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Cerberus wins Wells Fargo’s Project Phoenix German retail portfolio

By James Wallace - Monday, October 01, 2012 14:30

Cerberus Capital Management has been selected by Wells Fargo as preferred bidder to buy the €70m-valued nine-strong Project Phoenix portfolio of secondary German retail properties, CoStar News has learned.

CoStar News understands that Wells Fargo, in collaboration with Phoenix sales agents Eastdil Secured and Jones Lang LaSalle, selected Cerberus at the end of last week as preferred bidder, edging out Morgan Stanley Real Estate Funds.

While the discount Cerberus agreed with Wells Fargo relative to the latest valuation is unknown, the portfolio’s original value was around €200m in 2007. The Phoenix portfolio assets were reclaimed by Wells Fargo through German insolvency procedures.

Cerberus is expected to complete the final due diligence work on the portfolio before closing the deal by the end of the year.   

Eastdil secured and JLL jointly re-launched the Project Phoenix portfolio sale in Mid-May.

Wells Fargo enforced on the legacy defaulted and matured €150m senior Wachovia loan in 2010, with full provisions against the loans absorbed in previous years.

Cerberus has a clear asset management play to improve the distressed secondary German retail portfolio’s value through investing in the assets, re-gearing maturing leases to improve the long-term cash flows of the properties before disposing of them piecemeal or as a portfolio to more natural long-term holders, such as income-seeking institutional investors.

The current vacancy rate across the Phoenix portfolio is 19%, while the annualised gross income is €10.5m. All the assets feature short average unexpired terms.

Phoenix comprises nine retail-led schemes across circa 995,000 sq ft Western Germany portfolio are located across Bielefeld, Bonn, Buchholz, Constance, Minden, Nuremberg, Radevormwald, Rheine and Viersen.

There are six shopping centres, one office and retail building, a retail warehouse and a mixed use scheme.

The largest three properties by rental income are: Marktpassage Bielefeld, a shopping centre in Bielefeld; Seerhein Center, a retail scheme in Constance; and a fully let retail warehouse scheme near Nuremberg.

The current centre managers are TreuReal and Estama, but there has been a suspension in investment and new lettings since the assets went into administration in 2010.

All parties declined to comment.

jwallace@costar.co.uk