The Blackstone Group Reports First Quarter 2011 Results

Economic Net Income increased to $568 million for the first quarter of 2011, up 58% from $360 million for the first quarter of 2010.

Distributable Earnings increased to $197 million for the first quarter of 2011, up 32% from $149 million in the first quarter of 2010.

GAAP Results Attributable to The Blackstone Group L.P. was net income of $43 million in the first quarter of 2011, compared to a net loss of $121 million in the first quarter of 2010, in each case including net IPO and acquisition-related accounting charges.

Fee-Earning Assets Under Management increased 26% to $124.0 billion at March 31, 2011, from $98.1 billion at March 31, 2010, while Total Assets Under Management increased 43% to $150 billion at March 31, 2011.

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

NEW YORK--()--The Blackstone Group L.P. (NYSE: BX) today reported its first quarter 2011 results.

Economic Net Income (“ENI”) was $568.1 million for the first quarter of 2011, an increase of $207.7 million compared to ENI for the first quarter of 2010. The increase in ENI was driven principally by strong investment performance across Blackstone’s investment segments, which produced $726.9 million in Performance Fees and Investment Income, more than twice the $343.0 million in the first quarter of 2010.

Blackstone’s Fee-Earning Assets Under Management and Total Assets Under Management continued to demonstrate consistently strong growth, rising to a record $124.0 billion and $150.0 billion, respectively, driven both by net inflows and investment appreciation. Blackstone funds had $31.8 billion of committed but uninvested capital, or “dry powder”, at the end of the first quarter of 2011, a record level.

For the first quarter of 2011, Total Segment Revenues were $1.2 billion, up 64% from the first quarter of 2010. The increase was driven by higher Performance Fees across all the investment segments and an increase in Total Management Fees to $425.7 million, up 17% from $362.6 million in the prior year’s first quarter.

Total Segment Expenses were $509.9 million for the first quarter of 2011, an increase from $326.0 million for the first quarter of 2010, driven largely by increased accruals for Performance Fee Compensation of $177.1 million for the first quarter of 2011. Compensation, excluding Performance Fee Compensation, was up 21% to $229.9 million. Blackstone’s non-compensation expenses were up 41% from the first quarter of 2010 driven mostly by fund-raising and financing activities.

Net Fee Related Earnings from Operations were $93.2 million for the first quarter of 2011, down slightly from $98.7 million for the first quarter of 2010 reflecting increased fund-raising and financing expenses.

GAAP results for the first quarter of 2011 included Revenues of $1.2 billion, compared to $701.2 million for the first quarter of 2010, and Net Income Attributable to The Blackstone Group L.P. of $42.7 million, compared to a net loss of $121.4 million for the first quarter of 2010.

Stephen A. Schwarzman, Chairman and Chief Executive Officer, said, “Blackstone reported our strongest quarterly earnings since becoming a public company four years ago, as the values of all of our funds continued to increase. In real estate, operating fundamentals continue to improve and two of our global funds moved above their preferred return hurdle and started accruing performance fees. Our unique mix of businesses, each of which is a leader in its own right, gives us a distinct competitive advantage in identifying opportunities for value creation and attracting new capital. Every one of our investing businesses grew sharply year over year, and Blackstone ended the first quarter with record total assets under management of $150 billion, up from $105 billion this time last year.”

The table below details Blackstone’s ENI, Net Fee Related Earnings from Operations, Distributable Earnings and Fee-Earning Assets Under Management as of, and for, the first quarters of 2011 and 2010. ENI, Total Segments includes unrealized gains (losses) and the direct compensation impact related to those gains (losses), but excludes IPO and acquisition-related accounting charges.

      As of and for the Three  
Months Ended March 31, Variance
2011   2010 $   %
(Dollars in Thousands, Except per Unit Amounts)
Economic Net Income, Total Segments $ 654,305 $ 385,102 $ 269,203 70%
Provision for Income Taxes (a)   86,206   24,709   61,497 N/M
Economic Net Income, After Taxes $ 568,099 $ 360,393 $ 207,706 58%
 
Economic Net Income, After Taxes per Adjusted Unit (b) $

0.51

$ 0.32 $

0.19

59%

Net Fee Related Earnings from Operations $ 93,180 $ 98,745 $ (5,565) -6%
Distributable Earnings $ 196,549 $ 148,696 $ 47,853 32%
Distributable Earnings per Common Unit (c) $ 0.18 $ 0.14 $ 0.04 29%
 
Fee-Earning Assets Under Management:
Private Equity $ 35,892,804 $ 25,173,936 $ 10,718,868 43%
Real Estate 26,454,012 23,820,697 2,633,315 11%
Hedge Fund Solutions 35,847,002 28,902,220 6,944,782 24%
Credit Businesses   25,838,878   20,173,319   5,665,559 28%
Total Fee-Earning Assets Under Management $ 124,032,696 $ 98,070,172 $ 25,962,524 26%

_________________________________

(a)   Represents the implied provision 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. A reconciliation of this item to the comparable GAAP measure is presented in Exhibit 4 to this release.

(c) See Exhibit 4 for the calculation of Distributable Earnings Units Outstanding.

SEGMENT REVIEW

Private Equity

Private Equity had revenues of $273.7 million for the first quarter of 2011 compared to $276.8 million in 2010. Increases in Performance Fees and Management Fees of 25% and 10%, respectively, were offset by a decline in Investment Income of $37.2 million.

Private Equity had Realized Performance Fees of $82.4 million resulting from realizations in BCP IV and Realized Investment Income of $17.9 million resulting from realizations in both its BCP IV and BCP V funds.

The appreciation of the underlying assets for Blackstone’s contributed Private Equity funds was 4.9% for the first quarter of 2011. BCP’s privately held portfolio companies continued to perform well on a revenue and EBITDA basis while its publicly held investments benefited from an increase in public stock markets, as well as public offerings of Nielsen and Bank United. As of March 31, 2011, the unrealized value and cumulative realized proceeds, before carried interest, fees and expenses, of Blackstone’s contributed Private Equity funds represented 1.5 times investors’ original investments.

Economic Net Income was $175.5 million for the first quarter of 2011, down from $193.2 million for the first quarter of 2010, a result of lower Investment Income and increased operating expenses.

BCP V closed its investment period on January 7, 2011, thereby commencing the investment period for BCP VI, which is now included in Fee-Earning Assets Under Management. Fee-Earning Assets Under Management were $35.9 billion compared to $25.2 billion in the first quarter of 2010 principally due to the start of BCP VI’s investment period.

Dry powder for Private Equity, which is inclusive of amounts related to BCP VI, was $16.9 billion as of March 31, 2011. Limited Partner Capital Invested during the first quarter of 2011 totaled $652.9 million, an increase from $387.9 million invested during the first quarter of 2010. Blackstone’s Private Equity segment’s funds had $1.7 billion of Limited Partner Capital committed to transactions which had not yet closed as of March 31, 2011.

Real Estate

Real Estate had revenues of $555.6 million for the first quarter of 2011, compared with revenues of $152.2 million for the first quarter of 2010. Improved operating performance, primarily across the hospitality and office segments, led to an increase in the real estate investments’ carrying values, which drove an increase in Performance Fees.

As of March 31, 2011, the unrealized value and cumulative realized proceeds, before carried interest, fees and expenses, of the Real Estate segment’s contributed carry funds represented 1.4 times investors’ original investment.

The appreciation of the underlying assets for Blackstone’s contributed Real Estate carry funds was 8.7% for the first quarter of 2011, and for the Real Estate debt hedge funds was 4.5% for the first quarter of 2011.

ENI for the Real Estate segment was $361.0 million for the first quarter of 2011 compared to $89.3 million for the first quarter of 2010, driven principally by the increase in Performance Fees noted above.

Fee-Earning Assets Under Management were $26.5 billion compared to $23.8 billion for the first quarter of 2010. Fee-Earning Assets Under Management increased principally due to the commencement of Blackstone’s management of the Merrill Lynch Asia assets which added $2.1 billion in Fee-Earning Assets Under Management in the fourth quarter of 2010.

Dry powder for Real Estate was $8.6 billion as of March 31, 2011. Limited Partner Capital Invested during the first quarter of 2011 was $654.4 million, up from $424.9 million during the first quarter of 2010. Blackstone’s Real Estate segment’s funds had $2.4 billion of Limited Partner Capital committed to transactions which had not yet closed as of March 31, 2011. This active investment pace has resulted in the segment’s BREP VI fund reaching approximately 82% invested or committed capital as of the end of the first quarter of 2011. Accordingly, Blackstone has commenced fund-raising for its next major real estate fund.

Hedge Fund Solutions

Hedge Fund Solutions had revenues of $105.4 million for the first quarter of 2011, compared with revenues of $89.2 million for the first quarter of 2010. The increase from the first quarter of 2010 was principally due to an increase in Total Management Fees of 18% to $76.2 million for the first quarter of 2011.

The appreciation of the underlying assets for Blackstone’s Hedge Fund Solutions’ funds was 2% for the first quarter of 2011.

ENI for the Hedge Funds Solutions segment was up 10% to $58.1 million for the first quarter of 2011 compared to $52.6 million for the first quarter of 2010 as higher Fee-Earning Assets Under Management drove increases in Management and Performance Fees.

Fee-Earning Assets Under Management for the segment grew 24% to $35.8 billion from $28.9 billion at the end of the first quarter of 2010. The increase from the prior year period was principally due to net inflows and market appreciation across the segment. Net inflows for Blackstone’s Hedge Fund Solutions business came primarily from its commingled and customized investment products, hedge fund manager seeding platform and long only solutions business.

As of March 31, 2011, 74% of the Fee-Earnings Assets Under Management in Blackstone’s Hedge Fund Solutions products which were eligible to earn performance fees were above their respective high water marks.

Credit Businesses

Credit Businesses had revenues of $156.7 million for the first quarter of 2011, compared with revenues of $115.4 million for the first quarter of 2010. The increase from the first quarter of 2010 was due to an increase in Performance Fees of 47% to $95.0 million for the first quarter of 2011, resulting from strong fund performance across the segment, and an increase in Total Management Fees of 40% to $55.3 million.

The appreciation of the underlying assets for Blackstone’s credit-oriented business was 8.1% for the flagship hedge funds, 9.0% for the mezzanine funds and 9.4% for the rescue lending funds for the first quarter of 2011.

ENI for the Credit Businesses segment was up 45% to $60.5 million for the first quarter of 2011 compared to $41.8 million for the first quarter of 2010 as higher Fee-Earning Assets Under Management and favorable market conditions drove increases in Management and Performance Fees.

Fee-Earning Assets Under Management for the segment increased 28% to $25.8 billion from $20.2 billion for the first quarter of 2010. The long only platform had particularly strong year over year growth in Fee-Earning Assets Under Management, increasing to $19.3 billion, up $5.1 billion, or 36%, from the first quarter of last year as the segment continued to launch new products and strategies. Additionally, Blackstone announced the acquisition of Allied Irish Banks’ CLO platform, which will add $2.1 billion of Fee-Earning Assets Under Management when that acquisition closes sometime in the second quarter.

As of March 31, 2011, 99% of the Fee-Earning Assets Under Management in Blackstone’s credit-oriented hedge funds which were eligible to earn performance fees were above their respective high water marks compared to 88% as of March 31, 2010.

Dry powder of drawdown funds for the Credit Businesses segment was $4.1 billion as of March 31, 2011.

Financial Advisory

Revenues were $72.8 million for the first quarter of 2011, a modest decrease from $77.5 million for the first quarter of 2010. The decrease in segment revenues was primarily driven by decreases in Blackstone Advisory Partners’ business as several transactions closed in late 2010 instead of 2011 and a decrease in the restructuring and reorganization business largely due to the improving economy as well as the continued strength of the credit markets. These decreases were largely offset by an increase in fees earned by Blackstone’s fund placement business as the institutional fund-raising environment improved compared to the first quarter of 2010.

ENI was a loss of $0.9 million for the first quarter of 2011 compared to income of $8.2 million for the first quarter of 2010.

CAPITAL AND LIQUIDITY

As of March 31, 2011, Blackstone had $455.8 million in cash, $976.1 million invested in Blackstone’s Treasury cash management strategies, $254.0 million invested in liquid Blackstone funds and $1.7 billion invested in illiquid Blackstone funds. Long-term debt totaled $1.0 billion in borrowings from the 2010 and 2009 bond issuances. Blackstone has no borrowings outstanding against its $1 billion revolving credit facility. On April 8, 2011, Blackstone and its lenders amended the revolving credit facility to extend its maturity from March 23, 2013 to April 8, 2016.

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 16, 2011. This distribution will be paid on May 31, 2011.

Blackstone's general partner maintains the right to determine the amount to be distributed from The Blackstone Group L.P.’s net after-tax share of its annual Distributable Earnings. Distributable Earnings will only be a starting point for the determination of the amount to be distributed to unitholders because 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. The aggregate amounts of Blackstone’s distributions to unitholders will typically be less than its Distributable Earnings for that year.

Although for calendar 2010 Blackstone distributed substantially all of its net after-tax annual Distributable Earnings. Blackstone’s current intention is now to distribute to its common unitholders substantially all of The Blackstone Group L.P.'s net after-tax share of annual Distributable Earnings less the amount of its realized investment gains. This determination was made based on the continued pace of organic and inorganic growth and the potential for further strategic initiatives and the retained amount will be used for those purposes. The retained cash will be deducted from the fourth quarter distribution which is made in the first quarter of the ensuing calendar year. Distributions for the first three quarters will remain unchanged at $0.10 per unit. All distributions are subject to Blackstone’s discretion to retain additional amounts from the amount of annual Distribituable Earnings to be distributed as described above.

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 are expected to be smaller than the final quarterly distribution in respect of such year. For the fourth quarter of 2011 Blackstone expects to pay the remaining amount of the year’s Distributable Earnings less realized investment gains.

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 2011 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 21, 2011 at 11:00 a.m. ET to discuss first quarter 2011 results. The conference call can be accessed by dialing (877) 391-6747 (U.S. domestic) or +1 (617) 597-9291 (international) pass code 14994355. 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 77830492, beginning approximately two hours after the event.

Blackstone expects to host conference calls to report its 2011 results as follows: second quarter results, July 21, 2011; third quarter results, October 20, 2011 and fourth quarter and full year results, February 2, 2012.

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, hedge fund solutions, credit-oriented funds 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, 2010, 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 filings. 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)

 
          Quarter Ended March 31,
2011   2010
Revenues
Management and Advisory Fees $ 412,738   $ 354,820  
Performance Fees
Realized 96,203 54,049
Unrealized   512,401     131,779  
Total Performance Fees   608,604     185,828  
Investment Income
Realized 12,783 5,726
Unrealized   107,395     149,220  
Total Investment Income   120,178     154,946  
Interest and Dividend Revenue 9,490 8,895
Other   2,259     (3,250 )
Total Revenues   1,153,269     701,239  
Expenses
Compensation and Benefits
Compensation 659,483 924,950
Performance Fee Compensation
Realized 14,543 7,741
Unrealized   162,525     54,600  
Total Compensation and Benefits 836,551 987,291
General, Administrative and Other 129,386 106,379
Interest Expense 13,803 7,185
Fund Expenses   11,124     (141 )
Total Expenses   990,864     1,100,714  
Other Income
Net Gains (Losses) from Fund Investment Activities   (45,191 )   171,804  
Income (Loss) Before Provision (Benefit) for Taxes 117,214 (227,671 )
Provision for Taxes   38,850     9,635  
Net Income (Loss) 78,364 (237,306 )

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

22,025 23,969

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

(93,081 ) 135,966

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

  106,716     (275,864 )

Net Income (Loss) Attributable to The Blackstone Group L.P.

$ 42,704   $ (121,377 )

Net Loss per Common Unit, Basic and Diluted

 

 

$ (0.36

)

Net Income per Common Unit, Basic

$

0.10

 

 

Net Income per Common Unit, Diluted

$

0.09

 

 

 

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 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
Mar 31, 2011 vs.
Mar 31, Jun 30, Sep 30, Dec 31, Mar 31, Mar 31, 2010
2010 2010 2010 2010 2011 $ %

Economic Net Income Recap, Total Segments

Revenues
Management and Advisory Fees
Base Management Fees $ 251,971 $ 262,914 $ 269,434 $ 285,152 $ 305,587 $ 53,616 21 %
Advisory Fees 76,568 134,099 84,541 130,932 70,252 (6,316 ) -8 %
Transaction and Other Fees,

Net *

35,260 20,617 22,948 58,923 58,363 23,103 66 %
Management Fee Offsets **   (1,178 )   (179 )   (674 )   (282 )   (8,536 )   (7,358 ) N/M  
Total Management and

Advisory Fees

  362,621     417,451     376,249     474,725     425,666     63,045   17 %
Performance Fees
Realized 53,881 46,374 66,039 195,369 95,600 41,719 77 %
Unrealized   132,333     (20,738 )   192,745     260,286     505,197     372,864   N/M  
Total Performance Fees   186,214     25,636     258,784     455,655     600,797     414,583   N/M  
Investment Income
Realized 5,307 15,721 14,276 11,611 23,499 18,192 N/M
Unrealized   151,521     87,186     128,247     134,680     102,577     (48,944 ) -32 %
Total Investment Income 156,828 102,907 142,523 146,291 126,076 (30,752 ) -20 %
Interest Income and Dividend

Revenue

8,690 6,930 10,187 10,289 9,448 758 9 %
Other   (3,250 )   (644 )   4,468     (1,192 )   2,259     5,509   N/M  
Total Revenues   711,103     552,280     792,211     1,085,768     1,164,246     453,143   64 %
Expenses
Compensation and Benefits
Compensation 190,637 220,662 210,582 237,233 229,898 39,261 21 %
Performance Fee

Compensation

Realized 7,741 22,879 24,962 72,734 14,543 6,802 88 %
Unrealized   54,600     (892 )   104,323     70,615     162,525     107,925   198 %
Total Compensation

and Benefits

252,978 242,649 339,867 380,582 406,966 153,988 61 %
Other Operating Expenses   73,023     88,160     84,253     99,080     102,975     29,952   41 %
Total Expenses   326,001     330,809     424,120     479,662     509,941     183,940   56 %

Total Economic Net Income

$ 385,102   $ 221,471   $ 368,091   $ 606,106   $ 654,305   $ 269,203   70 %
 

Total Net Fee Related Earnings from Operations

$ 98,745   $ 107,915   $ 112,914   $ 122,740   $ 93,180   $ (5,565 ) -6 %

____________________

* 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.

continued...

THE BLACKSTONE GROUP L.P.

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

(Dollars in Thousands)

           
Three Months Ended
              Mar 31, 2011 vs.
Mar 31, Jun 30, Sep 30, Dec 31, Mar 31, Mar 31, 2010
2010 2010 2010 2010 2011 $   %
Private Equity
Revenues
Management Fees
Base Management Fees $ 65,432 $ 66,795 $ 66,077 $ 65,003 $ 79,935 $ 14,503 22 %
Transaction and Other Fees,

Net *

31,972 16,367 13,348 10,556 35,342 3,370 11 %
Management Fee Offsets **       (91 )   (97 )   (7,889 )   (7,889 ) N/M  
Total Management Fees   97,404     83,162     79,334     75,462     107,388     9,984   10 %
Performance Fees
Realized 46,175 1,106 44,814 64,774 82,389 36,214 78 %
Unrealized   45,549     (24,020 )   45,499     84,466     32,537     (13,012 ) -29 %
Total Performance Fees   91,724     (22,914 )   90,313     149,240     114,926     23,202   25 %
Investment Income (Loss) N/M
Realized (495 ) 3,141 9,940 2,746 17,907 18,402 N/M
Unrealized   84,684     17,275     30,491     20,838     29,126     (55,558 ) -66 %
Total Investment Income

(Loss)

84,189 20,416 40,431 23,584 47,033 (37,156 ) -44 %
Interest Income and Dividend

Revenue

3,428 2,728 3,802 4,086 3,505 77 2 %
Other   100     460     1,061     400     811     711   N/M  
Total Revenues   276,845     83,852     214,941     252,772     273,663     (3,182 ) -1 %
Expenses
Compensation and Benefits
Compensation 46,910 46,612 47,552 38,271 56,254 9,344 20 %
Performance Fee

Compensation

Realized 6,005 128 10,783 15,711 7,718 1,713 29 %
Unrealized   6,344     (10,296 )   18,306     6,966     5,464     (880 ) -14 %
Total Compensation

and Benefits

59,259 36,444 76,641 60,948 69,436 10,177 17 %
Other Operating Expenses   24,431     28,677     26,359     30,122     28,713     4,282   18 %
Total Expenses   83,690     65,121     103,000     91,070     98,149     14,459   17 %
Economic Net Income $ 193,155   $ 18,731   $ 111,941   $ 161,702   $ 175,514   $ (17,641 ) -9 %
 
Net Fee Related Earnings

from Operations

$ 28,712   $ 11,464   $ 17,465   $ 7,355   $ 23,803   $ (4,909 ) -17 %

____________________

* 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.

continued...

THE BLACKSTONE GROUP L.P.

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

(Dollars in Thousands)

           
Three Months Ended
              Mar 31, 2011 vs.
Mar 31, Jun 30, Sep 30, Dec 31, Mar 31, Mar 31, 2010
2010 2010 2010 2010 2011 $   %
Real Estate
Revenues
Management Fees
Base Management Fees $ 83,060 $ 82,916 $ 83,232 $ 89,220 $ 95,439 $ 12,379 15%

Transaction and Other Fees, Net *

1,942 2,979 8,538 46,455 21,543 19,601 N/M

Management Fee Offsets **

  (489 )   (110 )   (401 )   (71 )   (505 )   (16 ) -3%

Total Management Fees

  84,513     85,785     91,369     135,604     116,477     31,964   38%
Performance Fees
Realized 5,948 16,319 5,010 13,011 2,593 (3,355 ) -56%
Unrealized   11,391     21,117     69,910     154,553     368,104     356,713   N/M
Total Performance Fees   17,339     37,436     74,920     167,564     370,697     353,358   N/M
Investment Income
Realized 2,632 3,900 2,159 2,560 2,919 287 11%
Unrealized   46,892     79,543     83,968     108,576     61,406     14,514   31%
Total Investment Income 49,524 83,443 86,127 111,136 64,325 14,801 30%

Interest Income and Dividend Revenue

2,718 2,178 3,026 3,251 3,288 570 21%
Other   (1,876 )   (390 )   2,330     (400 )   860     2,736   N/M
Total Revenues   152,218     208,452     257,772     417,155     555,647     403,429   N/M
Expenses
Compensation and Benefits
Compensation 40,150 44,528 43,219 55,280 58,501 18,351 46%
Performance Fee

Compensation

Realized 1,524 8,895 1,806 3,619 1,230 (294 ) -19%
Unrealized   6,937     15,999     46,182     53,746     106,501     99,564   N/M
Total Compensation

and Benefits

48,611 69,422 91,207 112,645 166,232 117,621 N/M

Other Operating Expenses

  14,290     17,647     18,584     23,668     28,366     14,076   99%
Total Expenses   62,901     87,069     109,791     136,313     194,598     131,697   N/M
Economic Net Income $ 89,317   $ 121,383   $ 147,981   $ 280,842   $ 361,049   $ 271,732   N/M
 

Net Fee Related Earnings from Operations

$ 29,825   $ 24,743   $ 39,853   $ 52,457   $ 31,233   $ 1,408   5%

____________________

* Transaction and Other Fees, Net, are net of amounts, if any, shared with limited partners.
** Primarily placement fees.

continued...

THE BLACKSTONE GROUP L.P.

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

(Dollars in Thousands)

           
Three Months Ended
          Mar 31, 2011 vs.
Mar 31, Jun 30, Sep 30, Dec 31, Mar 31, Mar 31, 2010
2010 2010 2010 2010 2011 $   %
Hedge Fund Solutions
Revenues
Management Fees
Base Management Fees $ 63,866 $ 65,533 $ 69,305 $ 74,069 $ 75,612 $ 11,746 18%
Transaction and Other Fees,

Net *

809 870 846 1,047 727 (82 ) -10%
Management Fee Offsets **     (72 )   (163 )   (95 )   (124 )   (124 ) N/M
Total Management Fees   64,675     66,331     69,988     75,021   76,215   11,540   18%
Performance Fees
Realized 2,117 1,021 872 52,616 893 (1,224 ) -58%
Unrealized   10,413     (2,596 )   14,137     (18,972 )   19,253   8,840   85%
Total Performance Fees   12,530     (1,575 )   15,009     33,644   20,146   7,616   61%
Investment Income (Loss)
Realized (250 ) 5,438 1,050 3,580 1,341 1,591 N/M
Unrealized   11,880     (6,749 )   7,831     6,399   7,120   (4,760 ) -40%
Total Investment Income

(Loss)

11,630 (1,311 ) 8,881 9,979 8,461 (3,169 ) -27%
Interest Income and Dividend

Revenue

475 353 498 543 516 41 9%
Other   (83 )   (40 )   270     (50 )   104   187   N/M
Total Revenues   89,227     63,758     94,646     119,137   105,442   16,215   18%
Expenses
Compensation and Benefits
Compensation 20,742 26,388 24,506 23,750 28,657 7,915 38%
Performance Fee

Compensation

Realized 771 356 3,313 16,193 300 (471 ) -61%
Unrealized   3,783     (977 )   5,075     (6,814 )   5,358   1,575   42%
Total Compensation

and Benefits

25,296 25,767 32,894 33,129 34,315 9,019 36%
Other Operating Expenses   11,285     12,353     12,388     15,334   13,008   1,723   15%
Total Expenses   36,581     38,120     45,282     48,463   47,323   10,742   29%
Economic Net Income $ 52,646   $ 25,638   $ 49,364   $ 70,674 $ 58,119 $ 5,473   10%
 
Net Fee Related Earnings

from Operations

$ 31,542   $ 26,857   $ 36,082   $ 29,240 $ 33,136 $ 1,594   5%

____________________

* Transaction and Other Fees, Net, are net of amounts, if any, shared with limited partners.

** Primarily placement fees.

continued...

THE BLACKSTONE GROUP L.P.

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

(Dollars in Thousands)

           
Three Months Ended
             

Mar 31, 2011 vs.

Mar 31, Jun 30, Sep 30, Dec 31, Mar 31,

Mar 31, 2010

2010 2010 2010 2010 2011 $   %
Credit Businesses
Revenues
Management Fees
Base Management Fees $ 39,613 $ 47,670 $ 50,820 $ 56,860 $ 54,601 $ 14,988 38%
Transaction and Other Fees,

Net *

536 299 216 606 745 209 39%
Management Fee Offsets **   (689 )   3     (19 )   (19 )   (18 )   671   97%
Total Management Fees   39,460     47,972     51,017     57,447     55,328     15,868   40%
Performance Fees
Realized (359 ) 27,928 15,343 64,968 9,725 10,084 N/M
Unrealized   64,980     (15,239 )   63,199     40,239     85,303     20,323   31%
Total Performance Fees   64,621     12,689     78,542     105,207     95,028     30,407   47%
Investment Income (Loss)
Realized 3,233 3,291 658 2,518 1,235 (1,998 ) -62%
Unrealized   7,835     (3,444 )   5,350     (269 )   4,532     (3,303 ) -42%
Total Investment Income

(Loss)

11,068 (153 ) 6,008 2,249 5,767 (5,301 ) -48%
Interest Income and Dividend

Revenue

673 403 1,252 710 453 (220 ) -33%
Other   (459 )   (332 )   330     (27 )   98     557   N/M
Total Revenues   115,363     60,579     137,149     165,586     156,674     41,311   36%
Expenses
Compensation and Benefits
Compensation 28,343 26,982 28,774 39,158 30,325 1,982 7%
Performance Fee

Compensation

Realized (559 ) 13,500 9,060 37,211 5,295 5,854 N/M
Unrealized   37,536     (5,618 )   34,760     16,717     45,202     7,666   20%
Total Compensation

and Benefits

65,320 34,864 72,594 93,086 80,822 15,502 24%
Other Operating Expenses   8,290     12,167     9,669     8,980     15,357     7,067   85%
Total Expenses   73,610     47,031     82,263     102,066     96,179     22,569   31%
Economic Net Income $ 41,753   $ 13,548   $ 54,886   $ 63,520   $ 60,495   $ 18,742   45%
 
Net Fee Related Earnings

from Operations

$ 2,594   $ 7,695   $ 13,252   $ 10,028   $ 8,987   $ 6,393   N/M

____________________

* Transaction and Other Fees, Net, are net of amounts, if any, shared with limited partners.

** Primarily placement fees.

continued...

THE BLACKSTONE GROUP L.P.

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

(Dollars in Thousands)

                           
Three Months Ended
 
Mar 31, 2011 vs.
Mar 31, Jun 30, Sep 30, Dec 31, Mar 31, Mar 31, 2010
2010 2010 2010 2010 2011 $ %
Financial Advisory
Revenues
Advisory Fees $ 76,568 $ 134,099 $ 84,541 $ 130,932 $ 70,252 $ (6,316 ) -8%

Transaction and Other Fees, Net

  1     102       259     6     5   N/M

Total Advisory and Transaction Fees

  76,569     134,201     84,541   131,191     70,258     (6,311 ) -8%
Investment Income (Loss)
Realized 187 (49 ) 469 207 97 (90 ) -48%
Unrealized   230     561     607   (864 )   393     163   71%

Total Investment Income (Loss)

417 512 1,076 (657 ) 490 73 18%

Interest Income and Dividend Revenue

1,396 1,268 1,609 1,699 1,686 290 21%
Other   (932 )   (342 )   477   (1,115 )   386     1,318   N/M
Total Revenues   77,450     135,639     87,703   131,118     72,820     (4,630 ) -6%
Expenses

Compensation and Benefits

Compensation   54,492     76,152     66,531   80,774     56,161     1,669   3%
Total Compensation

and Benefits

54,492 76,152 66,531 80,774 56,161 1,669 3%
Other Operating Expenses   14,727     17,316     17,253   20,976     17,531     2,804   19%
Total Expenses   69,219     93,468     83,784   101,750     73,692     4,473   6%
Economic Net Income (Loss) $ 8,231   $ 42,171   $ 3,919 $ 29,368   $ (872 ) $ (9,103 ) N/M
 
Net Fee Related Earnings (Loss)

from Operations

$ 6,072   $ 37,156   $ 6,262 $ 23,660   $ (3,979 ) $ (10,051 ) N/M

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,
2010 2010 2010 2010 2011
Private Equity
Economic Net Income $ 193,155 $ 18,731 $ 111,941 $ 161,702 $ 175,514

Performance Fees Adjustment (a)

(91,724 ) 22,914 (90,313 ) (149,240 ) (114,926 )

Investment Income (Loss) Adjustment (b)

(84,189 ) (20,416 ) (40,431 ) (23,584 ) (47,033 )

Investment Income - Blackstone's Treasury Cash Management Strategies (c)

1,650 2,278 5,052 (3,358 ) 275

Performance Fee Compensation and Benefits Adjustment (d)

12,349 (10,168 ) 29,089 22,677 13,182

Taxes Payable (e)

  (2,529 )   (1,875 )   2,127     (842 )   (3,209 )

Net Fee Related Earnings from Operations

$ 28,712   $ 11,464   $ 17,465   $ 7,355   $ 23,803  
 
Real Estate
Economic Net Income $ 89,317 $ 121,383 $ 147,981 $ 280,842 $ 361,049
Performance Fees Adjustment (a) (17,339 ) (37,436 ) (74,920 ) (167,564 ) (370,697 )
Investment Income (Loss) Adjustment (b) (49,524 ) (83,443 ) (86,127 ) (111,136 ) (64,325 )

Investment Income - Blackstone's Treasury Cash Management Strategies (c)

1,311 1,811 4,016 (2,669 ) 257

Performance Fee Compensation and Benefits Adjustment (d)

8,461 24,894 47,988 57,365 107,731
Taxes Payable (e)   (2,401 )   (2,466 )   915     (4,381 )   (2,782 )
Net Fee Related Earnings from Operations $ 29,825   $ 24,743   $ 39,853   $ 52,457   $ 31,233  
(a)   This adjustment removes from ENI the segment amount of Performance Fees.
(b) This adjustment removes from ENI the segment amount of Investment Income (Loss).
(c) This adjustment represents the realized and unrealized gain on Blackstone’s Treasury 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.
(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.

continued...

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 - Continued

(Dollars in Thousands)

           
Three Months Ended
March 31, June 30, September 30, December 31, March 31,
2010 2010 2010 2010 2011
Hedge Fund Solutions
Economic Net Income $ 52,646 $ 25,638 $ 49,364 $ 70,674 $ 58,119
Performance Fees Adjustment (a) (12,530 ) 1,575 (15,009 ) (33,644 ) (20,146 )
Investment Income (Loss) Adjustment (b) (11,630 ) 1,311 (8,881 ) (9,979 ) (8,461 )

Investment Income - Blackstone's Treasury Cash Management Strategies (c)

215 292 647 (430 ) 40

Performance Fee Compensation and Benefits Adjustment (d)

4,554 (621 ) 8,388 9,379 5,658
Taxes Payable (e)   (1,713 )   (1,338 )   1,573     (6,760 )   (2,074 )
Net Fee Related Earnings from Operations $ 31,542   $ 26,857   $ 36,082   $ 29,240   $ 33,136  
 
Credit Businesses
Economic Net Income $ 41,753 $ 13,548 $ 54,886 $ 63,520 $ 60,495
Performance Fees Adjustment (a) (64,621 ) (12,689 ) (78,542 ) (105,207 ) (95,028 )
Investment Income (Loss) Adjustment (b) (11,068 ) 153 (6,008 ) (2,249 ) (5,767 )

Investment Income - Blackstone's Treasury Cash Management Strategies (c)

139 197 438 2,494 667

Performance Fee Compensation and Benefits Adjustment (d)

36,977 7,882 43,820 53,928 50,497

Taxes Payable (e)

  (586 )   (1,396 )   (1,342 )   (2,458 )   (1,877 )

Net Fee Related Earnings from Operations

$ 2,594   $ 7,695   $ 13,252   $ 10,028   $ 8,987  
____________________
(a)   This adjustment removes from ENI the segment amount of Performance Fees.
(b) This adjustment removes from ENI the segment amount of Investment Income (Loss).
(c) This adjustment represents the realized and unrealized gain on Blackstone’s Treasury 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.
(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.

continued...

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 - Continued

(Dollars in Thousands)

           
Three Months Ended
March 31, June 30, September 30, December 31, March 31,
2010 2010 2010 2010 2011
Financial Advisory
Economic Net Income (Loss) $ 8,231 $ 42,171 $ 3,919 $ 29,368 $ (872 )
Investment Income (Loss) Adjustment (a) (417 ) (512 ) (1,076 ) 657 (490 )

Investment Income - Blackstone's Treasury Cash Management Strategies (b)

350 484 1,073 (713 ) 63
Taxes Payable (c)   (2,092 )   (4,987 )   2,346     (5,652 )   (2,680 )

Net Fee Related Earnings (Loss) from Operations

$ 6,072   $ 37,156   $ 6,262   $ 23,660   $ (3,979 )

____________________

(a)   This adjustment removes from ENI the segment amount of Investment Income (Loss).
(b) This adjustment represents the realized and unrealized gain on Blackstone’s Treasury cash management strategies which are a component of Investment Income (Loss) but included in Net Fee Related Earnings.
(c) Represents an implied payable for income taxes calculated using a similar methodology applied in calculating the current provision for The Blackstone Group L.P.

continued...

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 - Continued

(Dollars in Thousands)

             
Three Months Ended
March 31, June 30, September 30, December 31, March 31,
2010 2010 2010 2010 2011
Income (Loss) Before Provision (Benefit)

for Taxes

$ (227,671 ) $ (636,928 ) $ 143,302 $ 198,643 $ 117,214
IPO and Acquisition-Related Charges (a) 726,722 749,930 438,568 453,975 421,861
Amortization of Intangibles (b) 39,512 40,822 40,872 44,172 44,174

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

  (153,461 )   67,647     (254,651 )   (90,684 )   71,056  
Total Segments
Total Segments, Economic Net Income 385,102 221,471 368,091 606,106 654,305
Performance Fees Adjustment (d) (186,214 ) (25,636 ) (258,784 ) (455,655 ) (600,797 )
Investment Income (Loss) Adjustment (e) (156,828 ) (102,907 ) (142,523 ) (146,291 ) (126,076 )

Investment Income - Blackstone's Treasury Cash Management Strategies (f)

3,665 5,062 11,226 (4,676 ) 1,302
Performance Fee Compensation and

Benefits Adjustment (g)

62,341 21,987 129,285 143,349 177,068
Taxes Payable (h)   (9,321 )   (12,062 )   5,619     (20,093 )   (12,622 )
Net Fee Related Earnings from Operations 98,745 107,915 112,914 122,740 93,180
Realized Performance Fees (i) 46,140 23,495 41,077 122,635 81,057
Realized Investment Income (Loss) (j) 5,307 15,721 14,276 11,611 23,499

Adjustment Related to Realized Investment Income - Blackstone's Treasury Cash Management Strategies (k)

(1,264 ) 512 (4,874 ) (2,156 ) (1,010 )

Other Payables Including Payable Under Tax Receivable Agreement

  (232 )   (68 )   2,923     (15,633 )   (177 )
Distributable Earnings $ 148,696   $ 147,575   $ 166,316   $ 239,197   $ 196,549  
 

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

$ 120,805   $ 132,866   $ 124,195   $ 163,600   $ 126,666  
____________________
(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 and includes the amount of Management Fee Revenues associated with Consolidated CLO Entities.
(d) This adjustment removes from ENI the total segment amount of Performance Fees.
(e) This adjustment removes from ENI the total segment amount of Investment Income (Loss).
(f) This adjustment represents the realized and unrealized gain on Blackstone’s Treasury cash management strategies which are a component of Investment Income (Loss) but included in Net Fee Related Earnings.
(g) This adjustment removes from expenses the compensation and benefit amounts related to Blackstone’s profit sharing plans related to Performance Fees.
(h) Represents an implied payable for income taxes calculated using a similar methodology applied in calculating the current provision for The Blackstone Group L.P.
(i) Represents the adjustment for realized Performance Fees net of corresponding actual amounts due under Blackstone’s profit sharing plans related thereto.
(j) Represents the adjustment for Blackstone’s Investment Income (Loss) - Realized.
(k) Represents the elimination of Realized Investment Income attributable to Blackstone’s Treasury cash management strategies which is a component of both Net Fee Related Earnings from Operations and Realized Investment Income (Loss).
(l)

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 cash taxes payable component from the Distributable Earnings reconciliation presented above, which is included in (i), and segment interest and depreciation and amortization. The cash taxes payable component of (i) was $9.3 million, $12.1 million, $(5.6) million, $20.1 million and $12.6 million for the three months ended March 31, 2010, June 30, 2010, September 30, 2010, December 31, 2010, and March 31, 2011, respectively. Interest was $6.3 million, $6.8 million, $10.3 million, $13.2 million and $12.7 million for the three months ended March 31, 2010, June 30, 2010, September 30, 2010, December 31, 2010, and March 31, 2011, respectively. Depreciation and amortization was $6.4 million, $6.1 million, $6.6 million, $7.6 million and $8.2 million for the three months ended March 31, 2010, June 30, 2010, September 30, 2010, December 31, 2010, and March 31, 2011, respectively.

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.

 
        Three Months Ended
March 31,
2011   2010
Fee Related Earnings
Revenues
Total Management and Advisory Fees (a) $ 425,666 $ 362,621
Interest and Dividend Revenue (a) 9,448 8,690
Other (a) 2,259 (3,250 )
Investment Income - Blackstone's Treasury Cash Management Strategies (b)   1,302     3,665  
Total Revenues   438,675     371,726  
Expenses
Compensation and Benefits - Compensation (a) 229,898 190,637
Other Operating Expenses (a) 102,975 73,023
Cash Taxes (c)   12,622     9,321  
Total Expenses   345,495     272,981  
Net Fee Related Earnings from Operations   93,180     98,745  
Performance Fees, Net of Related Compensation
Performance Fees - Realized (a) 95,600 53,881
Compensation and Benefits - Performance Fee Compensation - Realized (a)   (14,543 ) (7,741 )
Total Performance Fees, Net of Related Compensation   81,057   46,140  
Investment Income and Other
Investment Income - Realized (a) 23,499 5,307
Adjustment Related to Realized Investment Income -

Blackstone's Treasury Cash Management Strategies (d)

(1,010 ) (1,264 )
Other Payables Including Payable Under Tax Receivable Agreement   (177 )   (232 )
Total Investment Income and Other   22,312     3,811  
Distributable Earnings $ 196,549   $ 148,696  
_________________________
(a)   Represents the total segment amounts of the respective captions.
(b) Represents the inclusion of Investment Income from Blackstone’s Treasury 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 Treasury 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—Basic and Diluted to Weighted-Average Economic Net Income Adjusted Units—Basic and Diluted and of Total GAAP Common Units Outstanding—Basic and Diluted to Economic Net Income Adjusted Units—Basic and Diluted and of Total GAAP Common Units Outstanding to Distributable Earnings Units Outstanding

 

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

 

     
Three Months Ended
March 31,
2011 2010
Total GAAP Weighted-Average Common Units Outstanding - Basic 447,742,389 333,433,864
Adjustments:
Weighted-Average Unvested Deferred Restricted Common Units

9,910,527

Total GAAP Weighted-Average Common Units Outstanding - Diluted

457,652,916

333,433,864
Adjustments:
Weighted-Average Blackstone Holdings Partnership Units 658,290,684 764,866,007
Weighted-Average Unvested Deferred Restricted Common Units 28,626,333
Weighted-Average Economic Net Income Adjusted Units - Diluted

1,115,943,600

1,126,926,204
 
 

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

 
March 31,
2011 2010
Total GAAP Common Units Outstanding - Basic

464,502,284

347,181,400
Adjustments:
Blackstone Holdings Partnership Units 639,228,191 751,496,468
Unvested Deferred Restricted Common Units 24,297,037 27,815,594
Economic Net Income Adjusted Units - Basic 1,128,027,512 1,126,493,462

 

March 31,
2011 2010
Total GAAP Common Units Outstanding - Diluted

474,412,811

347,181,400
Adjustments:
Blackstone Holdings Partnership Units 639,228,191 751,496,468
Unvested Deferred Restricted Common Units 27,815,594
Economic Net Income Adjusted Units - Diluted

1,113,641,002

1,126,493,462
 
 

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

 
March 31,
2011 2010
Total GAAP Common Units Outstanding (a) 464,502,284 347,181,400
Adjustments:
Blackstone Holdings Partnership Units 639,228,191 751,496,468
Distributable Earnings Units Outstanding 1,103,730,475 1,098,677,868
______________________
(a)   Common unit holders receive tax benefits from deductions taken by Blackstone’s corporate tax paying subsidiaries and bear responsibility for the deduction from Distributable Earnings of the Payable Under the Tax Receivable Agreement and certain other tax-related payables.

THE BLACKSTONE GROUP L.P.

Exhibit 5. Assets Under Management

(Dollars in Thousands)

         
As of and for the Periods Ended
March 31,
2011 2010
Total Assets Under Management
  (End of Period)
Private Equity $ 43,955,392 $ 28,022,326
Real Estate 34,990,590 21,880,655
Hedge Fund Solutions 39,542,086 30,322,510
Credit Businesses   31,475,397   24,290,357
$ 149,963,465 $ 104,515,848
Fee-Earning Assets Under Management
  (End of Period)
Private Equity $ 35,892,804 $ 25,173,936
Real Estate 26,454,012 23,820,697
Hedge Fund Solutions 35,847,002 28,902,220
Credit Businesses   25,838,878   20,173,319
$ 124,032,696 $ 98,070,172
Weighted-Average Fee-Earning
Assets Under Management
  (For the Three Months Ended)
Private Equity $ 35,775,826 $ 25,010,887
Real Estate 26,454,180 23,719,287
Hedge Fund Solutions 35,320,896 28,506,845
Credit Businesses   25,482,707   20,259,313
$ 123,033,609 $ 97,496,332

THE BLACKSTONE GROUP L.P.

Exhibit 6. Limited Partner Capital Invested Metrics

(Dollars in Thousands)

           
As of and for the Periods
Ended March 31,
2011 2010
Limited Partner Capital Invested
  (For the Three Months Ended)
Private Equity $ 652,947 $ 387,904
Real Estate (a) 654,428 424,868
Credit Businesses   154,298   157,052
$ 1,461,673 $ 969,824
 
Fund Level Unrealized Value (b)
  (End of Period)
Private Equity
Cost $ 20,262,265 $ 19,695,417
Unrealized Value $ 22,646,168 $ 19,695,029
Real Estate (a)
Cost $ 16,637,075 $ 12,478,211
Unrealized Value $ 20,805,296 $ 8,355,147
Credit Businesses
Cost $ 3,668,448 $ 3,088,626
Unrealized Value $ 4,418,781 $ 3,424,993
_________________________
(a)   Limited Partner Capital Invested and Fund Level Unrealized Value for the Real Estate segment represents activity related to funds raised by Blackstone.
(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.

THE BLACKSTONE GROUP L.P.

Exhibit 7. Definitions of Non-GAAP Financial Information

 

Blackstone discloses the following financial measures that are calculated and presented on the basis of methodologies other than in accordance with generally accepted accounting principles in the United States of America (“non-GAAP”) in the attached press release:

  • Blackstone uses Economic Net Income, or “ENI”, as a key measure of value creation and as a benchmark of its performance. ENI represents segment net income excluding the impact of income taxes and initial public offering (“IPO”) and acquisition-related items, including charges associated with equity-based compensation, the amortization of intangibles and corporate actions including acquisitions. For segment reporting purposes, revenues and expenses are presented on a basis that deconsolidates the investment funds we manage.

    Total Segment ENI equals the aggregate of ENI for all segments. ENI is used by management primarily in making resource deployment and compensation decisions across Blackstone’s five segments.
  • Economic Net Income After Taxes represents ENI adjusted to reflect the implied provision (benefit) for income taxes calculated using a similar methodology as applied in calculating the tax provision (benefit) for The Blackstone Group L.P. but consistent with the ENI concepts as noted above.
  • Blackstone uses Net Fee Related Earnings from Operations as a key measure to highlight earnings from operations excluding: (a) the income related to performance fees and related carry plan costs, (b) income earned from Blackstone’s investments in the Blackstone Funds, and (c) realized and unrealized gains (losses) from other investments except for such gains (losses) from Blackstone’s Treasury cash management strategies. Management uses Net Fee Related Earnings from Operations as a measure to assess whether recurring revenue from our businesses is sufficient to adequately cover all of our operating expenses and generate profits. Net Fee Related Earnings from Operations equals contractual fee revenues, investment income from Blackstone’s Treasury cash management strategies and interest income, less (a) compensation expenses (which includes amortization of non-IPO and non-acquisition-related equity-based awards, but excludes amortization of IPO and acquisition-related equity-based awards, carried interest and incentive fee compensation), (b) other operating expenses, and (c) cash taxes due on earnings from operations as calculated using a similar methodology as applied in calculating the current tax provision (benefit) for The Blackstone Group L.P.
  • Blackstone uses Earnings Before Interest, Taxes and Depreciation and Amortization from Net Fee Related Earnings from Operations (“EBITDA-NFRE”) as a measure of segment performance and an indicator of our ability to cover our recurring operating expenses. EBITDA-NFRE equals Net Fee Related Earnings from Operations before segment interest expense, segment depreciation and amortization and the cash taxes included in Net Fee Related Earnings from Operations.
  • Distributable Earnings, which is derived from our segment reported results, is a supplemental measure to assess performance and amounts available for distributions to Blackstone unitholders, including Blackstone personnel and others who are limited partners of the Blackstone Holdings partnerships. Distributable Earnings is intended to show the amount of net realized earnings without the effects of the consolidation of the Blackstone Funds.

    Distributable Earnings, which is a component of Economic Net Income, is the sum across all segments of: (a) Total Management and Advisory Fees, (b) Interest and Dividend Revenue, (c) Other Revenue, (d) Realized Performance Fees, and (e) Realized Investment Income (Loss); less (a) Compensation, (b) Realized Performance Fee Compensation, (c) Other Operating Expenses, and (d) Cash Taxes and Payables Under the Tax Receivable Agreement. Distributable Earnings is reconciled to Blackstone’s Consolidated Statement of Operations. It is Blackstone’s current intention that on an annual basis it will distribute to unitholders all of its Distributable Earnings, less realized investment gains, 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.

Reconciliations of these non-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP are included within this press release. These non-GAAP financial measures should be considered in addition to and not as a substitute for, or superior to, financial measures presented in accordance with GAAP.

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