Ares Management Agrees to Acquire Black Creek Group
May 25, 2021 | James Sprow | Blue Vault
A subsidiary of Ares Management Corp. has entered into a definitive agreement to acquire Black Creek Group’s US real estate investment advisory and distribution business.
Black Creek Group currently sponsors two nontraded REIT programs: Black Creek Diversified Property Fund, Inc., and Black Creek Industrial REIT IV, Inc. Black Creek Diversified Property Fund Inc. is a NAV-based perpetual life REIT that was formed on April 11, 2005. The REIT owns 56 properties, of which 18 are industrial properties with 5.08 million rentable square feet that are 95.2% leased as of March 31, 2021. The REIT also owned 9 office properties, 25 retail properties and four multifamily properties. Black Creek Industrial REIT IV, Inc. was formed in 2014 to make investments in income-producing assets consisting primarily of high-quality distribution warehouses and other industrial properties leased to creditworthy corporate customers. The REIT owned 134 buildings as of March 31, 2021, 67 of which were consolidated and 67 unconsolidated. Those buildings totaled 30.75 million rentable square feet and were leased to 212 customers. The total portfolio was 90.8% leased at March 31, 2021.
The two nontraded REITs sponsored by Black Creek had total assets of approximately $4.0 billion as of March 31, 2021. As of Q4 2020, Black Creek Group has raised approximately $11.3 billion in the nontraded REIT space.
Black Creek Group has an excellent track record in the nontraded REIT space. In December 2017 Industrial Income Trust merged with GLP and liquidated its remaining portfolio, providing investors with an 11.1% capital gain and an average holding period return to early investors of an estimated 8.10% annualized return, including DRIP investments. DCT Industrial Trust Inc. listed on the NYSE in 2006 and later gave early investors a 13.08% annualized rate of return including DRIP investments and a 23.5% capital gain. Most recently, Industrial Property Trust, Inc. merged with Prologis L.P. and liquidated a remaining portfolio on July 28, 2020, providing early investors with an estimated 37.2% capital gain. Blue Vault estimates that the annualized rate of return to early investors in the REIT was approximately 9.7% with DRIP investments.
As of March 31, 2021, Black Creek had approximately $11.6 billion of assets under management in core and core-plus real estate strategies across the two non-traded REITs and various institutional fund vehicles. Black Creek, which has more than 100 investment professionals operating across eight offices throughout the US, has experience in major property types, including industrial, multifamily, office and retail.
Black Creek was founded in 1993 and has a senior management team with an average of 25 years of experience in sourcing, acquiring, operating and developing properties in the US. After closing, key members of the Black Creek leadership team will become part of the Ares Real Estate Group, led by Bill Benjamin.
Ares expects that the transaction will broaden its existing capabilities and product offerings. Additionally, it should provide vehicles that complement Ares’ existing real estate debt and US and European value-add and opportunistic funds.
Specifically, Black Creek’s 25-year experience in the industrial sector should further drive operating, sourcing and informational advantages for its Ares Real Estate Group’s fund investors. Ares believes industrial is positioned to benefit from heightened institutional interest-driven in part by secular tailwinds and the accelerated growth of e-commerce. The firm also believes the Black Creek acquisition will transform its retail distribution capability.
The addition of Black Creek’s two separate non-traded REITs should increase Ares perpetual, non-traded REIT capital by $5.1 billion. Black Creek has a broker dealer team that distributes and markets to more than 70 relationships with over 100,000 financial advisors. Ares sees the potential to accelerate the retail distribution of its various alternative asset products to broker-dealers through Black Creek’s distribution platform.
“This acquisition presents an attractive opportunity to further enhance our team’s capabilities and grow our leading global real estate equity and debt business to approximately $29 billion in assets under management with offices spanning across the US and Europe,” said Benjamin, partner and head of the Ares Real Estate Group, in a prepared statement.
Ares is also focused on the distressed space. Last month, it completed its largest US real estate equity fundraise to date with the final closing of its Ares U.S. Real Estate Opportunity Fund III, which targets distressed, repositioning, and selective development opportunities. The fund was oversubscribed with approximately $1.7 billion of commitments compared to its $1.5 billion target.
“Looking ahead, the unprecedented change in space utilization has potentially widened the opportunity set for both attractive undercapitalized assets and assets within sectors experiencing accelerated demand,” said David Roth, head of US Real Estate Private Equity, said in a prepared statement. “We believe that we are well-positioned with our flexible mandate and experienced team to continue to build upon the great progress that the Fund has already achieved.”
Sources: GlobeSt.com, Blue Vault
