Ares’ Arougheti Sees Tariffs Boosting Real Estate

Harrisson Connery of PERE reports that Ares’ Arougheti sees tariffs will boost real estate values, transaction activity:

As tariff-related uncertainty casts a shadow over global property markets, Ares Management chief executive Michael Arougheti said his firm’s real estate strategies stand to benefit from the disruption. 

“We continue to believe that this is an opportune time for continued growth in our real estate business,” said Arougheti on the Los Angeles-based manager’s first-quarter earnings call this week. “Tariffs should drive up construction costs, which might constrain supply in markets that are already supply-constrained. This, coupled with a decrease in cost of capital and lower interest rates should improve values of real estate held and spur transaction activity.”  

Arougheti’s comments came as Ares reported $3.9 billion in fundraising for its real estate strategies in the quarter, up from just $400 million for the same period last year.  

It was Ares’ first quarterly update since finalizing its $3.7 billion acquisition of Singapore-based logistics and data center specialist GLP Capital Partners’ non-China business, and Ares’ revised portfolio metrics reflect the scale of that transaction. Its real assets platform now manages $124.2 billion in assets, Ares reported, up from $75.3 billion at the end of 2024. 

The GLP deal significantly boosted Ares’ regional footprint as well, particularly in Japan and Southeast Asia, and the manager’s first Japanese data center development fund attracted $1.5 billion in commitments in the first quarter, Arougheti said, adding that he anticipates a final close “in the near term.”  

Ares’ American real estate equity real estate funds produced returns of 1.8 percent for the quarter and 7.3 percent over the past 12 months, and its European real estate equity strategies produced returns of 0.2 percent last quarter and 1 percent over the prior year. It deployed $3.3 billion into real estate assets in the quarter, up from $500 million in the first quarter of 2024. 

Arougheti’s optimism stands in contrast to some of the prevailing concerns held by other private real estate managers that tariffs will bring further pain to the industry. Investors and managers alike have told PERE that Trump’s on-again, off-again policies would make underwriting all but impossible in the near term. The potential for prolonged transaction paralysis helped contribute to a record secondaries fundraise for New York-based StepStone Group last week, according to Jeff Giller, the manager’s head of real estate.   

Arougheti said the macro-environment has not impacted his outlook on logistics and data center assets, for which he believes there is strong demand, and added that US tariffs could drive more volume towards Ares’ distribution businesses in Japan.  

“There is a modest shift of investor interest and appetite away from the US markets,” he said. “So I could envision that if we continue to be in that type of environment, that the opportunity to offer non-US product in Japan and in our European distribution business could actually catch a stronger bid here and be a net beneficiary.”

Ares's co-founder Michael Arougheti is optimistic on real estate, private equity and private credit and believes his firm stands to benefit from any severe dislocation.

Speaking from the Milken Institute conference, he also stated that tariffs are unlikely to trigger a sharp uptick in private-equity-owned companies failing to repay their loans.

Things are going very well for Ares Management. Silas Sloan of Secondaries Investor reports the firm is looking to close its third infrastructure fund and its secondaries fund is attracting a lot of capital too:

Ares Management is looking to close its third infrastructure fund soon with its secondaries business continuing to “generate significant investor interest”, chief executive Michael Arougheti said on the firm’s recent earnings call.

Ares Secondaries Infrastructure Solutions III crossed $2 billion in total commitments, doubling its predecessor, Arougheti said during the firm’s Q1 2025 earnings call on 5 May. The fund is expected to hold a final close this summer.

Arougheti’s comments mean the fund launched in 2023 has also hit its target, which is $2 billion, according to Secondaries Investor data. The infrastructure fund collected about $400 million in the first quarter, according to slides prepared for the earnings call.

In addition to the infrastructure fund, Ares Credit Secondaries I raised $475 million in Q1 and $700 million in April, bringing the total equity commitments in the strategy to $3 billion and exceeding the fund’s target, Arougheti said on the call.

Ares raised about $2.3 billion in Q1 across PE, credit, infrastructure and real estate. Overall, the firm raised more than $20 billion in the first three months of the year, which Arougheti said was the strongest first quarter of fundraising ever for the firm.

“As we think about fundraising for 2025 and how it could be impacted by the current market uncertainty, we believe that we’re well-positioned due to the strength in the institutional channel and the global diversity of our investor base,” Arougheti said on the call. “We have deep relationships with our LPs who tend to be repeat investors across our funds and strategies as they seek to consolidate with key relationships.”

Fundraising got off to a blazing start in 2025, collecting a total of $50.7 billion in Q1, according to Secondaries Investor data. It was a massive step up from the $10 billion raised in Q1 2024.

However, there’s more than meets the eye when it comes to that Q1 total, as nearly 60 percent came from Ardian’s $30 billion close on Ardian Secondary Fund IX in January. Without the behemoth fund, Q1 2025 secondaries fundraising would have seen its fourth-largest tally for total closed commitments across the first three months of the year since 2020.

Ares is a strategic partner to Canada's large pension funds and institutional funds all over the world.

 

Therefore I would pay attention to what this firm is doing and what its CEO and co-founder is saying.

 

Below, Ares Management CEO and co-founder Michael Arougheti discussed the market impact of trade tariffs, investment in China markets, investors taking shelter in credit markets and where he sees “massive opportunity” for private equity. Arougheti spoke with Sonali Basak on the sidelines of The Milken Institute Global Conference in Beverly Hills, California.

Also, Michael Arougheti joins CNBC's 'Squawk on the Street' to discuss macro outlooks, growth expectations for Ares, and more.

Lastly, Blackstone President Jon Gray says he expects some countries will strike trade deals with the US “fairly soon,” and the effective tariff rate will be around 10%. Gray says the uncertainty around a trade war is likely to slow down GDP growth. He also talks about the AI revolution, real estate and inflation in the US. He speaks to Bloomberg's Sonali Basak at the Milken Conference. 

All great interviews, worth listening to their views.