Abu Dhabi's Mubadala leads $1bn investment in European private real estate credit

The platform, launched in partnership with Aldar and Ares Management, aims to have total available capital of more than $5bn

Residential properties in Enfield, England. Private credit is an increasingly important element of real estate finance in mature markets. Getty Images

Abu Dhabi's sovereign investor Mubadala, Aldar Properties and US alternative investment manager Ares Management have teamed up to jointly invest $1 billion in a new European private real estate credit platform, to tap into opportunities in the key markets of the region.

Mubadala will own a 50 per cent stake in the new venture, while Aldar, Abu Dhabi's largest listed developer, and Los Angeles-based Ares will hold 30 per cent and 20 per cent, respectively, the companies said on Wednesday.

The three organisations' combined capital commitments for the platform are expected to grow to about $2 billion eventually and, including anticipated leverage, the total available capital is projected to surpass $5 billion, they said.

“This new platform leverages the collective strengths of each party to invest in the private real estate credit market in the UK and Europe,” Omar Eraiqaat, deputy chief executive of disruptive investments at Mubadala, said.

“This collaborative approach reflects our shared commitment to identifying and capitalising on unique investment opportunities that deliver sustainable, long-term returns.”

In addition, Aldar will invest a further $100 million into an existing European private real estate credit strategy that was first established by Mubadala and Ares in 2021.

That platform focuses on senior secured debt with a first lien on physical real estate assets, including those in the office, multifamily residential, industrial, retail and hospitality sectors.

“This partnership is wholly unique, blending financial strength, a proven track record and in-depth knowledge of the real estate sector and asset classes,” said Talal Al Dhiyebi, group chief executive of Aldar Properties.

“It is an ideal opportunity in terms of timing to gain both high quality exposure to a key asset class and a solid foothold in a market that is not only scalable but that also offers favourable risk-adjusted returns through market cycles.”

The creation of the platform also follows Aldar's expansion into the UK with its $291 million purchase of developer London Square earlier this month, marking its first acquisition outside the Middle East and North Africa as the company grows its geographical footprint.

“The strategy is focused on investing in mature markets outside of Aldar’s home region and aims to accelerate the company’s growth through diversifying its revenue and geographic presence and increasing its portfolio and investment exposure to high-growth alternative real estate asset classes,” it said.

Private credit, or non-bank lending, is an increasingly important element of real estate finance in mature markets.

Real estate credit is an "attractive thematic opportunity", with investments underpinned by strong market fundamentals, increased borrower demand for diversified funding sources and defensive characteristics of the asset class, according to CBRE Investment Management.

The value of the UK real estate market is projected to grow to nearly $451 billion by 2028, from an estimated $341 billion in 2023, at a compound annual rate of 5.75 per cent, data from Mordor Intelligence shows.

For Europe, the market's value is expected to hit $2.33 trillion by 2028, up from an estimated $1.87 trillion last year, at a CAGR of 4.5 per cent, the research firm said.

“The global opportunity for flexible private real estate lenders continues to grow as we see ongoing retrenchment of traditional sources of capital,” said Phil Moore, partner and head of European real estate debt at Ares Real Estate.

The residential, mixed-use and adjacent real estate sectors “continue to benefit from attractive supply/demand dynamics”, he said.

Ares, which has about $49 billion of real estate assets under management, will provide the platform with a dedicated investment team that will cover real estate debt deal origination, portfolio monitoring and deal pipeline execution.