Blackstone Reports Third Quarter 2011 Results

Economic Net Income was a loss of $342 million for the third quarter of 2011, down from net income of $339 million for the third quarter of 2010. Economic Net Income was $929 million for the nine months ended September 30, 2011, up 3% from 2010.

Distributable Earnings were $120 million for the third quarter of 2011, down from $166 million in the third quarter of 2010. Distributable Earnings were $501 million for the nine months ended September 30, 2011, up 8% from 2010.

GAAP Results Attributable to The Blackstone Group L.P. included a net loss of $275 million in the third quarter of 2011, compared to a net loss of $44 million in the third quarter of 2010, in each case including net IPO and acquisition-related accounting charges.

Fee-Earning Assets Under Management increased 27% to a record $133 billion at September 30, 2011, from $104 billion at September 30, 2010, while Total Assets Under Management increased 32% to $158 billion at September 30, 2011.

Blackstone’s GSO Capital Partners Acquires Harbourmaster Capital.

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

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

Economic Net Income (“ENI”) was a loss of $341.9 million for the third quarter of 2011, a decrease of $681.2 million compared to ENI for the third quarter of 2010. The decrease in ENI compared to the third quarter of 2010 was principally due to market-driven declines in the carrying value of assets as of September 30, 2011 across Blackstone’s investment segments, partially offset by an increase of $66.4 million, or 18%, in Management and Advisory Fees to $442.6 million for the third quarter of 2011. However, since September 30, 2011, U.S. and European markets have rebounded. ENI was $929.4 million for the nine months ended September 30, 2011, an increase of $24.5 million compared to ENI for the nine months ended September 30, 2010 of $904.9 million, primarily attributable to increases in Performance Fees net of applicable compensation and Total Management and Advisory Fees.

Driven both by net inflows and investment appreciation during the last year, Blackstone’s managed assets demonstrated consistently strong growth with Fee-Earning Assets Under Management rising to a record $132.9 billion and Total Assets Under Management rising to $157.7 billion at September 30, 2011. The Blackstone funds had $33.4 billion of committed but uninvested capital, or “dry powder”, at the end of the third quarter of 2011, a record level.

For the third quarter of 2011, Total Segment Revenues were $(140.3) million, down from $792.2 million in the third quarter of 2010, due to lower Performance Fees in the Private Equity, Real Estate and Credit Businesses segments and lower Investment Income. Total Management Fees increased to $442.6 million, up 18% from $376.2 million in the prior year’s third quarter, principally from the increase in Fee-Earning Assets Under Management.

Total Segment Expenses were $239.9 million for the third quarter of 2011, a decrease from $424.1 million for the third quarter of 2010, primarily due to the reversal of accruals for Performance Fee Compensation of $230.2 million to $(100.9) million for the third quarter of 2011. Compensation, excluding Performance Fee Compensation, was up 16% to $243.8 million principally as a result of increased personnel. Blackstone’s non-compensation expenses were up 15% from the third quarter of 2010 driven mostly by financing activities and occupancy costs related to continuing global expansion.

GAAP results for the third quarter of 2011 included Revenues of $(124.1) million, compared to $784.0 million for the third quarter of 2010, and Net Loss Attributable to The Blackstone Group L.P. of $274.6 million, compared to a net loss of $44.4 million for the third quarter of 2010.

Stephen A. Schwarzman, Chairman and Chief Executive Officer, said, “The third quarter presented extremely challenging market conditions, dominated by risk aversion and volatility. While our earnings were not immune to the sharp downward trajectory of global markets, our limited partner investors affirmed their confidence in our world-leading businesses and increased their share of funds with us. We reported net inflows in all of our businesses and grew fee-earning assets under management to a firm record $133 billion, up nearly 30% year over year. During the quarter we capitalized on the significant dislocation in the market and invested $4.8 billion in total capital, our highest level of investment activity since 2007, sowing the seeds for strong future returns.”

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 nine months ended September 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										Nine Months Ended
	Months Ended September 30,					Variance					September 30,				Variance
	2011			2010		$			%		2011		2010		$		%
	(Dollars in Thousands, Except per Unit Amounts)
Economic Net Income (Loss),
Total Segments	$	(380,183	)	$	368,091	$	(748,274	)	N/M		$	1,084,854	$	974,664	$	110,190	11	%
Provision (Benefit) for
Income Taxes (a)		(38,258	)		28,812		(67,070	)	N/M			155,416		69,752		85,664	123	%
Economic Net Income (Loss),
After Taxes	$	(341,925	)	$	339,279	$	(681,204	)	N/M		$	929,438	$	904,912	$	24,526	3	%
Economic Net Income (Loss),
After Taxes per Adjusted
Unit (b)	$	(0.31	)	$	0.31	$	(0.62	)	N/M		$	0.84	$	0.82	$	0.02	2	%
Net Fee Related Earnings from
Operations	$	102,009		$	112,914	$	(10,905	)	-10	%	$	332,406	$	319,574	$	12,832	4	%
Distributable Earnings	$	120,112		$	166,316	$	(46,204	)	-28	%	$	501,193	$	462,587	$	38,606	8	%
Distributable Earnings
per Common Unit (c)	$	0.10		$	0.15	$	(0.05	)	-33	%	$	0.43	$	0.42	$	0.01	2	%
Fee-Earning Assets Under
Management:
Private Equity	$	37,006,024		$	24,311,443	$	12,694,581		52	%
Real Estate		29,981,920			24,345,161		5,636,759		23	%
Hedge Fund Solutions		37,231,013			31,760,599		5,470,414		17	%
Credit Businesses		28,715,420			23,875,979		4,839,441		20	%
Total Fee-Earning Assets
Under Management	$	132,934,377		$	104,293,182	$	28,641,195		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 $(285.1) million for the third quarter of 2011 compared to $214.9 million in 2010. Revenues were $387.9 million for the nine months ended September 30, 2011, compared with revenues of $575.6 million in the same period of 2010. The decrease from the third quarter of 2010 was principally due to decreases in Performance Fees and Investment Income of $378.3 million and $141.6 million, respectively.

The carrying value of assets in contributed Private Equity funds declined by 10.9% for the third quarter of 2011. The carrying value of the segment’s publicly held investments was reduced due to a significant drop in global equities markets during the quarter and lower values of foreign currencies in relation to the U.S. dollar. The segment’s privately held investments declined in carrying value to a lesser extent due to continued strong operating performance of the underlying portfolio companies. For the first two quarters of 2011, the latest available quarterly financial information, growth in revenue and EBITDA of the portfolio companies averaged approximately 12% and 10%, respectively. Private Equity’s portfolio companies continue to exhibit generally positive revenue and earnings growth. As of September 30, 2011, the unrealized value and cumulative realized proceeds, before carried interest, fees and expenses, for Blackstone’s contributed Private Equity funds was 1.4 times investors’ original investments. On a realized/partially realized basis, this multiple was 2.3 times investors' original investments.

Economic Net Income was a loss of $319.5 million for the third quarter of 2011, down from income of $111.9 million for the third quarter of 2010, primarily a result of lower Performance Fees and Investment Income.

Fee-Earning Assets Under Management were $37.0 billion compared to $24.3 billion in the third quarter of 2010 principally due to the commencement of the investment period for BCP VI.

Dry powder for Private Equity, which is inclusive of amounts related to BCP VI, was $16.9 billion as of September 30, 2011. Limited Partner Capital Invested during the third quarter of 2011 totaled $1.4 billion, an increase from $678.9 million during the third quarter of 2010. Blackstone’s Private Equity segment’s funds had $689.8 million of Limited Partner Capital committed to transactions which had not yet closed as of September 30, 2011.

Real Estate

Real Estate had revenues of $(15.2) million for the third quarter of 2011, compared with revenues of $257.8 million for the third quarter of 2010. Real Estate had nine-month revenues of $1.2 billion, compared with revenues of $618.4 million in the same period of 2010. The decrease from the third quarter of 2010 was principally due to decreases in Performance Fees and Investment Income of $189.8 million and $104.9 million, respectively.

The carrying value of assets in contributed Real Estate funds, including co-investments, increased 0.1% for the third quarter of 2011. The segment’s properties continued to demonstrate solid growth in revenue and net operating income. For the third quarter of 2011, RevPAR (Revenue per Available Room) of Blackstone’s investments increased between 6% and 8% year over year. Occupancy levels and rental rates within the office portfolio increased 130 basis points and 11%, respectively, compared to the prior year. In addition, retail sales in mall investments were up 8% and leasing activity increased 40% at the grocery anchored strip centers, compared to the prior year. The decrease in Performance Fees and Investment Income was primarily related to the decline in the public markets, which impacted the segment’s public stock holdings and certain hospitality investments along with the negative impact of foreign exchange. Offsetting these factors was an increase in the value of the retail portfolio. A material portion of the decrease in Performance Fees was due to the reversal of previously recognized profit allocations, amplified by the “catch-up” provisions of the funds. As of September 30, 2011, the unrealized value and cumulative realized proceeds, before carried interest, fees and expenses, of Blackstone’s Real Estate funds represented 1.4 times investors’ original investment. On a realized/partially realized basis, this multiple was 2.2 times investors’ original investments.

ENI for the Real Estate segment was a loss of $65.7 million for the third quarter of 2011 compared to income of $148.0 million for the third quarter of 2010, driven principally by the decrease in Performance Fees and Investment Income.

Fee-Earning Assets Under Management were $30.0 billion compared to $24.3 billion for the third quarter of 2010. Fee-Earning Assets Under Management increased in the third quarter of 2011 principally due to Blackstone’s next major real estate fund, BREP VII, which had its first closing of $4 billion of committed capital in August 2011.

Dry powder for Real Estate, which is inclusive of amounts related to BREP VII, was $10.1 billion as of September 30, 2011. Limited Partner Capital Invested during the third quarter of 2011 was $1.7 billion, up from $689.0 million during the third quarter of 2010. Blackstone’s Real Estate segment’s funds had $264.9 million of Limited Partner Capital committed to transactions which had not yet closed as of September 30, 2011.

Hedge Fund Solutions

Hedge Fund Solutions had revenues of $57.2 million for the third quarter of 2011, compared with revenues of $94.6 million for the third quarter of 2010. The decrease in revenues from the third quarter of 2010 was principally due to decreases in Performance Fees and Investment Income of $29.1 million and $17.9 million, respectively, partially offset by an increase in Total Management Fees of 14% to $79.8 million for the third quarter of 2011. Hedge Fund Solutions had nine-month revenues of $247.2 million, compared with revenues of $247.6 million in the same period of 2010.

The returns for the underlying assets for Blackstone’s Hedge Fund Solutions’ funds were negative 4.1% for the third quarter of 2011, a result of the return of turbulent markets.

ENI for the Hedge Funds Solutions segment decreased by 67% to $16.5 million for the third quarter of 2011 compared to $49.4 million for the third quarter of 2010, driven principally by the decreases in Performance Fees and Investment Income.

Fee-Earning Assets Under Management for the segment grew 17% to $37.2 billion from $31.8 billion at the end of the third quarter of 2010. The increase from the prior year period was principally due to net inflows 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 $2.4 billion of net inflows of Fee-Earning Assets Under Management for the third quarter of 2011, bringing year to date net fee-earning inflows to $6.1 billion.

Credit Businesses

Credit Businesses had revenues of $15.4 million for the third quarter of 2011, compared with revenues of $137.1 million for the third quarter of 2010. The decrease from the third quarter of 2010 was due to a decrease in Performance Fees to $(40.3) million for the third quarter of 2011, partially offset by an increase in Total Management Fees of 17% to $59.5 million driven by an increase in Fee-Earning Assets Under Management. Credit Businesses had nine-month revenues of $269.9 million, compared with revenues of $313.1 million in the same period of 2010. The net decrease from 2010 was driven by the same reasons noted above.

The returns of the underlying assets for Blackstone’s credit-oriented businesses for the third quarter of 2011 was negative 5.0% for the hedge funds, negative 9.9% for the rescue lending funds, due in each case to broad declines in public debt markets, and positive 7.1% for the mezzanine funds due primarily to favorable realizations of certain investments.

ENI for the Credit Businesses segment was a loss of $17.0 million for the third quarter of 2011 compared to income of $54.9 million for the third quarter of 2010 driven, principally by the decrease in Performance Fees.

Fee-Earning Assets Under Management for the segment increased 20%, or $4.8 billion, to $28.7 billion from $23.9 billion for the third quarter of 2010. Of the $4.8 billion increase, the long only platform had its strongest year over year growth including the acquisition of Allied Irish Bank’s CLOs in the second quarter of 2011. Also driving the increase in Fee-Earning Assets Under Management was $1.3 billion of Limited Partner Capital Deployed from the mezzanine funds and rescue lending funds in the third quarter of 2011.

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

On October 6, 2011, GSO Capital Partners LP (“GSO”), the global credit platform of Blackstone, announced the acquisition of Harbourmaster Capital, a European leveraged loan manager and adviser with $10.3 billion of Assets Under Management as of September 30, 2011. The Harbourmaster Capital Dublin-based team will continue to support the Harbourmaster funds, and will form a combined platform with GSO’s existing European leveraged loan business to develop new European focused funds for their global investor base. As of September 30, 2011, the combined GSO and Harbourmaster European leveraged loan platform would have been $15.2 billion in Assets Under Management supported by a combined team of 40 professionals in both Dublin and London. The transaction is expected to close in early 2012 following regulatory and certain third party approvals.

Financial Advisory

Revenues were relatively flat at $87.4 million for the third quarter of 2011 compared to $87.7 million for the third quarter of 2010. Revenues were $264.6 million for the nine months ended September 30, 2011, a decrease from $300.8 million in the same period of 2010.

ENI was $5.6 million for the third quarter of 2011 compared to $3.9 million for the third quarter of 2010.

CAPITAL AND LIQUIDITY

As of September 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 November 15, 2011. This distribution will be paid on November 30, 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 October 20, 2011 at 11:00 a.m. ET to discuss third quarter 2011 results. The conference call can be accessed by dialing [phone] (U.S. domestic) or [phone] (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 [phone] (U.S. domestic) or [phone] (international) conference ID number 60737059, beginning approximately two hours after the event.

Blackstone expects to host a conference call to report its 2011 fourth quarter and full year results on February 2, 2012.

About The Blackstone Group

Blackstone (NYSE:BX) is one of the world’s leading investment and advisory firms. Blackstone seeks to create positive economic impact and long-term value for its investors, the companies they invest in, the companies they advise and the broader global economy. Blackstone does this through the commitment of their extraordinary people and flexible capital. Their 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. Blackstone 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. Follow us on Twitter @Blackstone.

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 September 30,
	2011			2010
Revenues
Management and Advisory Fees	$	425,193		$	362,521
Performance Fees
Realized		6,605			66,142
Unrealized		(462,902	)		199,824
Total Performance Fees		(456,297	)		265,966
Investment Income (Loss)
Realized		45,596			13,542
Unrealized		(145,990	)		127,428
Total Investment Income (Loss)		(100,394	)		140,970
Interest and Dividend Revenue		9,085			10,075
Other		(1,666	)		4,468
Total Revenues		(124,079	)		784,000
Expenses
Compensation and Benefits
Compensation		494,478			664,004
Performance Fee Compensation
Realized		10,542			24,962
Unrealized		(111,435	)		104,324
Total Compensation and Benefits		393,585			793,290
General, Administrative and Other		124,929			114,291
Interest Expense		13,785			11,766
Fund Expenses		8,635			6,422
Total Expenses		540,934			925,769
Other Income
Net Gains (Losses) from Fund Investment Activities		(329,399	)		285,071
Income (Loss) Before Benefit for Taxes		(994,412	)		143,302
Benefit for Taxes		7,637			4,225
Net Income (Loss)		(986,775	)		147,527
Net Income (Loss) Attributable to Redeemable
Non-Controlling Interests in Consolidated Entities		(44,776	)		23,623
Net Income (Loss) Attributable to Non-Controlling Interests
in Consolidated Entities		(265,353	)		242,723
Net Loss Attributable to Non-Controlling Interests
in Blackstone Holdings		(402,079	)		(74,461	)
Net Income (Loss) Attributable to The Blackstone Group L.P.	$	(274,567	)	$	(44,358	)
Net Income (Loss) per Common Unit, Basic and Diluted	$	(0.56	)	$	(0.12	)

THE BLACKSTONE GROUP L.P.
Exhibit 1b. Consolidated Statements of Operations
(Dollars in Thousands, Except Per Unit Data)
	Nine Months Ended
	September 30,
	2011			2010
Revenues
Management and Advisory Fees	$	1,335,971		$	1,123,403
Performance Fees
Realized		164,571			171,941
Unrealized		659,987			312,304
Total Performance Fees		824,558			484,245
Investment Income
Realized		77,682			29,493
Unrealized		70,116			371,691
Total Investment Income		147,798			401,184
Interest and Dividend Revenue		27,423			25,922
Other		1,721			573
Total Revenues		2,337,471			2,035,327
Expenses
Compensation and Benefits
Compensation		1,853,393			2,556,665
Performance Fee Compensation
Realized		52,797			55,582
Unrealized		169,188			158,032
Total Compensation and Benefits		2,075,378			2,770,279
General, Administrative and Other		380,433			341,853
Interest Expense		41,773			26,633
Fund Expenses		19,045			15,484
Total Expenses		2,516,629			3,154,249
Other Income
Net Gains (Losses) from Fund Investment Activities		(449,244	)		397,625
Income (Loss) Before Provision for Taxes		(628,402	)		(721,297	)
Provision for Taxes		95,412			24,802
Net Income (Loss)		(723,814	)		(746,099	)
Net Income (Loss) Attributable to Redeemable Non-Controlling
Interests in Consolidated Entities		(22,891	)		47,171
Net Income (Loss) Attributable to Non-Controlling Interests
in Consolidated Entities		(450,842	)		320,816
Net Income (Loss) Attributable to Non-Controlling Interests
in Blackstone Holdings		(104,455	)		(755,031	)
Net Income (Loss) Attributable to The Blackstone Group L.P.	$	(145,626	)	$	(359,055	)
Net Income (Loss) per Common Unit, Basic and Diluted	$	(0.31	)	$	(1.02	)

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																										Nine Months Ended
	Mar 31,			Jun 30,			Sep 30,			Dec 31,			Mar 31,			Jun 30,			Sep 30,			Sep 30, 2011 vs. Sep 30, 2010					Sep 30,			Sep 30,
	2010			2010			2010			2010			2011			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		$	322,371		$	52,937		20	%	$	784,319		$	944,432
Advisory Fees		76,568			134,099			84,541			130,932			70,252			102,243			86,178			1,637		2	%		295,208			258,673
Transaction and Other Fees, Net *		35,260			20,617			22,948			58,923			58,363			103,561			41,793			18,845		82	%		78,825			203,717
Management Fee Offsets **		(1,178	)		(179	)		(674	)		(282	)		(8,536	)		(8,675	)		(7,703	)		(7,029	)	N/M			(2,031	)		(24,914	)
Total Management and Advisory Fees		362,621			417,451			376,249			474,725			425,666			513,603			442,639			66,390		18	%		1,156,321			1,381,908
Performance Fees
Realized		53,881			46,374			66,039			195,369			95,600			60,215			7,897			(58,142	)	-88	%		166,294			163,712
Unrealized		132,333			(20,738	)		192,745			260,286			505,197			612,843			(465,176	)		(657,921	)	N/M			304,340			652,864
Total Performance Fees		186,214			25,636			258,784			455,655			600,797			673,058			(457,279	)		(716,063	)	N/M			470,634			816,576
Investment Income (Loss)
Realized		5,307			15,721			14,276			11,611			23,499			30,732			31,647			17,371		122	%		35,304			85,878
Unrealized		151,521			87,186			128,247			134,680			102,577			106,837			(165,753	)		(294,000	)	N/M			366,954			43,661
Total Investment Income (Loss)		156,828			102,907			142,523			146,291			126,076			137,569			(134,106	)		(276,629	)	N/M			402,258			129,539
Interest Income and Dividend Revenue		8,690			6,930			10,187			10,289			9,448			9,283			10,110			(77	)	-1	%		25,807			28,841
Other		(3,250	)		(644	)		4,468			(1,192	)		2,259			1,128			(1,667	)		(6,135	)	N/M			574			1,720
Total Revenues		711,103			552,280			792,211			1,085,768			1,164,246			1,334,641			(140,303	)		(932,514	)	N/M			2,055,594			2,358,584
Expenses
Compensation and Benefits
Compensation		190,637			220,662			210,582			237,233			229,898			278,738			243,840			33,258		16	%		621,881			752,476
Performance Fee Compensation
Realized		7,741			22,879			24,962			72,734			14,543			27,711			10,543			14,419		-58	%		55,582			52,797
Unrealized		54,600			(892	)		104,323			70,615			162,525			118,097			111,435			215,758		N/M			158,031			169,187
Total Compensation and Benefits		252,978			242,649			339,867			380,582			406,966			424,546			142,948			(196,919	)	-58	%		835,494			974,460
Other Operating Expenses		73,023			88,160			84,253			99,080			102,975			99,363			96,932			12,679		15	%		245,436			299,270
Total Expenses		326,001			330,809			424,120			479,662			509,941			523,909			239,880			(184,240	)	-43	%		1,080,930			1,273,730
Total Economic Net Income (Loss)	$	385,102		$	221,471		$	368,091		$	606,106		$	654,305		$	810,732		$	(380,183	)	$	(748,274	)	N/M		$	974,664		$	1,084,854
Total Net Fee Related Earnings from Operations	$	98,745		$	107,915		$	112,914		$	122,740		$	93,180		$	137,217		$	102,009		$	(10,905	)	-10	%	$	319,574		$	332,406
* 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																										Nine Months Ended
																						Sep 30, 2011 vs.
	Mar 31,			Jun 30,			Sep 30,			Dec 31,			Mar 31,			Jun 30,			Sep 30,			Sep 30, 2010					Sep 30,			Sep 30,
	2010			2010			2010			2010			2011			2011			2011			$			%		2010			2011
Private Equity
Revenues
Management Fees
Base Management Fees	$	65,432		$	66,795		$	66,077		$	65,003		$	79,935		$	82,297		$	85,534		$	19,457		29	%	$	198,304		$	247,766
Transaction and Other Fees, Net *		31,972			16,367			13,348			10,556			35,342			52,353			21,430			8,082		61	%		61,687			109,125
Management Fee Offsets **		―			―			(91	)		(97	)		(7,889	)		(7,629	)		(6,498	)		(6,407	)	N/M			(91	)		(22,016	)
Total Management Fees		97,404			83,162			79,334			75,462			107,388			127,021			100,466			21,132		27	%		259,900			334,875
Performance Fees
Realized		46,175			1,106			44,814			64,774			82,389			1,362			(17,966	)		(62,780	)	N/M			92,095			65,785
Unrealized		45,549			(24,020	)		45,499			84,466			32,537			187,190			(270,014	)		(315,513	)	N/M			67,028			(50,287	)
Total Performance Fees		91,724			(22,914	)		90,313			149,240			114,926			188,552			(287,980	)		(378,293	)	N/M			159,123			15,498
Investment Income (Loss)
Realized		(495	)		3,141			9,940			2,746			17,907			3,021			20,548			10,608		107	%		12,586			41,476
Unrealized		84,684			17,275			30,491			20,838			29,126			76,947			(121,688	)		(152,179	)	N/M			132,450			(15,615	)
Total Investment Income (Loss)		84,189			20,416			40,431			23,584			47,033			79,968			(101,140	)		(141,571	)	N/M			145,036			25,861
Interest Income and Dividend Revenue		3,428			2,728			3,802			4,086			3,505			3,197			3,396			(406	)	-11	%		9,958			10,098
Other		100			460			1,061			400			811			665			141			(920	)	-87	%		1,621			1,617
Total Revenues		276,845			83,852			214,941			252,772			273,663			399,403			(285,117	)		(500,058	)	N/M			575,638			387,949
Expenses
Compensation and Benefits
Compensation		46,910			46,612			47,552			38,271			56,254			66,694			54,220			6,668		14	%		141,074			177,168
Performance Fee Compensation
Realized		6,005			128			10,783			15,711			7,718			49			(2,443	)		(13,226	)	N/M			16,916			5,324
Unrealized		6,344			(10,296	)		18,306			6,966			5,464			29,309			(44,955	)		(63,261	)	N/M			14,354			(10,182	)
Total Compensation and Benefits		59,259			36,444			76,641			60,948			69,436			96,052			6,822			(69,819	)	-91	%		172,344			172,310
Other Operating Expenses		24,431			28,677			26,359			30,122			28,713			30,124			27,588			1,229		5	%		79,467			86,425
Total Expenses		83,690			65,121			103,000			91,070			98,149			126,176			34,410			(68,590	)	-67	%		251,811			258,735
Economic Net Income (Loss)	$	193,155		$	18,731		$	111,941		$	161,702		$	175,514		$	273,227		$	(319,527	)	$	(431,468	)	N/M		$	323,827		$	129,214
* 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																										Nine Months Ended
																						Sep 30, 2011 vs.
	Mar 31,			Jun 30,			Sep 30,			Dec 31,			Mar 31,			Jun 30,			Sep 30,			Sep 30, 2010					Sep 30,			Sep 30,
	2010			2010			2010			2010			2011			2011			2011			$			%		2010			2011
Real Estate
Revenues
Management Fees
Base Management Fees	$	83,060		$	82,916		$	83,232		$	89,220		$	95,439		$	97,467		$	97,925		$	14,693		18	%	$	249,208		$	290,831
Transaction and Other Fees, Net *		1,942			2,979			8,538			46,455			21,543			49,288			19,551			11,013		129	%		13,459			90,382
Management Fee Offsets **		(489	)		(110	)		(401	)		(71	)		(505	)		(745	)		(880	)		(479	)	-119	%		(1,000	)		(2,130	)
Total Management Fees		84,513			85,785			91,369			135,604			116,477			146,010			116,596			25,227		28	%		261,667			379,083
Performance Fees
Realized		5,948			16,319			5,010			13,011			2,593			20,832			5,308			298		6	%		27,277			28,733
Unrealized		11,391			21,117			69,910			154,553			368,104			429,458			(120,176	)		(190,086	)	N/M			102,418			677,386
Total Performance Fees		17,339			37,436			74,920			167,564			370,697			450,290			(114,868	)		(189,788	)	N/M			129,695			706,119
Investment Income (Loss)
Realized		2,632			3,900			2,159			2,560			2,919			11,394			7,313			5,154		N/M			8,691			21,626
Unrealized		46,892			79,543			83,968			108,576			61,406			37,332			(26,060	)		(110,028	)	N/M			210,403			72,678
Total Investment Income (Loss)		49,524			83,443			86,127			111,136			64,325			48,726			(18,747	)		(104,874	)	N/M			219,094			94,304
Interest Income and Dividend Revenue		2,718			2,178			3,026			3,251			3,288			2,989			3,195			169		6	%		7,922			9,472
Other		(1,876	)		(390	)		2,330			(400	)		860			515			(1,390	)		(3,720	)	N/M			64			(15	)
Total Revenues		152,218			208,452			257,772			417,155			555,647			648,530			(15,214	)		(272,986	)	N/M			618,442			1,188,963
Expenses
Compensation and Benefits
Compensation		40,150			44,528			43,219			55,280			58,501			71,618			55,259			12,040		28	%		127,897			185,378
Performance Fee Compensation
Realized		1,524			8,895			1,806			3,619			1,230			9,382			2,251			445		25	%		12,225			12,863
Unrealized		6,937			15,999			46,182			53,746			106,501			91,021			(30,510	)		(76,692	)	N/M			69,118			167,012
Total Compensation and Benefits		48,611			69,422			91,207			112,645			166,232			172,021			27,000			(64,207	)	-70	%		209,240			365,253
Other Operating Expenses		14,290			17,647			18,584			23,668			28,366			22,971			23,495			4,911		26	%		50,521			74,832
Total Expenses		62,901			87,069			109,791			136,313			194,598			194,992			50,495			(59,296	)	-54	%		259,761			440,085
Economic Net Income (Loss)	$	89,317		$	121,383		$	147,981		$	280,842		$	361,049		$	453,538		$	(65,709	)	$	(213,690	)	N/M		$	358,681		$	748,878
* 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																										Nine Months Ended
																						Sep 30, 2011 vs.
	Mar 31,			Jun 30,			Sep 30,			Dec 31,			Mar 31,			Jun 30,			Sep 30,			Sep 30, 2010					Sep 30,			Sep 30,
	2010			2010			2010			2010			2011			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		$	79,355		$	10,050		15	%	$	198,704		$	234,257
Transaction and Other Fees, Net *		809			870			846			1,047			727			861			740			(106	)	-13	%		2,525			2,328
Management Fee Offsets **		―			(72	)		(163	)		(95	)		(124	)		(196	)		(258	)		(95	)	-58	%		(235	)		(578	)
Total Management Fees		64,675			66,331			69,988			75,021			76,215			79,955			79,837			9,849		14	%		200,994			236,007
Performance Fees
Realized		2,117			1,021			872			52,616			893			667			5,764			4,892		N/M			4,010			7,324
Unrealized		10,413			(2,596	)		14,137			(18,972	)		19,253			3,441			(19,861	)		(33,998	)	N/M			21,954			2,833
Total Performance Fees		12,530			(1,575	)		15,009			33,644			20,146			4,108			(14,097	)		(29,106	)	N/M			25,964			10,157
Investment Income (Loss)
Realized		(250	)		5,438			1,050			3,580			1,341			12,855			1,023			(27	)	-3	%		6,238			15,219
Unrealized		11,880			(6,749	)		7,831			6,399			7,120			(12,864	)		(10,034	)		(17,865	)	N/M			12,962			(15,778	)
Total Investment Income (Loss)		11,630			(1,311	)		8,881			9,979			8,461			(9	)		(9,011	)		(17,892	)	N/M			19,200			(559	)
Interest Income and Dividend Revenue		475			353			498			543			516			472			500			2		0	%		1,326			1,488
Other		(83	)		(40	)		270			(50	)		104			(38	)		18			(252	)	-93	%		147			84
Total Revenues		89,227			63,758			94,646			119,137			105,442			84,488			57,247			(37,399	)	-40	%		247,631			247,177
Expenses
Compensation and Benefits
Compensation		20,742			26,388			24,506			23,750			28,657			32,288			31,319			6,813		28	%		71,636			92,264
Performance Fee Compensation
Realized		771			356			3,313			16,193			300			253			2,257			(1,056	)	-32	%		4,440			2,810
Unrealized		3,783			(977	)		5,075			(6,814	)		5,358			2,955			(7,214	)		(12,289	)	N/M			7,881			1,099
Total Compensation and Benefits		25,296			25,767			32,894			33,129			34,315			35,496			26,362			(6,532	)	-20	%		83,957			96,173
Other Operating Expenses		11,285			12,353			12,388			15,334			13,008			16,075			14,421			2,033		16	%		36,026			43,504
Total Expenses		36,581			38,120			45,282			48,463			47,323			51,571			40,783			(4,499	)	-10	%		119,983			139,677
Economic Net Income	$	52,646		$	25,638		$	49,364		$	70,674		$	58,119		$	32,917		$	16,464		$	(32,900	)	-67	%	$	127,648		$	107,500
* 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																										Nine Months Ended
																						Sep 30, 2011 vs.
	Mar 31,			Jun 30,			Sep 30,			Dec 31,			Mar 31,			Jun 30,			Sep 30,			Sep 30, 2010					Sep 30,			Sep 30,
	2010			2010			2010			2010			2011			2011			2011			$			%		2010			2011
Credit Businesses
Revenues
Management Fees
Base Management Fees	$	39,613		$	47,670		$	50,820		$	56,860		$	54,601		$	57,420		$	59,557		$	8,737		17	%	$	138,103		$	171,578
Transaction and Other Fees, Net *		536			299			216			606			745			849			(26	)		(242	)	N/M			1,051			1,568
Management Fee Offsets **		(689	)		3			(19	)		(19	)		(18	)		(105	)		(67	)		(48	)	N/M			(705	)		(190	)
Total Management Fees		39,460			47,972			51,017			57,447			55,328			58,164			59,464			8,447		17	%		138,449			172,956
Performance Fees
Realized		(359	)		27,928			15,343			64,968			9,725			37,354			14,791			(552	)	-4	%		42,912			61,870
Unrealized		64,980			(15,239	)		63,199			40,239			85,303			(7,246	)		(55,125	)		(118,324	)	N/M			112,940			22,932
Total Performance Fees		64,621			12,689			78,542			105,207			95,028			30,108			(40,334	)		(118,876	)	N/M			155,852			84,802
Investment Income (Loss)
Realized		3,233			3,291			658			2,518			1,235			3,236			2,807			2,149		N/M			7,182			7,278
Unrealized		7,835			(3,444	)		5,350			(269	)		4,532			5,437			(7,800	)		(13,150	)	N/M			9,741			2,169
Total Investment Income (Loss)		11,068			(153	)		6,008			2,249			5,767			8,673			(4,993	)		(11,001	)	N/M			16,923			9,447
Interest Income and Dividend Revenue		673			403			1,252			710			453			902			1,404			152		12	%		2,328			2,759
Other		(459	)		(332	)		330			(27	)		98			(47	)		(132	)		(462	)	N/M			(461	)		(81	)
Total Revenues		115,363			60,579			137,149			165,586			156,674			97,800			15,409			(121,740	)	-89	%		313,091			269,883
Expenses
Compensation and Benefits
Compensation		28,343			26,982			28,774			39,158			30,325			34,170			41,512			12,738		44	%		84,099			106,007
Performance Fee Compensation
Realized		(559	)		13,500			9,060			37,211			5,295			18,027			8,478			(582	)	-6	%		22,001			31,800
Unrealized		37,536			(5,618	)		34,760			16,717			45,202			(5,188	)		(28,756	)		(63,516	)	N/M			66,678			11,258
Total Compensation and Benefits		65,320			34,864			72,594			93,086			80,822			47,009			21,234			(51,360	)	-71	%		172,778			149,065
Other Operating Expenses		8,290			12,167			9,669			8,980			15,357			10,226			11,210			1,541		16	%		30,126			36,793
Total Expenses		73,610			47,031			82,263			102,066			96,179			57,235			32,444			(49,819	)	-61	%		202,904			185,858
Economic Net Income (Loss)	$	41,753		$	13,548		$	54,886		$	63,520		$	60,495		$	40,565		$	(17,035	)	$	(71,921	)	N/M		$	110,187		$	84,025
* 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																									Nine Months Ended
																					Sep 30, 2011 vs.
	Mar 31,			Jun 30,			Sep 30,		Dec 31,			Mar 31,			Jun 30,			Sep 30,			Sep 30, 2010					Sep 30,			Sep 30,
	2010			2010			2010		2010			2011			2011			2011			$			%		2010			2011
Financial Advisory
Revenues
Advisory Fees	$	76,568		$	134,099		$	84,541	$	130,932		$	70,252		$	102,243		$	86,178		$	1,637		2	%	$	295,208		$	258,673
Transaction and Other Fees, Net		1			102			―		259			6			210			98			98		N/M			103			314
Total Advisory and Transaction Fees		76,569			134,201			84,541		131,191			70,258			102,453			86,276			1,735		2	%		295,311			258,987
Investment Income (Loss)
Realized		187			(49	)		469		207			97			226			(44	)		(513	)	N/M			607			279
Unrealized		230			561			607		(864	)		393			(15	)		(171	)		(778	)	N/M			1,398			207
Total Investment Income (Loss)		417			512			1,076		(657	)		490			211			(215	)		(1,291	)	N/M			2,005			486
Interest Income and Dividend Revenue		1,396			1,268			1,609		1,699			1,686			1,723			1,615			6		0	%		4,273			5,024
Other		(932	)		(342	)		477		(1,115	)		386			33			(304	)		(781	)	N/M			(797	)		115
Total Revenues		77,450			135,639			87,703		131,118			72,820			104,420			87,372			(331	)	0	%		300,792			264,612
Expenses
Compensation and Benefits
Compensation		54,492			76,152			66,531		80,774			56,161			73,968			61,530			(5,001	)	-8	%		197,175			191,659
Total Compensation and Benefits		54,492			76,152			66,531		80,774			56,161			73,968			61,530			(5,001	)	-8	%		197,175			191,659
Other Operating Expenses		14,727			17,316			17,253		20,976			17,531			19,967			20,218			2,965		17	%		49,296			57,716
Total Expenses		69,219			93,468			83,784		101,750			73,692			93,935			81,748			(2,036	)	-2	%		246,471			249,375
Economic Net Income (Loss)	$	8,231		$	42,171		$	3,919	$	29,368		$	(872	)	$	10,485		$	5,624		$	1,705		44	%	$	54,321		$	15,237

	THE BLACKSTONE GROUP L.P.
	Exhibit 2b. Reconciliation of Income (Loss) Before Provision (Benefit) for Taxes to Total Segments, Economic Net Income (Loss), of Total
	Segments, Economic Net Income (Loss) 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																					Nine Months Ended
		March 31,			June 30,			September 30,			December 31,			March 31,			June 30,			September 30,			September 30,			September 30,
		2010			2010			2010			2010			2011			2011			2011			2010			2011
Income (Loss) Before Provision (Benefit) for Taxes		$	(227,671	)	$	(636,928	)	$	143,302		$	198,643		$	117,214		$	248,796		$	(994,412	)	$	(721,297	)	$	(628,402	)
IPO and Acquisition-Related Charges (a)			726,722			749,930			438,568			453,975			421,861			424,483			258,435			1,915,220			1,104,779
Amortization of Intangibles (b)			39,512			40,822			40,872			44,172			44,174			44,905			45,665			121,206			134,744
(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			310,129			(340,465	)		473,733
Total Segments
Total Segments, Economic Net Income (Loss)			385,102			221,471			368,091			606,106			654,305			810,732			(380,183	)		974,664			1,084,854
Performance Fees Adjustment (d)			(186,214	)		(25,636	)		(258,784	)		(455,655	)		(600,797	)		(673,058	)		457,279			(470,634	)		(816,576	)
Investment Income (Loss) Adjustment (e)			(156,828	)		(102,907	)		(142,523	)		(146,291	)		(126,076	)		(137,569	)		134,106			(402,258	)		(129,539	)
Investment Income (Loss) - Blackstone's Treasury
Cash Management Strategies (f)			3,665			5,062			11,226			(4,676	)		1,302			4,038			(3,011	)		19,953			2,329
Performance Fee Compensation and
Benefits Adjustment (g)			62,341			21,987			129,285			143,349			177,068			145,808			(100,892	)		213,613			221,984
Taxes Payable (h)			(9,321	)		(12,062	)		5,619			(20,093	)		(12,622	)		(12,734	)		(5,290	)		(15,764	)		(30,646	)
Net Fee Related Earnings from Operations			98,745			107,915			112,914			122,740			93,180			137,217			102,009			319,574			332,406
Realized Performance Fees (i)			46,140			23,495			41,077			122,635			81,057			32,504			(2,646	)		110,712			110,915
Realized Investment Income (j)			5,307			15,721			14,276			11,611			23,499			30,732			31,647			35,304			85,878
Adjustment Related to Realized Investment Income -
Blackstone's Treasury Cash Management Strategies (k)			(1,264	)		512			(4,874	)		(2,156	)		(1,010	)		(2,343	)		(309	)		(5,626	)		(3,662	)
Other Payables Including Payable Under Tax
Receivable Agreement			(232	)		(68	)		2,923			(15,633	)		(177	)		(13,578	)		(10,589	)		2,623			(24,344	)
Distributable Earnings		$	148,696		$	147,575		$	166,316		$	239,197		$	196,549		$	184,532		$	120,112		$	462,587		$	501,193
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		$	128,201		$	377,866		$	425,723

____________________

(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 (loss) 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 - 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 (h), and segment interest and depreciation and amortization. The cash taxes payable component of (h) was $9.3 million, $12.1 million, $(5.6) million, $20.1 million, $12.6 million, $12.7 million, and $5.3 million for the three months ended March 31, 2010, June 30, 2010, September 30, 2010, December 31, 2010, March 31, 2011, June 30, 2011, and September 30, 2011, respectively. The cash taxes payable component of (h) was $30.6 million and $15.8 million for the nine months ended September 30, 2011 and 2010, respectively. Interest was $6.3 million, $6.8 million, $10.3 million, $13.2 million, $12.7 million, $13.1 million, and $12.6 million for the three months ended March 31, 2010, June 30, 2010, September 30, 2010, December 31, 2010, March 31, 2011, June 30, 2011, and September 30, 2011, respectively. Interest was $38.4 million and $23.5 million for the nine months ended September 30, 2011 and 2010, respectively. Depreciation and amortization was $6.4 million, $6.1 million, $6.6 million, $7.6 million, $8.2 million, $7.8 million, and $8.3 million for the three months ended March 31, 2010, June 30, 2010, September 30, 2010, December 31, 2010, March 31, 2011, June 30, 2011, and September 30, 2011, respectively. Depreciation and amortization was $24.3 million and $19.0 million for the nine months ended September 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						Nine Months Ended
	September 30,						September 30,
	2011			2010			2011			2010
Fee Related Earnings
Revenues
Total Management and Advisory Fees (a)	$	442,639		$	376,249		$	1,381,908		$	1,156,321
Interest and Dividend Revenue (a)		10,110			10,187			28,841			25,807
Other (a)		(1,667	)		4,468			1,720			574
Investment Income (Loss) - Blackstone's Treasury Cash
Management Strategies (b)		(3,011	)		11,226			2,329			19,953
Total Revenues		448,071			402,130			1,414,798			1,202,655
Expenses
Compensation and Benefits - Compensation (a)		243,840			210,582			752,476			621,881
Other Operating Expenses (a)		96,932			84,253			299,270			245,436
Cash Taxes (c)		5,290			(5,619	)		30,646			15,764
Total Expenses		346,062			289,216			1,082,392			883,081
Net Fee Related Earnings from Operations		102,009			112,914			332,406			319,574
Performance Fees, Net of Related Compensation
Performance Fees - Realized (a)		7,897			66,039			163,712			166,294
Compensation and Benefits - Performance Fee
Compensation - Realized (a)		(10,543	)		(24,962	)		(52,797	)		(55,582	)
Total Performance Fees, Net of Related Compensation		2,646			41,077			110,915			110,712
Investment Income and Other
Investment Income - Realized (a)		31,647			14,276			85,878			35,304
Adjustment Related to Realized Investment Income -
Blackstone's Treasury Cash Management Strategies (d)		(309	)		(4,874	)		(3,662	)		(5,626	)
Other Payables Including Payable Under Tax
Receivable Agreement		(10,589	)		2,923			(24,344	)		2,623
Total Investment Income and Other		20,749			12,325			57,872			32,301
Distributable Earnings	$	120,112		$	166,316		$	501,193		$	462,587

_________________________

(a)	Represents the total segment amounts of the respective captions.
(b)	Represents the inclusion of Investment Income (Loss) 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. Total GAAP Weighted-Average Common Units Outstanding—Basic and Diluted and Reconciliation of Total GAAP Weighted-Average Common Units Outstanding—Basic and Diluted to Weighted-Average Economic Net Income Adjusted Units with End of Period Economic Net Income Adjusted Units Outstanding and Reconciliation of Total GAAP Common Units Outstanding to Distributable Earnings Units Outstanding
The following table provides Blackstone’s Total GAAP Weighted-Average Common Units Outstanding—Basic
and Diluted.
		Three Months		Nine Months
		Ended September 30,		Ended September 30,
		2011	2010	2011	2010
	Total GAAP Weighted-Average Common Units
	Outstanding - Basic and Diluted ( a)	487,189,657	370,101,582	470,551,727	352,794,385

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

	Three Months		As of and for the Nine
	Ended September 30,		Months Ended September 30,
	2011	2010	2011	2010
Total GAAP Weighted-Average Common Units
Outstanding - Basic and Diluted	487,189,657	370,101,582	470,551,727	352,794,385
Adjustments:
Weighted-Average Blackstone Holdings Partnership Units	616,168,175	727,528,593	633,174,021	745,006,116
Weighted-Average Unvested Deferred Restricted
Common Units	7,243,768	-	8,169,431	2,106,877
Weighted-Average Economic Net Income Adjusted Units	1,110,601,600	1,097,630,175	1,111,895,179	1,099,907,378
Economic Net Income Adjusted Units, End of Period			1,110,027,706	1,101,164,769

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

	September 30,
	2011	2010
Total GAAP Common Units Outstanding (b)	488,178,170	374,003,111
Adjustment:
Blackstone Holdings Partnership Units	615,164,340	723,662,686
Distributable Earnings Units Outstanding (c)	1,103,342,510	1,097,665,797

______________________

(a)	Unvested Deferred Restricted Common Units and Blackstone Holdings Partnership Units are anti-dilutive for the three and nine months periods presented due to Net Losses in each of the periods presented.
(b)	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.
(c)	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
	September 30,
	2011		2010
Total Assets Under Management
(End of Period)
Private Equity	$	42,967,159	$	29,202,952
Real Estate		40,709,500		27,129,825
Hedge Fund Solutions		40,373,092		33,166,553
Credit Businesses		33,648,697		29,615,916
	$	157,698,448	$	119,115,246
Fee-Earning Assets Under Management
(End of Period)
Private Equity	$	37,006,024	$	24,311,443
Real Estate		29,981,920		24,345,161
Hedge Fund Solutions		37,231,013		31,760,599
Credit Businesses		28,715,420		23,875,979
	$	132,934,377	$	104,293,182
Weighted-Average Fee-Earning
Assets Under Management
(For the Three Months Ended)
Private Equity	$	36,670,087	$	24,610,920
Real Estate		28,701,420		24,016,964
Hedge Fund Solutions		37,658,240		30,554,606
Credit Businesses		28,429,249		23,540,949
	$	131,458,996	$	102,723,439
Weighted-Average Fee-Earning
Assets Under Management
(Year to Date Period Ended)
Private Equity	$	35,731,733	$	25,028,962
Real Estate		27,425,607		23,826,723
Hedge Fund Solutions		36,857,511		29,557,897
Credit Businesses		26,889,108		22,373,831
	$	126,903,959	$	100,787,413

THE BLACKSTONE GROUP L.P. Exhibit 6. Limited Partner Capital Invested Metrics (Dollars in Thousands)
	As of and for the Periods
	Ended September 30,
	2011		2010
Limited Partner Capital Invested
(For the Three Months Ended)
Private Equity	$	1,414,734	$	678,882
Real Estate (a)		1,706,157		688,951
Credit Businesses		1,314,318		692,275
	$	4,435,209	$	2,060,108
Limited Partner Capital Invested
(Year to Date Period Ended)
Private Equity	$	2,735,022	$	1,536,594
Real Estate (a)		5,145,773		1,757,636
Credit Businesses		1,621,498		1,113,419
	$	9,502,293	$	4,407,649
Fund Level Unrealized Value (b)
(End of Period)
Private Equity
Cost	$	21,367,917	$	20,582,631
Unrealized Value	$	22,784,672	$	21,924,759
Real Estate (a)
Cost	$	20,431,870	$	13,754,522
Unrealized Value	$	25,632,721	$	13,360,662
Credit Businesses
Cost	$	4,453,452	$	3,465,813
Unrealized Value	$	4,958,853	$	3,905,776

_________________________

(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.