Blackstone Deal Exits Ease Pain From Investment Writedowns
Blackstone cashed out of big deals in the second quarter, creating ballast to counteract writedowns on investments.
(Bloomberg) -- Blackstone Inc., the world’s largest alternative-asset manager, cashed out of big deals in the second quarter, mitigating the sting from writedowns on investments and the tumult rippling through markets.
Second-quarter distributable earnings surged 86% from a year earlier to $2 billion, or $1.49 a share, after the firm took profits from large investments, Blackstone said Thursday in a statement. That exceeded the average estimate of $1.47.
Writedowns on holdings, including those tied to the technology and industrials sectors, contributed to a net loss of $29.4 million. Blackstone’s corporate private equity depreciated by 6.7% in the quarter. Credit bets were also in the red, with liquid credit down 5.5% as leveraged-loan markets sold off.
Blackstone shares fell 6.7% to $94.28 at 9:42 a.m. in New York trading Thursday. The stock has slid 22% this year through Wednesday, compared with the S&P 500’s 17% decline.
Blackstone President Jon Gray said he sees a challenge ahead amid Federal Reserve interest-rate increases, and as it gets harder for companies to go public and for buyout firms to dispose of bets at big profits.
“No one is unscathed in this environment,” Gray said in an interview. “The Fed tightening is going to lead to an economic slowdown.” It will take time for the Fed to cool inflation, he said. “It’s a little bit like a train that’s got a lot of momentum and a conductor has got to pull back.”
Blackstone is the first of the biggest alternative-asset managers to report second-quarter earnings. The firm invests in real estate, company take-private deals and fast-growing startups, and is a source of financing to businesses. With $940.8 billion in assets under management, it is a force in the world beyond stocks and bonds and a barometer of the health of the industry.
Real Estate
Real estate, the largest division by assets and biggest driver of distributable earnings, delivered cash windfalls in the second quarter. Blackstone’s real estate arm sold hotel and casino company the Cosmopolitan of Las Vegas for $5.65 billion in the period, when the firm also took profits by shifting logistics company Mileway between portfolios run by the firm.
Net flows in the period rose to $73.9 billion from $25.6 billion a year earlier, Blackstone said. This includes $24.4 billion raised for a new real estate fund, which is targeted to be $30 billion and the largest ever of its kind.
Among advancing strategies, the firm eked out a gain in the portfolios of hedge funds it assembles for clients. The hedge fund unit has been going through a shakeup under new chief Joe Dowling, who took over last year.
Blackstone deployed $47.8 billion in the last quarter, up from $23.8 billion a year ago. The firm is sitting on a record $170 billion in dry powder.
In the tough environment, the firm will be more focused on how companies are performing now --- rather than how they performed a year ago -- when looking at new deals, Gray said.
(Updates shares in fourth paragraph.)
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