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Blackstone Net Profit Surges Nearly Tenfold in Q1 as Real Estate Business Rebounds

2024/04/20 by Kevin He Leave a Comment

Stephen Schwarzman Blackstone

Blackstone chairman and chief executive, Stephen Schwarzman (Getty Images)

Blackstone’s attributable net profit jumped nearly tenfold in the first quarter from a year earlier, as the private equity titan’s real estate business led its main strategies for growth in revenue, fee-related earnings and distributable earnings.

The world’s largest alternative asset manager reported attributable net profit of $847.4 million in the first quarter, representing an 887 percent jump from the previous year, while revenue climbed 167 percent to $3.7 billion over the same period, according to the firm’s first quarter results announced Thursday.

“Blackstone reported strong results for the first quarter of 2024, including healthy distributable earnings of $1.3 billion…underpinned by the highest fee-related earnings in six quarters,” Steve Schwarzman, Blackstone’s chairman and chief executive said on the earnings call. In the review of his company’s performance from January through March, Schwarzman pointed to the results as fulfilling expectations of a market rebound.

“On our January earnings call, following a volatile multi-year period for global markets, we noted an improving external environment and shared our view that 2023 would be the cyclical bottom for our firm,” Schwarzman said. “While changing market conditions take time to translate to financial results, including realisations and performance revenues, we are seeing positive momentum across many key forward indicators at our firm.”

The fund manager’s real estate strategies returned to profitability in the first quarter as Blackstone’s income-focused core plus strategy notched a gross return of 1.2 percent and its riskier opportunistic strategy generated a 0.3 percent return, marking a reversal from 2023 results, when the two segments were the company’s only strategies to post negative investment returns.

Seoul Office Boost

Manhattan-based Blackstone’s first quarter fee-related earnings grew 12 percent year-on-year to $1.2 billion, while distributable earnings increased 1 percent to $1.3 billion over the same period.

Arc Place Seoul

Blackstone completed the sale of the Arc Place in Seoul last month

Real estate accounted for the largest proportion of those earnings, with the segment’s fee-related earnings having increased 12 percent year-on-year to $586.1 million, while distributable earnings climbed 15 percent to $616.4 million. That compares to negative distributable earnings growth in its private equity, credit and insurance, and multi-asset investing segments.

The fund manager booked $902.6 million of real estate revenue in the first quarter, representing the only segment to post positive revenue growth during the period with a 20 percent year-on-year increase.

Blackstone’s also pointed to the positive performance of its real estate segment as being aided by some profitable disposals, including its sale of the Arc Place office building in Seoul to local fund manager Koramco for around $588 million, in a deal which closed last month.

“We also closed or announced several dispositions in our real estate and infrastructure perpetual vehicles…these included a trophy retail asset in Milan for €1.3 billion, representing the largest real estate single asset sale ever in Italy, a portfolio of warehouses in Southern California and a prime office building in Seoul,” Michael Chae, Blackstone’s chief financial officer said on the call. “Each of these sales generated a substantial profit individually and in aggregate, a gross multiple of invested capital of approximately two times. These dispositions exemplify the significant quality and embedded value within the firm’s investment portfolio.”

Blackstone’s real estate assets under management grew 2 percent year-on-year to $339.3 billion, accounting for 32 percent of the fund manager’s $1.1 trillion of total assets under management as of March.

AI Driving Data Centre Demand

Blackstone reported $63.8 billion of real estate dry powder as of March, including $7.6 billion raised for the fund manager’s new flagship European real estate fund, as well as $6.9 billion which remains uninvested from an $8 billion Asia property fund, which closed in 2022.

Both of those funds are currently in their investment period, which concludes in March 2029 for the European fund and September 2027 for the Asian fund.

The fund manager remains focused on property investments in Europe, where it has a “big exposure” to logistics assets, pointing to a favourable backdrop for capital deployment amid negative sentiment despite positive fundamentals, as well as interest rates that are expected to decline more quickly than in the US.

Data centres also remain a major focus for Blackstone, with the fund manager pointing to digital infrastructure as one of the firm’s highest conviction investment themes and the biggest driver of value in both real estate and infrastructure strategies in the first quarter. Blackstone vehicles currently own $50 billion of data centres assets globally, including facilities under construction, while an additional $50 billion has been earmarked for future development, according to Schwarzman.

“Just as we recognised the rise of e-commerce nearly 15 years ago and started buying warehouses, we anticipated a paradigm shift around demand for data centres, driven by growth in content creation, cloud adoption, and most importantly now, the revolution underway in artificial intelligence. Others now know that AI requires exponentially more computing power and capacity than was previously imagined,” said Schwarzman.

Blackstone also remains positive on US rental housing assets, European and Asian infrastructure, as well as real estate private credit.

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Filed Under: Finance Tagged With: Blackstone, daily-sp, Featured

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