Ares wins $700m debt mandate

The firm will make commercial real estate debt investments for a life insurance company.

Ares Management has won a $700m commercial real estate debt mandate from a large North American speciality life insurer to originate US commercial mortgage loans, PDI sister title, Real Estate Capital reported last week.

Ares will use the funds to originate and service two- to 10-year floating and fixed rate US commercial mortgage loans across a variety of property types. The loans will typically range between $15m and $50m and go up to a 70% loan-to-value on stabilized properties — or those with a light transitional element — across major US markets, sources said.

The inclusion of a flexible prepayment option could make the loans attractive to borrowers when compared to other options like CMBS, particularly those seeking longer-term product. Ares now has $5bn of assets under management through direct investments from the insurance sector, and the firm will be looking to do more business with insurance companies as it continues to beef up its real estate operations.

The mandate is a “significant achievement in the continued expansion of the breadth and scale of our real estate products,” said Todd Schuster, senior partner of the Ares Real Estate Group and head of Ares Real Estate Debt, in a statement.

In 2012, Ares Real Estate Group formed Ares Commercial Real Estate Corporation (NYSE:ACRE), a real estate investment trust; and in June of 2013 Ares completed the acquisition of AREA Property Partners, a real estate management firm investing across North America, Europe, and India. Last quarter the firm closed two equity funds, Ares European Real Estate Fund IV and Ares US Real Estate Fund VIII, announcing last week that both funds were oversubscribed.