Mubadala, the sovereign wealth investment company owned by the government of Abu Dhabi, is aiming to significantly upscale its exposure to the European real estate debt market through the launch of a strategic partnership with ambitions to invest $1 billion into the sector.
The company has joined forces with Aldar Properties, the Abu Dhabi-headquartered real estate company, and US private equity firm Ares Management in a platform designed to invest in real estate credit opportunities in the UK and Continental Europe.
Mubadala will hold a 50 percent stake in the platform, while Aldar will hold 30 percent and Ares will hold the remaining 20 percent. The three firms are aiming to invest the $1 billion in the coming three to five years.
For Mubadala, the partnership is its second recent strategy to gain exposure to Europe’s property lending market. In November, the sovereign wealth fund contributed an undisclosed amount of anchor capital to London-based mid-market real estate lender Starz Real Estate in the Starz Orion Capital fund. Through the strategy, Starz will target senior, mezzanine, bridge finance and non-performing loan opportunities, with deals typically expected to be within the €30 million-€60 million range. Starz said it will top up Mubadala’s commitment, giving it total funds of €300 million to deploy.
Mubadala and Ares have an existing relationship. In today’s announcement, the three firms said Aldar will invest – on top of the $1 billion investment drive – an additional $100 million into an existing platform established by Mubadala and Ares in 2021. The platform focuses on senior secured debt with a first lien on assets including offices, residential, industrial, retail and hospitality.
“Mubadala has strong and strategic relationships with both Ares and Aldar, and this new platform leverages the collective strengths of each party to invest in the private real estate credit market in the United Kingdom and Europe,” said Omar Eraiqat, deputy chief executive officer of disruptive investments at Mubadala. “This collaborative approach reflects our shared commitment to identifying and capitalizing on unique investment opportunities that deliver sustainable, long-term returns.”
For Ares, the relationship with Mubadala is expected to significantly boost its lending potential over time. The firms said the Ares European Real Estate Debt Strategy is expected to upsize to around $2 billion in capital commitments from Mubadala, Aldar and Ares funds. With anticipated leverage, the total available capital could be more than $5 billion.
Ares has rapidly grown its European real estate lending business since its January 2022 launch. According to Real Estate Capital Europe’s Active Lenders 2023 list, published this month, it lent around €1 billion in Europe in the first three quarters of this year, including the European element of a €750 million global refinancing of Queensgate Investments’ Generator Group hospitality platform, backing €440 million for the European business.
In Thursday’s announcement, Ares said it will provide a dedicated investment team mandated to cover real estate debt deal origination, portfolio monitoring and deal pipeline execution.
“The global opportunity for flexible private real estate lenders continues to grow as we see ongoing retrenchment of traditional sources of capital,” commented Phil Moore, partner and head of European real estate debt for Ares.
“We remain focused on leveraging our cycle-tested team, global market perspective and disciplined approach to capitalize on our high conviction sectors, including the residential, mixed-use and adjacent spaces, all of which continue to benefit from attractive supply/demand dynamics,” he added.
For Aldar, the strategy represents a broadening from the equity investments it has undertaken in Europe. With a total investment of $400 million, the firm said its entry into the private credit space will diversify its portfolio alongside “reputable and established players.”
“With the rising prevalence of non-bank lending, as credit conditions tighten and stricter capital requirements are implemented, we see a substantial opportunity for Aldar as a strategic real estate investor,” said Talal Al Dhiyebi, group chief executive officer of Aldar Properties.
“This partnership between Mubadala, Ares and Aldar is wholly unique, blending financial strength, a proven track record and in-depth knowledge of the real estate sector and asset classes. It is an ideal opportunity in terms of timing to gain both high quality exposure to a key asset class and a solid foothold in a market that is not only scalable but that also offers favorable risk-adjusted returns through market cycles,” he added.
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