Ares US Real Estate Opportunity Fund III
Washington, D.C. Multifamily – In-Closing+
Option to control a multi-phased multifamily development project consisting of up to approximately 1,200
units located in one of the strongest and fastest growing submarkets in D.C.
an
Investment Date:
Location:
Gross Capitalization: (¹)
Anticipated Total Equity
Committed:(3)
Anticipated Initial Equity
Committed:(3)
Capital Value:
Investment Theme:
Key Metrics
Q3 2020
Washington, D.C.
$145 million++
$115 million
$50 million*
$354K Unit*
Multifamily in Supply
Constrained Market
I
Investment Summary and Rationale
Investment in a two-year option to invest in a multi-phase, 1,200 unit multifamily
development located in the NoMa submarket of Washington, D.C.
Represents an opportunity to develop a trophy asset in a resilient, gateway city with
flexibility on timing of groundbreaking as we continue to assess the impact of COVID and
absorption of local market, and requires minimal upfront equity
Value Drivers
Class-A Washington, D.C. Multifamily Positioned to Outperform
D.C. has proven to be a resilient market with transaction pricing rebounding to pre-
recession levels six quarters faster than the U.S. average post the GFC**
The workforce concentration lends stability in times of distress(¹) and submarket rent
growth never fell below 2% during the same period ***
The NoMa submarket is largely built out with limited new supply planned; Across
D.C. new supply is forecast to remain below 1.0% of existing supply over the next
three years***
Phased Development and Transaction Structure Mitigates Risk and Provides
Optionality
Ares negotiated a two year option to acquire the site before making a full
commitment, and structured a favorable land basis due to its experience with public
private partnerships
The property is priced at a 50-60% discount to pre-COVID land trades in the market
and Ares will have a low cost option to close until Q2 2022****
Ares believes it is rare to control an urban, infill site of this size and quality for such
an extended period at a low option price
Strong Sponsor Track Record and Repeat Ares Partner
The Project will be developed in partnership with an experienced local sponsor with
direct experience in the NoMa submarket and with whom Ares has previously
transacted
-
Investment Status
Documentation for this transaction was finalized in August 2020
*This investment closed in August 2020. **Gross capitalization of Phase I only. Total platform capital value to be determined by the final composition of the portfolio. *Represents equity required for Phase I should Ares decide to
proceed with vertical development. **CBRE, Q1 2020. ***CoStar, Q2 2020. ****Costar Q1 2020. Please refer to the endnotes on page 64. Please refer to notes on page 36. As of June 30, 2020 unless otherwise noted.
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