Blue Owl Capital Inc Expands Digital Infrastructure Capabilities with Acquisition of IPI Business Summary

The following is excerpted from the question-and-answer section of the transcript.

Question: Patrick Davitt - Autonomous Research LLP - Analyst : Hey, good morning, everyone. It looks like the target for fund $3 billion, about $4 billion to your point, which is not really much of a pickup from the last fund at $3.8 billion. So given the large TAM and strong performance of the legacy funds, why not targeting something much larger there? Thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 07, 2024 / 12:30PM, OWL.N - Blue Owl Capital Inc Expands Digital Infrastructure Capabilities with Acquisition of IPI Business

Question: Patrick Davitt - Autonomous Research LLP - Analyst : So that $3 billion is already earning fees?

Question: Patrick Davitt - Autonomous Research LLP - Analyst : Oh, got it. Okay. That makes more sense. Thank you.

Question: Patrick Davitt - Autonomous Research LLP - Analyst : All right. That makes more sense. Okay. Thank you. Marc Lipschultz - Blue Owl Capital Inc - Co-Chief Executive Officer, Co-Founder, Director Of course. Good piece this morning, by the way.

Question: Glenn Schorr - Evercore ISI - Analyst : Hi, everybody. Good morning. So obviously you've had great success with the Oak Street. It is your fourth deal in a year and I very much appreciate -- you don't need to fix this or the others. But maybe you could just talk to -- how you going to approach the challenge of executing, integrating, helping each of them grow while you're running this big, broader and more diversified companies? It's a lot and I know it's massive success so far. Just curious if you could speak towards that challenge.

Question: Glenn Schorr - Evercore ISI - Analyst : All right. Thanks a lot, and really like the duck metaphor. Awesome. But either way.

Question: Alex Blostein - Goldman Sachs & Co. - Analyst : Hey, good morning, guys. The duck metaphor is hard to follow. But I guess we'll try. Can you expand a little bit on the servicing agreement with Iconiq? I know there's a bullet point in the deck and you mentioned that in your prepared remarks as well. But maybe just a little more in terms of what are the services they're going to provide to you guys and how significant the potential payments and I guess in the structure of those payments could be. And I guess to what extent is that sort of incorporated in your accretion that you talked to, to '26 so said modestly creative to 2026 EPS, but maybe just wash that out a little more. Thanks. Marc Lipschultz - Blue Owl Capital Inc - Co-Chief Executive Officer, Co-Founder, Director So let me just comment on the combination. And then I'll turn it over to Alan to talk about the details and services agreement, please. So Alex first, you know, Iconiq just by way of stage setting here, you remember, Iconiq has been one of the very first investors we have in Blue Owl and has been an investor in products throughout our life cycle, has been a partner, one of the largest buyers, purchasers of stock when we went public. You know, they have been an anchor partner. The depth is hard to, you know, frankly describe for almost 10 years. So we already have an exceptional working relationship. Obviously, we're taking it to a different level here by becoming actual business partners with regard to IPI. IPI was built enormously successfully by Matt A'hearn who's on the call here along with Iron Point and Iconiq. Iron Point helped really create this entire proposition of data centers and broad real estate expertise to help form this business. From here forward, you know, Iconiq, of course, is an absolute market leader in its connectivity and service to the tech industry. And from here forward, that marriage them working hand in glove with us with their knowledge of tech and their deep relationships into the hyperscalers with our expertise in triple net lease real estate more broadly, and of course, the continuing leadership of the management team, the founding team here, you know, we really think that creates a very powerful system. And frankly, it's part of what led to this opportunity. Remember here, you know, we're buying this business for 13 times. You all know, because there have been other acquisitions in this space, that's probably about half the multiple other people have paid. And this is an outstanding business. So that again has to do with, well, why? Because it's about the power of what we can do together going forward, not an exit today. Now, the services agreement align us for that. So we're going to continue to pay them for all of that continued partnership value added. So with that, let me turn it to Alan. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 07, 2024 / 12:30PM, OWL.N - Blue Owl Capital Inc Expands Digital Infrastructure Capabilities with Acquisition of IPI Business

Question: Alex Blostein - Goldman Sachs & Co. - Analyst : Got it. And sorry for the nuanced question, but also the tax rate on this is expected to be still pretty low, kind of like the Owl level tax rate or does that change the tax rate profile at all?

Question: Alex Blostein - Goldman Sachs & Co. - Analyst : Great. Okay, thank you.

Question: Alex Blostein - Goldman Sachs & Co. - Analyst : Thanks. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 07, 2024 / 12:30PM, OWL.N - Blue Owl Capital Inc Expands Digital Infrastructure Capabilities with Acquisition of IPI Business

Question: Brennan Hawken - UBS Securities LLC - Analyst : Good morning. Thanks for taking my question. I just got a follow up on that servicing question. Could you maybe help us understand the nature of the services tied to this? From the bullet, it looks like it's investment analysis, investor relations, the sort of activity that I would think of as operating expenses. So am I mistaken here or is that fair? And then how should we be thinking about the timing of those expenses moving over to Owl's P&L and how that might impact FRE margin?

Question: Brennan Hawken - UBS Securities LLC - Analyst : Yeah, I totally appreciate all that and get that this is a partnership over the long run. I'm just trying to understand at least from the purposes of this agreement of what happens to those expenses once we are finished with this -- with the term of this agreement. Do you need to just re-up it or do those become operating expenses for Owl and what's that impact? Marc Lipschultz - Blue Owl Capital Inc - Co-Chief Executive Officer, Co-Founder, Director We will -- by the time this is over, I think you can anticipate all of those capabilities, all of the relationships and the time they'll pass that that will have transition. So I don't anticipate now and you can comment on this that there'd be any expectation of re-upping in its current form nor would there be incremental expenses at Blue Owl. These are going to be supportive, think of it as transitional support as we move from the standalone business back to kind of early question: how do we make sure these integrations work great? Well, we're really continuing the partnership. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 07, 2024 / 12:30PM, OWL.N - Blue Owl Capital Inc Expands Digital Infrastructure Capabilities with Acquisition of IPI Business I mean, when you get right down to it, it's really continuing the joint venture, but in a way it's between Blue Owl and Iconiq now. And that's what's reflected in that agreement when that agreement ends. I mean, very well be great value creating things for us to continue to do together. That's obviously a long time into the future. But in terms of the role that Iconiq is playing now and this agreement, when it ends, there'd be no expectation that it would either be re-upped in this forum or that it would lead to any incremental expense for us by that time the transition will have been completed.

Question: Brennan Hawken - UBS Securities LLC - Analyst : Okay. Thanks for taking my question.

Question: Bill Katz - TD Cowen - Analyst : Okay. Thank you very much for taking the question and congrats on the transaction. Alan, you gave some sort of implicit guidance out to 2026 to sort of say it be modestly accretive. I was wondering if you could maybe unpack that a little bit in terms of your definition of modest. And then what are some of the underlying growth or margin assumptions to support that expectation? Thank you.

Question: Bill Katz - TD Cowen - Analyst : Thank you. Marc Lipschultz - Blue Owl Capital Inc - Co-Chief Executive Officer, Co-Founder, Director Thanks, Bill.

Question: Brian McKenna - Citizens JMP - Analyst : Thanks. Good morning, everyone. Appreciate all the detail. So maybe just a bigger picture Blue Owl question. And so the last several quarters you've talked about line of sight into a billion dollars of future revenue over the next couple of years. And this is really only driven by a handful of item items, private wealth flows and next style fund, deploying AUM, not yet earning fees and then the public listings of your private BDCs. I think if you look at some of these underlying drivers today, like private wealth flows and AUM not earning fees, these flows and revenues are likely higher than that initial expectation. You've also done several deals now including IPI and you have a number of other fundraising initiatives underway. So I guess the question is how should we think about that billion dollars as we sit here today. Post all these transactions, it would seem like the trajectory of revenues is decently above that but will be great just to get your thoughts here.

Question: Brian McKenna - Citizens JMP - Analyst : Ok, great. Thank you, guys.

Question: Crispin Love - Piper Sandler & Co - Analyst : Thanks. Good morning, everyone. Appreciate taking my question. Can you just give a little bit more color on IPI's tenants? Presentation says it's primarily investment-grade tenants. But are you able to name any of the larger ones? Any concentrations here? Geography make up? Just an overview on the tenant base would be great and then also just average terms of the leases as well. That I'd appreciate it. Thank you,

Question: Mike Brown - Wells Fargo Securities - Analyst : Hi, good morning, everyone. Wanted to ask a question about maybe the specifics on the balance sheet side. So the cash portion of the payment, is that going to be funded with cash on hand? Or is that kind of prefunded with debt already? And then on the shares that could be issued related to the service agreement, what are some of the -- can you give us a view into maybe what those targets could be? Are they based on FRE growth? And what's kind of a magnitude that would need to be achieved to reach the high end or reach the full target? Thank you.