Blackstone Reports Second Quarter 2011 Results

Economic Net Income increased to $703 million for the second quarter of 2011, up 243% from $205 million for the second quarter of 2010.

Distributable Earnings increased to $185 million for the second quarter of 2011, up 25% from $148 million in the second quarter of 2010.

GAAP Results Attributable to The Blackstone Group L.P. included net income of $86 million in the second quarter of 2011, compared to a net loss of $193 million in the second quarter of 2010, in each case including net IPO and acquisition-related accounting charges.

Fee-Earning Assets Under Management increased 27% to $129 billion at June 30, 2011, from $101 billion at June 30, 2010, while Total Assets Under Management increased 43% to $159 billion at June 30, 2011.

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

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

Economic Net Income (“ENI”) was $703.3 million for the second quarter of 2011, an increase of $498.0 million compared to ENI for the second quarter of 2010, and an increase of $135.2 million compared to ENI for the first quarter of 2011. The increase in ENI compared to the second quarter of 2010 was driven principally by strong investment performance across Blackstone’s investment segments, which produced $810.6 million in Performance Fees and Investment Income, more than six times the $128.5 million in the second quarter of 2010, and an increase of $96.2 million, or 23%, in Management and Advisory Fees. The increase in ENI compared to the first quarter of 2011 was driven by an increase of $87.9 million in Management and Advisory Fees to $513.6 million, primarily attributable to Advisory and Transaction Fees, and continued strong investment performance. ENI was $1.3 billion for the six months ended June 30, 2011, an increase of $705.7 million compared to ENI for the six months ended June 30, 2010 of $565.6 million, primarily attributable to Performance Fees net of applicable compensation.

Blackstone’s Fee-Earning Assets Under Management and Total Assets Under Management continued to demonstrate consistently strong growth, rising to a record $129.0 billion and $158.7 billion, respectively, driven both by net inflows and investment appreciation. Blackstone funds had $31.4 billion of committed but uninvested capital, or “dry powder”, at the end of the second quarter of 2011, a record level.

For the second quarter of 2011, Total Segment Revenues were $1.3 billion, up 142% from the second quarter of 2010. The increase was driven by higher Performance Fees, particularly in the Real Estate and Private Equity segments, which increased $412.9 million and $211.5 million, respectively. Total Management Fees increased to $513.6 million, up 23% from $417.5 million in the prior year’s second quarter, principally from the increase in Fee-Earning Assets Under Management.

Total Segment Expenses were $523.9 million for the second quarter of 2011, an increase from $330.8 million for the second quarter of 2010, driven largely by increased accruals for Performance Fee Compensation of $145.8 million for the second quarter of 2011. Compensation, excluding Performance Fee Compensation, was up 26% to $278.7 million. Blackstone’s non-compensation expenses were up 13% from the second quarter of 2010 driven mostly by financing activities and occupancy costs including global expansion.

GAAP results for the second quarter of 2011 included Revenues of $1.3 billion, compared to $550.1 million for the second quarter of 2010, and Net Income Attributable to The Blackstone Group L.P. of $86.2 million, compared to a net loss of $193.3 million for the second quarter of 2010.

Stephen A. Schwarzman, Chairman and Chief Executive Officer, said, “Despite the challenges presented by slowing global economic growth, overall our portfolio companies and real estate investments performed well in the second quarter. The carrying values of our investment funds continued to increase, and we once again reported our best quarterly earnings since becoming a public company four years ago. We experienced inflows across all of our businesses as we captured share and deepened relationships with our limited partner investors. We ended the quarter with record total assets under management of $159 billion, up from $111 billion during the same period 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 three and six months ended June 30, 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     Six Months Ended  
Months Ended June 30, Variance June 30, Variance
2011   2010 $   % 2011   2010 $   %
 
(Dollars in Thousands, Except per Unit Amounts)

Economic Net Income, Total Segments

$ 810,732 $ 221,471 $ 589,261 N/M $ 1,465,037 $ 606,573 $ 858,464 142%

Provision for Income Taxes (a)

  107,468   16,231   91,237 N/M   193,674   40,940   152,734 N/M

Economic Net Income, After Taxes

$ 703,264 $ 205,240 $ 498,024 N/M $ 1,271,363 $ 565,633 $ 705,730 125%
 

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

$

0.63

$ 0.18 $

0.45

N/M $

1.14

$ 0.50 $

0.64

128%

Net Fee Related Earnings from Operations

$ 137,217 $ 107,915 $ 29,302 27% $ 230,397 $ 206,660 $ 23,737 11%

Distributable Earnings

$ 184,532 $ 147,575 $ 36,957 25% $ 381,081 $ 296,271 $ 84,810 29%

Distributable Earnings per Common Unit (c)

$ 0.15 $ 0.13 $ 0.02 15% $ 0.33 $ 0.27 $ 0.06 22%
 

Fee-Earning Assets Under Management:

Private Equity $ 35,778,240 $ 25,190,195 $ 10,588,045 42%
Real Estate 27,919,000 23,841,360 4,077,640 17%
Hedge Fund Solutions 37,244,509 28,832,317 8,412,192 29%

Credit Businesses

  28,059,457   23,556,109   4,503,348 19%

Total Fee-Earning Assets Under Management

$ 129,001,206 $ 101,419,981 $ 27,581,225 27%

(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 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 $399.4 million for the second quarter of 2011 compared to $83.9 million in 2010. Private Equity had six-month revenues of $673.1 million, compared with revenues of $360.7 million in the same period of 2010. The increase from the second quarter of 2010 was principally due to increases in Performance Fees, Investment Income and Management Fees of $211.5 million, $59.6 million and $43.9 million, respectively.

The appreciation of the underlying assets for Blackstone’s contributed Private Equity funds was approximately 9% for the second 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 portfolio companies, Kosmos and Vanguard. As of June 30, 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 $273.2 million for the second quarter of 2011, up from $18.7 million for the second quarter of 2010, primarily a result of higher Performance Fees and Investment Income.

Fee-Earning Assets Under Management were $35.8 billion compared to $25.2 billion in the second quarter of 2010 principally due to the commencement of BCP VI’s investment period.

Dry powder for Private Equity, which is inclusive of amounts related to BCP VI, was $17.3 billion as of June 30, 2011. Limited Partner Capital Invested during the second quarter of 2011 totaled $667.3 million, an increase from $469.8 million invested during the second quarter of 2010. Blackstone’s Private Equity segment’s funds had $560.7 million of Limited Partner Capital committed to transactions which had not yet closed as of June 30, 2011.

Real Estate

Real Estate had revenues of $648.5 million for the second quarter of 2011, compared with revenues of $208.5 million for the second quarter of 2010. Real Estate had six-month revenues of $1.2 billion, compared with revenues of $360.7 million in the same period of 2010. A material portion of the increase in revenues was due to the impact of the “catch-up” provisions of the Real Estate funds’ profit allocations, which specify that once a fund’s preferred return hurdle has been reached, Blackstone is entitled to a disproportionately greater share of the profits until it effectively reaches its full share of performance fees. Improved operating performance, projected cash flows and exit multiples led to an increase in the real estate investments’ carrying values, which drove an increase in Performance Fees. Increased investment activity in the segment led to an increase in Transaction and Other Fees, primarily resulting from the acquisition of the U.S. assets of Centro, one of the leading shopping center owners in the country.

As of June 30, 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 approximately 6.7% for the second quarter of 2011.

ENI for the Real Estate segment was $453.5 million for the second quarter of 2011 compared to $121.4 million for the second quarter of 2010, driven principally by the increase in Performance Fees noted above.

Fee-Earning Assets Under Management were $27.9 billion compared to $23.8 billion for the second quarter of 2010. Fee-Earning Assets Under Management increased principally due to the commencement of Blackstone’s management of the Bank of America Merrill Lynch Asia assets which added $2.1 billion in Fee-Earning Assets Under Management in the fourth quarter of 2010 and $1.1 billion of fee-earning co-investment capital related to the acquisition of the U.S. assets of Centro in the second quarter of 2011.

Dry powder for Real Estate was $7.4 billion as of June 30, 2011. Limited Partner Capital Invested during the second quarter of 2011 was $2.8 billion, up from $643.8 million during the second quarter of 2010. Blackstone’s Real Estate segment’s funds had $592.0 million of Limited Partner Capital committed to transactions which had not yet closed as of June 30, 2011. The BREP VI fund reached approximately 87% invested or committed capital as of the end of the second quarter of 2011 and Blackstone has commenced fund-raising for its next major real estate fund, BREP VII.

Hedge Fund Solutions

Hedge Fund Solutions had revenues of $84.5 million for the second quarter of 2011, compared with revenues of $63.8 million for the second quarter of 2010. The increase from the second quarter of 2010 was principally due to an increase in Total Management Fees of 21% to $80.0 million for the second quarter of 2011. Hedge Fund Solutions had six-month revenues of $189.9 million, compared with revenues of $153.0 million in the same period of 2010.

Despite turbulent markets, the returns for the underlying assets for Blackstone’s Hedge Fund Solutions’ funds were relatively flat for the second quarter of 2011.

ENI for the Hedge Funds Solutions segment was up 28% to $32.9 million for the second quarter of 2011 compared to $25.6 million for the second quarter of 2010 as higher Fee-Earning Assets Under Management drove increases in Management Fees.

Fee-Earning Assets Under Management for the segment grew 29% to $37.2 billion from $28.8 billion at the end of the second 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. Hedge Fund Solutions had $1.6 billion of net inflows of Fee-Earning Assets Under Management for the second quarter of 2011 and $1.3 billion of inflows in July 2011, bringing year to date net fee-earning inflows to $5.0 billion.

As of June 30, 2011, 69% 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 and / or hurdles.

Credit Businesses

Credit Businesses had revenues of $97.8 million for the second quarter of 2011, compared with revenues of $60.6 million for the second quarter of 2010. The increase from the second quarter of 2010 was due to an increase in Performance Fees of 137% to $30.1 million for the second quarter of 2011, resulting from strong fund performance across the segment, and an increase in Total Management Fees of 21% to $58.2 million driven by the increase in Fee-Earning Assets Under Management. Credit Businesses had six-month revenues of $254.5 million, compared with revenues of $175.9 million in the same period of 2010.

The appreciation of the underlying assets for Blackstone’s credit-oriented business was 1.8% for the flagship hedge funds, 4.3% for the mezzanine funds and 2.0% for the rescue lending funds for the second quarter of 2011.

ENI for the Credit Businesses segment was up 199% to $40.6 million for the second quarter of 2011 compared to $13.5 million for the second 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 19% to $28.1 billion from $23.6 billion for the second quarter of 2010. The long only platform had particularly strong year over year growth in Fee-Earning Assets Under Management, increasing to $21.9 billion, up $4.2 billion, or 24%, from the second quarter of last year as the segment continued to launch new products and strategies. Of the $4.2 billion increase in long only Fee-Earning Assets Under Management, $2.1 billion was related to the acquisition of management agreements of CLO vehicles previously owned by Allied Irish Banks. The acquisition closed in the second quarter of 2011.

As of June 30, 2011, 98% 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 89% as of June 30, 2010.

Dry powder of drawdown funds for the Credit Businesses segment was $4.7 billion as of June 30, 2011.

Financial Advisory

Revenues were $104.4 million for the second quarter of 2011, a decrease from $135.6 million for the second quarter of 2010. The decrease in segment revenues was primarily driven by a decrease in the restructuring and reorganization business due to a decline from near-peak revenue levels in the second quarter of 2010, amid an improving economy and continued strength in the credit markets. This decrease was partially offset by an increase in fees earned by Blackstone’s fund placement business and an increase in the Blackstone Advisory Partners’ business driven by an increase in the size of transactions completed compared to the prior year period. Revenues were $177.2 million for the six months ended June 30, 2011, a decrease from $213.1 million in the same period of 2010.

ENI was $10.5 million for the second quarter of 2011 compared to $42.2 million for the second quarter of 2010.

CAPITAL AND LIQUIDITY

As of June 30, 2011, Blackstone had $1.8 billion in cash, Treasury cash management strategies and liquid 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.

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 August 15, 2011. This distribution will be paid on August 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 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 Distributable 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 July 21, 2011 at 11:00 a.m. ET to discuss second 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 97437596, beginning approximately two hours after the event.

Blackstone expects to host conference calls to report its 2011 results as follows: 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 1a. Consolidated Statements of Operations

(Dollars in Thousands, Except Per Unit Data)

   

 

Quarter Ended June 30,
2011 2010
Revenues
Management and Advisory Fees $ 498,040 $ 406,062
Performance Fees
Realized 61,763 51,750
Unrealized   610,488   (19,299)
Total Performance Fees   672,251   32,451
Investment Income
Realized 19,303 10,225
Unrealized   108,711   95,043
Total Investment Income   128,014   105,268
Interest and Dividend Revenue 8,848 6,952
Other   1,128   (645)
Total Revenues   1,308,281   550,088
Expenses
Compensation and Benefits
Compensation 699,432 967,711
Performance Fee Compensation
Realized 27,712 22,879
Unrealized   118,098   (892)
Total Compensation and Benefits 845,242 989,698
General, Administrative and Other 126,118 121,183
Interest Expense 14,185 7,682
Fund Expenses   (714)   9,203
Total Expenses   984,831   1,127,766
Other Income
Net Gains (Losses) from Fund Investment Activities   (74,654)   (59,250)
Income (Loss) Before Provision for Taxes 248,796 (636,928)
Provision for Taxes   64,199   19,392
Net Income (Loss) 184,597 (656,320)

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

(140) (421)

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

(92,408) (57,873)

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

  190,908   (404,706)
Net Income (Loss) Attributable to The Blackstone Group L.P. $ 86,237 $ (193,320)
Net Income (Loss) per Common Unit, Basic and Diluted $ 0.18 $ (0.55)

THE BLACKSTONE GROUP L.P.

Exhibit 1b. Consolidated Statements of Operations

(Dollars in Thousands, Except Per Unit Data)

   
Six Months Ended June 30,
2011 2010
Revenues
Management and Advisory Fees $ 910,778 $ 760,882
Performance Fees
Realized 157,966 105,799
Unrealized   1,122,889   112,480
Total Performance Fees   1,280,855   218,279
Investment Income
Realized 32,086 15,951
Unrealized   216,106   244,263
Total Investment Income   248,192   260,214
Interest and Dividend Revenue 18,338 15,847
Other   3,387   (3,895)
Total Revenues   2,461,550   1,251,327
Expenses
Compensation and Benefits
Compensation 1,358,915 1,892,661
Performance Fee Compensation
Realized 42,255 30,620
Unrealized   280,623   53,708
Total Compensation and Benefits 1,681,793 1,976,989
General, Administrative and Other 255,504 227,562
Interest Expense 27,988 14,867
Fund Expenses   10,410   9,062
Total Expenses   1,975,695   2,228,480
Other Income
Net Gains (Losses) from Fund Investment Activities   (119,845)   112,554
Income (Loss) Before Provision for Taxes 366,010 (864,599)
Provision for Taxes   103,049   29,027
Net Income (Loss) 262,961 (893,626)

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

21,885 23,548

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

(185,489) 78,093

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

  297,624   (680,570)
Net Income (Loss) Attributable to The Blackstone Group L.P. $ 128,941 $ (314,697)
Net Income (Loss) per Common Unit, Basic and Diluted $ 0.28 $ (0.91)

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 Six Months Ended

Jun 30, 2011 vs.

Mar 31, Jun 30, Sep 30, Dec 31, Mar 31, Jun 30, Jun 30, 2010 Jun 30, Jun 30,
2010 2010 2010 2010 2011 2011 $ % 2010 2011
Economic Net Income, Total Segments
Revenues
Management and Advisory Fees
Base Management Fees $ 251,971 $ 262,914 $ 269,434 $ 285,152 $ 305,587 $ 316,474 $ 53,560 20% $ 514,885 $ 622,061
Advisory Fees 76,568 134,099 84,541 130,932 70,252 102,243 (31,856) -24% 210,667 172,495
Transaction and Other Fees, Net * 35,260 20,617 22,948 58,923 58,363 103,561 82,944 N/M 55,877 161,924
Management Fee Offsets **   (1,178)   (179)   (674)   (282)   (8,536)   (8,675)   (8,496) N/M   (1,357)   (17,211)
Total Management and Advisory Fees   362,621   417,451   376,249   474,725   425,666   513,603   96,152 23%   780,072   939,269
Performance Fees
Realized 53,881 46,374 66,039 195,369 95,600 60,215 13,841 30% 100,255 155,815
Unrealized   132,333   (20,738)   192,745   260,286   505,197   612,843   633,581 N/M   111,595   1,118,040
Total Performance Fees   186,214   25,636   258,784   455,655   600,797   673,058   647,422 N/M   211,850   1,273,855
Investment Income
Realized 5,307 15,721 14,276 11,611 23,499 30,732 15,011 95% 21,028 54,231
Unrealized   151,521   87,186   128,247   134,680   102,577   106,837   19,651 23%   238,707   209,414
Total Investment Income 156,828 102,907 142,523 146,291 126,076 137,569 34,662 34% 259,735 263,645
Interest Income and Dividend Revenue 8,690 6,930 10,187 10,289 9,448 9,283 2,353 34% 15,620 18,731
Other   (3,250)   (644)   4,468   (1,192)   2,259   1,128   1,772 N/M   (3,894)   3,387
Total Revenues   711,103   552,280   792,211   1,085,768   1,164,246   1,334,641   782,361 142%   1,263,383   2,498,887
Expenses
Compensation and Benefits
Compensation 190,637 220,662 210,582 237,233 229,898 278,738 58,076 26% 411,299 508,636
Performance Fee Compensation
Realized 7,741 22,879 24,962 72,734 14,543 27,711 4,832 21% 30,620 42,254
Unrealized   54,600   (892)   104,323   70,615   162,525   118,097   118,989 N/M   53,708   280,622
Total Compensation and Benefits 252,978 242,649 339,867 380,582 406,966 424,546 181,897 75% 495,627 831,512
Other Operating Expenses   73,023   88,160   84,253   99,080   102,975   99,363   11,203 13%   161,183   202,338
Total Expenses   326,001   330,809   424,120   479,662   509,941   523,909   193,100 58%   656,810   1,033,850
Total Economic Net Income $ 385,102 $ 221,471 $ 368,091 $ 606,106 $ 654,305 $ 810,732 $ 589,261 N/M $ 606,573 $ 1,465,037
 
Total Net Fee Related Earnings from Operations $ 98,745 $ 107,915 $ 112,914 $ 122,740 $ 93,180 $ 137,217 $ 29,302 27% $ 206,660 $ 230,397
 
* 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 Six Months Ended
               

Jun 30, 2011 vs.

 
Mar 31, Jun 30, Sep 30, Dec 31, Mar 31, Jun 30, Jun 30, 2010 Jun 30, Jun 30,
2010 2010 2010 2010 2011 2011 $   % 2010 2011
Private Equity
Revenues
Management Fees
Base Management Fees $ 65,432 $ 66,795 $ 66,077 $ 65,003 $ 79,935 $ 82,297 $ 15,502 23% $ 132,227 $ 162,232
Transaction and Other Fees, Net * 31,972 16,367 13,348 10,556 35,342 52,353 35,986 N/M 48,339 87,695
Management Fee Offsets **  

--

 

--

  (91)   (97)   (7,889)   (7,629)   (7,629) N/M  

--

  (15,518)
Total Management Fees   97,404   83,162   79,334   75,462   107,388   127,021   43,859 53%   180,566   234,409
Performance Fees
Realized 46,175 1,106 44,814 64,774 82,389 1,362 256 23% 47,281 83,751
Unrealized   45,549   (24,020)   45,499   84,466   32,537   187,190   211,210 N/M   21,529   219,727
Total Performance Fees   91,724   (22,914)   90,313   149,240   114,926   188,552   211,466 N/M   68,810   303,478
Investment Income (Loss)
Realized (495) 3,141 9,940 2,746 17,907 3,021 (120) -4% 2,646 20,928
Unrealized   84,684   17,275   30,491   20,838   29,126   76,947   59,672 N/M   101,959   106,073
Total Investment Income (Loss) 84,189 20,416 40,431 23,584 47,033 79,968 59,552 N/M 104,605 127,001
Interest Income and Dividend Revenue 3,428 2,728 3,802 4,086 3,505 3,197 469 17% 6,156 6,702
Other   100   460   1,061   400   811   665   205 45%   560   1,476
Total Revenues   276,845   83,852   214,941   252,772   273,663   399,403   315,551 N/M   360,697   673,066
Expenses
Compensation and Benefits
Compensation 46,910 46,612 47,552 38,271 56,254 66,694 20,082 43% 93,522 122,948
Performance Fee Compensation
Realized 6,005 128 10,783 15,711 7,718 49 (79) -62% 6,133 7,767
Unrealized   6,344   (10,296)   18,306   6,966   5,464   29,309   39,605 N/M   (3,952)   34,773
Total Compensation and Benefits 59,259 36,444 76,641 60,948 69,436 96,052 59,608 164% 95,703 165,488
Other Operating Expenses   24,431   28,677   26,359   30,122   28,713   30,124   1,447 5%   53,108   58,837
Total Expenses   83,690   65,121   103,000   91,070   98,149   126,176   61,055 94%   148,811   224,325
Economic Net Income $ 193,155 $ 18,731 $ 111,941 $ 161,702 $ 175,514 $ 273,227 $ 254,496 N/M $ 211,886 $ 448,741
 
 
* 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 Six Months Ended
               

Jun 30, 2011 vs.

 
Mar 31, Jun 30, Sep 30, Dec 31, Mar 31, Jun 30, Jun 30, 2010 Jun 30, Jun 30,
2010 2010 2010 2010 2011 2011 $   % 2010 2011
Real Estate
Revenues
Management Fees
Base Management Fees $ 83,060 $ 82,916 $ 83,232 $ 89,220 $ 95,439 $ 97,467 $ 14,551 18% $ 165,976 $ 192,906
Transaction and Other Fees, Net * 1,942 2,979 8,538 46,455 21,543 49,288 46,309 N/M 4,921 70,831
Management Fee Offsets **   (489)   (110)   (401)   (71)   (505)   (745)   (635) N/M   (599)   (1,250)
Total Management Fees   84,513   85,785   91,369   135,604   116,477   146,010   60,225 70%   170,298   262,487
Performance Fees
Realized 5,948 16,319 5,010 13,011 2,593 20,832 4,513 28% 22,267 23,425
Unrealized   11,391   21,117   69,910   154,553   368,104   429,458   408,341 N/M   32,508   797,562
Total Performance Fees   17,339   37,436   74,920   167,564   370,697   450,290   412,854 N/M   54,775   820,987
Investment Income
Realized 2,632 3,900 2,159 2,560 2,919 11,394 7,494 192% 6,532 14,313
Unrealized   46,892   79,543   83,968   108,576   61,406   37,332   (42,211) -53%   126,435   98,738
Total Investment Income 49,524 83,443 86,127 111,136 64,325 48,726 (34,717) -42% 132,967 113,051
Interest Income and Dividend Revenue 2,718 2,178 3,026 3,251 3,288 2,989 811 37% 4,896 6,277
Other   (1,876)   (390)   2,330   (400)   860   515   905 N/M   (2,266)   1,375
Total Revenues   152,218   208,452   257,772   417,155   555,647   648,530   440,078 N/M   360,670   1,204,177
Expenses
Compensation and Benefits
Compensation 40,150 44,528 43,219 55,280 58,501 71,618 27,090 61% 84,678 130,119
Performance Fee Compensation
Realized 1,524 8,895 1,806 3,619 1,230 9,382 487 5% 10,419 10,612
Unrealized   6,937   15,999   46,182   53,746   106,501   91,021   75,022 N/M   22,936   197,522
Total Compensation and Benefits 48,611 69,422 91,207 112,645 166,232 172,021 102,599 148% 118,033 338,253
Other Operating Expenses   14,290   17,647   18,584   23,668   28,366   22,971   5,324 30%   31,937   51,337
Total Expenses   62,901   87,069   109,791   136,313   194,598   194,992   107,923 124%   149,970   389,590
Economic Net Income $ 89,317 $ 121,383 $ 147,981 $ 280,842 $ 361,049 $ 453,538 $ 332,155 N/M $ 210,700 $ 814,587
 
* 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   Six Months Ended
               

Jun 30, 2011 vs.

 
Mar 31, Jun 30, Sep 30, Dec 31, Mar 31, Jun 30, Jun 30, 2010 Jun 30, Jun 30,
2010 2010 2010 2010 2011 2011 $   % 2010 2011
Hedge Fund Solutions
Revenues
Management Fees
Base Management Fees $ 63,866 $ 65,533 $ 69,305 $ 74,069 $ 75,612 $ 79,290 $ 13,757 21% $ 129,399 $ 154,902
Transaction and Other Fees, Net * 809 870 846 1,047 727 861 (9) -1% 1,679 1,588
Management Fee Offsets **  

--

  (72)   (163)   (95)   (124)   (196)   (124) -172%   (72)   (320)
Total Management Fees   64,675   66,331   69,988   75,021   76,215   79,955   13,624 21%   131,006   156,170
Performance Fees

 

Realized 2,117 1,021 872 52,616 893 667 (354) -35% 3,138 1,560
Unrealized   10,413   (2,596)   14,137   (18,972)   19,253   3,441   6,037 N/M   7,817   22,694
Total Performance Fees   12,530   (1,575)   15,009   33,644   20,146   4,108   5,683 N/M   10,955   24,254
Investment Income (Loss)
Realized (250) 5,438 1,050 3,580 1,341 12,855 7,417 136% 5,188 14,196
Unrealized   11,880   (6,749)   7,831   6,399   7,120   (12,864)   (6,115) -91%   5,131   (5,744)
Total Investment Income (Loss) 11,630 (1,311) 8,881 9,979 8,461 (9) 1,302 99% 10,319 8,452
Interest Income and Dividend Revenue 475 353 498 543 516 472 119 34% 828 988
Other   (83)   (40)   270   (50)   104   (38)   2 5%   (123)   66
Total Revenues   89,227   63,758   94,646   119,137   105,442   84,488   20,730 33%   152,985   189,930
Expenses
Compensation and Benefits
Compensation 20,742 26,388 24,506 23,750 28,657 32,288 5,900 22% 47,130 60,945
Performance Fee Compensation
Realized 771 356 3,313 16,193 300 253 (103) -29% 1,127 553
Unrealized   3,783   (977)   5,075   (6,814)   5,358   2,955   3,932 N/M   2,806   8,313
Total Compensation and Benefits 25,296 25,767 32,894 33,129 34,315 35,496 9,729 38% 51,063 69,811
Other Operating Expenses   11,285   12,353   12,388   15,334   13,008   16,075   3,722 30%   23,638   29,083
Total Expenses   36,581   38,120   45,282   48,463   47,323   51,571   13,451 35%   74,701   98,894
Economic Net Income $ 52,646 $ 25,638 $ 49,364 $ 70,674 $ 58,119 $ 32,917 $ 7,279 28% $ 78,284 $ 91,036
 
* 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 Six Months Ended
               

Jun 30, 2011 vs.

 
Mar 31, Jun 30, Sep 30, Dec 31, Mar 31, Jun 30, Jun 30, 2010 Jun 30, Jun 30,
2010 2010 2010 2010 2011 2011 $   % 2010 2011
Credit Businesses
Revenues
Management Fees
Base Management Fees $ 39,613 $ 47,670 $ 50,820 $ 56,860 $ 54,601 $ 57,420 $ 9,750 20% $ 87,283 $ 112,021
Transaction and Other Fees, Net * 536 299 216 606 745 849 550 184% 835 1,594
Management Fee Offsets **   (689)   3   (19)   (19)   (18)   (105)   (108) N/M   (686)   (123)
Total Management Fees   39,460   47,972   51,017   57,447   55,328   58,164   10,192 21%   87,432   113,492
Performance Fees
Realized (359) 27,928 15,343 64,968 9,725 37,354 9,426 34% 27,569 47,079
Unrealized   64,980   (15,239)   63,199   40,239   85,303   (7,246)   7,993 52%   49,741   78,057
Total Performance Fees   64,621   12,689   78,542   105,207   95,028   30,108   17,419 137%   77,310   125,136
Investment Income (Loss)
Realized 3,233 3,291 658 2,518 1,235 3,236 (55) -2% 6,524 4,471
Unrealized  

7,835

  (3,444)   5,350   (269)   4,532   5,437   8,881 N/M   4,391   9,969
Total Investment Income (Loss) 11,068 (153) 6,008 2,249 5,767 8,673 8,826 N/M 10,915 14,440
Interest Income and Dividend Revenue 673 403 1,252 710 453 902 499 124% 1,076 1,355
Other   (459)   (332)   330   (27)   98   (47)   285 86%   (791)   51

Total Revenues

  115,363   60,579   137,149   165,586   156,674   97,800   37,221 61%   175,942   254,474
Expenses
Compensation and Benefits
Compensation 28,343 26,982 28,774 39,158 30,325 34,170 7,188 27% 55,325 64,495
Performance Fee Compensation
Realized (559) 13,500 9,060 37,211 5,295 18,027 4,527 34% 12,941 23,322
Unrealized   37,536   (5,618)   34,760   16,717   45,202   (5,188)   430 8%   31,918   40,014
Total Compensation and Benefits 65,320 34,864 72,594 93,086 80,822 47,009 12,145 35% 100,184 127,831
Other Operating Expenses   8,290   12,167   9,669   8,980   15,357   10,226   (1,941) -16%   20,457   25,583
Total Expenses   73,610   47,031   82,263   102,066   96,179   57,235   10,204 22%   120,641   153,414
Economic Net Income $ 41,753 $ 13,548 $ 54,886 $ 63,520 $ 60,495 $ 40,565 $ 27,017 199% $ 55,301 $ 101,060
 
* 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   Six Months Ended
               

Jun 30, 2011 vs.

 
Mar 31, Jun 30, Sep 30, Dec 31, Mar 31, Jun 30, Jun 30, 2010 Jun 30, Jun 30,
2010 2010 2010 2010 2011 2011 $   % 2010 2011
Financial Advisory
Revenues
Advisory Fees $ 76,568 $ 134,099 $ 84,541 $ 130,932 $ 70,252 $ 102,243 $ (31,856) -24% $ 210,667 $ 172,495
Transaction and Other Fees, Net   1   102  

--

  259   6   210   108 106%   103   216
Total Advisory and Transaction Fees   76,569   134,201   84,541   131,191   70,258   102,453   (31,748) -24%   210,770   172,711
Investment Income (Loss)
Realized 187 (49) 469 207 97 226 275 N/M 138 323
Unrealized   230   561   607   (864)   393   (15)   (576) N/M   791   378
Total Investment Income (Loss) 417 512 1,076 (657) 490 211 (301) -59% 929 701
Interest Income and Dividend Revenue 1,396 1,268 1,609 1,699 1,686 1,723 455 36% 2,664 3,409
Other   (932)   (342)   477   (1,115)   386   33   375 N/M   (1,274)   419
Total Revenues   77,450   135,639   87,703   131,118   72,820   104,420   (31,219) -23%   213,089   177,240
Expenses
Compensation and Benefits
Compensation   54,492   76,152   66,531   80,774   56,161   73,968   (2,184) -3%   130,644   130,129
Total Compensation and Benefits 54,492 76,152 66,531 80,774 56,161 73,968 (2,184) -3% 130,644 130,129
Other Operating Expenses   14,727   17,316   17,253   20,976   17,531   19,967   2,651 15%   32,043   37,498
Total Expenses   69,219   93,468   83,784   101,750   73,692   93,935   467 0%   162,687   167,627
Economic Net Income (Loss) $ 8,231 $ 42,171 $ 3,919 $ 29,368 $ (872) $ 10,485 $ (31,686) -75% $ 50,402 $ 9,613

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)

   
Three Months Ended Six Months Ended
March 31,   June 30,  

September 30,

 

December 31,

  March 31,   June 30, June 30,   June 30,
2010 2010 2010 2010 2011 2011 2010 2011
Income (Loss) Before Provision (Benefit) for Taxes $ (227,671) $ (636,928) $ 143,302 $ 198,643 $ 117,214 $ 248,796 $ (864,599) $ 366,010
IPO and Acquisition-Related Charges (a) 726,722 749,930 438,568 453,975 421,861 424,483 1,476,652 846,344
Amortization of Intangibles (b) 39,512 40,822 40,872 44,172 44,174 44,905 80,334 89,079

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

  (153,461)   67,647   (254,651)   (90,684)   71,056   92,548   (85,814)   163,604
Total Segments
Total Segments, Economic Net Income (Loss) 385,102 221,471 368,091 606,106 654,305 810,732 606,573 1,465,037
Performance Fees Adjustment (d) (186,214) (25,636) (258,784) (455,655) (600,797) (673,058) (211,850) (1,273,855)
Investment Income (Loss) Adjustment (e) (156,828) (102,907) (142,523) (146,291) (126,076) (137,569) (259,735) (263,645)

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

3,665 5,062 11,226 (4,676) 1,302 4,038 8,727 5,340

Performance Fee Compensation and Benefits Adjustment (g)

62,341 21,987 129,285 143,349 177,068 145,808 84,328 322,876
Taxes Payable (h)   (9,321)   (12,062)   5,619   (20,093)   (12,622)   (12,734)   (21,383)   (25,356)
Net Fee Related Earnings from Operations 98,745 107,915 112,914 122,740 93,180 137,217 206,660 230,397
Realized Performance Fees (i) 46,140 23,495 41,077 122,635 81,057 32,504 69,635 113,561
Realized Investment Income (Loss) (j) 5,307 15,721 14,276 11,611 23,499 30,732 21,028 54,231

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

(1,264) 512 (4,874) (2,156) (1,010) (2,343) (752) (3,353)

Other Payables Including Payable Under Tax Receivable Agreement

  (232)   (68)   2,923   (15,633)   (177)   (13,578)   (300)   (13,755)
Distributable Earnings $ 148,696 $ 147,575 $ 166,316 $ 239,197 $ 196,549 $ 184,532 $ 296,271 $ 381,081
 

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 $ 170,856 $ 253,671 $ 297,522

(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, $12.6 million, and $12.7 million for the three months ended March 31, 2010, June 30, 2010, September 30, 2010, December 31, 2010, March 31, 2011, and June 30, 2011, respectively. The cash taxes payable component of (i) was $25.4 million and $21.4 million for the six months ended June 30, 2011 and 2010, respectively. Interest was $6.3 million, $6.8 million, $10.3 million, $13.2 million, $12.7 million, and $13.1 million for the three months ended March 31, 2010, June 30, 2010, September 30, 2010, December 31, 2010, March 31, 2011, and June 30, 2011, respectively. Interest was $25.8 million and $13.1 million for the six months ended June 30, 2011 and 2010, respectively. Depreciation and amortization was $6.4 million, $6.1 million, $6.6 million, $7.6 million, $8.2 million, and $7.8 million for the three months ended March 31, 2010, June 30, 2010, September 30, 2010, December 31, 2010, March 31, 2011, and June 30, 2011, respectively. Depreciation and amortization was $16.0 million and $12.5 million for the six months ended June 30, 2011 and 2010, 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 Six Months Ended
June 30, June 30,
2011   2010 2011   2010
Fee Related Earnings
Revenues
Total Management and Advisory Fees (a) $ 513,603 $ 417,451 $ 939,269 $ 780,072
Interest and Dividend Revenue (a) 9,283 6,930 18,731 15,620
Other (a) 1,128 (644) 3,387 (3,894)

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

  4,038   5,062   5,340   8,727
Total Revenues   528,052   428,799   966,727   800,525
Expenses
Compensation and Benefits - Compensation (a) 278,738 220,662 508,636 411,299
Other Operating Expenses (a) 99,363 88,160 202,338 161,183
Cash Taxes (c)   12,734   12,062   25,356   21,383
Total Expenses   390,835   320,884   736,330   593,865
Net Fee Related Earnings from Operations   137,217   107,915   230,397   206,660
Performance Fees, Net of Related Compensation
Performance Fees - Realized (a) 60,215 46,374 155,815 100,255

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

  (27,711) (22,879)   (42,254)   (30,620)
Total Performance Fees, Net of Related Compensation   32,504 23,495   113,561   69,635
Investment Income and Other
Investment Income (Loss) - Realized (a) 30,732 15,721 54,231 21,028

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

(2,343) 512 (3,353) (752)

Other Payables Including Payable Under Tax Receivable Agreement

  (13,578)   (68)   (13,755)   (300)
Total Investment Income and Other   14,811   16,165   37,123   19,976
Distributable Earnings $ 184,532 $ 147,575 $ 381,081 $ 296,271

(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 to Total GAAP Weighted-Average Common Units Outstanding—Diluted and of Total GAAP Weighted-Average Common Units Outstanding—Diluted to Weighted-Average Economic Net Income Adjusted Units with End of Period Economic Net Income Adjusted Units Outstanding 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 to Total GAAP Weighted-Average Common Units Outstanding—Diluted.

       
Three Months Ended Six Months Ended
June 30, June 30,
2011 2010 2011 2010
Total GAAP Weighted-Average Common Units Outstanding - Basic 476,289,647 354,399,780 462,094,878 344,084,390

Adjustment:

Weighted-Average Unvested Deferred Restricted Common

Units

7,353,999

--

6,523,856

--

Total GAAP Weighted-Average Common Units Outstanding - Diluted 483,643,646 354,399,780 468,618,734 344,084,390

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

       
Three Months Ended

As of and for the
Six Months Ended

June 30, June 30,
2011 2010 2011 2010

Total GAAP Weighted-Average Common Units Outstanding - Diluted

483,643,646

354,399,780

468,618,734

344,084,390
Adjustments:
Weighted-Average Blackstone Holdings Partnership Units 625,526,089 743,034,050 641,817,877 753,889,719

Weighted-Average Unvested Deferred Restricted Common Units

-

27,418,933

-

28,019,298
Weighted-Average Economic Net Income Adjusted Units

1,109,169,735

1,124,852,763

1,110,436,611

1,125,993,407

Economic Net Income Adjusted Units, End of Period

1,110,129,505

1,123,902,642

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

 
June 30,
2011   2010
Total GAAP Common Units Outstanding (a) 483,765,891 359,245,237

Adjustment:

Blackstone Holdings Partnership Units 618,779,283 740,033,677

Distributable Earnings Units Outstanding (b)

1,102,545,174 1,099,278,914
 

(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.

(b) Excludes units which are not entitled to distributions.

THE BLACKSTONE GROUP L.P.

Exhibit 5. Assets Under Management

(Dollars in Thousands)

 
As of and for the Periods Ended
June 30,
2011   2010
Total Assets Under Management
(End of Period)
Private Equity $ 46,728,301 $ 28,360,282
Real Estate 37,605,560 23,922,589
Hedge Fund Solutions 40,578,219 30,176,931
Credit Businesses   33,791,093   28,688,608
$ 158,703,173 $ 111,148,410
Fee-Earning Assets Under Management
(End of Period)
Private Equity $ 35,778,240 $ 25,190,195
Real Estate 27,919,000 23,841,360
Hedge Fund Solutions 37,244,509 28,832,317
Credit Businesses   28,059,457   23,556,109
$ 129,001,206 $ 101,419,981
Weighted-Average Fee-Earning
Assets Under Management
(For the Three Months Ended)
Private Equity $ 35,734,164 $ 25,184,621
Real Estate 26,747,354 23,771,825
Hedge Fund Solutions 36,993,058 29,014,171
Credit Businesses   27,161,734   23,382,930
$ 126,636,310 $ 101,353,547
Weighted-Average Fee-Earning
Assets Under Management
(Year to Date Period Ended)
Private Equity $ 36,004,409 $ 25,276,377
Real Estate 26,785,526 23,745,556
Hedge Fund Solutions 36,355,679 28,783,876
Credit Businesses   26,323,118   21,845,976
$ 125,468,732 $ 99,651,785

THE BLACKSTONE GROUP L.P.

Exhibit 6. Limited Partner Capital Invested Metrics

(Dollars in Thousands)

 
As of and for the Periods
Ended June 30,
2011   2010
Limited Partner Capital Invested
(For the Three Months Ended)
Private Equity $ 667,341 $ 469,808
Real Estate (a) 2,785,188 643,817
Credit Businesses   152,882   264,092
$ 3,605,411 $ 1,377,717
Limited Partner Capital Invested
(Year to Date Period Ended)
Private Equity $ 1,320,288 $ 857,712
Real Estate (a) 3,439,616 1,068,685
Credit Businesses   307,180   421,144
$ 5,067,084 $ 2,347,541
Fund Level Unrealized Value (b)
(End of Period)
Private Equity
Cost $ 20,581,091 $ 20,139,830
Unrealized Value $ 25,078,110 $ 20,605,713
Real Estate (a)
Cost $ 19,382,923 $ 13,081,763
Unrealized Value $ 24,647,701 $ 10,620,256
Credit Businesses
Cost $ 3,355,531 $ 3,332,121
Unrealized Value $ 3,991,861 $ 3,624,684

(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, a benchmark of its performance and in making resource deployment and compensation decisions across its five segments. ENI represents segment net income before taxes excluding transaction-related charges. Transaction-related charges arise from Blackstone’s initial public offering (“IPO”) and other corporate actions, including acquisitions. Transaction-related charges include equity-based compensation charges, the amortization of intangible assets and contingent consideration associated with acquisitions. ENI presents revenues and expenses on a basis that deconsolidates the investment funds Blackstone manages.
  • 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. Blackstone uses Net Fee Related Earnings from Operations as a measure to assess whether recurring revenue from its businesses is sufficient to adequately cover all of its 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 its ability to cover 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 Blackstone’s 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