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Blue Owl Capital, an alternative asset manager, is making a strategic move to expand its real estate financing business by acquiring Prima Capital Advisors for USD 170 million. The acquisition aims to capitalise on the opportunity created by traditional banks leaving the market last year due to stricter regulations and concerns about rising defaults caused by low occupancy and high interest rates.
Investment firms are keen to gain a larger share of the commercial real estate market as traditional banks withdraw. Blue Owl's co-CEOs Doug Ostrover and Marc Lipschultz noted the reduced availability of capital in real estate, making this acquisition a timely one. The deal is expected to close in the second or third quarter of 2024 and marks Blue Owl's second acquisition this month.
The Prima Capital Advisors deal follows Blue Owl's recent agreement to purchase Kuvare Asset Management for USD 750 million. Though the Prima deal is smaller in size, TD Cowen analysts believe it will bring key benefits that will enhance Blue Owl's value. Prima has a three-decade history and manages nearly USD 10 billion in assets, mainly investing in commercial mortgage-backed securities. Its main owner is Stone Point Capital, an alternative asset manager based in Greenwich, Connecticut.
Blue Owl's stock has experienced significant growth this year, rising nearly 32% and outperforming major asset managers like Blackstone and BlackRock. This success has given Blue Owl more flexibility to use its stock as currency for further acquisitions. TD Cowen recently increased its price target for Blue Owl's stock from USD 22.50 to USD 23.
The Prima deal will be financed with USD 157 million in equity and USD 13 million in cash. Additionally, Blue Owl stated that investors could receive an extra USD 35 million in equity based on the future performance of the business.
As part of its real estate expansion strategy, Blue Owl also announced the appointment of Jesse Hom, the former global head of real estate credit at Singapore's sovereign wealth fund GIC, to lead its real estate finance strategy. This move aligns with Blue Owl's plans to strengthen its presence in the real estate market.
The acquisition of Prima Capital Advisors is set to play a crucial role in Blue Owl's expansion in real estate financing, positioning the firm for continued growth and success in the alternative asset management space.
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