A subsidiary of Ares Management Corporation is to acquire 100 per cent of Black Creek Group’s US real estate investment advisory and distribution business (Black Creek).
Founded in 1993, Black Creek had approximately USD11.6 billion of assets under management, as of 31 March, 2021, in core/core-plus real estate strategies across two non-traded Real Estate Investment Trusts (REITs) and various institutional fund vehicles. Black Creek’s senior management team has an average of 25 years of experience in sourcing, acquiring, operating and developing properties in the US. Supported by large institutional investors and an established retail investor base, Black Creek has a longstanding track record across major property types, including industrial, multifamily, office and retail. Black Creek’s vertically integrated platform brings significant local expertise with over 100 investment professionals operating across eight offices throughout the US.
With an experienced team focused on core/core-plus strategies, the transaction is expected to broaden the existing capabilities and product offerings of the Ares Real Estate Group. Additionally, the acquisition of Black Creek will expand the Ares real estate platform with vehicles that complement Ares’ existing real estate debt and US and European value-add and opportunistic funds. Black Creek has operated in the high conviction industrial sector for more than 25 years, which is expected to increase the Ares Real Estate Group’s breadth in the sector and further drive operating, sourcing and informational advantages for its fund investors. Ares believes the approximately USD2 trillion industrial real estate sector exhibits consistent fundamentals across diverse market cycles and is positioned to benefit from heightened institutional interest driven in part by secular tailwinds and the accelerated growth of e-commerce.
The acquisition will also transform Ares’ retail distribution capability and increase Ares’ perpetual, non-traded REIT capital by USD5.1 billion with the addition of two separate non-traded REITs. As one of the leading retail fundraising platforms for non-traded REITs, Black Creek’s over 80-person broker dealer team distributes and markets to more than 70 relationships that have access to over 100,000 financial advisors. Over time, it is expected that through this combination there will be attractive growth prospects for Black Creek’s non-traded REITs and enhanced opportunities to accelerate retail distribution for Ares’ various alternative asset products to broker dealers through Black Creek’s distribution platform.
“We are very pleased to enter into this strategic transaction with Black Creek, which further scales our real estate business, expands us into core/core-plus strategies and provides us with a leading non-traded REIT retail distribution platform,” says Michael Arougheti, Chief Executive Officer and President of Ares. “We believe that this highly complementary combination will add meaningful revenue synergies for our real estate business as we offer new products to our existing investor base.”
“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 USD29 billion in assets under management with offices spanning across the US and Europe,” says Bill Benjamin, Partner and Head of the Ares Real Estate Group. “We are very excited to partner with senior management at Black Creek to offer new strategies, expand our sourcing networks and bolster execution. We have known and respected the team at Black Creek for many years and we believe there is a strong cultural alignment, which positions us for long-term success of our combined businesses.”
“We are excited to join the Ares team and we believe this is a highly complementary combination of people, investment products and resources,” says Raj Dhanda, Chief Executive Officer at Black Creek Group. “As a leading firm with extensive global relationships and a collaborative culture, Ares was the ideal partner for Black Creek Group and this agreement will allow the combined Ares Real Estate Group to expand our capabilities, reach and growth potential. We are excited for our leadership teams to work together and capitalise on what we believe will be a promising future.”
Upon closing, key members of the Black Creek leadership team will remain in place and become part of the Ares Real Estate Group, which is led by Bill Benjamin. The transaction consideration will include an upfront amount comprised of a combination of cash and Ares Operating Group Units in addition to a potential performance-based earnout payable in a combination of cash and Ares equity. The transaction is expected to be accretive to Ares’ after-tax fee related earnings per share of Class A common stock and after-tax realised income per share of Class A common stock in the first year and a more meaningful driver of growth in earnings in the years ahead. The transaction is expected to close early in the third quarter of 2021 and is subject to customary closing conditions, including regulatory approvals.
Eastdil Secured, LLC acted as financial advisor to Ares and Latham & Watkins LLP served as legal counsel. Hodes Weill & Associates acted as financial advisor to Black Creek and Simpson Thacher & Bartlett LLP served as legal counsel.
