Ares Management closes Capital Automotive acquisition

April 2022 | DEALFRONT | PRIVATE EQUITY & VENTURE CAPITAL

Financier Worldwide Magazine

April 2022 Issue

Global alternative investment manager Ares Management Corporation has completed the close of its previously announced $3.8bn acquisition of Capital Automotive LLC from a Brookfield private real estate fund.

The deal has been completed by funds managed by Ares’ Alternative Credit strategy and Real Estate Group.

Founded in 1998 as Capital Automotive Real Estate Services Inc., Capital Automotive is a self-managed real estate company that provides highly tailored, sale-leaseback capital to automotive dealers in the US and Canada to support them in acquiring new locations and upgrading facilities. The company owns a diversified portfolio of over 250 high quality, operationally essential real estate assets that are structured as long-term triple net leases.

Ares has made a concerted push to improve its net leasing activities of late. Including the recent investment in Capital Automotive, Ares’ funds have invested in over 1200 assets totalling approximately $7.2bn of gross asset value in the US and Europe over the last 15 months. This includes net lease investments spanning retail, industrial and office assets leased to tenants with varying credit profiles. Ares’ net lease investment team benefits from deep industry experience combined with an integrated operating platform. The team focuses on high quality real estate and tenants while seeking to provide creative structuring and financing solutions to maintain maximum capital flexibility.

“Our net lease capabilities sit at the nexus of our leading credit and real estate teams, providing us with a 360-degree view through which we can offer highly flexible net lease solutions,” said Joel Holsinger, a partner and co-head of alternative credit at Ares. “We are excited by growing market demand from sponsors and companies seeking a creative partner to help them unlock the value of their real estate assets. We are committed to being a partner of choice to them.”

“This is an area of the market that plays to Ares’ strengths as a platform given the different disciplines that are in constant collaboration. We believe that our ability to apply a hybrid real estate and credit lens to assess opportunities is a key differentiator,” said David Roth, a partner and co-head of US real estate at Ares. “We provide our partners with the advantages of scale and experience to deliver a full suite of solutions that are unconstrained by asset type, tenant profile and structure.”

“I’m excited to be partnering with the team at Ares and believe that together we will be well positioned to take advantage of the expanding opportunity set in the net lease market,” said Jay Ferriero, president and chief executive at Capital Automotive. “Beyond the competitive edge of the Ares platform and the experience of the team, the strength of this partnership is reinforced through our shared commitment to accelerating positive social impact.”

As of 31 December 2021, Ares Management Corporation had $306bn of assets under management with 2100 employees across North America, Europe, Asia Pacific and the Middle East. Ares Alternative Credit leverages a broadly skilled and cohesive team of approximately 50 investment professionals as of the end of 2021. Aligning Ares’ investment activities with its societal impact, Ares and Alternative Credit portfolio managers have committed to donating a portion of carried interest from certain alternative credit funds to global health and education charities. The Ares Real Estate Group manages comprehensive public and private, equity and debt strategies, with approximately $41.2bn of assets under management and over 200 investment professionals, as of 31 December 2021. The real estate team maintains a time-tested and consistent investment approach across equity and debt strategies focusing on major property types that have value creation opportunities, located in liquid markets with diversified economies.

Brookfield had been eying a sale of the Capital Automotive business as early as March 2020, according to media reports. A Brookfield private real estate affiliate acquired Capital Automotive in 2014 from DRA Advisors LLC in a deal that reportedly valued the company at $4.3bn. DRA had taken the business private in 2005.

Richard Summerfield