Cerberus Capital Management has closed fundraising for its flagship global distressed real estate strategy fund, Cerberus Institutional Real Estate Partners V, pulling in $2.8 billion.
The firm has wasted little time in putting the money to work. The fund participated this month with investment and hospitality management company Highgate in picking up six hotel portfolios from Colony Capital.
“The investment landscape plays to the strengths of our global real estate franchise,” Lee Millstein, president of Cerberus Global Investments and global head of real estate, said in a statement about the fund’s closing. “There are market dislocations and macrotrends that are driving compelling opportunities across our broad platform.”
The company declined to comment further.
Colony Capital said it completed the sale last week of its remaining hotel holdings to Cerberus and Highgate. Spread across six portfolios, the sale totaled 22,676 rooms across 197 hotel properties in the United States.
Boca Raton, Florida-based investment firm Colony Capital, which moved its headquarters from Los Angeles and is shifting toward technology holdings such as data centers and cellphone towers, received $67.5 million in cash from the deal. The buyers, Cerberus and Highgate, assumed $2.7 billion in debt.
“This investment marks an ongoing strategic commitment by Highgate to the select service and extended stay space,” Mahmood Khimji, co-founder and managing principal of Highgate, said in a statement.
The Cerberus fund's participation was confirmed by a source familiar with the deal who spoke on the condition of anonymity because the details are not public.
Cerberus said it received commitments to the overall fund from existing and new limited partners, surpassing its initial fundraising target of $2 billion, according to the company.
The strategy of the fund is to invest in direct assets, real estate companies, entities with significant real estate exposure and real estate-related debt, including nonperforming loan portfolios, Cerberus said. The New York private equity firm is one of the largest investors in nonperforming loan portfolios.
While a global fund, investments are likely to be primarily in the United States, Europe and Asia, Cerberus said.
In addition to its recent participation in the hotel purchases, Cerberus has also partnered recently on building holdings of industrial properties, including service facilities, logistics centers and self-storage and cold-storage assets, according to the company.