RXR, Ares Team for $1B Fund to Buy Distressed NYC Office Properties
RXR Realty and Ares Management, a global alternatives powerhouse with $49 billion in real estate assets, are teaming up to form a $1 billion fund to invest in distressed New York City office properties, according to a report in the Financial Times.
The two firms have seeded the new fund with $500 million and hope to raise an additional $500 million.
RXR and Ares are convinced that a prolonged paralysis in an office market frozen by uncertainty about interest rates and the threat of remote working is now breaking, with many players ready to accept losses to unload or restructure assets, noted the FT.
“We have clarity as to where rates are, we have clarity about the future of offices, and which buildings are going to be competitive, and we have a capitulation, I think, to a recognition that values aren’t just bouncing back like they did in ‘08,” said Scott Rechler, RXR CEO, to the publication. “There’s a reset and that this is more permanent.”
The firms want to target a sliver of office buildings throughout the city that they believe are still desirable but may require more financing to remain competitive or debt restructuring to reflect the new realities of higher interest rates and slower rent growth.
In December, Ares made a splash when it raised about $3.3 billion of real estate secondaries capital, which comprises the Landmark Real Estate Fund IX, General Partner commitments and affiliated vehicles, to further boost its real estate portfolio.
