Blackstone Inc. - Quarter Report: 2020 March (Form 10-Q)

 

 

 

 

 

 

 

 

 

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM              TO

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.                    Yes No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).                                                                                        Yes No

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule of the Exchange Act.

 

 

 

 

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the Registrant is a shell company (as defined in Rule of the Exchange Act). Yes No ☒

 

This report 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 our current views with respect to, among other things, our operations, taxes, earnings and financial performance, share repurchases and dividends. You can identify these forward-looking statements by the use of words such as “outlook,” “indicator,” “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. We believe these factors include but are not limited to the impact of the novel coronavirus and energy market dislocation, as well as those described under the section entitled “Risk Factors” in our Annual Report on Form for the year ended December 31, 2019 and in this report, as such factors may be updated from time to time in our periodic filings with the United States Securities and Exchange Commission (“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 report and in our other periodic filings. The forward-looking statements speak only as of the date of this report, and we undertake no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise.

We refer to our real estate opportunistic funds as Blackstone Real Estate Partners (“BREP”) funds and our real estate debt investment funds as Blackstone Real Estate Debt Strategies (“BREDS”) funds. We refer to our real estate investment trusts as “REITs”, to Blackstone Mortgage Trust, Inc., our NYSE-listed REIT, as “BXMT”, and to Blackstone Real Estate Income Trust, Inc., our traded REIT, as “BREIT”. We refer to our real estate funds which target substantially stabilized assets in prime markets, as Blackstone Property Partners (“BPP”) funds. We refer to BPP and BREIT collectively as our core+ real estate strategies. “Our hedge funds” refers to our funds of hedge funds, hedge funds, certain of our real estate debt investment funds, including a registered investment company, and certain other credit-focused funds which are managed by Blackstone. “BIS” refers to Blackstone Insurance Solutions, which partners with insurers to deliver bespoke, capital-efficient investments tailored to each insurer’s needs and risk profile.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets Under Management” refers to the assets we manage on which we derive management fees and/or performance revenues. Our Assets Under Management equals the sum of:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Each of our segments may include certain Assets Under Management on which we earn performance revenues but not management fees.

Our calculations of assets under management and assets under management may differ from the calculations of other asset managers, and as a result this measure may not be comparable to similar measures presented by other asset managers. In addition, our calculation of assets under management includes commitments to, and the fair value of, invested capital in our funds from Blackstone and our personnel, regardless of whether such commitments or invested capital are subject to fees. Our definitions of assets under management and assets under management are not based on any definition of assets under management and assets under management that is set forth in the agreements governing the investment funds that we manage.

For our carry funds, total assets under management includes the fair value of the investments held and uncalled capital commitments, whereas assets under management includes the total amount of capital commitments or the remaining amount of invested capital at cost depending on whether the investment period has expired or as specified by the fee terms of the fund. As such, assets under management may be greater than total assets under management when the aggregate fair value of the remaining investments is less than the cost of those investments.

“Perpetual Capital” refers to the component of assets under management with an indefinite term, that is not in liquidation, and for which there is no requirement to return capital to investors through redemption requests in the ordinary course of business, except where funded by new capital inflows. Perpetual Capital includes capital with an investor right to convert into Perpetual Capital.

 

 

 

 

 

 

		March 31,				December 31,
		2020				2019
Assets
Cash and Cash Equivalents		$	2,068,326			$	2,172,441
Cash Held by Blackstone Funds and Other			318,003				351,210
Investments (including assets pledged of $132,805 and $196,094 at March 31, 2020 and December 31, 2019, respectively)			16,430,701				22,281,682
Accounts Receivable			696,729				975,075
Due from Affiliates			2,706,112				2,594,873
Intangible Assets, Net			379,758				397,508
Goodwill			1,869,860				1,869,860
Other Assets			541,896				382,493
Right-of-Use Assets			542,757				471,059
Deferred Tax Assets			1,392,352				1,089,305
Total Assets		$	26,946,494			$	32,585,506
Liabilities and Equity
Loans Payable		$	10,392,903			$	11,080,723
Due to Affiliates			1,247,098				1,026,871
Accrued Compensation and Benefits			1,965,237				3,796,044
Securities Sold, Not Yet Purchased			51,498				75,545
Repurchase Agreements			105,133				154,118
Operating Lease Liabilities			605,809				542,994
Accounts Payable, Accrued Expenses and Other Liabilities			1,000,708				806,159
Total Liabilities			15,368,386				17,482,454
Commitments and Contingencies
Redeemable Non-Controlling Interests in Consolidated Entities			72,066				87,651
Equity
Stockholders’ Equity of The Blackstone Group Inc.
Class A Common Stock, $0.00001 par value, 90 billion shares authorized,   (676,630,489 shares issued and outstanding as of March 31, 2020; 671,157,692 shares issued and outstanding as of December 31, 2019)			7				7
Class B Common Stock, $0.00001 par value, 999,999,000 shares authorized,   (1 share issued and outstanding as of March 31, 2020)			—				—
Class C Common Stock, $0.00001 par value, 1,000 shares authorized,   (1 share issued and outstanding as of March 31, 2020)			—				—
Additional Paid-in-Capital			6,298,093				6,428,647
Retained Earnings  (Deficit)			(871,948	)			609,625
Accumulated Other Comprehensive Loss			(41,533	)			(28,495	)
Total Stockholders’ Equity of The Blackstone Group Inc.			5,384,619				7,009,784
Non-Controlling Interests in Consolidated Entities			3,591,160				4,186,069
Non-Controlling Interests in Blackstone Holdings			2,530,263				3,819,548
Total Equity			11,506,042				15,015,401
Total Liabilities and Equity		$	26,946,494			$	32,585,506

		March 31,				December 31,
		2020				2019
Assets
Cash Held by Blackstone Funds and Other		$	318,003			$	351,210
Investments			7,270,514				8,371,899
Accounts Receivable			323,792				220,372
Due from Affiliates			5,051				7,856
Other Assets			957				1,204
Total Assets		$	7,918,317			$	8,952,541
Liabilities
Loans Payable		$	5,817,702			$	6,479,867
Due to Affiliates			165,786				142,546
Securities Sold, Not Yet Purchased			42,086				55,289
Repurchase Agreements			105,133				154,118
Accounts Payable, Accrued Expenses and Other Liabilities			314,501				301,355
Total Liabilities		$	6,445,208			$	7,133,175

 

 

 

 

 

 

 

 

 

Condensed Consolidated Statements of Changes in

See notes to condensed consolidated financial statements.

		Three Months Ended March 31,
		2020				2019
Operating Activities
Net Income (Loss)		$	(2,607,155	)		$	1,072,877
Adjustments to Reconcile Net Income (Loss) Net Cash Provided by Operating Activities
Blackstone Funds Related
Net Realized Gains on Investments			(156,408	)			(324,140	)
Changes in Unrealized (Gains) Losses on Investments			1,292,707				(275,047	)
Non-Cash Performance Allocations			3,453,081				(663,999	)
Non-Cash Performance Allocations and Incentive Fee Compensation			(1,318,433	)			378,816
Equity-Based Compensation Expense			118,812				121,179
Amortization of Intangibles			17,750				17,750
Other Non-Cash Amounts Included in Net Income (Loss)			(237,086	)			(6,282	)
Cash Flows Due to Changes in Operating Assets and Liabilities
Accounts Receivable			496,348				106,815
Due from Affiliates			(54,790	)			(309,916	)
Other Assets			(168,965	)			6,577
Accrued Compensation and Benefits			(541,706	)			(347,853	)
Securities Sold, Not Yet Purchased			(26,840	)			(14,883	)
Accounts Payable, Accrued Expenses and Other Liabilities			(103,025	)			(356,158	)
Repurchase Agreements			(48,985	)			(3,338	)
Due to Affiliates			(5,498	)			28,964
Investments Purchased			(2,065,680	)			(882,973	)
Cash Proceeds from Sale of Investments			2,955,340				1,582,142
Net Cash Provided by Operating Activities			999,467				130,531
Investing Activities
Purchase of Furniture, Equipment and Leasehold Improvements			(12,428	)			(18,858	)
Net Cash Used in Investing Activities			(12,428	)			(18,858	)
Financing Activities
Distributions to Non-Controlling Interest Holders in Consolidated Entities			(148,415	)			(148,782	)
Contributions from Non-Controlling Interest Holders in Consolidated Entities			154,914				157,880
Payments Under Tax Receivable Agreement			(73,881	)			(84,640	)
Net Settlement of Vested Class A Common Stock and Repurchase of Class A Common Stock and Blackstone Holdings Partnership Units			(268,716	)			(61,403	)
Proceeds from Loans Payable			102				16

		Three Months Ended March 31,
		2020				2019
Financing Activities (Continued)
Repayment and Repurchase of Loans Payable		$	(938	)		$	(823	)
Dividends/Distributions to Shareholders and Unitholders			(780,782	)			(730,309	)
Net Cash Used in Financing Activities			(1,117,716	)			(868,061	)
Effect of Exchange Rate Changes on Cash and Cash Equivalents and Cash Held by Blackstone Funds and Other			(6,645	)			(407	)
Cash and Cash Equivalents and Cash Held by Blackstone Funds and Other
Net Decrease			(137,322	)			(756,795	)
Beginning of Period			2,523,651				2,545,161
End of Period		$	2,386,329			$	1,788,366
Supplemental Disclosure of Cash Flows Information
Payments for Interest		$	42,440			$	42,979
Payments for Income Taxes		$	13,217			$	10,656
Supplemental Disclosure of Non-Cash Investing and Financing Activities
Non-Cash Contributions from Non-Controlling Interest Holders		$	44,835			$	242
Non-Cash Distributions to Non-Controlling Interest Holders		$	(1,973	)		$	(34	)
Transfer of Interests to Non-Controlling Interest Holders		$	(2,239	)		$	(1,260	)
Change in The Blackstone Group Inc.’s Ownership Interest		$	9,779			$	(10,965	)
Net Settlement of Vested Class A Common Stock		$	60,214			$	55,951
Conversion of Blackstone Holdings Units to Class A Common Stock		$	65,158			$	12,670
Acquisition of Ownership Interests from Non-Controlling Interest Holders
Deferred Tax Asset		$	(126,171	)		$	(14,572	)
Due to Affiliates		$	113,777			$	12,405
Equity		$	12,394			$	2,167

		March 31,				December 31,
		2020				2019
Cash and Cash Equivalents		$	2,068,326			$	2,172,441
Cash Held by Blackstone Funds and Other			318,003				351,210
		$	2,386,329			$	2,523,651

As a result of the Conversion, the financial impact to the condensed consolidated financial statements contained herein consist of (a) a partial in the tax basis of certain assets resulting in the recognition of a net income tax benefit and (b) reclassification from partnership equity accounts to equity accounts appropriate for a corporation. See Note 13. “Income Taxes” for additional information and Note 14. “Earnings Per Share and Stockholder’s Equity”.

Blackstone, together with its subsidiaries, is one of the world’s leading investment firms. Blackstone’s asset management business includes investment vehicles focused on real estate, private equity, public debt and equity, growth equity, opportunistic, grade credit, real assets and secondary funds, all on a global basis. “Blackstone Funds” refers to the funds and other vehicles that are managed by Blackstone. Blackstone’s business is organized into four segments: Real Estate, Private Equity, Hedge Fund Solutions and Credit & Insurance.

The activities of Blackstone are conducted through its holding partnerships: Blackstone Holdings I L.P., Blackstone Holdings AI L.P., Blackstone Holdings II L.P., Blackstone Holdings III L.P. and Blackstone Holdings IV L.P. (collectively, “Blackstone Holdings”, “Blackstone Holdings Partnerships” or the “Holding Partnerships”). Blackstone, through its wholly owned subsidiaries, is the sole general partner in each of these Holding Partnerships. Generally, holders of the limited partner interests in the Holding Partnerships may, four times each year, exchange their limited partnership interests (“Partnership Units”) for Blackstone Class A common stock, on a basis, exchanging one Partnership Unit from each of the Holding Partnerships for one share of Blackstone Class A common stock.

The accompanying unaudited condensed consolidated financial statements of Blackstone have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and the instructions to Form The condensed consolidated financial statements, including these notes, are unaudited and exclude some of the disclosures required in audited financial statements. Management believes it has made all necessary adjustments (consisting of only normal recurring items) so that the condensed consolidated financial statements are presented fairly and that estimates made in preparing its