Ares Management has hired Todd Farrell as a partner and its first head of US multifamily development as the Los Angeles-based firm looks to establish a vertically integrated platform in the property type, PERE has learned.
Farrell joins with over 30 years of experience in multifamily development, most recently as the president of Quarterra Multifamily, a Denver-based development company formerly known as LMC. Farrell began as the subsidiary of home construction company Lennar’s first employee and grew the platform to over $10 billion AUM. Before Quarterra, Farrell spent time at Crescent Communities, Summit Partners and Lincoln Property Group.
For Ares, Farrell marks the second residential-focused hire in the last year, after adding former Resource REIT chief investment officer Marshall Hayes, who joined Ares last year as partner and head of multifamily acquisitions. The plan is for both Hayes and Farrell to build out a vertically-integrated multifamily business similar to the industrial platform that Ares had acquired via its purchase of Black Creek in 2021, David Roth, co-head of Ares’ real estate business, told PERE.
Through the Black Creek transaction, Ares acquired a non-traded REIT, which allowed the firm to buy, lease and manage industrial properties, Roth said. Ares explored a similar entry through the purchase of a multifamily vertical platform, but couldn’t find a firm with a similar vehicle that provided recurring income.
“We weren’t seeing a lot of platforms that we thought fit the bill,” Roth said. “We figured that we could build it, frankly, much more cost effectively.”
Ares plans to use existing capital sources across the risk spectrum to fund multifamily developments for the moment. Roth declined to comment on the launch of future vehicles to support the efforts.
Before adding Farrell, Ares had typically done development using a joint venture model, providing capital to trusted sponsors. That business will continue alongside the direct business Farrell is being tasked with building. Roth noted that when the firm acquired Black Creek, Ares continued JV transactions, still maintaining relationships with all its existing partners in that business. Farrell will also be involved in sourcing and managing some of the existing and new JV development partnerships, Roth added.
The firm is forming the platform now to take advantage of a perceived opportunity with land, which he anticipates will see pricing corrections after adjustments occur in traditional real estate sectors. The reset will be driven by property owners that will be forced to sell assets as financing becomes more costly or less available amid the rising interest rate environment, Roth added. Land owners in particular will come under pressure because rising debt costs will not be offset by income produced from the underlying asset.
When that reset happens, Ares plans to be ready. “We are just laying the groundwork to put together a team. We are looking at some option contracts with long lead times,” Farrell said. “We’re not running out there to build the next property if the timing is not right to do that. We have the capital to be patient.”
Roth believed that “in a moment of inflection in the markets,” it was an opportune time to find skilled development professionals ahead of good land buying opportunities emerging.
Ares Management’s current real estate AUM is $49 billion. In the US, the firm focuses on both urban and suburban properties and is broadly targeting the Sunbelt and other growth markets. for multifamily investment and development.