Ares R2 Qs Flashcards
Why Ares
2 main reasons; huge network and scale!
Ares has a huge global mandate especially in credit and the benefits for that for the real assets team are immense. One example is EPIC Midstream which Ares initially supported EPIC through private credit to expand it’s pipelines into Texas and New Mexico and later, Ares extended this relationship by making equity investments through its real asset arm, enabling EPIC to grow its pipeline network and build key assets such as the 730-mile crude oil pipeline that runs from New Mexico to the Texas Gulf Coast.
Additionally, during my internship at Avington this summer, a global investment bank for ultra-luxury hotels, part of my role was formulating a weekly deals and hospitality industry newsletter. I saw Ares Management’s $1.07 billion acquisition of the Hyatt Regency Orlando and was amazed by the scale and complexity of the deal. Securing $620 million in acquisition financing for the development of a new 2,500-room Grand Hyatt next to the existing property, which will cater to the growing demand for group events and leisure tourism in Orlando, fuelled by attractions like Walt Disney World and the upcoming Epic Universe by Universal Studios. This showcases how Ares doesn’t just find value in any standard investment but looks to position itself at the forefront of industry innovation, especially in prime tourist destinations where the demand for high-quality accommodations is skyrocketing post-COVID.
Why did you choose to do Economics and Economic History, how does it relate to Ares?
I chose my degree due to it’s unique niche and combination of quantative analysis and a crucial qualtative analysis. As a result of it’s uniquness, I belive it truly distinguishes me as an investor, from understanding the different factors that contribute to growth historically and the importance of instiutions. This sentiment is echoed by Ray Dalio in his recent books, pointing out the importance of economic history in his investing decisions.
What is a cap rate, explain this to me
cap rate, shorthand for “capitalization rate”, estimates the return that a real estate investor expects to earn on a property investment.
The cap rate is the ratio between a property’s net operating income (NOI) and its current market value, expressed as a percentage.
Cap Rate (%) = Net Operating Income (NOI) ÷ Property Value
The primary use-case of the cap rate by real estate practitioners is to analyze a potential property investment side-by-side with comparable properties to determine if the property’s risk-return profile is worthy of an investment.
What are the 3 methods of appraising (valuing) a property
Walk Me Through the Income Approach (or Direct Capitalization Method).
Under the income approach (or direct capitalization), real estate appraisers can estimate property value based on the future income potential of the property.
The direct capitalization method estimates the value of a property based on the income expected to be generated in a one-year time horizon.
The initial step is to project the forward NOI on a twelve-month basis, in which the operating drivers are the vacancy and credit losses and operating expenses assumptions.
The forward NOI reflects the pro-forma, stabilized net operating income (NOI) of the property.
The estimated property value can then be determined by dividing the market cap rate by the rental property’s forward NOI.
What is the Intuition Behind the Cost Approach?
The basis of the cost approach (or “replacement cost”) is the principle of substitution, which states that no rational investor would pay more for a property than the cost of constructing an equivalent substitute with similar utilities and amenities.
The cost approach to appraisal is grounded on the notion that the pricing of a property should be determined by the cost of the land and construction, net of depreciation.
Estimated Property Value = Land Value + (Cost New – Accumulated Depreciation)
General Rules of Thumb:
* Replacement Cost < Asking Price → Current Pricing is Potentially Reasonable
* Replacement Cost > Asking Price → Current Pricing is NOT Reasonable
Therefore, an investor should not purchase a property at a higher price, relative to the cost of reconstructing a similar property.
WHY RE
RE investing is about having the biggest impact through investing and improving assets to be the best possible —> Kibaha —> hospitals curing thousands, markets making communities thrive —> made me interested in the scale of capital –> the scale of firms like Ares is exactly where I want to be, try and find value utilising expertise similar to the Landsec portfolio acquisition of $400 million looking to reposition hotels in UK cities —> same I experienced at Avington, family office investment became 7th in the world.
What are some trends you have been following in the RE sector?
During my internship at Avington, I closely monitored Blackstone’s strategic expansion within the UK ‘staycation’ market, following their acquisition of Bourne Leisure for £3 billion. Combined with further bolt-on asset acquisitions and a £400 million investment in the Haven Parks segment reflecting their long-term confidence in the continued growth of domestic tourism within the UK. Seemed puzzling at first look with a stagnating UK economy and wage growth as holidays always seem to be income elastic. Actually serves a strong section of middle class that burdened a much higher CoL don’t see the same value in international tourism. BX repositoning the owned assets such as the Forest of Ardent Country Club and the integration of JD Wetherspoon pubs into Haven parks demonstrates their intent to cement the asset class as a long-term alternative.
What is the business model of Ares
General PE Structure: 2/20 model
2% Management Fees on AUM
20% Performance Fees on returns of a threshold
Split into:
Credit
Real Assets
Private Equity
Secondaries
Looking to expand in European Real Assets into debt. Grown 3x in US.
What is a misconception ppl have about you
In the past, colleagues have mentioned that I’m “too nice,” but I see it differently. I believe kindness, flexibility, and adaptability are strengths. For example, in my recent internship I took on a last-minute project in my last couple days and even worked on the weekend after my contract ended to finish the work to a high standard . Some coworkers thought I should have set boundaries, but I saw it as an opportunity to support the team. I knew I could handle the workload and communicate if it became too much. Ultimately, it allowed me to secure a return offer to work part-time during university and as a summer analyst in 2025.
how would your friends describe you
Leader - I have a history of forming multiple successful organisations using my friends and network such as the Charity Committee and Sherpa Mentors
Curious - I sought out a unique and risky degree with the lowest acceptance rate at LSE rather than taking the safer choice. With my career I’ve also looked to pursues my passions and curiosity rather than purely talking the ‘prestige’ or popular choices. I believe such diverse perspectives and curiosity that diverges from the mainstream gives me a unique and diverse opinion and input.
Discipline - To achieve my aims in academics and extra-curriculars required time management and discpline to do hard work and not crumble under pressure. I teach this to mentees at Sherpa Mentors.
Would you like to go back to SC/Natwest/Avington?
While I gained a lot of technical skills and interpersonal skills relevant to PE, I think it’s ultimately not where I want to be. Sell-side is about providign a service and moving on whereas the investment side is about responsibility from the very start along with actually making and choosing the impact rather than faciliating it.
Why Buyside?
Always had a native interest and passion for investing. (Simpsons) —> managed a small portfolio through YouTube, books and learning from huge value investors —> took that into lse, second stock pitch in lse investment competition, one of only 4 investors to be chosen from the first year —> thought investment banking might be for me but most interesting part was evaluating family office investments and optimising current e.g optimising every small detail from procurement to the material on roofs, everything made a big impact.
Why REPE rather than Corporate PE?
Real Estate has always been my core passion seeing your individual assets has no real comparison, and feels you can get much more into details than corporate PE laden with bureaucracy
e..g AM can actually go to hotel and figure out the nooks and crannies s
Why did you choose to do Real Estate Equity rather than debt considering Ares is the best for credit?
- Not interested in credit, mostly on the equity side. Credit is more capital preservation and fix the returns and terms of debt you give out.
- Link to buyside –> much more responsibility and analysis.
What are some landmark or unique investments that you found at Ares?
- The LANDSEC !!! Standout deal. Purchasing it at a very good acquisition price! Purchased it lower than the replacement cost –> LANDSEC was distressed. Ares able to generate a return, structuring the deal.
- Ares Management’s $1.07 billion acquisition of the Hyatt Regency Orlando and was amazed by the scale and complexity of the deal. Securing $620 million in acquisition financing for the development of a new 2,500-room Grand Hyatt next to the existing property, which will cater to the growing demand for group events and leisure tourism in Orlando, fuelled by attractions like Walt Disney World and the upcoming Epic Universe by Universal Studios.
Why did you choose to do Real Estate Equity rather than debt considering Ares is the best for credit?
Not interested in credit, mostly on the equity side. Credit is more capital preservation and fix the returns and terms of debt you give out.
What are some landmark or unique investments that you found at Ares?
The LANDSEC !!! Standout deal. Purchasing it at a very good acquisition price! Purchased it lower than the replacement cost –> LANDSEC was distressed. Ares able to generate a return, structuring the deal.
Why Ares over Competitors?
As I said before, Ares is the best in the business in certain functions such as credit which lends immediately to giving them a very strong client base and direct links in major RE functions like RE credit. For example, the previous EPIC deal. It was this industry expertise and relationship that I also saw prosper at Avington and Avington, both different functions but clients would often utilise both.
Ares not only a major player in the RE investments but has clearly differentiated itself in attracting capital in tough times, hallmark of a successful investor. In Q2 this year, Ares raised around $26 billion, which was a record number when other RE funds attracked the lowest first half total since 2012. Serious competitive advantage.
Introduce yourself/walk me through your cv
- I’m Abbas and I’m a second year at LSE Studying Economics and Economic History
- Heavily involved and leading charitable groups for years in the UK and even in Africa through loans to hospitals and microfinance to the community.
- Seeing the impact of fundraising I took an interest in the healthcare industry working at the HQ of MACC Care a popular care home provider, Healthcare department of Downing an investment firm in London. Provided me with business specific knowledge and interpersonal skills but for me it lacked the technical skills of a longer finance internship.
- At LSE I’ve carried on this interest in investments through multiple stock pitch competition such as achieving 2nd in the LSE Investment Competition, capitalising on my public speaking certifications, and being chosen as 1 of 4 to the LSE Student Investment Fund from the entire cohort after a very competitive process.
- Confirmed this through my internship this summer at Avington, a boutique that specialises in luxury hotels, where I worked on multiple different deal mandates from sucg as securing a mandate for an advisory role on an $8 billion sale. Enjoyed the steep learning curve but most enjoyable experience was actually asset management and family office side. Enjoyed the higher responsibility and intimacy with each asset or investment.
In my spare time, as mentioned before, I work a lot in the charitable space as I serve as an advisory role to previous organisations I led and I now run an organisation called Sherpa Mentors, a west-midlands based mentoring group that has mentored over 120 mentees from low socioeconomic and underrepresented backgrounds. Enjoy football too but even more so from the important financial perspective, following deals such as Chelsea as well as upcoming sagas like Friedkin and Everton.
Why Ares RE and not PC or another division
Prior reasons of impact as mentioned above.More ARES RE specific.
Ares not only a major player in the RE investments but has clearly differentiated itself in attracting capital in tough times, hallmark of a successful investor. In Q2 this year, Ares raised around $26 billion, which was a record number when other RE funds attracked the lowest first half total since 2012. Serious competitive advantage.
Tell me your weaknesses?
Taking on too many or unnecessary responsibilities - From an early age I’ve taken on many different responsibilities and leadership roles to match my initiative. However this can sometimes be excessive as in my recent internship or even university societies I looked to stay on extra and do additional work just to ‘prove myself’. Reflecting on this, I believe that while going above and beyond in your tasks is essential, you should be sensible and sustainable if you want to do this as a long term job.
Trying to do everything perfectly all at once - often at times during my internship, I would want to delivery every piece of work to the highest standard as well as using my own initiative to add value; e.g rate analysis looking at every day and adjusting by suite. Whereas partners just said to take a weekly average, as we had other projects to work on. Made me realise that prioritising and being able to deliver all your tasks to a suitable standard is more important that doing one perfectly and sacrificing everything else.
tell me a time you had to show leadership
Charity committee founding and planned this big flagship event for months. Covid and week before nearly cancelled —> calmed everyone down and took a positive and practical outlook —> created more marketing tools with the extra time such as BTS trailers and auctions of VIP tickets —> extra week allowed us to break the school record for fundraising, setting up our future success of raising £35,000 in our first year and receiving congratulations from the King and Minister of Education .
what did you learn in your last internship
I learnt a combination of technical, interpersonal skills to thrive in a high pressure environment. For example:
On the technical side I expanded my standard equity modelling to learn Hotel USALI modelling and exit transactions. This modelling was used to underwrite a $220 million luxury hotel in Europe.
In terms of soft skills, I adapted my interpersonal skills to be able to understand both client and senior relations. Particularly the when and how of asking for help, standards for deliverables and knowing when to challenge seniors with your own research viewpoints to add on value.
From these I feel I have a solid base to perform at Ares but also have space to learn more in a much larger financial institutions while maintaining the principles that let me thrive.
what do you expect from this internship
I expect to start off with performing basic tasks and hopefully being able to talk to seniors about their experiences and learn from them. I hope to use my resourcefulness and research to find ways to add value to my tasks and prove my competency. I hope to be able to then deliver on tasks above what was expected by commiting myself to spend extra time with seniors to learn more.
I’ve heard from Lasen: lean deal teams, flat structure, investment in juniours with time
What 3 words would your friends use to describe you?
Leader - I have a history of forming multiple successful organisations using my friends and network such as the Charity Committee and Sherpa Mentors
Curious - I sought out a unique and risky degree with the lowest acceptance rate at LSE rather than taking the safer choice. With my career I’ve also looked to pursues my passions and curiosity rather than purely talking the ‘prestige’ or popular choices. I believe such diverse perspectives and curiosity that diverges from the mainstream gives me a unique and diverse opinion and input.
Discipline - To achieve my aims in academics and extra-curriculars required time management and discpline to do hard work and not crumble under pressure. I teach this to mentees at Sherpa Mentors.
Tell me about a time you had to show resilience
Charity committee founding and planned this big flagship event for months. Covid and week before nearly cancelled —> calmed everyone down and took a positive and practical outlook —> created more marketing tools with the extra time such as BTS trailers and auctions of VIP tickets —> extra week allowed us to break the school record for fundraising, setting up our future success of raising £35,000 in our first year and receiving congratulations from the King and Minister of Education .
Tell me about a time that you resolved conflict
CC elections —> zayn problrm with others —> others angry, I wanted to give him a second chance —> came up with a solution where he could come up with and put on a successful event then he would be let in —> we put on a unique multi-faith iftar event, the first of its kind, and it was an amazing success —> proved competency and helped us spearhead future success
CC elections —> zayn problrm with others —> others angry, I wanted to gi
How do you keep up with news and trends
Job at Avington and Avingstone keeps me up to date on both confidential and breaking news as part of my job is forming a weekly deals newsletter
Apart from the standard Financial Times and Economist, I utilise podcasts such as In Good Company, newsletters such as Pari Passu which give an in depth look into specific companies and topics.
I’m also integrated into the main societies at LSE who bring in their own networking events, as well as regularly attending SEO with over 100 hours in events, lunch and learns, and masterclasses.
Why this Programme Specifically?
This programme is the route into Ares through performing on the Summer Analyst role, as this is my end goal it is the perfect programme for me. It is also the perfect next step in my career journey so far, from interning at various institutions during my school years to interning last year at a family office with an $8 billion mandate, PWP maintains the lean deal teams where I thrived last year while providing a strong set up with a broad exposure to strong expertise in some of the largest investments such as the Hyatt Regency Orlando Deal and the Landsec shows, deals on the border of innovation.
Where do you see yourself/your career path?
I see myself starting out as an analyst at a strong REPE Firm such as Ares –> Through the summer analyst, refine my sectoral expertise and technical knoweldge in it to a high level while becoming part of the Ares culture as a ‘culture carrier’ –> have a strong speicalism in my investments –> One day mentor the interns who come through in 10 years time!
What do you do in your spare time?
In my spare time I enjoy my charitable roles as well as football finance. My charitable roles include advisory as a chairman to my schools charity committee and being gounder of Sherpa Mentors..,
I enjoy viewing football through the lens of an investor, following the differing strategies of large instituional investors llike Clearlake Capital in Chelsea FC or upcoming potential purchases such as Friedkin and Everton.
What are the 4 Main Real Estate Investment Strategies?
What are the 3 Methods of Appraising a Property?
