Performance in Q1 2018
The real estate segment of Blackstone Group (BX) garnered total revenues amounting to $641 million in the first quarter, a decline of 17% on a YoY (year-over-year) basis. This decline was primarily the result of a fall in principal investment income as well as performance revenues. The segment’s performance revenues were impacted by private investments’ appreciation at a slower pace as well as a fall in the value of public investments.
The real estate segment garnered total management fees (net) of $247.9 million in the first quarter, which implies a YoY rise of 15%. The company’s real estate portfolio is witnessing a decent performance. However, the retail sector has been witnessing negative momentum.
What could impact real estate?
High-interest rate environments negatively affect the real estate sector because rising rates have an inverse correlation with real estate prices. The Federal Reserve might raise rates twice in 2H 2018, which could impact the real estate businesses of alternative asset managers (XLF) like KKR (KKR), Apollo Global Management (APO), and Carlyle Group (CG).
Of the total assets under management (or AUM) in Carlyle’s real assets segment, the real estate component contributed $19 billion at the end of the first quarter. During the same period, Apollo Global’s real assets segment saw realizations amounting to $412 million. A rise in the interest rates would also raise the financing costs for Blackstone’s real estate business, which could have a negative impact.