Cerberus Capital is undertaking a novel approach to financing. The private equity firm is now offering financing to small investment firms that are purchasing foreclosed homes.
This is the company's bet on the recovery of the US housing market. The program was confirmed by four sources familiar with the situation but spoke on condition of anonymity.
The targets include firms that are looking into purchasing small numbers of homes in niche housing areas in the US. Then, the owners in turn rent them out. When the firms obtain the financing from Cerberus, it is locked out from obtaining financial deals from other institutions such as Deutsche Bank, Goldman Sachs and Credit Suisse.
The deals are small, with amounts from under US$25 million and may even be as low as US$10 million. This is a response to a call from investment groups that are seeking to raise cash in order to purchase cheap homes.
A spokesman for Cerberus declined to comment as the loan product has not yet been formally introduced by the company.
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