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Blue Owl Capital Inc. (NYSE:OWL) Q3 2023 Earnings Convention Name November 2, 2023 8:30 AM ET
Firm Members
Ann Dai – Head, Investor Relations
Doug Ostrover – Co-Chief Govt Officer
Marc Lipschultz – Co-Chief Govt Officer
Alan Kirshenbaum – Chief Monetary Officer
Convention Name Members
Craig Siegenthaler – Financial institution of America
Alex Blostein – Goldman Sachs
Patrick Davitt – Autonomous Analysis
Steven Chubak – Wolfe Analysis
Brian McKenna – JMP Securities
Brennan Hawken – UBS
Alex Bernstein – JPMorgan
Mike Brown – KBW
Operator
Women and gents, thanks for standing by. My title is Bhavesh, and I will likely be your convention operator right now. At the moment, I want to welcome everybody to the Blue Owl Q3 2023 Convention Name. All traces have been positioned on mute to stop any background noise. After the audio system’ remarks, there be a question-and-answer session. [Operator Instructions]
Thanks. I’ll now hand the decision over to Ann Dai, Head of Investor Relations. Chances are you’ll start your convention.
Ann Dai
Thanks, Operator, and good morning, everybody. Becoming a member of me right now are Doug Ostrover and Marc Lipschultz, Co-Chief Govt Officers; and Alan Kirshenbaum, our Chief Monetary Officer.
I’d wish to remind our listeners that remarks made through the name might include forward-looking statements, which aren’t a assure of future efficiency or outcomes and contain quite a few dangers and uncertainties which can be exterior the corporate’s management.
Precise outcomes might differ materially from these in forward-looking statements because of quite a few elements, together with these described from time-to-time in Blue Owl Capital’s filings with the Securities and Change Fee. The corporate assumes no obligation to replace any forward-looking statements.
We’d additionally wish to remind everybody that we’ll seek advice from non-GAAP measures on the decision, that are reconciled to GAAP figures in our earnings presentation accessible on the Investor Assets part of our web site at blueowl.com. Please be aware that nothing on this name constitutes a suggestion to promote or a solicitation of a suggestion to buy an curiosity in any Blue Owl Fund.
This morning we issued our monetary outcomes for the third quarter of 2023, reporting fee-related earnings or FRE of $0.17 per share and distributable earnings or DE of $0.16 per share. We declared a dividend of $0.14 per share for the third quarter payable on November thirtieth to holders of report as of November twentieth.
In the course of the name right now, we’ll be referring to the earnings presentation, which we posted to our web site this morning, so please have that on-hand to observe alongside.
With that, I’d like to show the decision over to Doug.
Doug Ostrover
Thanks, Ann, and good morning, everybody. I need to thank all of you for becoming a member of us right now. It’s been a pleasure to spend the final two years on these earnings calls with our shareholders and analysts. As we transfer via the transition of the Co-CEO construction that we introduced earlier this yr, we determined to take a divide and conquer method to permit every member of the administration workforce to leverage their time extra effectively.
And so going-forward, you’ll be listening to from Marc and Alan on our quarterly earnings calls, whereas, Michael and I will likely be taking a step again from this side of the enterprise. To be clear, I’m not going wherever. I’ll proceed to be very accessible and accessible and I look-forward to seeing lots of you at upcoming conferences and conferences.
That stated, given the speedy development that we’ve had at Blue Owl and what now seems like a fairly well-oiled earnings course of. It seems like the suitable time for me to focus my consideration extra totally on the numerous strategic development initiatives we now have within the works proper now.
So with that, let me hand issues over to Marc.
Marc Lipschultz
Thanks a lot, Doug. As we speak, we once more demonstrated the regular and resilient development that we imagine units Blue Owl aside within the different asset administration area with our tenth straight quarter as a public firm, additionally being our tenth straight quarter of producing FRE development.
After we take into consideration what’s occurred on the planet over that timeframe. This time in 2021 10-year treasuries have been round 1.5% and a yr in the past, they only crossed 4%, with the expectation by the top of 2023, we’ll be speaking about fee cuts. Clearly, these expectations have shifted meaningfully over the previous yr.
Within the first three quarters of 2022, S&P 500 corrected 25% as rates of interest marched upwards, solely to reverse and rally 20% over the subsequent yr, regardless of elevated charges and ongoing geopolitical dangers. The capital markets and M&A have been put in for the higher a part of the yr, and in March, we witnessed a handful of financial institution failures that took the market utterly off-guard.
All of that is to say, the one factor that’s been clear over the previous couple of years is the shortage of readability into the short-term path of charges for the long run affect of these charges on financial development and the way liquid markets will react to the data we now have on-hand.
In distinction, we’ve been capable of reveal our Blue Owl everlasting capital at FRE centric mannequin by design, creates a differentiated and extra predictable earnings profile. And on a final 12-month foundation, we now have grown DE by 28% and FRE by 26% regardless of of those market headwinds, since we’ve been public administration charge development has been over 40% per yr.
That’s to not say that this development has come simply, however one benefit we now have structural is that only a few property depart our system, as a result of our AUM is usually everlasting capital. So the capital we’re elevating is usually additive as a substitute of changing property which can be being returned to buyers.
On high of that, our enterprise is positively levered to most of the ongoing secular tailwinds inside alternate options, together with the continued development of direct lending, bigger managers benefiting from ongoing consolidation throughout alts and personal wealth’s incremental adoption of alternate options as a core part of an investor portfolio. For these causes, we really feel assured that Blue Owl will stay a differentiated story with a differentiated development trajectory.
Because it pertains to the fundraising panorama, we proceed to see very constructive indications for demand throughout our methods, that are typically income-oriented and draw back protection-focused. Throughout our perpetually supplied merchandise and wealth, we raised $1.5 billion within the third quarter, an almost 20% step up from the prior quarter.
During the last 12 months, we now have been the highest fundraiser within the business in each credit score and actual property when web flows, and on a gross foundation, we now have been the second-best fundraiser over that interval. Each of those are extraordinary statistics and I believe testaments to the numerous years that we’ve been constructing our platform and relationships on this area.
Now, loads of corporations are attempting to catch as much as the place we’re and given the scale of the chance, this isn’t a zero-sum recreation. We and others can do effectively on the identical time and there will likely be loads of development forward throughout the business.
However I wished to take a second to acknowledge what we’ve been capable of accomplish to date. I believe we’re exceeding expectations within the face of headwinds and I’m very enthused about what lies forward for this enterprise.
On the institutional aspect of our enterprise, we introduced $1 billion mandate from a number one sovereign wealth agency, reflecting continued progress within the strategic and geographic enlargement of our LP base. Now we have enhancing visibility into the end-of-year flows as we launch fundraising for a handful of methods, together with GP Stakes, for which we anticipate a small shut for our sixth fund earlier than the top of this yr.
We’re very excited in regards to the potential for cross-sell for this fund with our credit score and actual property buyers and we’ve seen robust demand to deliver the GP Stakes technique to quite a few new wealth platforms as effectively.
In actual property, we stay very effectively positioned, regardless of the substantial headwinds on this area. Having already reached our $4 billion goal for this newest classic of our flagship fund, attending to the $5 billion laborious cap, which we count on to hit, will symbolize a doubling within the measurement from the prior classic, a difficult feat even in robust markets and reflective of the distinctive and enticing attributes of our web lease technique.
And as I discussed earlier, within the wealth channel, we’re outselling opponents by a large margin and we proceed to construct out that syndicate. And we stay engaged in quite a few institutional investor dialogues concerning separate accounts and upcoming launches, a few of which can shut through the fourth quarter.
Shifting on to the enterprise efficiency. In credit score, we noticed enhancing traits in deployment, with Blue Owl taking lead roles in a number of the largest offers and refinancing introduced or closed throughout the market, together with Finastra and PetVet. Repayments through the quarter have been elevated relative to ranges seen earlier within the yr, offering extra alternatives to redeploy capital at much more enticing ranges.
Total, we proceed to see our direct lending enterprise develop as we meet the capital wants of an evolving market. And the risk-reward alternative offered by non-public credit score right now stays top-of-the-line we’ve seen in our tenures as funding professionals, a sentiment that we regularly hear echoed again by our buyers.
In our GP Stakes enterprise, we proceed to witness the resilience of bigger cap GPs, with these managers being the beneficiaries of market share features throughout more difficult fundraising environments.
In actual property, we’ve been energetic in deploying capital at enticing cap charges, with Fund VI about 20% dedicated or deployed and have continued to monetize at significant spreads to our entry factors.
Bringing all of this collectively, we consider our enterprise as Different Asset Supervisor 3.0, that means our enterprise presents the regular stream of administration fee-driven earnings that buyers have been asking for together with the sturdy development that they count on and we now have a better means to maintain property in our system as a consequence of our everlasting capital.
Our monetary profile may be very easy and sturdy, and doesn’t rely on realizations or capital market charges to drive earnings development. As a premier options supplier to a big and rising market, we expect we provide a really enticing proposition of robust earnings and dividend development underpinned by a core asset base that’s exceptionally secure and we sit up for persevering with to show this mannequin out to all forms of market circumstances.
With that, let me flip to Alan to debate our monetary outcomes.
Alan Kirshenbaum
Thanks, Marc. Good morning, everybody. Thanks for becoming a member of us right now. To begin off, we’re happy with our third quarter and LTM outcomes. Marc talked about this, however I need to reiterate that that is our tenth consecutive quarter. It’s truly been each quarter since changing into a public firm of each administration charge and FRE sequential development. The one different asset supervisor that has demonstrated this over the previous two and a half years.
And as Marc additionally referred to earlier, as you’ll be able to see on slide 5, our administration charges have grown at a 42% CAGR since we turned a public firm. We’re speaking not simply superb development, however regular, constant, resilient development via what has clearly been a really difficult and unstable market surroundings.
So let’s undergo a number of the key highlights of our LTM outcomes via September thirtieth. Administration charges are up 32% for the LTM interval versus a yr in the past, and 93% of those administration charges are from everlasting capital automobiles.
FRE is up 26% for the LTM interval versus a yr in the past and our FRE margin is correct on high of our 60% goal, which we proceed to count on to be the goal for the subsequent few years. And DE is up 28% for the LTM interval versus a yr in the past.
Now I’d wish to spend a second on our fundraising efforts. As you’ll be able to see on slide 12, we raised $2.9 billion within the third quarter and during the last 12 months, we raised $14.5 billion. I’ll break down the third quarter numbers throughout our methods and merchandise.
In credit score, we raised over $2.1 billion. $1.2 billion was raised in our diversified and first-lien lending methods, together with over $900 million raised in our wealth distributed credit score earnings BDC, OCIC, returning to a tempo we haven’t seen for the reason that first half of 2022. And roughly $1 billion was raised in our tech lending methods, together with roughly $300 million raised in our wealth distributed tech lending BDC, OTIC.
In GP strategic capital, we raised roughly $100 million through the third quarter and in October, we closed on roughly $400 million for a GP Stakes co-investment automobile with a longstanding and valued accomplice, which can make investments aspect by aspect with our fifth and sixth GP stakes funds.
In actual property, we raised roughly $700 million, roughly half of that in our sixth classic of our actual property technique and the opposite half in our wealth distributed non-traded REITs, ORENT.
Now we have now raised over $2 billion of fairness in ORENT since its launch a yr in the past, primarily via only one wire home and through what has been an exceptionally difficult surroundings for actual property.
So we’re happy with these outcomes. And since Might, we now have launched ORENT on just a few extra platforms and have some significant launches forward for the fourth quarter and into 2024.
As Marc alluded to earlier, we proceed to see robust institutional curiosity in our merchandise and we expect a robust end to the yr within the institutional channel. As we now have mentioned all year long general, as we head into the top of 2023, we proceed to see fundraising tilting institutional for the yr.
Within the wealth channel, we now have continued to see strong curiosity in our methods with regular will increase once more in our fundraising ranges quarter-over-quarter and we imagine that may proceed to construct on itself via the top of this yr and into subsequent yr. We’re very enthusiastic about the place we will be subsequent yr. All in all, we’ve raised over $36 billion of fee-paying AUM since January 1, 2022.
Once I take into consideration fundraising general, we’ve all the time talked about how everlasting capital differentiates us, as a result of property not leaving the system implies that we now have larger development for a similar quantity of fundraising. Mentioned one other approach, we hold extra of the capital we increase than our friends.
Placing some numbers round that, for about each $5 of fee-paying AUM inflows we herald, we see simply $1 going out within the type of distributions or redemptions. For our friends, on common, each $2 raised is met with $1 leaving their system, that means half of their fundraising covers property which can be being paid out to buyers in a single type or one other. That’s an enormous distinction. It’s a giant benefit for us.
Along with the endurance of current AUM and the good thing about ongoing fundraising, we now have substantial embedded earnings that we are going to unlock over time. AUM not but paying charges was $12.6 billion at September thirtieth. This AUM corresponds to an anticipated improve in annual administration charges, totaling over $175 million as soon as deployed.
And as lots of you’ll recall, we now have over $200 million of administration charges in mixture that may activate upon the itemizing of our non-public BDCs over time. We imagine, partly due to this stuff and partly due to our everlasting capital, we now have a better high quality of earnings.
Shifting on to our credit score platform, we had gross originations of $4.4 billion for the quarter and web funded deployment of $2.1 billion. This brings our gross originations for the final 12 months to $13 billion with $7.4 billion of web funded deployment. In order it pertains to the $9.3 billion of AUM not but paying charges and credit score, it could take us just a little over one yr to completely deploy this capital based mostly on our common web funded deployment tempo during the last 12 months.
With that stated, as Marc commented earlier, we now have been seeing a substantial uptick in pipeline exercise in our direct lending platform and imagine the fourth quarter could possibly be a a lot greater quarter for deployment than earlier quarters this yr. Though the affect of administration charges in 2023 will likely be nominal, it’s an amazing place to start out 2024.
Our credit score portfolio returned 4.1% within the third quarter and 17.4% over the LTM, whereas annualized realized losses stay roughly 6 foundation factors on a gross foundation and have been totally offset by realized features. Rated common LTVs stay within the low 40s throughout direct lending and within the low 30s particularly in our tech lending portfolio.
For our GP strategic capital platform, whole invested commitments for our fifth GP Stakes fund, together with agreements in precept, are roughly $11 billion of capital with line of sight into about $2 billion of alternatives, which if all indicators would deliver us via the remaining capital accessible in Fund V.
And efficiency throughout these funds stay robust with a web IRR of 23% for Fund III, 46% for Fund IV and 21% for Fund V, all of which examine favorably to the median returns for personal fairness funds of the identical vintages.
And in our actual property platform, deployment exercise stays sturdy with over $1 billion deployed through the quarter. And our pipeline of alternatives remained robust with over $4 billion of transaction quantity underneath letter of intent or contract to shut. Close to efficiency, we achieved gross returns throughout our actual property portfolio of two.4% for the third quarter and 13.8% for the final 12 months.
Okay, let’s wrap up right here with one closing thought, dividend development. This yr, we may have posted dividend development of twenty-two% over final yr and since changing into a public firm, we now have achieved a 28% CAGR for our dividend, the best within the public different asset supervisor area and we really feel that is really reflective of how we now have grown our enterprise.
Dividend development is our north star. It displays our tempo of development, but in addition informs in regards to the high quality of the earnings underlying that development and the boldness we now have within the endurance of these earnings. It’s a metric that captures all facets of our enterprise, together with fundraising, deployment, income development, embedded future earnings and so forth. And for that cause, it’s one of many metrics that we expect buyers needs to be most targeted on for us.
Thanks once more to everybody who has joined us on the decision right now. With that, Operator, can we please open the road for questions?
Query-and-Reply Session
Operator
Thanks. [Operator Instructions] Thanks. Our first query comes from the road of Craig Siegenthaler from Financial institution of America. Please go forward along with your query.
Craig Siegenthaler
Good morning, Doug, Alan. Hope everybody’s doing effectively. Following Alan’s feedback round a robust end to 2023 within the institutional channel, we wished to get your perspective on the quarterly influx of $1 billion and the way we must always take into consideration the extent of institutional fundraising over the subsequent few quarters, truly particularly with a primary shut in GP Stakes VI by December 31, particularly?
Marc Lipschultz
Hey, Craig. That is Marc. Thanks for the query. Look, this quarter is — quarter 4 is predicted to be a robust one from a fundraising standpoint throughout wealth and institutional. We’re seeing terrific power in wealth proceed to develop there. As you already know, we’ve been the primary web fundraiser available in the market and we proceed to see substantial development as we head into this month and this quarter. After which institutional as effectively with GP Stakes VI, we do count on to do our first shut within the fourth quarter.
And so I suppose it leads most likely to a broader level, which is to name it what it’s, look, we count on fourth quarter to be very robust. This quarter, the timing between when issues shut for us is rather less predictable. We simply don’t run as many funds. So we don’t wish to get both overexcited a couple of notably robust quarter or overly involved a couple of quarter that’s just a little bit lighter. We sit up for long-term robust predictable dividend development. We simply don’t run as many funds, as you already know and we don’t count on we are going to.
As we speak, we now have the best charge fee within the business. We run merchandise the place we’re going to ship superior threat returns and the place we will construct true scale, as you already know, in actually nearly the whole lot we do. We’re a market chief, if not the singular market chief and that’s going to proceed to be our middle of gravity.
What we need to do is develop FRE and develop dividends, and naturally, did that once more this quarter, and we plan to do it once more subsequent quarter and carry on conserving on in that regard. So between wealth institutional and having a flagship product again available in the market in This autumn, we do anticipate it being robust.
Craig Siegenthaler
Thanks, Marc.
Marc Lipschultz
In fact. Thanks.
Craig Siegenthaler
Only for my follow-up, we have been in search of an replace on Oak Belief’s fundraising trajectory. So I used to be questioning for those who might share what number of massive retail platforms it’s on right now. And if in case you have line of sight into extra platform additions over the near-term. And some other feedback round its web circulation potential can be useful, too? Thanks.
Alan Kirshenbaum
Positive. Thanks, Craig. We’re presently reside on three platforms, three massive platforms. We added one presently within the fourth quarter and we anticipate approaching a number of extra massive platforms in a single queue. The trajectory continues to look robust, once more, within the face of unimaginable headwinds on the planet of actual property, and positively, comparatively talking, very, very robust flows that we’ve seen to-date.
When you recall, we’ve raised about $2 billion primarily from actually one wire home platform within the face of quite a few issues which have occurred over this previous yr, and within the face of robust headwinds, as I stated, in actual property writ massive. So we proceed to be cautiously very optimistic about continued traits up and to the suitable in what we will do with our ORENT product, particularly, in 2024 and ahead.
Marc Lipschultz
I’ll simply add one thing to that and I — linking type of the 2 feedback, my remark and Alan’s remark, collectively. ORENT’s an amazing instance of a really distinctive product in the actual property area and one the place we see actually substantial long-term potential and development.
It’s a much more sturdy product. We proceed to generate extraordinarily enticing constructive returns in ORENT throughout markets the place persons are possibly rather less discerning about dangers, these distinctions don’t seem vital. You then get right into a world of uncertainty and merchandise which can be actually constructed for sturdiness, which is the hallmark of what we do at Blue Owl, actually sing.
And that’s in no small half why ORENT is by far the primary web fundraiser available in the market and we’re persevering with to develop at a time when the phrase actual property is out of favor and that’s precisely what makes the chance for ORENT and for us so substantial as a result of we’re delivering glorious returns in that market and albeit originating at actually enticing cap charges with excellent counterparties.
So that’s an space the place I believe you’ll proceed to see us. After we look ahead, we expect it’s some of the thrilling areas we now have. We see it on the institutional aspect, frankly, as effectively. Now we have already closed $4 billion for Fund VI, which was our goal. We’ll hit our laborious cap of $5 billion and that’ll be double the scale of our final fund. And I’ll mark it once more the place everybody else in actual property goes the opposite approach.
That’s that type of sturdiness, predictability and product differentiation that’s going to proceed to be our hallmark and I do suppose ORENT particularly will likely be a very enticing development engine for us. It produces an amazing yield with nice predictability and stability.
Craig Siegenthaler
Marc, Alan, thanks.
Alan Kirshenbaum
Thanks, Craig.
Marc Lipschultz
Thanks.
Operator
Thanks. Our subsequent query comes from the road of Alex Blostein from Goldman Sachs. Please go forward along with your query.
Alex Blostein
Hello. Good morning. Thanks for the query. Truly, a query for Doug, possibly going again to the primary level you made to start with of the decision round a number of the adjustments in form of management priorities and the way you guys are going to be spending your time. So possibly assist us body type of what your strategic development initiatives are that you just count on to deal with over the near-term and actually which one among these are you anticipating to be most form of needle transferring when it comes to income development into 2024?
Doug Ostrover
Positive. I’m so pleased I get a query. I used to be sitting right here dying to talk. To start with, let me simply say I’m not going wherever and for higher or worse, you’re going to be caught with me for a very long time. I’m extremely pleased with what we’ve constructed and I believe we’re within the early innings of taking this enterprise to an entire different stage.
And we’ve all the time wished to create and I believe we’re executing on changing into some of the distinctive different asset managers. And only for everyone listening, I actually plan on simply spending as a lot time as potential with our stakeholders, our LPs and shareholders.
Look, we now have quite a few initiatives and I’m pleased to offline to enter loads of them. However let me simply provide you with one which I believe will resonate. About six and a half years in the past, we noticed a very attention-grabbing alternative within the software program area. It was a rising sector. There have been no devoted swimming pools of capital there. We launched our first devoted software program lending product and right now we now have about $20 billion of capital targeted on that sector.
When you look what we’ve accomplished in healthcare right now, we’ve spent loads of time working with buyout corporations. We’ve accomplished, I believe, nearly $14 billion of offers within the area and have an amazing observe report. We’ve added experience in Royalty Pharma. We’ve now — we simply made a small acquisition so as to add life sciences experience and we’re spending loads of time eager about might a devoted healthcare product be comparable or the TAM is actually greater than the software program area. In order that’s the type of factor we’re engaged on and the place I plan to spend the majority of my time.
Alex Blostein
All proper. Superior. And we positively sit up for nonetheless talking with you. So my second query could also be much less strategic and just a little bit extra micro. So, Alan, I believe this one’s for you. I believe in your ready remarks, you prompt that FRE margins will hover round 60% for the subsequent a number of years. I suppose I’m simply higher making an attempt to grasp, why isn’t there extra working leverage within the enterprise that’s rising revenues at a tempo that you just guys have been capable of put up and are more likely to proceed to place up over the subsequent few years.
Alan Kirshenbaum
Positive. Thanks, Alex. So we’ve talked about FRE margins. We predict working at a 60% FRE margin is a really robust margin. It’s clearly among the many finest or the perfect within the business. And as we proceed to develop, Doug simply talked about, some new product launches.
As we proceed to develop our enterprise, we’re going to proceed to spend money on that enterprise, whether or not it’s folks, whether or not it’s actual property, whether or not it’s placement prices, whether or not it’s comp. And so I’d count on a excessive development fee for our expense line, no totally different than for our income line.
Clearly, ideally, our income line outpaces the bills. However as we proceed to reinvest within the enterprise, I proceed to suppose a 60% FRE margin is the suitable place for our enterprise to function for the subsequent few years.
Doug Ostrover
Yeah. I — Alex, look, there may be can be pure scale economies, to your level. However we proceed to be very targeted, not simply measured in quarters or perhaps a couple years, however many, a few years on persevering with to ship actually robust FRE and dividend development and so we do need to proceed to place some capital and a few of our accessible income into beginning new merchandise.
We’ve accomplished so much very efficiently organically and we proceed to need to try this. We need to proceed to spend money on constructing the infrastructure, world-class infrastructure, in our group to be the perfect within the areas we’re in.
So, I believe at already the best margin within the business, it’s not notably a precedence to see the way to make that larger relative to creating certain we proceed to develop income at an especially enticing fee and due to this fact convert that into FRE and into dividends.
Alan Kirshenbaum
When you concentrate on what we’re investing in, Alex, we take into consideration healthcare, as Doug simply talked about, when it comes to natural product launches. We take into consideration our strategic fairness product that we’re within the means of launching. These are all natural that we’re constructing from scratch internally right here or that we now have been constructing from scratch.
Take into consideration continued funding in our institutional fundraising platform, persevering with funding in our wealth fundraising platform. These are all issues which can be essential to that income development that we proceed to speak about.
And also you pull the lens again and you concentrate on how easy our enterprise is. We’ve taken an FRE income development quantity occasions 60%. FRE margin, that’s our FRE development and that interprets to very excessive continued dividend development year-after-year.
Alex Blostein
Yeah. All proper. Thanks all very a lot.
Marc Lipschultz
Thanks.
Operator
Thanks. Our subsequent query comes from Patrick Davitt from Autonomous Analysis. Please go forward along with your query.
Patrick Davitt
Hey. Good morning, everybody. My first one is on deployment. Craig Packer was tremendous bullish on deployment in your most up-to-date replace name and certainly the gross web originations have been up 30% sequentially, however each FPAUM influx and transaction charges have been down sequentially. So might you assist us higher body the way to mannequin the ins and outs of the actions of these line objects towards exercise ranges, which have been clearly significantly better?
Alan Kirshenbaum
Positive. Why don’t I…
Marc Lipschultz
Effectively, I’ll inform you what, let’s do that. Let me begin on type of what we’re seeing in whole within the market originations, you’re clearly pushed from that after which Alan will join in with some to type of a selected query of how do you mannequin it, so to talk.
So your commentary, after all, is completely spot on. The originations have been up and measured in proportion phrases up fairly considerably at 30%. That’s not — that’s fairly significant within the context of our enterprise.
That stated, we’re nonetheless at ranges clearly beneath originations the place they have been a yr in the past, when occasions have been a lot, way more energetic within the M&A market. So a few observations that stay true right now.
At first, the direct lending position within the financing markets stays extraordinarily substantial. And I don’t know for those who like to make use of the phrase market share. I’m not a giant fan of the phrase market share as a result of it means that, we and the banks are competing for a similar financings. We’re actually not. We’re providing a totally totally different worth proposition and we’re a holder, not an middleman of debt.
However in any case, simply to make use of that phrase for a second as a shorthand, the share for direct lending is extraordinarily excessive and Blue Owl’s position stays main. We proceed to be completely a key driving drive in most of the very largest financings for the easiest corporations and largest sponsors. So all of that may be very constructive and partly mirrored within the 30% development.
Alternatively, it’s a assertion of the apparent that M&A stays low in whole and we will solely have — we will have as full a share as all of us collectively need and Lester’s M&A exercise, it may solely translate into so many {dollars}.
And sitting right here right now, we proceed to see good exercise ranges when it comes to inflows. Actually appears to be extra convergence between patrons and sellers in converging on costs. High quality of property is great. The issues we’re seeing, the issues we’re originating, the standard is excellent. Now that will replicate our personal origination and our personal very, very selective financing decisions. We’ve checked out 8,400 loans to make the five hundred or so we now have.
However I believe it additionally displays the fact of {the marketplace} right now, which is larger high quality corporations are what will be bought and better high quality corporations are ones that may be financed, actually by us. We deal with very prime quality corporations. And so I believe in whole, what we’re seeing is a really, very robust place in a type of tepid M&A market. It would return.
One might need thought, just a few weeks in the past it could return even sooner sitting right here now with the geopolitical world we’re in. I don’t know. You all have nearly as good a perch as any. However we now have had a — proceed to have a really good pipeline of actually very prime quality product. And with that when it comes to how to consider the flows the ins and outs. Perhaps we flip it to Alan just a little bit on that one.
Alan Kirshenbaum
Nice. Thanks, Marc. So, Patrick, after we take into consideration — there’s quite a few various factors that each one drive via what you’re referring to, what your query is. When we now have fundraise, clearly fundraise raises are AUM and fee-paying AUM.
Typically talking, we’ll have some fee-free capital that we’ll increase from time-to-time, like what we closed just a little little bit of in 3Q that goes to AUM however clearly doesn’t accrue to fee-paying AUM. We’ll have AUM going up for truthful worth will increase that additionally doesn’t accrue to fee-paying AUM.
Gross deployment will. Typically we’ll have paydowns through the quarter on loans that we originate which can be paid again. That doesn’t depart the system. That simply wants to take a seat till it will get redeployed. And so you may have various things transferring totally different of these ratios up and down.
And then you definitely even have debt. So for us, there’s quite a few our merchandise the place we earn a administration charge on debt, on whole property, so fairness plus leverage. And after we increase debt in these merchandise, that goes to fee-paying AUM. In order that they received’t all the time transfer in sync, however typically talking, it is best to see all of them improve over time.
Patrick Davitt
Okay. Thanks. And any replace on ideas about increasing into extra type of closed-end fund wrappers like a number of the different massive direct lending gamers do?
Marc Lipschultz
Different — whenever you — different closed-end fund wrappers that means?
Patrick Davitt
Which means like a extra institutional type of drawdown sort fund construction.
Marc Lipschultz
Oh! Received you. Look, we now have — sure, we now have a method of being, as you already know, the market chief in massive cap, prime quality financing options. Now we have a mannequin that’s distinctive, which is something we originate will get shared between the handful of funds that we handle. Now we have a a lot, a lot easier enterprise, each to grasp, to handle, for infrastructure, as you already know, than our friends and fewer totally different automobiles, as famous.
Nevertheless, in reply to your query, sure, we proceed to take a look at methods to satisfy the market the place they need us. That’s to say, to satisfy constructions that serve totally different constituents’ wants. So, sure, we now have continued to develop the forms of choices we now have, to your level about different forms of closed-end funds that will seem like extra conventional funds. Completely. We’re pursuing placing these in place as effectively.
We’re all about creating the on-ramps that meet the wants of our buyers in order that that’s designed for them after which delivering to all of them a standard, prime quality expertise by having the ability to share in each mortgage that we make that’s acceptable to a method. In order that itself, as you already know, is fairly distinctive. So we are going to proceed so as to add these on-ramps into our product suites. Sure.
Doug Ostrover
I believe I’d simply add right here, Patrick, typically talking, we now have a wrapper for every sort of distribution channel for every of our methods. Loads of these wrappers will take each institutional and wealth shoppers and buyers, however we do have GP LP constructions that meet the wants for every of our methods. A few of them are simply not as scaled as, let’s say, our BDC platform and they also don’t drive the numbers as a lot, so that you don’t hear about them as a lot on these earnings calls. However we do have merchandise that go well with these wants.
Marc Lipschultz
I notice this isn’t the query that you just requested precisely, however I simply need to add one different thought. Look, it’s not our intention, although, to proliferate merchandise in order that we will simply collect property. We’ve stated this earlier than, we’re keenly keen on rising FRE and dividends. We aren’t keenly keen on rising AUM for the sake of rising AUM. There’s loads of very low-margin AUM that’s accessible, proper?
And so gathering property, launching automobiles, we’re simply not going to pursue having dozens and dozens of automobiles simply so we will get a greenback. What we need to do is get very high-quality {dollars}. Our charge fee is the best within the business and that displays the standard of what we ship to buyers and the sorts of property we increase and that, I believe, will proceed to be essential to us. We’re not within the AUM gathering enterprise. We’re within the excellent outcomes and market management enterprise.
Patrick Davitt
Thanks.
Alan Kirshenbaum
Thanks, Patrick.
Operator
Thanks. Our subsequent query comes from the road of Steven Chubak from Wolfe Analysis. Please go forward along with your query.
Steven Chubak
Hello. Good morning. Thanks for taking my questions.
Marc Lipschultz
Thanks, Steven.
Doug Ostrover
Good morning.
Steven Chubak
So I wished to start out off with a query simply in your European enlargement plans. There’s been some press articles suggesting you’re exploring a deal for a direct lender in Europe. I don’t count on you to touch upon that particular deal. Perhaps simply communicate to your broader choice to construct versus purchase to develop your footprint within the area and whether or not latest hypothesis that friends need to launch no-carry credit score funds in Europe informs your urge for food to develop.
Marc Lipschultz
Nice. Thanks. In order famous and appreciated, clearly, we received’t touch upon any explicit hypothesis when it comes to M&A. However to say this, look, we as a agency, I’d put so as three type of priorities after we take into consideration how we develop our enterprise.
Effectively, above all of it, after all, is delivering excellent risk-adjusted returns in any respect moments, proper? Our LP expertise is monumentally vital finally to us. It truly doesn’t affect our financials, as you already know, as a result of we’re a fee-based enterprise. So our enterprise is distinctively predictable. We don’t have efficiency charges. However to us, delivering excellent outcomes will all the time be, lifeblood from our standpoint.
Now, with that stated, there’s 3 ways for us to develop the enterprise, all three of which we now have accomplished and can proceed to take a look at. However on this order, it’s natural development of our base product enterprise, base merchandise. Once more, we now have market-leading positions, decidedly the market-leading place in triple web lease for top of the range — excessive credit-quality counterparties, decidedly the market-leading place in GP strategic capital.
And one among, don’t need to overstate it, one of many market-leading positions in direct lending. And persevering with to guide these markets goes to be our focus, persevering with to have scaled merchandise, which result in very robust margins and powerful charge charges as a result of we now have an amazing worth proposition for these buyers, goes to proceed to be the place we are going to focus at the start.
And bear in mind, as a result of our capital is everlasting, 93% of our revenues are based mostly on everlasting capital. In order that development, each time we herald a greenback, we’re conserving these {dollars}, we’re a layer cake, not the spinning wheel, and as you heard us say, we’ll absorb, for each greenback, for each $1 that leaves our system by advantage of say a quote realization or a return, we now have $5 coming in. Our common competitor has $2. That may be a enormous distinction in development affect in that natural section.
In order that’s going to be precedence one. Precedence two is add in merchandise the place we will finally grow to be the market chief, a market chief, however most significantly, ship a very robust expertise. Take our Blue Owl strategic fairness product. GP-led secondaries. Large market alternative. That’s a spot the place we’ll do our first shut in This autumn. Now we have a very distinctive answer. We predict that could possibly be a really massive addressable market and we now have a functionality to originate, underwrite and make funding selections that’s really distinctive and we expect will enable us to ship excellent outcomes.
So half two, construct new natural merchandise. Doug simply talked about healthcare. We will do in healthcare what we’ve accomplished in software program and know-how. Now we have the capabilities. We’ve constructed out, you noticed our acquisition of the widespread well being enterprise, finishes rounding out extraordinarily deep mental capital and relationships to try this.
Three and it’s acquisitions. After we can discover a enterprise as unbelievable as Oak Road, we’re going to need to purchase it and add it as a result of it’s extremely accretive and additive in each sense. Marc Zahr is an excellent investor and senior chief for this agency, and in order that’s an addition together with, clearly, terrific development. It’s been our highest development enterprise.
So after we can discover that cultural match, strategic match, we’re going to do it. So I admire that was all so much, however I do need to actually discuss how we construct our enterprise going ahead. As for, due to this fact, say, European direct lending.
Effectively, look, strategically, it’s a wonderfully coherent place for us to be, proper? We’re a market chief in U.S. direct lending. Now, we just like the U.S. market so much. The danger return may be very compelling within the U.S. market. Being in European direct lending makes excellent sense.
Is it vital? No, it’s not vital. If we will discover the suitable platform, whether or not that might be natural or inorganic, I’d say in Europe it’s extra logically inorganic, acquired, given the dimensions and complexity of {the marketplace}. But it surely could possibly be both over time. We’ll have a look at each. And getting at that market is one thing that might be very logical and positively one thing we’re severe about. However we don’t need to do it.
We’re solely going to do it if we will do it actually, rather well and after we do it, we’re going to ship nice outcomes doing so and we’re going to be disciplined about it. In order that’s type of the framework after we take into consideration European direct lending. Good enterprise for us to be in on the suitable foundation. It doesn’t make our U.S. enterprise higher. It doesn’t make Blue Owl higher except we generally is a market chief and that’s what we’re targeted on.
With that stated, and final query you raised about folks and the type of charge construction in Europe. Look, our charges are the best charge fee within the business for a cause, as a result of we ship nice returns, and persons are prepared to and needs to be prepared to pay for that. It’s a web consequence that may matter for our buyers.
I can’t touch upon anyone else’s particular technique, however look, whenever you’re making an attempt to get right into a market like direct lending the place we’re a frontrunner, generally folks can attempt to assault on worth. I don’t — It’s not a part of the best way we see the world. It’s not a part of the best way we function. However look, in each market the place somebody needs to get in or is making an attempt to catch up, generally they’ll might attempt worth as a lever.
Steven Chubak
Thanks for the fulsome response there and possibly only for my follow-up on credit score efficiency. The credit score backdrop has been benign for the final decade plus. We’re beginning to see some proof of defaults rising with larger for longer charges. Not a shocking improvement, however one variable that we’ve been paying nearer consideration to is restoration charges. That’s been steadily declining for twenty years plus, thoughts you. I do know you spoke about LTVs within the low 40s present vital loss cushion. I simply need to get your ideas on the place restoration charges might settle out this cycle, particularly given your heavier publicity to growthier sectors reminiscent of software program and healthcare.
Marc Lipschultz
Effectively, let’s begin with, I’d say, what number of years has it been that individuals have stated, oh, the credit score issues are coming, the credit score issues are coming, we simply don’t know in direct lending, these form of very amorphous and I’m not saying you’re saying this, however these type of amorphous, spooky-sounding questions, which I believe, we will guess generally who the persons are that advocate that story.
Let’s simply begin with just a few information. The actual fact of the matter is we haven’t seen any uptick in defaults, any uptick in losses. Truly, we’re nonetheless working at a 6-basis-point annualized loss fee since inception, all of which has been offset by realized features and a bit greater than that.
Now, I admire and agree it’s been a typically benign surroundings economically, however, I imply, we did have a pandemic. Now we have had a struggle in Ukraine. Now we have had charges rise dramatically and we’ve had many friends expertise much more credit score issues than we now have.
I’m not saying that with complacency or conceitedness or something prefer it, however on the finish of the day, there are variations in the best way we function, the credit we choose, how we choose them. You famous a very powerful half from our standpoint, which is loan-to-value. Having a lot of cushions, each in proportion and absolute phrases.
Keep in mind, after we’re fortunate sufficient to accomplice with Thoma Bravo and lead a financing for, say, Anaplan, not solely is it a 70% fairness test, it’s a $7 billion fairness test. Each of these matter on this calculus, proportion and scale, and that’s why we focus the place we do.
So, with regard to default charges, let me simply observe that the indicators that may presage, that may come forward of a significant change in default charges, these usually are not in any method flashing yellow but. That’s to not counsel that there received’t be a recession sooner or later. In actual fact, as credit score folks, it’d be loopy for us to not ponder and plan for that.
However right now, our portfolio, proper now, income and EBITDA on common throughout the portfolio grew 10% quarter-over-quarter. That’s fairly sturdy. Now, that’s partly the favorable collection of the varieties of companies we underwrite, however fairly favorable.
We aren’t seeing any significant change in requests for out-of-the-ordinary course amendments. We aren’t seeing any significant change in requests for PIC. We aren’t seeing significant adjustments in working out of liquidity. So, I say all of that to say that we don’t see any of these, not simply warning indicators, they form of are checkpoints that need to occur earlier than you get to significant defaults.
You then get to recoveries, to your level, which we couldn’t agree extra, in some regards is the essential merchandise, as a result of a default in and of itself isn’t an issue. Now, we’re higher off to keep away from them and we will rely the variety of defaults we’ve had actually on issues like fingers. So, conserving defaults actually low stays a very powerful factor we will do and can do.
However after we’ve taken corporations, our recoveries have been extraordinarily robust and conserving mortgage to worth is the best way to make sure that. Whenever you’re working 40% of a purchase order worth in a mortgage, a hearth sale nonetheless will get you your a reimbursement and that’s actually vital. That’s why we like these huge, sturdy, strategic property.
We’ve stated this from inception and there’s been a lot of questions alongside the best way as we led the market towards this course of lender of first alternative going to the largest credit, the perfect credit, why, a lot of discuss all these, there’s extra alternatives within the small market, there’s not.
The alternatives to be within the huge credit the place you may have that sturdiness as a result of they’re strategic property that somebody will purchase, even when they stumble, even when they get in hassle. And that, to your level, which we couldn’t agree extra, is all about maximizing recoveries.
The final half you stated was in these growthier companies, software program companies. Truly, the rationale we like these companies is as a result of the recoveries will truly be the best in our view. These companies, if and after they have an issue, they nonetheless have huge quantities of gross margin, proper?
These corporations, those we finance and those which can be purchased have extraordinarily excessive, let’s put aside even the expansion fee, assume that someway has to get tempered if we’re going to have one among these issues that you just’re speaking about.
However these are nonetheless companies which have lots of of thousands and thousands of {dollars} of consumers which can be actually for all intents and functions depending on using a chunk of software program with 80% to 90% gross margins. Taking that and consolidating it with one other strategic proprietor of a software program enterprise is strictly the type of approach out that we’re speaking about.
Somebody needs that enterprise. That may be a beneficial money circulation stream, not like a conventional industrial enterprise the place let’s suppose you’re out in a deep cycle and no person needs the capability. Who needs a manufacturing unit that doesn’t have any use for its capability? That’s simply not what you may have in these software program companies. So, it’s precisely why we prefer it. It’s why, really, we now have nonetheless not ever had a default in a software program enterprise, not to mention an issue with a restoration.
Steven Chubak
These are nice insights. Thanks a lot for taking my questions.
Marc Lipschultz
Thanks.
Operator
Thanks. Our subsequent query comes from Brian McKenna from JMP Securities. Please go forward along with your query.
Brian McKenna
Thanks. Good morning, everybody. So, you’ve been clear about your expectations for development in 2023 and then you definitely even have the greenback dividend goal on the market for 2025. So, first, are you continue to comfy with the greenback dividend goal at this level? After which how ought to we take into consideration the underlying trajectory of development in 2024? This yr, FRA development will whole within the low-to-mid 20s. So, is {that a} good place to begin for subsequent yr?
Alan Kirshenbaum
Thanks, Brian. I’ll take the final a part of that query. Whenever you do exit to the dollar-shared dividend based mostly on our Investor Day, you possibly can actually see each income development and FRA development for the subsequent two years within the approaching 30% or 30%-plus vary. I’ll depart it to Marc to the touch on the dollar-shared dividend and the way we really feel about that purpose.
Marc Lipschultz
Look, the dollar-shared dividend stays our north star. That — we’ve simply talked about this quite a few occasions. We’re about sturdiness, predictability, FRA development and dividend development and the greenback stays our goal.
There’s little doubt, it’d be foolish to not observe we’re in a extra unstable world. Now we have been through the course of this yr and now in the previous few weeks, it’s going to be type of a wild eye to not say we’re in an ever extra unstable world given what’s occurring geopolitically.
So, does that create incremental threat to that greenback? Positive, it creates some incremental threat, some incremental variability. However bear in mind, as a result of we’re a everlasting capital enterprise and since we now have very predictable charge charges and since we now have all this capital that’s already within the system that’s being deployed, our mannequin is extraordinarily sturdy.
So, the band round, say, the greenback is a good band. We don’t have efficiency charges and issues which can be going to drive significant variation. So, is there just a little extra threat to it? Positive, there’s just a little extra threat to it. However that threat may be very banded and it continues to be our north star is driving our solution to that greenback.
Brian McKenna
Useful. Thanks. After which, Alan, I imagine you famous that Actual Property Fund VI is 20% funded or dedicated. Clearly, the deployment surroundings may be very constructive proper now and also you famous a wholesome pipeline of potential offers. So how ought to we take into consideration the quarterly tempo of deployment for this fund, type of transferring into subsequent yr? After which, are you able to remind us at what stage of funded or dedicated do you sometimes begin elevating for the VI Asset Fund?
Marc Lipschultz
So, on the actual property entrance, we’re very energetic. This can be a good time for the triple web lease actual property enterprise for a few causes. One is, look, in a world with a lot much less useful capital markets, using an actual property asset as a part of a financing plan is extra attention-grabbing to each type of person.
Keep in mind, our companions in that enterprise are folks like Amazon and Walgreens and Starbucks. I imply, it’s not as if these are folks that have monetary challenges, however utilizing actual property versus the place the world was a few years in the past the place issuing practically free IG borrowings, that’s modified, proper? So, it creates extra curiosity in a lot of these novel options.
We’re originating right now at extremely compelling cap charges, shut to eight% sorts of cap charges for IG counterparties. So, we love what we’re getting. The pipeline may be very, very energetic because of this. We’ve already now deployed about 20% of Fund VI.
And as I stated, we’re doing nice on fundraising for Fund VI, maybe no shock, on condition that we’ve been capable of proceed to generate actually excellent returns in an asset class that many individuals have discovered they wrestle with now.
So, when it comes to the precise tempo of deployment, once more, like something, it’ll range quarter to quarter, however I’d name our pipeline in actual property extraordinarily robust. So, we count on that to proceed to be a fairly sturdy deployment enviornment for us.
Alan Kirshenbaum
And we’ll sometimes look to the business stage of 75% to start out eager about the subsequent follow-on fund.
Brian McKenna
Nice. Thanks, guys.
Marc Lipschultz
Thanks.
Alan Kirshenbaum
Thanks, Brian.
Operator
Thanks. Our subsequent query comes from line of Brennan Hawken from UBS. Please go forward along with your query.
Brennan Hawken
Good morning. Thanks for taking my questions. You guys had an acquisition right here this quarter, a small one with Par-4. May you tell us what the affect was for income from that deal, what we must always count on within the fourth quarter? After which, extra broadly, this isn’t the primary COO supervisor you’ve purchased. Ought to we proceed to count on you to roll up some extra of those COO managers and construct out the enterprise and the dimensions in that enterprise for yourselves?
Marc Lipschultz
So, with regard to Par-4 after which the extra common query, I’d — per the framework I described, look, we are going to all the time have a look at acquisitions the place they’re additive or strategic, if you wish to use that time period.
And Par-4 is a very nice instance of this construct versus purchase, natural. And I additionally suppose possibly it’s generally — not misplaced, however I believe it’s price calling again out within the context of issues like development and fundraising versus AUM.
The — on the finish of the day, we will launch CLOs and we will, like each different agency, use a little bit of capital to try this or possibly even some circumstances corporations loads of capital to try this and that might result in elevating $1.6 billion and that might present up in our fundraising column.
However as a substitute, we’d say, look, we will, for what turned out to be actually de minimis consideration, purchase these contracts, and as a substitute of constructing them, in that case, purchase them, and that truly is one other $1.6 billion of fee-paying AUM, the jointer system.
Now, once more, I don’t need to recover from targeted on AUM, however I do need to level out that in our system, we’re always going to take a look at what’s the easiest way to get these property, the simplest solution to do it, that’s accretive for the continued development and dividends of our enterprise.
So, Par-4 is a superb instance of substituting, I’d say, an acquisition for little or no funding rather than an natural construct of the exact same CLOs that we might have undertaken. So, that’s there.
Will we proceed so as to add to that? Positive, opportunistically, we’re pleased so as to add to it. CLOs are a a lot decrease margin enterprise. Our specialty, with out query, is on the planet of personal capital options, so you shouldn’t count on us to grow to be a big liquid supervisor.
That’s a really totally different, decrease margin enterprise. Our merchandise are way more distinctive on the planet of privates. We keep targeted on what we’re actually, actually good at. However, sure, it’s an space we will proceed so as to add to. It’s not an crucial for us to grow to be notably massive in CLOs.
Brennan Hawken
Thanks. And the affect of income for the quarter, what we must always count on for 4Q?
Alan Kirshenbaum
Brennan, we haven’t disclosed that.
Brennan Hawken
Okay. Then one final one, extra of a form of housekeeping merchandise. Now that members of senior administration are going to be paid in all inventory, ought to we count on that adjustment, the equity-based comp adjustment to form of ramp just a little bit right here — from right here? What sort of affect ought to we count on there?
Alan Kirshenbaum
Positive. So all of our senior members of the administration workforce, Doug, Marc, Michael, Marc Zahr, others, have been taking inventory comp totally for the final two-plus years, nearly since we’ve been a public firm. In order that continues its large alignment with our shareholders and also you shouldn’t count on a significant improve as a consequence of that.
Brennan Hawken
Glorious. Thanks for taking my questions.
Alan Kirshenbaum
Thanks, Brennan.
Operator
Thanks. Our subsequent query comes from Kenneth Worthington from JPMorgan. Please go forward along with your query.
Alex Bernstein
Hello. That is Alex on for Ken. Thanks a lot for taking our questions. Two questions, please. The primary one, are you able to double-click on the actual property phase once more? You posted constructive returns, which is certainly a pleasant distinction versus what we’ve seen in another components of the market. Are you able to please talk about what’s form of driving that and possibly a number of the differentiation that you just’re seeing relative to different gamers? After which the second query is, I discover that almost the Cowen HealthCare acquisition, for those who might discuss that one as effectively, that might be nice? Thanks a lot.
Marc Lipschultz
Nice. Sure. I’m pleased to touch upon each. Let me begin with the Cowen HealthCare query. So Cowen HealthCare, one other nice instance of having the ability, by advantage of our platform to develop each functionality and add to our earnings concurrently.
As Doug commented, healthcare has been a really, very vital focus for us. We’ve deployed vital capital in healthcare lending, royalties, structured options and now, by advantage of including the Cowen enterprise, are including in even better depth on the pharma aspect.
And within the pharma aspect of the enterprise, after all, there’s technical abilities concerned. There are data that the Cowen HealthCare workforce has in spades. They’ve made investments in 60 totally different corporations over time, pharma-centric corporations.
So by including that functionality, we now have added to a full spectrum of skills inside healthcare that may enable us to actually take that enterprise ahead in life sciences over the subsequent 20 years. In our humble view, it’s going to be an space of huge alternative, very similar to information providers was the final 20 years.
Most likely not a coincidence that we’ve been capable of construct the market-leading place in software program lending and waiting for see a possibility in healthcare with some similarities. So that’s type of on a chase for strategic causes.
However accomplished the best way we now have, by including Blue Owl and making Blue Owl a platform that individuals need to be a part of, we now have a workforce that stated, look, that is the place we need to deliver our platform. The consideration was very, very minor for that enterprise, as a result of it was actually in regards to the workforce coming and discovering a house.
So what we now have managed to do in that case is add to our capabilities terrific folks and add $1 billion of property and add earnings because of this. So it wasn’t an or. We didn’t need to go pay some enormous worth so as to get admission. Fairly the alternative. Now we have an amazing workforce be a part of us, get a workforce and property and earnings. In order that was actually what’s behind the Cowen enterprise. Very enthusiastic about Kevin and his workforce.
With regard to actual property. So on the actual property aspect, we’ve been capable of proceed to put up enticing returns, as a result of we now have a really, very distinctive proposition. We don’t do in actual property what different folks do. We don’t personal issues that need to be launched. We don’t personal issues which have vacancies. We don’t personal issues the place this inflationary surroundings and the bills circulation via to us. Now we have a emptiness. Now you even have the bills.
Now we have triple web leases, the bills, the inflation that has clearly been occurring on the planet. That’s the accountability of our tenant. Our tenants join with us for 20 years at a time. When you have a look at, for instance, in Q3, simply to present you a way of the ability of this mannequin, as a result of once more, we provide a price proposition to our buyers. We accomplice with the Walgreens of the world.
We’re not simply out available in the market shopping for from brokers, like, I’ve heard earlier than, I can recall being in a setting the place one of many leaders, one of many largest brokers within the nation stated, we by no means promote something to Blue Owl, as a result of they originate at charges approach larger, far more enticing than we promote at and you may see that in our apply.
So for those who look throughout Q3, for instance, we bought 71 totally different properties for over $1 billion at a median cap fee of seven.9% with a 16-year common lease. I don’t imply to only spew numbers, however simply take into consideration that for a minute. Roughly 8% cap fee, 16 per yr common lease, triple web. So we’re not taking dangers. In actual fact, we’ve made principally the equal of loans to principally IG corporations and we personal actual property as a backup within the case that we wanted it.
On the identical time, throughout the identical interval, we bought 16 properties for over $0.25 billion, $267 million to be exact, at a median cap fee of 5.4%. So we’re shopping for at 8%, we’re promoting to five.4%, producing on common a 31% web IRR and an almost 2-time web fairness a number of.
So why do I say that? What I’m saying is our enterprise and the position we play as a strategic accomplice to massive corporates permits them to conduct what quantities to wholesale transactions, to get {dollars} that matter to them.
Promoting a retailer doesn’t do any good. Promoting a warehouse has restricted affect. Having a real partnership with somebody that has billions of {dollars} to supply them, that has worth. So we will purchase it wholesale. After which at occasions, we are going to go forward and promote these properties and we constantly have at costs meaningfully higher than the costs we purchase at.
So that you’ll hear even in a really disrupted market, rising charges, actual property is disrupted. I imply, not that it’s laborious to explain a worse surroundings for actual property, however this can be a fairly uneven one. We have been shopping for it at 8 and promoting at 5.4%.
Alex Bernstein
Very useful. Thanks a lot.
Marc Lipschultz
Thanks.
Alan Kirshenbaum
Thanks.
Operator
Thanks. Our subsequent query involves the road from Mike Brown from KBW. Please go forward along with your query.
Mike Brown
Okay. Nice. Thanks for taking my query. On the fundraising entrance, it appears to be like like all three enterprise segments might see a greater yr in 2024 versus the problem 2023. Are you able to simply possibly assist me summarize the constructing blocks for subsequent yr? So in GP Options, you’ll have the Outlook Fund VI. In direct lending, you’ll have each from BDCs, SMAs, and maybe, CLOs. After which in the actual property aspect, Fund VI needs to be accomplished, so I suppose many of the contributions would truly be from ORENT. Is that right? Am I summarizing these items accurately? And I suppose for those who simply summed all of it up, what can be type of a very powerful fundraising campaigns?
Alan Kirshenbaum
Sure. You summed it up accurately, Mike. BDCs, SMAs on the credit score aspect, CLOs, GP Stakes Fund VI and ORENT. And also you’re proper, Fund VI will likely be largely wrapped up by then. There are new product launches that we talked about earlier that Doug and Marc hit on, whether or not it’s healthcare. Now we have an attention-grabbing new actual property product or merchandise popping out to the market in 2024 that we expect we might increase some good {dollars} on. And another methods we haven’t talked about to-date that we expect could possibly be attention-grabbing in 2024.
Mike Brown
Okay. Nice. So I suppose extra to return on these. After which possibly only a fast follow-up on the greenback dividend commentary. You’ve actually delivered distinctive development on the dividend so far and your payout has constantly been in that type of mid to excessive 80% vary relative to GE. Is that payout nonetheless the suitable approach to consider that greenback dividend as effectively in 2025 or is there type of like an evolution within the enterprise or a change within the steadiness sheet that might will let you possibly improve that payout nearer to 100% and even for those who have been to take action considerably briefly? Thanks.
Alan Kirshenbaum
Yeah. I don’t suppose — it’s an amazing query, Mike. I don’t suppose there’s an evolution within the enterprise. I’ve commented on earlier calls that that quantity can transfer up and down. We’ve seen it as little as mid-80percents. I believe this quarter is about 88%. You possibly can see that actually rise in some quarters in some years. I believe I framed it because it could possibly be as little as an 80%-ish, possibly just a little decrease. It could possibly be as excessive as 90% or 95%.
So we’re going to proceed to deal with dividend development. We’ve received a 28% CAGR on our dividend development since changing into a public firm. It’s the best on the market and we’re all very aligned. We personal 25% of the excellent shares, so we sit proper there with our shareholders and we’ll proceed to deal with robust FRE administration charge development, FRE development and undoubtedly,
after all, dividend development.
Mike Brown
Okay. Nice. Thanks, Alan.
Alan Kirshenbaum
Thanks, Mike.
Operator
Thanks. Our ultimate query of the day comes from Patrick Davitt from Autonomous Analysis. Please proceed along with your query.
Patrick Davitt
Hey. Thanks for the follow-up. I’m going to take a flyer on this one. Would you be prepared to present any early learn on the November first flows for the three flagship retail merchandise?
Alan Kirshenbaum
I believe, Patrick, we might have to say no commenting. These are SEC registrants and so they haven’t filed but. I believe you heard earlier within the name we really feel like we now have superb momentum within the wealth channels quarter-over-quarter rising and we expect we now have superb prospects, if not very robust prospects, for what we’re going to see within the wealth channels in 2024.
Patrick Davitt
Thanks.
Alan Kirshenbaum
Thanks, Patrick.
Marc Lipschultz
Effectively, thanks all very a lot. We actually admire the time and we’re going to proceed to deal with robust, predictable, excessive development and delivering these dividends to all of you. Thanks.
Alan Kirshenbaum
Thanks, everybody. Have day.
Operator
Thanks, women and gents. That does conclude right now’s convention name. Thanks for collaborating. Chances are you’ll now disconnect.
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