Ares Management Corporation (NYSE: ARES) is the latest investor looking to capitalize on growing distress in senior housing.
The Los Angeles-based global investment firm raised $1.7 billion in commitments for its newest opportunity fund, beating its $1.5 billion target, and distressed senior housing is expected to play a significant part of the fund’s acquisition strategy, Private Equity Real Estate (PERE) reported.
The fund, which targets distressed real estate, repositioning and selective development opportunities, is Ares’ largest to date, with an investor base including sovereign wealth funds, public pension funds, family offices, insurance companies and foundations, according to PERE.
Ares did not return a request from SHN for comment.
In addition to distressed senior housing, the new fund will prioritize post-pandemic distress opportunities in hospitality and retail, as well as sectors experiencing increased in demand such as multifamily, life science and industrial real estate, PERE reported. So far, nine investments have been completed through the fund, including two distressed office buildings in the Washington, D.C. market.
Ares has experience in the senior housing space. The firm is an investor partner with ZOM Senior Living and Liberty Senior Living, which is developing a $180 million, multi-phase senior rental community in Wellington, Florida.
Ares is the latest investor to raise funds targeting potential senior housing distress, which emerged last summer as Covid-19 placed additional pressure on operators already struggling before the pandemic swept the country.
And there will be plenty of competition for distressed assets, although few have the dry powder at their disposal as Ares. McFarlin Group announced the launch of a $100 million fund last April which would specifically target distressed assets. The firm believes there will be opportunities to acquire properties at a discount from lenders looking to remove underperforming properties or new communities in lease-ups from their portfolios, Managing Director Matt Johnson told Senior Housing News.
Last December, Harrison Street Real Estate Capital raised $720 million in a new fund targeting senior housing, data center and life science real estate — and may raise as much as $2 billion by the time it closes. However, Harrison Street generally does not pursue distressed senior housing properties.