(Bloomberg)—Blackstone Group LP posted third-quarter profit that exceeded analysts’ expectations as its private equity portfolio appreciated, credit holdings gained and it sold a string of real estate assets.
Economic net income, a measure of earnings that reflects both realized and unrealized investment gains, was $687 million, or 57 cents a share, New York-based Blackstone said in a statement Thursday. Analysts on average expected earnings of 47 cents, according to estimates compiled by Bloomberg.
Blackstone, led by Chief Executive Officer Steve Schwarzman, continues to prove the strength of its real estate business, which is the largest among alternative asset managers. The firm has found several willing Chinese buyers for its property holdings this year, including Anbang Insurance Group Co., which bought Strategic Hotels & Resorts Inc. in the quarter. This week Blackstone also struck a deal to sell 25 percent of its biggest holding, hotel operator Hilton Worldwide Holdings Inc., to China’s HNA Group for $6.5 billion.
In real estate, “we expect fundamentals to remain solid for the foreseeable future,” Schwarzman said Thursday on a conference call with analysts and investors. “In most markets supply remains constrained, demand for high-quality real estate is strong, debt levels are not excessive and bank competition is diminished.”
Blackstone’s real estate group, overseen by Jon Gray, sold $7.2 billion in holdings during the quarter, the second-highest level ever. That keeps them on track to seal $20 billion in real estate realizations for the third year in a row, Chief Financial Officer Michael Chae said during the call. Dispositions in the period ended Sept. 30 included Chicago-based Strategic Hotels and Blackstone’s remaining stake in Brixmor Property Group Inc.
“We are not planning on slowing down, with clear visibility on a number of large monetizations over the next 12 to 18 months,” Chae said of Blackstone’s real estate portfolio.
The firm’s private equity unit shed $4.5 billion in assets during the quarter, including its remaining ownership in NXP Semiconductors NV and stakes of drug-products maker Catalent Inc. and Scout24 AG, a German digital-advertising company.
“Performance remained strong while fundraising, realization activity and investment activity all continued at a healthy pace,” Jefferies Group LLC analysts led by Dan Fannon wrote in a note to clients Thursday. Blackstone’s economic net income compared with a loss of $415.9 million a year earlier.
Shares of Blackstone gained 2.4 percent to $25.99 as of 2:50 p.m. in New York. The stock was down 9.1 percent, including reinvested dividends, this year through Wednesday.
Blackstone’s distributable earnings, which reflect cash profits on asset sales and fund management fees, were $593 million, compared with $691.5 million a year earlier. The firm said it will pay stockholders a dividend of 41 cents a share on Nov. 14.
Its private equity portfolio appreciated 3 percent in the quarter, compared with 5.8 percent for KKR & Co. and 3 percent for Carlyle Group LP, which both reported results earlier this week. The S&P 500 index of large U.S. companies was up 3.3 percent in the three months ended Sept. 30.
Blackstone earlier this month took advantage of low global interest rates by issuing 1 percent senior notes, raising 600 million euros ($655 million). That adds to $2.8 billion in debt as of Sept. 30 on the company’s balance sheet, which had about $3.9 billion in cash and marketable securities.
With $361 billion in assets under management, Blackstone is viewed as a bellwether for the alternative asset sector given its size and reach across markets. Peter Grauer, chairman of Bloomberg LP, the parent of Bloomberg News, is a non-executive director at Blackstone.
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