Ares Management

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Disclosures & prior history10 disclosures · worst medium

Material items extracted from the risk-factor, conflicts, and prior-performance sections of Ares Management's PPMs. Each is quoted verbatim with its source page — surfaced, not editorialized.

Related-party conflict disclosed — Advisor affiliate services fees do not reduce Advisory Fee

Medium

The Company may pay separate fees to Advisor Affiliates for property management, leasing, transaction support, construction/development management, loan servicing, and other operational services at market rates or cost reimbursement. Critically, these fees are additive to — and do not reduce — the Advisory Fee, raising potential for layered related-party charges.

“The Company may retain certain of the Advisor's Affiliates from time to time, for services relating to its investments or its operations ... Any fees paid to the Advisor's affiliates for any such services will not reduce the advisory fees.”

PPM p.1695% confidence

Related-party conflict disclosed — Advisor managing competing investment programs and conflicts of interest

Medium

The Advisor and its Affiliates are expressly permitted to manage other investment programs with similar objectives that compete with the Company for investments. The Advisor has no obligation to present any particular investment opportunity to the Company even if it is suitable. Allocation of investment opportunities is governed by procedures in the Prospectus.

“Nothing herein contained shall prevent the Advisor or any of its Affiliates from engaging in or earning fees from other activities, including, without limitation, the rendering of advice to other Persons (including other REITs) and the management of other programs advised, sponsored or organized by the Advisor or its Affiliates ... neither the Advisor nor any Affiliate of the Advisor shall be obligated generally to present any particular investment opportunity to the Company even if the opportunity is of a character that, if presented to the Company, could be taken by the Company.”

PPM p.2095% confidence

Related-party conflict disclosed — Ares Commercial Real Estate Corporation — investment opportunity allocation

Medium

No officer or director is obligated to offer the Corporation any business or investment opportunity presented to them in any capacity other than as an officer or director of the Corporation, creating a structural conflict of interest in investment opportunity allocation.

“No officer or director of the Corporation, including any officer or director who also serves as a director, officer or employee of any entity that provides investment advisory services or as a member of the investment committee or underwriting committee of any such entity, shall be obligated to offer to the Corporation the opportunity to participate in any business or investing activity or venture that is presented to such person other than in his or her capacity as an officer or director of the Corporation.”

PPM p.492% confidence

Related-party conflict disclosed — Officers and Directors of Ares Commercial Real Estate Corporation

Medium

No officer or director is obligated to offer the Corporation any investment opportunity presented to such person in any other capacity, creating a potential conflict of interest where investment opportunities sourced through their roles at affiliated investment advisers need not be offered to the Corporation.

“No officer or director of the Corporation, including any officer or director who also serves as a director, officer or employee of any entity that provides investment advisory services or as a member of the investment committee or underwriting committee of any such entity, shall be obligated to offer to the Corporation the opportunity to participate in any business or investing activity or venture that is presented to such person other than in his or her capacity as an officer or director of the Corporation.”

PPM p.493% confidence

Material disclosure — Series A Convertible Preferred Stock — Defaulting Holders

Low

Holders deemed 'Defaulting Holders' under their Subscription Agreement forfeit cash dividends (retained by the Corporation), receive only the Subscription Price (not the full Liquidation Preference) upon liquidation, lose voting rights, and are treated at parity with Common Stock on liquidation.

“shares of Series A Preferred Stock held by Defaulting Holders being entitled to be paid an amount equal to the Subscription Price and having the same rank and priority as shares of Common Stock”

PPM p.2093% confidence

Related-party conflict disclosed — Advisor directors/officers serving on Company Board without additional compensation — but Company reimburses Advisor for their compensation

Low

Directors, officers and employees of the Advisor or its Affiliates may serve as Directors or officers of the Company but may not receive Company compensation for such roles (only travel expense reimbursement). However, the Company reimburses the Advisor under Section 10 for such persons' compensation when they perform services for the Company, creating an indirect compensation channel from the Company to Advisor personnel serving on the Board.

“directors, officers and employees of the Advisor and its Affiliates that are also Directors or officers of the Company may receive compensation from the Advisor or its Affiliates for which the Advisor or its Affiliates are reimbursed by the Company pursuant to Section 10 of this Agreement.”

PPM p.1488% confidence

Key-person history disclosed — Advisor voting restriction on Advisor-owned Shares

Info

The Advisor holds 20,000 Class E Shares (initial $200,000 investment) and is prohibited from selling them while serving as advisor. The Advisor also cannot vote these shares in Director elections or votes regarding approval/termination of any contract with the Advisor or its Affiliates, limiting self-dealing but also creating a governance dependency.

“The Advisor owns 20,000 Class E Shares, which were issued in connection with the original advisor's initial investment in the Company of $200,000. The Advisor may not sell any of such Shares while the Advisor acts in such advisory capacity to the Company ... The Advisor shall not vote any Shares it now owns, or hereafter acquires, in any vote for the election of Directors or any vote regarding the approval or termination of any contract with the Advisor or any of its Affiliates.”

PPM p.2492% confidence

Material disclosure — Aggregate Stock Ownership Limit — REIT ownership concentration restriction

Info

No person may beneficially or constructively own more than 9.8% in value of all outstanding Capital Stock or 9.8% of any class or series, enforced by automatic transfer to a charitable trust upon violation. Designed to preserve REIT qualification under IRC Section 856.

“No Person, other than an Excepted Holder, shall Beneficially Own or Constructively Own shares of Capital Stock in excess of the Aggregate Stock Ownership Limit”

PPM p.892% confidence

Material disclosure — Ares Commercial Real Estate Corporation — ownership concentration / REIT qualification risk

Info

The charter imposes a 9.8% aggregate stock ownership limit per person (by value or number of shares, whichever is more restrictive) to protect REIT status. Transfers violating these limits are void ab initio or subject to automatic transfer to a charitable trust.

“no Person may Beneficially Own or Constructively Own shares of Capital Stock in excess of 9.8% in value of the aggregate of the outstanding shares of Capital Stock or 9.8% (in value or in number of shares, whichever is more restrictive) of any class or series of shares of Capital Stock, unless such Person is an Excepted Holder”

PPM p.1195% confidence

Related-party conflict disclosed — Affiliate loans to Company subject to Independent Director approval

Info

The Advisor or any Affiliate may only make loans to the Company or Operating Partnership if a majority of Directors (including a majority of Independent Directors) not otherwise interested in the loan approve it as fair, competitive, and commercially reasonable and no less favorable than loans between unaffiliated parties.

“The Advisor or any Affiliate thereof may not make any loan to the Company or the Operating Partnership unless a majority of the Directors (including a majority of the Independent Directors) not otherwise interested in such loan approve the loan as being fair, competitive, and commercially reasonable and no less favorable to the Company or the Operating Partnership than loans between unaffiliated parties under the same circumstances.”

PPM p.1690% confidence