Blue Owl secures Sacramento Kings minority stake
Yahoo Finance’s Brian Sozzi, Myles Udland, and Julie Hyman speak with Marc Lipschultz, Co-Founder and Co-President of Blue Owl, and Michael Rees, Co-President of Blue Owl, about how the company is faring since its IPO, outlook, overall strategy, and much more.
Video Transcript
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BRIAN SOZZI: Alternative asset manager Blue Owl is on the prowl for some slam dunks, recently taking a 5% stake in the Sacramento Kings. Let's see what else the newly created money manager has cooking.
Joining us now is Blue Owl co-founder and co-president Marc Lipschultz and co-president Michael Rees. Good morning to you both. Marc, let me start with you, certainly catching a lot of attention with that new investment in the Sacramento Kings. Why did you make that play?
MARC LIPSCHULTZ: Well, listen, thank you so much for having us this morning. Really a pleasure to be here. I'm going to actually turn that to my partner and friend Michael here.
MICHAEL REES: Yeah, thank you. We're really excited about our strategy we call HomeCourt, which is our joint venture with the NBA. We have two early positions, one in the Phoenix Suns and the other you referenced, the Sacramento Kings. And it gives our investors a way at a smaller denomination, to participate in the growth and excitement that the league offers from an investment perspective.
BRIAN SOZZI: So Michael, how would an investor, how do they earn a return on the stake?
MICHAEL REES: Well, we've seen a tremendous increase in value of the overall sports and media industry. Investors in our funds are able to participate in both the cash flow dynamics that the league offers, as well as the long-term appreciation. Invest in the fund and at some point, you have both the right to exit and get the appreciation that your position has achieved over that period of time.
MYLES UDLAND: And Marc, it's Myles here. I'd love if we could maybe just back up and talk a little bit about the structure here of this company and the structure of the SPAC transaction and sort of how it fits into this conversation around SPACs. I mean, I think us here in the media, we kind of paint it all as one big thing but certainly, within that space you know, it's just a structure and there's a lot of opportunities in there and I'm curious how you guys see yourselves fitting into that?
MARC LIPSCHULTZ: That's a fantastic and perceptive question. The SPAC is itself just a structure as you said. And for us, frankly, it offered a really critical structural tool to achieve the strategic end. The mission for us was to bring together direct lending business of Owl Rock with the GP Capital Solutions business of Dyal and bring those two together.
And to do that, we needed to have a vehicle as you say, a structure, and a SPAC served as that structure. Sitting here today we're just like any other public company that has gone through an IPO, and the SPAC was quite small as a portion of our capital structure. And so today we're a publicly-traded company and that happened to have been the mechanical way for us to become the one-stop-shop for capital solutions for the alternatives industry.
JULIE HYMAN: And so it's Julie here, what does that mean exactly? For folks out there who are not necessarily familiar right, when you talk about alternatives, alternative assets, I know part of your business is direct lending, the other is alternatives like the NBA stakes that you were talking about. What are some of the other-- what's sort of the breakdown of the portfolio, if you will?
MICHAEL REES: Well, Julie, think about the overall alternatives industry as a growth industry, and it needs capital to grow in a number of different ways. And you mentioned direct lending, we have one of the leading platforms for making loans at the portfolio company level. But we also have additional pools of capital to buy into the firms at their GP level, at the management company level, and to lend to those firms as well. So we want to be the provider of picks and shovels to the alternatives industry, not doing the deals directly but as I said, providing the capital that they need to accomplish their objectives, whether it's across the buyout space, infrastructure, real estate, et cetera. We have pools of capital to meet all those needs.
BRIAN SOZZI: Marc, I talked last week to one of your competitors, Apollo, and they told me they remain long United States. Are you still long US, despite all the concerns we're seeing about peak growth, COVID variant, you name it?
MARC LIPSCHULTZ: We certainly are. The US economy continues to be extremely strong. We see this through-- and we have hundreds of companies in our portfolio. So we have an interesting lens, and do it heavily US-centric into that picture. And businesses are thriving. And there's certainly challenges, inflationary pressures are very real, the wage issues and achieving, finding workers is certainly a challenge but the businesses are really doing well.
We have a particular focus as a firm on lending capital to the technology sector. And as I think is apparent to everyone, this is an area of tremendous growth that is thriving. And I think there's little reason to think it's going to slow down.
JULIE HYMAN: It's interesting to hear you guys talk about the growth there because when you hear from the traditional banks when they reported their numbers, lending was pretty lackluster. That was one of the areas where they were just not seeing a lot of demand. So what's different with the clients to whom you're lending versus what a traditional bank might see?
MARC LIPSCHULTZ: So here is the reason our business exists, which is to provide capital to midsize upper middle market in our parlance, businesses that are growing. And that is really an area the banks no longer focus on. We make loans and hold those loans. So we have long-dated in fact, in the case of Blue Owl, over 90% of our capital is permanent capital, this is really an important attribute of our business, but it's really important as it relates to our ability to deliver capital.
So we keep our capital. We can provide very long-dated solutions or very tailored short-dated solutions to these companies that really aren't served by the banks anymore. And just like banking of old, where loans used to be made and then retained by the bank and there was a relationship between the bank and the borrower and it was about mutual success, that's really what we've brought back to the picture. And with private equity, in particular, driving a lot of borrowing, we really have never-- we in fact have never been busier. We just had our busiest quarter ever in terms of loan origination.
BRIAN SOZZI: And Michael, back to you on sports, how big do you envision that part of the portfolio getting, and how far away are you from another deal?
MICHAEL REES: Well, the overall industry has been dominated by individual investors. And we all know the names that own the teams across all different leagues. This is really the very beginning of the process for institutions and more retail investors to have their ability to access this. So it's really early days. The institutional investment in sports is just getting started and we think it could be quite substantial over time.
BRIAN SOZZI: We look forward to following your journey. Blue Owl co-founder and co-president Marc Lipschultz, and co-president Michael Rees, good to see you guys. Have a great week.
MARC LIPSCHULTZ: Thank you. You too.
MICHAEL REES: Thank you so much.
