Alternative asset manager Blue Owl Capital said on Tuesday it will buy Prima Capital Advisors for $170 million to expand into real estate financing, a market that traditional banks have been retreating from since last year. Investment firms have been rushing to grab a bigger slice of the commercial real estate market as traditional lenders, which are subjected to harsh regulations, back out on fears of rising defaults due to low occupancy and high interest rates. "There is a growing lack of capital availability in real estate today," Blue Owl co-CEOs Doug Ostrover and Marc Lipschultz said in a statement.
The Prima deal that is expected to close in the second or third quarter of 2024 marks Blue Owl's second acquisition this month. Last week, it agreed to acquire Kuvare Asset Management for $750 million. "Though smaller in size versus the Kuvare acquisition, we see a number of key positives," TD Cowen analysts wrote, noting the support the Prima deal will provide to Blue Owl's valuation.
Three decade-old Prima manages nearly $10 billion of assets and invests primarily in commercial mortgage-backed securities. Its majority owner is Greenwich, Connecticut-based alternative asset manager Stone Point Capital. TD Cowen also lifted its price target on Blue Owl's stock to $23 from $22.50. The company's shares have gained nearly 32% this year, outperforming asset management giants Blackstone and BlackRock and allowing it the flexibility to use its stock as currency for acquisitions.
The Prima deal will be financed with $157 million of equity and $13 million in cash, and the company's investors could also be eligible for an additional $35 million in equity, Blue Owl said, depending on the future performance of the business. Blue Owl said Jesse Hom, previously the global head of real estate credit at Singapore's sovereign wealth fund GIC, will lead its real estate finance strategy.
Source: Reuters