Blackstone Group LP (BX.N), the largest alternative asset manager, said on Thursday that second-quarter earnings more than tripled as the value of its funds rose and it cashed out on parts of its portfolio, including SeaWorld.
Despite market jitters in the second half of the quarter over the Federal Reserve ending its bond buying program, Blackstone's private equity and real estate funds appreciated more than 5 percent, surpassing analysts' expectations, while its hedge and credit funds posted strong gains.
Blackstone shares rose 5.1 percent to $23.08. Up to the end of trading on Wednesday, they had risen 41 percent year-to-date, compared to a 30 percent rise for competitor KKR & Co LP (KKR.N), a 41 percent rise for Apollo Global Management LLC (APO.N) and a 3 percent rise for Carlyle Group LP (CG.O).
Blackstone, whose investments include The Weather Channel, Hilton Worldwide and Pinnacle Foods Inc (PF.N), reported economic net income (ENI) of $703 million, up from $212 million in the second quarter a year ago. ENI takes into account changes in the market value of its funds.
This translated into ENI of 62 cents per share versus the average analyst projection of 49 cents, according to a Thomson Reuters poll.
"The unrealized performance fee strength in real estate as well as private equity drove the beat on ENI," Jefferies analysts wrote in a note.
Distributable earnings, which show cash available to pay dividends, rose 73 percent to $338 million as Blackstone took advantage of strong capital markets to exit more of its investments.
At the end of the quarter, SeaWorld Entertainment Inc (SEAS.N), which completed a $702 million initial public offering in April, was valued at three times Blackstone's investment. Also, Blackstone sold shares in PBF Energy Inc (PBF.N), Travelport Ltd and TV ratings company Nielsen Holdings NV (NLSN.N) at an average valuation of 2.6 times its investment.
In real estate, Blackstone Mortgage Trust Inc (BXMT.N) raised $660 million through a secondary offering, while Blackstone exited from General Growth Properties Inc (GGP.N) making 2.3 times its money. Overall, Blackstone realized $2.1 billion in real estate asset sales and $1.6 billion in private equity asset sales in the quarter.
"Robust realizations allowed us to generate significant returns for our fund investors and higher distributable earnings for our unitholders," Blackstone Chief Executive Stephen Schwarzman said in a statement.
GROWING REAL ESTATE REALIZATIONS
Real estate is Blackstone's biggest earner, accounting for about half its profits in the last quarter. The improving U.S. economy and limited new construction have continued to work in Blackstone's favor, pushing up the value of its properties by 5.7 percent for the quarter and 11.9 percent versus a year ago.
Its theory of buying real estate has been to buy, fix and sell. In line with that strategy, on Blackstone on Thursday filed for an IPO for Brixmor Property Group, its grocery-anchored shopping center business it created after it bought most of the U.S. assets from Australia's Centro Properties Group two years ago more than $9 billion.
The IPO is likely to occur next quarter, Blackstone President Tony James told reporters on a conference call.
"They'll continue to be a growing series of real estate realizations as we go forth over next 12 to 18 months," James said. "In general, it will be lumpy. There will be some variability but you can expect it to ramp up over the next year."
The United States represents the bulk of Blackstone's real estate holdings. But the New York-based firm is seeing more opportunities abroad, where Europe's distressed real estate is finally becoming available for sale and Asia's financial problems are creating opportunities, making them more attractive than the higher priced U.S. market, James said.
Assets under management totaled $230 billion at the end of June, up 21 percent year on year. Fee-earning assets under management rose 12 percent to $176 billion.
Blackstone completed the first fundraising period of its inaugural Asian real estate fund in June, with $1.5 billion in total commitments from investors, while its latest real estate debt strategies drawdown fund has so far raised $3.5 billion.
Blackstone's second rescue lending fund had raised $5 billion by the end of the quarter, hitting its fundraising limit, while its tactical opportunities investment vehicles had amassed $3 billion.
Blackstone's capital raised from investors that is available for deals -- so-called dry powder -- reached a record $38.5 billion at the end of the quarter. Of this, $15.6 billion was available for private equity and $11.9 billion for real estate.
Blackstone declared a second-quarter distribution of 23 cents per common unit.
(Reporting by Greg Roumeliotis and Ilaina Jonas in New York; Editing by Jeffrey Benkoe and Andrew Hay)