SPAC capital edges towards direct real estate

The $1.6bn takeover of Oak Street by recently formed Blue Owl demonstrates how blank check companies are getting closer to direct real estate investing.

Special purpose acquisition companies have seemingly been everywhere during the past year and a half – everywhere except traditional real estate, that is.

Since the start of 2020, 728 SPACs have attracted more than $218 billion in equity, nearly seven times the total of the previous five years combined, according to Also known as blank check companies, these vehicles have wielded retail capital to acquire and list sports betting platforms, pharmaceutical companies, electric car makers and even marijuana delivery services. But commercial property has largely been left off the menu.

The consensus in the space is that owning physical real estate does not offer the strata of growth potential investors expect from these types of speculative commitments. But that might soon change following a SPAC-fueled acquisition of one of private real estate’s fastest growing managers.

This week, net-lease specialist Oak Street Real Estate Capital was acquired for a total price tag of $1.6 billion by Blue Owl Capital, a company that came into existence earlier this year by way of a blank check merger.

Blue Owl is the byproduct of an unorthodox transaction, even by SPAC standards. Last year, private debt manager Owl Rock Capital agreed to merge with Dyal Capital Partners, a subsidiary of fund of funds manager Neuberger Berman that provides capital solutions to other fund managers. Together, they then struck a deal in December to be acquired by Altimar Acquisition Corp, a SPAC backed by New York-based investment firm HPS Investment Partners. The product of that merger was Blue Owl, which began trading on the New York Stock Exchange in May.

Blue Owl quickly identified Oak Street as the next leg of its expansion, PERE understands, contacting the Chicago-based firm before even hitting the public market. Ultimately, Blue Owl parlayed its $12.5 billion post-merger market capitalization into an offer of $950 million in cash and stock up-front plus an additional $650 million in subsequent payouts. The deal was too good for Oak Street to turn down.

Because Oak Street was brought into the fold after the SPAC merger was finalized, its inclusion was not subject to shareholder approval, as was the case for Owl Rock and Dyal Capital. Still, Blue Owl’s swift and decisive move to acquire the manager demonstrates Oak Street’s value as an engine for growth.

Oak Street had already proven itself capable of rapid expansion in the private market. It debuted at number 20 on the PERE 100 list of top managers in 2020, having raised more than $6.5 billion during the previous five years. It added $600 million to that total for this year’s ranking, as the reliable returns of net lease strategies have come into vogue during the pandemic.

Oak Street’s acquisition is still a step removed from an outright SPAC merger. It also benefits from an alignment with the business’s other component parts – one focused on stable, credit-like returns from private equity investments – that will not be easily replicated. But Blue Owl’s swift purchase of the firm sets a clear precedent: direct real estate ownership can provide the growth needed to satisfy SPAC capital.