Blackstone Group LP (BX.N), the largest publicly listed alternative asset manager, said on Thursday it had nearly $20 billion of its assets in companies that have filed to go public as it seeks to capitalize further on strong capital markets.
Blackstone, which took SeaWorld Entertainment Inc (SEAS.N) public this year and is preparing to take Hilton Worldwide Holdings Inc public next year, said realizing investments helped it generate 59 percent more cash to pay dividends in the third quarter than a year earlier.
"The pipeline for realizations is really growing. The potential, although nothing is guaranteed, obviously is very high for large amounts of realizations and consequent gains," Blackstone chief executive and co-founder Stephen Schwarzman told analysts on a conference call held to discuss earnings.
Blackstone's headline earnings metric rose 3 percent in the third quarter, edging past analysts' expectations. Blackstone shares rose 0.6 percent in afternoon trading on the New York Stock Exchange. They are up more than 73 percent year-to-date, outperforming a 21 percent rise in the S&P 500 index .INX.
Over the last 12 months, Blackstone's asset sales totaled $26 billion, dwarfing the $8 billion reported over the 12 months preceding that period, Schwarzman said.
More is to come through initial public offerings (IPOs), Blackstone said. At the end of the third quarter, 31 percent of Blackstone's private equity assets and only 1 percent of real estate investment assets were public. But if the companies on file go public at current valuations on paper, private equity assets will be nearly 50 percent public and real estate will be 40 percent public, Blackstone chief financial officer Laurence Tosi said on the call.
Blackstone's real estate business had $1.6 billion of proceeds in the third quarter from asset sales while its private equity arm had $2.5 billion of proceeds.
Among real estate exits in the third quarter was a sale of the majority of a U.S. shopping center portfolio it acquired just last year. Blackstone's almost doubled its $350 million investment there, Schwarzman said.
In private equity, Blackstone sold its remaining stake in TRW Automotive Holdings Corp TRW.N, a car safety equipment maker it invested in more than 10 years ago. The sale earned Blackstone about seven times its money, even though the value of that investment plunged in 2009 to 15 cents on the dollar in the aftermath of the financial crisis, Schwarzman said.
Blackstone's real estate holdings rose in value by 5.8 percent and accounted for 65 percent of earnings. Private equity assets rose by 4.2 percent, contributing only 13 percent, as the value of some of publicly traded investments fell.
RAISED MORE THAN OTHER FOUR COMPETITORS COMBINED
Blackstone said economic net income (ENI), a measure of profitability that takes into account the mark-to-market valuation of its portfolio, was $640.2 million, up from $621.8 million in the third quarter of 2012.
Distributable earnings, or actual cash available to pay dividends, rose by 59 percent to $312.7 million, with private equity and real estate contributing almost equally.
Total assets under management hit a record $248 billion at the end of September, up 21 percent year on year. Fee-earning assets under management rose 12 percent to $188.7 billion.
"Over the past few years, we have raised more capital than our four closest competitors combined. It's almost really hard to imagine," Schwarzman said.
Schwarzman said Blackstone had raised $2 billion for its first Asian real estate fund, which is targeting $4 billion, and 1.4 billion euros ($2 billion) for its fourth European real estate fund that is targeting 5 billion euros.
Blackstone's tactical opportunities strategy, which invests across its private equity, real estate, credit and hedge fund platforms, has now raised $4.4 billion from investors, Schwarzman added.
Strategic Partners, a private equity secondaries business that Blackstone acquired from Credit Suisse in August, has started raising its sixth fund targeting at last $3 billion, Schwarzman said.
Blackstone declared a quarterly distribution of 23 cents per common unit.
Asked whether Blackstone was affected by regulators' increased scrutiny of Wall Street, Schwarzman said his firm did not take people's deposits and does not rely on the Federal Reserve or the government.
It therefore does not face such regulatory risks and in fact stands to benefit from financial institutions shedding assets and losing employees which it can poach. Nevertheless, Blackstone takes regulatory compliance seriously, Schwarzman said.
Earlier, Blackstone President Tony James told reporters on another conference call that chief executives of companies controlled by Blackstone saw little impact as a result of the U.S. government shutdown which ended on Thursday.
(Reporting by Greg Roumeliotis and Ilaina Jonas in New York; Editing by Gerald E. McCormick, Jeffrey Benkoe and David Gregorio)