When an affiliate of Cerberus and a co-investor acquired a Berlin-based public housing company from the State of Berlin in one of Germany’s first public housing privatizations, the housing company suffered from an outdated management structure, poorly utilized properties and dissatisfied occupants.
Cerberus’s investment in the struggling company showcases the Firm’s ability to leverage its experienced real estate professionals and financial acumen to unlock rental property value while improving tenant satisfaction.
Following the acquisition, Cerberus moved quickly to install an experienced management team and execute a thorough operational restructuring, which included:
- Refocusing efforts on the company’s primary properties and selling non-core assets
- Improving tenant satisfaction by investing heavily in the properties and their maintenance
- Optimizing the company’s corporate cost base
- Increasing property cash flows by raising occupancy rates to record levels
- Securing a new sustainable financing structure with low interest rates and staggered maturities through senior bilateral loans from six banks
By 2011, Cerberus’s initiatives had transformed the company into a German market leader with robust cash flows, high quality assets and significantly improved tenant satisfaction. With more than 50,000 residential units, the company remains the largest non-government residential housing provider in Berlin.
The successful operational improvements – and Cerberus’s patience in weathering the downturn in the German real estate market – positioned the company for its successful €468 million initial public offering (IPO) on the Frankfurt Stock Exchange in April 2011. Following the company’s IPO, Cerberus and its co-investor retained minority stakes in the housing provider, which were exited in January 2012.