Blackstone refunds real estate fees earned during boom

TRD New York /
Aug.August 27, 2010 10:00 AM

Blackstone Group and some of its managers have returned $3 million worth of performance fees earned during the commercial real estate boom to investors in one of its real estate funds, and another $15.7 million in refunds may soon be on the way, Bloomberg news reported. Blackstone took in a total of $1.74 billion in performance fees through its property buyout funds between 2004 and 2007, allocating some of those profits to more than 100 individuals. But in the years since, prices for the office towers, hotels and apartments it acquired have dropped by around 39 percent. Clawback provisions for private-equity funds typically stipulate that if its holdings permanently decline in value, the firm and its executives return a portion of their profits to investors. Blackstone isn’t the only private equity fund forced to make refunds in the wake of the real estate crash, nor is it the first: “that is what happened when the Internet bubble burst and there is certainly the potential for that with the sharp downturn in the real estate market,” said Michael Harrell, of law firm Debevoise & Plimpton. Blackstone said in a statement that it expects its funds to be profitable going forward and that “any final clawbacks will be insignificant.” [Bloomberg]


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