Blue Owl has made an unusual debut in the real estate debt space

Twenty-four firms on the PERE 100 ranking of the world’s largest real estate managers by capital raised also feature on the Real Estate Debt 50 roster of the largest capital raisers in real estate debt. Others on the top 100 list also have real estate debt platforms of varying sizes.

In most cases, these managers entered the real estate debt space either organically – making a significant hire and then building the team over time – or by acquiring an existing real estate lending platform with a team in place.

In throwing its hat into the real estate lending ring, Blue Owl, which is in 15^th place on the PERE 100, has decided to do both.

This week, the New York-based alternative asset manager made a two-part announcement. The first part was the inorganic entry point: the launch of the firm’s real estate finance strategy with the $170 million acquisition of Prima Capital Advisors, a real estate lender focused on commercial mortgage-backed securities. Prima, based in Scarsdale, New York, manages approximately $10 billion in assets on behalf of institutional investors and select high net worth individuals.

The second part of the announcement marked the organic entry point: the hire of Jesse Hom, previously global head of real estate credit at GIC, to oversee the new business. In addition to leading the real estate finance strategy, Hom will focus on expanding Blue Owl’s existing triple net lease business and identify other strategic growth opportunities for the real estate platform.

It is unusual for a firm to be entering the real estate debt space through a two-pronged approach of acquiring an existing team, portfolio and track record and hiring a blue-chip industry name who ran the real estate credit business of one of the world’s largest real estate investors. But when one considers that Blue Owl is launching its real estate finance strategy later than many of its competitors, such a tactic can be viewed as a way to jumpstart the platform and scale fairly quickly.

In some ways, the hybrid approach is also the story of Blue Owl’s real estate business, which was established when Blue Owl bought Oak Street Real Estate Capital, a Chicago-based net-lease specialist, in December 2021. Oak Street’s co-founder and CEO Marc Zahr now leads Blue Owl’s real estate business, which has grown from $12.4 billion of assets under management at the time of acquisition to $26.9 billion as of December 31.

But even before its acquisition by Blue Owl, Oak Street had seen significant organic growth, raising successively larger funds for its net-lease strategy and making the highest PERE 100 debut in the 20th spot in 2020. That organic growth, now supported by Hom as one of Zahr’s right-hand people, will be bolstered by the inorganic growth of deals like the Prima acquisition.

Of course, it remains to be seen how well the two pieces fit. But if Blue Owl plays its cards right, it may not be long before the firm starts eyeing its place on the RED 50, too.