Exhibit 99.1

Blackstone Reports Third Quarter 2011 Results

Economic Net Income was a loss of $342 million for the third quarter of 2011, down from net income of $339 million for the third quarter of 2010. Economic Net Income was $929 million for the nine months ended September 30, 2011, up 3% from 2010.

Distributable Earnings were $120 million for the third quarter of 2011, down from $166 million in the third quarter of 2010. Distributable Earnings were $501 million for the nine months ended September 30, 2011, up 8% from 2010.

GAAP Results Attributable to The Blackstone Group L.P. included a net loss of $275 million in the third quarter of 2011, compared to a net loss of $44 million in the third quarter of 2010, in each case including net IPO and acquisition-related accounting charges.

Fee-Earning Assets Under Management increased 27% to a record $133 billion at September 30, 2011, from $104 billion at September 30, 2010, while Total Assets Under Management increased 32% to $158 billion at September 30, 2011.

Blackstone’s GSO Capital Partners Acquires Harbourmaster Capital.

Blackstone declares a quarterly distribution of $0.10 per common unit.

New York, October 20, 2011: The Blackstone Group L.P. (NYSE: BX) today reported its third quarter 2011 results.

Economic Net Income (“ENI”) was a loss of $341.9 million for the third quarter of 2011, a decrease of $681.2 million compared to ENI for the third quarter of 2010. The decrease in ENI compared to the third quarter of 2010 was principally due to market-driven declines in the carrying value of assets as of September 30, 2011 across Blackstone’s investment segments, partially offset by an increase of $66.4 million, or 18%, in Management and Advisory Fees to $442.6 million for the third quarter of 2011. However, since September 30, 2011, U.S. and European markets have rebounded. ENI was $929.4 million for the nine months ended September 30, 2011, an increase of $24.5 million compared to ENI for the nine months ended September 30, 2010 of $904.9 million, primarily attributable to increases in Performance Fees net of applicable compensation and Total Management and Advisory Fees.

Driven both by net inflows and investment appreciation during the last year, Blackstone’s managed assets demonstrated consistently strong growth with Fee-Earning Assets Under Management rising to a record $132.9 billion and Total Assets Under Management rising to $157.7 billion at September 30, 2011. The Blackstone funds had $33.4 billion of committed but uninvested capital, or “dry powder”, at the end of the third quarter of 2011, a record level.

The Blackstone Group^® L.P.

345 Park Avenue

New York, NY 10154

212 583-5000

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For the third quarter of 2011, Total Segment Revenues were $(140.3) million, down from $792.2 million in the third quarter of 2010, due to lower Performance Fees in the Private Equity, Real Estate and Credit Businesses segments and lower Investment Income. Total Management Fees increased to $442.6 million, up 18% from $376.2 million in the prior year’s third quarter, principally from the increase in Fee-Earning Assets Under Management.

Total Segment Expenses were $239.9 million for the third quarter of 2011, a decrease from $424.1 million for the third quarter of 2010, primarily due to the reversal of accruals for Performance Fee Compensation of $230.2 million to $(100.9) million for the third quarter of 2011. Compensation, excluding Performance Fee Compensation, was up 16% to $243.8 million principally as a result of increased personnel. Blackstone’s non-compensation expenses were up 15% from the third quarter of 2010 driven mostly by financing activities and occupancy costs related to continuing global expansion.

GAAP results for the third quarter of 2011 included Revenues of $(124.1) million, compared to $784.0 million for the third quarter of 2010, and Net Loss Attributable to The Blackstone Group L.P. of $274.6 million, compared to a net loss of $44.4 million for the third quarter of 2010.

Stephen A. Schwarzman, Chairman and Chief Executive Officer, said, “The third quarter presented extremely challenging market conditions, dominated by risk aversion and volatility. While our earnings were not immune to the sharp downward trajectory of global markets, our limited partner investors affirmed their confidence in our world-leading businesses and increased their share of funds with us. We reported net inflows in all of our businesses and grew fee-earning assets under management to a firm record $133 billion, up nearly 30% year over year. During the quarter we capitalized on the significant dislocation in the market and invested $4.8 billion in total capital, our highest level of investment activity since 2007, sowing the seeds for strong future returns.”

The table below details Blackstone’s ENI, Net Fee Related Earnings from Operations, Distributable Earnings and Fee-Earning Assets Under Management as of, and for, the three and nine months ended September 30, 2011 and 2010. ENI, Total Segments includes unrealized gains (losses) and the direct compensation impact related to those gains (losses), but excludes IPO and acquisition-related accounting charges.

 

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		As of and for the Three Months Ended September 30,								Variance								Nine Months Ended September 30,								Variance
		2011				2010				$				%				2011				2010				$				%
		(Dollars in Thousands, Except per Unit Amounts)
Economic Net Income (Loss), Total Segments		$	(380,183	)		$	368,091			$	(748,274	)			N/M			$	1,084,854			$	974,664			$	110,190				11	%
Provision (Benefit) for Income Taxes (a)			(38,258	)			28,812				(67,070	)			N/M				155,416				69,752				85,664				123	%
Economic Net Income (Loss), After Taxes		$	(341,925	)		$	339,279			$	(681,204	)			N/M			$	929,438			$	904,912			$	24,526				3	%
Economic Net Income (Loss), After Taxes per Adjusted Unit (b)		$	(0.31	)		$	0.31			$	(0.62	)			N/M			$	0.84			$	0.82			$	0.02				2	%
Net Fee Related Earnings from Operations		$	102,009			$	112,914			$	(10,905	)			-10	%		$	332,406			$	319,574			$	12,832				4	%
Distributable Earnings		$	120,112			$	166,316			$	(46,204	)			-28	%		$	501,193			$	462,587			$	38,606				8	%
Distributable Earnings per Common Unit (c)		$	0.10			$	0.15			$	(0.05	)			-33	%		$	0.43			$	0.42			$	0.01				2	%
Fee-Earning Assets Under Management:
Private Equity		$	37,006,024			$	24,311,443			$	12,694,581				52	%
Real Estate			29,981,920				24,345,161				5,636,759				23	%
Hedge Fund Solutions			37,231,013				31,760,599				5,470,414				17	%
Credit Businesses			28,715,420				23,875,979				4,839,441				20	%
Total Fee-Earning Assets Under Management		$	132,934,377			$	104,293,182			$	28,641,195				27	%

 

(a)	Represents the implied provision for income taxes calculated using a similar methodology applied in calculating the tax provision for The Blackstone Group L.P.

 

(b)	Adjusted Units represents the weighted-average unit count for Economic Net Income purposes. A reconciliation of this item to the comparable GAAP measure is presented in Exhibit 4 to this release.

 

(c)	See Exhibit 4 for the calculation of Distributable Earnings Units Outstanding.

SEGMENT REVIEW

Private Equity

Private Equity had revenues of $(285.1) million for the third quarter of 2011 compared to $214.9 million in 2010. Revenues were $387.9 million for the nine months ended September 30, 2011, compared with revenues of $575.6 million in the same period of 2010. The decrease from the third quarter of 2010 was principally due to decreases in Performance Fees and Investment Income of $378.3 million and $141.6 million, respectively.

The carrying value of assets in contributed Private Equity funds declined by 10.9% for the third quarter of 2011. The carrying value of the segment’s publicly held investments was reduced due to a significant drop in global equities markets during the quarter and lower values of foreign currencies in relation to the U.S. dollar. The segment’s privately held investments declined in carrying value to a lesser extent due to continued strong operating performance of the underlying portfolio companies. For the first two quarters of 2011, the latest available quarterly financial information, growth in revenue and EBITDA of the portfolio companies averaged approximately 12% and 10%, respectively. Private Equity’s portfolio companies continue to exhibit generally positive revenue and earnings growth. As of September 30, 2011, the unrealized value and cumulative realized proceeds, before carried interest, fees and expenses, for Blackstone’s contributed Private Equity funds was 1.4 times investors’ original investments. On a realized/partially realized basis, this multiple was 2.3 times investors’ original investments.

 

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Economic Net Income was a loss of $319.5 million for the third quarter of 2011, down from income of $111.9 million for the third quarter of 2010, primarily a result of lower Performance Fees and Investment Income.

Fee-Earning Assets Under Management were $37.0 billion compared to $24.3 billion in the third quarter of 2010 principally due to the commencement of the investment period for BCP VI.

Dry powder for Private Equity, which is inclusive of amounts related to BCP VI, was $16.9 billion as of September 30, 2011. Limited Partner Capital Invested during the third quarter of 2011 totaled $1.4 billion, an increase from $678.9 million during the third quarter of 2010. Blackstone’s Private Equity segment’s funds had $689.8 million of Limited Partner Capital committed to transactions which had not yet closed as of September 30, 2011.

Real Estate

Real Estate had revenues of $(15.2) million for the third quarter of 2011, compared with revenues of $257.8 million for the third quarter of 2010. Real Estate had nine-month revenues of $1.2 billion, compared with revenues of $618.4 million in the same period of 2010. The decrease from the third quarter of 2010 was principally due to decreases in Performance Fees and Investment Income of $189.8 million and $104.9 million, respectively.

The carrying value of assets in contributed Real Estate funds, including co-investments, increased 0.1% for the third quarter of 2011. The segment’s properties continued to demonstrate solid growth in revenue and net operating income. For the third quarter of 2011, RevPAR (Revenue per Available Room) of Blackstone’s investments increased between 6% and 8% year over year. Occupancy levels and rental rates within the office portfolio increased 130 basis points and 11%, respectively, compared to the prior year. In addition, retail sales in mall investments were up 8% and leasing activity increased 40% at the grocery anchored strip centers, compared to the prior year. The decrease in Performance Fees and Investment Income was primarily related to the decline in the public markets, which impacted the segment’s public stock holdings and certain hospitality investments along with the negative impact of foreign exchange. Offsetting these factors was an increase in the value of the retail portfolio. A material portion of the decrease in Performance Fees was due to the reversal of previously recognized profit allocations, amplified by the “catch-up” provisions of the funds. As of September 30, 2011, the unrealized value and cumulative realized proceeds, before carried interest, fees and expenses, of Blackstone’s Real Estate funds represented 1.4 times investors’ original investment. On a realized/partially realized basis, this multiple was 2.2 times investors’ original investments.

ENI for the Real Estate segment was a loss of $65.7 million for the third quarter of 2011 compared to income of $148.0 million for the third quarter of 2010, driven principally by the decrease in Performance Fees and Investment Income.

Fee-Earning Assets Under Management were $30.0 billion compared to $24.3 billion for the third quarter of 2010. Fee-Earning Assets Under Management increased in the third quarter of 2011 principally due to Blackstone’s next major real estate fund, BREP VII, which had its first closing of $4 billion of committed capital in August 2011.

Dry powder for Real Estate, which is inclusive of amounts related to BREP VII, was $10.1 billion as of September 30, 2011. Limited Partner Capital Invested during the third quarter of 2011 was $1.7 billion, up from $689.0 million during the third quarter of 2010. Blackstone’s Real Estate segment’s funds had $264.9 million of Limited Partner Capital committed to transactions which had not yet closed as of September 30, 2011.

 

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Hedge Fund Solutions

Hedge Fund Solutions had revenues of $57.2 million for the third quarter of 2011, compared with revenues of $94.6 million for the third quarter of 2010. The decrease in revenues from the third quarter of 2010 was principally due to decreases in Performance Fees and Investment Income of $29.1 million and $17.9 million, respectively, partially offset by an increase in Total Management Fees of 14% to $79.8 million for the third quarter of 2011. Hedge Fund Solutions had nine-month revenues of $247.2 million, compared with revenues of $247.6 million in the same period of 2010.

The returns for the underlying assets for Blackstone’s Hedge Fund Solutions’ funds were negative 4.1% for the third quarter of 2011, a result of the return of turbulent markets.

ENI for the Hedge Funds Solutions segment decreased by 67% to $16.5 million for the third quarter of 2011 compared to $49.4 million for the third quarter of 2010, driven principally by the decreases in Performance Fees and Investment Income.

Fee-Earning Assets Under Management for the segment grew 17% to $37.2 billion from $31.8 billion at the end of the third quarter of 2010. The increase from the prior year period was principally due to net inflows across the segment. Net inflows for Blackstone’s Hedge Fund Solutions business came primarily from its commingled and customized investment products, hedge fund manager seeding platform and long only solutions business. Hedge Fund Solutions had $2.4 billion of net inflows of Fee-Earning Assets Under Management for the third quarter of 2011, bringing year to date net fee-earning inflows to $6.1 billion.

Credit Businesses

Credit Businesses had revenues of $15.4 million for the third quarter of 2011, compared with revenues of $137.1 million for the third quarter of 2010. The decrease from the third quarter of 2010 was due to a decrease in Performance Fees to $(40.3) million for the third quarter of 2011, partially offset by an increase in Total Management Fees of 17% to $59.5 million driven by an increase in Fee-Earning Assets Under Management. Credit Businesses had nine-month revenues of $269.9 million, compared with revenues of $313.1 million in the same period of 2010. The net decrease from 2010 was driven by the same reasons noted above.

The returns of the underlying assets for Blackstone’s credit-oriented businesses for the third quarter of 2011 was negative 5.0% for the hedge funds, negative 9.9% for the rescue lending funds, due in each case to broad declines in public debt markets, and positive 7.1% for the mezzanine funds due primarily to favorable realizations of certain investments.

ENI for the Credit Businesses segment was a loss of $17.0 million for the third quarter of 2011 compared to income of $54.9 million for the third quarter of 2010, driven principally by the decrease in Performance Fees.

Fee-Earning Assets Under Management for the segment increased 20%, or $4.8 billion, to $28.7 billion from $23.9 billion for the third quarter of 2010. Of the $4.8 billion increase, the long only platform had its strongest year over year growth including the acquisition of Allied Irish Bank’s CLOs in the second quarter of 2011. Also driving the increase in Fee-Earning Assets Under Management was $1.3 billion of Limited Partner Capital Deployed from the mezzanine funds and rescue lending funds in the third quarter of 2011.

 

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Dry powder of drawdown funds for the Credit Businesses segment was $4.7 billion as of September 30, 2011.

On October 6, 2011, GSO Capital Partners LP (“GSO”), the global credit platform of Blackstone, announced the acquisition of Harbourmaster Capital, a European leveraged loan manager and adviser with $10.3 billion of Assets Under Management as of September 30, 2011. The Harbourmaster Capital Dublin-based team will continue to support the Harbourmaster funds, and will form a combined platform with GSO’s existing European leveraged loan business to develop new European focused funds for their global investor base. As of September 30, 2011, the combined GSO and Harbourmaster European leveraged loan platform would have been $15.2 billion in Assets Under Management supported by a combined team of 40 professionals in both Dublin and London. The transaction is expected to close in early 2012 following regulatory and certain third party approvals.

Financial Advisory

Revenues were relatively flat at $87.4 million for the third quarter of 2011 compared to $87.7 million for the third quarter of 2010. Revenues were $264.6 million for the nine months ended September 30, 2011, a decrease from $300.8 million in the same period of 2010.

ENI was $5.6 million for the third quarter of 2011 compared to $3.9 million for the third quarter of 2010.

CAPITAL AND LIQUIDITY

As of September 30, 2011, Blackstone had $1.8 billion in cash, Treasury cash management strategies and liquid Blackstone funds. Long-term debt totaled $1.0 billion in borrowings from the 2010 and 2009 bond issuances. Blackstone has no borrowings outstanding against its $1 billion revolving credit facility.

DISTRIBUTION

The Blackstone Group L.P. has declared a quarterly distribution of $0.10 per common unit to record holders of common units at the close of business on November 15, 2011. This distribution will be paid on November 30, 2011.

Blackstone’s general partner maintains the right to determine the amount to be distributed from The Blackstone Group L.P.’s net after-tax share of its annual Distributable Earnings. Distributable Earnings will only be a starting point for the determination of the amount to be distributed to unitholders because in determining the amount to be distributed Blackstone will subtract from Distributable Earnings any amounts determined by its general partner to be necessary or appropriate to provide for the conduct of its business, to make appropriate investments in its business and funds, to comply with applicable law, any of its debt instruments or other agreements, or to provide for future distributions to its unitholders for any ensuing quarter. The aggregate amounts of Blackstone’s distributions to unitholders will typically be less than its Distributable Earnings for that year.

Although for calendar 2010 Blackstone distributed substantially all of its net after-tax annual Distributable Earnings, Blackstone’s current intention is to distribute to its common unitholders substantially all of The Blackstone Group L.P.’s net after-tax share of annual Distributable Earnings less the amount of its realized investment gains. This determination was made based on the continued pace of organic and inorganic growth and the potential for further strategic initiatives and the retained amount will be used for those purposes. The retained cash will be deducted from the fourth quarter distribution which is made in the first quarter of the ensuing calendar year. Distributions for the first three quarters will remain unchanged at $0.10 per unit. All distributions are subject to Blackstone’s discretion to retain additional amounts from the amount of annual Distributable Earnings to be distributed as described above.

 

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Because Blackstone will not know what its Distributable Earnings will be for any fiscal year until the end of such year, Blackstone expects that its first three quarterly distributions in respect of any given year will be based on its anticipated annualized Net Fee Related Earnings. As such, the distributions for the first three quarters are expected to be smaller than the final quarterly distribution in respect of such year. For the fourth quarter of 2011 Blackstone expects to pay the remaining amount of the year’s Distributable Earnings less realized investment gains.

All of the foregoing is subject to the qualification that the declaration and payment of any distributions are at the sole discretion of Blackstone’s general partner and the general partner may change its distribution policy at any time.

Because the wholly-owned subsidiaries of The Blackstone Group L.P. must pay taxes and make payments under the tax receivable agreements described in Blackstone’s Annual Report on Form 10-K, the amounts ultimately distributed by The Blackstone Group L.P. to its common unitholders in respect of fiscal 2011 and subsequent years are expected to be different, on a per unit basis, than the amounts distributed by the Blackstone Holdings partnerships to the Blackstone personnel and others who are limited partners of the Blackstone Holdings partnerships in respect of their Blackstone Holdings partnership units.

# # #

Blackstone will host a conference call on October 20, 2011 at 11:00 a.m. ET to discuss third quarter 2011 results. The conference call can be accessed by dialing (877) 261-8937 (U.S. domestic) or +1 (857) 244-7415 (international) pass code 14994355. Additionally, the conference call will be broadcast live over the internet and can be accessed by all interested parties through the Investor Relations section of The Blackstone Group’s website http://ir.blackstone.com. For those unable to listen to the live broadcast, a replay will be available on Blackstone’s website or by dialing (888) 286-8010 (U.S. domestic) or +1 (617) 801-6888 (international) conference ID number 60737059, beginning approximately two hours after the event.

Blackstone expects to host a conference call to report its 2011 fourth quarter and full year results on February 2, 2012.

Investor Relations Contacts:

Joan Solotar

The Blackstone Group

Tel: +1 (212) 583-5068

solotar@blackstone.com

Weston Tucker

The Blackstone Group

Tel: +1 (212) 583-5231

tucker@blackstone.com

Media Relations Contact:

Peter Rose

The Blackstone Group

Tel: +1 (212) 583-5871

rose@blackstone.com

 

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About The Blackstone Group

Blackstone (NYSE:BX) is one of the world’s leading investment and advisory firms. Blackstone seeks to create positive economic impact and long-term value for its investors, the companies they invest in, the companies they advise and the broader global economy. Blackstone does this through the commitment of their extraordinary people and flexible capital. Their alternative asset management businesses include the management of private equity funds, real estate funds, hedge fund solutions, credit-oriented funds and closed-end mutual funds. Blackstone also provides various financial advisory services, including financial and strategic advisory, restructuring and reorganization advisory and fund placement services. Further information is available at www.blackstone.com. Follow us on Twitter @Blackstone.

Forward-Looking Statements

This release may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 which reflect Blackstone’s current views with respect to, among other things, Blackstone’s operations and financial performance. You can identify these forward-looking statements by the use of words such as “outlook,” “believes,” “expects,” “potential,” “continues,” “may,” “will,” “should,” “seeks,” “approximately,” “predicts,” “intends,” “plans,” “estimates,” “anticipates” or the negative version of these words or other comparable words. Such forward-looking statements are subject to various risks and uncertainties. Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from those indicated in these statements. Blackstone believes these factors include but are not limited to those described under the section entitled “Risk Factors” in its Annual Report on Form 10-K for the fiscal year ended December 31, 2010, as such factors may be updated from time to time in its periodic filings with the SEC, which are accessible on the SEC’s website at www.sec.gov. These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this release and in the filings. Blackstone undertakes no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise.

This release does not constitute an offer of any Blackstone Fund.

 

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THE BLACKSTONE GROUP L.P.

Exhibit 1a. Consolidated Statements of Operations

(Dollars in Thousands, Except Per Unit Data)

 

		Quarter Ended September 30,
		2011				2010
Revenues
Management and Advisory Fees		$	425,193			$	362,521
Performance Fees
Realized			6,605				66,142
Unrealized			(462,902	)			199,824
Total Performance Fees			(456,297	)			265,966
Investment Income (Loss)
Realized			45,596				13,542
Unrealized			(145,990	)			127,428
Total Investment Income (Loss)			(100,394	)			140,970
Interest and Dividend Revenue			9,085				10,075
Other			(1,666	)			4,468
Total Revenues			(124,079	)			784,000
Expenses
Compensation and Benefits
Compensation			494,478				664,004
Performance Fee Compensation
Realized			10,542				24,962
Unrealized			(111,435	)			104,324
Total Compensation and Benefits			393,585				793,290
General, Administrative and Other			124,929				114,291
Interest Expense			13,785				11,766
Fund Expenses			8,635				6,422
Total Expenses			540,934				925,769
Other Income
Net Gains (Losses) from Fund Investment Activities			(329,399	)			285,071
Income (Loss) Before Benefit for Taxes			(994,412	)			143,302
Benefit for Taxes			7,637				4,225
Net Income (Loss)			(986,775	)			147,527
Net Income (Loss) Attributable to Redeemable Non-Controlling Interests in Consolidated Entities			(44,776	)			23,623
Net Income (Loss) Attributable to Non-Controlling Interests in Consolidated Entities			(265,353	)			242,723
Net Loss Attributable to Non-Controlling Interests in Blackstone Holdings			(402,079	)			(74,461	)
Net Income (Loss) Attributable to The Blackstone Group L.P.		$	(274,567	)		$	(44,358	)
Net Income (Loss) per Common Unit, Basic and Diluted		$	(0.56	)		$	(0.12	)

 

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THE BLACKSTONE GROUP L.P.

Exhibit 1b. Consolidated Statements of Operations

(Dollars in Thousands, Except Per Unit Data)

 

		Nine Months Ended September 30,
		2011				2010
Revenues
Management and Advisory Fees		$	1,335,971			$	1,123,403
Performance Fees
Realized			164,571				171,941
Unrealized			659,987				312,304
Total Performance Fees			824,558				484,245
Investment Income
Realized			77,682				29,493
Unrealized			70,116				371,691
Total Investment Income			147,798				401,184
Interest and Dividend Revenue			27,423				25,922
Other			1,721				573
Total Revenues			2,337,471				2,035,327
Expenses
Compensation and Benefits
Compensation			1,853,393				2,556,665
Performance Fee Compensation
Realized			52,797				55,582
Unrealized			169,188				158,032
Total Compensation and Benefits			2,075,378				2,770,279
General, Administrative and Other			380,433				341,853
Interest Expense			41,773				26,633
Fund Expenses			19,045				15,484
Total Expenses			2,516,629				3,154,249
Other Income
Net Gains (Losses) from Fund Investment Activities			(449,244	)			397,625
Income (Loss) Before Provision for Taxes			(628,402	)			(721,297	)
Provision for Taxes			95,412				24,802
Net Income (Loss)			(723,814	)			(746,099	)
Net Income (Loss) Attributable to Redeemable Non-Controlling Interests in Consolidated Entities			(22,891	)			47,171
Net Income (Loss) Attributable to Non-Controlling Interests in Consolidated Entities			(450,842	)			320,816
Net Income (Loss) Attributable to Non-Controlling Interests in Blackstone Holdings			(104,455	)			(755,031	)
Net Income (Loss) Attributable to The Blackstone Group L.P.		$	(145,626	)		$	(359,055	)
Net Income (Loss) per Common Unit, Basic and Diluted		$	(0.31	)		$	(1.02	)

 

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THE BLACKSTONE GROUP L.P.

Exhibit 2a. Economic Net Income and Net Fee Related Earnings from Operations

(Dollars in Thousands)

 

The tables below detail Blackstone’s Economic Net Income and Net Fee Related Earnings from Operations. Net Fee Related Earnings from Operations is a supplemental measure of after tax performance used to highlight earnings from operations excluding the income from and related profit sharing expenses of Blackstone’s performance fees and investment income, except for interest income. The reconciliation of Economic Net Income to Net Fee Related Earnings from Operations is presented in Exhibit 2b to this release.

 

		Three Months Ended																																				Nine Months Ended
																														Sep 30, 2011 vs. Sep 30, 2010
		Mar 31, 2010				Jun 30, 2010				Sep 30, 2010				Dec 31, 2010				Mar 31, 2011				Jun 30, 2011				Sep 30, 2011				$				%				Sep 30, 2010				Sep 30, 2011
Economic Net Income, Total Segments
Revenues
Management and Advisory Fees
Base Management Fees		$	251,971			$	262,914			$	269,434			$	285,152			$	305,587			$	316,474			$	322,371			$	52,937				20	%		$	784,319			$	944,432
Advisory Fees			76,568				134,099				84,541				130,932				70,252				102,243				86,178				1,637				2	%			295,208				258,673
Transaction and Other Fees, Net *			35,260				20,617				22,948				58,923				58,363				103,561				41,793				18,845				82	%			78,825				203,717
Management Fee Offsets **			(1,178	)			(179	)			(674	)			(282	)			(8,536	)			(8,675	)			(7,703	)			(7,029	)			N/M				(2,031	)			(24,914	)
Total Management and Advisory Fees			362,621				417,451				376,249				474,725				425,666				513,603				442,639				66,390				18	%			1,156,321				1,381,908
Performance Fees
Realized			53,881				46,374				66,039				195,369				95,600				60,215				7,897				(58,142	)			88	%			166,294				163,712
Unrealized			132,333				(20,738	)			192,745				260,286				505,197				612,843				(465,176	)			(657,921	)			N/M				304,340				652,864
Total Performance Fees			186,214				25,636				258,784				455,655				600,797				673,058				(457,279	)			(716,063	)			N/M				470,634				816,576
Investment Income (Loss)
Realized			5,307				15,721				14,276				11,611				23,499				30,732				31,647				17,371				122	%			35,304				85,878
Unrealized			151,521				87,186				128,247				134,680				102,577				106,837				(165,753	)			(294,000	)			N/M				366,954				43,661
Total Investment Income (Loss)			156,828				102,907				142,523				146,291				126,076				137,569				(134,106	)			(276,629	)			N/M				402,258				129,539
Interest Income and Dividend Revenue			8,690				6,930				10,187				10,289				9,448				9,283				10,110				(77	)			-1	%			25,807				28,841
Other			(3,250	)			(644	)			4,468				(1,192	)			2,259				1,128				(1,667	)			(6,135	)			N/M				574				1,720
Total Revenues			711,103				552,280				792,211				1,085,768				1,164,246				1,334,641				(140,303	)			(932,514	)			N/M				2,055,594				2,358,584
Expenses
Compensation and Benefits
Compensation			190,637				220,662				210,582				237,233				229,898				278,738				243,840				33,258				16	%			621,881				752,476
Performance Fee Compensation
Realized			7,741				22,879				24,962				72,734				14,543				27,711				10,543				(14,419	)			58	%			55,582				52,797
Unrealized			54,600				(892	)			104,323				70,615				162,525				118,097				(111,435	)			(215,758	)			N/M				158,031				169,187
Total Compensation and Benefits			252,978				242,649				339,867				380,582				406,966				424,546				142,948				(196,919	)			-58	%			835,494				974,460
Other Operating Expenses			73,023				88,160				84,253				99,080				102,975				99,363				96,932				12,679				15	%			245,436				299,270
Total Expenses			326,001				330,809				424,120				479,662				509,941				523,909				239,880				(184,240	)			-43	%			1,080,930				1,273,730
Total Economic Net Income (Loss)		$	385,102			$	221,471			$	368,091			$	606,106			$	654,305			$	810,732			$	(380,183	)		$	(748,274	)			N/M			$	974,664			$	1,084,854
Total Net Fee Related Earnings from Operations		$	98,745			$	107,915			$	112,914			$	122,740			$	93,180			$	137,217			$	102,009			$	(10,905	)			-10	%		$	319,574			$	332,406

 

*	Transaction and Other Fees, Net, are net of amounts, if any, shared with limited partners including, for Private Equity, broken deal expenses.

 

**	Primarily placement fees.

continued…

 

11

---

THE BLACKSTONE GROUP L.P.

Exhibit 2a. Economic Net Income and Net Fee Related Earnings from Operations - Continued

(Dollars in Thousands)

 

		Three Months Ended																																				Nine Months Ended
																														Sep 30, 2011 vs. Sep 30, 2010
		Mar 31, 2010				Jun 30, 2010				Sep 30, 2010				Dec 31, 2010				Mar 31, 2011				Jun 30, 2011				Sep 30, 2011				$				%				Sep 30, 2010				Sep 30, 2011
Private Equity
Revenues
Management Fees
Base Management Fees		$	65,432			$	66,795			$	66,077			$	65,003			$	79,935			$	82,297			$	85,534			$	19,457				29	%		$	198,304			$	247,766
Transaction and Other Fees, Net *			31,972				16,367				13,348				10,556				35,342				52,353				21,430				8,082				61	%			61,687				109,125
Management Fee Offsets **			—				—				(91	)			(97	)			(7,889	)			(7,629	)			(6,498	)			(6,407	)			N/M				(91	)			(22,016	)
Total Management Fees			97,404				83,162				79,334				75,462				107,388				127,021				100,466				21,132				27	%			259,900				334,875
Performance Fees
Realized			46,175				1,106				44,814				64,774				82,389				1,362				(17,966	)			(62,780	)			N/M				92,095				65,785
Unrealized			45,549				(24,020	)			45,499				84,466				32,537				187,190				(270,014	)			(315,513	)			N/M				67,028				(50,287	)
Total Performance Fees			91,724				(22,914	)			90,313				149,240				114,926				188,552				(287,980	)			(378,293	)			N/M				159,123				15,498
Investment Income (Loss)
Realized			(495	)			3,141				9,940				2,746				17,907				3,021				20,548				10,608				107	%			12,586				41,476
Unrealized			84,684				17,275				30,491				20,838				29,126				76,947				(121,688	)			(152,179	)			N/M				132,450				(15,615	)
Total Investment Income (Loss)			84,189				20,416				40,431				23,584				47,033				79,968				(101,140	)			(141,571	)			N/M				145,036				25,861
Interest Income and Dividend Revenue			3,428				2,728				3,802				4,086				3,505				3,197				3,396				(406	)			-11	%			9,958				10,098
Other			100				460				1,061				400				811				665				141				(920	)			-87	%			1,621				1,617
Total Revenues			276,845				83,852				214,941				252,772				273,663				399,403				(285,117	)			(500,058	)			N/M				575,638				387,949
Expenses
Compensation and Benefits
Compensation			46,910				46,612				47,552				38,271				56,254				66,694				54,220				6,668				14	%			141,074				177,168
Performance Fee Compensation
Realized			6,005				128				10,783				15,711				7,718				49				(2,443	)			(13,226	)			N/M				16,916				5,324
Unrealized			6,344				(10,296	)			18,306				6,966				5,464				29,309				(44,955	)			(63,261	)			N/M				14,354				(10,182	)
Total Compensation and Benefits			59,259				36,444				76,641				60,948				69,436				96,052				6,822				(69,819	)			-91	%			172,344				172,310
Other Operating Expenses			24,431				28,677				26,359				30,122				28,713				30,124				27,588				1,229				5	%			79,467				86,425
Total Expenses			83,690				65,121				103,000				91,070				98,149				126,176				34,410				(68,590	)			-67	%			251,811				258,735
Economic Net Income (Loss)		$	193,155			$	18,731			$	111,941			$	161,702			$	175,514			$	273,227			$	(319,527	)		$	(431,468	)			N/M			$	323,827			$	129,214

 

*	Transaction and Other Fees, Net, are net of amounts, if any, shared with limited partners including, for Private Equity, broken deal expenses.

**	Primarily placement fees.

continued…

 

12

---

THE BLACKSTONE GROUP L.P.

Exhibit 2a. Economic Net Income and Net Fee Related Earnings from Operations - Continued

(Dollars in Thousands)

 

		Three Months Ended																																				Nine Months Ended
																														Sep 30, 2011 vs. Sep 30, 2010
		Mar 31, 2010				Jun 30, 2010				Sep 30, 2010				Dec 31, 2010				Mar 31, 2011				Jun 30, 2011				Sep 30, 2011				$				%				Sep 30, 2010				Sep 30, 2011
Real Estate
Revenues
Management Fees
Base Management Fees		$	83,060			$	82,916			$	83,232			$	89,220			$	95,439			$	97,467			$	97,925			$	14,693				18	%		$	249,208			$	290,831
Transaction and Other Fees, Net *			1,942				2,979				8,538				46,455				21,543				49,288				19,551				11,013				129	%			13,459				90,382
Management Fee Offsets **			(489	)			(110	)			(401	)			(71	)			(505	)			(745	)			(880	)			(479	)			-119	%			(1,000	)			(2,130	)
Total Management Fees			84,513				85,785				91,369				135,604				116,477				146,010				116,596				25,227				28	%			261,667				379,083
Performance Fees
Realized			5,948				16,319				5,010				13,011				2,593				20,832				5,308				298				6	%			27,277				28,733
Unrealized			11,391				21,117				69,910				154,553				368,104				429,458				(120,176	)			(190,086	)			N/M				102,418				677,386
Total Performance Fees			17,339				37,436				74,920				167,564				370,697				450,290				(114,868	)			(189,788	)			N/M				129,695				706,119
Investment Income (Loss)
Realized			2,632				3,900				2,159				2,560				2,919				11,394				7,313				5,154				N/M				8,691				21,626
Unrealized			46,892				79,543				83,968				108,576				61,406				37,332				(26,060	)			(110,028	)			N/M				210,403				72,678
Total Investment Income (Loss)			49,524				83,443				86,127				111,136				64,325				48,726				(18,747	)			(104,874	)			N/M				219,094				94,304
Interest Income and Dividend Revenue			2,718				2,178				3,026				3,251				3,288				2,989				3,195				169				6	%			7,922				9,472
Other			(1,876	)			(390	)			2,330				(400	)			860				515				(1,390	)			(3,720	)			N/M				64				(15	)
Total Revenues			152,218				208,452				257,772				417,155				555,647				648,530				(15,214	)			(272,986	)			N/M				618,442				1,188,963
Expenses
Compensation and Benefits
Compensation			40,150				44,528				43,219				55,280				58,501				71,618				55,259				12,040				28	%			127,897				185,378
Performance Fee Compensation
Realized			1,524				8,895				1,806				3,619				1,230				9,382				2,251				445				25	%			12,225				12,863
Unrealized			6,937				15,999				46,182				53,746				106,501				91,021				(30,510	)			(76,692	)			N/M				69,118				167,012
Total Compensation and Benefits			48,611				69,422				91,207				112,645				166,232				172,021				27,000				(64,207	)			-70	%			209,240				365,253
Other Operating Expenses			14,290				17,647				18,584				23,668				28,366				22,971				23,495				4,911				26	%			50,521				74,832
Total Expenses			62,901				87,069				109,791				136,313				194,598				194,992				50,495				(59,296	)			-54	%			259,761				440,085
Economic Net Income (Loss)		$	89,317			$	121,383			$	147,981			$	280,842			$	361,049			$	453,538			$	(65,709	)		$	(213,690	)			N/M			$	358,681			$	748,878

 

*	Transaction and Other Fees, Net, are net of amounts, if any, shared with limited partners.

 

**	Primarily placement fees.

continued…

 

13

---

THE BLACKSTONE GROUP L.P.

Exhibit 2a. Economic Net Income and Net Fee Related Earnings from Operations - Continued

(Dollars in Thousands)

 

		Three Months Ended																																				Nine Months Ended
																														Sep 30, 2011 vs. Sep 30, 2010
		Mar 31, 2010				Jun 30, 2010				Sep 30, 2010				Dec 31, 2010				Mar 31, 2011				Jun 30, 2011				Sep 30, 2011				$				%				Sep 30, 2010				Sep 30, 2011
Hedge Fund Solutions
Revenues
Management Fees
Base Management Fees		$	63,866			$	65,533			$	69,305			$	74,069			$	75,612			$	79,290			$	79,355			$	10,050				15	%		$	198,704			$	234,257
Transaction and Other Fees, Net *			809				870				846				1,047				727				861				740				(106	)			-13	%			2,525				2,328
Management Fee Offsets **			—				(72	)			(163	)			(95	)			(124	)			(196	)			(258	)			(95	)			-58	%			(235	)			(578	)
Total Management Fees			64,675				66,331				69,988				75,021				76,215				79,955				79,837				9,849				14	%			200,994				236,007
Performance Fees
Realized			2,117				1,021				872				52,616				893				667				5,764				4,892				N/M				4,010				7,324
Unrealized			10,413				(2,596	)			14,137				(18,972	)			19,253				3,441				(19,861	)			(33,998	)			N/M				21,954				2,833
Total Performance Fees			12,530				(1,575	)			15,009				33,644				20,146				4,108				(14,097	)			(29,106	)			N/M				25,964				10,157
Investment Income (Loss)
Realized			(250	)			5,438				1,050				3,580				1,341				12,855				1,023				(27	)			-3	%			6,238				15,219
Unrealized			11,880				(6,749	)			7,831				6,399				7,120				(12,864	)			(10,034	)			(17,865	)			N/M				12,962				(15,778	)
Total Investment Income (Loss)			11,630				(1,311	)			8,881				9,979				8,461				(9	)			(9,011	)			(17,892	)			N/M				19,200				(559	)
Interest Income and Dividend Revenue			475				353				498				543				516				472				500				2				0	%			1,326				1,488
Other			(83	)			(40	)			270				(50	)			104				(38	)			18				(252	)			-93	%			147				84
Total Revenues			89,227				63,758				94,646				119,137				105,442				84,488				57,247				(37,399	)			-40	%			247,631				247,177
Expenses
Compensation and Benefits
Compensation			20,742				26,388				24,506				23,750				28,657				32,288				31,319				6,813				28	%			71,636				92,264
Performance Fee Compensation
Realized			771				356				3,313				16,193				300				253				2,257				(1,056	)			-32	%			4,440				2,810
Unrealized			3,783				(977	)			5,075				(6,814	)			5,358				2,955				(7,214	)			(12,289	)			N/M				7,881				1,099
Total Compensation and Benefits			25,296				25,767				32,894				33,129				34,315				35,496				26,362				(6,532	)			-20	%			83,957				96,173
Other Operating Expenses			11,285				12,353				12,388				15,334				13,008				16,075				14,421				2,033				16	%			36,026				43,504
Total Expenses			36,581				38,120				45,282				48,463				47,323				51,571				40,783				(4,499	)			-10	%			119,983				139,677
Economic Net Income		$	52,646			$	25,638			$	49,364			$	70,674			$	58,119			$	32,917			$	16,464			$	(32,900	)			-67	%		$	127,648			$	107,500

 

*	Transaction and Other Fees, Net, are net of amounts, if any, shared with limited partners.

 

**	Primarily placement fees.

continued…

 

14

---

THE BLACKSTONE GROUP L.P.

Exhibit 2a. Economic Net Income and Net Fee Related Earnings from Operations - Continued

(Dollars in Thousands)

 

		Three Months Ended																																				Nine Months Ended
																														Sep 30, 2011 vs. Sep 30, 2010
		Mar 31, 2010				Jun 30, 2010				Sep 30, 2010				Dec 31, 2010				Mar 31, 2011				Jun 30, 2011				Sep 30, 2011				$				%				Sep 30, 2010				Sep 30, 2011
Credit Businesses
Revenues
Management Fees
Base Management Fees		$	39,613			$	47,670			$	50,820			$	56,860			$	54,601			$	57,420			$	59,557			$	8,737				17	%		$	138,103			$	171,578
Transaction and Other Fees, Net *			536				299				216				606				745				849				(26	)			(242	)			N/M				1,051				1,568
Management Fee Offsets **			(689	)			3				(19	)			(19	)			(18	)			(105	)			(67	)			(48	)			N/M				(705	)			(190	)
Total Management Fees			39,460				47,972				51,017				57,447				55,328				58,164				59,464				8,447				17	%			138,449				172,956
Performance Fees
Realized			(359	)			27,928				15,343				64,968				9,725				37,354				14,791				(552	)			-4	%			42,912				61,870
Unrealized			64,980				(15,239	)			63,199				40,239				85,303				(7,246	)			(55,125	)			(118,324	)			N/M				112,940				22,932
Total Performance Fees			64,621				12,689				78,542				105,207				95,028				30,108				(40,334	)			(118,876	)			N/M				155,852				84,802
Investment Income (Loss)
Realized			3,233				3,291				658				2,518				1,235				3,236				2,807				2,149				N/M				7,182				7,278
Unrealized			7,835				(3,444	)			5,350				(269	)			4,532				5,437				(7,800	)			(13,150	)			N/M				9,741				2,169
Total Investment Income (Loss)			11,068				(153	)			6,008				2,249				5,767				8,673				(4,993	)			(11,001	)			N/M				16,923				9,447
Interest Income and Dividend Revenue			673				403				1,252				710				453				902				1,404				152				12	%			2,328				2,759
Other			(459	)			(332	)			330				(27	)			98				(47	)			(132	)			(462	)			N/M				(461	)			(81	)
Total Revenues			115,363				60,579				137,149				165,586				156,674				97,800				15,409				(121,740	)			-89	%			313,091				269,883
Expenses
Compensation and Benefits
Compensation			28,343				26,982				28,774				39,158				30,325				34,170				41,512				12,738				44	%			84,099				106,007
Performance Fee Compensation
Realized			(559	)			13,500				9,060				37,211				5,295				18,027				8,478				(582	)			-6	%			22,001				31,800
Unrealized			37,536				(5,618	)			34,760				16,717				45,202				(5,188	)			(28,756	)			(63,516	)			N/M				66,678				11,258
Total Compensation and Benefits			65,320				34,864				72,594				93,086				80,822				47,009				21,234				(51,360	)			-71	%			172,778				149,065
Other Operating Expenses			8,290				12,167				9,669				8,980				15,357				10,226				11,210				1,541				16	%			30,126				36,793
Total Expenses			73,610				47,031				82,263				102,066				96,179				57,235				32,444				(49,819	)			-61	%			202,904				185,858
Economic Net Income (Loss)		$	41,753			$	13,548			$	54,886			$	63,520			$	60,495			$	40,565			$	(17,035	)		$	(71,921	)			N/M			$	110,187			$	84,025

 

*	Transaction and Other Fees, Net, are net of amounts, if any, shared with limited partners.

 

**	Primarily placement fees.

continued…

 

15

---

THE BLACKSTONE GROUP L.P.

Exhibit 2a. Economic Net Income and Net Fee Related Earnings from Operations - Continued

(Dollars in Thousands)

 

		Three Months Ended																																				Nine Months Ended
																														Sep 30, 2011 vs. Sep 30, 2010
		Mar 31, 2010				Jun 30, 2010				Sep 30, 2010				Dec 31, 2010				Mar 31, 2011				Jun 30, 2011				Sep 30, 2011				$				%				Sep 30, 2010				Sep 30, 2011
Financial Advisory
Revenues
Advisory Fees		$	76,568			$	134,099			$	84,541			$	130,932			$	70,252			$	102,243			$	86,178			$	1,637				2	%		$	295,208			$	258,673
Transaction and Other Fees, Net			1				102				—				259				6				210				98				98				N/M				103				314
Total Advisory and Transaction Fees			76,569				134,201				84,541				131,191				70,258				102,453				86,276				1,735				2	%			295,311				258,987
Investment Income (Loss)
Realized			187				(49	)			469				207				97				226				(44	)			(513	)			N/M				607				279
Unrealized			230				561				607				(864	)			393				(15	)			(171	)			(778	)			N/M				1,398				207
Total Investment Income (Loss)			417				512				1,076				(657	)			490				211				(215	)			(1,291	)			N/M				2,005				486
Interest Income and Dividend Revenue			1,396				1,268				1,609				1,699				1,686				1,723				1,615				6				0	%			4,273				5,024
Other			(932	)			(342	)			477				(1,115	)			386				33				(304	)			(781	)			N/M				(797	)			115
Total Revenues			77,450				135,639				87,703				131,118				72,820				104,420				87,372				(331	)			0	%			300,792				264,612
Expenses
Compensation and Benefits
Compensation			54,492				76,152				66,531				80,774				56,161				73,968				61,530				(5,001	)			-8	%			197,175				191,659
Total Compensation and Benefits			54,492				76,152				66,531				80,774				56,161				73,968				61,530				(5,001	)			-8	%			197,175				191,659
Other Operating Expenses			14,727				17,316				17,253				20,976				17,531				19,967				20,218				2,965				17	%			49,296				57,716
Total Expenses			69,219				93,468				83,784				101,750				73,692				93,935				81,748				(2,036	)			-2	%			246,471				249,375
Economic Net Income (Loss)		$	8,231			$	42,171			$	3,919			$	29,368			$	(872	)		$	10,485			$	5,624			$	1,705				44	%		$	54,321			$	15,237

 

16

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THE BLACKSTONE GROUP L.P.

Exhibit 2b. Reconciliation of Income (Loss) Before Provision (Benefit) for Taxes to Total Segments, Economic Net Income (Loss), of Total Segments, Economic Net Income (Loss) to Net Fee Related Earnings from Operations, of Net Fee Related Earnings from Operations to Distributable Earnings and of Earnings Before Interest, Taxes and Depreciation and Amortization from Net Fee Related Earnings from Operations to Net Fee Related Earnings from Operations

(Dollars in Thousands)

 

		Three Months Ended																												Nine Months Ended
		March 31, 2010				June 30, 2010				September 30, 2010				December 31, 2010				March 31, 2011				June 30, 2011				September 30, 2011				September 30, 2010				September 30, 2011
Income (Loss) Before Provision (Benefit) for Taxes		$	(227,671	)		$	(636,928	)		$	143,302			$	198,643			$	117,214			$	248,796			$	(994,412	)		$	(721,297	)		$	(628,402	)
IPO and Acquisition-Related Charges (a)			726,722				749,930				438,568				453,975				421,861				424,483				258,435				1,915,220				1,104,779
Amortization of Intangibles (b)			39,512				40,822				40,872				44,172				44,174				44,905				45,665				121,206				134,744
(Income) Loss Associated with Non-Controlling Interests in (Income) Loss of Consolidated Entities (c)			(153,461	)			67,647				(254,651	)			(90,684	)			71,056				92,548				310,129				(340,465	)			473,733
Total Segments
Total Segments, Economic Net Income (Loss)			385,102				221,471				368,091				606,106				654,305				810,732				(380,183	)			974,664				1,084,854
Performance Fees Adjustment (d)			(186,214	)			(25,636	)			(258,784	)			(455,655	)			(600,797	)			(673,058	)			457,279				(470,634	)			(816,576	)
Investment Income (Loss) Adjustment (e)			(156,828	)			(102,907	)			(142,523	)			(146,291	)			(126,076	)			(137,569	)			134,106				(402,258	)			(129,539	)
Investment Income (Loss) - Blackstone’s Treasury Cash Management Strategies (f)			3,665				5,062				11,226				(4,676	)			1,302				4,038				(3,011	)			19,953				2,329
Performance Fee Compensation and Benefits Adjustment (g)			62,341				21,987				129,285				143,349				177,068				145,808				(100,892	)			213,613				221,984
Taxes Payable (h)			(9,321	)			(12,062	)			5,619				(20,093	)			(12,622	)			(12,734	)			(5,290	)			(15,764	)			(30,646	)
Net Fee Related Earnings from Operations			98,745				107,915				112,914				122,740				93,180				137,217				102,009				319,574				332,406
Realized Performance Fees (i)			46,140				23,495				41,077				122,635				81,057				32,504				(2,646	)			110,712				110,915
Realized Investment Income (j)			5,307				15,721				14,276				11,611				23,499				30,732				31,647				35,304				85,878
Adjustment Related to Realized Investment Income - Blackstone’s Treasury Cash Management Strategies (k)			(1,264	)			512				(4,874	)			(2,156	)			(1,010	)			(2,343	)			(309	)			(5,626	)			(3,662	)
Other Payables Including Payable Under Tax Receivable Agreement			(232	)			(68	)			2,923				(15,633	)			(177	)			(13,578	)			(10,589	)			2,623				(24,344	)
Distributable Earnings		$	148,696			$	147,575			$	166,316			$	239,197			$	196,549			$	184,532			$	120,112			$	462,587			$	501,193
Earnings Before Interest, Taxes and Depreciation and Amortization from Net Fee Related Earnings from Operations (l)		$	120,805			$	132,866			$	124,195			$	163,600			$	126,666			$	170,856			$	128,201			$	377,866			$	425,723

 

(a)	This adjustment adds back to Income (Loss) Before Provision for Taxes amounts for Transaction-Related Charges which include principally equity-based compensation charges associated with Blackstone’s initial public offering and other corporate actions.

 

(b)	This adjustment adds back to Income (Loss) Before Provision for Taxes amounts for the Amortization of Intangibles which are associated with Blackstone’s initial public offering and other corporate actions.

 

(c)	This adjustment adds back to Income (Loss) Before Provision for Taxes the amount of (Income) Loss Associated with Non-Controlling Interests in (Income) Loss of Consolidated Entities and includes the amount of Management Fee Revenues associated with Consolidated CLO Entities.

continued...

 

17

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THE BLACKSTONE GROUP L.P.

Exhibit 2b. Reconciliation of Income (Loss) Before Provision (Benefit) for Taxes to Total Segments, Economic Net Income (Loss), of Total Segments, Economic Net Income (Loss) to Net Fee Related Earnings from Operations, of Net Fee Related Earnings from Operations to Distributable Earnings and of Earnings Before Interest, Taxes and Depreciation and Amortization from Net Fee Related Earnings from Operations to Net Fee Related Earnings from Operations

(Dollars in Thousands)

 

(d)	This adjustment removes from ENI the total segment amount of Performance Fees.

 

(e)	This adjustment removes from ENI the total segment amount of Investment Income (Loss).

 

(f)	This adjustment represents the realized and unrealized gain (loss) on Blackstone’s Treasury cash management strategies which are a component of Investment Income (Loss) but included in Net Fee Related Earnings.

 

(g)	This adjustment removes from expenses the compensation and benefit amounts related to Blackstone’s profit sharing plans related to Performance Fees.

 

(h)	Represents an implied payable for income taxes calculated using a similar methodology applied in calculating the current provision for The Blackstone Group L.P.

 

(i)	Represents the adjustment for realized Performance Fees net of corresponding actual amounts due under Blackstone’s profit sharing plans related thereto.

 

(j)	Represents the adjustment for Blackstone’s Investment Income—Realized.

 

(k)	Represents the elimination of Realized Investment Income attributable to Blackstone’s Treasury cash management strategies which is a component of both Net Fee Related Earnings from Operations and Realized Investment Income (Loss).

 

(l)

Earnings Before Interest, Taxes and Depreciation and Amortization from Net Fee Related Earnings from Operations represents Net Fee Related Earnings from Operations adding back the implied cash taxes payable component from the Distributable Earnings reconciliation presented above, which is included in (h), and segment interest and depreciation and amortization. The cash taxes payable component of (h) was $9.3 million, $12.1 million, $(5.6) million, $20.1 million, $12.6 million, $12.7 million, and $5.3 million for the three months ended March 31, 2010, June 30, 2010, September 30, 2010, December 31, 2010, March 31, 2011, June 30, 2011, and September 30, 2011, respectively. The cash taxes payable component of (h) was $30.6 million and $15.8 million for the nine months ended September 30, 2011 and 2010, respectively. Interest was $6.3 million, $6.8 million, $10.3 million, $13.2 million, $12.7 million, $13.1 million, and $12.6 million for the three months ended March 31, 2010, June 30, 2010, September 30, 2010, December 31, 2010, March 31, 2011, June 30, 2011, and September 30, 2011, respectively. Interest was $38.4 million and $23.5 million for the nine months ended September 30, 2011 and 2010, respectively. Depreciation and amortization was $6.4 million, $6.1 million, $6.6 million, $7.6 million, $8.2 million, $7.8 million, and $8.3 million for the three months ended March 31, 2010, June 30, 2010, September 30, 2010, December 31, 2010, March 31, 2011, June 30, 2011, and September 30, 2011, respectively. Depreciation and amortization was $24.3 million and $19.0 million for the nine months ended September 30, 2011 and 2010, respectively.

 

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THE BLACKSTONE GROUP L.P.

Exhibit 3. Distributable Earnings

(Dollars in Thousands)

The following table calculates Blackstone’s Distributable Earnings. Distributable Earnings is a supplemental measure of performance to assess amounts available for distributions to Blackstone unitholders, including Blackstone personnel.

 

		Three Months Ended September 30,								Nine Months Ended September 30,
		2011				2010				2011				2010
Fee Related Earnings
Revenues
Total Management and Advisory Fees (a)		$	442,639			$	376,249			$	1,381,908			$	1,156,321
Interest and Dividend Revenue (a)			10,110				10,187				28,841				25,807
Other (a)			(1,667	)			4,468				1,720				574
Investment Income (Loss) - Blackstone’s Treasury Cash Management Strategies (b)			(3,011	)			11,226				2,329				19,953
Total Revenues			448,071				402,130				1,414,798				1,202,655
Expenses
Compensation and Benefits - Compensation (a)			243,840				210,582				752,476				621,881
Other Operating Expenses (a)			96,932				84,253				299,270				245,436
Cash Taxes (c)			5,290				(5,619	)			30,646				15,764
Total Expenses			346,062				289,216				1,082,392				883,081
Net Fee Related Earnings from Operations			102,009				112,914				332,406				319,574
Performance Fees, Net of Related Compensation
Performance Fees - Realized (a)			7,897				66,039				163,712				166,294
Compensation and Benefits - Performance Fee Compensation - Realized (a)			(10,543	)			(24,962	)			(52,797	)			(55,582	)
Total Performance Fees, Net of Related Compensation			(2,646	)			41,077				110,915				110,712
Investment Income and Other
Investment Income - Realized (a)			31,647				14,276				85,878				35,304
Adjustment Related to Realized Investment Income - Blackstone’s Treasury Cash Management Strategies (d)			(309	)			(4,874	)			(3,662	)			(5,626	)
Other Payables Including Payable Under Tax Receivable Agreement			(10,589	)			2,923				(24,344	)			2,623
Total Investment Income and Other			20,749				12,325				57,872				32,301
Distributable Earnings		$	120,112			$	166,316			$	501,193			$	462,587

 

(a)	Represents the total segment amounts of the respective captions.

 

(b)	Represents the inclusion of Investment Income (Loss) from Blackstone’s Treasury cash management strategies.

 

(c)	Represents the provisions for and/or adjustments to income taxes that were calculated using a similar methodology applied in calculating the current provision for The Blackstone Group L.P.

 

(d)	Represents the elimination of Realized Investment Income attributable to Blackstone’s Treasury cash management strategies which is a component of Net Fee Related Earnings from Operations.

 

19

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THE BLACKSTONE GROUP L.P.

Exhibit 4. Total GAAP Weighted-Average Common Units Outstanding—Basic and Diluted and

Reconciliation of Total GAAP Weighted-Average Common Units Outstanding—Basic and Diluted

to Weighted-Average Economic Net Income Adjusted Units with End of Period Economic Net

Income Adjusted Units Outstanding and Reconciliation of Total GAAP Common Units

Outstanding to Distributable Earnings Units Outstanding

The following table provides Blackstone’s Total GAAP Weighted-Average Common Units Outstanding—Basic and Diluted.

 

		Three Months Ended September 30,								Nine Months Ended September 30,
		2011				2010				2011				2010
Total GAAP Weighted-Average Common Units Outstanding—Basic and Diluted (a)			487,189,657				370,101,582				470,551,727				352,794,385

The following table provides a reconciliation of Blackstone’s Total GAAP Common Units Outstanding—Basic and Diluted to Weighted-Average Economic Net Income Adjusted Units and presents the end of period Economic Net Income Adjusted Units Outstanding.

 

		Three Months Ended September 30,								As of and for the Nine Months Ended September 30,
		2011				2010				2011				2010
Total GAAP Weighted-Average Common Units Outstanding—Basic and Diluted			487,189,657				370,101,582				470,551,727				352,794,385
Adjustments:
Weighted-Average Blackstone Holdings Partnership Units			616,168,175				727,528,593				633,174,021				745,006,116
Weighted-Average Unvested Deferred Restricted Common Units			7,243,768				—				8,169,431				2,106,877
Weighted-Average Economic Net Income Adjusted Units			1,110,601,600				1,097,630,175				1,111,895,179				1,099,907,378
Economic Net Income Adjusted Units, End of Period											1,110,027,706				1,101,164,769

The following table provides a reconciliation of Blackstone’s Total GAAP Common Units Outstanding to Distributable Earnings Units Outstanding.

 

		September 30,
		2011				2010
Total GAAP Common Units Outstanding (b)			488,178,170				374,003,111
Adjustment:
Blackstone Holdings Partnership Units			615,164,340				723,662,686
Distributable Earnings Units Outstanding (c)			1,103,342,510				1,097,665,797

 

(a)	Unvested Deferred Restricted Common Units and Blackstone Holdings Partnership Units are anti-dilutive for the three and nine months periods presented due to Net Losses in each of the periods presented.

 

(b)	Common unit holders receive tax benefits from deductions taken by Blackstone’s corporate tax paying subsidiaries and bear responsibility for the deduction from Distributable Earnings of the Payable Under the Tax Receivable Agreement and certain other tax-related payables.

 

(c)	Excludes units which are not entitled to distributions.

 

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THE BLACKSTONE GROUP L.P.

Exhibit 5. Assets Under Management

(Dollars in Thousands)

 

		As of and for the Periods Ended September 30,
		2011				2010
Total Assets Under Management (End of Period)
Private Equity		$	42,967,159			$	29,202,952
Real Estate			40,709,500				27,129,825
Hedge Fund Solutions			40,373,092				33,166,553
Credit Businesses			33,648,697				29,615,916
		$	157,698,448			$	119,115,246
Fee-Earning Assets Under Management (End of Period)
Private Equity		$	37,006,024			$	24,311,443
Real Estate			29,981,920				24,345,161
Hedge Fund Solutions			37,231,013				31,760,599
Credit Businesses			28,715,420				23,875,979
		$	132,934,377			$	104,293,182
Weighted-Average Fee-Earning Assets Under Management (For the Three Months Ended)
Private Equity		$	36,670,087			$	24,610,920
Real Estate			28,701,420				24,016,964
Hedge Fund Solutions			37,658,240				30,554,606
Credit Businesses			28,429,249				23,540,949
		$	131,458,996			$	102,723,439
Weighted-Average Fee-Earning Assets Under Management (Year to Date Period Ended)
Private Equity		$	35,731,733			$	25,028,962
Real Estate			27,425,607				23,826,723
Hedge Fund Solutions			36,857,511				29,557,897
Credit Businesses			26,889,108				22,373,831
		$	126,903,959			$	100,787,413

 

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THE BLACKSTONE GROUP L.P.

Exhibit 6. Limited Partner Capital Invested Metrics

(Dollars in Thousands)

 

		As of and for the Periods Ended September 30,
		2011				2010
Limited Partner Capital Invested (For the Three Months Ended)
Private Equity		$	1,414,734			$	678,882
Real Estate (a)			1,706,157				688,951
Credit Businesses			1,314,318				692,275
		$	4,435,209			$	2,060,108
Limited Partner Capital Invested (Year to Date Period Ended)
Private Equity		$	2,735,022			$	1,536,594
Real Estate (a)			5,145,773				1,757,636
Credit Businesses			1,621,498				1,113,419
		$	9,502,293			$	4,407,649
Fund Level Unrealized Value (b) (End of Period)
Private Equity
Cost		$	21,367,917			$	20,582,631
Unrealized Value		$	22,784,672			$	21,924,759
Real Estate (a)
Cost		$	20,431,870			$	13,754,522
Unrealized Value		$	25,632,721			$	13,360,662
Credit Businesses
Cost		$	4,453,452			$	3,465,813
Unrealized Value		$	4,958,853			$	3,905,776

 

(a)	Limited Partner Capital Invested and Fund Level Unrealized Value for the Real Estate segment represents activity related to funds raised by Blackstone.

 

(b)

Cost and unrealized value represent the limited partners’ share, including co-investments arranged by Blackstone, of those fund level investments on which carried interest can be earned, before carried interest allocations to Blackstone, when a fund achieves cumulative investment returns in excess of a specified rate.

 

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THE BLACKSTONE GROUP L.P.

Exhibit 7. Definitions of Non-GAAP Financial Information

Blackstone discloses the following financial measures that are calculated and presented on the basis of methodologies other than in accordance with generally accepted accounting principles in the United States of America (“non-GAAP”) in the attached press release:

 

•

Blackstone uses Economic Net Income, or “ENI”, as a key measure of value creation, a benchmark of its performance and in making resource deployment and compensation decisions across its five segments. ENI represents segment net income before taxes excluding transaction-related charges. Transaction-related charges arise from Blackstone’s initial public offering (“IPO”) and other corporate actions, including acquisitions. Transaction-related charges include equity-based compensation charges, the amortization of intangible assets and contingent consideration associated with acquisitions. ENI presents revenues and expenses on a basis that deconsolidates the investment funds Blackstone manages.

 

•

Economic Net Income After Taxes represents ENI adjusted to reflect the implied provision (benefit) for income taxes calculated using a similar methodology as applied in calculating the tax provision (benefit) for The Blackstone Group L.P. but consistent with the ENI concepts as noted above.

 

•

Blackstone uses Net Fee Related Earnings from Operations as a key measure to highlight earnings from operations excluding: (a) the income related to performance fees and related carry plan costs, (b) income earned from Blackstone’s investments in the Blackstone Funds, and (c) realized and unrealized gains (losses) from other investments except for such gains (losses) from Blackstone’s Treasury cash management strategies. Blackstone uses Net Fee Related Earnings from Operations as a measure to assess whether recurring revenue from its businesses is sufficient to adequately cover all of its operating expenses and generate profits. Net Fee Related Earnings from Operations equals contractual fee revenues, investment income from Blackstone’s Treasury cash management strategies and interest income, less (a) compensation expenses (which includes amortization of non-IPO and non-acquisition-related equity-based awards, but excludes amortization of IPO and acquisition-related equity-based awards, carried interest and incentive fee compensation), (b) other operating expenses, and (c) cash taxes due on earnings from operations as calculated using a similar methodology as applied in calculating the current tax provision (benefit) for The Blackstone Group L.P.

 

•

Blackstone uses Earnings Before Interest, Taxes and Depreciation and Amortization from Net Fee Related Earnings from Operations (“EBITDA-NFRE”) as a measure of segment performance and an indicator of its ability to cover recurring operating expenses. EBITDA-NFRE equals Net Fee Related Earnings from Operations before segment interest expense, segment depreciation and amortization and the cash taxes included in Net Fee Related Earnings from Operations.

 

•

Distributable Earnings, which is derived from Blackstone’s segment reported results, is a supplemental measure to assess performance and amounts available for distributions to Blackstone unitholders, including Blackstone personnel and others who are limited partners of the Blackstone Holdings partnerships. Distributable Earnings is intended to show the amount of net realized earnings without the effects of the consolidation of the Blackstone Funds.

Distributable Earnings, which is a component of Economic Net Income, is the sum across all segments of: (a) Total Management and Advisory Fees, (b) Interest and Dividend Revenue, (c) Other Revenue, (d) Realized Performance Fees, and (e) Realized Investment Income (Loss); less (a) Compensation, (b) Realized Performance Fee Compensation, (c) Other Operating Expenses, and (d) Cash Taxes and Payables Under the Tax Receivable Agreement. Distributable Earnings is reconciled to Blackstone’s Consolidated Statement of Operations. It is Blackstone’s current intention that on an annual basis it will distribute to unitholders all of its Distributable Earnings, less realized investment gains, in excess of amounts determined by its general partner to be necessary or appropriate to provide for the conduct of its business, to make appropriate investments in its business and funds, to comply with applicable law, any of its debt instruments or other agreements, or to provide for future distributions to its unitholders for any ensuing quarter.

 

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THE BLACKSTONE GROUP L.P.

Exhibit 7. Definitions of Non-GAAP Financial Information

Reconciliations of these non-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP are included within this press release. These non-GAAP financial measures should be considered in addition to and not as a substitute for, or superior to, financial measures presented in accordance with GAAP.

 

24