NEW YORK CITY-In a sharp decline from 2010, private equity giant the Blackstone Group has reported 11% in losses in the third quarter, the company said in its quarterly earnings report on Thursday morning. The firm reported economic net income losses of $342 million, or 31-cents a share, down from net income of $339 million from last year companywide.
Stephen A. Schwarzman, chairman and chief executive officer, says in a statement that Q3 “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,” he says.
But as a result of market instability, Blackstone’s real estate segment had revenues of $15.2 million in Q3, a large dip compared with revenues of $257.8 million in Q3 2010. The firm’s ENI also declined to $65.7 million from $148 million in Q3 2010.
The decreases, the firm says, were driven by declines in performance fees and investment income of $189.8 million and $104.9 million, according to the report. The nose-dive in these categories is related to the general decline in the public markets in the US and Europe, which “impacted the segment’s public stock holdings and certain hospitality investments along with the negative impact of foreign exchange,” Blackstone explained.
Offsetting these losses was an increase in the value of the retail portfolio, the firm says. Retail sales in mall investments were up 8% and leasing activity increased 40% at grocery-anchored strip centers. On the hospitality side, RevPAR increased between 6% and 8% over last year, while occupancy levels and rental rates within the office sector increased 130 basis points, or 11%.
Notable deals year-to-date include the firm’s $9-billion acquisition of Centro Properties Group’s US portfolio and the $473.1 million purchase of 36 shopping centers from Equity One during the summer.
Long-term, the real estate segment’s fund had $264.9 million of limited partner capital committed to deals which hadn’t closed as of the end of the month. In addition, fee-earning assets under management were $30 billion, due to Blackstone next major real estate fund, BREP VII, which had its first closing of $4 billion of committed capital in August.
On a firm-wide basis, Schwarzman says Blackstone reported inflows in all of its businesses and grew fee-earning assets under management to a firm record of $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,” he says.
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