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Blackstone’s Schwarzman Got $213.3 Million as Profit Rose

Photographer: Simon Dawson/Bloomberg

Stephen Schwarzman, chairman and chief executive officer of Blackstone Group LP. Close

Stephen Schwarzman, chairman and chief executive officer of Blackstone Group LP.

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Photographer: Simon Dawson/Bloomberg

Stephen Schwarzman, chairman and chief executive officer of Blackstone Group LP.

Stephen Schwarzman, co-founder and chief executive officer of Blackstone Group LP (BX), received $213.3 million in pay and cash dividends last year, the private-equity firm reported yesterday in a filing, almost matching his payout of $213.5 million a year earlier.

Leon Black, co-founder and CEO of Apollo Global Management LLC (APO), received $125.5 million in compensation and dividends last year as his combined payout climbed from $77.3 million, Apollo reported in a separate filing.

Private-equity executives benefited as a 13 percent rally in global stocks lifted assets at their firms and fees for overseeing them. Henry Kravis and George Roberts, KKR & Co.’s co-founders and co-CEOs, got payouts of more than $137 million each in 2012, their firm said last week.

Blackstone and Apollo -- the world’s biggest and third- biggest private-equity firms, respectively -- aren’t required by the New York Stock Exchange, where their shares are listed, to have compensation committees because they are each considered a limited partnership. As a result, executive pay decisions are left to Schwarzman as board chairman and to Black and his co- founders Joshua Harris and Marc Rowan.

Schwarzman, 66, was paid a $350,000 salary and $8.1 million from his share of the firm’s profits, known as carried interest. He got $204 million in cash dividends from his ownership of Blackstone stock, according to the filing.

The co-founder also received $800,000 in distributions from funds started before the company went public in 2007, called legacy funds. That amount was $74 million in 2011.

Profit Increase

Black, 61, was paid $287,368, which included a $100,000 salary and $187,368 from other compensation, New York-based Apollo said. He received $125.2 million in cash dividends from his ownership of Apollo stock.

Blackstone’s economic net income, a measure of profit excluding some costs tied to its 2007 initial public offering, rose 30 percent to $2 billion in 2012 from the previous year, marking the best performance since the IPO, the firm said in January. The increase was driven by the 14 percent gain in the value of Blackstone’s private-equity funds, outpacing the 13 percent gain in the MSCI All-Country World Index (MXWD), and a doubling of revenues from its credit investments.

“When private equity works, it really works,” Schwarzman said on a Jan. 31 conference call while discussing the year’s earnings. “And our credit business had a truly standout year.”

‘Good Time’

Apollo’s economic net income after taxes, a measure of profit excluding some costs tied to its 2011 initial public offering, was $1.5 billion in 2012, compared with a loss of $322 million the previous year, the company said last month. The increase was driven by the sale of Apollo-owned assets and strong performance by several of the firm’s largest holdings, including LyondellBasell Industries NV (LYB) and Metals USA Holdings Corp. (MUSA)

“Given the nature of our portfolio, when it was invested and how these companies are doing, we believe that we were ripe for monetizations,” Marc Spilker, Apollo’s president, said last month on a conference call discussing the firm’s earnings. “As long as the window stays open, it feels like a good time for us to monetize.”

Tony James, Blackstone’s president and chief operating officer, got $66 million during the year. That included a $350,000 salary, a $30.1 million bonus and $2.8 million in carried interest, with the remainder coming from dividends on his stock ownership. Tom Hill, head of Blackstone’s asset- management business, known as BAAM, received $28.3 million, including a $350,000 salary, a $7.2 million bonus and a $6.1 million stock award, with the remainder in the form of stock dividends.

‘Stronger’ Results

Blackstone last year started disclosing the pay of Jonathan Gray, the company’s 43-year-old global head of real estate, after Gray joined the board of directors in February. In 2012, Gray got $72.9 million in pay and cash dividends, which included a $350,000 salary, a $28.7 million bonus and $8.2 million in carried interest. Gray, who joined Blackstone out of college in 1992, owns 8 percent of the firm’s partnership units, which produced $35.7 million in dividends during the year.

“Commercial real estate results are much stronger than the economy,” James said on the conference call in January. “We’re seeing stronger operating results in real estate than we are in our companies.”

Blackstone’s real estate funds have made money for investors, producing 1.6 times their invested capital at a net internal rate of return of 16 percent, Blackstone said in its most recent earnings report. The firm’s latest property pool, Blackstone Real Estate Partners VII, generated a 31 percent net IRR and a multiple of 1.2 as of Dec. 31.

Fund Returns

The firm has also profited from buyouts, with its private- equity funds generating 1.6 times invested capital at a net IRR of 14 percent. Its latest buyout fund, Blackstone Capital Partners VI, produced a net IRR of 11 percent as of Dec. 31, and its predecessor pool was generating 2 percent.

Apollo’s private-equity funds have also thrived, generating a 25 percent net internal rate of return across pools as of Dec. 31, according to Apollo’s most recent earnings report. Its latest flagship buyout fund, which started investing in 2008 with $14.7 billion, was producing a 26 percent net IRR, with its value standing at $23.1 billion.

Schwarzman is worth an estimated $7 billion, according to the Bloomberg Billionaires Index. Kravis and Roberts, who are cousins and both 69 years old, are worth about $4.6 billion and $4.5 billion, respectively. Black is worth an estimated $6.9 billion.

Schwarzman founded Blackstone in 1985 with Peter G. Peterson, who left the company in 2008 to pursue philanthropic causes. With $210 billion under management, Blackstone is the biggest manager of alternative assets, which include private equity, real estate, credit and hedge funds.

Apollo, which oversees $113 billion, was founded in 1990 by Black and two of his previous partners at Drexel Burnham Lambert Inc., Joshua Harris and Marc Rowan.

To contact the reporter on this story: Devin Banerjee in New York at dbanerjee2@bloomberg.net

To contact the editor responsible for this story: Christian Baumgaertel at cbaumgaertel@bloomberg.net

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