Blackstone Second-Quarter Profit Falls 62% as Stocks Fall

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Run by billionaire Stephen Schwarzman, Blackstone has become the largest private equity real estate investor, more than tripling its money in Hilton Worldwide Holdings Inc.

Run by billionaire Stephen Schwarzman, Blackstone has become the largest private equity real estate investor, more than tripling its money in Hilton Worldwide Holdings Inc.

Photographer: Michael Nagle/Bloomberg

Blackstone Group LP, the world’s biggest manager of alternative assets, said second-quarter profit fell 62 percent as companies it had taken public fell during a lackluster quarter for stocks.

Economic net income, a measure of earnings that reflects realized and unrealized investment gains, fell to $508.4 million, or 43 cents a share, from $1.33 billion, or $1.15 a share, a year earlier, New York-based Blackstone said Thursday in a statement. Analysts expected earnings of 44 cents a share, according to the average of 15 estimates in a Bloomberg survey.

Blackstone, which oversees an industry record $333 billion in private equity, real estate, credit assets and hedge funds, took a hit in a quarter when Greece’s debt crisis intensified, Chinese stocks plunged and the Standard & Poor’s 500 Index declined 0.2 percent. Stakes the firm owns in oil refiner PBF Energy Inc., travel booker Travelport Worldwide Ltd. and real estate companies Hudson Pacific Properties Inc. and Brixmor Property Group Inc. were down between 13 percent and 18 percent.

Blackstone’s results “largely reflect weakness in the public portfolio,” Dan Fannon, an analyst at Jefferies Group LLC, said in a note to clients last week, referring to companies the firm has taken public and continues to own.

Blackstone fell 1.1 percent to $40.87 at 9:32 a.m., paring its gain this year to 21 percent. That compares with a 2.9 percent year-to-date advance in the S&P 500.

Biomet, Hilton

The firm’s distributable earnings, which reflect cash gains on sales of holdings, were $1 billion, up 35 percent from a year earlier. Blackstone notched gains by exiting stakes it held in audience tracker Nielsen NV, medical devices maker Biomet Inc. and Pinnacle Foods Inc., and by cutting its holdings of Hilton Worldwide Holdings Inc. and drug tablet maker Catalent Inc.

The value of a private equity firm’s buyout and real estate holdings affects economic net income, or ENI, because the metric in part depends on quarterly mark-to-market valuations of those investments. Accounting rules require the firms to value their portfolio holdings every quarter.

Blackstone’s economic net income differs from U.S. generally accepted accounting principles. Under those standards, known as GAAP, the company had net income of $134 million, compared with $517 million a year ago.

Run by billionaire Stephen Schwarzman, Blackstone has become the largest private equity real estate investor, more than tripling its money in Hilton. In April, it led a deal to buy $23 billion in assets from General Electric Co., the largest real estate transaction since the financial crisis.

Blackstone said it will pay stockholders a dividend of 74 cents a share on Aug. 3.

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