The Real Deal Miami

Blackstone profits fall 70% in Q4

Plummeting oil prices, drop in asset sales sees NI drop to $436M
January 28, 2016 04:30PM

Tony James

From the New York websiteThe Blackstone Group saw its profits shrink by 70 percent in the fourth quarter amid weak stock markets. The alternative asset manager, whose real estate funds collectively were the biggest investor in New York City real estate in 2015, also took a hit on its stake in the Hilton hotel chain.

Blackstone’s economic net income fell from $1.45 billion to $435.7 million, or from 44 cents to 37 cents a share. Analysts had expected profits to stay flat at 44 cents per share.

Weak stock markets are partly to blame, as share prices influence the fund manager’s net economic income. Blackstone’s credit arm GSO Capital Partners, meanwhile, was hit hard by falling oil prices and saw its profits shrink by 87 percent. Blackstone’s stake in hotel company Hilton Worldwide Holdings has lost $2.3 billion in value since September.

“It’s really just noise,” Blackstone’s president Tony James said on an earnings call Thursday. “We do not believe the markdowns represent permanent diminution of values, impairments or changes in what we ultimately expect to realize from our investments.”

The Blackstone Group’s realized much of its income from fees it charges investors for managing its private equity, real estate, hedge and debt funds. Weaker performance of those funds translates into lower earnings. Blackstone’s funds have $336.4 billion in assets under management, making it the world’s largest alternative asset manager.

Blackstone’s real estate division, headed by Jonathan Gray, last year made a splash by buying New York’s Stuyvesant Town-Peter Cooper Village for $5.3 billion. The firm also dished out $23 billion for GE Capital’s real estate portfolio in partnership with Wells Fargo and $8 billion for BioMed Realty Trust.

In South Florida, the financial giant regularly trades in multifamily complexes and retail developments. The firm’s Invitation Homes division also operates 175 rental properties in the region.[Bloomberg]Konrad Putzier