Blue Owl Acquires Prima Capital Advisors for $170 Million

When Blue Owl Capital Inc., the New York-based alternative investment and asset manager, announced last week that it was acquiring Prima Capital Advisors, another US-based firm owned by Greenwich in Connecticut, the company had its own reasons.

Blue Owl’s acquisition of Prima will be funded through a combination of approximately $157 million of equity and the remaining $13 million in cash, subject to certain closing consideration adjustments. In addition, there is potential for up to $35 million of earn-out consideration in the form of equity.

Blue Owl, which manages assets worth $165 billion as of December 2023, is reportedly eyeing an estimated $5 trillion commercial mortgage-backed security (CMBS) loans backed by commercial real estate sector, which coming due between now and next few years. The transaction is expected to close in the second or third quarter.

According to a media report, most of these loans originated before the USFED’s campaign of rate hikes, confronting property owners with higher borrowing costs and plunging CRE valuations as loans come due and traditional lenders pull back from the market.

The perfect storm in the CRE debt market has created a huge opportunity for other sources of financing, including private equity players.

Blue Owl’s co-CEOs Doug Ostrover and Marc Lipshultz, said that there was a growing lack of capital availability in real estate at present.

“We believe that Prima’s strong underwriting capabilities and track record, combined with the scale of Blue Owl’s ecosystem, can address those needs while creating attractive risk-reward opportunities for investors,” they averred.

Opportunities Aplenty

In an interview with Bloomberg TV, Marc Zahr, co-president of Blue Owl, described the real estate financing market as a $5 trillion opportunity and Prima as a phenomenal entry point in the market. As traditional lenders are slowing down and you’re seeing a pickup in rates and spreads, we think it’s a great time to enter that marketplace, Zahr said.

“As rates creep up—especially with the combination of higher rates, less credit availability and spreads increasing as well—when you take that combination, it makes it harder for groups to transact, which makes it a better buying opportunity,” Zahr explained.

Blue Owl Capital was formed in 2021 in the merger of Owl Rock and Dyal Capital. Later that year, the company acquired Oak Street Real Estate Capital. Earlier this month, Blue Owl acquired Kuvare Asset Management, an insurance and reinsurance specialist, for $750 million.

Prima, founded in 1992 by Gregory White, is a real estate lender focused primarily on investing in commercial mortgage-backed securities. Prima is majority owned by Stone Point Capital LLC, an alternative investment firm based in Greenwich, Connecticut.