The Blackstone Group (BX) announced Q3 earnings this morning, and had a lot to crow about. Economic net income (Blackstone’s term for profits) rose 23% from Q3 2009, and even more over Q2 2010.
Here is a link to the results (.pdf)
Per usual, Blackstone is holding a media call prior to its analyst call (us hacks can never get a question in edgewise during those things). I’ll live-blog it below, with newest items at the bottom (yes, you’ll have to keep refreshing). Advanced apologies for not using CoverItLive — seems there are some tech capability issues that need to get worked out on our end…
* Just hopped on hold. Seems like we’ve got some smooth jazz going on. Kenny G perhaps?
* For the uninitiated, Blackstone president Tony James usually handles these calls, perhaps with a couple other execs on the line. Steve Schwarzman is reserved for the important people (i.e., analysts).
* Ok, here we go. First they will basically read the earnings release, and then do Q&A. No idea why the first part ever has to happen. Do they not think we’re literate?
* Yup, Tony James, plus public markets chief Joan Solotar and then CFO Lawrence Tossi.
* Blackstone LPs overall have 40% gain on private equity investments. Assume that’s all funds ever raised.
* 50% of debt carried into financial crisis has been restructured or paid off.
* Anticipates issues rolling over or meeting debt obligations going forward.
* $1.3 billion of realizations for PE limited partners so far this year.
* $3.2b in new PE investment outlays this year.
* Yes, there are going to be lots of typos. Let’s accept it and move on…
* Real Estate: Particular improvement in short-cycle businesses like hotels. In terms of longer-term like office buildings, James says occupancy has stabilized.
* Deployed/committed over $4b in real estate over prior 12 months. Most new investments now being focused on distressed properties where BX can take control of the assets.
* Hyping performance of credit biz, with 17% AUM growth over past year. Pretty sure that figure includes both BAM and GSO.
* If you have a question you’d like me to ask Tony (when the opportunity presents itself), just put it in the comments section below. I’ll do my best…
* Says the acquisition of a 40% stake in Brazil’s Patrio was quarter’s “most exciting” event for Blackstone. For Fortune’s earlier coverage of the deal, go here.
* After discussing sale of some new 10-year notes, James said: “Goldman got us beat with 50-year bonds. I wish we’d thought of that.”
* Hey, shout-out to Fortune for calling Blackstone a good place for youngin’s to work.
* Q&A time…
* Question: Why the drop in PE operations income.
* Answer: Increase in expenses related to closing of BCP 6, which are one-time costs. Take those numbers out, expenses were relatively flat.
* Question: What is the rational for taking BankUnited public so soon after the acquisition? No way he answers this…
* I was wrong. Answer: James says he’s working closely with FDIC, and equity raise will strengthen bank further. From BX’s standpoint, “view this as acquiror of smaller troubled banks in market, and gives us capital base to take advantage of some of those in-market acquisition opportunities.” Also, IPO will not mean immediate divestiture.
* Question: When will final close of BCP VI be?
* Answer: He says final signature pages are in the mail. Final figure will be over $13.5b, with final close announcement to come “shortly.”
* Joe Mantone (sp?) of SNL Financial snuck on the call to ask a question. Hey Joe, stick to your own call!
* If I’m able to ask a question, it probably will be if James expects Volcker Rule to open up opportunities for Blackstone’s credit biz to add additional resources (kind of like what KKR just did with Goldman’s prop traders).
* Also may ask something about election…
* Unrelated: Can’t wait until Apollo goes public, and then I get to ask about why they paid Al Villalobos to help place funds in California…
* More BankUnited chatter… seems James realized that he virtually confirmed press speculation. Walked it back.
* I ask Volcker question. James says that he doesn’t expect Volcker to cause Blackstone to add many resources, since it already has full teams at BAML and GSO. Moreover, James says that Blackstone tends to focus on “lower-end” opportunities rather than macro opportunities, because “what we know is companies.” He does say, however, that BX has held talks about pulling a structured finance team out of a big bank, although he obviously didn’t give specifics.
* My other question is about next week’s elections, and James’ thoughts on Republicans taking the House. He didn’t talk too much about specific policy — save for needing to create jobs, deal with the debt, etc.
He did, however, seem to be concerned about gridlock: “I’m hoping that we end up with a government that isn’t so polarized that it can’t enact legislation. We’re a country that still needs a lot of things done.”
* James addresses press reports that Bright Foods is no longer interested in BX portfolio company United Biscuits. He says Bright Foods has assured BX that it is, indeed, still interested.
* Question about the pace of deploying private equity capital. Specifically, why isn’t it faster?
* Answer: “The curse in PE is it’s hard to put $$ out in bottom part of cycle because you’re scared and it’s easy to put money out in boomtimes because it’s a frenzy and the competitive juices flow.” He adds that “it’s gotten a lot harder to find things of attractive value… keep getting priced out of the market” on competitive processes. Means they’re doing more proprietary platform deals.
* That’s all folks… thanks for reading. KKR’s earning calls are next week.
