Exclusive: Cerberus seeks to bankroll investor landlords
By Matthew Goldstein
NEW YORK (Reuters) - Private equity firm Cerberus Capital Management wants to provide financing to small investment firms that are buying foreclosed homes as part of a long-term bullish bet on the housing recovery, according to four sources familiar with the situation.
Cerberus is targeting investment firms that are looking to buy a small number of homes in niche housing markets in the U.S. and rent them out, the sources said. These investors cannot tap the much larger financing deals being put together by banks such as Deutsche Bank, Credit Suisse, and Goldman Sachs Group for institutional buyers of foreclosed homes.
Cerberus' financing deals will be small, under $25 million, and many will be for less than $10 million, the sources said, declining to be identified as the new loan product has not been announced. A spokesman for Cerberus declined to comment.
The move by the New York-based firm, with $20 billion under management, comes amid a rush over the past year by investor groups seeking to raise cash to buy up cheap homes.
The U.S. Federal Reserve has held mortgage rates near record lows, helping to fuel the housing market recovery. A drop in the flow of foreclosed homes coming on to the market has also helped to push up home prices, which soared 8.1 percent in January in 20 metropolitan areas tracked by S&P/Case Shiller, the biggest 12-month rise since June 2006.
The National Association of Realtors said in February that roughly 32 percent of all single-family homes were purchased in all-cash transactions. Historically, the realtor group said all-cash deals have represented no more than 20 percent of all transactions.
But many all-cash buyers also are leveraging themselves with cheap loans from banks.
Large institutional investors - led by private equity firm Blackstone Group, upstart firm American Homes 4 Rent and real estate firm Colony Capital - will spend up to $10 billion over the next two years to buy distressed single family homes, housing analysts estimate. That is part of a strategy to first rent out the homes and later sell them at a profit. Continued...