2014 Blackstone Investor Day

Transcription

June 12, 2014
The Waldorf Astoria
New York, NY
Table of Contents
Please click on the section links below to navigate to the section
Important Disclosures
Agenda
Introduction
Welcome Remarks
GSO
Real Estate
Private Equity
Portfolio Operations
Tactical Opportunities
Strategic Partners
Private Wealth
BAAM
Blackstone Financials Update & Conclusion
Appendix
Blackstone
Important Disclosures
Not an offer. These materials are provided as an overview of The Blackstone Group L.P. and are for informational purposes only, and do not constitute an offer to sell,
or a solicitation of an offer to buy, any security or instrument, or a solicitation of interest in any particular Blackstone fund, account or strategy. If such an offer is
made, it will only be made by means of an offering document, which would contain material information (including certain risks of investing in such security, fund or
strategy) not contained in these materials and which would supersede and qualify in its entirety the information set forth in these materials. Any decision to invest in
a fund should only be made after reviewing the offering document, conducting such investigations as an investor deems necessary and consulting the investor’s own
legal, accounting and tax advisors in order to make an independent determination of the suitability and consequences of an investment.
Performance Information. Past performance is not necessarily indicative of future results and there can be no assurance that any Blackstone fund or strategy will
achieve comparable results, or that any investments made by Blackstone in the future will be profitable. Actual realized value of currently unrealized investments will
depend on, among other factors, future operating results, the value of the assets and market conditions at the time of disposition, any related transaction costs and
the timing and manner of sale, all of which may differ from the assumptions and circumstances on which the current unrealized valuations are based. Accordingly, the
actual realized values of unrealized investments may differ materially from the values indicated herein.
General. Data in the materials is as of March 31, 2014 unless otherwise noted. Unless otherwise indicated, assets under management (“AUM”) in this presentation
refers to total assets under management, which differs from fee-earning assets under management. Neither Blackstone, any Blackstone fund nor any of Blackstone’s
affiliates makes any representation or warranty, express or implied, as to the accuracy or completeness of the information contained herein. Unless otherwise
specified, the source for all graphs, charts and information in these materials is Blackstone. Certain information contained in these materials has been obtained from
sources outside Blackstone. While such information is believed to be reliable for purposes used herein, no representations are made as to the accuracy or
completeness thereof and Blackstone does not take any responsibility for such information. Certain information contained in the presentation discusses general
market activity, industry or sector trends, or other broad-based economic, market or political conditions and should not be construed as research or investment
advice.
Index Comparisons. The volatility and risk profile of the indices presented may be materially different from that of the Blackstone funds. In addition, the indices
employ different investment guidelines and criteria than the funds and do not employ leverage; as a result, the holdings in the funds and the liquidity of such holdings
may differ significantly from the securities that comprise the indices. The indices are not subject to fees or expenses and it may not be possible to invest in the
indices. The performance of the indices has not been selected to represent an appropriate benchmark to compare to the performance of the Blackstone funds, but
rather is disclosed to allow for comparison of the funds’ performance to that of well-known and widely recognized indices. A summary of the investment guidelines
for the indices presented are available upon request. In the case of equity indices, performance of the indices reflects the reinvestment of dividends.
Non-GAAP Financial Measures. The materials contain information regarding Blackstone’s financial results prepared on a basis of accounting generally accepted in the
United States of America (“GAAP”) as well as certain financial measures calculated and presented on the basis of methodologies other than in accordance with GAAP
(“non-GAAP”). Definitions and calculations for each of these non-GAAP measures can be found in the Appendix to the materials.
Blackstone
1
Important Disclosures, continued
Forward-Looking Statements. These materials may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section
21E of the Securities Exchange Act of 1934 which reflect Blackstone’s current views with respect to, among other things, Blackstone’s operations and financial
performance. You can identify these forward-looking statements by the use of words such as “outlook,” “believes,” “expects,” “potential,” “continues,” “may,” “will,”
“should,” “seeks,” “approximately,” “predicts,” “intends,” “plans,” “estimates,” “anticipates” or the negative version of these words or other comparable words. Such
forward-looking statements are subject to various risks and uncertainties. Accordingly, there are or will be important factors that could cause actual outcomes or
results to differ materially from those indicated in these statements. Blackstone believes these factors include but are not limited to those described under the
section entitled “Risk Factors” in its Annual Report on Form 10-K for the fiscal year ended December 31, 2013, as such factors may be updated from time to time in its
periodic filings with the Securities and Exchange Commission, which are accessible on the SEC’s website at www.sec.gov. These factors should not be construed as
exhaustive and should be read in conjunction with the other cautionary statements that are included in this presentation and in the filings. Blackstone undertakes no
obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise.
GSO Section, page 3. Certain GSO entities act as sub‐adviser to the business development companies (“BDCs”). The applicable non‐GSO entities that act as advisers to
the BDCs (the “BDC Advisers”) retain investment discretion over the BDCs’ investment programs. Thus, while GSO proposes investment opportunities to the BDC
Advisers for investment by the BDCs, the BDC Advisers have investment discretion to approve or reject such proposed investment opportunities. GSO does not have
investment discretion with respect to the BDCs.
Strategic Partners Section, page 1. Net returns for Strategic Partners flagship funds, SP I – SP V, are from inception in December 2000 to December 31, 2013. The
valuation policy of each of the Funds is to mark its holdings to amounts that reflect the fair value of the underlying portfolio investments as reported by the general
partners or managers of the underlying funds, rather than the cost of the secondary investments paid by the respective Fund. The purchase discounts (or premiums)
paid at the closing of a transaction initially impact the internal rate of return, which over time reflects subsequent changes in the valuations of the underlying funds.
The performance of SP I, SP II, SP III and SP V as applicable is presented together with such Funds’ parallel funds on a combined basis. Gross internal rate of return
(“IRR”) is annualized and calculated based on the limited partners’ daily inflows and outflows, before fund expenses and the general partner’s carried interest of the
Fund, but after the fund expenses and carried interest of the underlying funds. Net IRR is calculated after management fees and fund expenses and the general
partner’s carried interest of the Fund. Each of SP I, SP II, SP III and SP 2007 has a lower carried interest than that of SP IV and SP V. In addition, SP I has a different fee
structure compared to the other Funds. SP V has experienced limited investment dispositions and the relevant measurement / holdings periods over which the IRRs
have been calculated are significantly shorter than the anticipated average holding period of the Fund’s investments. Accordingly, such IRRs are not meaningful at this
time.
BAAM Section, page 2. BAAM Principal Solutions Composite covers the period from January 2000 to present, although BAAM’s inception date is September 1990.
BAAM’s Principal Solutions Composite does not include BAAM’s long-only equity, long-biased commodities, seed, strategic opportunities (external investments) or
advisory platforms. BAAM’s external AUM in specialized or customized solutions includes BAAM’s customized, strategic opportunity, strategic capital, seed, long-only
equity, long-biased commodity, and individual investor solutions platforms.
Blackstone
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Agenda – Thursday, June 12, 2014
Time
Function
Location
7:00 am – 2:00 pm
Conference Registration
Distribution of Conference Materials
Starlight Roof – Foyer
7:00 am – 8:00 am
Welcome Buffet Breakfast
Starlight Roof – North
8:00 am – 8:05 am
5 mins
Introduction
Joan Solotar, Head of External Relations and Strategy
Starlight Roof – Center
8:05 am – 8:15 am
10 mins
Welcome Remarks
Tony James, President & COO
8:15 am – 8:40 am
25 mins
GSO
Bennett Goodman, Co-Founder, GSO Capital Partners,
Senior Managing Director, Blackstone
8:40 am – 9:10 am
30 mins
Real Estate
Jon Gray, Global Head of Real Estate
9:10 am – 9:35 am
25 mins
Private Equity
Joe Baratta, Global Head of Private Equity
9:35 am – 9:50 am
15 mins
Dave Calhoun, Global Head of Portfolio Operations
9:50 am – 10:00 am
10 mins
Break
Starlight Roof
(Park Avenue entrance elevators)
Blackstone
Agenda – Thursday, June 12, 2014
Time
Function
Location
10:00 am – 10:25 am
25 mins
The Buy-Side View
Moderator: Steve Schwarzman, Chairman, CEO and Co-Founder
Mario Giannini, CEO, Hamilton Lane
10:25 am – 10:40 am
15 mins
David Blitzer, Head of Tactical Opportunities
10:40 am – 10:55 am
15 mins
Strategic Partners
Verdun Perry, Co-Head of Strategic Partners
10:55 am – 11:10 am
15 mins
Private Wealth
Brendan Boyle, Head of Private Wealth Distribution
11:10 am – 11:35 am
25 mins
BAAM
Tom Hill, President and CEO, BAAM, Vice Chairman, Blackstone
11:35 am – 11:55 am
20 mins
Laurence Tosi, Chief Financial Officer
11:55 am – 12:20 pm
25 mins
Wrap-Up and Q&A
Steve Schwarzman, Chairman, CEO and Co-Founder
Tony James, President & COO
12:30 pm – 1:45 pm
Seated Lunch
Starlight Roof – North
Blackstone
Introduction
Blackstone: Leaving the pack behind
FAST LANE
Blackstone
1
What you may not know about Blackstone
 Our funds created $33 billion of value in the past year
 In the past year investors entrusted us with $52 billion in additional funds
 We invest for over half of all U.S. pensioners
 Innovation has driven $122 billion in AUM from new products since our IPO
 We are the most profitable asset manager in the world
 We have a greater presence on social media than any of our peers
Blackstone
2
The “Alternatives” have evolved
# of Public Companies
# of Institutions with >1mm Shares of BX
65
8
3
14
2007
Today
IPO
Today
Average Daily Trading Volume
Market Cap and Free Float
($ in millions)
($ in billions)
$357
$84
$100
$6
$165
Mkt Cap
2007
________________________________________________
$41
$40
Today
BX
Alternatives
$38
Float
$19
Mkt Cap
2007
Float
Today
BX
Alternatives
Note: As of June 10, 2014. Alternatives include: APO, ARES, BX, CG, FIG, KKR, OAK and OZM.
Blackstone
3
Where would Blackstone rank today in the S&P 500?
($ in millions)
Market
Cap
Blackstone
Employees
Market
Cap /
Employee
Avg. Daily
Trading
Volume
LTM
Earnings
$38,014
2,016
Median for Asset Managers in S&P 500
22,149
7,523
3.3
1,255
S&P 500 Financials Median
19,498
10,991
1.1
S&P 500 Median
17,983
17,800
1
4
In which quartile would
Blackstone rank?
$18.9
$3,700
$165
Dividend Yield
’13A
’14E
4.3%
5.4%
97
2.0%
2.0%
1,004
108
2.0%
2.1%
1.0
796
124
1.6%
1.7%
1
1
2
1
1
________________________________________________
Note: As of June 10, 2014.
Blackstone
4
Blackstone’s earnings are not closely linked to the stock market
Blackstone Earnings vs. S&P 500
300%
200%
R² = 0.22
BX ENI
100%
0%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
-100%
-200%
-300%
S&P 500
Blackstone
5
The market values growth
BX
Asset Managers
Advisory Firms
Biotech
Software
Earnings Growth(1)
31%
10%
15%
11%
9%
Stock Volatility(2)
26%
24%
26%
39%
30%
’14E P/E(3)
10x
16x
23x
19x
23x
$6.9bn
$0.4bn
’98
’00
’02
’04
’06
’08
’10
’12
1Q’14 LTM
________________________________________________
Note:
(1)
(2)
(3)
Asset managers include: AB, AMG, BEN, BLK, EV, FII, IVZ, JNS, LM, TROW and WDR. Advisory firms include: LAZ, GHL, EVR, and MC. Biotech and Software based on the Global Industry Classification Standard.
As of December, 31, 2013. Trailing 3-year CAGR.
Based on the average of the implied volatility (6M, 100 strike) for the companies within the industries.
Based on 2014 consensus estimates.
Blackstone
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What’s it all worth?
Hypothetical Fee-Earning AUM
$610
($ in billions)
60% below our historic rate
$204
If:
 12% AUM growth
 2x multiple on invested capital
 7%–10% liquid fund returns
Current
1
2
3
4
5
6
7
8
9
10
Years
Hypothetical Distributable Earnings
($ per diluted unit)
Year 10
Cumulative
Yield in excluding Distributions
Year 10 Distributions
Paid
Total
Average Cash Earnings: $2.70
LTM
1
2
________________________________________________
3
Implied Stock Price
$4.15
4
5
Years
6
7
8
9
10
6%
$69
5%
$83
4%
$104
+
+
+
$27
$27
$27
=
=
=
$96
$110
$131
Note: Presentation of hypothetical growth in Fee-Earning AUM and Distributable Earnings not intended to project future performance. Calculation of hypothetical Distributable Earnings per unit is intended
to be illustrative and for that purpose contains a number of assumptions including, among others, constant management and performance fee rates and margins over the ten-year period, a 2x realized
multiple of invested capital over an average hold period of 4.5 years for our draw-down funds and an effective tax rate of 15%–20% on taxable income for the ten-year period. Cumulative distributions
paid assumes 100% payout of Distributable Earnings. Analysis assumes no reinvestment of distributions paid.
Blackstone
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Welcome Remarks
Welcome to Blackstone’s fourth Investor Day
Private Equity
Real Estate
Joe Baratta
Dave Calhoun
Jon Gray
Credit
Bennett Goodman
Hedge Fund Solutions
Tom Hill
David Blitzer
Private Wealth
Brendan Boyle
Secondaries
Finance & Technology
Verdun Perry
Laurence Tosi
Blackstone
1
Leading market positions across all our businesses
People have been trying to imitate Blackstone
for years…
Blackstone
2
Not easy to replicate
 One of the best brands in all financial services
 Most extensive network of institutional LP relationships
 Deepest and broadest management team
 Scale to handle large, complex transactions that others can’t
 Better information; seamless sharing of knowledge and ideas
 Unique culture
 Tradition of winning
The only firm with leadership positions across multiple businesses
Blackstone
3
What makes Blackstone different?
Small Firm Feel
each person makes a difference
Engaged Leaders
shaping and guiding people daily
Camaraderie
Flat Organization
An enduring
culture that is
unique and
compelling
no bureaucracy; move quickly
Passion
drive to win
cohesive teams; common mission
Talent
Innovation
deep; broad; driven
entrepreneurial spirit
Blackstone
4
How is the market valuing leadership?
For companies in
the S&P 500 with…
The median P/E
multiple is…
Earnings growth
>30%
20x
EBITDA margin
>50%
24x
Return on equity
>40%
19x
>5%
16x
Dividend yield
Blackstone surpasses all of
these metrics…
…but BX
multiple is 10x
________________________________________________
Note: Earnings growth reflects 3-year CAGR from 2010 through 2013. EBITDA margin and return on equity reflect 2013 full-year results. Dividend yield is based on 2014 consensus estimates. S&P 500 P/E
multiple reflects the median multiple, based on 2014 consensus earnings, of S&P 500 companies that meet or exceed the given metric. Blackstone 10x multiple reflects 2014 consensus estimates.
Blackstone
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GSO
GSO’s Business Today
Global footprint with over 250 employees in New York, London,
Dublin and Houston
Total Assets Under Management
GSO Capital Partners
$66.0 billion
Alternative
Investment Funds
Customized
Credit Strategies – Long Only
$35.2 billion
$30.8 billion
Mezzanine
Funds
Rescue
Lending
Funds
BDCs
(Small Cap
Direct Lending)
Hedge Fund
Strategies
CLOs
Closed End &
Commingled
Funds, ETF and
SMAs
$7.8 billion
$8.8 billion
$11.0 billion
$7.6 billion
$20.3 billion
$10.5 billion
Private Market Strategies
________________________________________________
Public Market Strategies
Note: The AUM for Blackstone, GSO or any specific fund, account or investment strategy presented in this Presentation may differ from any comparable AUM disclosure in other non-public or public sources.
Certain of these differences are in some cases required by applicable regulation.
Blackstone
2
Our Mission: Strong investment results across our strategies
($ in billions)
Strategy
2013
Results
Inception to Date(1)
Net Returns
Net Returns
Index(2)
$8.6
24.3%
17.6%
9.2%
5.4
17.9%
19.0%
10.4%
11.0
10.5%
15.8%
14.1%
$4.5
18.2%
9.4%
4.8%
7.8
5.1%
5.7%
5.0%
AUM
Private Market Strategies
Rescue Lending Flagship Funds
Mezzanine Flagship Funds
Small Cap Direct Lending (BDCs)
Public Market Strategies
Hedge Fund Strategies Flagship Funds
U.S. Leveraged Loans Composite(3)
________________________________________________
Note: Past Performance is not necessarily indicative of future results. See “Important Disclosures” section at the front of the presentation book.
(1) Rescue Lending Flagship funds and Mezzanine Flagship funds returns shown from inception of the first flagship fund of each strategy (September 2009 and June 2007, respectively) through March 31,
2014. BDCs shown from inception of first fund in January 2009 through March 31, 2014. Hedge Fund Strategies Flagship Funds shown from inception (August 2005) through March 31, 2014. Leveraged
Loans shown from December 2000 through March 31, 2014.
(2) Indices, in order, are as follows: DJ CS Event Driven Distressed, CS High Yield Index + 200bps, 80% CS LLI / 20% CS HYI, HFRI Fund Weighted Composite and CS Leveraged Loan Index.
(3) U.S. Leveraged Loans Composite includes U.S. CLO and other vehicles where at least 80% of the invested assets are senior secured bank loans. Performance is presented gross of fees. Estimated net
returns for this composite are 3.8% and 4.5% for 2013 and ITD, respectively, assuming a 1.25% management fee. The performance of CLO portfolios included in this composite is calculated based on the
unlevered underlying portfolio assets within the CLO structure. Actual management fees for accounts within this composite vary. CLOs within this composite also have an incentive fee specific to the
fund, subject to an IRR hurdle, which is not included here.
Blackstone
3
GSO’s Evolution
Evolution of the GSO platform
($ in billions)
December 31, 2008
Total AUM:
March 31, 2014
$22.4
$66.0
5.9
35.2
16.5
30.8
% of AUM from products
that didn’t exist in 2008(1)
–
71%
% of LPs invested in products
that didn’t exist in 2008(1)
–
34%
Alternatives
Customized Credit Strategies
71% of our AUM and 34% of LPs are invested in products
that did not exist five years ago
________________________________________________
(1)
Alternative assets only.
Blackstone
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Where have we grown?
($ in billions)
As of December 31, 2008
Hedge Fund Strategies Flagship funds
As of March 31, 2014
$2.7
$4.5
Mezzanine Flagship funds
2.0
5.4
Rescue Lending Flagship funds
–
8.6
Strategic SMAs(1)
–
5.3
BDCs
–
11.0
Other Credit Funds(2)
3.6
0.3
14.1
30.8
$22.4
$66.0
Customized Credit Strategies
Total AUM
Over the past five years, $25 billion of our AUM growth has come
from new products and strategies
________________________________________________
(1)
(2)
Includes various SMAs, co-investments and opportunistic funds managed by GSO.
Includes legacy funds currently in wind down.
Blackstone
6
How have we achieved this growth?
Leverage Industry
Themes
Capitalize on Market
Dislocations and
Regulatory Changes
 Raise new pools of capital based on key industry themes developed within GSO
and Blackstone
 Examples: energy and residential housing
 Rescue Lending Funds
 Business Development Corps (BDCs)
 CLO consolidation
 Created over $5 billion in separate accounts with large LPs over past few years
Strategic Partnerships
with Large LPs
 Capitalizes on LP trend to consolidate GP relationships
 Allows LPs to invest more capital quickly with better fees and greater
transparency
 Products that capitalize on strong demand for yield by retail investors:
Retail Channels
Closed-End Funds, ETF, BDCs
 Tapping into private banks for distribution: Rescue Lending, Mezzanine and
Hedge Funds
Blackstone
7
Capitalizing on industry themes: Energy and Power
 GSO has invested over $15 billion in the Energy sector since 2005
 Dedicated Energy team of 16 people with unique sector expertise and
long-standing management relationships
 Energy fits extremely well within GSO’s investment approach
• Deal flow driven by significant capital needs and fragmented nature of the industry
• Hard asset value coupled with commodity exposure should allow for downside protection
and upside participation
 We have leveraged our Energy capability across the GSO platform
• $1 billion of Energy separate accounts
• Energy-focused BDC (~$3 billion)
• GSO believes high exposure to Energy investments has driven strong investment results
across funds and has enabled us to raise larger sized funds
Blackstone
8
Select GSO Energy and Power investments
Sub Sector / Theme
Privately Originated
Public Investments
Upstream
Pecos
Midstream
Service and Equipment
Power Generation
Lake Road
Generating
Calpeak
________________________________________________
All rights to the trademarks listed herein belong to their respective owners, and GSO’s use hereof does not imply any affiliation with, or endorsement by, the owners of these trademarks.
Blackstone
________________________________________________
9
GSO’s Energy investments touch the major U.S. oil & gas plays
Bakken
Utica
Exploration & Production
Midstream
Power
Services
________________________________________________
Note: Green shading represents key U.S. oil & gas production area.
Blackstone
10
Capitalizing on industry themes: residential housing
2006–2007


2013–2014
2009
 GSO provides capital to mid cap
Bearish view
homebuilders:
• Beazer Homes
• Plygem
• KB Homes
Short positions
 Rescue financings for Morris Homes, KP1
 Hedge fund positions in Beazer, iStar, Quinn Group
 GSO forms dedicated $500 million Land Bank Fund
2011–2012
 Positive view on homebuilding recovery
 GSO deploys capital across public and private funds
 Invested in Hovnanian, City Ventures, Miller Homes,
2008
 Cautious but turning constructive
CEMEX, Giant Cement, Cementos Portland and Realogy
 Land bank strategy initially deployed in hedge and
mezzanine funds
 Investment in Standard Pacific
2006
2007
2008
2009
2010
2011
2012
2013
Opportunistically invested $4 billion of capital across public and private strategies
as our view on the housing recovery evolved(1)
________________________________________________
(1)
Includes long investments made in GSO’s Hedge Fund Strategies funds, Rescue Lending funds, Mezzanine funds, total commitments for GSO’s dedicated Land Bank Fund and investments made by
alternative investment SMAs managed by GSO since GSO’s inception within the Homebuilder, Building Materials and Real Estate sectors.
Blackstone
11
Select GSO homebuilder and building products investments
Sub Sector / Theme
Privately Originated
Public Investments
Homebuilders / Realtor
Building Products
REITs
________________________________________________
All rights to the trademarks listed herein belong to their respective owners, and GSO’s use hereof does not imply any affiliation with, or endorsement by, the owners of these trademarks.
Blackstone
12
Market dislocation and regulatory changes
GSO’s views on market opportunity
 Significant structural and regulatory changes in financial markets create opportunity for GSO
 Global investment banking model moved to “Capital Lite”
 Volcker Rule / Dodd-Frank / OCC Leverage Guidelines
 Basel III
 CLO “skin in the game” requirements / limited new issuance
GSO Activities
Launch:
New AUM(1):
Strategy:
Rescue Lending
Flagship Funds
BDCs
CLO Acquisitions
September 2009
January 2009
April 2010
$8.6 billion
$11 billion
$15 billion
Rescue lending
Small cap direct
lending
Consolidation of the
CLO industry
________________________________________________
(1)
Rescue Lending Flagship Funds New AUM reflects AUM of GSO’s flagship Rescue Lending funds as of March 31, 2014. BDCs New AUM reflects AUM of GSO’s Small Cap Direct Lending funds as of
March 31, 2014. CLO Acquisitions New AUM reflects the dollar amount of CLOs acquired by GSO following April 2010.
Blackstone
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What’s next?
GSO’s views:
 Credit markets remain frothy
•
Yields and spreads at record lows
•
Public market deals have more aggressive leverage, weaker covenants and
lower credit quality
•
Sets up well for next distressed cycle
 Activity in Europe picking up significantly
 Areas of Focus:
•
European direct lending fund – $2.5 billion
•
Expand into emerging market corporate debt
•
Additional capital for energy activities
•
Forge new strategic partnerships with large LPs
Blackstone
14
Why are we well positioned for the future?
Investment
Performance
 Superior results generated across the platform
Unique
Competitive
Advantages
 Ubiquitous presence in below investment grade corporate credit
Tradition of
Innovation
 Long track record of providing creative solutions
 Believe we’re top quartile performer in all of our major strategies
 Scale enables us to do deals that others can’t
 “Blackstone / GSO” brand globally recognized by companies and boards
 Market volatility and dislocations are our opportunity to grow
 Entrepreneurial group of 15 SMDs
Culture
 Strong cooperation across Blackstone and GSO
 Excellent alignment with our LPs
Blackstone
15
Real Estate
Blackstone Real Estate Overview
• $81 Billion AUM
Blackstone
Real Estate
• 17% Net Returns(1)
• Only 1% Realized Losses
• $34 Billion of Capital Deployed Post-Crisis(2)
• Same Simple Strategy – Buy it, Fix it, Sell it
Keys to
Success
• Same Investment Process
• Same People
• Compelling Investment Opportunities, Particularly Outside the U.S.
Current
Environment
• Competitive Landscape Radically Altered
• Limited New Construction
________________________________________________
Note: Past performance is not necessarily indicative of future results. See “Important Disclosures” section at the front of the presentation book.
(1)
BREP global funds include Pre-BREP, BREP I, BREP II, BREP III, BREP IV, BREP V, BREP VI and BREP VII; excludes BREP regional funds, co-investments and BREDS.
(2)
Reflects invested and committed capital.
Blackstone
1
BREP Performance Summary
Blackstone Real Estate Partners (“BREP”) has consistently delivered solid
performance since 1991
BREP Global Funds’ Performance Summary
(US$ in thousands)
Fund
Pre-BREP
BREP I
’94-'96
467,168
40%
BREP II
’96-'99
1,218,877
19%
BREP III
’99-'03
1,415,422
21%
BREP IV
’03-'05
2,737,219
14%
BREP V
’05-'07
5,756,971
10%
BREP VI
’07-'11
10,850,345
13%
BREP VII
’11-Present
9,300,871
28%
$ 31,887,587
17%
Total
Invested
Capital
$
140,714
3/31/2014(1)
Net IRR
33%
Investment
Period
’91-'93
________________________________________________
(1)
Pre-BREP through BREP III are substantially fully realized funds and BREP IV, BREP V, BREP VI and BREP VII represent realized and unrealized values as of March 31, 2014.
Blackstone
2
Real Estate Assets Under Management
Investment success has translated into tremendous fundraising success
Fee-Earning Real Estate AUM
Total Real Estate AUM
($ in billions)
($ in billions)
$81
$53
+827%
$6
2005 2006 2007 2008 2009 2010 2011 2012 2013
1Q’14
1Q’14
+1074%
$7
2005 2006 2007 2008 2009 2010 2011 2012 2013
Blackstone
3
Evolution of Blackstone Real Estate
Assets have become far more diversified by product type and geography
AUM Pre-Crisis
AUM Today
(2007)
(1Q ’14)
BREP
Global
53%
$26B
10%
5%
BREP Europe
BREP
Co-Invest
12%
BREP
Global
85%
$81B
BREDS
11%
BREP
Co-Invest
BREDS Drawdown
BXMT
BREDS Liquid
BREDS Co-Invest
BREP
Europe
18%
Core+
1%
Blackstone
4
Global Real Estate Platform
Growth driven by a highly integrated global investment platform
Europe
60 Professionals
 BREP
 BREDS
 Core+
Latin America
4 Professionals(1)
 BREP
Professionals globally
20
North America
156 Professionals
 BREP
 BREDS
 Core+
270+
Partners average 13 years
at Blackstone
Asia
59 Professionals
 BREP
 BREDS
 Core+
1
Global Investment
Committee
________________________________________________
(1)
Includes professionals in New York dedicated to investing in Latin America.
Blackstone
5
Operating Platforms
Operating platforms provide a competitive edge in identifying market
trends, deploying capital and/or creating asset value
Office
Hospitality
Retail
Industrial
Residential/
Multifamily
Madrid MF
________________________________________________
Note: The above platforms represent select investments made by the equity platform of the Blackstone Real Estate Group and should not be considered reflective of investments made by other funds.
Blackstone
6
Real Estate Invested Capital
Active capital deployment continues with geographic and product expansion
Real Estate Invested Capital
($ in millions)
$10,250
$8,515
$6,600
$4,217
$973
2009
2010
2011
2012
2013
Blackstone
7
Key Questions for Blackstone Real Estate
Where Are We in the Global Real Estate Cycle?
Where Are We in the Global Real Estate Cycle?
No major global market is yet experiencing an excess of cranes or capital
Global Real Estate Cycle
Distressed Phase
Excess Phase
 Depressed Asset Values
 Peaking Asset Values
 No Financing
 Abundant Financing
 Limited New Supply
Europe
Recent Investments
Europe – Distress
Tower NPL Portfolio
Pan-Europe
€1.1B
Asia
Asia – Capital Dislocation
SCP
China Retail
 Lots of New Supply
U.S.
$1.8B
U.S. – Recovery
Cosmopolitan
Las Vegas Hotel(1)
$1.7B
________________________________________________
(1)
While BREP is under contract to acquire this investment, there is no assurance that the transaction will close as expected or at all.
Blackstone
10
U.S. Single Family Overview
Lack of new supply supports further appreciation
U.S. Single Family Housing Completions(1)
Home Price Index(2)
(Units in thousands)
Invitation Homes Markets
110
1,654
100
90
Still down 27%
from ’06
80
569
70
60
50
________________________________________________
(1)
(2)
Census Bureau, February 2014.
Representative of Invitation Homes markets. John Burns Home Value Index as of May 2014 (Index 100 = July 2006).
Blackstone
11
What Is the Status of Realizations?
What Is the Status of Realizations?
Distributions to limited partners are on the rise and should accelerate
Blackstone Real Estate Gross Distributions
($ in millions)
$7,443
$3,708
$1,848
$30
2008
$213
2009
+120%
$681
2010
$2,055
$932
2011
2012
2013
1Q’13
1Q’14
________________________________________________
Blackstone
13
Realizations
77% of BREP’s $21 billion of unrealized gains is concentrated in public
holdings and an office portfolio in liquidation
BREP/Co-Invest Unrealized Gains
Public Holdings and
Office Portfolio in Liquidation
($ in millions)
$21,161
Unrealized
Gains
77%
Unrealized Gains
Invested
Capital
$32,965
®
BREP/Co-Invest
________________________________________________
Blackstone
14
Real Estate Carried Interest
Net accrued carry continues to grow despite over $660 million paid out
since 2010
Net Accrued Carried Interest(1)
($ in millions)
$2,424
Fund
BREP VI
$1,446
$918
$1,284
BREP V
623
BREP VII
358
BREP Europe III
117
BREP / BREDS Other
Total
$311
1Q’14
Net Accrued
Carried Interest
42
$2,424
$17
1Q’10
1Q’11
1Q’12
1Q’13
1Q’14
________________________________________________
Note: Realized Carry is net of performance fee compensation. Past performance is not necessarily indicative of future results. See “Important Disclosures” section at the front of the presentation book.
(1)
Carried Interest is net of performance fee compensation and includes co-investment capital for respective funds.
Blackstone
15
Is Blackstone Real Estate Too Big to Keep Growing?
Best-In-Class Real Estate Platform
Blackstone has the world’s preeminent global real estate platform with
significant growth opportunities ahead
Equity
Debt
 $72 billion equity under management
North
America
Europe
Opportunistic
Core+
$13.3B
$1.1B
BREP VII
$6.9B
BREP Europe IV
$3.8B
Asia
($5.0B target)
BREP Asia
Latin
America
Future
Opportunity
SMAs
$0.5B
 $9 billion equity under management
High Yield
1st Mortgage
$4.0B
$2.8B
BREDS II
BXMT
Liquid
$0.8B
CMBS/BREIF
SMAs
Future
Opportunity
Future
Opportunity
Shading indicates areas
of opportunity(1)
________________________________________________
(1)
There is no assurance that these products / growth areas will ever be realized and if realized will be profitable.
Blackstone
17
Blackstone Core+ Summary
Core+ initiative leverages platform to bring scale, speed, certainty and
market insights to the core plus space
Blackstone Real Estate
Core+ Investments
Select Investments(1)
$1.6bn
Edens
Various, U.S.
Alban Gate
London
$Nov ’13
1Q’14
________________________________________________
(1)
Represents select Core+ investments that have closed to date.
Blackstone
18
Blackstone Real Estate Key Takeaways
17%
1%
Net IRR
Realized Losses
BREP Global Funds
BREP Global Funds
Performance
Drives Business
Fundraising
Robust Capital
Deployment
Accelerating
Dispositions(2)
• Raised Since ’07:
$56 billion
• In Market:
BREP Asia, Core+, BREIF & BXMT
• Invested Since ’09:
$34 billion
• Dry Powder(1):
$18 billion + Recycling Ability
• Distributions:
1Q’14: Up 120% YOY
• Performance Fees:
1Q’14: Up 171% YOY
• Public Equities:
$22 billion (2.4x multiple)
________________________________________________
(1)
Represents illiquid drawdown funds only; excludes marketable vehicles; includes both Fee-earning (third party) capital and general partner / employee commitments that do not earn fees.
(2)
Distributions and performance fees vs. 1Q‘13. Performance fees are realized only and gross of performance fee compensation. Public Equity amount represents unrealized value of BREP’s public
equity holdings.
Blackstone
19
Private Equity
Our Mission
 We enable pension plans, endowments and governments to meet their future
obligations
• We invest on behalf of over half the retirees in the U.S.; 37 million people globally
 We invest in companies to grow them and in large projects that wouldn’t have
gotten off the ground without our sponsorship
 We have the capability and expertise to drive transformational change in our
companies
 We have the flexibility to invest all over the world in different sectors and
transaction types out of global funds
 We seek to find value where others don’t and identify sectors / companies with
capital needs not readily met in the public markets
Blackstone
1
Our Commitment
 We must have a specific intervention strategy to improve the target company
 The anticipated unlevered returns must readily beat the public markets
 We have to retain the best investors and operators in the industry
Blackstone
2
What differentiates us?
 Single global fund
• One investment committee; one culture; one global deal team
• Flexibility to allocate capital to best opportunities globally
• Consistent decision making; consistent results
 Scale platform with global reach
• Offices on 3 continents: 105 investment professionals around the globe
• 78 portfolio companies with $90 billion of annual revenue and 617,000 employees
• One of largest pools of committed capital in Private Equity with $16 billion to
BCP VI
• Leverage intellectual capital from all Blackstone businesses
 Capability to improve performance of companies
• Strong leadership under Dave Calhoun
• Functional experts in key areas
• Company-specific executive advisors with significant experience
 Well-defined investment strategy and discipline
Blackstone
3
Consistently strong performance over 26 years
Investing Funds
Total Gross MOIC
Closed Funds
Net IRRs
2.6x
2.5x
2.8x
2.3x
1.7x
1.5x
1.4x
BCP IV
(2002)
BCP V
(2006)
BCP VI
(2011)
BEP
(2011)
37%
7%
17%
49%
1.3x
BCP I
(1987)
BCP II
(1993)
BCP III
(1997)
19%
32%
14%
BCOM
(2000)
6%
________________________________________________
Note: Past performance is not necessarily indicative of future results. See “Important Disclosures” section at the front of this presentation book for more information on performance. BEP MOIC shown
above is pro forma for reclass of certain partnership expenses. Public filings reflect 1.6x gross MOIC.
Blackstone
4
Strong recent momentum (performance from January 1, 2013)
 17 portfolio companies IPO’d or sold(1)
 $14.8 billion of cash returned to BCP LPs(2) – average realization MOIC of 2.5x(3)
 $10.7 billion market capitalization created for companies taken public
 28.3% cumulative BCP net IRR
 48.1% gross IRR for realizations
 15 new portfolio companies with $3.8 billion of invested / committed capital
________________________________________________
Note:
(1)
(2)
(3)
Past performance is not necessarily indicative of future results. See “Important Disclosures” section at the front of this presentation book for more information on performance.
Excludes partial dispositions, with the exception of Apria, and any fully realized deals where the prior quarter carrying value was less than $100 million.
Includes $1.4 billion of proceeds from co-invest.
MOIC represents multiple for full dispositions only.
Blackstone
5
Reason for caution in current market environment
 Credit availability high;
cost historically low
 Equity markets at all-time high
 Options for sellers numerous
 LBO prices rising
• IPO market wide open
• Corporate buyers active
 Discipline waning
• Credit markets funding
dividends
• Private Equity firms re-loaded
and confident
 Risks abound
 Underlying economic
fundamentals good, not great
Blackstone
6
Credit availability high; cost historically low
High Yield / Leverage Loan New Issuance(1)
High Yield – Yield to Worst / Default Rate(2)
($ in billions)
$1,746
13.0%
$1,375
$1,113
$920
HY YTW 20-Yr Avg.
1,316
$745
438
55
2008
2008
415
$732
990
712
$493 $500
2009
2009
331
654
2010
2010
2011
2011
401
2012
2012
430
2013
2013
385
2014
Run
2014
Rate
Run
Rate
High Yield
180
9.9%
Loan Index Yield 20-Yr Avg. 8.6%
HY YTW 10-Yr Avg. 8.5%
Loan Index Yield 10-Yr Avg. 8.0%
584
267
9.0%
1,019
307
193
11.0%
$1,200
7.0%
5.3%
5.0%
148
2007 2003-2005
2003-2005
2007
Average
Average
5.0%
6/09 12/09 5/10 10/10 4/11
Leveraged Loan
9/11
HY YTW
2/12
7/12 12/12 6/13 11/13 4/14
Loan Index Yield
Driving up purchase prices particularly for large assets in competitive situations
________________________________________________
(1)
(2)
Source: CS Leveraged Finance Strategy as of March 31, 2014. Volume is U.S. and Western Europe combined.
Source: CS Leveraged Finance Monthly Index as of April 30, 2014.
Blackstone
7
Stock markets at all-time high; options for sellers numerous
S&P 500
IPO Volume (U.S. / Europe)
(January 1, 2004 – Present)
($ in billions)
$93B
$100
2,000
$80
1,500
$60
$40
1,000
$20
$0
500
2004
2006
2008
2010
2012
2009
2014
2010
2011
2012
2013
Dividend Recap Volume (U.S. / Europe)
Corp-Cash Acquisitions (U.S. / Europe)
($ in billions)
($ in billions)
$76B
$80
$800
$639B
$60
$600
$40
$400
$20
$0
$200
2009
2010
2011
2012
2013
2009
2010
2011
2012
2013
________________________________________________
Source: Bloomberg, S&P 500, S&P LCD, Thomson Financial.
Blackstone
8
LBO prices rising
10.2x
2008
2009
2010
2011
8.7x
2007
9.1x
9.4x
2006
9.9x
2005
8.7x
2004
8.4x
2003
7.5x
6.9x
2002
8.5x
6.7x
2001
8.4x
6.4x
2000
7.5x
6.7x
1.5x
EBITDA Multiples
2012
2013
4Q’13
Though valuations are not at all-time highs,
assets appear expensive in relation to growth prospects
________________________________________________
Source: S&P LCD, 4Q 2013, deals with TEV of $500 million or more.
Blackstone
9
How we are navigating the environment
Adhere to our core discipline
 Ability to intervene to change performance of company – actions under our control
• Not a passive recipient of the market return in an auction
 Unlevered returns drive value decision
• Focus on yield, not comparable trading multiples
Proactive deal sourcing and resources allocated
to most appealing sectors / opportunities
 Mismatch between
requirements for capital
and its supply
 Growth platforms
 Transformational
operating intervention
Blackstone
10
How we are navigating the environment (Cont’d)
Mismatch between
requirements for capital
and its supply
Growth platforms
Transformational
operating intervention
23%
24%
29%
BCP VI Invested / Committed
14.0%–18.8%
10.2%–15.6%
10.5%-16.6%
Unlevered “Hold Forever” Gross Returns(1)
Unlevered 5-Year Gross IRR(1)
Unlevered 5-Year Gross IRR(1)
________________________________________________
(1)
Range represents targeted returns based on underwriting assumptions at the time of the deal. There can be no assurance that any Blackstone Fund will achieve its objectives or avoid substantial losses.
These selected examples may not be representative of all transactions of a given type or of investments generally, both with respect to operating metrics and performance, and it should not be
assumed that BCP will make comparable or equally successful investments in the future. See “Important Disclosures” section at the front of the presentation book for more information.
Blackstone
11
We are well positioned for the future
Excellent recent performance
 $14.8 billion returned in cash / $10.7 billion market capitalization created(1)
 BCP V “de-risked” with 1.2x cost in cash, publicly traded stock(1)
 BCP VI / BEP great performance so far – 17% / 49% net IRR
Committed to our well-defined investment approach
 Ability to intervene to drive value
 Unlevered returns drive valuation decisions
 Proactive, targeted sourcing program
Invest in and maintain world-class team
 Significant investment in portfolio company intervention team
 Develop, promote, empower young investment talent
________________________________________________
Note: Past performance is not necessarily indicative of future results. See “Important Disclosures” section at the front of this presentation book for more information on performance.
(1)
As of April 30, 2014.
Blackstone
12
What’s next?
 Actively marketing next energy fund – substantially larger than first
 Global fund will be in the market at end of year
 Several initiatives underway to leverage strong Blackstone relationship with
largest global LPs to grow AUM
________________________________________________
Note: See “Important Disclosures” section at the front of this presentation book for more information.
Blackstone
13
Blackstone’s Portfolio Operations group drives value
 Strong track record improving operations:
Quarterly EBITDA Trends
EBITDA YoY% Growth (Decline)
20%
15.2%
15%
10%
5%
9.4%
BX Portfolio
5.2%
6.7%
2.5%
0%
-5%
11.2%
10.9%
-2.1%
2.5%
S&P
-6.2%
-10%
1Q'13
2Q'13
3Q'13
4Q'13
1Q'14
 Functional experts deliver scale and expertise:
• Healthcare / Benefit plans
• Lean / Six Sigma
• Energy
• IT
• Sourcing
Leading Platform
Blackstone
1
Recent enhancements extend performance advantage
 Early appointment of Executive Advisors (Operators) to Board  expand
CEO reach
 Rigorous Leadership assessments  early and often
 Early mobilization for key initiatives  growth and productivity
 Example  Gates
Leveraging our “Private” advantage
Blackstone
2
Blackstone Tactical Opportunities (“Tac Opps”) was created to pursue
opportunistic investing – a strategy in which we’re well placed to succeed
 Dramatic change in competitive environment
• Bank exit due to regulatory restrictions (e.g., Volcker)
• Hedge fund use of side pockets severely limited
 Few (if any) managers have depth and diversity of the Blackstone platform
Private
Equity
Real
Estate
Hedge Fund
Solutions
Credit
Secondary
Fund Solutions
Financial
Advisory
Blackstone Tactical Opportunities
Tac Opps leverages the full breadth of the Blackstone platform
Blackstone
2
Tac Opps invests across asset classes, capital structures and geographies
and seeks to generate attractive risk-adjusted returns
Opportunistic
Strategy
Flexible
Capital
Attractive
Risk-Adjusted
Returns
Team with
Depth as well
as Breadth
 Nimble and swift in the face of changing market conditions
 Capture differences in relative risk / return across asset classes
 Thematic approach
 Can invest across asset classes, capital structures and geographies
 “Solutions provider” to sellers
 Target mid-teens net returns on a portfolio of differentiated / uncorrelated
investments(1)
 Focus on downside protection, including a current yield component
 Well-diversified, dedicated team – 30 professionals across U.S., Europe & Asia
 Leverages Blackstone – a leader in each of its asset management & advisory
businesses
 Seasoned and experienced Investment Committee
________________________________________________
(1)
Targeted returns based on Blackstone underwriting criteria at time of investment. There can be no assurance that such returns will be realized or that the fund will avoid substantial losses.
Blackstone
3
Tac Opps pursues differentiated investments outside of traditional
alternative “buckets”
Tac Opps Investments:
Alternative Investment Landscape
 Typically do not fall neatly in
Traditional
Real Assets
any asset class (e.g., U.S.
NPLs: credit / real assets)
 Structured to minimize
downside risk and / or amplify
upside potential (e.g., Eletson)
 Can complement and enhance
traditional investor portfolios
U.S.
NPLs
U.K. Resi.
Development Regulatory
Finance Platform Capital
Wireless Tower
Cable Ground Leases
Spectrum
Single Family Rental Finance Platform
Servicing Advances
LPG Shipping
Traditional
Private
Equity
Traditional
Credit
U.K. Pension
Liabilities
CLO Equity
Blackstone
4
Two years into launching the business, investor reception has been positive,
deal flow has been strong and early results highly promising
AUM
Investments
Returns
 Raised $5.6 billion in “first vintage” fund raise
 Seeking to launch second fund later this year
 Invested / committed over $3 billion in 30 deals across
asset classes, capital structures and geographies
 18% gross (inception through March 31, 2014)
________________________________________________
Note: Past performance is not necessarily indicative of future results. See “Important Disclosure” section at the front of this presentation book for more information. Net return of the portfolio as of
March 31, 2014 is approximately 13%.
Blackstone
5
Strategic Partners
Market-leading provider of liquidity solutions to owners of
private equity partnership interests
Proven Strategy
Experienced
Team with
Global Reach
Consistent
Focus
Strong
Investment
Track Record
 Acquires secondary interests in mature, high-quality private equity funds from investors
seeking liquidity on a fair, timely and confidential basis
 Dedicated team of 31 investment professionals in New York, London and San Francisco
 Led by Founder and Co-Head Stephen Can and Co-Head Verdun Perry, who have each
been with Strategic Partners since inception
 Primarily targets secondary opportunities to acquire private investment funds on
a global basis
 Completed more than 800 transactions representing interests in over 1,700 unique
underlying funds
 Aggregate gross and net IRRs of 20% and 17%, respectively, from inception through
December 31, 2013 across SP I - V
________________________________________________
Note: Past performance is not necessarily indicative of future results. See “Important Disclosures” section at the front of the presentation book. The figures above represent the cumulative performance
of SP I - V. Because this is cumulative information, these figures do not reflect the actual results achieved by any individual fund or any investor therein.
Blackstone
1
Over $14 billion raised since inception(1)
Strategic Partners
Venture Capital
Overage
Real Estate
SP I
$0.8 billion
18% Net IRR
SP II
$1.6 billion
31% Net IRR
SP II RE
$300 million
SP III
$1.9 billion
6% Net IRR
SP IV
$2.1 billion
15% Net IRR
SP V
$2.4 billion
46% Net IRR
2014
2011
2008
2005
2003
2001
LBO-Centric
SP III VC
$210 million
SP III RE
$315 million
SP IV VC
$203 million
SP IV RE
$300 million
SP V VC
$103 million
Currently Raising Our Latest Secondary Fund
SP V Overage
$412 million
SP V RE
$211 million
Future
Real Estate
________________________________________________
(1) Capital raised as of May 31, 2014, including commitments to latest secondary fund.
Blackstone
2
Properly executed secondary investing generally provides
several advantages relative to primary investing
Investment Characteristic
Secondary Investment
Primary Investment
Assets Acquired
Funded, identifiable assets at a more mature stage
Blind pool
Year of Acquisition of Underlying Fund
Years 3–7
At inception
Cost of Investment
Typically at a discount to NAV
Invested capital
Return of Capital
Years 0–7
Years 5–10
Diversification
By vintage year, type, size, sector and geography
Limited to fund’s portfolio
Private Equity J-curve
IRR
Reduction of Blind Pool Risk
Earlier Return of Capital
Time
Reduced Cost (Discount to NAV)
Typical Primary Investment
Typical Secondary Investment
Blackstone
3
Large addressable market, with strong industry fundamentals
600
Global Capital Commitments to
Private Equity Partnerships(1)
Primary Commitments
Primary Commitments
500
506
(US$ in billions)
Available Global Secondary
Private Equity Capital(2)
486
(US$ in billions)
395
506
486
400
307
395
300
307 185
156
200
105
185
187
15667
53
100
0
20 21 27
44
20 21 27 105
44 53 67
149
98 97
307
307
187
418
231
224
277
418
231
224
305
277
305
45
42
35
45
36
98 97
149
-100
Secondary
1
Volume
1
1
1
1
1
1
2
2
3
2
2
5
7
7 10 18 20 10 23 25 25 28
1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013
LBO
Real Estate / Other
Secondary Commitments
Venture Capital
Secondary Volume
Jan-2010 Jan-2011 Jan-2012 Jan-2013 Jan-2014
 Sales driven by asset allocation, risk management, liquidity, regulatory reform or other strategic needs
 Enormous saleable asset backlog, with over $1.5 trillion–$2.5 trillion of unrealized assets
 Secondary private equity is a niche and inefficient market with current transaction volume representing
less than 2% of global private equity exposure; there is significant room to grow
________________________________________________
Note: Real Estate PE Capital prior to 1994 represents negligible amount; ‘Real Estate / Other’ includes Real Estate, Mezzanine, Distressed Debt , Fund of Funds and Other.
(1)
Commitment data from Thomson Financial Venture Economics and Preqin; secondary volume data from Cogent Partners and SP estimates.
(2)
UBS Private Funds Group.
Blackstone
4
Seller motivations are dynamic and driven by a variety
of factors
Market Issue
Active Portfolio
Management
Secondary Transaction Driver
 Divestment of non-core GP relationships
 Strategic and opportunistic sales from limited partners
 Pressing liquidity needs
Financial Regulatory
Reform
 De-leveraging, bank spin-outs, balance sheet reductions
 Overhaul of illiquid asset portfolios
Frictional Displacement
 Growing number of tail-end portfolios
 Capitalization on fund of fund opportunities
Attractive opportunities continue to emerge in secondary private equity
Blackstone
5
Growth opportunities for Strategic Partners
Current
Future
Early
Secondaries
LBO / RE
Secondaries
(<50% Funded)
Over 800 transactions
Provides diversified
completed since 2000,
exposure to high quality
acquiring over 1,700
assets that are
unique underlying interests significantly less funded
in LBO, Mezzanine, Real
than traditional
Estate, VC, fund of funds
secondary purchases
and other assets
$14+B
$1B
raised
raised
(1)
Infra. /
Real Assets
Secondaries
Infrastructure and Real
Assets Program
dedicated to acquiring
mature, yielding assets
in high quality
infrastructure, energy,
timber and other real
asset funds
CoInvestments
Ability to access
co-investment
opportunities alongside
high quality managers.
Strategic Partners owns
fund interests managed
by more than 700
general partners
Primaries
Access to wide array of
fund managers and
strategies, enhancing
ability to build
customized primary
portfolios
Fund
Admin.
One of the most
comprehensive fund
monitoring databases,
providing real-time
information on portfolio
assets and managers
________________________________________________
(1)
Capital raised as of May 31, 2014, including commitments to latest secondary fund.
Blackstone
6
Key ingredients for a successful secondary business
Sourcing
 Broad, global sourcing capabilities, many repeat sellers
Pricing
 A market leader in human and intellectual capital (+1,700 funds owned)
Closing
 Most experienced secondary buyer in the world (+800 deals executed since inception)
Performance
 Strong risk-adjusted returns and earlier return of capital
 Consistent top quartile performer, with exceptional diversification
Fundraising
 Final closing for our latest secondary offering expected end of July 2014
People
 High integrity, respectful, team-oriented
 Hungry for growth; Love to win
Blackstone
7
Private Wealth
Relative to institutions, individual investors are under-allocated
to Alternatives
Allocation to Alternatives
26.0%
19.4%
2.0 – 3.0%
U.S. Pensions (1)
U.S. Endowments (2)
Individual
Investors(3)
________________________________________________
(1)
(2)
(3)
2013 Pensions and Investments annual plan sponsor survey.
National Association of College and University Business Officers 2013 Study (Equal-weighted Average).
Cerulli Research.
Blackstone
1
The larger wealth management firms are recommending increased
allocations
 Top 5 Firms Total AUM = $5 trillion(1)
 Recommended Alternative Allocations = 5%–20%(1)
 Actual Alternative Allocations = 2%–3%(2)
 Every 1% in Additional Alternative Allocations = $50 billion in AUM
________________________________________________
(1)
(2)
Client research reports. Allocations as of December 31, 2013. Investment strategists at these firms typically recommend clients allocate 5%–20% to Alternative Allocation depending on risk and
liquidity preferences.
Cerulli Research. Allocations as of December 31, 2013. The average client at these firms typically has 2%–3% in Alternative Investments.
Blackstone
2
Capitalizing on the sizeable opportunity in Private Wealth
 Alternatives continue to be an area of focus and growth for the larger
wealth management firms because of their appeal to higher net worth
investors
• Net new assets
 Financial pressures have forced these firms to reduce their relationships
and rely on key partners more heavily for product and sales support
 The complex nature of Alternatives suggests that the training and
education of Financial Advisors will lead to increased product
penetration
Blackstone
3
Blackstone U: An “Alternative” education
 Blackstone U provides education on
our businesses – what they are, how
they work, why they might benefit
high net worth clients
 Blackstone U gives advisors the
chance to come to Blackstone to
learn directly from investment
heads across all of our businesses
 Advisors may earn CE Credit for
attending the event(1)
________________________________________________
(1)
Blackstone works with the accrediting organizations IMCA and CFP to provide CE credits to members.
Blackstone
4
Sales, service, delivery
Three Main Channels
 Partner Firms: Accessing high-net-worth clients at large banks and wire-houses with
existing funds and bespoke product
 Direct Investors: Direct relationships with select family office and ultra
high-net-worth investors
 Sub-advisory: Reaching mass affluent investors through sub-advised products with
greater liquidity
Blackstone
5
Product Diversity: Episodic “drawdown” funds, “bespoke” investment
products, and a suite of current and prospective “evergreen” funds
Episodic
Bespoke
 Global and Regional Real
Estate
 Multi-strategy Hedge Fund  Long / Short Equity Hedge
of Fund (SMA)
FoF (RIC)
 Global Energy
 SMA into Tactical
 Private Equity Secondaries
Opportunities
 GP Stakes in Hedge Funds
 Tactical Opportunities
 Mezzanine and Distressed
Debt
 Global Buyout
 Broad Allocation to
Illiquid Funds
Evergreen
 Liquid Real Estate Income
Fund (RIC)
 Credit Opportunity(1)
 Real Estate Opportunity(1)
 Hedge Fund (BAAM)
Opportunity(1)
________________________________________________
(1)
In development.
Blackstone
6
Sales in the Private Wealth channel are growing steadily
Blackstone’s Retail Fundraising
($ in billions)
$9.3
$7.8
$5.9
$2.5
$2.7
$0.6
2009
2010
2011
2012
2013
LTM 1Q’14
Blackstone
7
The Private Wealth segment is becoming a larger part of Blackstone’s
overall investor profile
2010(1)
Private Wealth Management AUM
at Blackstone
Today
Private
Wealth
Private
Wealth
8%
$128bn in total AUM
12%
$272bn in total AUM
________________________________________________
(1)
As of December 31, 2010.
Blackstone
8
Blackstone Alternative Asset Management
BAAM’s growth has outpaced the hedge fund industry
Cumulative Growth in AUM(1)(2)
Percentage Change in AUM(1)(2)(3)
(Jan-2009–Dec-2013)
(Jan-2009–Dec-2013)
160%
120%
BAAM
 130%
10 Largest HFs as of Jan-09
 36%
10 Largest FoFs as of Jan-09
 29%
80%
40%
0%
-40%
Jan-09
Jan-10
BAAM
(1)
(2)
(3)
Jan-11
Jan-12
Large FoF
Jan-13
HF Industry
Source: InvestHedge Billion Dollar Club. Data as of December 2013.
Represents data from 1/1/2009 to 12/31/2013.
Largest HFs and FoFs equal the 10 largest funds measured by AUM excluding BAAM. Source: InvestHedge Billion Dollar Club, December 2013.
Blackstone
1
BAAM has outperformed industry benchmarks(1)
Annualized outperformance:
BAAM Composite (net) vs. industry benchmarks
(Jan-2000–Dec-2013)(2)
3.0%
3.2%
Annualized reduced volatility:
BAAM Composite (net) vs. industry benchmarks
(Jan-2000–Dec-2013)(2)
3.2%
-0.64%
2.2%
-1.23%
-5.41%
-10.96%
HFRI FoF
Composite
(1)
(2)
HFRX Global
HF Index
60% MSCI TR &
40% Barclays
Agg.
S&P 500 TR
HFRI FoF
Composite
HFRX Global
HF Index
60% MSCI TR &
40% Barclays
Agg.
S&P 500 TR
Performance is shown since J. Tomilson Hill became President and CEO of BAAM.
Past performance is not necessarily indicative of future results. Composite performance presented does not include all funds or strategies managed by BAAM. See disclosures at
the beginning of this presentation for a description of the composite.
Blackstone
2
Manufacturing new capacity drives growth and revenue in
BAAM’s traditional business lines
BAAM Principal Solutions (“BPS”): traditional commingled and customized solutions
Executed Deals
Negotiated Structures/Transactions
(Jan-2012 – Apr-2014(1))
Seed Deals
6
Special
Situations
53
Fee
Discounts
44
(Apr-2014 Allocations(2))
Total: 65%
Total: 138
Traditional
Structures
AUM: $18bn
Negotiated
Structures &
Transactions
AUM: $38bn
Customized
Capacity
35
________________________________________________
(1)
(2)
Count includes customized vehicles, vehicles with negotiated fee discounts, seeding platform funds and co-investment deals (special situations) that occurred since 2012. Volume does not double
count (i.e., where a vehicle is customized capacity and has a negotiated fee discount, that vehicle is counted only once).
Calculated by dividing total amount invested by BAAM in all customized vehicles, seeding platform funds, vehicles with negotiated fee discounts, and special situations co-investments (BSOF
transactions) by BAAM's total AUM as of April 1, 2014. For purposes of this slide, BAAM includes BAAM’s affiliated advisors.
Blackstone
3
BAAM has diversified its AUM and revenue across multiple
business lines
2013
2016 Forecast
Next Generation Businesses
16%
33%
AUM
Breakdown
67%
84%
1) Direct Investing
2) Hedge Fund Ownership
3) Liquid Alternatives
17%
Revenue
Breakdown
44%
56%
83%
BAAM Principal
Solutions
Next Generation
Businesses
Blackstone
4
Direct investing and hedge fund ownership drive
increased profitability
Direct Investing
Hedge Fund Ownership
$5.5bn AUM
$5.8bn AUM
 Idea sourcing
 Direct economic participation
 Direct ownership
 Leveraged to industry growth
 Trading and hedging decisions
 Very long duration
 Single layer of fees
 Monetization potential
AUM of Managers Seeded by BAAM
($ in billions)
$25
Our direct investing platform has
produced returns in line with our
composite of multi-strategy hedge
funds, while achieving a higher
Sharpe ratio
$20
$15
$10
$5
$0
2007
Future vision: Multi-manager HF platform
2008
2009
2010
2011
2012
2013
YTD
2014
Future vision: GP stakes, 3rd Seed fund
Blackstone
5
Liquid alternatives hold growth potential
Liquid Alternatives
$2.0bn AUM
AUM Growth: Alternative Mutual Funds(2)
($ in billions)
Differentiation by managing risks and
creating capacity
BAAM Mutual Fund performance since inception(1)
$140
?
(’13 and beyond)
10%
$120
8%
$100
6%
28% CAGR
4%
$80
2%
$60
(’09–’12)
13% CAGR
(’04–’08)
0%
$40
-2%
$20
$0
BAAM Mutual Fund (Net)
HFRI FoF Diversified
Future vision: Mutual funds, UCITS, EM bonds
(1)
(2)
Past performance is not necessarily indicative of future results. Inception date was 8/6/13. Please see additional disclosures at the front of this presentation.
The BAAM Mutual Fund is not available for investment by the general public.
Morningstar: as of 12/31/13.
Blackstone
6
BAAM’s scale and long term investments in key capabilities
have created significant barriers to entry
Human Capital
Value Proposition
234
60%+
BAAM professionals Worldwide(1)
Of historical inflows from existing clients(2)
100
50%–100%
Investment professionals
Worldwide(1)
Of initial capital for new business lines
often comes from existing clients
Culture of Entrepreneurship
50+
 New strategies
 New markets
 New structures
Annual run rate deals
negotiated with managers to
create custom exposures
BX
$20 million+
Access to the broader
Blackstone team
Spent annually on investment technology
18
Clients utilize proprietary portfolio and risk
management system
(1)
(2)
As of 6/1/14.
Average from 2000–2013.
Blackstone
7
BAAM is a high-growth business
 BAAM has maintained strong financial performance across major metrics…
Hedge Fund Solutions (“HFS”) Summary Financials
($ in millions)
2009
2013
CAGR
$28,799
$55,657
18%
Revenue
313
649
20%
Economic Income
170
377
22%
AUM
 …while making a significant contribution to Blackstone
Base Earnings(1)
HFS as % of BX
(1)
2009
22.1%
2010
28.4%
2011
24.7%
2012
25.7%
2013
27.6%
5-yr Average
25.9%
Represents Economic Income excluding Performance Fee Revenues, Total Investment Income (Loss) and Performance Fee Compensation for the respective periods.
Blackstone
8
Appendix: Industry Dynamics Should Support BAAM’s
Continued Growth
A strong outlook for the hedge fund industry should further
strengthen BAAM’s growth trajectory
AUM Growth (Hedge Fund Industry)(1)
($ in billions)
$6,000
$5,000
$4,000
$3,000
$2,000
$1,000
$0
2001
2003
2005
2007
2009
2011
2013
2014–2018
Projections(2)
________________________________________________
(1)
(2)
Source: HFR Global Hedge Fund Industry Report, 12/31/13.
Source: Citi Investors Services Annual Hedge Fund Survey, May 2014.
Blackstone
10
Hedge funds becoming a larger part of institutional portfolios
 Pension Funds are increasing allocations to hedge funds
Average Pension Fund Allocation
to Hedge Funds(1)
6.4%
6.8%
 Nearly half of institutions, including 52%
of pension funds, reported increased
hedge fund holdings during 2013(2)
 Pension funds, in particular, are
4.2%
increasing their hedge fund investments,
with over 62% of them planning to grow
such allocations in 2014(2)
 Allocations to alternatives, including
2009
2010
2013
hedge funds, now account for nearly one
fifth of global pension fund AUM,
compared to 5% only 15 years ago, with
demand expected to continue(2)
________________________________________________
(1)
(2)
Source: McKinsey, “The Mainstreaming of Alternative Investments,” 2013. Represents pension funds in the U.S., Canada, Australia, Japan, Netherlands, Switzerland and U.K.
Source: Deutsche Bank’s Annual Alternative Investment Survey, 2014.
Blackstone
11
Momentum: A record twelve months with strengthening forward indicators
(Dollars in millions)
Economic
Net Income
Fee Related
Earnings
Distributable
Earnings
73% Increase
13% Increase
46% Increase
$3,700
$42 billion
Total Capital Returned over LTM
$1,957
$783
$2,132
$62 billion
$1,345
$691
Gross Inflows over LTM
$22 billion
1Q'13
LTM
1Q'14
LTM
Note: LTM represents the last twelve months.
1Q'13
LTM
1Q'14
LTM
1Q'13
LTM
1Q'14
LTM
LTM Capital Invested / Committed
Blackstone
1
Growth: Consistent, best-in-class growth over the last several years
Fee-Earning AUM
Total AUM
(Dollars in billions)
$272
$204
$91
2008
$95
2009
2010
2011
2012
2013
1Q'14
2008
2009
2010
2011
2012
Distributable Earnings
Realizations
2013
1Q'14
$33
$1,957
$461
$1
2008
2009
2010
2011
2012
2013
1Q'14
LTM
2008
2009
2010
2011
2012
2013
1Q'14
LTM
Blackstone
2
Potential: Alternative Managers are gaining share as LPs continue an
accelerating trend of allocating to higher returning private markets
Over 150
Public Asset Managers(1)
8
Alternative Manager
Allocation Drivers
Public Alternative Asset Managers
 Superior long-term returns
Public Asset Managers(1)
Public Alternatives
 Increasing allocations
$272
 Not public market dependent
$12.1
$199
$159
Traditionals
$102
 Fewer scale competitors
$1.0
$86 $77
$63
$43
Alternatives
$13.1 trillion
Assets Under Management
 Higher manager return
dispersion
$1.0 trillion
Assets Under Management
Totals may not add due to rounding. Data sourced from S&P Capital IQ and company filings.
(1) Public Traditional Asset Managers with a market capitalization of $75 million or more based on closing stock price as of June 5, 2014 using available data.
Blackstone
3
Positioning: The leader in the fastest-growing asset management segment
Since 2011, Alternatives are growing faster
than Traditionals…
…and Blackstone is the fastest growing
in the Alternative space
Total AUM Growth: 2011 – 1Q’14
Total AUM and Capital Raised: 2011 – 1Q’14
(CAGR)
$547
22%
19%
$272
6%
6%
19%
$153
10%
Traditional Asset Top 4 Alternative
Managers
Competitors
Blackstone
Top 4 Alternative
Competitors
Indicates Organic Growth(1)
Totals may not add due to rounding. Data sourced from company filings. Compounded Annual Growth Rate (“CAGR”).
Traditional Asset Managers include: AB, AMG, BEN, BLK, EV, FII, IVZ, JNS, LM, TROW and WDR. Top 4 Competitors Combined include: APO, CG, KKR and OAK.
(1) Organic growth strips out acquisitions and includes top 11 public traditional managers.
28%
$143
53%
Blackstone
Indicates Capital Raised
Blackstone
4
Innovation: Integrated investment platform exposed to opportunities
around the world and moves quickly to develop new strategies
Total AUM
Total Capital Invested
$272
$18
$122
$8
$9
$150
$86
2008
Existing Strategies(2)
(1)
(2)
New Strategies include acquisitions.
Existing strategies at the time of the IPO.
$129 billion
$10
$7
2008
1Q'14
1Q’14 LTM Capital Invested outside
of North America
Gross Inflows in New Strategies(1)
since 2008
$7
$95
43%
$97 billion
1Q'14 LTM
Gross Inflows in Existing Strategies
since 2008
New Strategies (1)
Blackstone
5
Diversity: Blackstone has the most diversified and balanced Fee Revenues
Carlyle
Fund of
Funds
Real
Assets
KKR
15%
22%
17%
Global
Market
Strategies
Public
Markets
Capital
Markets
28%
Private
Equity
12%
46%
Credit
Private
Markets
Apollo
18%
Ares
Real
Estate
Private
Equity
34%
4%
Real
Estate
19%
19%
12%
Hedge Fund
Solutions
28%
Real
Estate
69%
62%
Credit
24%
53%
Corporate
Private Equity
Private
Equity
Advisory
20%
Direct Lending and
Tradable Credit
Data as of March 31, 2014.
Note: Fee Revenues for Blackstone represent Total Management and Advisory Fees, Net, Interest Income and Dividend Revenue and Other Revenue.
Blackstone
6
Balance: Continuing to grow at a rapid pace while maintaining diversity and
growing the competitive advantage over peers
Total AUM
$272
$66
CAGR
Total AUM Growth Since 2008
23%
$58
19%
$81
26%
$66
21%
$95
$23
$24
$24
$24
2008
Private Equity
Hedge Fund Solutions
$73 billion
Realizations since 2008
$48 billion
1Q’14
Real Estate
187%
Credit
1Q’14 Dry Powder
Blackstone
7
Value Realization: Drives a shift in the earnings mix while “value creation”
remains robust, which is an indicator of future earnings
Economic Income
$3,596
$3,783
31%
$1,785
Economic Income CAGR since 2010
$1,707
$2,041
$1,581
$830
$1,585
35%
$875
$814
$1,144
$1,216
$745
$783
cash flow components(1)
CAGR since 2010
$466
$272
$225
$478
$546
2010
2011
Fee Related Earnings
$700
2012
Net Realizations
Totals may not add due to rounding.
(1) Cash flow components include Net Realizations and Fee Related Earnings.
2013
1Q'14 LTM
53%
of earnings related to cash flow
components(1), up from 47% in 2010
Net Unrealized
Blackstone
8
Compounding Effect: Value creation and asset diversity drives Net
Performance Fee growth, even throughout robust realization cycles
Net Accrued and Realized Performance Fees
$3.00/unit
$1.99/unit
$3.11/unit
71%
$1,023
Net Accrued Performance Fees
public or liquidating at 1Q’14
$1,588
$1.33/unit(1)
$1,793
$1,061
$407
$228
$1,812
$0.37/unit
$2.21/unit
$1,487
2013
Public(3)
130%
Realized Performance Fee
CAGR since 2011
$1,418
2012
Realized (2)
$2,523
$0.40/unit
$629
2011
(1)
(2)
(3)
$445
$1.60/unit
1Q’14
Private(3)
Per unit calculations are based on quarter-end Distributable Earnings Units Outstanding.
Represents Total Segments Realized Carried Interest and Realized Incentive Fee for the respective periods with 1Q’14 representing 1Q’14 LTM.
In total, represents Blackstone’s Net Accrued Performance Fee Receivable. 1Q’14 Public includes liquidating portfolio investments.
100%
BX drawdown funds inception to
date in Net Carry position
Blackstone
9
Uncorrelated: Annual seasonality and underlying investment performance
drives financial performance rather than trends of the S&P 500
72 Realization Events
11%
11%
10%
12%
10%
10%
$485
6%
5%
5%
5%
2%
$143
1%
(0)%
(1)%
(3)%
(12)%
(14)%
2010
S&P % Change
2011
2012
Consensus Estimate
Note: Data presented annually by quarter. Consensus Estimates are sourced from S&P Capital IQ and/or research reports.
2013
1Q’14
Fourth Quarter
Blackstone
10
Core Strategy: a business model optimized to outperform for fund and
equity investors across all cycles
Organic
Growth
Pure Asset
Manager
Value
Creation
Consistent
Earnings
Advantages
of Scale
Superior growth
comes from fund
performance,
breadth of
offerings and
culture of
innovation
Managing third
party assets
provides scale,
avoids LP
conflicts and
drives higher
Return on Equity
Core expertise of
actively creating
value at the
portfolio level is
a sustainable
advantage across
cycles
Underlying
portfolio assets
provide
diversified and
uncorrelated
earnings stream
Each business
benefits from the
long track record
and global scale
needed to
sustain growth
for the long-term
Blackstone
11
Unique: Blackstone is one of the world’s fastest growing and most profitable
asset managers
Publicly
Traded Asset
Managers
Profitability
Yield
Scale
Growth
26
19
6
3
Blackstone:
1
EBITDA(1) Margin > 30%
Dividend Yield > 3%
Net Income > $1B
54.6%
4.2%
$3.5B
(2)
3 Yr AUM CAGR > 20%
27.5%
Source: Company filings, FactSet, SNL. Data as of December 31, 2013.
Note: Publicly Traded Asset Managers include BEN, BLK, AMG, TROW, LM, EV, JNS, FII, CLMS, WDR, GBL, CNS, AB, IVZ, PZN, WETF, VRTS, MN, APAM, BX, KKR, APO, FIG, OZM, CG and OAK.
(1)
EBITDA adjusted for unusual and non-recurring items; NFRE EBITDA used for alternative asset managers (KKR, APO, CG, OAK, OZM and FIG). Blackstone EBITDA margin equals Adjusted EBITDA divided by Total Management and Advisory Fees, Net, Interest Income and Dividend Revenue,
Other, Realized Carried Interest, Realized Incentive Fees and Realized Investment Income.
(2)
Represents Economic Net Income.
Blackstone
12
Appendix
GAAP Statement of Operations
(Dollars in Thousands)
Revenues
Management and Advisory Fees, Net
Performance Fees
Realized Carried Interest
Realized Incentive Fees
Realized
Unrealized Carried Interest
Unrealized Incentive Fees
Unrealized
Total Performance Fees
Investment Income (Loss)
Realized
Unrealized
Total Investment Income (Loss)
Interest and Dividend Revenue
Other
Total Revenues
Expenses
Compensation and Benefits
Compensation
Performance Fee Compensation
Realized
Unrealized
Total Compensation and Benefits
General, Administrative and Other
Interest Expense
Fund Expenses
Total Expenses
Other Income (Loss)
Reversal of Tax Receivable Agreement Liability
Net Gains (Loss) from Fund Investment Activities
Income (Loss) Before Provision (Benefit) for Taxes
Provision (Benefit) for Taxes
Net Income (Loss)
Net Income (Loss) Attributable to Redeemable Non-Controlling
Interests in Consolidated Entities
Net Income (Loss) Attributable to Non-Controlling Interests in
Consolidated Entities
Blackstone Holdings
Net Income (Loss) Attributable to The Blackstone Group L.P.
2008
2009
2010
2011
2012
2013
$ 1,476,357 $ 1,482,226 $ 1,584,748 $ 1,811,750 $ 2,030,693 $ 2,193,985 $
38,941
(1,286,261)
(1,247,320)
(16,425)
(606,452)
(622,877)
30,879
13,600
(349,361)
4,062,238
4,997
(207,448)
3,859,787
440,776
23,008
63,031
4,386,602
1Q'12
471,676 $
1Q'13
1Q'14
1Q'13 LTM
1Q'14 LTM
482,133 $
573,160 $ 2,041,150 $ 2,285,012
244,963
121,758
138,907
90,099
327,422
301,801
943,958
464,838
13,560
5,279
294,170
23,741
333,623
43,794
608,032
320,263
983,411
484,891
457,002
114,111
971,518
(17,864)
994,190
(30,361)
2,158,010
(22,749)
298,796
67,135
177,347
105,798
330,394
64,233
872,741
8,302
2,311,057
(64,314)
601,056
772,044
1,809,338
3,715,045
42,353
106,230
148,583
12,557
2,144
1,246,473
153,026
13,500
166,526
14,069
869
1,526,668
119,981
289,635
409,616
45,275
8,499
4,313,878
299,317
518,934
818,251
66,023
9,032
6,893,363
70,492
150,598
221,090
937,834
1,182,660
1,593,052
3,544,057
384,770
44,320
(3,716)
40,604
22,680
7,099
1,773,699
29,157
532,004
561,161
36,218
(619)
3,119,342
87,542
125,781
213,323
37,427
7,416
3,252,576
93,963
256,231
350,194
40,354
5,148
4,019,441
188,644
611,664
800,308
64,511
10,307
6,613,168
16,335
72,826
89,161
7,636
(1,207)
952,036
3,778,686
3,253,226
2,421,712
2,091,698
1,844,485
495,255
451,430
485,351
2,047,873
1,878,406
70,716
57,600
43,615
55,912
96,433
140,042
257,201
200,915
7,938
4,252
89,437
10,508
149,398
23,635
177,932
146,298
317,162
214,042
165,340
63,307
237,945
(20,759)
321,599
(44,528)
966,717
(11,651)
84,543
12,779
95,472
44,478
40,730
23,531
332,528
(12,829)
911,975
(32,598)
604,767
142,766
14,518
21,742
783,793
691,325
109,306
27,062
7,408
835,101
722,645
135,554
24,667
4,985
887,851
288,142
456,385 $
38,753
417,632 $
67,210
478,582 $
50,993
427,589 $
20,469
70,155
35,213
384,609
708,972 $ 1,037,102 $ 3,378,951
54,097
197,263
258,746
654,875 $
839,839 $ 3,120,205
25,102
(26,182)
3,777,606
443,573
13,384
7,296
4,241,859
(872,336)
176,694
$ (5,608,299) $ (2,291,466) $
(14,145)
99,230
$ (5,594,154) $ (2,390,696) $
3,610,189
466,358
41,229
26,214
4,143,990
501,994
(522,654) $
84,669
(607,323) $
2,738,425
566,313
57,824
25,507
3,388,069
2,605,244
548,738
72,870
33,829
3,260,681
3,257,667
474,442
107,973
26,658
3,866,740
197,816
20,469
14,935
256,145
381,664
77,258 $ 1,014,905 $ 3,148,561 $
345,711
185,023
255,642
(268,453) $
829,882 $ 2,892,919 $
2,691,802
515,278
85,414
19,495
3,311,989
3,288,987
500,690
105,578
24,235
3,919,490
(632,495)
131,097
87,651
(24,869)
103,598
183,315
54,259
62,316
45,792
111,655
166,791
(159,828)
(14,328)
343,498
7,953
99,959
198,557
197,643
(9,452)
43,961
(107,136)
251,970
(3,638,799)
(1,792,174)
$ (1,163,032) $ (715,291) $
(668,444)
(370,028) $
(83,234)
(168,303) $
407,727
1,339,845
218,598 $ 1,171,202 $
107,405
58,325 $
207,090
167,635 $
299,505
265,617 $
507,412
1,432,260
327,908 $ 1,269,184
Blackstone
1
Total Segments
Revenues
Base Management Fees
Advisory Fees
Transaction and Other Fees, Net(1)
Management Fee Offsets(2)
Total Management and Advisory Fees, Net
Performance Fees
Realized
Unrealized
Total Investment Income (Loss)
Interest Income and Dividend Revenue
Other
Total Revenues
Expenses
Compensation
Other Operating Expenses
Total Expenses
Economic Income (Loss)
(1)
(2)
2008
2009
2010
2011
2012
2013
$ 1,041,718 $
999,829 $ 1,069,471 $ 1,281,185 $ 1,591,403 $ 1,740,807 $
397,519
390,718
426,140
382,240
357,417
410,514
96,358
115,040
137,748
247,513
227,119
206,977
(16,437)
(17,161)
(2,313)
(33,393)
(40,953)
(72,220)
1,519,158
1,488,426
1,631,046
1,877,545
2,134,986
2,286,078
26,953
12,060
(1,274,327)
(11,935)
(1,247,249)
29,452
44,812
100,304
65,563
240,131
(64,677)
(691,934)
(756,611)
29,014
13,595
(442,093)
29,544
3,880
33,424
22,492
7,096
1,791,569
771,426
769,856
1Q'12
1Q'13
1Q'14
1Q'13 LTM
1Q'14 LTM
395,506 $
75,846
38,471
(13,050)
496,773
408,747 $
67,020
37,974
(9,662)
504,079
476,878 $ 1,604,644 $ 1,808,938
69,963
348,591
413,457
59,910
226,622
228,913
(16,644)
(37,565)
(79,202)
590,107
2,142,292
2,372,106
294,170
24,727
177,347
107,755
603,999
333,623
53,837
330,288
61,266
779,014
608,032
320,912
872,741
10,323
1,812,008
983,411
503,443
2,310,951
(66,417)
3,731,388
38,110
96,661
134,771
14,661
2,143
1,259,653
111,917
4,550
116,467
22,362
869
1,508,819
110,016
227,593
337,609
51,946
8,499
4,352,354
244,278
425,223
669,501
78,637
9,034
6,860,666
1,042,981
1,155,208
244,963
116,700
457,002
107,624
926,289
138,907
89,029
971,518
(24,928)
1,174,526
327,422
301,464
994,190
(29,311)
1,593,765
943,958
474,333
2,158,010
(19,928)
3,556,373
13,560
5,279
298,796
68,121
385,756
46,915
501,634
548,549
36,096
(618)
3,141,362
102,575
82,689
185,264
38,844
7,415
3,283,594
95,398
190,846
286,244
46,630
5,149
4,066,774
170,471
517,334
687,805
70,936
10,308
6,611,500
23,492
59,914
83,406
9,345
(1,207)
974,073
960,569
1,030,776
1,115,640
254,772
266,977
306,545
7,938
4,252
84,543
12,779
364,284
109,521
473,805
500,268 $
89,437
10,508
95,472
44,478
506,872
114,444
621,316
638,337 $
149,398
177,932
317,162
23,635
146,298
214,042
40,690
332,528
911,935
23,531
(12,829)
(32,598)
543,799
1,686,910
2,565,749
139,774
486,368
511,969
683,573
2,173,278
3,077,718
825,246 $ 2,179,076 $ 3,782,948
859,114
(1,421)
2,844
70,716
43,615
96,433
257,201
6,418
22,260
57,600
55,912
140,042
200,915
(204,262)
(69,824)
165,340
237,944
321,599
966,717
(3,452)
43,641
63,306
(20,759)
(44,528)
(11,651)
568,709
768,777
1,216,076
1,277,281
1,544,322
2,528,822
319,216
299,029
344,516
421,342
481,445
486,639
887,925
1,067,806
1,560,592
1,698,623
2,025,767
3,015,461
$ (1,330,018) $
723,763 $ 1,580,770 $ 1,584,971 $ 2,041,007 $ 3,596,039 $
Transaction and Other Fees, Net, are net of amounts, if any, shared with limited partners including, for Private Equity, broken deal expenses.
Primarily placement fees.
Blackstone
2
First Quarter 2014 Segments
Private
Equity
Revenues
Base Management Fees
Advisory Fees
Transaction and Other Fees, Net(1)
Management Fee Offsets(2)
Total Management and Advisory Fees, Net
Performance Fees
Realized
Unrealized
Total Investment Income
Interest Income and Dividend Revenue
Other
Total Revenues
Expenses
Compensation
Other Operating Expenses
Total Expenses
(1)
(2)
$
$
Real
Estate
Hedge Fund
Solutions
159,336 $
13,564
(9,224)
163,676
119,805
167,065
286,870
194,658
(26)
140,237
2,737
337,606
39,845
18,085
57,930
19,160
14,018
22,986
40,444
96,608
-
60,535
(9,033)
51,502
5,228
864
484,182
31,357
5,379
36,736
6,110
317
544,445
16,820
4,431
21,251
2,661
122
193,986
3,071
3,079
6,150
5,861
(259)
213,026
134
694
828
2,502
(175)
73,180
73,307
80,233
40,571
50,752
61,682
306,545
61,682
21,342
83,024
(9,844) $
149,398
23,635
40,690
23,531
543,799
139,774
683,573
825,246
51,833
(16)
56,985
1,382
190,417
33,107
223,524
320,921 $
13,271
6,761
60,603
19,480
80,083
113,903 $
Transaction and Other Fees, Net, are net of amounts, if any, shared with limited partners including broken deal expenses.
Primarily placement fees.
105,574 $
3,344
(4,252)
104,666
11,794
10,380
10,853
15,388
99,167
32,839
132,006
81,020 $
$
69,963
62
70,025
Total
98,584 $
42,847
(1,713)
139,718
85,771
(27,148)
131,930
33,006
164,936
319,246 $
113,384 $
93
(1,455)
112,022
Credit
Financial
Avisory
476,878
69,963
59,910
(16,644)
590,107
333,623
53,837
330,288
61,266
779,014
111,917
4,550
116,467
22,362
869
1,508,819
Blackstone
3
Reconciliation of GAAP to Non-GAAP Measures
2008
Net Income (Loss) Attributable to The Blackstone Group L.P.
Blackstone Holdings
Consolidated Entities
Net Income (Loss) Attributable to Redeemable Non-Controlling
Interests in Consolidated Entities
Net Income (Loss)
Provision (Benefit) for Taxes
Income (Loss) Before Provision (Benefit) for Taxes
IPO and Acquisition-Related Charges(1)
(2)
Amortization of Intangibles
Other Adjustments
(Income) Loss Associated with Non-Controlling Interests in
(Income) Loss of Consolidated Entities(3)
Taxes(4)
Economic Net Income (Loss)
Taxes(4)
Performance Fee Adjustment(5)
Investment (Income) Loss Adjustment(6)
Investment Income - Blackstone's Treasury
Cash Management Strategies(7)
Performance Fee Compensation and Benefits Adjustment (8)
Fee Related Earnings
Realized Performance Fees(9)
Realized Investment Income (Loss)(10)
Adjustment Related to Realized Investment Income Blackstone's Treasury Cash Management Strategies(11)
Taxes and Related Payables Including
Payable Under Tax Receivable Agreement(12)
(13)
Equity Based Compensation
Interest Expense
Taxes and Related Payables Including
Payable Under Tax Receivable Agreement(12)
Depreciation and Amortization
Adjusted EBITDA
Notes on next page.
2009
2010
2011
$ (1,163,032) $ (715,291) $ (370,028) $ (168,303) $
(3,638,799)
(1,792,174)
(159,828)
(14,328)
2012
2013
218,598 $ 1,171,202 $
1Q'12
58,325 $
(668,444)
(83,234)
407,727
1,339,845
107,405
343,498
7,953
99,959
198,557
197,643
(632,495)
131,097
87,651
(24,869)
103,598
183,315
$ (5,594,154) $ (2,390,696) $ (607,323) $ (268,453) $ 829,882 $ 2,892,919 $
(14,145)
99,230
84,669
345,711
185,023
255,642
$ (5,608,299) $ (2,291,466) $ (522,654) $
77,258 $ 1,014,905 $ 3,148,561 $
3,331,722
2,973,950
2,369,195
1,269,932
1,079,511
722,707
153,237
158,048
165,378
220,865
150,148
106,643
999
-
54,259
417,632 $
38,753
456,385 $
244,897
50,888
-
1Q'13
1Q'14
1Q'13 LTM
1Q'14 LTM
167,635 $
265,617 $
327,908 $ 1,269,184
207,090
299,505
507,412
43,961
(107,136)
(9,452)
62,316
427,589 $
50,993
478,582 $
186,962
25,657
-
1,432,260
251,970
45,792
111,655
166,791
654,875 $ 839,839 $ 3,120,205
54,097
197,263
258,746
708,972 $ 1,037,102 $ 3,378,951
177,024
1,021,576
712,769
29,003
124,917
109,989
-
792,323
(116,769)
(431,149)
16,916
(203,557)
(381,872)
(251,902)
(52,864)
(89,753)
(4,519)
(418,761)
$ (1,330,018) $ 723,763 $ 1,580,770 $ 1,584,971 $ 2,041,007 $ 3,596,039 $ 500,268 $ 638,337 $ 825,246 $ 2,179,076 $ 3,782,948
(43,457)
(51,086)
(28,932)
(45,763)
(45,708)
(82,164)
(9,051)
(10,031)
(11,312)
(46,688)
(83,445)
$ (1,373,475) $ 672,677 $ 1,551,838 $ 1,539,208 $ 1,995,299 $ 3,513,875 $ 491,217 $ 628,306 $ 813,934 $ 2,132,388 $ 3,699,503
43,457
51,086
28,932
45,763
45,708
82,164
9,051
10,031
11,312
46,688
83,445
1,247,249
(240,131)
(926,289) (1,174,526) (1,593,765) (3,556,373)
(385,756)
(603,999)
(779,014) (1,812,008) (3,731,388)
756,611
(33,424)
(548,549)
(185,264)
(286,244)
(687,805)
(83,406)
(134,771)
(116,467)
(337,609)
(669,501)
(202,717)
$ 471,125 $
34,016
(64,677)
-
$
$
12,367
(1,079)
461,496 $
49,160
29,544
(10,142)
15,277
356,962
478,171 $
233,347
46,915
4,600
316,712
546,493 $
128,409
102,575
(7,782)
(6,057)
25,769
(19,574)
513,546
1,413,182
700,313 $ 745,469 $
392,411
960,175
95,398
170,471
(21,872)
13,194
6,310
109,512
146,928 $
6,649
23,492
(1,729)
239,895
137,733 $
218,952
38,110
7,810
237,254
174,829 $
214,427
111,917
(5,897)
(3,820)
(1,344)
17,730
(10,035)
643,929
1,410,541
691,118 $ 782,565
604,714
955,650
110,016
244,278
(19,795)
15,670
(43,457)
64,288
461,295 $
19,992
(51,086)
66,789
545,761 $
10,238
(48,867)
68,900
770,684 $
36,666
(74,696)
(132,325)
(156,734)
84,626
90,040
130,124
781,350 $ 1,123,965 $ 1,862,699 $
53,201
69,152
103,904
(9,051)
7,846
169,967 $
13,554
(12,148)
12,085
390,912 $
26,069
(31,054)
(135,422)
(175,640)
16,337
94,279
134,376
485,112 $ 1,344,910 $ 1,956,899
30,398
81,667
108,233
43,457
19,639
544,383 $
51,086
23,750
630,835 $
48,867
26,629
882,846 $
74,696
132,325
156,734
32,764
42,235
35,441
942,011 $ 1,367,677 $ 2,158,778 $
9,051
10,268
202,840 $
12,148
8,643
437,772 $
31,054
135,422
175,640
10,373
40,610
37,171
556,937 $ 1,602,609 $ 2,277,943
Blackstone
4
Reconciliation of GAAP to Non-GAAP Measures – Notes
Note: See Appendix - Definitions.
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
(10)
(11)
(12)
(13)
This adjustment adds back to Income (Loss) Before Provision (Benefit) for Taxes amounts for Transaction-Related Charges which
include principally equity-based compensation charges associated with Blackstone’s initial public offering and long-term retention
programs outside of annual deferred compensation and other corporate actions.
This adjustment adds back to Income (Loss) Before Provision (Benefit) for Taxes amounts for the Amortization of Intangibles which
are associated with Blackstone’s initial public offering and other corporate actions.
This adjustment adds back to Income (Loss) Before Provision (Benefit) for Taxes the amount of (Income) Loss Associated with NonControlling Interests of Consolidated Entities and includes the amount of Management Fee Revenues associated with Consolidated
CLO Entities.
Taxes represent the current tax provision (benefit) calculated on Income (Loss) Before Provision (Benefit) for Taxes.
This adjustment removes from Economic Income the total segment amount of Performance Fees.
This adjustment removes from Economic Income the total segment amount of Investment Income (Loss).
This adjustment represents the realized and unrealized gain on Blackstone’s Treasury Cash Management Strategies which are a
component of Investment Income (Loss) but included in Fee Related Earnings.
This adjustment removes from expenses the compensation and benefit amounts related to Blackstone’s profit sharing plans related
to Performance Fees.
Represents the adjustment for realized Performance Fees net of corresponding actual amounts due under Blackstone’s profit sharing
plans related thereto.
Represents the adjustment for Blackstone’s Investment Income (Loss) - Realized.
Represents the elimination of Realized Investment Income (Loss) attributable to Blackstone’s Treasury Cash Management Strategies
which is a component of both Fee Related Earnings and Realized Investment Income (Loss).
Taxes and Related Payables Including Payable Under Tax Receivable Agreement represent the current tax provision (benefit)
calculated on Income (Loss) Before Provision (Benefit) for Taxes and the Payable Under Tax Receivable Agreement.
Represents equity-based award expense included in Economic Income.
Blackstone
5
Earnings Composition – Calculation of Net Realizations and Net Unrealized
2010
2011
2012
2013
1Q'13
1Q'14
1Q'14 LTM
Less: Realized Incentive Fee Compensation
Net Realized Incentive Fees
Less: Realized Carried Interest Compensation
Net Realized Carried Interest
Realized Investment Income
Adjustment Related to Realized Investment Income Blackstone's Treasury Cash Management Strategies(1)
Net Realized Investment Income
Net Realizations
$ 116,700 $ 89,029 $ 301,464 $ 474,333 $ 24,727 $ 53,837 $ 503,443
(57,600)
(55,912) (140,042)
(200,915)
(10,508)
(23,635)
(214,042)
59,100
33,117
161,422
273,418
14,219
30,202
289,401
244,963
138,907
327,422
943,958
294,170
333,623
983,411
(70,716)
(43,615)
(96,433)
(257,201)
(89,437) (149,398)
(317,162)
174,247
95,292
230,989
686,757
204,733
184,225
666,249
46,915
102,575
95,398
170,471
38,110
111,917
244,278
Less: Unrealized Incentive Fee Compensation
Net Unrealized Incentive Fees
Less: Unrealized Carried Interest Compensation
Net Unrealized Carried Interest
Unrealized Investment Income
Less: Investment Income - Blackstone's Treasury Cash Management Strategies(1)
Less: Adjustment Related to Realized Investment Income Blackstone's Treasury Cash Management Strategies(1)
Net Unrealized Investment Income (Loss)
Net Unrealized
$ 107,624 $ (24,928) $ (29,311) $ (19,928) $ 107,755 $ 61,266 $ (66,417)
(63,306)
20,759
44,528
11,651
(44,478)
(23,531)
32,598
44,318
(4,169)
15,217
(8,277)
63,277
37,735
(33,819)
457,002
971,518
994,190
2,158,010
177,347
330,288
2,310,951
(165,340) (237,944) (321,599)
(966,717)
(95,472)
(40,690)
(911,935)
291,662
733,574
672,591
1,191,293
81,875
289,598
1,399,016
501,634
82,689
190,846
517,334
96,661
4,550
425,223
(15,277)
(4,600)
(25,769)
19,574
1,729
(7,810)
10,035
(7,782)
(6,057)
(21,872)
13,194
(3,820)
(1,344)
15,670
39,133
96,518
73,526
183,665
34,290
110,573
259,948
$ 272,480 $ 224,927 $ 465,937 $ 1,143,840 $ 253,242 $ 325,000 $ 1,215,598
7,782
6,057
21,872
(13,194)
3,820
1,344
(15,670)
494,139
84,146
186,949
523,714
102,210
(1,916)
419,588
$ 830,119 $ 813,551 $ 874,757 $ 1,706,730 $ 247,362 $ 325,417 $ 1,784,785
Unless otherwise noted, all amounts are the respective captions from Appendix – Total Segments.
(1) See Appendix – Reconciliation of GAAP to Non-GAAP Measures and the related notes for these adjustments.
Blackstone
6
Definitions
Blackstone discloses the following financial measures that are calculated and presented on the basis of methodologies other than in accordance with
generally accepted accounting principles in the United States of America (“non-GAAP”) in this presentation:
• Blackstone uses Economic Income, or “EI”, as a key measure of value creation, a benchmark of its performance and in making resource deployment
and compensation decisions across its five segments. EI represents segment net income before taxes excluding transaction-related charges.
Transaction-related charges arise from Blackstone’s initial public offering (“IPO”) and long-term retention programs outside of annual deferred
compensation and other corporate actions, including acquisitions. Transaction-related charges include equity-based compensation charges, the
amortization of intangible assets and contingent consideration associated with acquisitions. EI presents revenues and expenses on a basis that
deconsolidates the investment funds Blackstone manages.
• Economic Net Income, or “ENI”, represents EI adjusted to include current period taxes. Taxes represent the current tax provision (benefit) calculated
on Income (Loss) Before Provision for Taxes.
• Blackstone uses Fee Related Earnings, or “FRE”, as a key measure to highlight earnings from operations excluding: (a) the income related to
performance fees and related carry plan costs, (b) income earned from Blackstone’s investments in the Blackstone Funds, and (c) realized and
unrealized gains (losses) from other investments except for such gains (losses) from Blackstone’s Treasury cash management strategies. Blackstone
uses FRE as a measure to assess whether recurring revenue from its businesses is sufficient to adequately cover all of its operating expenses and
generate profits. FRE equals contractual fee revenues, investment income from Blackstone’s Treasury cash management strategies and interest
income, less (a) compensation expenses (which includes amortization of non-IPO and non-acquisition-related equity-based awards, but excludes
amortization of IPO and acquisition-related equity-based awards, carried interest and incentive fee compensation), and (b) other operating expenses.
• Distributable Earnings, or “DE”, which is derived from Blackstone’s segment reported results, is a supplemental measure to assess performance and
amounts available for distributions to Blackstone unitholders, including Blackstone personnel and others who are limited partners of the Blackstone
Holdings partnerships. DE is intended to show the amount of net realized earnings without the effects of the consolidation of the Blackstone Funds.
DE, which is a component of ENI, is the sum across all segments of: (a) Total Management and Advisory Fees, (b) Interest and Dividend Revenue,
(c) Other Revenue, (d) Realized Performance Fees, and (e) Realized Investment Income (Loss); less (a) Compensation, excluding the expense of
equity-based awards, (b) Realized Performance Fee Compensation, (c) Other Operating Expenses, and (d) Taxes and Related Payables Including the
Payable Under Tax Receivable Agreement. DE is reconciled to Blackstone’s Consolidated Statement of Operations.
• Blackstone uses Adjusted Earnings Before Interest, Taxes and Depreciation and Amortization, or “Adjusted EBITDA”, as a measure of segment
performance and an indicator of its ability to cover recurring operating expenses. Adjusted EBITDA equals DE before segment interest expense,
segment depreciation and amortization, and the taxes and related payables including the Payable Under Tax Receivable Agreement.
Blackstone
7

2014 Blackstone Investor Day

Transcription

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