Ares begins raising capital for €1.25bn European real estate fund

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Ares Management plans to raise €1.25bn for its fifth European real estate fund, according to one of its investors.

Texas Permanent School Fund said at its board meeting that it had approved a €75m commitment to Ares European Real Estate Fund V.

According to the investor, the fund will invest mostly in offices and apartments in Germany, France and the UK. It will target non-core assets that can be redeveloped or recapitalised.

Texas Permanent’s decision was based on the recommendation of its real estate consultant, Courtland Partners, which cited Ares’ strong track record and proprietary deal flow in Europe.

The pension fund has also approved $75m (€64.3m) commitments to Pennybacker IV and Berkshire Mortgage Debt Fund II, to target real estate investment opportunities in the US.

The former, managed by Pennybacker Capital, will invest non-core assets in ‘sunbelt’ states, including workforce housing and age-restricted affordable housing.

Courtland said Pennybacker has completed 31 realised investments that have produced a 25% internal rate of return with 1.6x equity multiple.

Berkshire’s second mortgage debt fund will invest in B piece loans on multifamily properties across US. The net target returns for the fund are 11% to 12% with a current distribution of 6% to 7%.

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