Ares Management, a global alternative investment manager, has raised over $3.3 billion to purchase U.S. distressed real estate — known to investors as an opportunistic strategy.
The capital represents the final closing amount for its Ares U.S. Real Estate Opportunity Fund IV. The haul marks the largest Ares Real Estate closed-end fundraise to date and surpasses the $2.2 billion of commitments raised for its predecessor fund.
The fund positions Ares to acquire real estate out of distressed ownership positions and special situations and then either enhance and reposition the assets or pursue development and redevelopment projects in desirable markets. Opportunistic investments are known to come with a high amount of risk.
“As capital markets stabilize, we are observing significant opportunities for AREOF IV,” David Roth, partner and co-head of Ares U.S. Real Estate, said in a statement. “We believe the mounting need for capital infusions to bridge gaps created by the deleveraging that has occurred over the past two years has yielded an attractive investible universe of high-quality real estate in desirable markets.”
AREOF IV has a four-year investment window that extends through the end of 2026, according to Ares in a presentation to the Pennsylvania State Employees' Retirement System, an investor in the fund.
“We are focused on an expanding universe of over-levered properties requiring gap equity and stalled projects in need of rescue capital,” the company said in its presentation.
AREOF IV’s current portfolio includes the recent acquisition and redevelopment of the Hyatt Regency Orlando in Orlando, Florida, for $1.07 billion, marking one of the largest hotel transactions of 2024 to date.
In July 2023, the fund provided preferred equity for the conversion of 55 Broad St. in New York’s Financial District, one of the largest office-to-residential conversions in city history.