Blue Owl’s Zahr outlines private credit growth ambitions

The manager will be looking to originate its own loans, pursue securitized deals and acquire loans from traditional lenders as part of its real estate debt roadmap.

Blue Owl Capital is looking to scale its presence into commercial real estate private credit via a mix of acquisitions, hires and organic growth.

“The world has changed rapidly,” said Marc Zahr, co-president and head of real estate at the New York-based alternative manager. “And what we have seen is the lending landscape has shifted and given us a great entry point to do a new-to-us real estate finance strategy.”

Earlier in April, the firm acquired Scarsdale, New York-based advisory Prima Capital Advisors from Greenwich, Connecticut-based manager Stone Point Capital through a combination of about $157 million of equity and $13 million in cash. Prima, which focuses on investing in commercial mortgage-backed securities, managed $10 billion in assets at that time with an investor base that includes institutional and high-net-worth clients.

At the same time, Blue Owl is hiring Jesse Hom, current global head of real estate credit at Singapore-based wealth fund GIC, to take up senior leadership of the firm’s real estate lending division. Hom is slated to begin his tenure as chief investment officer for Blue Owl’s real estate platform on June 17 and will also lead the firm’s newly created Blue Owl Real Estate Finance strategy.

The increase and sustained elevation of interest rates, increase in credit spreads and decrease in credit availability have all combined to make transacting in the traditional real estate marketplace more difficult for buyers and sellers, Zahr noted.

“Because of the all-in increase in borrowing costs, and because we do not have a legacy book of business that was built in the environment when rates were really low, spreads were non-existent and credit availability was abundant, we do not have any legacy issues,” Zahr said. “We are entering the market – at least in our opinion – at a great time where we can target strong risk-adjusted returns for this asset class.”

As Zahr pointed out, Blue Owl is entering the real estate finance space at a point when many of its peers already operate across the real estate equity and debt spectrum. But in the last 15 years, he said the debt and credit financing realm has never been more appealing than it is now.

Blue Owl finds three investment channels in the real estate debt landscape particularly compelling. Zahr said the firm is looking to originate its own loans, pursue deals on the securitized market and aiming to purchase loans sitting on the balance sheets of traditional lenders to build up Blue Owl’s own debt book.

To build scale and move toward being an ‘all-weather manager’ akin to its contemporaries, Blue Owl opted for a hybrid approach by both hiring a seasoned professional and acquiring an existing lending platform to establish its presence.

Zahr and Hom’s working relationship dates back to 2021, even prior to Blue Owl and GIC’s joint $14 billion privatization of the Scottsdale, Arizona-based net lease real estate investment trust Store Capital. “As I was evaluating who was the right person to run this business and who was the right person to lead this team, Jesse was the only candidate that fit,” Zahr said.

Atop Prima’s integration and Hom’s appointment, Blue Owl also has a hiring plan in place to bolster the real estate finance division. “We have identified other key individuals that we will be bringing on board to make it a more holistic team and approach,” Zahr says. “As you can imagine, we will be leaner in nature as we start and would assume that we grow over time, but who knows where things play out.”