Ares Management has raised $415 million in the first round of fundraising for its latest US real estate fund, Ares US Real Estate Fund IX, according to a filing with the Securities and Exchange Commission.
The first close occurred earlier this month and included commitments from 12 investors, the filings said. Limited partners in Fund IX include the Pennsylvania Public Schools’ Employees Retirement System, which committed $100 million in February, and the Texas Permanent School Fund, which earmarked $75 million in April, according to documents from those institutions. The firm is targeting $1 billion for the fund, according to PERE data.
Through the fund, Ares will target the acquisition of cash-flowing assets that are undermanaged and undercapitalized, with the intention of improving net operating income through renovations, repositioning and retenanting. The vehicle will be focused on the four major property types, including multifamily, industrial, retail and selective office properties.
The fund marks Ares’ first new real estate fundraise since the firm’s acquisition of AREA Property Partners in July 2013.
Fund VII, a vintage-2007 vehicle, is fully deployed and Fund VIII is approximately 80 percent invested. As of September 30, the funds were projected to generate a combined 19 percent gross internal rate of return and a 1.8x gross multiple of capital, or a 13.7 percent net IRR and 1.6x net multiple of capital, according to a memorandum from PennPSERS.
Ares’ real estate business currently manages $10.4 billion in assets and a portfolio of approximately 170 properties. The property team consists of a total of 71 investment professionals, including about 50 in its real estate equity team and roughly 20 in its real estate debt team. The equity team primarily targets control or majority-control investments involving the repositioning of assets and select new developments, while the debt team directly originates and invests in debt opportunities for middle-market owners and operators of US commercial real estate.
Founded in 1997, Ares, which is led by co-founder and president Michael Arougheti, managed approximately $97 billion across three investment categories in credit, private equity and real estate and had about 915 employees across the US, Europe, Asia and Australia as of September 30.