The Blackstone Group Reports First Quarter 2010 Results

NEW YORK--()--The Blackstone Group L.P. (NYSE: BX):

Economic Net Income of $360 million for the first quarter of 2010 was up significantly from negative $82 million for the first quarter of 2009.

Net Fee Related Earnings for the first quarter of 2010 were $99 million, up from $90 million for the first quarter of 2009.

Distributable Earnings were $149 million for the first quarter of 2010, up from $77 million in the first quarter of 2009.

GAAP Results Attributable to The Blackstone Group L.P. improved significantly in the first quarter of 2010 with a net loss of $121 million, compared to a net loss of $232 million in the first quarter of 2009, in each case including net IPO and acquisition-related charges.

Fee-Earning Assets Under Management totaled $98.1 billion at March 31, 2010, up from $92.2 billion at March 31, 2009.

Blackstone declares a quarterly distribution of $0.10 per common unit.

The Blackstone Group L.P. (NYSE: BX) today reported its first quarter 2010 results.

For the first quarter of 2010, Total Segment Revenues were $711.1 million, up significantly from $45.8 million for the first quarter of 2009. The improvement was driven by increases in Performance Fees and Allocations and Investment Income derived from an increase in the carrying value of the underlying portfolio investments in the Private Equity, Real Estate and Credit and Marketable Alternatives segments. These increases were partially offset by decreased fees earned in the Financial Advisory segment.

Total Segment Expenses were $326.0 million for the first quarter of 2010, an increase from $139.0 million for the first quarter of 2009. The increase in Compensation and Benefits to $253.0 million for the first quarter of 2010 was primarily driven by an increase in carried interest allocations. Base Compensation was $190.6 million for the first quarter of 2010, up from $177.5 million for the first quarter of 2009.

GAAP results for the first quarter of 2010 included Revenues of $701.2 million, compared to $44.9 million for the first quarter of 2009, and Net Loss Attributable to The Blackstone Group L.P. of $121.4 million, compared to a net loss of $231.6 million for the first quarter of 2009.

Equity and credit markets rose in most regions of the world in the first quarter of 2010, although to a lesser extent than in late 2009. In the United States, there is a growing consensus that the risk of a double dip recession has abated which is positively impacting markets. Investor appetite for risk has continued to increase as market participants search for yield in a sustained low interest rate environment. In real estate, the fundamental picture generally improved in the first quarter. In office, occupancy trends and leasing activity improved in certain markets. In hospitality, industry RevPAR (Revenue Per Available Room), an important hospitality industry metric, grew 4% in March, which was the first month of growth in nearly two years.

Stephen A. Schwarzman, Chairman and Chief Executive Officer, said, “We are witnessing a positive trend in most asset classes as the economic recovery takes firmer root and the outlook for growth improves. We are seeing concrete signs of economic improvement in our portfolio, and as a result, the carrying value of investments in Blackstone funds rose meaningfully in the first quarter. During the downturn Blackstone protected investors' capital and now, as the largest and most diversified independent manager of private investments for public institutions, we are very well positioned to take advantage of opportunities in a reviving world.”

The table below details Blackstone’s Economic Net Income, Net Fee Related Earnings from Operations, Distributable Earnings and Fee-Earning Assets Under Management as of, and for, the first quarters 2010 and 2009. Economic Net Income, Total Segments includes unrealized gains (losses) and the direct compensation impact related to those gains/losses, but excludes IPO and acquisition-related charges.

  As of and for the Quarters  
Ended March 31,   Variance  
2010   2009   $     %
(Dollars in Thousands, Except per Unit Amounts)

Economic Net Income, Total Segments

$ 385,102 $ (93,202 ) $ 478,304 N/M

Provision (Benefit) for Income Taxes (a)

  24,709   (10,772 )   35,481   N/M  

Economic Net Income, After Taxes

$ 360,393 $ (82,430 ) $ 442,823   N/M  

 

 

 

 

 

Economic Net Income, After Taxes per Adjusted Unit (b)

$ 0.32 $ (0.07 ) $ 0.39   N/M  

Net Fee Related Earnings from Operations

$ 98,745 $ 89,518   $ 9,227   10 %
Distributable Earnings $ 148,696 $ 77,030   $ 71,666   93 %

Distributable Earnings per Adjusted Unit (c)

$

0.14

$

0.07

 

$

0.07

 

100

%

Fee-Earning Assets Under Management:

Private Equity $ 25,173,936 $ 25,461,139 $ (287,203 ) -1 %
Real Estate 23,820,697 22,867,992 952,705 4 %

Credit and Marketable Alternatives

  49,075,539   43,898,435     5,177,104   12 %

Total Fee-Earning Assets Under Management

$ 98,070,172 $ 92,227,566   $ 5,842,606   6 %
(a)   Represents the implied provision (benefit) for income taxes calculated using a similar methodology applied in calculating the tax provision for The Blackstone Group L.P.

(b)

Adjusted Units represents the weighted-average fully diluted unit count for Economic Net Income purposes using the if-converted method. A reconciliation of this item to the comparable GAAP measure is presented in Exhibit 4 to this release.

(c)

Adjusted Units represents the unit count for Distributable Earnings purposes. A reconciliation of this item to the comparable GAAP measure is presented in Exhibit 4 to this release.

SEGMENT REVIEW

Private Equity

Private Equity had revenues of $276.8 million for the first quarter of 2010, compared with revenues of $68.1 million for the first quarter of 2009. The change from 2009 was driven principally by combined Performance Fees and Allocations and Investment Income of $175.9 million, which included a $45.7 million realized gain. Compared to the prior year, approximately half of the portfolio companies had growth in revenue and three-fourths had growth in EBITDA, based on their fair market value. The net return for Blackstone’s Private Equity funds was 15% in the first quarter of 2010 versus a negative 5% in the first quarter of 2009 and 6% in the fourth quarter of 2009. The improved performance was primarily due to improved prospects for privately held investments reflected in increased operating projections, increased interest from strategic buyers and various balance sheet restructurings. During the first quarter of 2010, the Private Equity funds had realizations from a secondary offering of TRW Automotive of $169.0 million and distributions from certain privately held investments. At March 31, 2010, the unrealized value and cumulative realized proceeds, before carried interest, fees and expenses, of Blackstone’s contributed Private Equity funds represented 1.4 times investors’ original investments. Excluding funds which are still in their Investment Period, the value was 2.2 times investors’ original investments. Blackstone had $1.4 billion of Limited Partner Capital committed to deals made by the Private Equity funds that had not yet closed as of March 31, 2010.

Net Fee Related Earnings from Operations were $28.7 million for the first quarter of 2010, up from $19.9 million for the first quarter of 2009. The change from 2009 was primarily due to a one time fee related to the termination of a monitoring fee arrangement. Economic Net Income was $193.2 million for the first quarter of 2010, up from $53.1 million for the first quarter of 2009, a result of the improved Performance Fees and Allocations and Investment Income (Loss).

Compensation and Benefits expense increased to $59.3 million from $(5.1) million for the first quarter of 2009. The change from 2009 was primarily due to an increase in Performance Fee Related Compensation, driven by improved Performance Fees and Allocations revenue. Other Operating Expenses of $24.4 million were up from $20.1 million for the first quarter of 2009.

Fee-Earning Assets Under Management were down slightly at $25.2 billion compared with $25.5 billion for the first quarter of 2009 reflecting the impact of investment realizations.

Limited Partner Capital Invested during the first quarter of 2010 totaled $387.9 million, including new and follow-on investments, an increase from $196.1 million invested during the first quarter of 2009.

Real Estate

Real Estate had revenues of $152.2 million for the first quarter of 2010, compared with negative revenues of $212.6 million for the first quarter of 2009. The change from 2009 was primarily due to an improvement in Performance Fees and Allocations and Investment Income (Loss), driven by the improved operating performance across investments, modestly reduced capitalization rates and the impact of the acquisition of portfolio company debt. The net return for Blackstone’s Real Estate carry funds was 10% for the first quarter of 2010 compared to a negative 17% in the first quarter of 2009, while the net returns for Real Estate debt investment funds was 9% for the first quarter of 2010 compared to negative 2% in the first quarter of 2009. Blackstone had $562.4 million of Limited Partner Capital committed to deals, or under letter of intent, by the segment’s funds that had not yet closed as of March 31, 2010.

Net Fee Related Earnings from Operations were $29.8 million in the first quarter of 2010, little changed from $30.5 million for the first quarter of 2009. Economic Net Income was $89.3 million for the first quarter of 2010 compared to a negative $187.9 million for the first quarter of 2009, driven by the increases in Performance Fees and Allocations and Investment Income (Loss).

Compensation and Benefits were $48.6 million compared to a negative $37.3 million for the first quarter of 2009. The change from 2009 was primarily due to reversals of prior period carried interest allocations in the first quarter of 2009. Other Operating Expenses of $14.3 million were up from $12.6 million for the first quarter of 2009.

Fee-Earning Assets Under Management were $23.8 billion compared with $22.9 billion for the first quarter of 2009 reflecting the continued fundraising success of Blackstone’s Real Estate debt platform which grew to $1.7 billion Total Assets Under Management for the quarter.

Limited Partner Capital Invested during the first quarter of 2010 was $424.9 million, up from $215.1 million during the first quarter of 2009.

Credit and Marketable Alternatives (CAMA)

CAMA had revenues of $204.6 million, compared with $99.2 million for the first quarter of 2009. The change from 2009 was due primarily to improved returns, driven by improved performance in equity and credit markets, on the segment’s credit-oriented funds and funds of hedge funds, resulting in positive performance fees and allocations and investment income in both businesses. The net core funds composite returns for Blackstone’s funds of hedge funds was 3% for the first quarter of 2010 compared to 1% for the first quarter of 2009 and 3% for the fourth quarter of 2009. Base management fees also increased as a result of market appreciation in the funds of hedge funds business.

Net Fee Related Earnings from Operations were $34.1 million for the first quarter of 2010, an increase of $19.7 million from $14.4 million for the first quarter of 2009, reflecting increased management fees and general expense reductions. Economic Net Income was $94.4 million for the first quarter of 2010 compared to $14.4 million for the first quarter of 2009.

Compensation and Benefits were $90.6 million, up from $61.1 million for the first quarter of 2009. The increase from the first quarter of 2009 was principally driven by performance fee related compensation due to positive returns on Blackstone’s credit-oriented funds and the funds of hedge funds, partially offset by a decline in base compensation. Other Operating Expenses of $19.6 million were down from $23.6 million for the first quarter of 2009, reflecting a decrease in professional fees and Blackstone’s ongoing focus on expense control.

Fee-Earning Assets Under Management for the first quarter of 2010 totaled $49.1 billion, up from $43.9 billion for the first quarter of 2009. The increase from 2009 was principally due to market appreciation in the funds of hedge funds and closed-end mutual funds.

Limited Partner Capital Invested in certain carry credit-oriented funds during the first quarter of 2010 totaled $157.1 million, down from $208.4 million for the first quarter of 2009.

Financial Advisory

Revenues were $77.5 million for the first quarter of 2010, down from $91.0 million for the first quarter of 2009. The decrease in segment revenues was primarily driven by a decline in fees generated from the restructuring and reorganization advisory services business from the near record revenues achieved in the first quarter of 2009. The decrease was partially offset by increases in fees in the strategic advisory business as several large transactions closed in the quarter. The pipeline for the restructuring and reorganization advisory services business remains strong across a diverse group of industries and geographies. The financial and strategic advisory business is experiencing a cyclical upswing attributable to the improved economic environment and the pipeline for this business continues to be strong and includes a significant international component. The fund placement business saw an increase in fees to more normalized levels as economic conditions negatively impacting institutional allocations to alternative investment funds modestly abated.

Net Fee Related Earnings from Operations were $6.1 million for the first quarter of 2010, a decrease from $24.7 million for the first quarter of 2009. The primary catalyst for the decrease from 2009 was a decrease in fees generated by Blackstone’s restructuring and reorganization advisory services business related to several large mandates which closed in that period. Economic Net Income was $8.2 million for the first quarter of 2010 compared to $27.1 million for the first quarter of 2009.

CAPITAL AND LIQUIDITY

For Economic Net Income purposes, the weighted-average fully diluted unit count for the first quarters of 2010 and 2009 were 1,126.9 million units and 1,132.2 million units, respectively.

The total number of units used in calculating cash distributions and Distributable Earnings per Adjusted Unit was 1,098.7 million units for the first quarter 2010 and 1,093.4 million units for the first quarter 2009.

As of March 31, 2010, Blackstone had $627.3 million in cash, $703.5 million invested in cash management strategies which included high grade liquid debt strategies and $422.1 million invested in liquid Blackstone funds, against $600 million in borrowings from the 2009 bond issuance. On March 23, 2010, an indirect, wholly-owned subsidiary of Blackstone entered into a $1.07 billion revolving credit facility with a final maturity date of March 23, 2013. Interest on the borrowing is based on an adjusted LIBOR rate or alternate base rate, in each case plus a margin, and undrawn commitments bear a commitment fee.

DISTRIBUTION

The Blackstone Group L.P. has declared a quarterly distribution of $0.10 per common unit to record holders of common units at the close of business on May 14, 2010. This distribution will be paid on May 31, 2010.

For distributions related to fiscal 2010 and thereafter, Blackstone’s current intention is to distribute to its common unitholders substantially all of The Blackstone Group L.P.’s net after-tax share of its annual Distributable Earnings in excess of amounts determined by its general partner to be necessary or appropriate to provide for the conduct of its business, to make appropriate investments in its business and funds, to comply with applicable law, any of its debt instruments or other agreements, or to provide for future distributions to its unitholders for any ensuing quarter. Because Blackstone will not know what its Distributable Earnings will be for any fiscal year until the end of such year, Blackstone expects that its first three quarterly distributions in respect of any given year will be based on its anticipated annualized Net Fee Related Earnings. As such, the distributions for the first three quarters will likely be smaller than the final quarterly distribution in respect of such year. In the fourth quarter Blackstone will distribute the remaining Distributable Earnings for the year, which is expected to also include realized Performance Fees and Allocations net of related compensation and realized net investment income.

In most years the aggregate amounts of Blackstone’s distributions to unitholders will not equal its Distributable Earnings for that year. Distributable Earnings will only be a starting point for the determination of the amount to be distributed to unitholders because as noted above, in determining the amount to be distributed Blackstone will subtract from Distributable Earnings any amounts determined by its general partner to be necessary or appropriate to provide for the conduct of its business, to make appropriate investments in its business and funds, to comply with applicable law, any of its debt instruments or other agreements, or to provide for future distributions to its unitholders for any ensuing quarter.

All of the foregoing is subject to the qualification that the declaration and payment of any distributions are at the sole discretion of Blackstone’s general partner and the general partner may change its distribution policy at any time.

Because the wholly-owned subsidiaries of The Blackstone Group L.P. must pay taxes and make payments under the tax receivable agreements described in Blackstone’s Annual Report on Form 10-K, the amounts ultimately distributed by The Blackstone Group L.P. to its common unitholders in respect of fiscal 2010 and subsequent years are expected to be different, on a per unit basis, than the amounts distributed by the Blackstone Holdings partnerships to the Blackstone personnel and others who are limited partners of the Blackstone Holdings partnerships in respect of their Blackstone Holdings partnership units.

Blackstone will host a conference call on April 22, 2010 at 11:00 a.m. ET to discuss first quarter 2010 results. The conference call can be accessed by dialing (888) 680-0892 (U.S. domestic) or +1 (617) 213-4858 (international) pass code 92163618. Additionally, the conference call will be broadcast live over the internet and can be accessed by all interested parties through the Investor Relations section of The Blackstone Group’s website http://ir.blackstone.com. For those unable to listen to the live broadcast, a replay will be available on Blackstone’s website or by dialing (888) 286-8010 (U.S. domestic) or +1 (617) 801-6888 (international) conference ID number 95856654, beginning approximately two hours after the event.

About The Blackstone Group

Blackstone is one of the world’s leading investment and advisory firms. We seek to create positive economic impact and long-term value for our investors, the companies we invest in, the companies we advise and the broader global economy. We do this through the commitment of our extraordinary people and flexible capital. Our alternative asset management businesses include the management of private equity funds, real estate funds, funds of hedge funds, credit-oriented funds, collateralized loan obligation vehicles (CLOs) and closed-end mutual funds. The Blackstone Group also provides various financial advisory services, including financial and strategic advisory, restructuring and reorganization advisory and fund placement services. Further information is available at www.blackstone.com.

Forward-Looking Statements

This release may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 which reflect Blackstone’s current views with respect to, among other things, Blackstone’s operations and financial performance. You can identify these forward-looking statements by the use of words such as “outlook,” “believes,” “expects,” “potential,” “continues,” “may,” “will,” “should,” “seeks,” “approximately,” “predicts,” “intends,” “plans,” “estimates,” “anticipates” or the negative version of these words or other comparable words. Such forward-looking statements are subject to various risks and uncertainties. Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from those indicated in these statements. Blackstone believes these factors include but are not limited to those described under the section entitled “Risk Factors” in its Annual Report on Form 10-K for the fiscal year ended December 31, 2009, as such factors may be updated from time to time in its periodic filings with the SEC, which are accessible on the SEC’s website at www.sec.gov. These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this release and in the prospectus. Blackstone undertakes no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise.

This release does not constitute an offer of any Blackstone Fund.

THE BLACKSTONE GROUP L.P.
Exhibit 1. Consolidated Statements of Operations
(Dollars in Thousands, Except Per Unit Data)
 
Quarters Ended March 31,
2010   2009
Revenues
Management and Advisory Fees $ 354,820   $ 341,172  
Performance Fees and Allocations
Realized 54,049 646
Unrealized   131,779     (214,894 )
Total Performance Fees and Allocations   185,828     (214,248 )
Investment Income (Loss)
Realized 5,726 (69 )
Unrealized   149,220     (82,384 )
Total Investment Income (Loss) (a)   154,946     (82,453 )
Interest and Dividend Revenue 8,895 2,127
Other   (3,250 )   (1,684 )
Total Revenues   701,239     44,914  
Expenses
Compensation and Benefits
Base Compensation 924,950 920,213
Performance Fee Related
Realized 7,741 2,189
Unrealized   54,600     (110,055 )
Total Compensation and Benefits (b) 987,291 812,347
General, Administrative and Other (c) 106,379 105,600
Interest Expense (d) 7,185 1,399
Fund Expenses   (141 )   3,012  
Total Expenses   1,100,714     922,358  
Other Income
Net Gains (Losses) from Fund Investment Activities   249,625     (34,763 )
Income (Loss) Before Provision (Benefit) for Taxes (e) (149,850 ) (912,207 )
Provision (Benefit) for Taxes   9,635     17,731  
Net Income (Loss) (159,485 ) (929,938 )

Net Income (Loss) Attributable to Redeemable Non-Controlling Interests in Consolidated Entities

23,969 2,596

Net Income (Loss) Attributable to Non-Controlling Interests in Consolidated Entities

213,787 (41,031 )

Net Income (Loss) Attributable to Non-Controlling Interests in Blackstone Holdings

  (275,864 )   (659,929 )
Net Income (Loss) Attributable to The Blackstone Group L.P. (f) $ (121,377 ) $ (231,574 )
 
Net Loss per Common Unit, Basic and Diluted
Common Units $ (0.36 )
Common Units Entitled to Priority Distributions $ (0.84 )
Common Units Not Entitled to Priority Distributions $ (1.14 )
 
Net IPO and acquisition-related charges included above were:
(a) Investment Income (Loss) $ 9,305 $ 2,358
(b) Total Compensation and Benefits $ 987,291 $ 812,347

Less: Compensation and Benefits - IPO and acquisition-related

$ 734,313   $ 742,704  
Compensation - non-IPO and acquisition-related (*) $ 252,978   $ 69,643  
(c) General, Administrative and Other $ 40,318 $ 39,513
(d) Interest Expense $ 908 $ 713
(e) Total IPO and acquisition-related charges $ 766,234 $ 780,572

(f) Total IPO and acquisition-related charges attributable to The Blackstone Group L.P., net of tax

$ 224,652 $ 191,807
 
(*) Principally comprised of base pay, bonus, net carried interest allocations, benefits and non-IPO and acquisition-related equity-based compensation.

THE BLACKSTONE GROUP L.P.

Exhibit 2a. Economic Net Income and Net Fee Related Earnings from Operations

(Dollars in Thousands)

 

The tables below detail Blackstone’s Economic Net Income and Net Fee Related Earnings from Operations. Net Fee Related Earnings from Operations is a supplemental measure of after tax performance used to highlight earnings from operations excluding the income from and related profit sharing expenses of Blackstone’s performance fees and allocations and investment income, except for interest income. The reconciliation of Economic Net Income to Net Fee Related Earnings from Operations is presented in Exhibit 2b to this release.

         
Three Months Ended
March 31, June 30, September 30, December 31, March 31,
2009 2009 2009 2009 2010
Private Equity
Revenues
Management Fees
Base Management Fees $ 68,431 $ 67,740 $ 67,009 $ 67,329 $ 65,432
Transaction and Other Fees, Net *   10,328     15,145     18,368     42,495     31,972  
Total Management Fees   78,759     82,885     85,377     109,824     97,404  
Performance Fees and Allocations
Realized - - - 34,021 46,175
Unrealized   4,818     97,185     110,867     90,621     45,549  
Total Performance Fees and Allocations   4,818     97,185     110,867     124,642     91,724  
Investment Income (Loss)
Realized (344 ) 102 8,794 28,416 (495 )
Unrealized   (15,165 )   17,118     18,640     12,676     84,684  
Total Investment Income (Loss) (15,509 ) 17,220 27,434 41,092 84,189
Interest Income and Dividend Revenue (152 ) 824 2,553 4,531 3,428
Other   180     472     677     1,516     100  
Total Revenues   68,096     198,586     226,908     281,605     276,845  
Expenses
Compensation and Benefits
Base Compensation 36,848 40,667 42,011 61,740 46,910
Performance Fee Related
Realized (6 ) (3 ) 135 615 6,005
Unrealized   (41,966 )   13,599     27,755     20,919     6,344  
Total Compensation and Benefits (5,124 ) 54,263 69,901 83,274 59,259
Other Operating Expenses   20,108     20,553     21,318     20,492     24,431  
Total Expenses   14,984     74,816     91,219     103,766     83,690  
Economic Net Income $ 53,112   $ 123,770   $ 135,689   $ 177,839   $ 193,155  
 

Net Fee Related Earnings from Operations

$ 19,883   $ 23,885   $ 21,153   $ 32,905   $ 28,712  
 

 

 

 

 

 

Real Estate
Revenues
Management Fees
Base Management Fees $ 80,198 $ 81,517 $ 83,409 $ 83,323 $ 83,060
Transaction and Other Fees, Net * 3,140 2,879 3,347 16,472 1,942
Management Fee Offsets **   (1,193 )   (486 )   (415 )   (373 )   (489 )
Total Management Fees   82,145     83,910     86,341     99,422     84,513  
Performance Fees and Allocations
Realized 646 4,590 (11,441 ) 3,166 5,948
Unrealized   (229,219 )   (51,960 )   23,608     5,391     11,391  
Total Performance Fees and Allocations   (228,573 )   (47,370 )   12,167     8,557     17,339  
Investment Income (Loss)
Realized 1,397 1,345 (3,078 ) 6,500 2,632
Unrealized   (67,239 )   (59,408 )   1,242     (219 )   46,892  
Total Investment Income (Loss) (65,842 ) (58,063 ) (1,836 ) 6,281 49,524
Interest Income and Dividend Revenue 384 197 2,035 3,414 2,718
Other   (669 )   2,405     1,450     75     (1,876 )
Total Revenues   (212,555 )   (18,921 )   100,157     117,749     152,218  
Expenses
Compensation and Benefits
Base Compensation 36,002 39,207 38,484 44,422 40,150
Performance Fee Related
Realized 2,138 (542 ) (1,690 ) 3,600 1,524
Unrealized   (75,459 )   (45,489 )   5,721     1,246     6,937  
Total Compensation and Benefits (37,319 ) (6,824 ) 42,515 49,268 48,611
Other Operating Expenses   12,615     12,978     13,437     17,295     14,290  
Total Expenses   (24,704 )   6,154     55,952     66,563     62,901  
Economic Net Income (Loss) $ (187,851 ) $ (25,075 ) $ 44,205   $ 51,186   $ 89,317  
 

Net Fee Related Earnings from Operations

$ 30,513   $ 32,867   $ 33,376   $ 38,431   $ 29,825  
 
Credit and Marketable Alternatives
Revenues
Management Fees
Base Management Fees $ 96,503 $ 96,293 $ 105,430 $ 102,647 $ 103,479
Transaction and Other Fees, Net * 443 687 778 958 1,345
Management Fee Offsets **   (4,213 )   (4,365 )   (4,121 )   (1,995 )   (689 )
Total Management Fees 92,733 92,615 102,087 101,610 104,135
Performance Fees and Allocations
Realized - 587 7,622 35,073 1,758
Unrealized   9,922     21,832     36,114     46,688     75,393  
Total Performance Fees and Allocations   9,922     22,419     43,736     81,761     77,151  
Investment Income (Loss)
Realized (11,998 ) (4,268 ) 1,953 (718 ) 2,983
Unrealized   8,090     29,049     29,976     28,901     19,715  
Total Investment Income (Loss) (3,908 ) 24,781 31,929 28,183 22,698
Interest Income and Dividend Revenue 709 279 929 1,535 1,148
Other   (253 )   315     715     248     (542 )
Total Revenues   99,203     140,409     179,396     213,337     204,590  
Expenses
Compensation and Benefits
Base Compensation 53,707 49,304 54,365 40,741 49,085
Performance Fee Related
Realized 57 82 842 19,873 212
Unrealized   7,370     8,020     24,594     27,509     41,319  
Total Compensation and Benefits 61,134 57,406 79,801 88,123 90,616
Other Operating Expenses   23,645     16,461     18,123     22,432     19,575  
Total Expenses   84,779     73,867     97,924     110,555     110,191  
Economic Net Income $ 14,424   $ 66,542   $ 81,472   $ 102,782   $ 94,399  
 

Net Fee Related Earnings from Operations

$ 14,428   $ 25,164   $ 24,005   $ 36,049   $ 34,136  
 
 
Financial Advisory
Revenues
Advisory Fees $ 90,940 $ 82,503 $ 94,566 $ 122,709 $ 76,568
Transaction and Other Fees, Net   -     -     -     -     1  
Total Management Fees 90,940 82,503 94,566 122,709 76,569
Investment Income (Loss)
Realized - - - 1,443 187
Unrealized   -     -     476     (257 )   230  
Total Investment Income (Loss) - - 476 1,186 417
Interest Income and Dividend Revenue 1,044 1,118 1,250 1,842 1,396
Other   (943 )   (122 )   1,051     (21 )   (932 )
Total Revenues   91,041     83,499     97,343     125,716     77,450  
Expenses
Compensation and Benefits
Base Compensation   50,952     54,239     57,686     69,482     54,492  
Total Compensation and Benefits 50,952 54,239 57,686 69,482 54,492
Other Operating Expenses   12,976     21,734     22,666     22,196     14,727  
Total Expenses   63,928     75,973     80,352     91,678     69,219  
Economic Net Income $ 27,113   $ 7,526   $ 16,991   $ 34,038   $ 8,231  
 

Net Fee Related Earnings from Operations

$ 24,694   $ 4,874   $ 16,405   $ 31,778   $ 6,072  
 
 

Economic Net Income Recap, Total Segments

Revenues
Management and Advisory Fees
Base Management Fees $ 245,132 $ 245,550 $ 255,848 $ 253,299 $ 251,971
Advisory Fees 90,940 82,503 94,566 122,709 76,568
Transaction and Other Fees, Net * 13,911 18,711 22,493 59,925 35,260
Management Fee Offsets **   (5,406 )   (4,851 )   (4,536 )   (2,368 )   (1,178 )

Total Management and Advisory Fees

  344,577     341,913     368,371     433,565     362,621  
Performance Fees and Allocations
Realized 646 5,177 (3,819 ) 72,260 53,881
Unrealized   (214,479 )   67,057     170,589     142,700     132,333  
Total Performance Fees and Allocations   (213,833 )   72,234     166,770     214,960     186,214  
Investment Income (Loss)
Realized (10,945 ) (2,821 ) 7,669 35,641 5,307
Unrealized   (74,314 )   (13,241 )   50,334     41,101     151,521  
Total Investment Income (Loss) (85,259 ) (16,062 ) 58,003 76,742 156,828
Interest Income and Dividend Revenue 1,985 2,418 6,767 11,322 8,690
Other   (1,685 )   3,070     3,893     1,818     (3,250 )
Total Revenues   45,785     403,573     603,804     738,407     711,103  
Expenses
Compensation and Benefits
Base Compensation 177,509 183,417 192,546 216,385 190,637
Performance Fee Related
Realized 2,189 (463 ) (713 ) 24,088 7,741
Unrealized   (110,055 )   (23,870 )   58,070     49,674     54,600  
Total Compensation and Benefits 69,643 159,084 249,903 290,147 252,978
Other Operating Expenses   69,344     71,726     75,544     82,415     73,023  
Total Expenses   138,987     230,810     325,447     372,562     326,001  
Total Economic Net Income (Loss) $ (93,202 ) $ 172,763   $ 278,357   $ 365,845   $ 385,102  
 

Total Net Fee Related Earnings from Operations

$ 89,518   $ 86,790   $ 94,939   $ 139,163   $ 98,745  
 

* Transaction and Other Fees, Net, are net of amounts, if any, shared with limited partners including, for Private Equity, broken deal expenses.

** Primarily placement fees.

THE BLACKSTONE GROUP L.P.

Exhibit 2b. Reconciliation of Income (Loss) Before Provision (Benefit) for Taxes to Total Segments Economic Net Income, of Total Segments, Economic Net Income to Net Fee Related Earnings from Operations, of Net Fee Related Earnings from Operations to Distributable Earnings and of Earnings Before Interest, Taxes and Depreciation and Amortization from Net Fee Related Earnings from Operations to Net Fee Related Earnings from Operations

(Dollars in Thousands)

 

The tables below reconcile Economic Net Income (Loss) to Net Fee Related Earnings from Operations.

         

Three Months Ended

March 31, June 30, September 30, December 31, March 31,
2009 2009 2009 2009 2010
Private Equity
Economic Net Income $ 53,112 $ 123,770 $ 135,689 $ 177,839 $ 193,155
Performance Fees and Allocations Adjustment (a) (4,818 ) (97,185 ) (110,867 ) (124,642 ) (91,724 )
Investment Income (Loss) Adjustment (b) 15,509 (17,220 ) (27,434 ) (41,092 ) (84,189 )
Investment Income (Loss) - Cash Management Strategies (c) - - -

5,510

1,650

Performance Fee Related Compensation and Benefits Adjustment (d)

(41,972 ) 13,596 27,890 21,534 12,349
Taxes Payable (e)   (1,948 )   924     (4,125 )   (6,244 )   (2,529 )
Net Fee Related Earnings from Operations $ 19,883   $ 23,885   $ 21,153   $ 32,905   $ 28,712  
 
Real Estate
Economic Net Income (Loss) $ (187,851 ) $ (25,075 ) $ 44,205 $ 51,186 $ 89,317
Performance Fees and Allocations Adjustment (a) 228,573 47,370 (12,167 ) (8,557 ) (17,339 )
Investment Income (Loss) Adjustment (b) 65,842 58,063 1,836 (6,281 ) (49,524 )
Investment Income (Loss) - Cash Management Strategies (c) - - - 4,312 1,311

Performance Fee Related Compensation and Benefits Adjustment (d)

(73,321 ) (46,031 ) 4,031 4,846 8,461
Taxes Payable (e)   (2,730 )   (1,460 )   (4,529 )   (7,075 )   (2,401 )
Net Fee Related Earnings from Operations $ 30,513   $ 32,867   $ 33,376   $ 38,431   $ 29,825  
 
Credit and Marketable Alternatives
Economic Net Income $ 14,424 $ 66,542 $ 81,472 $ 102,782 $ 94,399
Performance Fees and Allocations Adjustment (a) (9,922 ) (22,419 ) (43,736 ) (81,761 ) (77,151 )
Investment Income (Loss) Adjustment (b) 3,908 (24,781 ) (31,929 ) (28,183 ) (22,698 )
Investment Income (Loss) - Cash Management Strategies (c) - - - 1,326 354

Performance Fee Related Compensation and Benefits Adjustment (d)

7,427 8,102 25,436 47,382 41,531
Taxes Payable (e)   (1,409 )   (2,280 )   (7,238 )   (5,497 )   (2,299 )
Net Fee Related Earnings from Operations $ 14,428   $ 25,164   $ 24,005   $ 36,049   $ 34,136  
 
Financial Advisory
Economic Net Income $ 27,113 $ 7,526 $ 16,991 $ 34,038 $ 8,231
Investment Income (Loss) Adjustment (b) - - (476 ) (1,186 ) (417 )
Investment Income (Loss) - Cash Management Strategies (c) - - - 1,220 350
Taxes Payable (e)   (2,419 )   (2,652 )   (110 )   (2,294 )   (2,092 )
Net Fee Related Earnings from Operations $ 24,694   $ 4,874   $ 16,405   $ 31,778   $ 6,072  
 

(a) This adjustment removes from ENI the segment amount of Performance Fees and Allocations.

(b) This adjustment removes from ENI the segment amount of Investment Income (Loss).

(c) This adjustment represents the realized and unrealized gain (loss) on Blackstone’s cash management strategies which are a component of Investment Income (Loss) but included in Net Fee Related Earnings.

(d) This adjustment removes from expenses the compensation and benefit amounts related to Blackstone’s profit sharing plans related to Performance Fees and Allocations.

(e) Represents an implied payable for income taxes calculated using a similar methodology applied in calculating the current provision for The Blackstone Group L.P.

 

Three Months Ended

March 31, June 30, September 30, December 31, March 31,
2009 2009 2009 2009 2010
Income (Loss) Before Provision (Benefit) for Taxes $ (912,207 ) $ (586,986 ) $ (426,959 ) $ (365,314 ) $ (149,850 )
IPO and Acquisition-Related Charges (a) 741,057 761,834 719,708 751,351 726,722
Amortization of Intangibles (b) 39,513 39,511 39,513 39,511 39,512

(Income) Loss Associated with Non-Controlling Interests in (Income) Loss of Consolidated Entities (c)

38,435 (41,596 ) (53,905 ) (59,703 ) (237,756 )

Management Fee Revenues Associated with Consolidated CLO Entities (d)

  -     -     -     -     6,474  
Total Segments
Total Segments, Economic Net Income (Loss) (93,202 ) 172,763 278,357 365,845 385,102
Performance Fees and Allocations Adjustment (e) 213,833 (72,234 ) (166,770 ) (214,960 ) (186,214 )
Investment Income (Loss) Adjustment (f) 85,259 16,062 (58,003 ) (76,742 ) (156,828 )
Investment Income (Loss) - Cash Management Strategies (g) - - - 12,368 3,665

Performance Fee Related Compensation and Benefits Adjustment (h)

(107,866 ) (24,333 ) 57,357 73,762 62,341
Taxes Payable (i)   (8,506 )   (5,468 )   (16,002 )   (21,110 )   (9,321 )
Net Fee Related Earnings from Operations 89,518 86,790 94,939 139,163 98,745
Realized Performance Fees and Allocations (j) (1,543 ) 5,637 (3,105 ) 48,172 46,140
Realized Investment Income (Loss) (k) (10,945 ) (2,821 ) 7,669 35,641 5,307

Adjustment Related to Investment Income - Cash Management Strategies (l)

- - - (10,142 ) (1,264 )

Other Payables Including Payable Under Tax Receivable Agreement

  -     -     -     -     (232 )
Distributable Earnings $ 77,030   $ 89,606   $ 99,503   $ 212,834   $ 148,696  
 

Earnings Before Interest, Taxes and Depreciation and Amortization from Net Fee Related Earnings from Operations (m)

$ 104,846   $ 97,463   $ 121,259   $ 171,916   $ 120,805  
 

(a) This adjustment adds back to Income (Loss) Before Provision for Taxes amounts for Transaction-Related Charges which include principally equity-based compensation charges associated with Blackstone’s initial public offering and other corporate actions.

(b) This adjustment adds back to Income (Loss) Before Provision for Taxes amounts for the Amortization of Intangibles which are associated with Blackstone’s initial public offering and other corporate actions.

(c) This adjustment adds back to Income (Loss) Before Provision for Taxes the amount of (Income) Loss Associated with Non-Controlling Interests in (Income) Loss of Consolidated Entities.

(d) This adjustment adds back to Income (Loss) Before Provision for Taxes the amount of Management Fee Revenues associated with Consolidated CLO Entities.

(e) This adjustment removes from ENI the segment amount of Performance Fees and Allocations.

(f) This adjustment removes from ENI the segment amount of Investment Income (Loss).

(g) This adjustment represents the realized and unrealized gain (loss) on Blackstone’s cash management strategies which are a component of Investment Income (Loss) but included in Net Fee Related Earnings.

(h) This adjustment removes from expenses the compensation and benefit amounts related to Blackstone’s profit sharing plans related to Performance Fees and Allocations.

(i) Represents an implied payable for income taxes calculated using a similar methodology applied in calculating the current provision for The Blackstone Group L.P.

(j) Represents the adjustment for realized Performance Fees and Allocations net of corresponding actual amounts due under Blackstone’s profit sharing plans related thereto.

(k) Represents the adjustment for Blackstone’s Investment Income - Realized.

(l) Represents the elimination of Realized Investment Income attributable to Blackstone’s cash management strategies which is a component of both Net Fee Related Earnings from Operations and Realized Investment Income (Loss).

(m) Earnings Before Interest, Taxes and Depreciation and Amortization from Net Fee Related Earnings from Operations represents Net Fee Related Earnings from Operations adding back the implied taxes payable for Net Fee Related Earnings from Operations, see (h), and segment interest and depreciation and amortization.

THE BLACKSTONE GROUP L.P.
Exhibit 3. Distributable Earnings
(Dollars in Thousands)
 

The following table calculates Blackstone’s Distributable Earnings. Distributable Earnings is a supplemental measure of performance to assess amounts available for distributions to Blackstone unitholders, including Blackstone personnel.

   
For the Three Months
Ended March 31,
2010 2009
Fee Related Earnings
Management and Advisory Fees
Total Management and Advisory Fees (a) $ 362,621 $ 344,577
Interest and Dividend Revenue (a) 8,690 1,985
Other (a) (3,250 ) (1,685 )

Investment Income - Cash Management Strategies (b)

  3,665     -  
Total Fee Related Earnings   371,726     344,877  
Expenses
Compensation and Benefits - Base Compensation (a) 190,637 177,509
Other Operating Expenses (a) 73,023 69,344
Cash Taxes (c)   9,321     8,506  
Total Expenses   272,981     255,359  
Net Fee Related Earnings from Operations   98,745     89,518  

Performance Fees and Allocations, Net of Related Compensation

Performance Fees and Allocations - Realized (a) 53,881 646

Compensation and Benefits - Performance Fee Related - Realized (a)

  (7,741 )   (2,189 )

Total Performance Fees and Allocations, Net of Related Compensation

  46,140     (1,543 )
Investment Income and Other
Investment Income (Loss) - Realized (a) 5,307 (10,945 )

Adjustment Related to Investment Income - Cash Management Strategies (d)

(1,264 ) -

Other Payables Including Payable Under Tax Receivable Agreement

  (232 )   -  
Total Investment Income and Other   3,811     (10,945 )
Distributable Earnings $ 148,696   $ 77,030  
 

(a) Represents the total segment amounts of the respective captions.

(b) Represents the inclusion of Investment Income from Blackstone’s cash management strategies.

(c) Represents the provisions for and/or adjustments to income taxes that were calculated using a similar methodology applied in calculating the current provision for The Blackstone Group L.P.

(d) Represents the elimination of Realized Investment Income attributable to Blackstone’s cash management strategies which is a component of Net Fee Related Earnings from Operations.

THE BLACKSTONE GROUP L.P.

Exhibit 4. Reconciliation of Total GAAP Weighted-Average Common Units Outstanding to Weighted-Average Economic Net Income Adjusted Units—Diluted and of Total GAAP Common Units Outstanding to Economic Net Income Adjusted Units—Diluted and of Total GAAP Common Units Outstanding to Distributable Earnings Adjusted Units—Diluted

 

The following table provides a reconciliation of Blackstone’s Total GAAP Weighted-Average Common Units Outstanding to Weighted-Average Economic Net Income Adjusted Units—Diluted.

   
Three Months Ended March 31,
2010 2009

Total GAAP Weighted-Average Common Units Outstanding

333,433,864 275,252,037
Adjustments:
Weighted-Average Partnership Units 764,866,007 830,772,697
Weighted-Average Unvested Deferred Restricted Common Units 28,626,333 26,206,018
Weighted-Average Economic Net Income Adjusted Units - Diluted 1,126,926,204 1,132,230,752

The following table provides a reconciliation of Blackstone’s Total GAAP Common Units Outstanding to Economic Net Income Adjusted Units—Diluted as of March 31, 2010.

 
March 31,
2010

Total GAAP Common Units Outstanding

347,181,400

Adjustments:
Partnership Units 751,496,468
Unvested Deferred Restricted Common Units

27,815,594

Economic Net Income Adjusted Units - Diluted 1,126,493,462

The following table provides a reconciliation of Blackstone’s Total GAAP Common Units Outstanding to Distributable Earnings Adjusted Units—Diluted.

       
March 31,
2010   2009
Total GAAP Common Units Outstanding 347,181,400 274,529,136
Adjustments:
Partnership Units 751,496,468 818,893,328
Distributable Earnings Adjusted Units - Diluted 1,098,677,868 1,093,422,464
THE BLACKSTONE GROUP L.P.
Exhibit 5. Assets Under Management
(Dollars in Thousands)
 
As of and for the Periods
Ended March 31,
2010   2009
Total Assets Under Management
(End of Period)
Private Equity $ 28,022,326 $ 23,202,949
Real Estate 21,880,655 21,454,095
CAMA   54,612,867   47,888,124
$ 104,515,848 $ 92,545,168
Fee-Earning Assets Under Management
(End of Period)
Private Equity $ 25,173,936 $ 25,461,139
Real Estate 23,820,697 22,867,992
CAMA   49,075,539   43,898,435
$ 98,070,172 $ 92,227,566
Weighted-Average Fee-Earning
Assets Under Management
(For the Three Months Ended)
Private Equity $ 25,010,887 $ 25,455,066
Real Estate 23,719,287 22,746,282
CAMA   48,766,158   43,230,872
$ 97,496,332 $ 91,432,220
THE BLACKSTONE GROUP L.P.
Exhibit 6. Limited Partner Capital Invested Metrics

(Dollars in Thousands)

As of and for the Periods

Ended March 31,

2010

 

2009

Limited Partner Capital Invested
(For the Three Months Ended)
Private Equity $ 387,904 $ 196,140
Real Estate 424,868 215,123
CAMA (a)   157,052   208,359
$ 969,824 $ 619,622
Fund Level Unrealized Value (b)
(End of Period)
Private Equity
Cost $ 19,695,417 $ 19,229,828
Unrealized Value $ 19,695,029 $ 14,874,562
Real Estate
Cost $ 12,478,211 $ 11,798,292
Unrealized Value $ 8,355,147 $ 8,169,473
CAMA (a)
Cost $ 3,088,626 $ 2,903,539
Unrealized Value $ 3,424,993 $ 1,947,368
 

(a) Limited Partner Capital Invested and Fund Level Unrealized Value for the CAMA segment represent activity in Blackstone’s mezzanine and credit liquidity funds.

(b) Cost and unrealized value represent the limited partners’ share, including co-investments arranged by Blackstone, of those fund level investments on which carried interest can be earned, before carried interest allocations to Blackstone, when a fund achieves cumulative investment returns in excess of a specified rate.

Contacts

The Blackstone Group
Investor Relations:
Joan Solotar, +1-212-583-5068
solotar@blackstone.com
or
Weston Tucker, +1-212-583-5231
tucker@blackstone.com
or
Media Relations:
Peter Rose, +1-212-583-5871
rose@blackstone.com

Sharing

Contacts

The Blackstone Group
Investor Relations:
Joan Solotar, +1-212-583-5068
solotar@blackstone.com
or
Weston Tucker, +1-212-583-5231
tucker@blackstone.com
or
Media Relations:
Peter Rose, +1-212-583-5871
rose@blackstone.com