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Investments

Key business feature boosts Blackstone's earnings 89%

After several years, company crosses financial threshold

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Blackstone’s (BX) second-quarter economic net income hit $1.3 billion, or $1.15 a share, surging 89% from 2013, as the company’s funds created $9.3 billion of value in the second quarter alone.

This beat analyst expectations, with EPS beating by $0.44 and revenue by $710 million. 

Earnings were drastically boosted by strong performances across all of its funds in the second and first quarter.

“Blackstone’s second-quarter results marked one of our best ever in terms of both ENI and distributable earnings. As more of our assets under management have seasoned, we’ve been increasingly active in harvesting the value we’ve created over several years,” Stephen Schwarzman, chairman and CEO, said.

“At the same time, ENI, which reflects our current value creation, remains at record levels, reaching $4.3 billion for the past twelve months. Despite our sharp increase in realizations to $39 billion over the past year, continued capital inflows and strong investment performance brought us to another record for total assets under management, reaching $279 billion at quarter end, up 21% year over year,” continued Schwarzman.

In addition, Blackstone’s real estate economic income increased 32% to $489 million in the fourth quarter due to strong global real estate fundamentals, including improving rents and occupancy across Blackstone’s diversified real estate portfolio.

Blackstone’s commercial mortgage REIT, BXMT, finished the quarter with a $1.4 billion market capitalization, up from $80 million at the time of its May 2013 re-IPO.

According to an article in DealBook, the huge rise in results is based on a feature of the company’s business model, which promises the investors in their funds that they won’t start collecting profit until the funds cross a certain threshold for investment performance.

Blackstone’s fifth private equity fund, a $21.7 billion war chest dating to 2005, which stands as the largest such fund ever raised, finally crossed that threshold in the second quarter.

That means it has entered a catch-up period, taking 80 cents on every dollar earned until it makes up the profit that had been deferred in the years since the financial crisis. Then it will switch to collecting the standard 20% of profits.

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