Blackstone's quarterly earnings more than double; shares rise

NEW YORK Thu Jan 30, 2014 1:32pm EST

Stephen Schwarzman, chairman and CEO of the Blackstone Group, attends the annual meeting of the World Economic Forum in Davos January 24, 2013. REUTERS/Denis Balibouse

Stephen Schwarzman, chairman and CEO of the Blackstone Group, attends the annual meeting of the World Economic Forum in Davos January 24, 2013.

Credit: Reuters/Denis Balibouse

NEW YORK (Reuters) - Blackstone Group LP (BX.N) reported on Thursday that fourth-quarter profit surged 130 percent, capping a record earnings year and far exceeding analysts' expectations, with its real estate business behind much of the gains.

The property business of Blackstone, the world's largest alternative asset manager, got a lift from the initial public offerings of Hilton Worldwide Holdings Inc (HLT.N), Extended Stay America Inc (STAY.N) and Brixmor Property Group Inc(BRX.N).

Profit also soared in Blackstone's private equity and hedge fund units as the value of its assets rose amid red-hot capital markets and the firm cashed out on many of its investments.

Blackstone shares were up 4.6 percent in afternoon trading at $32.35.

Merlin Entertainments Plc (MERL.L), an operator of amusement parks and the Madame Tussauds museums which is one of Blackstone's private equity fund investments, also went public in the fourth quarter.

"In the fourth quarter alone, we completed four IPOs, including Hilton, Extended Stay, Brixmor and Merlin, which ended the year valued 35 percent above just their third quarter mark," Blackstone co-founder and Chief Executive Stephen Schwarzman said on a conference call with analysts and investors.

Blackstone said economic net income (ENI) - a metric of its profitability that takes into account the mark-to-market valuation of its portfolio - was $1.54 billion in the fourth quarter of 2013, more than double the $670 million of a year ago.

This translated into ENI per unit of $1.35 per share, beating even the most optimistic estimate of $1.30 per share of analysts polled by Thomson Reuters. The average estimate in the poll was 83 cents a share.

"Another strong quarter for Blackstone that demonstrates the true earning power of the firm as the economy improves," RBC Capital Markets LLC analyst Bulent Ozcan wrote in a note.

ENI in real estate surged 279 percent year-on-year in the fourth quarter, private equity was up 82 percent and hedge fund solutions were up 63 percent. ENI in its credit business, impeded by an environment of low interest rates, bucked the trend to fall 2 percent year-on-year, as it failed to beat a very strong 2012 fourth quarter.

The value of Blackstone's private equity funds rose 11.5 percent in the quarter, while the value of its real estate funds appreciated 13.1 percent.

Distributable earnings, which show actual cash that is available to pay dividends, jumped 46 percent in the fourth quarter to $820.6 million.

REAL ESTATE FUNDS

Blackstone, whose investments also include SeaWorld Entertainment Inc (SEAS.N) and Pinnacle Foods Inc (PF.N), said it had a record $46.8 billion as available capital for investments as of the end of December. This included of $17.7 billion in available capital for investments in private equity and $17.1 billion in real estate.

Total assets under management were $265.8 billion as of the end of December, up 26 percent year-on-year. Fee-earning assets under management rose 18 percent to $198 billion.

Blackstone said it had raised $3.2 billion by the end of December for its first Asian real estate fund, which has a $5 billion fundraising limit, and $5.6 billion for its fourth European real estate fund, which has a $6.9 billion fundraising limit.

It said that "tactical opportunities," a strategy it launched two years ago to invest across alternative asset classes that are usually not a target for Blackstone's other units, had raised $5.1 billion thus far.

Media reports this month have linked Blackstone to an auction for JPMorgan Chase & Co's (JPM.N) commodities unit.

In a conference call with reporters on Thursday, Blackstone's President Tony James did not comment specifically on the JPMorgan unit but said commodities was an area that Blackstone had mulled getting into for the past three years.

"I don't think we have got that figured out just yet," James said, referring to the capital requirements and liabilities associated with expanding Blackstone's investment platform into the physical commodities business.

Blackstone declared a quarterly distribution of 58 cents per common unit.

(Editing by Bernadette Baum)

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