Blue Owl Capital is doubling down on its investment in artificial intelligence infrastructure, including financing two more data centers, Business Insider has learned.
Last year, Wall Street investment and credit firms raised nearly $10 billion for digital infrastructure, primarily for ownership of data center projects. The company also expanded its lending to the sector.
New York City-based Blue Owl recently agreed to provide a $240 million loan for a Minneapolis data center purchased by investors Crowd Capital and Arcapita Group, according to two people familiar with the deal.
The company plans to both invest in and finance a recently announced large-scale data center development in Wichita Falls, Texas, being built by Dallas-based company Skybox Data Centers, according to people familiar with the project’s structure. Blue Owl’s role as a lender in the development was not previously disclosed.
Blue Owl declined to comment on the loan.
In February, the company revealed it had a $500 million loan tied to a data center it was building in Lancaster, Pennsylvania, for AI cloud provider CoreWeave.
Analysts said they see the company’s increased focus on debt as a way to increase its exposure to profitable digital assets.
“They’re definitely in a position to evaluate the validity of any deal, and they’re definitely smart credit investors,” said Glenn Scholl, a research analyst at Evercore ISI who covers Blue Owl, about the company’s data center financing. “It makes perfect sense to me conceptually.”
The company’s success in data center investments stands in contrast to headwinds being felt elsewhere in its portfolio. In the fourth quarter, the company experienced an increase in customer withdrawals from two credit funds. One reason for this is that both service loans tied to software companies.
AI models are advancing rapidly, allowing users to build sophisticated applications with simple prompts, raising concerns that they will transform the software business.
The company’s credit business manages approximately $160 billion in assets, making it the largest division in the company’s portfolio. The company unveiled approximately $15.4 billion in digital infrastructure.
Focus on digital infrastructure
Blue Owl executives said the company plans to dramatically expand its data center portfolio. Much of its activity focuses on acquiring ownership of transactions and development projects. For example, the company last year agreed to invest $2.45 billion to buy an 80% interest in a large data center campus being built for Meta in Louisiana, which is expected to cost more than $30 billion.
The company has built large data facilities in Texas and New Mexico through its data center platform Stack Infrastructure, and recently announced it would develop a $12 billion campus for Amazon in Louisiana.
The company is eyeing more opportunities.
People involved in the sale of the data center development site outside Birmingham, Alabama, told Business Insider that Blue Owl has expressed interest in acquiring the property. The person said the company is one of several interested parties and that sales efforts for the site are in preliminary stages and may not proceed.
In the fourth quarter, Blue Owl completed $1.7 billion in financing for a new private wealth-focused entity called Blue Owl Digital Infrastructure Trust, which will acquire the data centers. Last May, the company announced that it had raised a third separate digital infrastructure fund with $7 billion in capital, nearly double its original target.
Mark Lipschultz, the company’s co-chief executive officer, said on the company’s fourth-quarter earnings call that the company will raise a new digital infrastructure fund this year.
“You’ve seen the great success we’ve had in raising our latest Digital Infrastructure Fund III, in which we’ve already made a significant investment, so we’re coming back this year with Digital Infrastructure Fund IV,” Lipschultz said, according to a transcript of the call from AlphaSense.
Credit anxiety and increased withdrawals
In the fourth quarter, two funds in Blue Owl’s credit portfolio saw an increase in withdrawals. Blue Owl Technology Income Corporation, an approximately $3.5 billion fund, received redemptions totaling 15.6% of its net asset value. This is more than three times the fund’s quarterly withdrawal limit of 5%. Another fund, Blue Owl Credit Income Corporation, had redemptions of about $1 billion, or about 5.2% of the fund, which also exceeded the 5% withdrawal limit. Although the redemption requests exceeded the fund’s exit criteria, Blue Owl complied with the requests. Some analysts say the concerns that prompted the withdrawal are overblown.
Investor withdrawal from private credit extends beyond Blue Owl. Blackstone reported that withdrawal requests by private credit funds totaled 7.9% in the first quarter. It also fulfilled their redemption.
A collection of private credit funds tracked by Robert A. Stanger & Company had an average withdrawal of 4.84% of their net asset value in the fourth quarter, more than double the average 1.75% in the third quarter.
“We’re in a cycle where all BDCs are going to have higher redemptions,” said Michael Covello, managing director at Stanger, referring to business development companies used by many private credit funds.
