UPDATE 4-Blackstone earnings rise, real estate gains

* Adjusted ENI 18 cents/share vs Street view 14 cents

* Sees IPOs of portfolio companies, but financing harder

* Financial services sector “under assault”

* Shares up 4 percent

(Adds analyst quote)

By Megan Davies

NEW YORK, July 22 (BestGrowthStock) – Private equity firm Blackstone
Group (BX.N: ) reported higher second-quarter results, beating
analysts’ expectations, helped by a rebound in the value of its
vast real estate portfolio and smaller gains from its private
equity assets.

The firm, which has investments in companies including
Hilton Hotels and casino company Harrah’s Entertainment, said
the value of its private equity portfolio rose 3 percent during
the quarter, while its real estate portfolio jumped 19

Blackstone isn’t anticipating a double-dip recession, Chief
Executive Stephen Schwarzman said on a conference call, but he
expressed concern about the impact of politics on business.

Consumer and business confidence has been hit by “harsh
anti-capitalist and anti-wealth-creation rhetoric and policy
initiatives in the political area,” Schwarzman said.

Chief Operating Officer Tony James said the Obama
administration and Congress have “made a lot of people … just
feel they’re being villainized.”

“I frankly think the whole financial services sector is
under assault from the political powers in Washington and it is
having an effect on the extension of credit in this country,”
James said.

Blackstone said its economic net income or ENI for the second
quarter was $205 million, up from $181 million a year earlier.
Adjusted ENI per share was 18 cents, ahead of analysts’ average
forecast of 14 cents, according to Thomson Reuters I/B/E/S.

ENI strips out items such as noncash charges for vesting
equity-based compensation and the amortization of intangible
assets. It is the measure that private equity firms prefer to
report and that analysts follow.

Robert Lee, analyst at Keefe, Bruyette & Woods, said in a
research note released earlier on Thursday that the results
“seem to confirm that business is on an upward trend as portfolio
company results and the environment stabilizes.”


Blackstone said it expects to either take public or sell a
number of its investments in the near future and that the
calendar for exiting investments is pretty robust.

One potential exit Blackstone might make is chipmaker
Freescale, which is considering an IPO and has started initial
talks with banks, sources told Reuters. Blackstone led the
consortium that invested in Freescale in 2006. [ID:nN21180824]

James said that Blackstone’s new investment pipeline is very
active and the current backlog of deals is the highest in several

But getting financing for new deals is tougher, as banks
are less willing to take on refinancing risk and rates are
higher, James said.

Private equity firms were effectively shut off from doing
large leveraged buyouts when the credit crisis severely limited
access to financing. Deals have been creeping back, but large
leveraged buyouts have yet to return.

A consortium of buyout funds, including Blackstone, was in
talks earlier this year to buy Fidelity National Information
Services Inc (FIS.N: ) for about $15 billion. Those talks fell
apart late in May over price, but the buyout firms managed to
get financing to support a deal.

“(Large leveraged buyouts) are harder right now, when the
credit markets are backed up, but you’ll definitely see mega
buyouts (return) at some point for the industry,” James said.


Blackstone recently finished raising its sixth buyout fund,
BCP VI, although a few investors are still finalizing
documents. The company anticipates the final amount raised will
be around $13.5 billion. [ID:nN14159017]

Its previous buyout fund is a $21 billion fund called BCP
V. Blackstone has about $3 billion of that remaining to invest.
That fund’s valuation had dipped in value but is now marked at
cost, Blackstone said.

That fund had been invested heavily in North American
companies, although more recently the focus shifted to Asia and
emerging markets.

“I think fund VI picks up where fund V left,” said James.
“(That) will be a big dose of Asia and emerging markets and not
too much in Europe in the near term, and a continuing high
level of activity in North America.”

Blackstone Real Estate Partners VI, a $10.9 billion fund it
finished raising in 2008, is valued at 85 cents on the dollar,
up from 49 cents on the dollar in September 2009, Blackstone

Blackstone shares were up 4 percent to $10.73 in late
afternoon trade. The shares sold for $31 in the company’s 2007
initial public offering.

Unitholders will receive a distribution of 10 cents per
share for the quarter, Blackstone said.

The company previously said it expected to distribute 10
cents per unit for each of the first three quarters and a larger
amount in the fourth quarter.

Stock Report

(Reporting by Megan Davies; Editing by Lisa Von Ahn, John
Wallace, Phil Berlowitz)

UPDATE 4-Blackstone earnings rise, real estate gains