Cerberus raises nearly $3B for new real estate fund

Funf will target non-performing or defaulted loans, among other assets

Cerberus Global Investments President Lee Millstein
Cerberus Global Investments President Lee Millstein

Cerberus Capital Management has raised about $2.8 billion for a new real estate fund — exceeding its target of $2 billion.

The fund, known as Cerberus Institutional Real Estate Partners, will focus on investing “opportunistically,” according to a release. That means looking at direct assets as well as entities with significant real estate exposure and debt, including non-performing or defaulted loans.

The company did not give much detail about how it will invest this money or which assets or debt opportunities it is targeting. But its launch comes at a time when investors have yet to see the wide-scale distress opportunities that were predicted as a consequence of the pandemic. Apocalyptic projections about fire sales, meanwhile, have yet to come true.

U.S. private equity funds had more than $250 billion to spend on commercial real estate loans as of March 23, according to Preqin. About $76 billion of that was earmarked for distressed debt.

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“There are market dislocations and macrotrends that are driving compelling opportunities across our broad platform,” Lee Millstein, president of Cerberus Global Investments and its global head of real estate, said in a statement.

Cerberus is a prolific investor in non-performing loans, or loans that are in default. Since 1998, it’s invested approximately $21.3 billion in equity into nearly 250 non-performing loan transactions, according to its website.

The company is also betting on logistics and industrial investments, one of the industry’s hottest sectors during the pandemic. An affiliate of Cerberus and Stonemont Financial Group recently formed a joint venture to acquire as much as $1 billion in industrial real estate.

A Cerberus entity and Highgate also recently acquired six hospitality portfolios from Colony Capital, according to a news release. In total, the firm’s real estate platform manages about $26 billion in assets.