Blackstone posts best Q2 as PE soars

Since 2010, Blackstone’s real estate division has dominated its earnings as property assets staged a comeback. Since the start of the year, however, private equity has become a bigger contributor, thanks to strong valuations and asset sales, sister news service Reuters reported. “Despite a strong run leading into today’s print, we expect these results to fuel further upside,” Sterne Agee analyst Jason Weyeneth wrote in a note.

Economic net income, a metric of profitability that takes into account the mark-to-market valuation of its portfolio, totaled $1.33 billion in the quarter, the highest- ever in a second quarter, versus $703 million a year ago. ENI per share came to $1.15, while analysts, on average, expected 71 cents, according to a Thomson Reuters poll.

The higher result was driven largely by private equity, which reported ENI of $647.7 million, a 278 percent year-on-year increase, while real estate posted ENI of $489.4 million, up 32 percent. Blackstone’s credit investments division reported ENI of $103.8 million, a 27 percent gain, while the unit that invests in hedge funds had a 16 percent advance to $83.1 million.

The $21.7 billion Blackstone Capital Partners V buyout fund, which launched in 2006, crossed an 8 percent returns hurdle that allowed Blackstone to receive 20 percent of the fund’s profits in so-called carried interest. Blackstone President Tony James told reporters on a conference call on July 17 that BCP V should continue to appreciate more than the hurdle rate, assuming that the wider market is static. Overall, Blackstone’s private equity portfolio appreciated 8.4 percent while its real estate portfolio appreciated 6 percent.

Competitor The Carlyle Group said earlier in July that its private equity portfolio appreciated 5 percent and its real estate portfolio rose 4 percent versus a 4 percent gain in the MSCI All Country World Index.

Distributable earnings, which reflect available cash to pay dividends, more than doubled in the quarter to $770.8 million, from $338.5 million a year ago. The latest result was the highest ever in a second quarter. By this metric, real estate continued to be the biggest contributor, accounting for $417.8 million of carried interest paid out versus $212.4 million from private equity.

Assets under management totaled $278.9 billion at the end of June, up from $272 billion at the end of March. Fee-earning assets under management rose to $209.9 billion from $203.6 billion at the end of March. Blackstone declared a quarterly distribution of 55 cents per common unit.

Greg Roumeliotis is a correspondent for Reuters in New York.