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Analyzing the Blackstone Group’s Real Estate Division

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Dec. 27 2017, Updated 7:32 a.m. ET

Total revenue

The Blackstone Group’s (BX) real estate division garnered total revenue of $2.4 billion in the first three quarters of 2017, compared to $1.5 billion in the same period of 2016.

This rise was mainly helped by rises in the company’s investment income, performance fees, and total net management fees. However, a fall in its other revenue negatively affected the rise.

The real estate division’s performance fees rose $832.3 million between the first nine months of 2016 and the first nine months of 2017 thanks to its opportunistic funds. The division garnered total investment income of $108.9 million in the first nine months of 2017, compared to $61.8 million in the first nine months of 2016.

BX’s other revenue fell $39 million between the first three quarters of 2016 and the first three quarters of 2017.

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Total management fees and expenses

The real estate division’s total net management fees stood at $695 million in the first three quarters of 2017, compared to $664 million in the same period in 2016, mainly aided by a rise in its base management fees. However, a fall in net transactions and other fees negatively affected the rise.

The real estate division incurred total expenses of $1.1 billion in the first three quarters of 2017, compared to $721.6 million in the same period of 2016, mainly reflecting upward momentum in performance fee compensation. This upward momentum was the result of a rise in performance fee revenue.

On a trailing-12-month basis, while Blackstone posted an EBITDA (earnings before interest, tax, depreciation, and amortization) margin of 54.4%, its peers (XLF) Brookfield Asset Management (BAM), CBRE Group (CBG), and Greenhill & Co. (GHL) posted EBITDAs of 24.4%, 10.6%, and 9.7%, respectively.

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