Ares Management Corporation (NYSE:ARES) Q4 2022 Earnings Call Transcript

Adam Beatty: Excellent. Thank you. And then just maybe a quick one on the performance of the real estate strategies in the quarter. Obviously the full year was quite good. The underlying fundamentals the lease re-ups that Mike talked about seem very good. But in the quarter maybe a little bit more of a negative mark than some might have expected. So just want to get a sense if there’s any time lag or other dynamics that played through there and anything that might be ahead for 1Q? Thank you.

Michael Arougheti: Yes. Look there’s — needless to say when you just think about real estate the impact of rising rates you have to just think about how interest rate increases correlate to changes in the cap rate and valuation environment and how increased rate challenges certain property sectors from a from a debt service standpoint. I think to your comment we are fortunate that close to 80% of our exposures are in multifamily and industrial and the fundamentals there have been very strong. And so even in a world where valuations may be coming in you’re growing through them with an installed base of tenants that is continuing to drive pretty strong NOI at the property level. And I think that’s kind of the way to think about it which is not all real estate is created equal.

We’re in gateway markets with great assets that are all performing really well. In terms of Q4 versus rest of the year, I would only read into that just the math of rates and not any kind of fundamental deterioration in performance. Because as you mentioned when you go drill down in terms of our re-up and re-leasing occupancy rates and what we’re able to command given the assets we own the fundamental strength in the portfolio we think is pretty clear. I do think for what it’s worth that the real estate markets are going to be one of the more challenging parts of the private market landscape. It’s one of the reasons why we’re so focused right now on our opportunistic real estate franchises just to make sure that we’re appropriately capitalized to take advantage of the distress that should roll through certain parts of that market as rates continue to go up here.

Adam Beatty: Got it. Make sense. Thanks very much, Mike.

Michael Arougheti: Sure. Thank you.

Operator: Thank you. There are no additional questions waiting at this time. So I’d like to pass the conference call back over to Michael for any closing remarks. Please go ahead.

Michael Arougheti: No we don’t have any. We thank everybody for their time. Sorry, if we went a little late but we appreciate everybody tuning in and for the support and we look forward to giving everybody the update next quarter. Thank you.

Operator: This concludes today’s conference call. Thank you all for your participation. You may disconnect your lines.