Cerberus, ACREST team up on new retail acquisition

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US private equity investor Cerberus won out in two tendering processes for two significant German retail property portfolios in mid-July from insolvency proceedings, one from US bank Wells Fargo. Cerberus has been putting together a significant retail portfolio – now valued at about €2bn - with a view to floating the business as a separate unit, and is thought to have already engaged a number of banks to prepare the path to a public offering.

One of Cerberus’ affiliate companies is buying the Phoenix portfolio consisting of nine shopping centres from Wells Fargo, while another Cerberus company is buying the so-called Monsoon portfolio out of administration from an unnamed seller.

The Phoenix deal involves a combined floor space of 92,000 sqm located at nine locations across Germany. The private sale, following a competitive process, enabled US bank Wells Fargo to clear the non-performing loans associated with the properties offi its balance sheet. The insolvency administrator was BBL Bernsau Brockdorff & Partners.

The ten retail properties in the larger Monsoon portfolio, for which Cerberus paid about €224m cash after a multi-level tendering procedure led by Dutch insolvency administrator Barend de Roy van Zuidewijn of the law firm AKD, have an aggregate floor space of 263,677 sqm.

Cerberus will be teaming up with long-time partner ACREST Property Group of Berlin to handle the coordination of asset management, letting and property development for properties in both the Phoenix and Monsoon portfolios. The two companies have worked a lot together, including on the 90 Woolworth-stores portfolio, the 43-unit Metro Cash & Carry chain, and the Rebound mixed-use portfolio. ACREST, with 120 employees across the country, manages about €3.7 billion in assets in Germany, including nearly 400 properties totalling 2.5m sqm of floor space.

Cerberus has rarely been far from our headlines here in REFIRE as one of the oldest and most experienced of the large US private equity groups on the German market, since it kicked off in the still largely-undeveloped German market in 2002.

Last year, Cerberus acquired the 300,000 sqm Rebound portfolio of 47 retail and mixed-use properties from FMS Wertmanagement, part of the defunct Hypo Real Estate bank, which resulted in significant capital improvements to redevelop those assets. Earlier that same year, Cerberus acquired the distressed assets of Speymill Deutsche Immobilien Company plc, in a transaction that injected capital for asset improvements and restructured the company's bank loans.

In 2011, Cerberus acquired a 900,000 sqm portfolio of Metro Cash & Carry wholesale-retail properties located in urban centres throughout Germany. On the residential front, in Germany's largest initial public offering of 2011, Cerberus and partner Goldman Sachs floated Berlin-based GSW Immobilien AG on the Frankfurt Stock Exchange after restructuring the company and upgrading its assets.