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Ares raises $2.1 bn for two real estate funds

The Los Angeles-based alternative asset manager has closed on its oversubscribed European and US property funds after more than two years in market.

Ares Management announced today the final closings of its latest two real estate funds, both of which were oversubscribed. Ares European Real Estate Fund IV raised $1.3 billion in commitments, beating its original target of $1 billion, while Ares US Real Estate Fund VIII collected $824 million, exceeding its initial $750 million equity goal.

The European fund will pursue residential, retail, office and industrial real estate investments in major markets in the region, including the UK, Germany and France. Meanwhile, the US vehicle will focus on value-add investments in the multifamily, industrial, retail, hotel and office sectors in top US markets. Park Hill Real Estate served as the placement agent on both funds.

The two vehicles have been in market for more than two years. Ares European Real Estate Fund IV, previously known as AREA European Real Estate Fund IV, is said to have been launched in March 2012. Ares held a first close of $427.82 million for the fund in September 2013 and had raised $767.06 million as of last August, according to filings with the US Securities and Exchange Commission. Limited partners in the fund included the Illinois Municipal Retirement Fund, which pledged up to $50 million last April, and the New Mexico State Investment Council, which designated $75 million last August.

Meanwhile, Ares US Real Estate Fund VIII, formerly AREA US Real Estate Fund VIII, has been on the fundraising trail since at least December 2011. The vehicle collected $173.08 million in its first close in September 2013 and had gathered $490.08 million as of last July. Among the fund’s backers were the Pennsylvania School Employees Retirement System, which committed $75 million in March 2013; and Texas Permanent School Fund, which agreed to invest up to $75 million last July.

“The fact that both successor funds were oversubscribed demonstrates the confidence that existing and new investors of all types have in Ares Management, our respective investment teams as well as the prospects for both opportunistic and value-add real estate strategies,” said Michael Arougheti, president and senior partner of Ares Management.

As of September 30, Ares Management’s real estate group managed approximately $9.6 billion of assets under management through commingled funds, separately managed accounts and other fund types, as well as through its publicly traded commercial mortgage REIT, Ares Commercial Real Estate Corporation. The business focuses on lending to and investing in properties that have been under-managed or need repositioning in core markets.