Along with Black Creek’s $11.6 billion of assets under management – bringing Ares’ total real estate exposure to $29 billion – the firm has added open-end core and core-plus funds to its existing stable of value-add and opportunistic offerings. But the part of the acquisition that could prove most impactful is Black Creek’s platform for raising capital from individual investors, Bill Benjamin, the head of Ares’ real estate group told PERE in an exclusive interview.
With a team of more than 80 broker-dealers, Black Creek has relationships with more than 100,000 financial advisors. While this network supports the firm’s non-traded REIT vehicles, Benjamin said the hope is to eventually use it to incorporate retail capital into its value-add and opportunistic vehicles, too.
“The retail or mass affluent market is a really deep pool of capital that is under exposed to alternatives – real estate, private equity, private debt and other sectors that Ares is active in,” Benjamin said. “We have high hopes that this will be an important complement to our mostly closed-end funds business.”
Founded in 1993, Black Creek owns and manages close to 50 million square feet of industrial property throughout the US. With land entitlements and development capabilities, the firm has largely built up its portfolio one asset at a time. Benjamin said he expects the platform to maintain the same strategy once it is under the Ares umbrella rather than vying for large portfolio deals.
The full Black Creek leadership and investment teams will be brought over and, eventually, incorporated into the Ares brand. Benjamin said no part of the businesses would “cannibalize” each other, so no layoffs would be necessary. “We think this is going to accelerate the growth in the entire business and we’re more likely to add people in the next few years,” he said.
Black Creek is being brought on to serve as Ares’ core arm, but Benjamin said he expects the newly acquired investment team to benefit the firm’s higher return strategies, and vice versa. “One of the synergies of this acquisition is that we’ve got an enhanced origination team that will create more dealflow for both sets of investment vehicles,” he said.
A chance to scale
On the other side of the deal, Black Creek chief executive called his firm’s acquisition a “perfect transaction.” He sees the merger as an opportunity to expand Black Creek’s exposure to institutional capital, which only made up, on average, about a quarter of the capital managed by the group at any given time.
“We’ve grown significantly throughout our history as a private, family-owned enterprise through our strong performance and relationships, but to continue to grow we need a partner like Ares with institutional relationships and a global brand around the world,” Dhanda said.
Dhanda said that adding Ares’ higher-return strategies to the list of offerings that Black Creek’s broker-dealers can bring to financial advisors will strengthen its retail capital network.
“Financial advisors are consolidating their trusted partners and meeting with fewer groups these days because they just don’t have the time,” he said. “Now our sales team can go into those meetings with two or three times as many investment solutions as we did before.”
Originally, Black Creek had envisioned a minority stake when it went looking for a firm-level investment last year. But when the opportunity was presented to David Roth, Ares’ head of US Real Estate, the Los Angeles-based manager had bigger plans.
“David was shown the minority stake transaction and was quick to recognize the fantastic strategic fit that checked all the right boxes,” Benjamin said. “We said we were interested, but we wanted to buy all of it. So, we negotiated and reached an agreement in the winter.”
The acquisition is expected to close early in the third quarter of this year.