* Adjusted ENI per unit 59 cents vs street view of 47 cents
* ENI flat in real estate on performance fees
* Shares close higher
* Executives expect '13, '14 to be more profitable
By Greg Roumeliotis
NEW YORK, Jan 31 Blackstone Group LP
reported a 43 percent rise in fourth-quarter profit on Thursday,
capping what it called its best year as a publicly listed
alternative asset manager, despite a lackluster performance by
its flagship real estate business.
Blackstone's shares closed up 6.1 percent at $18.50 on the
New York Stock Exchange. They had previously risen 11.9 percent
this month, outperforming the S&P 500 Index, which rose
Blackstone's private equity business made a strong comeback
in 2012 on the back of higher fund valuations, rising 14.3
percent for the year, as markets rallied. Its real estate
portfolio rose 14.4 percent, but earnings were roughly flat
based on how the firm booked performance fees last year.
Real estate remained the largest earnings contributor even
as private equity profits rose 86 percent in the fourth quarter.
Blackstone, whose investments include The Weather Channel,
Pinnacle Foods and SeaWorld Parks & Entertainment, said economic
net income (ENI), a measure of profitability that takes into
account the mark-to-market valuation of its assets, was $670
million, up 43 percent from a year ago.
Blackstone, the first to report fourth-quarter results in a
peer group that includes KKR & Co LP, Carlyle Group LP
and Apollo Global Management LLC, said earnings
rose strongly in its private equity, hedge funds and credit
ENI in its real estate division was down 2 percent to $246
million. Private equity posted an 86 percent rise in ENI to $198
million, hedge funds a 163 percent rise to $82.7 million and
credit a 96 percent rise to $107.2 million.
Overall, Blackstone's adjusted ENI was 59 cents per unit in
the fourth quarter, topping an average estimate by analysts of
"The strong performance and realized gains coupled with
another solid quarter for fundraising reaffirms our view that
Blackstone's diversified alternative platform, undervalued
future carried interest potential and strong secular flow trends
all contribute to what we view as one of the more compelling
long-term opportunities in the space," Barclay's analysts wrote
in a note.
Distributable earnings, which show cash available to pay
dividends, jumped 177 percent to $493.8 million in the fourth
quarter as Blackstone took advantage of the buoyant equity and
debt capital markets to divest more of its investments.
Among Blackstone's exits from investments in 2012 were an
initial public offering of U.S. refiner PBF Energy Inc,
valuing Blackstone's investment at 4.7 times what it paid, and
further share sales of Team Health Holdings Inc, which
averaged a value of 3.9 times Blackstone's investment.
Blackstone also sold its Sunwest senior living business in
the fourth quarter, a $220 million investment, making 2.4 times
its money in just two years.
"If we did that with every piece of real estate, we would be
managing most of the money in the world. But it does happen, and
it isn't just an odd outcome," Chief Executive Stephen
Schwarzman said on a call with analysts.
In private equity, Blackstone returned $3.5 billion to
investors in 2012 at an average 2.1 times their money. Across
all its funds, Blackstone said it returned $18 billion to its
investors. In real estate, it returned $3.7 billion.
"2013 should be a higher year for realizations in general...
and 2014 should be another good year. The portfolio that is
maturing the fastest and into which there is the best bid to
sell, so to speak, is real estate at this point," Blackstone's
President Tony James told reporters on a conference call.
The lack of building and commercial real estate offers an
opportunity to sell for a good price even in an economy that is
not very strong, James added.
Total assets under management were $210.2 billion as of the
end of December, up from $204.6 billion at the end of the third
quarter. Fee-earning assets under management were $167.9 billion
at the end of December, down from $168.6 billion at the end of
the third quarter.
In the fourth quarter, Blackstone raised $3.3 billion for
its new rescue lending fund and said it expected it would total
$4 billion to $5 billion this year.
Blackstone's undrawn capital, so-called "dry powder"
available for deals, was $35 billion at the end of the year.
Private equity had $15.7 billion in dry powder and real estate
had $11 billion.
Blackstone's financial advisory arm had a record level of
revenue in the fourth quarter as some companies and financial
investors rushed to close deals by the end of the year to avoid
higher taxes. But this was insufficient to offset a 21 percent
drop in profits for the year in that business.
New York-based Blackstone declared a quarterly distribution
of 42 cents per common unit. It said it intends to increase its
base quarterly distribution to 12 cents per unit in 2013, up
from 10 cents per unit.
Founded by Schwarzman and Peter Peterson in 1985 as a
private equity firm, Blackstone went public in 2007 and has
become more of a real estate group in recent years, as this
franchise has come to dominate its earnings.