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Ares Administration has agreed to pay as much as $5.2bn to purchase the worldwide arm of actual property funding supervisor GLP Capital Companions, in one of many largest mixtures within the personal funding business lately.
The deal will add $44bn in property to Ares’s enterprise — taking it in direction of its objective of managing greater than $750bn by 2028 — and prolong it past its core credit score franchise. It additionally places Ares a lot nearer in dimension to its bigger friends, together with Blackstone, Apollo International Administration and KKR.
The takeover of GLP Capital’s worldwide enterprise, which excludes its funds in Better China, will almost double Ares’s funding enterprise within the property sector, giving it massive actual property holdings in Japan and Europe.
Ares chief govt Michael Arougheti instructed the Monetary Instances the deal would make it one of many three largest traders in industrial actual property, placing it behind Blackstone and Prologis. The Los Angeles-based group managed slightly below $450bn on the finish of June.
High executives at Ares, led by billionaire Arougheti — who can be a co-owner of the Baltimore Orioles baseball workforce — have turned to takeovers to increase the personal funding enterprise, which has greater than doubled in dimension for the reason that finish of 2020.
In 2021 it purchased secondaries investor Landmark Companions for $1.1bn, which was adopted intently by the buyout of US actual property funding agency Black Creek. Then in 2023 it bought Asia-focused personal fairness group Crescent Level Capital.
Ares can pay $1.8bn in money for the enterprise often called GCP and fund the rest of the $3.7bn buy value with its personal shares. It has additionally agreed to a long-term incentive plan with GCP’s prime leaders, which might raise the payouts they obtain by an additional $1.5bn by 2027. Ares could select to pay nearly all of that with inventory.
Arougheti stated Ares was drawn to the deal because the Federal Reserve was slicing rates of interest and demand for information centres continued to blow up.
“We’re capable of come into the deal having underwritten property values in the next rate of interest surroundings,” Arougheti stated. “As rates of interest come down . . . it is best to see an enchancment in economics. We’re shopping for in on the proper time.”
The groundswell within the information centre enterprise has unleashed a race by a number of the largest cash managers. Ares’s funding comes a day after rival credit score funding store Blue Owl introduced it had agreed to purchase IPI Companions, an investor in information centre infrastructure with $10.5bn underneath administration, for $1bn. Final month BlackRock partnered with Microsoft on a $30bn synthetic intelligence funding fund to assist finance information centres.
“This market is so large when it comes to the info centre demand,” Arougheti stated. “There may be nonetheless a big undersupply of capital to fulfill that demand.”