Blue Owl Portfolio Suffers as Bankruptcies Slash Occupancy

Blue Owl faces steep occupancy drop after tenant bankruptcies hit its $1B portfolio and trigger CMBS loan downgrades.

June 6, 2025

Blue Owl Capital’s 6.5M SF portfolio saw occupancy plunge from 100% to just over 36% after Big Lots and Conn’s Inc. filed for bankruptcy.
A $275M CMBS loan tied to the 42-property portfolio was downgraded by S&P, though its senior Class A tranche retained a AAA rating.
The affected assets span retail, industrial, and office sectors, and were initially valued at over $1B when Blue Owl secured the loan in 2023.
Analysts see strong potential for re-leasing the industrial properties, despite growing distress among retail-linked CMBS borrowers.

Key Takeaways

Bankruptcies Shake the Portfolio

Retail bankruptcies have delivered a major blow to Blue Owl Capital. As reported by Bisnow, in 2024, Big Lots and Conn’s Inc. filed for bankruptcy. Big Lots vacated two distribution centers in Pennsylvania and Oklahoma. Conn’s, which owns Badcock, exited seven Florida properties—five warehouses and two offices.

Debt Under Stress

Blue Owl secured a $425M interest-only loan in 2023, backed by the 42-property portfolio. The fixed interest rate was 6.1%. At that time, the portfolio was worth over $1B.

After the bankruptcies, S&P Global downgraded three lower classes of the $275M CMBS loan. The senior Class A certificates kept their AAA rating.

Portfolio Breakdown

Originally, the portfolio had six tenants under triple-net leases. These included Save Mart (2M SF), Big Lots (2.6M SF), and Badcock (1.5M SF). Smaller tenants like NAICO, Nation Safe Drivers, and Big Y Foods filled the remaining space.

The loss of Big Lots and Badcock left large sections empty, dragging overall occupancy below 40%.

Industrial Assets Show Promise

S&P analysts believe Blue Owl can re-lease many of the industrial properties. The assets are in average-to-good condition, with some being newer builds. That increases their appeal in today’s leasing market.

Retail CMBS Pain Spreads

CMBS loans tied to bankrupt retailers are piling up. As of March, nearly $9B in CMBS loans were linked to distressed retail tenants. Recent closures include Bargain Hunt, Joann, 99 Cents Only, Party City, and Rite Aid.

More Closures Ahead

Retailers are on track to close over 15,000 stores this year. That’s more than double the number expected to open, according to a January report by Coresite Research.

What’s Next

Blue Owl must act quickly to backfill vacant space and stabilize income. While retail distress continues to grow, industrial demand could offer a lifeline.