April 9 (Reuters) - Alternative asset manager Blue Owl

Capital said on Tuesday it will buy Prima Capital

Advisors for $170 million to expand into real estate financing,

a market that traditional banks have been retreating from since

last year.

Investment firms, which are not subjected to harsh

regulations as banks, have been rushing to grab a bigger slice

of the commercial real estate (CRE) market as traditional

lenders are backing out on fears of increasing borrower defaults

due to low occupancy and high interest rates.

Investors have punished those with a high footprint in the

CRE market, such as New York Community Bancorp ( NYCB ),

prompting lenders to evaluate options to cut their exposure to

the industry.

"There is a growing lack of capital availability in real

estate today," Blue Owl co-CEOs Doug Ostrover and Marc

Lipschultz said in a statement.

The Prima deal is expected to close in the second or third

quarter of 2024 and will be financed with $157 million of equity

and $13 million in cash.

Prima's investors could also be eligible for an additional

$35 million in equity, Blue Owl said, depending on the future

performance of the business.

Three decade-old Prima manages nearly $10 billion of assets

and invests primarily in commercial mortgage-backed securities.

Its majority owner is Greenwich, Connecticut-based alternative

asset manager Stone Point Capital.

Blue Owl's shares have gained nearly 32% this year,

outperforming asset management giants Blackstone and

BlackRock ( BLK ) and allowing it the flexibility to use its

stock as currency for acquisitions.

The deal marks Blue Owl's second acquisition this month.

Last week, it agreed to acquire Kuvare Asset Management for $750

million to gain access to life insurance assets.

Blue Owl said Jesse Hom, previously the global head of real

estate credit at Singapore's sovereign wealth fund GIC, will

lead the new real estate finance investments division.