Ares US Real Estate Opportunity Fund III
Endnotes
1. The pro forma performance results shown herein have been compiled by Ares from actual realized and unrealized investments that are comprised of all investments from AREOF and AREOF II and their
respective Related Vehicles (as defined on page 67). Accordingly, these results aggregate all of the capital that Ares managed with respect to these investments, but such performance returns do not reflect any
single investor's performance. The management fee and promote with respect to Related Vehicles is lower than the management fee and promote borne by the related fund and therefore aggregate net
returns presented herein are inflated. Please review the performance information on page 62 to see a breakdown of performance by AREOF, AREOF II and their respective Related Vehicles. Pro forma
performance results have inherent limitations, and no representation is being made that any investor will or is likely to achieve profits similar to those shown. Given Ares did not offer a single investment vehicle
that held the full interest in all of the assets included in the pro forma track record, an investor was not able to invest in these assets as presented and no individual investor has achieved the investment
performance indicated herein. There are factors related to the markets in general, and/or to the implementation of any specific portfolio strategy, which cannot be fully accounted for in the preparation of pro
forma portfolio performance, all of which can adversely affect actual portfolio results. Certain assumptions, not all of which are described herein, have been made to calculate pro forma returns and the use of
different assumptions could produce materially different results. No assurance can be made that unrealized values will be realized as indicated; past performance is not indicative of future results. The
performance information summarized herein has not been audited and is as of June 30, 2020.
Gross IRR and Gross EM: Gross IRR is an internal rate of return generally based on aggregate periodic cash flow activities made or projected to be made between a specific vehicle and its investment (or
portfolio of investments, as applicable), including cash flows attributable to any sales, dispositions, reinvestment of proceeds, financing and/or refinancing and operating activities. Gross EM is generally the sum
of proceeds received or projected to be received by a vehicle from its investment (or portfolio of investments, as applicable) plus the projected value or fair value of the vehicle's investments (as further
described in notes 4 and 5), divided by the aggregate dollars the vehicle invested or projects to invest in such investment (or portfolio of investments, as applicable). Notwithstanding the forgoing, Gross IRR and
Gross EM figures for realized investments are calculated based on actual cash flows and are not based on projections or fair values. Gross IRRS and EMs do not reflect or include the impact of applicable
management fees, performance fees or carried interest, fund level expenses, working capital, use of subscription financing and other expenses (collectively, "Fund-Level Expenses"). Gross IRR and EM figures
take into account the vehicle's use of investment-level leverage.
Net IRR and Net EM: Net IRR and Net EM: Net IRR is an internal rate of return generally based on aggregate periodic cash flow activities between a specific vehicle and its limited partners. Net EM is generally
the sum of all distributions made or projected to be made to the limited partners of the vehicle plus the fair value or projected value of the vehicle's investments (as further described in notes 4 and 5), divided
by the aggregate dollars contributed or projected to be contributed by the limited partners to the vehicle. Notwithstanding the forgoing, Net IRR and Net EM figures for vehicles that have realized their
investment(s) are calculated based on actual cash flows and are not based on projections or fair values. Net IRRS and EMs generally include the impact of Fund-Level Expenses (as defined in note 2). RESCO net
returns are included only for deals alongside with AREOF, with Fund-Level Expenses allocated across such deals as determined by the Manager. CIP Program net returns do not include expenses for dead-deal
costs as such costs are borne by an administration fee that is paid outside of the deal-level entities. Each of AREOF and AREOF II utilized a credit facility during the capital raising period and for general cash
management purposes. Net IRRs would be lower had AREOF and AREOF II called capital from limited partners instead of utilizing the credit facility. The General Partner and any of its affiliates that do not bear
management fee or carried interest are excluded for purposes of calculating the Net IRR and Net EM. The net returns for AREOF reflect the highest management fees charged under the vehicle's governing
documents and do not reflect any management fee breaks granted to limited partners. The net returns for AREOF II reflect the blended returns after taking into account any management fee breaks granted to
limited partners, and therefore net returns as of June 30, 2020 for investors who receive the largest fee break are 0.4% higher than those who do not receive any fee break. The return earned by investors may
vary materially from those presented.
2.
3.
4. Projected Returns: Projected IRRs and EMs are calculated as described in notes 2 and 3 assuming the vehicle's remaining investment (or investments, as applicable) are held and disposed of in accordance with
the manager's business plan and therefore generate the projected cash flow and sales proceeds that the manager expects to generate during the applicable hold periods identified in the business plans.
Projected returns are based on various estimates and assumptions made by the manager, are not a reliable indicator of future performance, and no guarantee or assurance is given that such returns will be
achieved or that an investment will not result in a loss. There can be no assurance that projected cash flows and sales proceeds will be achieved.
5. Fair Value IRRs and EMs: Fair Value IRRS and EMS are calculated as described in notes 2 and 3 assuming the vehicle's remaining investment (or investments, as applicable) were liquidated at fair values as of
June 30, 2020 and proceeds were distributed accordingly. Fair values are based on the manager's estimates of the fair market value of any unrealized investments. The manager is responsible for the valuation
policies, processes and procedures related to the fair value of real estate investments and valuations are performed quarterly on an internal basis and are reviewed by external auditors on an annual basis at
year-end as part of a vehicle's annual financial audit. Fair value determinations, and particularly fair value determinations of private investments, are inherently uncertain, may fluctuate over short periods of
time, and may be based on estimates. As a result, determinations of fair value may differ materially from the values that would have been used if a ready market for these investments existed and may differ
materially from the values that the vehicle may ultimately realize. There can be no assurance that fair values will be achieved.
6. Target Returns: Represents the target returns established by the manager for the applicable vehicle. Target returns are not a reliable indicator of future performance and no guarantee or assurance is given that
such returns will be achieved or that an investment in the strategy will not result in a loss. Target returns are based on management's assumptions, all of which may differ materially from actual events and
conditions experienced by the applicable vehicle, take into account anticipated use of leverage and assume the reinvestment of proceeds from asset liquidations, income, and other earnings. Target net returns
reflects the deduction of any relevant transaction costs/expenses.
7. Loan-to-Value: Loan-to-Value is the ratio of a loan to the market value of the underlying property when stabilized, measured on a portfolio basis. The use of leverage magnifies the potential for gain or loss on
amount invested and may increase the risk of i
stments.
8. Fund Vintage: reflects (i) with respect to AREOF, the date of the fund's first investment because while AREOF held its initial closing in 2008, it did not commence investment activity until 2012 as a result of
market conditions, and (ii) with respect to AREOF II, the date of initial closing of capital commitments.
9. Vehicle Size or Equity Raised: reflects the aggregate amount of capital committed to, in each case, AREOF & Related Vehicles and AREOF II and Related Vehicles.
ARES
Confidential - Not for Publication or Distribution
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