Cerberus established our Residential Opportunities investment platform in 2008 to capitalize on opportunities to acquire distressed residential mortgage-backed securities following the Global Financial Crisis. Over the past decade, our Residential Opportunities platform has continued to build upon its expertise in residential debt and evolved to earn recognition as an innovator and market leader in securitizing performing residential real estate loans and investing in single-family rental real estate (SFRs).
Our Residential Opportunities strategies seek to maximize absolute return through a combination of capital appreciation and current income, investing primarily in mortgages, loans, and real assets, and leveraging our proprietary asset management platforms to enhance performance and drive value.
Whole Loan Securitizations
Cerberus’ residential loan securitization strategies focus on U.S. re-performing loans (RPLs) and discounted European performing loans – areas that continue to represent an abundant investable universe of assets.
Since 2014, Cerberus has been the first and largest issuer of residential rated RPL debt in the United States and a leading issuer of residential performing loan debt in Europe. Our Residential Opportunities team has invested in more than 170 transactions representing over $50 billion of RPL acquisitions and securitized more than $43 billion across 41 distinct rated U.S. transactions.
Acquiring these loans requires significant infrastructure to source, screen, underwrite, migrate, and service thousands of individual loans. Securitization allows Cerberus to transform illiquid loans into more liquid, investment grade bonds that can be rated and sold in the secondary market.
In 2013, Cerberus and certain affiliated funds and accounts established FirstKey Mortgage, a proprietary operating company designed to provide a competitive advantage in loan acquisition and securitization. FirstKey Mortgage has over 55 employees and is a market leader that enhances our capabilities in collateral underwriting and selection, pre-securitization due diligence, rating agency collaboration, and securitization and distribution operations.
Single-Family Rental Homes
The U.S. single-family home market is vast, with a market value close to $30 trillion. Within that market, single-family rentals represent an estimated 26 million units with a market value of $5 trillion that is almost entirely owned by non-institutional investors.
In 2014, Cerberus further expanded our capabilities in residential opportunities to provide institutional investors with direct access to the benefits of investing in diversified SFR portfolios. Cerberus manages our SFR properties using a seasoned team of investment professionals and the resources and services of our affiliated property manager, FirstKey Homes.
As a proprietary operating company, FirstKey Homes provides value through dedicated acquisition and property management services. FirstKey Homes’ comprehensive services include leasing, rental collection, credit screening, repairs and maintenance, construction, renovation oversight services, and quality control. FirstKey Homes has approximately 650 employees managing over 24,500 homes in 20 U.S. markets
The Cerberus Team
The Cerberus Residential Opportunities team consists of more than 24 dedicated professionals with extensive and complementary residential expertise. We have considerable experience investing in residential mortgage securities and assets, and a wide array of product knowledge, including liquid interest rate products, single-family rental homes, performing and non-performing whole loans, servicing, mortgage servicing rights (MSRs), securitization, contract finance, and indices.
Our team members bring years of knowledge from the sell side, having worked in trading, structuring, securitization, modeling, banking, and sales for large mortgage-backed securities issuers. Every investment opportunity is rigorously vetted through detailed examinations of loan and industry data, dual-track credit and prepayment modeling, and identification of pricing inefficiencies.
In addition, the Cerberus Residential Opportunities team leverages our global platform of approximately 175 investment professionals and over 100 operating executives and functional experts in Cerberus Operations and Advisory Company. Cerberus operating executives have been instrumental, for example, in establishing and growing our proprietary operating companies and creating operating leverage that can benefit our investment activities.