Ares Agrees to $440 Million Multifamily Portfolio Deal

(Bloomberg) -- An Ares Management LP affiliate has agreed to buy 12 multifamily properties from Cottonwood Residential for roughly $440 million, according to people with knowledge of the matter.

The acquisition is being made through Ares U.S. Real Estate Fund IX LP, and involves properties in Tennessee, Texas, Georgia and North and South Carolina, according to one of the people, who asked not to be identified because the details aren’t yet public. The transaction gives Salt Lake City-based Cottonwood an enterprise value of $1.7 billion, the person said. An Ares representative declined to comment, and a Cottonwood representative didn’t immediately respond to a request for comment.

According to a Commonwealth of Pennsylvania Public School Employees’ Retirement System memo, the Ares fund is focused on the multifamily, industrial, retail and office sectors and seeks to deliver returns by improving net operating income through renovations, repositioning of properties and re-tenanting.

Interest from private capital in the multifamily sector “remains robust” and transaction volumes are expected to accelerate throughout 2018, according to research from Green Street Advisors LLC. Deals by private buyers may put pressure on the growth outlook of publicly traded real estate investment trusts, according to Green Street, which warns that if apartment construction doesn’t moderate meaningfully, the combination of slowing job growth, aging millennials and stabilizing homeownership may lead to an outsized deceleration in rent growth.

To contact the reporter on this story: Gillian Tan in New York at gtan129@bloomberg.net

To contact the editors responsible for this story: Alan Goldstein at agoldstein5@bloomberg.net, Daniel Taub, Christine Maurus

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