank loans secured by property, gap capital for asset recapitalisations, distressed real estate assets foreclosed by lenders and monetising corporate real estate in banks and other companies that need liquidity.

In a statement, Cerberus' head of European and Asian distressed debt Lee Millstein said, "The pipeline in Europe is as big today as it has ever been, with banks wanting to sell loans before regulators force them to unload the bad debt."

Mr. Millstein said he was particularly bullish on German retail, which he believes is underserved. Earlier this year Cerberus bought two German retail property portfolios from Wells Fargo out of receivership (at about half the value of the original debt on the property), and in September paid €312m for a portfolio of commercial real estate loans from Lloyds Banking Group, as well as a loan portfolio in Spain.