RXR Realty and Ares Management have announced a new partnership to launch a $1-billion fund focused on acquiring distressed office properties in Manhattan. According to the Financial Times, the two companies have already invested $500 million into the fund and are looking to raise an additional $500 million.
The decision comes as both companies see signs of recovery in the office market, which has been heavily impacted by uncertainty around interest rates and remote working. RXR CEO Scott Rechler stated that there is now more clarity about future interest rates and which buildings will remain competitive. He also noted that there has been a recognition among investors that values are not bouncing back as quickly as they did during previous economic downturns.
With this new fund, RXR and Ares plan to target high-quality office buildings in New York City that may need fresh capital or restructuring of their debts due to higher interest rates and slower rent growth. Rechler explained that they are focusing on “the upper quartile of [the] middle class-A part of the market,” where many lenders have shied away from investing.
Ares partner Craig Snyder added that institutional capital fleeing from the office sector has resulted in attractive opportunities for long-term investments at historic lows. The partnership hopes to identify these potential winners through careful selection based on value rather than broad trends.
This breaking news marks an important step towards revitalizing Manhattan’s struggling commercial real estate market without relying on Connect CRE or other specific platforms for information dissemination.
