Ares in AREA takeover

The takeover sees Ares finally confirm itself as “a significant player” in the private equity real estate market following prior links with large corporate acquisitions.

Ares Management, the Los Angeles-based alternative asset manager, has signed a definitive agreement to buy private equity real estate firm AREA Property Partners, it was announced today.

The takeover of AREA sees Ares Management finally take a central position in the world’s private equity real estate markets after the firm was linked with various other platforms over recent years, including the world’s largest real estate investment management business, ING Real Estate Investment, which was eventually sold to CBRE Global Investors.

Ares’ acquisition of New York-based AREA, for an undisclosed price, sees it assume control of one of the best known private equity real estate businesses having been in operation since 1993.

In that time, the firm has raised $14 billion of equity for investments in the US, Europe and Asia for numerous commingled funds and joint venture partnerships. AREA has invested in more than 600 transactions with an aggregate value in excess of $70 billion. As of March this year, the firm held approximately $6 billion of committed capital under management.

Once the deal completes, the combined firm will have about $8 billion of committed capital run by a team of more than 70 investment professionals. All existing AREA funds will continue to be managed by AREA professionals.

The capture of AREA means Ares can add an equity investing platform to its existing real estate debt business. The firm acquired Wrightwood Capital in September 2011, a 40-staff business that specialises in senior and mezzanine lending.

The takeover also sees Ares buy out National Australia Bank’s 35 percent stake in AREA which was acquired by the bank in March 2011.

Tony Ressler, Ares’ senior partner and chairman said in a statement: “AREA’s expertise in value-add and opportunistic equity investing and mezzanine debt will complement our real estate group’s current capabilities in real estate private lending.”

“Further, the entire Ares Management platform will greatly benefit from AREA’s geographic reach, market insights, industry relationships and seasoned investment professionals – especially Lee Neibart in the US and Bill Benjamin in Europe.”

The transaction ushers in a new era for AREA’s senior management. Neibart, formerly the chief executive officer of AREA, will become co-head and senior partner of Ares Real Estate Group, the platform within Ares Management responsible for real estate investments, alongside existing head John Bartling. William Benjamin, AREA’s head of Europe and India, will become a senior partner and will continue to head both.

The deal spells the end of the road for AREA founder William Mack who will retire and focus on his family’s real estate initiatives, investments and various philanthropic pursuits. Richard Mack, his son, will become a senior advisor to Ares Real Estate Group.

“As we transition to this exciting new phase of joining Ares, we want to acknowledge Bill Mack for his foresight, investment insights and unwavering integrity, which shaped the philosophy that has guided our firm over the past two decades.  It was his vision and long-term commitment to building AREA that led to this opportunity to partner with Ares,” said Neibart. 

“Combining the complementary skill sets and asset classes of both firms will yield superior sourcing opportunities and enhanced credit analysis and information flow that will enable us to bring new products to investors while offering creative debt and equity financing solutions to the marketplace.  The Ares Real Estate Group will now be a significant player at a time when we are seeing increasingly compelling opportunities in existing and new mandates.”

Hodes Weill & Associates acted as strategic advisor to AREA Property Partners and JPMorgan Securities provided financial advisory services to Ares Management.