2023-10-19 17:57:07
Blackstone Inc. said Thursday its third-quarter distributable profits fell 12% from a year earlier as high interest rates weighed on asset values and discouraged the world’s largest alternative asset manager such as private equity and real estate to carry out liquidations.
In a conference call, Blackstone Chief Executive Stephen Schwarzman told analysts that while the company’s assets continued to generate profits, high interest rates had hurt the companies’ valuations and pushed Blackstone to keep certain assets longer.
“The current environment is less favorable for fulfillment, which is why we have chosen to sell less,” Mr. Schwarzman said.
Blackstone shares were down 6.4%, at $95.64, in afternoon trading.
Distributable profits, which represent cash available to pay dividends to shareholders, fell to $1.2 billion in the quarter from $1.4 billion a year earlier. That translated into distributable earnings per share of 94 cents, which beat analysts’ average estimate of $1.01, according to LSEG data.
Blackstone said its net profit from asset sales fell 36% to $259.4 million due to higher interest rates set by the Federal Reserve to combat inflation and geopolitical tensions that have limited merger and acquisition activity globally.
“We believe Blackstone faces a moderate outlook, with higher rates for a long time impacting fee income, fundraising and making investments,” CFRA analyst Kenneth Leon wrote in a note to investors. He lowered his rating on Blackstone from “buy” to “hold.”
The collapse in asset sales was concentrated in Blackstone’s real estate division, where realized performance revenue fell 88% to $17.4 million. Fee-related revenue, including revenue from lucrative management and advisory fees, fell 5% to $1.12 billion.
Blackstone Chairman Jonathan Gray told analysts on the conference call that the company had been hurt by high interest rates in the real estate sector, even as it had shifted its portfolio toward more resilient segments, such as warehouses, data centers and student accommodation.
“In some other areas of the portfolio, including our U.S. apartment properties, we are seeing moderation in growth,” Mr. Gray said.
During the quarter, Blackstone became the first private equity firm to join the benchmark S&P 500. Its market capitalization stands at $125 billion and its total assets under management remain above $1 trillion. of dollars.
Blackstone said its private equity portfolio grew 2.4%, while the S&P 500 index fell 3.65% during the same period.
Infrastructure funds gained 11% and private credit funds appreciated 4.6%. Opportunistic real estate funds fell 2%.
Blackstone raised $25.3 billion in new capital during the quarter, spent $12.4 billion on new acquisitions and retained $200.6 billion in unspent capital.
It declared a dividend of 80 cents per share, up from 79 cents in the previous quarter. (Reporting by Chibuike Oguh in New York; Additional reporting by Greg Roumeliotis in New York; Editing by Savio D’Souza and Leslie Adler)
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