Declining real estate activity
In its 2Q15 earnings release on July 16, Blackstone (BX) reported a 58% decline in the real estate division’s total revenues to $326 million as compared to $784 million in the corresponding quarter last year. The division contributed approximately 27% of the company’s total revenues.
The division’s funds appreciated by 1.2% as compared to 6% in the prior-year quarter. The slower growth was mainly due to a decline in public investment values. The division’s assets under management expanded by 14% to $92 billion when compared with 2Q14.
Realizations and returning capital
Blackstone has returned a total of $25 billion in the real estate division over the past 12 months. The company recorded total realization of $4.7 billion in the second quarter driven by a Hilton secondary equity offering and several private exits and refinancings.
The real estate market attracted new investments on the backdrop of an improving housing market. Blackstone raised $1.9 billion during the quarter, and $18.3 billion year-to-date, driven by all three fund groups. BXMT, a real estate investment trust, raised $1.0 billion in two accretive equity offerings, bringing its market capitalization to $2.6 billion two years after launching the platform.
Blackstone increased its investment activity during the quarter to take advantage of weaker market conditions and attractive valuations. It made a record level of investment activity with $8.0 billion invested or committed as of the end of the quarter. The investments were mainly driven by broad-based deployment across BREP, BREDS, and BPP.
Blackstone’s earnings per share (or EPS) grew by 30% over the past 12 months. Let’s compare this to EPS growth for Blackstone’s peers:
- The Carlyle Group (CG) posted a decline of 39.7%.
- KKR & Co. (KKR) posted a decline of 50.2%.
- Apollo Global Management (APO) posted a decline of 84.7%.
The company also faces competition from traditional asset managers forming part of the iShares US Financials ETF (IYF).