Item 8. Financial Statements and Supplementary Data

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Index to Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm			136
Consolidated Statements of Financial Condition as of December 31, 2019 and 2018			140
Consolidated Statements of Operations for the Years Ended December 31, 2019, 2018 and 2017			142
Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2019, 2018 and 2017			143
Consolidated Statements of Changes in Equity for the Years Ended December 31, 2019, 2018 and 2017			144
Consolidated Statements of Cash Flows for the Years Ended December 31, 2019, 2018 and 2017			147
Notes to Consolidated Financial Statements			149

Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of The Blackstone Group Inc.:

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated statements of financial condition of The Blackstone Group Inc. and subsidiaries (“Blackstone”) as of December 31, 2019 and 2018, the related consolidated statements of operations, comprehensive income, changes in equity, and cash flows for each of the three years in the period ended December 31, 2019, and the related notes (collectively referred to as the “financial statements”). We also have audited Blackstone’s internal control over financial reporting as of December 31, 2019, based on criteria established in

Internal Control — Integrated Framework (2013)

issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Blackstone as of December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2019, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, Blackstone maintained, in all material respects, effective internal control over financial reporting as of December 31, 2019, based on criteria established in

Internal Control — Integrated Framework (2013)

issued by COSO.

Basis for Opinions

Blackstone’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying management report on internal control over financial reporting. Our responsibility is to express an opinion on these financial statements and an opinion on Blackstone’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to Blackstone in accordance with the US federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the financial statements included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures to respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (a) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (b) provide reasonable

assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (c) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (a) relate to accounts or disclosures that are material to the financial statements and (b) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Fair Value of Underlying Investments to determine Performance Allocations and Accrued Performance Allocations — Refer to Notes 2 and 4 to the financial statements

Critical Audit Matter Description

Blackstone, as a general partner, is entitled to an allocation of income from certain Blackstone Funds (“Blackstone Funds”), assuming certain investment returns are achieved, referred to as “Performance Allocations.” Performance Allocations are made based on cumulative fund performance to date, subject to a preferred return to limited partners. The change in the fair value of the underlying investments held by the Blackstone Funds is the significant input into this calculation.

As the fair value of underlying investments varies between reporting periods, adjustments are made to amounts recorded as “Accrued Performance Allocations” to reflect either (a) positive performance resulting in an increase in the Accrued Performance Allocation or (b) negative performance that would cause the amount due to the general partner to be less than the amount previously recognized as revenue, resulting in a negative adjustment to the Accrued Performance Allocation to the general partner.

We considered the valuation of certain investments without readily determinable fair values used in the calculation of Performance Allocations and Accrued Performance Allocations as a critical audit matter because of the valuation techniques, assumptions, and subjectivity of the unobservable inputs used in the valuation. Auditing the fair value of these investments required a high degree of auditor judgment and increased effort, including the need to involve our fair value specialists who possess significant quantitative and modeling expertise.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to testing the fair values of certain investments without readily determinable fair values included the following, among others:

	•	We tested the design, implementation, and operating effectiveness of controls, including those related to management’s review of the techniques and assumptions used in the determination of fair value.

	•	We tested management’s assumptions through independent analysis and comparison to external sources.

	•	We evaluated management’s ability to accurately estimate fair value by comparing management’s historical fair value estimates to observable market transactions.

	•	We evaluated the impact of current market events and conditions, including relevant comparable transactions, on the valuation techniques and assumptions used by management (i.e., commodity prices, interest rate environment, and overall sector performance).

	•	We inspected industry reports for each industry in the portfolio for negative evidence of performance or expected performance changes (i.e., changing product demand/obsolescence or commodity prices declines) in determining if the current valuations captured significant economic or industry events.

	•	We utilized our internal fair value specialists to assist in the evaluation of management’s valuation methodologies and assumptions (or “inputs”). With the assistance of our internal fair value specialists, we evaluated certain of these inputs (e.g., guideline public companies, guideline transactions, valuation multiples, discount rates, yields, cap rates, exit multiples, and long-term growth rates). Our fair value specialist procedures included testing the underlying source information of the assumptions, as well as developing a range of independent estimates and comparing those to the inputs used by management.

Income Taxes — Impact of Conversion — Refer to Notes 2 and 15 to the financial statements

Critical Audit Matter Description

Effective July 1, 2019, The Blackstone Group L.P. converted from a Delaware limited partnership to a Delaware corporation, The Blackstone Group Inc. (the “Conversion”).

As a result of the Conversion, Blackstone recognized a

step-up

in the tax basis of certain assets that will be recovered as the assets are sold or the basis is amortized. The calculation and allocation of the

step-up

in tax basis to the various assets of the company was determined by management with the assistance of a third-party specialist. The basis information used was based on an estimate of the basis in Blackstone’s subsidiaries as of July 1, 2019. The final amount of the

step-up

in tax basis may differ as basis information, including the partnerships’ tax basis in underlying assets and liabilities based on 2019 tax return information, becomes available and is finalized. The calculated amount of the tax basis

step-up

impacted the magnitude of the deferred tax assets (“DTAs”) that were recorded pursuant to Accounting Standards Codification Topic 740,

Income Taxes

. Also, the allocation of the

step-up

determined the character of the underlying basis differences supporting the recorded DTAs as well as the related realizability assessments which considered the sufficiency and nature of future taxable income as either ordinary or capital gain. Blackstone recorded valuation allowances when DTAs were not more likely than not to be realized under relevant accounting standards.

The calculation and allocation of the tax basis

step-up

was complex due to the volume of information that needed to be analyzed and the assumptions and judgments used in the

step-up

methodology underpinning the allocation. Auditing management’s calculation and allocation of the tax basis

step-up

required a high degree of auditor judgment and increased effort, including the integral subject matter expertise of our tax specialists.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the calculation and allocation of the

step-up

in tax basis and its impact to the company’s income tax accounting included the following, among others:

	•	We tested the design, implementation, and operating effectiveness of management’s review of the accounting impacts of the Conversion.

	•	We assessed the appropriateness of the methodology employed by management in calculating and allocating the step-up, based upon the relevant tax rules and regulations.

	•	We tested the formulaic accuracy of the mathematical model used by management and its third-party specialist to compute the step-up, in order to evaluate whether the calculation and allocation was made in accordance with management’s chosen methodology.

	•	We tested key inputs to the mathematical model used by management, which included, among others, the fair values and tax bases of certain assets of the company.

	•	We tested the transactional steps undertaken by the company to legally effectuate the Conversion, in order to evaluate that the recorded income tax accounting consequences were supported by appropriately implemented legal transactions.

	•	We evaluated the financial statement disclosures related to the Conversion for completeness and accuracy.

/s/ DELOITTE & TOUCHE LLP

New York, New York

February 28, 2020

We have served as Blackstone’s auditor since 2006.

The Blackstone Group Inc.

Consolidated Statements of Financial Condition

(Dollars in Thousands, Except Share Data)

		December 31, 2019				December 31, 2018
Assets
Cash and Cash Equivalents		$	2,172,441			$	2,207,841
Cash Held by Blackstone Funds and Other			351,210				337,320
Investments (including assets pledged of $196,094 and $279,502 at December 31, 2019 and December 31, 2018, respectively)			22,281,682				20,377,031
Accounts Receivable			975,075				636,238
Due from Affiliates			2,594,873				1,994,123
Intangible Assets, Net			397,508				468,507
Goodwill			1,869,860				1,869,860
Other Assets			382,493				294,248
Right-of-Use Assets			471,059				—
Deferred Tax Assets			1,089,305				739,482
Total Assets		$	32,585,506			$	28,924,650
Liabilities and Equity
Loans Payable		$	11,080,723			$	9,951,862
Due to Affiliates			1,026,871				1,035,776
Accrued Compensation and Benefits			3,796,044				2,942,128
Securities Sold, Not Yet Purchased			75,545				142,617
Repurchase Agreements			154,118				222,202
Operating Lease Liabilities			542,994				—
Accounts Payable, Accrued Expenses and Other Liabilities			806,159				875,979
Total Liabilities			17,482,454				15,170,564
Commitments and Contingencies
Redeemable Non-Controlling Interests in Consolidated Entities			87,651				141,779
Equity
Stockholders’ Equity of The Blackstone Group Inc.
The Blackstone Group L.P. Partners’ Capital (663,212,830 common units issued and outstanding as of December 31, 2018)			—				6,415,700
Class A Common Stock, $0.00001 par value, 90 billion shares authorized, (671,157,692 shares issued and outstanding as of December 31, 2019)			7				—
Class B Common Stock, $0.00001 par value, 999,999,000 shares authorized, (1 share issued and outstanding as of December 31, 2019)			—				—
Class C Common Stock, $0.00001 par value, 1,000 shares authorized, (1 share issued and outstanding as of December 31, 2019)			—				—
Additional Paid-in-Capital			6,428,647				—
Retained Earnings			609,625				—
Accumulated Other Comprehensive Loss			(28,495	)			(36,476	)
Total Stockholders’ Equity of The Blackstone Group Inc.			7,009,784				6,379,224
Non-Controlling Interests in Consolidated Entities			4,186,069				3,648,766
Non-Controlling Interests in Blackstone Holdings			3,819,548				3,584,317
Total Equity			15,015,401				13,612,307
Total Liabilities and Equity		$	32,585,506			$	28,924,650

continued...

See notes to consolidated financial statements.

The Blackstone Group Inc.

Consolidated Statements of Financial Condition

(Dollars in Thousands)

The following presents the asset and liability portion of the consolidated balances presented in the Consolidated Statements of Financial Condition attributable to consolidated Blackstone Funds which are variable interest entities. The following assets may only be used to settle obligations of these consolidated Blackstone Funds and these liabilities are only the obligations of these consolidated Blackstone Funds and they do not have recourse to the general credit of Blackstone.

		December 31, 2019				December 31, 2018
Assets
Cash Held by Blackstone Funds and Other		$	351,210			$	337,030
Investments			8,371,899				8,363,669
Accounts Receivable			220,372				179,863
Due from Affiliates			7,856				6,303
Other Assets			1,204				3,880
Total Assets		$	8,952,541			$	8,890,745
Liabilities
Loans Payable		$	6,479,867			$	6,480,711
Due to Affiliates			142,546				129,370
Securities Sold, Not Yet Purchased			55,289				92,603
Repurchase Agreements			154,118				222,202
Accounts Payable, Accrued Expenses and Other Liabilities			301,355				252,176
Total Liabilities		$	7,133,175			$	7,177,062

See notes to consolidated financial statements.

The Blackstone Group Inc.

Consolidated Statements of Operations

(Dollars in Thousands, Except Share and Per Share Data)

		Year Ended December 31,
		2019				2018				2017
Revenues
Management and Advisory Fees, Net		$	3,472,155			$	3,027,796			$	2,751,322
Incentive Fees			129,911				57,540				242,514
Investment Income (Loss)
Performance Allocations
Realized			1,739,000				1,876,507				3,571,811
Unrealized			1,126,332				561,373				(105,473	)
Principal Investments
Realized			393,478				415,862				635,769
Unrealized			215,003				49,917				42,605
Total Investment Income			3,473,813				2,903,659				4,144,712
Interest and Dividend Revenue			182,398				171,947				139,696
Other			79,993				672,317				(133,229	)
Total Revenues			7,338,270				6,833,259				7,145,015
Expenses
Compensation and Benefits
Compensation			1,820,330				1,609,957				1,442,485
Incentive Fee Compensation			44,300				33,916				105,279
Performance Allocations Compensation
Realized			662,942				711,076				1,281,965
Unrealized			540,285				319,742				103,794
Total Compensation and Benefits			3,067,857				2,674,691				2,933,523
General, Administrative and Other			679,408				594,873				488,582
Interest Expense			199,648				163,990				197,486
Fund Expenses			17,738				78,486				132,787
Total Expenses			3,964,651				3,512,040				3,752,378
Other Income
Change in Tax Receivable Agreement Liability			161,567				—				403,855
Net Gains from Fund Investment Activities			282,829				191,722				321,597
Total Other Income			444,396				191,722				725,452
Income Before Provision (Benefit) for Taxes			3,818,015				3,512,941				4,118,089
Provision (Benefit) for Taxes			(47,952	)			249,390				743,147
Net Income			3,865,967				3,263,551				3,374,942
Net Income (Loss) Attributable to Redeemable Non-Controlling Interests in Consolidated Entities			(121	)			(2,104	)			13,806
Net Income Attributable to Non-Controlling Interests in Consolidated Entities			476,779				358,878				497,439
Net Income Attributable to Non-Controlling Interests in Blackstone Holdings			1,339,627				1,364,989				1,392,323
Net Income Attributable to The Blackstone Group Inc.		$	2,049,682			$	1,541,788			$	1,471,374
Net Income Per Share of Class A Common Stock
Basic		$	3.03			$	2.27			$	2.21
Diluted		$	3.03			$	2.26			$	2.21
Weighted-Average Shares of Class A Common Stock Outstanding
Basic			675,900,466				678,850,245				665,453,198
Diluted			676,167,851				1,206,962,846				666,246,846

See notes to consolidated financial statements.

The Blackstone Group Inc.

Consolidated Statements of Comprehensive Income

(Dollars in Thousands)

		Year Ended December 31,
		2019				2018				2017
Net Income		$	3,865,967			$	3,263,551			$	3,374,942
Other Comprehensive Income (Loss) – Currency Translation Adjustment			14,332				(33,506	)			80,366
Comprehensive Income			3,880,299				3,230,045				3,455,308
Less:
Comprehensive Income (Loss) Attributable to Redeemable Non-Controlling Interests in Consolidated Entities			(121	)			(2,104	)			13,806
Comprehensive Income Attributable to Non-Controlling Interests in Consolidated Entities			476,779				356,488				548,936
Comprehensive Income Attributable to Non-Controlling Interests in Blackstone Holdings			1,345,980				1,336,331				1,392,323
Comprehensive Income Attributable to Non-Controlling Interests			1,822,638				1,690,715				1,955,065
Comprehensive Income Attributable to The Blackstone Group Inc.		$	2,057,661			$	1,539,330			$	1,500,243

See notes to consolidated financial statements.

The Blackstone Group Inc.

Consolidated Statement of Changes in Equity

(Dollars in Thousands, Except Share Data)

						The Blackstone Group L.P.																								Redeemable Non- Controlling Interests in Consolidated Entities
		Common Units				Partners’ Capital				Accumulated Other Compre- hensive (Loss)				Total				Non- Controlling Interests in Consolidated Entities				Non- Controlling Interests in Blackstone Holdings				Total Partners’ Capital
Balance at December 31, 2016			643,459,542			$	6,521,531			$	(62,887	)		$	6,458,644			$	2,428,964			$	3,434,483			$	12,322,091			$	185,390
Consolidation of Fund Entity			—				—				—				—				387,006				—				387,006				—
Net Income			—				1,471,374				—				1,471,374				497,439				1,392,323				3,361,136				13,806
Currency Translation Adjustment			—				—				28,869				28,869				51,497				—				80,366				—
Capital Contributions			—				—				—				—				730,793				—				730,793				58,920
Capital Distributions			—				(1,534,586	)			—				(1,534,586	)			(836,535	)			(1,307,996	)			(3,679,117	)			(47,172	)
Transfer of Non-Controlling Interests in Consolidated Entities			—				—				—				—				(6,016	)			—				(6,016	)			—
Deferred Tax Effects Resulting from Acquisition of Ownership Interests from Non-Controlling Interest Holders			—				11,057				—				11,057				—				—				11,057				—
Equity-Based Compensation			—				183,484				—				183,484				—				151,539				335,023				—
Net Delivery of Vested Blackstone Holdings Partnership Units and Blackstone Common Units			7,084,888				(28,486	)			—				(28,486	)			—				(1,706	)			(30,192	)			—
Change in The Blackstone Group L.P.’s Ownership Interest			—				(15,197	)			—				(15,197	)			—				15,197				—				—
Conversion of Blackstone Holdings Partnership Units to Blackstone Common Units			8,981,663				59,334				—				59,334				—				(59,334	)			—				—
Balance at December 31, 2017			659,526,093			$	6,668,511			$	(34,018	)		$	6,634,493			$	3,253,148			$	3,624,506			$	13,512,147			$	210,944

continued…

See notes to consolidated financial statements.

The Blackstone Group Inc.

Consolidated Statement of Changes in Equity

(Dollars in Thousands, Except Share Data)

						The Blackstone Group L.P.																								Redeemable Non- Controlling Interests in Consolidated Entities
		Common Units				Partners’ Capital				Accumulated Other Compre- hensive (Loss)				Total				Non- Controlling Interests in Consolidated Entities				Non- Controlling Interests in Blackstone Holdings				Total Partners’ Capital
Balance at December 31, 2017			659,526,093			$	6,668,511			$	(34,018	)		$	6,634,493			$	3,253,148			$	3,624,506			$	13,512,147			$	210,944
Transfer Out Due to Deconsolidation of Fund Entities			—				—				—				—				(197,091	)			—				(197,091	)			—
Net Income (Loss)			—				1,541,788				—				1,541,788				358,878				1,364,989				3,265,655				(2,104	)
Currency Translation Adjustment			—				—				(2,458	)			(2,458	)			(2,389	)			(28,659	)			(33,506	)			—
Capital Contributions			—				—				—				—				903,655				—				903,655				12,980
Capital Distributions			—				(1,635,921	)			—				(1,635,921	)			(687,623	)			(1,410,483	)			(3,734,027	)			(78,688	)
Transfer or Repurchase of Non-Controlling Interests in Consolidated Entities			—				(7,642	)			—				(7,642	)			20,188				(6,005	)			6,541				(1,353	)
Deferred Tax Effects Resulting from Acquisition of Ownership Interests from Non-Controlling Interest Holders			—				13,907				—				13,907				—				—				13,907				—
Equity-Based Compensation			—				204,590				—				204,590				—				161,824				366,414				—
Net Delivery of Vested Blackstone Holdings Partnership Units and Blackstone Common Units			4,114,395				(20,198	)			—				(20,198	)			—				(5,462	)			(25,660	)			—
Repurchase of Blackstone Common Units			(16,000,000	)			(541,501	)			—				(541,501	)			—				—				(541,501	)			—
Change in The Blackstone Group L.P.’s Ownership Interest			—				66,799				—				66,799				—				(66,799	)			—				—
Conversion of Blackstone Holdings Partnership Units to Blackstone Common Units			14,821,603				100,397				—				100,397				—				(100,397	)			—				—
Issuance of Blackstone Common Units and Blackstone Holdings Partnership Units			750,739				24,970				—				24,970				—				50,803				75,773				—
Balance at December 31, 2018			663,212,830			$	6,415,700			$	(36,476	)		$	6,379,224			$	3,648,766			$	3,584,317			$	13,612,307			$	141,779

continued…

See notes to consolidated financial statements.

The Blackstone Group Inc.

Consolidated Statement of Changes in Equity

(Dollars in Thousands, Except Share Data)

		Shares of The Blackstone Group Inc. (a)								The Blackstone Group Inc. (a)
																										Accumulated																				Redeemable
																										Other								Non-				Non-								Non-
																										Compre-								Controlling				Controlling								Controlling
						Class A								Class A				Additional								hensive								Interests in				Interests in								Interests in
		Common				Common				Partners’				Common				Paid-in-				Retained				Income								Consolidated				Blackstone				Total				Consolidated
		Units				Stock				Capital				Stock				Capital				Earnings				(Loss)				Total				Entities				Holdings				Equity				Entities
Balance at December 31, 2018			663,212,830				—			$	6,415,700			$	—			$	—			$	—			$	(36,476	)		$	6,379,224			$	3,648,766			$	3,584,317			$	13,612,307			$	141,779
Net Income (Loss)			—				—				787,096				—				—				1,262,586				—				2,049,682				476,779				1,339,627				3,866,088				(121	)
Currency Translation Adjustment			—				—				—				—				—				—				7,981				7,981				—				6,353				14,334				—
Capital Contributions			—				—				—				—				—				—				—				—				775,873				—				775,873				—
Capital Distributions			—				—				(639,210	)			—				—				(652,961	)			—				(1,292,171	)			(712,234	)			(1,104,573	)			(3,108,978	)			(54,007	)
Transfer of Non-Controlling Interests in Consolidated Entities			—				—				—				—				—				—				—				—				(3,115	)			—				(3,115	)			—
Deferred Tax Effects Resulting from Acquisition of Ownership Interests from Non-Controlling Interest Holders			—				—				5,016				—				23,706				—				—				28,722				—				—				28,722				—
Equity-Based Compensation			—				—				101,200				—				131,501				—				—				232,701				—				182,809				415,510				—
Net Delivery of Vested Blackstone Holdings Partnership Units and Blackstone Common Shares			1,853,730				970,995				(10,613	)			—				(12,821	)			—				—				(23,434	)			—				(6	)			(23,440	)			—
Repurchase of Common Shares and Blackstone Holdings Partnership Units			(8,100,000	)			(4,650,000	)			(325,214	)			—				(236,686	)			—				—				(561,900	)			—				—				(561,900	)			—
Change in The Blackstone Group Inc.’s Ownership Interest			—				—				(23,270	)			—				83,614				—				—				60,344				—				(60,344	)			—				—
Conversion of Blackstone Holdings Partnership Units to Blackstone Common Shares			3,621,809				14,248,328				25,192				—				103,443				—				—				128,635				—				(128,635	)			—				—
Reclassification Resulting from Conversion to a Corporation			(660,588,369	)			660,588,369				(6,335,897	)			7				6,335,890				—				—				—				—				—				—				—
Balance at December 31, 2019			—				671,157,692			$	—			$	7			$	6,428,647			$	609,625			$	(28,495	)		$	7,009,784			$	4,186,069			$	3,819,548			$	15,015,401			$	87,651

(a)	Following the conversion to a corporation, Blackstone also has one share outstanding of each of Class B and Class C common stock, with par value of each less than one cent. After initial issuance, there have been no changes to the amounts related to Class B and Class C common stock during the period presented.

See notes to consolidated financial statements.

The Blackstone Group Inc.

Consolidated Statements of Cash Flows

(Dollars in Thousands)

		Year Ended December 31,
		2019				2018				2017
Operating Activities
Net Income		$	3,865,967			$	3,263,551			$	3,374,942
Adjustments to Reconcile Net Income to Net Cash Provided by (Used in) Operating Activities
Blackstone Funds Related
Net Realized Gains on Investments			(2,242,227	)			(2,381,683	)			(4,613,531	)
Changes in Unrealized (Gains) Losses on Investments			(324,448	)			4,784				(21,589	)
Non-Cash Performance Allocations			(1,126,332	)			(561,373	)			105,472
Non-Cash Performance Allocations and Incentive Fee Compensation			1,234,455				1,053,690				1,491,040
Equity-Based Compensation Expense			417,092				366,928				338,687
Amortization of Intangibles			70,999				59,021				46,776
Other Non-Cash Amounts Included in Net Income			(448,241	)			45,286				363,903
Cash Flows Due to Changes in Operating Assets and Liabilities
Cash Acquired with Consolidation of Fund Entity			—				31,422				13,822
Cash Relinquished with Deconsolidation of Fund Entities			—				(899,959	)			(33,566	)
Accounts Receivable			(237,751	)			43,037				282,026
Reverse Repurchase Agreements			—				—				118,495
Due from Affiliates			(451,302	)			(280,674	)			(298,501	)
Other Assets			(50,017	)			(76,596	)			17,377
Accrued Compensation and Benefits			(382,120	)			(729,109	)			(1,177,852	)
Securities Sold, Not Yet Purchased			(72,645	)			(10,125	)			(62,730	)
Accounts Payable, Accrued Expenses and Other Liabilities			(324,358	)			(357,582	)			(755,232	)
Repurchase Agreements			(68,084	)			103,362				43,516
Due to Affiliates			(5,250	)			74,108				(9,652	)
Investments Purchased			(8,537,874	)			(13,881,869	)			(19,573,153	)
Cash Proceeds from Sale of Investments			10,645,243				14,179,523				18,723,355
Net Cash Provided by (Used in) Operating Activities			1,963,107				45,742				(1,626,395	)
Investing Activities
Purchase of Furniture, Equipment and Leasehold Improvements			(60,280	)			(18,377	)			(24,347	)
Net Cash Paid for Acquisitions, Net of Cash Acquired			—				(98,219	)			(168,913	)
Net Cash Used in Investing Activities			(60,280	)			(116,596	)			(193,260	)
Financing Activities
Distributions to Non-Controlling Interest
Holders in Consolidated Entities			(765,849	)			(762,588	)			(813,987	)
Contributions from Non-Controlling Interest
Holders in Consolidated Entities			764,863				836,922				759,907
Payments Under Tax Receivable Agreement			(84,640	)			—				(135,831	)
Net Settlement of Vested Class A Common stock and Repurchase of Class A Common Stock and Blackstone Holdings Partnership Units			(585,340	)			(567,161	)			(30,192	)

continued…

See notes to consolidated financial statements.

The Blackstone Group Inc.

Consolidated Statements of Cash Flows

(Dollars in Thousands)

		Year Ended December 31,
		2019				2018				2017
Financing Activities (Continued)
Proceeds from Loans Payable		$	1,549,732			$	3,218,399			$	7,600,153
Repayment and Repurchase of Loans Payable			(403,401	)			(1,009,354	)			(1,766,129	)
Dividends/Distributions to Shareholders and Unitholders			(2,396,744	)			(3,046,404	)			(2,842,582	)
Net Cash Provided by (Used in) Financing Activities			(1,921,379	)			(1,330,186	)			2,771,339
Effect of Exchange Rate Changes on Cash and Cash Equivalents and Cash Held by Blackstone Funds and Other			(2,958	)			9,712				123,850
Cash and Cash Equivalents and Cash Held by Blackstone Funds and Other
Net Increase (Decrease)			(21,510	)			(1,391,328	)			1,075,534
Beginning of Period			2,545,161				3,936,489				2,860,955
End of Period		$	2,523,651			$	2,545,161			$	3,936,489
Supplemental Disclosure of Cash Flows Information
Payments for Interest		$	167,458			$	169,872			$	160,178
Payments for Income Taxes		$	159,302			$	192,790			$	106,032
Supplemental Disclosure of Non-Cash Investing and Financing Activities
Non-Cash Contributions from Non-Controlling Interest Holders		$	10,078			$	10,435			$	1,112
Non-Cash Distributions to Non-Controlling Interest Holders		$	(392	)		$	(18,723	)		$	(69,721	)
Non-Cash Consideration for Acquisition		$	—			$	(50,803	)		$	(95,262	)
Net Assets Related to the Consolidation of Certain Fund Entities		$	—			$	—			$	387,006
Notes Issuance Costs		$	11,143			$	—			$	5,582
Transfer of Interests to Non-Controlling Interest Holders		$	(3,115	)		$	20,188			$	(6,016	)
Change in The Blackstone Group Inc.’s Ownership Interest		$	60,344			$	66,799			$	(15,197	)
Net Settlement of Vested Common Units		$	102,028			$	136,238			$	127,392
Conversion of Blackstone Holdings Units to Common Units		$	128,635			$	100,397			$	59,334
Acquisition of Ownership Interests from Non-Controlling Interest Holders
Deferred Tax Asset		$	(149,513	)		$	(93,391	)		$	(74,487	)
Due to Affiliates		$	120,791			$	79,484			$	63,430
Equity		$	28,722			$	13,907			$	11,057
Issuance of New Shares/Units		$	—			$	24,970			$	—

The following table provides a reconciliation of Cash and Cash Equivalents and Cash Held by Blackstone Funds and Other reported within the Consolidated Statements of Financial Condition:

		December 31, 2019				December 31, 2018
Cash and Cash Equivalents		$	2,172,441			$	2,207,841
Cash Held by Blackstone Funds and Other			351,210				337,320
		$	2,523,651			$	2,545,161

See notes to consolidated financial statements.

The Blackstone Group Inc.

Notes to Consolidated Financial Statements

(All Dollars Are in Thousands, Except Share and Per Share Data, Except Where Noted)

1. Organization

Effective July 1, 2019, The Blackstone Group L.P. (the “Partnership”) converted from a Delaware limited partnership to a Delaware corporation, The Blackstone Group Inc. (the “Conversion”). This report includes the results for the Partnership prior to the Conversion and The Blackstone Group Inc. following the Conversion. In this report, references to “Blackstone” or the “Company” refer to (a) The Blackstone Group Inc. and its consolidated subsidiaries following the Conversion and (b) the Partnership and its consolidated subsidiaries prior to the Conversion. All references to shares or per share amounts prior to the Conversion refer to units or per unit amounts. Unless otherwise noted, all references to shares or per share amounts following the Conversion refer to shares or per share amounts of Class A common stock. All references to dividends prior to the Conversion refer to distributions

.

As a result of the Conversion, the financial impact to the consolidated financial statements contained herein consist of (a) a partial

step-up

in the tax basis of certain assets resulting in the recognition of a net income tax benefit and (b) reclassification from partnership equity accounts to equity accounts appropriate for a corporation. See Note 15. “Income Taxes” for additional information and Note 16. “Earnings Per Share and Stockholder’s Equity”.

Blackstone, together with its subsidiaries, is one of the world’s leading investment firms. Blackstone’s asset management business includes investment vehicles focused on real estate, private equity, public debt and equity, growth equity, opportunistic,

non-investment

grade credit, real assets and secondary funds, all on a global basis. “Blackstone Funds” refers to the funds and other vehicles that are managed by Blackstone. Blackstone’s business is organized into

four

segments: Real Estate, Private Equity, Hedge Fund Solutions and Credit.

Blackstone was formed on March 12, 2007, and, until the Conversion, was managed and operated by Blackstone Group Management L.L.C., which is in turn wholly owned by Blackstone’s senior managing directors and controlled by one of Blackstone’s founders, Stephen A. Schwarzman (the “Founder”). Following the Conversion, the Company’s equity consists of shares of Class A, B and C common stock. Blackstone Partners L.L.C. is the sole holder of the single share of Class B common stock outstanding and Blackstone Group Management L.L.C. is the sole holder of the single share of Class C common stock outstanding. See Note 16. “Earnings Per Share and Stockholder’s Equity”.

The activities of Blackstone are conducted through its holding partnerships: Blackstone Holdings I L.P., Blackstone Holdings AI L.P., Blackstone Holdings II L.P., Blackstone Holdings III L.P. and Blackstone Holdings IV L.P. (collectively, “Blackstone Holdings”, “Blackstone Holdings Partnerships” or the “Holding Partnerships”). Blackstone, through its wholly owned subsidiaries, is the sole general partner in each of these Holding Partnerships. Generally, holders of the limited partner interests in the Holding Partnerships may, four times each year, exchange their limited partnership interests (“Partnership Units”) for Blackstone Class A common stock, on a

one-to-one

basis, exchanging one Partnership Unit from each of the Holding Partnerships for one share of Blackstone Class A common stock.

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying consolidated financial statements of Blackstone have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).

The consolidated financial statements include the accounts of Blackstone, its wholly owned or majority-owned subsidiaries, the consolidated entities which are considered to be variable interest entities and for which Blackstone is considered the primary beneficiary, and certain partnerships or similar entities which are not considered variable interest entities but in which the general partner is determined to have control.

All intercompany balances and transactions have been eliminated in consolidation.

The Blackstone Group Inc.

Notes to Consolidated Financial Statements—Continued

(All Dollars Are in Thousands, Except Share and Per Share Data, Except Where Noted)

Restructurings within consolidated CLOs are treated as investment purchases or sales, as applicable, in the Consolidated Statements of Cash Flows.

Use of Estimates

The preparation of the consolidated financial statements in accordance with GAAP requires management to make estimates that affect the amounts reported in the consolidated financial statements and accompanying notes. Management believes that estimates utilized in the preparation of the consolidated financial statements are prudent and reasonable. Such estimates include those used in the valuation of investments and financial instruments, the measurement of deferred tax balances (including valuation allowances) and the accounting for Goodwill and equity-based compensation. Actual results could differ from those estimates and such differences could be material.

Consolidation

Blackstone consolidates all entities that it controls through a majority voting interest or otherwise, including those Blackstone Funds in which the general partner has a controlling financial interest. Blackstone has a controlling financial interest in Blackstone Holdings because the limited partners do not have the right to dissolve the partnerships or have substantive kick

-

out rights or participating rights that would overcome the control held by Blackstone. Accordingly, Blackstone consolidates Blackstone Holdings and records

non-controlling

interests to reflect the economic interests of the limited partners of Blackstone Holdings.

In addition, Blackstone consolidates all variable interest entities (“VIE”) in which it is the primary beneficiary. An enterprise is determined to be the primary beneficiary if it holds a controlling financial interest. A controlling financial interest is defined as (a) the power to direct the activities of a VIE that most significantly impact the entity’s economic performance and (b) the obligation to absorb losses of the entity or the right to receive benefits from the entity that could potentially be significant to the VIE. The consolidation guidance requires an analysis to determine (a) whether an entity in which Blackstone holds a variable interest is a VIE and (b) whether Blackstone’s involvement, through holding interests directly or indirectly in the entity or contractually through other variable interests, would give it a controlling financial interest. Performance of that analysis requires the exercise of judgment.

Blackstone determines whether it is the primary beneficiary of a VIE at the time it becomes involved with a variable interest entity and continuously reconsiders that conclusion. In determining whether Blackstone is the primary beneficiary, Blackstone evaluates its control rights as well as economic interests in the entity held either directly or indirectly by Blackstone. The consolidation analysis can generally be performed qualitatively; however, if it is not readily apparent that Blackstone is not the primary beneficiary, a quantitative analysis may also be performed. Investments and redemptions (either by Blackstone, affiliates of Blackstone or third parties) or amendments to the governing documents of the respective Blackstone Funds could affect an entity’s status as a VIE or the determination of the primary beneficiary. At each reporting date, Blackstone assesses whether it is the primary beneficiary and will consolidate or deconsolidate accordingly.

Assets of consolidated VIEs that can only be used to settle obligations of the consolidated VIE and liabilities of a consolidated VIE for which creditors (or beneficial interest holders) do not have recourse to the general credit of Blackstone are presented in a separate section in the Consolidated Statements of Financial Condition.

Blackstone’s other disclosures regarding VIEs are discussed in Note 9. “Variable Interest Entities”.

The Blackstone Group Inc.

Notes to Consolidated Financial Statements—Continued

(All Dollars Are in Thousands, Except Share and Per Share Data, Except Where Noted)

Revenue Recognition

Revenues primarily consist of management and advisory fees, incentive fees, investment income, interest and dividend revenue and other.

Management and advisory fees and incentive fees are accounted for as contracts with customers. Under the guidance for contracts with customers, an entity is required to (a) identify the contract(s) with a customer, (b) identify the performance obligations in the contract, (c) determine the transaction price, (d) allocate the transaction price to the performance obligations in the contract, and (e) recognize revenue when (or as) the entity satisfies a performance obligation. In determining the transaction price, an entity may include variable consideration only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized would not occur when the uncertainty associated with the variable consideration is resolved. See Note 20. “Segment Reporting” for a disaggregated presentation of revenues from contracts with customers.

Management and Advisory Fees, Net

— Management and Advisory Fees, Net are comprised of management fees, including base management fees, transaction and other fees and advisory fees net of management fee reductions and offsets.

Blackstone earns base management fees from limited partners of funds in each of its managed funds, at a fixed percentage of assets under management, net asset value, total assets, committed capital or invested capital. These customer contracts require Blackstone to provide investment management services, which represents a performance obligation that Blackstone satisfies over time. Management fees are a form of variable consideration because the fees Blackstone is entitled to vary based on fluctuations in the basis for the management fee. The amount recorded as revenue is generally determined at the end of the period because these management fees are payable on a regular basis (typically quarterly) and are not subject to clawback once paid.

Transaction, advisory and other fees are principally fees charged to the limited partners of funds indirectly through the managed funds and portfolio companies. The investment advisory agreements generally require that the investment adviser reduce the amount of management fees payable by the limited partners to Blackstone (“management fee reductions”) by an amount equal to a portion of the transaction and other fees paid to Blackstone by the portfolio companies. The amount of the reduction varies by fund, the type of fee paid by the portfolio company and the previously incurred expenses of the fund. These fees and associated management fee reductions are a component of the transaction price for Blackstone’s performance obligation to provide investment management services to the limited partners of funds and are recognized as changes to the transaction price in the period in which they are charged and the services are performed.

Management fee offsets are reductions to management fees payable by the limited partners of the Blackstone Funds, which are based on the amount such limited partners reimburse the Blackstone Funds or Blackstone primarily for placement fees. Providing investment management services requires Blackstone to arrange for services on behalf of its customers. In those situations where Blackstone is acting as an agent on behalf of the limited partners of funds, it presents the cost of services as net against management fee revenue. In all other situations, Blackstone is primarily responsible for fulfilling the services and is therefore acting as a principal for those arrangements. As a result, the cost of those services is presented as Compensation or General, Administrative and Other expense, as appropriate, with any reimbursement from the limited partners of the funds recorded as Management and Advisory Fees, Net. In cases where the limited partners of the funds are determined to be the customer in an arrangement, placement fees may be capitalized as a cost to acquire a customer contract. Capitalized placement fees are amortized over the life of the customer contract, are recorded within Other Assets in the Consolidated Statements of Financial Condition and amortization is recorded within General, Administrative and Other within the Consolidated Statements of Operations.

Accrued but unpaid Management and Advisory Fees, net of management fee reductions and management fee offsets, as of the reporting date are included in Accounts Receivable or Due from Affiliates in the Consolidated Statements of Financial Condition.

The Blackstone Group Inc.

Notes to Consolidated Financial Statements—Continued

(All Dollars Are in Thousands, Except Share and Per Share Data, Except Where Noted)

Incentive Fees —

Contractual fees earned based on the performance of Blackstone Funds (“Incentive Fees”) are a form of variable consideration in Blackstone’s contracts with customers to provide investment management services. Incentive Fees are earned based on fund performance during the period, subject to the achievement of minimum return levels, or high water marks, in accordance with the respective terms set out in each fund’s governing agreements. Incentive Fees will not be recognized as revenue until (a) it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur, or (b) the uncertainty associated with the variable consideration is subsequently resolved. Incentive Fees are typically recognized as revenue when realized at the end of the measurement period. Once realized, such fees are not subject to clawback or reversal. Accrued but unpaid Incentive Fees charged directly to investors in Blackstone Funds as of the reporting date are recorded within Due from Affiliates in the Consolidated Statements of Financial Condition.

Investment Income (Loss)

— Investment Income (Loss) represents the unrealized and realized gains and losses on Blackstone’s Performance Allocations and Principal Investments.

In carry fund structures Blackstone, through its subsidiaries, invests alongside its limited partners in a partnership and is entitled to its

pro-rata

share of the results of the fund (a

“pro-rata

allocation”). In addition to a

pro-rata

allocation, and assuming certain investment returns are achieved, Blackstone is entitled to a disproportionate allocation of the income otherwise allocable to the limited partners, commonly referred to as carried interest (“Performance Allocations”).

Performance Allocations are made to the general partner based on cumulative fund performance to date, subject to a preferred return to limited partners. At the end of each reporting period, Blackstone calculates the balance of accrued Performance Allocations (“Accrued Performance Allocations”) that would be due to Blackstone for each fund, pursuant to the fund agreements, as if the fair value of the underlying investments were realized as of such date, irrespective of whether such amounts have been realized. As the fair value of underlying investments varies between reporting periods, it is necessary to make adjustments to amounts recorded as Accrued Performance Allocations to reflect either (a) positive performance resulting in an increase in the Accrued Performance Allocation to the general partner or (b) negative performance that would cause the amount due to Blackstone to be less than the amount previously recognized as revenue, resulting in a negative adjustment to the Accrued Performance Allocation to the general partner. In each scenario, it is necessary to calculate the Accrued Performance Allocation on cumulative results compared to the Accrued Performance Allocation recorded to date and make the required positive or negative adjustments. Blackstone ceases to record negative Performance Allocations once previously Accrued Performance Allocations for such fund have been fully reversed. Blackstone is not obligated to pay guaranteed returns or hurdles, and therefore, cannot have negative Performance Allocations over the life of a fund. Accrued Performance Allocations as of the reporting date are reflected in Investments in the Consolidated Statements of Financial Condition.

Performance Allocations are realized when an underlying investment is profitably disposed of and the fund’s cumulative returns are in excess of the preferred return or, in limited instances, after certain thresholds for return of capital are met. Performance Allocations are subject to clawback to the extent that the Performance Allocation received to date exceeds the amount due to Blackstone based on cumulative results. As such, the accrual for potential repayment of previously received Performance Allocations, which is a component of Due to Affiliates, represents all amounts previously distributed to Blackstone Holdings and

non-controlling

interest holders that would need to be repaid to the Blackstone carry funds if the Blackstone carry funds were to be liquidated based on the current fair value of the underlying funds’ investments as of the reporting date. The actual clawback liability, however, generally does not become realized until the end of a fund’s life except for certain funds, including certain Blackstone real estate funds, multi-asset class investment funds and credit-focused funds, which may have an interim clawback liability.

Principal Investments include the unrealized and realized gains and losses on Blackstone’s principal investments, including its investments in Blackstone Funds that are not consolidated and receive

pro-rata

allocations, its equity method investments, and other principal investments. Income (Loss) on Principal Investments is realized when Blackstone redeems all or a portion of its investment or when Blackstone receives cash income, such as dividends or distributions. Unrealized Income (Loss) on Principal Investments results from changes in the fair value of the underlying investment as well as the reversal of unrealized gain (loss) at the time an investment is realized.

The Blackstone Group Inc.

Notes to Consolidated Financial Statements—Continued

(All Dollars Are in Thousands, Except Share and Per Share Data, Except Where Noted)

Interest and Dividend Revenue

— Interest and Dividend Revenue comprises primarily interest and dividend income earned on principal investments not accounted for under the equity method held by Blackstone.

Other Revenue

— Other Revenue consists of miscellaneous income and foreign exchange gains and losses arising on transactions denominated in currencies other than U.S. dollars.

Fair Value of Financial Instruments

GAAP establishes a hierarchical disclosure framework which prioritizes and ranks the level of market price observability used in measuring financial instruments at fair value. Market price observability is affected by a number of factors, including the type of financial instrument, the characteristics specific to the financial instrument and the state of the marketplace, including the existence and transparency of transactions between market participants. Financial instruments with readily available quoted prices in active markets generally will have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value.

Financial instruments measured and reported at fair value are classified and disclosed based on the observability of inputs used in the determination of fair values, as follows:

	•	Level I — Quoted prices are available in active markets for identical financial instruments as of the reporting date. The types of financial instruments in Level I include listed equities, listed derivatives and mutual funds with quoted prices. Blackstone does not adjust the quoted price for these investments, even in situations where Blackstone holds a large position and a sale could reasonably impact the quoted price.

	•	Level II — Pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reporting date, and fair value is determined through the use of models or other valuation methodologies. Financial instruments which are generally included in this category include corporate bonds and loans, including corporate bonds and loans held within CLO vehicles, government and agency securities, less liquid and restricted equity securities, and certain over-the-counter derivatives where the fair value is based on observable inputs. Senior and subordinated notes issued by CLO vehicles are classified within Level II of the fair value hierarchy.

	•	Level III — Pricing inputs are unobservable for the financial instruments and includes situations where there is little, if any, market activity for the financial instrument. The inputs into the determination of fair value require significant management judgment or estimation. Financial instruments that are included in this category generally include general and limited partnership interests in private equity and real estate funds, credit-focused funds, distressed debt and non-investment grade residual interests in securitizations, certain corporate bonds and loans held within CLO vehicles, and certain over-the-counter derivatives where the fair value is based on unobservable inputs.

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the determination of which category within the fair value hierarchy is appropriate for any given financial instrument is based on the lowest level of input that is significant to the fair value measurement. Blackstone’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the financial instrument.

Level II Valuation Techniques

Financial instruments classified within Level II of the fair value hierarchy comprise debt instruments, including certain corporate loans and bonds held by Blackstone’s consolidated CLO vehicles and debt securities sold, not yet purchased. Certain equity securities and derivative instruments valued using observable inputs are also classified as Level II.

The Blackstone Group Inc.

Notes to Consolidated Financial Statements—Continued

(All Dollars Are in Thousands, Except Share and Per Share Data, Except Where Noted)

The valuation techniques used to value financial instruments classified within Level II of the fair value hierarchy are as follows:

	•	Debt Instruments and Equity Securities are valued on the basis of prices from an orderly transaction between market participants provided by reputable dealers or pricing services. In determining the value of a particular investment, pricing services may use certain information with respect to transactions in such investments, quotations from dealers, pricing matrices and market transactions in comparable investments and various relationships between investments. The valuation of certain equity securities is based on an observable price for an identical security adjusted for the effect of a restriction.

	•	Freestanding Derivatives are valued using contractual cash flows and observable inputs comprising yield curves, foreign currency rates and credit spreads.

	•	Senior and subordinate notes issued by CLO vehicles are classified based on the more observable fair value of CLO assets less (a) the fair value of any beneficial interests held by Blackstone, and (b) the carrying value of any beneficial interests that represent compensation for services.

Level III Valuation Techniques

In the absence of observable market prices, Blackstone values its investments using valuation methodologies applied on a consistent basis. For some investments little market activity may exist; management’s determination of fair value is then based on the best information available in the circumstances, and may incorporate management’s own assumptions and involves a significant degree of judgment, taking into consideration a combination of internal and external factors, including the appropriate risk adjustments for

non-performance

and liquidity risks. Investments for which market prices are not observable include private investments in the equity of operating companies, real estate properties, certain funds of hedge funds and credit-focused investments.

Real Estate Investments

—

The fair values of real estate investments are determined by considering projected operating cash flows, sales of comparable assets, if any, and replacement costs among other measures. The methods used to estimate the fair value of real estate investments include the discounted cash flow method and/or capitalization rates (“cap rates”) analysis. Valuations may be derived by reference to observable valuation measures for comparable companies or assets (for example, multiplying a key performance metric of the investee company or asset, such as EBITDA, by a relevant valuation multiple observed in the range of comparable companies or transactions), adjusted by management for differences between the investment and the referenced comparables, and in some instances by reference to option pricing models or other similar methods. Where a discounted cash flow method is used, a terminal value is derived by reference to an exit EBITDA multiple or capitalization rate. Additionally, where applicable, projected distributable cash flow through debt maturity will be considered in support of the investment’s fair value.

Private Equity Investments

— The fair values of private equity investments are determined by reference to projected net earnings, earnings before interest, taxes, depreciation and amortization (“EBITDA”), the discounted cash flow method, public market or private transactions, valuations for comparable companies and other measures which, in many cases, are based on unaudited information at the time received. Valuations may be derived by reference to observable valuation measures for comparable companies or transactions (for example, multiplying a key performance metric of the investee company such as EBITDA by a relevant valuation multiple observed in the range of comparable companies or transactions), adjusted by management for differences between the investment and the referenced comparables, and in some instances by reference to option pricing models or other similar methods. Where a discounted cash flow method is used, a terminal value is derived by reference to EBITDA or price/earnings exit multiples.

The Blackstone Group Inc.

Notes to Consolidated Financial Statements—Continued

(All Dollars Are in Thousands, Except Share and Per Share Data, Except Where Noted)

Credit-Focused Investments

— The fair values of credit-focused investments are generally determined on the basis of prices between market participants provided by reputable dealers or pricing services. For credit-focused investments that are not publicly traded or whose market prices are not readily available, Blackstone may utilize other valuation techniques, including the discounted cash flow method or a market approach. The discounted cash flow method projects the expected cash flows of the debt instrument based on contractual terms, and discounts such cash flows back to the valuation date using a market-based yield. The market-based yield is estimated using yields of publicly traded debt instruments issued by companies operating in similar industries as the subject investment, with similar leverage statistics and time to maturity.

The market approach is generally used to determine the enterprise value of the issuer of a credit investment, and considers valuation multiples of comparable companies or transactions. The resulting enterprise value will dictate whether or not such credit investment has adequate enterprise value coverage. In cases of distressed credit instruments, the market approach may be used to estimate a recovery value in the event of a restructuring.

Investments, at Fair Value

The Blackstone Funds are accounted for as investment companies under the American Institute of Certified Public Accountants Accounting and Auditing Guide,

Investment Companies

, and in accordance with the GAAP guidance on investment companies and reflect their investments, including majority-owned and controlled investments (the “Portfolio Companies”), at fair value. Such consolidated funds’ investments are reflected in Investments on the Consolidated Statements of Financial Condition at fair value, with unrealized gains and losses resulting from changes in fair value reflected as a component of Net Gains from Fund Investment Activities in the Consolidated Statements of Operations. Fair value is the amount that would be received to sell an asset or paid to transfer a liability, in an orderly transaction between market participants at the measurement date, at current market conditions (i.e., the exit price).

Blackstone’s principal investments are presented at fair value with unrealized appreciation or depreciation and realized gains and losses recognized in the Consolidated Statements of Operations within Investment Income (Loss).

For certain instruments, Blackstone has elected the fair value option. Such election is irrevocable and is applied on an investment by investment basis at initial recognition. Blackstone has applied the fair value option for certain loans and receivables and certain investments in private debt securities that otherwise would not have been carried at fair value with gains and losses recorded in net income. The methodology for measuring the fair value of such investments is consistent with the methodology applied to private equity, real estate, credit-focused and funds of hedge funds investments. Changes in the fair value of such instruments are recognized in Investment Income (Loss) in the Consolidated Statements of Operations. Interest income on interest bearing loans and receivables and debt securities on which the fair value option has been elected is based on stated coupon rates adjusted for the accretion of purchase discounts and the amortization of purchase premiums. This interest income is recorded within Interest and Dividend Revenue.

Blackstone has elected the fair value option for the assets of consolidated CLO vehicles. As permitted under GAAP, Blackstone measures the liabilities of consolidated CLO vehicles as (a) the sum of the fair value of the consolidated CLO assets and the carrying value of any

non-financial

assets held temporarily, less (b) the sum of the fair value of any beneficial interests retained by Blackstone (other than those that represent compensation for services) and Blackstone’s carrying value of any beneficial interests that represent compensation for services. As a result of this measurement alternative, there is no attribution of amounts to

Non-Controlling

Interests for consolidated CLO vehicles. Assets of the consolidated CLOs are presented within Investments within the Consolidated Statements of Financial Condition and Liabilities within Loans Payable for the amounts due to unaffiliated third parties and Due to Affiliates for the amounts held by

non-consolidated

affiliates. Changes in the fair value of consolidated CLO assets and liabilities and related interest, dividend and other income are presented within Net Gains from Fund Investment Activities. Expenses of consolidated CLO vehicles are presented in Fund Expenses.

The Blackstone Group Inc.

Notes to Consolidated Financial Statements—Continued

(All Dollars Are in Thousands, Except Share and Per Share Data, Except Where Noted)

Blackstone has elected the fair value option for certain proprietary investments that would otherwise have been accounted for using the equity method of accounting. The fair value of such investments is based on quoted prices in an active market or using the discounted cash flow method. Changes in fair value are recognized in Investment Income (Loss) in the Consolidated Statements of Operations.

Further disclosure on instruments for which the fair value option has been elected is presented in Note 7. “Fair Value Option”.

The investments of consolidated Blackstone Funds in funds of hedge funds (“Investee Funds”) are valued at net asset value (“NAV”) per share of the Investee Fund. In limited circumstances, Blackstone may determine, based on its own due diligence and investment procedures, that NAV per share does not represent fair value. In such circumstances, Blackstone will estimate the fair value in good faith and in a manner that it reasonably chooses, in accordance with the requirements of GAAP.

Certain investments of Blackstone and of the consolidated Blackstone funds of hedge funds and credit-focused funds measure their investments in underlying funds at fair value using NAV per share without adjustment. The terms of the investee’s investment generally provide for minimum holding periods or

lock-ups,

the institution of gates on redemptions or the suspension of redemptions or an ability to side pocket investments, at the discretion of the investee’s fund manager, and as a result, investments may not be redeemable at, or within three months of, the reporting date. A side pocket is used by hedge funds and funds of hedge funds to separate investments that may lack a readily ascertainable value, are illiquid or are subject to liquidity restriction. Redemptions are generally not permitted until the investments within a side pocket are liquidated or it is deemed that the conditions existing at the time that required the investment to be included in the side pocket no longer exist. As the timing of either of these events is uncertain, the timing at which Blackstone may redeem an investment held in a side pocket cannot be estimated. Further disclosure on instruments for which fair value is measured using NAV per share is presented in Note 5. “Net Asset Value as Fair Value”.

Security and loan transactions are recorded on a trade date basis.

Equity Method Investments

Investments in which Blackstone is deemed to exert significant influence, but not control, are accounted for using the equity method of accounting except in cases where the fair value option has been elected. Blackstone has significant influence over all Blackstone Funds in which it invests but does not consolidate. Therefore, its investments in such Blackstone Funds, which include both a proportionate and disproportionate allocation of the profits and losses (as is the case with carry funds that include a Performance Allocation), are accounted for under the equity method. Under the equity method of accounting, Blackstone’s share of earnings (losses) from equity method investments is included in Investment Income (Loss) in the Consolidated Statements of Operations.

In cases where Blackstone’s equity method investments provide for a disproportionate allocation of the profits and losses (as is the case with carry funds that include a Performance Allocation), Blackstone’s share of earnings (losses) from equity method investments is determined using a balance sheet approach referred to as the hypothetical liquidation at book value (“HLBV”) method. Under the HLBV method, at the end of each reporting period Blackstone calculates the Accrued Performance Allocations that would be due to Blackstone for each fund pursuant to the fund agreements as if the fair value of the underlying investments were realized as of such date, irrespective of whether such amounts have been realized. As the fair value of underlying investments varies between reporting periods, it is necessary to make adjustments to amounts recorded as Accrued Performance Allocations to reflect either (a) positive performance resulting in an increase in the Accrued Performance Allocation to the general partner, or (b) negative performance that would cause the amount due to Blackstone to be less than the amount previously recognized as revenue, resulting in a negative adjustment to the Accrued Performance Allocation to the general partner. In each scenario, it is necessary to calculate the Accrued Performance Allocation on cumulative results compared to the Accrued Performance Allocation recorded to date and make the required positive or negative adjustments. Blackstone ceases to record negative Performance

The Blackstone Group Inc.

Notes to Consolidated Financial Statements—Continued

(All Dollars Are in Thousands, Except Share and Per Share Data, Except Where Noted)

Allocations once previously Accrued Performance Allocations for such fund have been fully reversed. Blackstone is not obligated to pay guaranteed returns or hurdles, and therefore, cannot have negative Performance Allocations over the life of a fund. The carrying amounts of equity method investments are reflected in Investments in the Consolidated Statements of Financial Condition.

Results from Blackstone’s investments in Strategic Partners funds are reported on a three month lag.

Cash and Cash Equivalents

Cash and Cash Equivalents represents cash on hand, cash held in banks, money market funds and liquid investments with original maturities of three months or less. Interest income from cash and cash equivalents is recorded in Interest and Dividend Revenue in the Consolidated Statements of Operations.

Cash Held by Blackstone Funds and Other

Cash Held by Blackstone Funds and Other represents cash and cash equivalents held by consolidated Blackstone Funds and other consolidated entities. Such amounts are not available to fund the general liquidity needs of Blackstone.

Accounts Receivable

Accounts Receivable includes management fees receivable from limited partners, receivables from underlying funds in the fund of hedge funds business, placement and advisory fees receivables, receivables relating to unsettled sale transactions and loans extended to unaffiliated third parties. Accounts Receivable, excluding those for which the fair value option has been elected, are assessed periodically for collectability. Amounts determined to be uncollectible are charged directly to General, Administrative and Other Expenses in the Consolidated Statements of Operations.

Intangibles and Goodwill

Blackstone’s intangible assets consist of contractual rights to earn future fee income, including management and advisory fees, Incentive Fees and Performance Allocations. Identifiable finite-lived intangible assets are amortized on a straight-line basis over their estimated useful lives, ranging from three to twenty years, reflecting the contractual lives of such assets. Amortization expense is included within General, Administrative and Other in the Consolidated Statements of Operations. Blackstone does not hold any indefinite-lived intangible assets. Intangible assets are reviewed for impairment when events or changes in circumstances indicate that the carrying amount may not be recoverable.

Goodwill comprises goodwill arising from the contribution and reorganization of Blackstone’s predecessor entities in 2007 immediately prior to its initial public offering (“IPO”) and the acquisitions of GSO in 2008, Strategic Partners in 2013, Harvest Fund Advisors LLC (“Harvest”) in 2017 and Clarus Ventures LLC (“Clarus”) in 2018. Goodwill is reviewed for impairment at least annually utilizing a qualitative or quantitative approach, and more frequently if circumstances indicate impairment may have occurred. The impairment testing for goodwill under the qualitative approach is based first on a qualitative assessment to determine if it is more likely than not that the fair value of Blackstone’s operating segments is less than their respective carrying values. The operating segment is the reporting level for testing the impairment of goodwill. If it is determined that it is more likely than not that an operating segment’s fair value is less than its carrying value or when the quantitative approach is used, a

two-step

quantitative assessment is performed to (a) calculate the fair value of the operating segment and compare it to its carrying value, and (b) if the carrying value exceeds its fair value, to measure an impairment loss.

Furniture, Equipment and Leasehold Improvements

Furniture, equipment and leasehold improvements consist primarily of leasehold improvements, furniture, fixtures and equipment, computer hardware and software and are recorded at cost less accumulated depreciation and amortization. Depreciation and amortization are calculated using the straight-line method over the assets’

The Blackstone Group Inc.

Notes to Consolidated Financial Statements—Continued

(All Dollars Are in Thousands, Except Share and Per Share Data, Except Where Noted)

estimated useful economic lives, which for leasehold improvements are the lesser of the lease terms or the life of the asset, generally ten to fifteen years, and three to seven years for other fixed assets. Blackstone evaluates long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

Foreign Currency

In the normal course of business, Blackstone may enter into transactions not denominated in United States dollars. Foreign exchange gains and losses arising on such transactions are recorded as Other Revenue in the Consolidated Statements of Operations. Foreign currency transaction gains and losses arising within consolidated Blackstone Funds are recorded in Net Gains (Losses) from Fund Investment Activities. In addition, Blackstone consolidates a number of entities that have a

non-U.S.

dollar functional currency.

Non-U.S.

dollar denominated assets and liabilities are translated to U.S. dollars at the exchange rate prevailing at the reporting date and income, expenses, gains and losses are translated at the prevailing exchange rate on the dates that they were recorded. Cumulative translation adjustments arising from the translation of

non-U.S.

dollar denominated operations are recorded in Other Comprehensive Income and allocated to

Non-Controlling

Interests in Consolidated Entities and

Non-Controlling

Interests in Blackstone Holdings, as applicable.

Comprehensive Income

Comprehensive Income consists of Net Income and Other Comprehensive Income. Blackstone’s Other Comprehensive Income is comprised of foreign currency cumulative translation adjustments.

Non-Controlling Interests in Consolidated Entities

Non-Controlling

Interests in Consolidated Entities represent the component of Equity in consolidated Blackstone Funds held by third party investors and employees. The percentage interests held by third parties and employees is adjusted for general partner allocations and by subscriptions and redemptions in funds of hedge funds and certain credit-focused funds which occur during the reporting period. In addition, all

non-controlling

interests in consolidated Blackstone Funds are attributed a share of income (loss) arising from the respective funds and a share of other comprehensive income, if applicable. Income (Loss) is allocated to

non-controlling

interests in consolidated entities based on the relative ownership interests of third party investors and employees after considering any contractual arrangements that govern the allocation of income (loss) such as fees allocable to The Blackstone Group Inc.

Redeemable

Non-Controlling

Interests in Consolidated Entities

Non-controlling

interests related to funds of hedge funds are subject to annual, semi-annual or quarterly redemption by investors in these funds following the expiration of a specified period of time, or may be withdrawn subject to a redemption fee during the period when capital may not be withdrawn. As limited partners in these types of funds have been granted redemption rights, amounts relating to third party interests in such consolidated funds are presented as Redeemable

Non-Controlling

Interests in Consolidated Entities within the Consolidated Statements of Financial Condition. When redeemable amounts become legally payable to investors, they are classified as a liability and included in Accounts Payable, Accrued Expenses and Other Liabilities in the Consolidated Statements of Financial Condition. For all consolidated funds in which redemption rights have not been granted,

non-controlling

interests are presented within Equity in the Consolidated Statements of Financial Condition as

Non-Controlling

Interests in Consolidated Entities.

Non-Controlling

Interests in Blackstone Holdings

Non-Controlling

Interests in Blackstone Holdings represent the component of Equity in the consolidated Blackstone Holdings Partnerships held by Blackstone personnel and others who are limited partners of the Blackstone Holdings Partnerships.

The Blackstone Group Inc.

Notes to Consolidated Financial Statements—Continued

(All Dollars Are in Thousands, Except Share and Per Share Data, Except Where Noted)

Certain costs and expenses are borne directly by the Holdings Partnerships. Income (Loss), excluding those costs directly borne by and attributable to the Holdings Partnerships, is attributable to

Non-Controlling

Interests in Blackstone Holdings. This residual attribution is based on the year to date average percentage of Blackstone Holdings Partnership Units held by Blackstone personnel and others who are limited partners of the Blackstone Holdings Partnerships.

Compensation and Benefits

Compensation and Benefits

—

Compensation

— Compensation consists of (a) salary and bonus, and benefits paid and payable to employees and senior managing directors and (b) equity-based compensation associated with the grants of equity-based awards to employees and senior managing directors. Compensation cost relating to the issuance of equity-based awards to senior managing directors and employees is measured at fair value at the grant date, and expensed over the vesting period on a straight-line basis, taking into consideration expected forfeitures, except in the case of (a) equity-based awards that do not require future service, which are expensed immediately, and (b) certain awards to recipients that meet criteria making them eligible for retirement (allowing such recipient to keep a percentage of those awards upon departure from Blackstone after becoming eligible for retirement), for which the expense for the portion of the award that would be retained in the event of retirement is either expensed immediately or amortized to the retirement date. Cash settled equity-based awards are classified as liabilities and are remeasured at the end of each reporting period.

Compensation and Benefits — Incentive Fee Compensation —

Incentive Fee Compensation consists of compensation paid based on Incentive Fees.

Compensation and Benefits — Performance Allocations Compensation —

Performance Allocation Compensation consists of compensation paid based on Performance Allocations (which may be distributed in cash or

in-kind).

Such compensation expense is subject to both positive and negative adjustments. Unlike Performance Allocations, compensation expense is based on the performance of individual investments held by a fund rather than on a fund by fund basis. These amounts may also include allocations of investment income from Blackstone’s principal investments, to senior managing directors and employees participating in certain profit sharing initiatives.

Other Income

Net Gains (Losses) from Fund Investment Activities in the Consolidated Statements of Operations include net realized gains (losses) from realizations and sales of investments, the net change in unrealized gains (losses) resulting from changes in the fair value of investments and interest income and expense and dividends attributable to the consolidated Blackstone Funds’ investments.

Expenses incurred by consolidated Blackstone funds are separately presented within Fund Expenses in the Consolidated Statements of Operations.

Other Income also includes amounts attributable to the Reduction of the Tax Receivable Agreement Liability. See Note 15. “Income Taxes — Other Income — Reduction of the Tax Receivable Agreement Liability” for additional information.

Income Taxes

The Blackstone Group Inc. is a corporation for U.S. federal income tax purposes and thus is subject to U.S. federal, state and local income taxes on Blackstone’s share of taxable income. The Blackstone Holdings Partnerships and certain of their subsidiaries operate in the U.S. as partnerships for U.S. federal income tax purposes and generally as corporate entities in

non-U.S.

jurisdictions. Accordingly, these entities in some cases are subject to New York City unincorporated business taxes or

non-U.S.

income taxes. In addition, certain of the wholly owned subsidiaries of Blackstone and the Blackstone Holdings Partnerships will be subject to federal, state and local corporate income taxes at the entity level and the related tax provision attributable to Blackstone’s share of this income tax is reflected in the Consolidated Financial Statements.

The Blackstone Group Inc.

Notes to Consolidated Financial Statements—Continued

(All Dollars Are in Thousands, Except Share and Per Share Data, Except Where Noted)

Income taxes are accounted for using the asset and liability method of accounting. Under this method, deferred tax assets and liabilities are recognized for the expected future tax consequences of differences between the carrying amounts of assets and liabilities and their respective tax basis, using tax rates in effect for the year in which the differences are expected to reverse. The effect on deferred assets and liabilities of a change in tax rates is recognized in income in the period when the change is enacted. Deferred tax assets are reduced by a valuation allowance when it is more likely than not that some portion or all of the deferred tax assets will not be realized. Current and deferred tax liabilities are recorded within Accounts Payable, Accrued Expenses and Other Liabilities in the Consolidated Statements of Financial Condition.

Blackstone uses the flow-through method to account for investment tax credits. Under this method, the investment tax credits are recognized as a reduction to income tax expense.

Blackstone analyzes its tax filing positions in all of the U.S. federal, state, local and foreign tax jurisdictions where it is required to file income tax returns, as well as for all open tax years in these jurisdictions. Blackstone records unrecognized tax benefits on the basis of a

two-step

process: (a) determination is made whether it is more likely than not that the tax positions will be sustained based on the technical merits of the position and (b) those tax positions that meet the more likely than not threshold are recognized as the largest amount of tax benefit that is greater than 50 percent likely to be realized upon ultimate settlement with the related tax authority.

Blackstone recognizes interest on tax deficiencies as Interest Expense and income tax penalty payments and accrued interest and penalties from unrecognized tax benefits in General, Administrative, and Other expenses within the Consolidated Statement of Operations.

Net Income (Loss) Per Share of Class A Common Stock

Basic Income (Loss) Per Share of Class A Common Stock is calculated by dividing Net Income (Loss) Attributable to The Blackstone Group Inc. by the weighted-average number of Class A common stock, unvested participating shares of Class A common stock outstanding for the period and vested deferred restricted shares of Class A common stock that have been earned for which issuance of the related shares of Class A common stock is deferred until future periods. Diluted Income (Loss) Per Share of Class A Common Stock reflects the impact of all dilutive securities.

Blackstone applies the treasury stock method to determine the dilutive weighted-average common units outstanding for certain equity-based compensation awards. Blackstone applies the

“if-converted”

method to the Blackstone Holdings Partnership Units to determine the dilutive impact, if any, of the exchange right included in the Blackstone Holdings Partnership Units.

Reverse Repurchase and Repurchase Agreements

Securities purchased under agreements to resell (“reverse repurchase agreements”) and securities sold under agreements to repurchase (“repurchase agreements”), comprised primarily of U.S. and

non-U.S.

government and agency securities, asset-backed securities and corporate debt, represent collateralized financing transactions. Such transactions are recorded in the Consolidated Statements of Financial Condition at their contractual amounts and include accrued interest. The carrying value of reverse repurchase and repurchase agreements approximates fair value.

Blackstone manages credit exposure arising from reverse repurchase agreements and repurchase agreements by, in appropriate circumstances, entering into master netting agreements and collateral arrangements with counterparties that provide Blackstone, in the event of a counterparty default, the right to liquidate collateral and the right to offset a counterparty’s rights and obligations.

Blackstone takes possession of securities purchased under reverse repurchase agreements and is permitted to repledge, deliver or otherwise use such securities. Blackstone also pledges its financial instruments to counterparties to collateralize repurchase agreements. Financial instruments pledged that can be repledged, delivered or otherwise used by the counterparty are recorded in Investments in the Consolidated Statements of Financial Condition. Additional disclosures relating to repurchase agreements are discussed in Note 10. “Repurchase Agreements”.

The Blackstone Group Inc.

Notes to Consolidated Financial Statements—Continued

(All Dollars Are in Thousands, Except Share and Per Share Data, Except Where Noted)

Blackstone does not offset assets and liabilities relating to reverse repurchase agreements and repurchase agreements in its Consolidated Statements of Financial Condition. Additional disclosures relating to offsetting are discussed in Note 12. “Offsetting of Assets and Liabilities”.

Securities Sold, Not Yet Purchased

Securities Sold, Not Yet Purchased consist of equity and debt securities that Blackstone has borrowed and sold. Blackstone is required to “cover” its short sale in the future by purchasing the security at prevailing market prices and delivering it to the counterparty from which it borrowed the security. Blackstone is exposed to loss in the event that the price at which a security may have to be purchased to cover a short sale exceeds the price at which the borrowed security was sold short.

Securities Sold, Not Yet Purchased are recorded at fair value in the Consolidated Statements of Financial Condition.

Derivative Instruments

Blackstone recognizes all derivatives as assets or liabilities on its Consolidated Statements of Financial Condition at fair value. On the date Blackstone enters into a derivative contract, it designates and documents each derivative contract as one of the following: (a) a hedge of a recognized asset or liability (“fair value hedge”), (b) a hedge of a forecasted transaction or of the variability of cash flows to be received or paid related to a recognized asset or liability (“cash flow hedge”), (c) a hedge of a net investment in a foreign operation, or (d) a derivative instrument not designated as a hedging instrument (“freestanding derivative”). Gains or losses on a derivative instrument that is designated as, and is effective as, an economic hedge of a net investment in a foreign operation are reported in the cumulative translation adjustment section of other comprehensive income to the extent it is effective as a hedge. The ineffective portion of a net investment hedge is recognized in current period earnings.

Blackstone formally documents at inception its hedge relationships, including identification of the hedging instruments and the hedged items, its risk management objectives, strategy for undertaking the hedge transaction and Blackstone’s evaluation of effectiveness of its hedged transaction. At least monthly, Blackstone also formally assesses whether the derivative it designated in each hedging relationship is expected to be, and has been, highly effective in offsetting changes in estimated fair values or cash flows of the hedged items using either the regression analysis or the dollar offset method. For net investment hedges, Blackstone uses a method based on changes in spot rates to measure effectiveness. If it is determined that a derivative is not highly effective at hedging the designated exposure, hedge accounting is discontinued. The fair values of hedging derivative instruments are reflected within Other Assets in the Consolidated Statements of Financial Condition.

For freestanding derivative contracts, Blackstone presents changes in fair value in current period earnings. Changes in the fair value of derivative instruments held by consolidated Blackstone Funds are reflected in Net Gains from Fund Investment Activities or, where derivative instruments are held by Blackstone, within Investment Income (Loss) in the Consolidated Statements of Operations. The fair value of freestanding derivative assets of the consolidated Blackstone Funds are recorded within Investments, the fair value of freestanding derivative assets that are not part of the consolidated Blackstone Funds are recorded within Other Assets and the fair value of freestanding derivative liabilities are recorded within Accounts Payable, Accrued Expenses and Other Liabilities in the Consolidated Statements of Financial Condition.

Blackstone has elected to not offset derivative assets and liabilities or financial assets in its Consolidated Statements of Financial Condition, including cash, that may be received or paid as part of collateral arrangements, even when an enforceable master netting agreement is in place that provides Blackstone, in the event of counterparty default, the right to liquidate collateral and the right to offset a counterparty’s rights and obligations.

The Blackstone Group Inc.

Notes to Consolidated Financial Statements—Continued

(All Dollars Are in Thousands, Except Share and Per Share Data, Except Where Noted)

Blackstone’s other disclosures regarding derivative financial instruments are discussed in Note 6. “Derivative Financial Instruments”.

Blackstone’s disclosures regarding offsetting are discussed in Note 12. “Offsetting of Assets and Liabilities”.

Leases

Blackstone determines if an arrangement is a lease at inception of the arrangement. Blackstone primarily enters into operating leases, as the lessee, for office space. Operating leases are included in

Right-of-Use

(“ROU”) Assets and Operating Lease Liabilities on our Consolidated Statement of Financial Condition. ROU Assets and Operating Lease Liabilities are recognized based on the present value of the future minimum lease payments over the lease term at the commencement date. Blackstone determines the present value of the lease payments using an incremental borrowing rate based on information available at the inception date. Leases may include options to extend or terminate the lease which are included in the ROU Assets and Operating Lease Liability when they are reasonably certain of exercise.

Certain leases include lease and nonlease components, which are accounted for as one single lease component. Occupancy lease agreements, in addition to contractual rent payments, generally include additional payments for certain costs incurred by the landlord, such as building expenses and utilities. To the extent these are fixed or determinable, they are included as part of the minimum lease payments used to measure the Operating Lease Liability. Operating lease expense associated with minimum lease payments is recognized on a straight-line basis over the lease term. When additional payments are based on usage or vary based on other factors, they are expensed when incurred as variable lease expense.

Minimum lease payments for leases with an initial term of twelve months or less are not recorded on the Consolidated Statement of Financial Condition. Blackstone recognizes lease expense for these leases on a straight-line basis over the lease term.

Additional disclosures relating to leases are discussed in Note 14. “Leases”.

Affiliates

Blackstone considers its Founder, senior managing directors, employees, the Blackstone Funds and the Portfolio Companies to be affiliates.

Dividends

Dividends are reflected in the consolidated financial statements when declared.

Recent Accounting Developments

In February 2016, the Financial Accounting Standards Board issued amended guidance on the accounting for leases. The new guidance was effective for Blackstone beginning January 1, 2019 and was adopted on a modified retrospective basis. Blackstone elected to apply the guidance to each lease that had commenced as of the adoption date. As a result, periods prior to January 1, 2019 are presented in accordance with previous GAAP. Blackstone also elected a package of practical expedients which resulted in no requirement to reassess (a) whether any expired or existing contracts are or contain leases, (b) the lease classification for any expired or existing leases and (c) the recognition requirements for initial direct costs for any existing leases. Blackstone also elected a practical expedient to account for lease and nonlease components as a single lease component. Short-term leases, which have a stated lease term of twelve months or less, have been excluded from the Operating Lease Liability and ROU Assets as a result of a policy election made by Blackstone.

The guidance requires the recognition of lease assets and lease liabilities for those leases previously classified as operating leases and it retains a distinction between finance leases and operating leases. The classification criteria for distinguishing between finance leases and operating leases are similar, but not identical, to the

The Blackstone Group Inc.

Notes to Consolidated Financial Statements—Continued

(All Dollars Are in Thousands, Except Share and Per Share Data, Except Where Noted)

classification criteria for distinguishing between capital leases and operating leases under previous GAAP. For operating leases, a lessee is required to do the following: (a) recognize a

right-of-use

asset and a lease liability, initially measured at the present value of the lease payments, in the Consolidated Statement of Financial Condition, (b) recognize a single lease cost, calculated so that the cost of the lease is allocated over the lease term on a generally straight-line basis, and (c) classify all cash payments within operating activities in the Consolidated Statements of Cash Flows. Upon adoption of the new guidance, Blackstone recognized Operating Lease Liabilities of $601.7 million and corresponding ROU Assets of $540.7 million on the Consolidated Statement of Financial Condition. These amounts were calculated as the present value of remaining lease payments on existing leases as of January 1, 2019, discounted using an incremental borrowing rate for each lease as of the adoption date. The guidance did not have a material impact on the Consolidated Statements of Operations or the Consolidated Statements of Cash Flows.

In June 2016, the FASB issued amended guidance on how to measure credit losses for most financial assets. The guidance requires entities to recognize their estimate of lifetime expected credit losses based on reasonable and supportable forecasts, current conditions, and historical experience. The guidance is effective for the Company on January 1, 2020 and requires a modified retrospective transition method that will result in a cumulative-effect adjustment in retained earnings upon adoption. The Company has identified all of the material financial assets and

off-balance

sheet credit exposures that are within the scope of this guidance and does not expect a material impact.

3. Goodwill and Intangible Assets

The carrying value of Goodwill was $1.9 billion as of December 31, 2019 and 2018, respectively. At December 31, 2019 and 2018, Blackstone determined there was no evidence of Goodwill impairment.

At December 31, 2019 and 2018, Goodwill has been allocated to each of Blackstone’s four segments as follows: Real Estate ($421.7 million), Private Equity ($870.0 million), Hedge Fund Solutions ($172.1 million), and Credit ($406.1 million).

Intangible Assets, Net consists of the following:

		December 31,
		2019				2018
Finite-Lived Intangible Assets/Contractual Rights		$	1,712,576			$	1,712,576
Accumulated Amortization			(1,315,068	)			(1,244,069	)
Intangible Assets, Net		$	397,508			$	468,507

Changes in Blackstone’s Intangible Assets, Net consists of the following:

		Year Ended December 31,
		2019				2018				2017
Balance, Beginning of Year		$	468,507			$	409,828			$	262,604
Amortization Expense			(70,999	)			(59,021	)			(46,776	)
Acquisitions			—				117,700				194,000
Balance, End of Year		$	397,508			$	468,507			$	409,828

Amortization of Intangible Assets held at December 31, 2019 is expected to be $71.0 million, $71.0 million, $63.3 million, $34.3 million and $26.9 million for each of the years ending December 31, 2020, 2021, 2022, 2023 and 2024, respectively. Blackstone’s Intangible Assets as of December 31, 2019 are expected to amortize over a weighted-average period of 7.9 years.

The Blackstone Group Inc.

Notes to Consolidated Financial Statements—Continued

(All Dollars Are in Thousands, Except Share and Per Share Data, Except Where Noted)

4. Investments

Investments consist of the following:

		December 31,
		2019				2018
Investments of Consolidated Blackstone Funds		$	8,380,698			$	8,376,338
Equity Method Investments
Partnership Investments			4,035,675				3,649,423
Accrued Performance Allocations			7,180,449				5,883,924
Corporate Treasury Investments			2,419,587				2,206,493
Other Investments			265,273				260,853
		$	22,281,682			$	20,377,031

Blackstone’s share of Investments of Consolidated Blackstone Funds totaled $347.4 million and $366.5 million at December 31, 2019 and December 31, 2018, respectively.

Investments of Consolidated Blackstone Funds

The following table presents the Realized and Net Change in Unrealized Gains (Losses) on investments held by the consolidated Blackstone Funds and a reconciliation to Other Income — Net Gains from Fund Investment Activities in the Consolidated Statements of Operations:

		Year Ended December 31,
		2019				2018				2017
Realized Gains		$	15,983			$	74,784			$	165,106
Net Change in Unrealized Losses			109,445				(54,697	)			(21,016	)
Realized and Net Change in Unrealized Gains from Consolidated Blackstone Funds			125,428				20,087				144,090
Interest and Dividend Revenue Attributable to Consolidated Blackstone Funds			157,401				171,635				177,507
Other Income — Net Gains from Fund Investment Activities		$	282,829			$	191,722			$	321,597

Equity Method Investments

Blackstone’s equity method investments include Partnership Investments, which represent the pro

-

rata investments, and any associated Accrued Performance Allocations, in private equity funds, real estate funds, funds of hedge funds and credit-focused funds. Partnership Investments also includes the 40%

non-controlling

interest in Pátria Investments Limited and Pátria Investimentos Ltda. (collectively, “Pátria”).

Blackstone evaluates each of its equity method investments, excluding Accrued Performance Allocations, to determine if any were significant as defined by guidance from the United States Securities and Exchange Commission (“SEC”). As of and for the years ended December 31, 2019, 2018 and 2017, no individual equity method investment held by Blackstone met the significance criteria. As such, Blackstone is not required to present separate financial statements for any of its equity method investments.

Partnership Investments

Blackstone recognized net gains related to its Partnership Investments accounted for under the equity method of $455.8 million, $430.6 million and $609.5 million for the years ended December 31, 2019, 2018 and 2017, respectively.

The Blackstone Group Inc.

Notes to Consolidated Financial Statements—Continued

(All Dollars Are in Thousands, Except Share and Per Share Data, Except Where Noted)

The summarized financial information of Blackstone’s equity method investments for December 31, 2019 are as follows:

		December 31, 2019 and the Year Then Ended
		Real Estate				Private Equity				Hedge Fund Solutions				Credit				Other (a)				Total
Statement of Financial Condition
Assets
Investments		$	119,951,496			$	99,906,080			$	26,516,304			$	25,923,446			$	849			$	272,298,175
Other Assets			5,318,743				2,907,054				2,609,755				1,680,187				119,739				12,635,478
Total Assets		$	125,270,239			$	102,813,134			$	29,126,059			$	27,603,633			$	120,588			$	284,933,653
Liabilities and Equity
Debt		$	24,750,242			$	12,399,899			$	378,950			$	6,687,654			$	—			$	44,216,745
Other Liabilities			6,575,483				1,124,857				2,402,920				1,535,636				24,717				11,663,613
Total Liabilities			31,325,725				13,524,756				2,781,870				8,223,290				24,717				55,880,358
Equity			93,944,514				89,288,378				26,344,189				19,380,343				95,871				229,053,295
Total Liabilities and Equity		$	125,270,239			$	102,813,134			$	29,126,059			$	27,603,633			$	120,588			$	284,933,653
Statement of Operations
Interest Income		$	535,274			$	897,990			$	16,708			$	1,252,747			$	—			$	2,702,719
Other Income			1,422,711				46,126				206,630				313,009				109,692				2,098,168
Interest Expense			(736,840	)			(416,603	)			(87,898	)			(250,261	)			—				(1,491,602	)
Other Expenses			(1,465,212	)			(1,011,584	)			(164,948	)			(470,033	)			(61,423	)			(3,173,200	)
Net Realized and Unrealized Gain from Investments			9,671,224				9,233,285				1,700,722				(456,651	)			—				20,148,580
Net Income		$	9,427,157			$	8,749,214			$	1,671,214			$	388,811			$	48,269			$	20,284,665

(a)	Other represents the summarized financial information of equity method investments whose results, for segment reporting purposes, have been allocated across more than one of Blackstone’s segments.

The Blackstone Group Inc.

Notes to Consolidated Financial Statements—Continued

(All Dollars Are in Thousands, Except Share and Per Share Data, Except Where Noted)

The summarized financial information of Blackstone’s equity method investments for December 31, 2018 are as follows:

		December 31, 2018 and the Year Then Ended
		Real Estate				Private Equity				Hedge Fund Solutions				Credit				Other (a)				Total
Statement of Financial Condition
Assets
Investments		$	89,742,226			$	79,718,783			$	26,336,573			$	24,634,380			$	353			$	220,432,315
Other Assets			3,542,235				2,257,152				3,119,639				1,706,579				125,007				10,750,612
Total Assets		$	93,284,461			$	81,975,935			$	29,456,212			$	26,340,959			$	125,360			$	231,182,927
Liabilities and Partners’ Capital
Debt		$	15,081,536			$	9,989,289			$	350,982			$	5,087,998			$	—			$	30,509,805
Other Liabilities			3,568,159				749,043				1,529,466				1,338,712				28,295				7,213,675
Total Liabilities			18,649,695				10,738,332				1,880,448				6,426,710				28,295				37,723,480
Partners’ Capital			74,634,766				71,237,603				27,575,764				19,914,249				97,065				193,459,447
Total Liabilities and Partners’ Capital		$	93,284,461			$	81,975,935			$	29,456,212			$	26,340,959			$	125,360			$	231,182,927
Statement of Operations
Interest Income		$	377,615			$	1,022,387			$	6,695			$	1,130,490			$	—			$	2,537,187
Other Income			1,244,754				92,696				166,842				417,883				106,525				2,028,700
Interest Expense			(518,137	)			(278,348	)			(17,780	)			(228,734	)			—				(1,042,999	)
Other Expenses			(921,990	)			(903,737	)			(150,135	)			(547,612	)			(65,249	)			(2,588,723	)
Net Realized and Unrealized Gain from Investments			4,437,434				10,172,066				352,018				(733,747	)			—				14,227,771
Net Income		$	4,619,676			$	10,105,064			$	357,640			$	38,280			$	41,276			$	15,161,936

(a)	Other represents the summarized financial information of equity method investments whose results, for segment reporting purposes, have been allocated across more than one of Blackstone’s segments.

The Blackstone Group Inc.

Notes to Consolidated Financial Statements—Continued

(All Dollars Are in Thousands, Except Share and Per Share Data, Except Where Noted)

The summarized financial information of Blackstone’s equity method investments for December 31, 2017 are as follows:

		December 31, 2017 and the Year Then Ended
		Real Estate				Private Equity				Hedge Fund Solutions				Credit				Other (a)				Total
Statement of Financial Condition
Assets
Investments		$	67,780,737			$	50,339,913			$	21,639,763			$	22,593,717			$	363			$	162,354,493
Other Assets			3,077,573				2,283,602				1,969,832				1,573,279				154,131				9,058,417
Total Assets		$	70,858,310			$	52,623,515			$	23,609,595			$	24,166,996			$	154,494			$	171,412,910
Liabilities and Partners’ Capital
Debt		$	6,329,068			$	6,779,634			$	53,787			$	4,896,346			$	—			$	18,058,835
Other Liabilities			1,618,408				430,763				1,150,307				420,988				39,923				3,660,389
Total Liabilities			7,947,476				7,210,397				1,204,094				5,317,334				39,923				21,719,224
Partners’ Capital			62,910,834				45,413,118				22,405,501				18,849,662				114,571				149,693,686
Total Liabilities and Partners’ Capital		$	70,858,310			$	52,623,515			$	23,609,595			$	24,166,996			$	154,494			$	171,412,910
Statement of Operations
Interest Income		$	485,751			$	362,788			$	2,942			$	928,670			$	—			$	1,780,151
Other Income			1,334,544				45,770				91,006				178,281				107,204				1,756,805
Interest Expense			(180,258	)			(121,876	)			(2,086	)			(127,153	)			—				(431,373	)
Other Expenses			(703,165	)			(568,369	)			(435,974	)			(258,157	)			(57,830	)			(2,023,495	)
Net Realized and Unrealized Gain from Investments			12,223,852				7,892,937				1,054,516				584,366				—				21,755,671
Net Income		$	13,160,724			$	7,611,250			$	710,404			$	1,306,007			$	49,374			$	22,837,759

(a)	Other represents the summarized financial information of equity method investments whose results, for segment reporting purposes, have been allocated across more than one of Blackstone’s segments.

Accrued Performance Allocations

Accrued Performance Allocations to Blackstone were as follows:

		Real Estate				Private Equity				Hedge Fund Solutions				Credit				Total
Accrued Performance Allocations, December 31, 2018		$	2,853,261			$	2,642,119			$	22,921			$	365,623			$	5,883,924
Performance Allocations as a Result of Changes in Fund Fair Values			1,866,491				935,707				48,484				124,526				2,975,208
Foreign Exchange Loss			(10,367	)			—				—				—				(10,367	)
Fund Distributions			(1,069,530	)			(514,677	)			(47,454	)			(36,655	)			(1,668,316	)
Accrued Performance Allocations, December 31, 2019		$	3,639,855			$	3,063,149			$	23,951			$	453,494			$	7,180,449

The Blackstone Group Inc.

Notes to Consolidated Financial Statements—Continued

(All Dollars Are in Thousands, Except Share and Per Share Data, Except Where Noted)

Corporate Treasury Investments

The portion of corporate treasury investments included in Investments represents Blackstone’s investments into primarily fixed income securities, mutual fund interests, and other fund interests. These strategies are managed by a combination of Blackstone personnel and third party advisors. The following table presents the Realized and Net Change in Unrealized Gains (Losses) on these investments:

		Year Ended December 31,
		2019				2018				2017
Realized Gains (Losses)		$	28,585			$	(1,024	)		$	4,378
Net Change in Unrealized Gains (Losses)			62,042				(38,113	)			50,222
		$	90,627			$	(39,137	)		$	54,600

Other Investments

Other Investments consist primarily of proprietary investment securities held by Blackstone. Other Investments include equity investments without readily determinable fair values which have a carrying value of $57.7 million as of December 31, 2019. The following table presents Blackstone’s Realized and Net Change in Unrealized Gains (Losses) in Other Investments:

		Year Ended December 31,
		2019				2018				2017
Realized Gains		$	46,248			$	56,381			$	4,886
Net Change in Unrealized Gains			21,450				20,335				14,324
		$	67,698			$	76,716			$	19,210

5. Net Asset Value as Fair Value

A summary of fair value by strategy type alongside the remaining unfunded commitments and ability to redeem such investments as of December 31, 2019 is presented below:

Strategy		Fair Value				Unfunded Commitments				Redemption Frequency (if currently eligible)				Redemption Notice Period
Diversified Instruments		$	221,901			$	126				(a)				(a)
Credit Driven			79,092				268				(b)				(b)
Equity			6,245				—				(c)				(c)
Commodities			1,613				—				(d)				(d)
		$	308,851			$	394

(a)	Diversified Instruments include investments in funds that invest across multiple strategies. Investments representing 3% of the fair value of the investments in this category may not be redeemed at, or within three months of, the reporting date. The remaining 97% of investments in this category are redeemable as of the reporting date.

(b)	The Credit Driven category includes investments in hedge funds that invest primarily in domestic and international bonds. Investments representing 21% of the fair value of the investments in this category are in liquidation. The remaining 79% of investments in this category are redeemable as of the reporting date.

(c)	The Equity category includes investments in hedge funds that invest primarily in domestic and international equity securities. Investments representing 100% of the fair value of the investments in this category are in liquidation. As of the reporting date, the investee fund manager had elected to side pocket 70% of Blackstone’s investments in the category.

The Blackstone Group Inc.

Notes to Consolidated Financial Statements—Continued

(All Dollars Are in Thousands, Except Share and Per Share Data, Except Where Noted)

(d)	The Commodities category includes investments in commodities-focused funds that primarily invest in futures and physical-based commodity driven strategies. Investments representing 100% of the fair value of the investments in this category may not be redeemed at, or within three months of, the reporting date.

6. Derivative Financial Instruments

Blackstone and the consolidated Blackstone Funds enter into derivative contracts in the normal course of business to achieve certain risk management objectives and for general investment purposes. Blackstone may enter into derivative contracts in order to hedge its interest rate risk exposure against the effects of interest rate changes. Additionally, Blackstone may also enter into derivative contracts in order to hedge its foreign currency risk exposure against the effects of a portion of its

non-U.S.

dollar denominated currency net investments. As a result of the use of derivative contracts, Blackstone and the consolidated Blackstone Funds are exposed to the risk that counterparties will fail to fulfill their contractual obligations. To mitigate such counterparty risk, Blackstone and the consolidated Blackstone Funds enter into contracts with certain major financial institutions, all of which have investment grade ratings. Counterparty credit risk is evaluated in determining the fair value of derivative instruments.

Freestanding Derivatives

Freestanding derivatives are instruments that Blackstone and certain of the consolidated Blackstone Funds have entered into as part of their overall risk management and investment strategies. These derivative contracts are not designated as hedging instruments for accounting purposes. Such contracts may include interest rate swaps, foreign exchange contracts, equity swaps, options, futures and other derivative contracts.

The table below summarizes the aggregate notional amount and fair value of the derivative financial instruments. The notional amount represents the absolute value amount of all outstanding derivative contracts.

		December 31, 2019																December 31, 2018
		Assets								Liabilities								Assets								Liabilities
		Notional				Fair Value				Notional				Fair Value				Notional				Fair Value				Notional				Fair Value
Freestanding Derivatives
Blackstone
Interest Rate Contracts		$	1,256,287			$	53,129			$	165,852			$	4,895			$	798,137			$	43,632			$	844,620			$	39,164
Foreign Currency Contracts			344,422				1,231				97,626				802				224,841				1,286				245,371				1,636
Credit Default Swaps			7,617				36				16,697				197				—				—				34,060				4,004
Investments of Consolidated Blackstone Funds
Foreign Currency Contracts			106,906				307				40,110				1,167				108,271				524				16,952				164
Interest Rate Contracts			—				—				33,000				1,728				—				—				10,000				311
Credit Default Swaps			5,108				58				47,405				960				20,952				55				46,685				5,710
Total Return Swaps			4,558				21				27,334				464				—				—				31,440				1,855
Other			1				4				1				2				—				—				—				—
		$	1,724,899			$	54,786			$	428,025			$	10,215			$	1,152,201			$	45,497			$	1,229,128			$	52,844

The Blackstone Group Inc.

Notes to Consolidated Financial Statements—Continued

(All Dollars Are in Thousands, Except Share and Per Share Data, Except Where Noted)

The table below summarizes the impact to the Consolidated Statements of Operations from derivative financial instruments

:

		Year Ended December 31,
		2019				2018				2017
Freestanding Derivatives
Realized Gains (Losses)
Interest Rate Contracts		$	(3,570	)		$	2,968			$	(2,400	)
Foreign Currency Contracts			6,099				10,761				(6,333	)
Credit Default Swaps			3,209				(539	)			(3,764	)
Total Return Swaps			(908	)			145				295
Other			(286	)			(120	)			(417	)
		$	4,544			$	13,215			$	(12,619	)
Net Change in Unrealized Gains (Losses)
Interest Rate Contracts			50,431				36,472				(24,629	)
Foreign Currency Contracts			(441	)			(6,682	)			(3,556	)
Credit Default Swaps			3,400				(521	)			4,881
Total Return Swaps			1,296				(2,107	)			(447	)
Other			(36	)			—				129
		$	54,650			$	27,162			$	(23,622	)

As of December 31, 2019, 2018 and 2017, Blackstone had not designated any derivatives as cash flow hedges.

7. Fair Value Option

The following table summarizes the financial instruments for which the fair value option has been elected:

		December 31,
		2019				2018
Assets
Loans and Receivables		$	500,751			$	304,173
Equity and Preferred Securities			432,472				390,095
Debt Securities			506,924				529,698
Assets of Consolidated CLO Vehicles
Corporate Loans			6,801,691				6,766,700
Other			770				—
		$	8,242,608			$	7,990,666
Liabilities
Liabilities of Consolidated CLO Vehicles
Senior Secured Notes
Loans Payable		$	6,455,016			$	6,473,233
Due to Affiliates			57,717				3,201
Subordinated Notes
Loans Payable			24,738				7,478
Due to Affiliates			20,535				52,811
		$	6,558,006			$	6,536,723

The Blackstone Group Inc.

Notes to Consolidated Financial Statements—Continued

(All Dollars Are in Thousands, Except Share and Per Share Data, Except Where Noted)

The following table presents the Realized and Net Change in Unrealized Gains (Losses) on financial instruments on which the fair value option was elected:

		Year Ended December 31,
		2019								2018								2017
		Realized Gains (Losses)				Net Change in Unrealized Gains (Losses)				Realized Gains (Losses)				Net Change in Unrealized Gains (Losses)				Realized Gains (Losses)				Net Change in Unrealized Gains (Losses)
Assets
Loans and Receivables		$	(4,595	)		$	(6,533	)		$	291			$	(447	)		$	(1,214	)		$	6,590
Equity and Preferred Securities			16,493				(2,331	)			3,451				(3,589	)			4,611				22,326
Debt Securities			(7,139	)			12,748				(1,105	)			(29,069	)			4,866				(3,390	)
Assets of Consolidated CLO Vehicles
Corporate Loans			(29,191	)			96,221				(8,749	)			(285,698	)			(3,827	)			(6,603	)
Corporate Bonds			—				—				(24,056	)			9,693				12,442				(36,219	)
Other			—				133				—				6				—				454
		$	(24,432	)		$	100,238			$	(30,168	)		$	(309,104	)		$	16,878			$	(16,842	)
Liabilities
Liabilities of Consolidated CLO Vehicles
Senior Secured Notes		$	—			$	(40,050	)		$	—			$	51,048			$	—			$	—
Subordinated Notes			—				15,017				—				254,966				—				81,460
		$	—			$	(25,033	)		$	—			$	306,014			$	—			$	81,460

The following table presents information for those financial instruments for which the fair value option was elected:

		December 31, 2019												December 31, 2018
						For Financial Assets Past Due (a)												For Financial Assets Past Due (a)
		Excess (Deficiency) of Fair Value Over Principal				Fair Value				Excess (Deficiency) of Fair Value Over Principal				Excess (Deficiency) of Fair Value Over Principal				Fair Value				Excess (Deficiency) of Fair Value Over Principal
Loans and Receivables		$	(3,875	)		$	—			$	—			$	2,421			$	—			$	—
Debt Securities			(14,667	)			—				—				(26,660	)			—				—
Assets of Consolidated CLO Vehicles
Corporate Loans			(234,430	)			—				—				(301,085	)			—				—
Other			133				—				—				—				—				—
		$	(252,839	)		$	—			$	—			$	(325,324	)		$	—			$	—

(a)	Corporate Loans within CLO assets are classified as past due if contractual payments are more than one day past due.

As of December 31, 2019 and 2018, no Loans and Receivables for which the fair value option was elected were past due or in

non-accrual

status. As of December 31, 2019 and 2018, no Corporate Bonds included within the Assets of Consolidated CLO Vehicles for which the fair value option was elected were past due or in

non-accrual

status.

The Blackstone Group Inc.

Notes to Consolidated Financial Statements—Continued

(All Dollars Are in Thousands, Except Share and Per Share Data, Except Where Noted)

8. Fair Value Measurements of Financial Instruments

The following tables summarize the valuation of Blackstone’s financial assets and liabilities by the fair value hierarchy:

		December 31, 2019
		Level I				Level II				Level III				NAV				Total
Assets
Cash and Cash Equivalents — Money Market Funds and Short-Term Investments		$	456,784			$	—			$	—			$	—			$	456,784
Investments
Investments of Consolidated Blackstone Funds (a)
Investment Funds			—				—				—				23,647				23,647
Equity Securities			31,812				40,495				255,900				—				328,207
Partnership and LLC Interests			—				13,116				418,250				—				431,366
Debt Instruments			—				715,246				79,381				—				794,627
Freestanding Derivatives
Foreign Currency Contracts			—				307				—				—				307
Credit Default Swaps			—				58				—				—				58
Total Return Swaps			—				21				—				—				21
Other			—				4				—				—				4
Assets of Consolidated CLO Vehicles
Corporate Loans			—				6,505,720				295,971				—				6,801,691
Other			—				—				770				—				770
Total Investments of Consolidated Blackstone Funds			31,812				7,274,967				1,050,272				23,647				8,380,698
Corporate Treasury Investments
Equity Securities			429,527				—				—				—				429,527
Debt Instruments			297,111				1,385,582				26,345				—				1,709,038
Other			—				—				2,944				278,078				281,022
Total Corporate Treasury Investments			726,638				1,385,582				29,289				278,078				2,419,587
Other Investments			200,478				—				—				7,126				207,604
Total Investments			958,928				8,660,549				1,079,561				308,851				11,007,889
Accounts Receivable — Loans and Receivables			—				—				500,751				—				500,751
Other Assets
Freestanding Derivatives
Interest Rate Contracts			502				52,627				—				—				53,129
Foreign Currency Contracts			—				1,231				—				—				1,231
Credit Default Swaps			—				36				—				—				36
Total Other Assets			502				53,894				—				—				54,396
		$	1,416,214			$	8,714,443			$	1,580,312			$	308,851			$	12,019,820

The Blackstone Group Inc.

Notes to Consolidated Financial Statements—Continued

(All Dollars Are in Thousands, Except Share and Per Share Data, Except Where Noted)

		December 31, 2019
		Level I				Level II				Level III				Total
Liabilities
Loans Payable — Liabilities of Consolidated CLO Vehicles (a)
Senior Secured Notes (b)		$	—			$	6,455,016			$	—			$	6,455,016
Subordinated Notes (b)			—				24,738				—				24,738
Total Loans Payable			—				6,479,754				—				6,479,754
Due to Affiliates — Liabilities of Consolidated CLO Vehicles (a)
Senior Secured Notes (b)			—				57,717				—				57,717
Subordinated Notes (b)			—				20,535				—				20,535
Total Due to Affiliates			—				78,252				—				78,252
Securities Sold, Not Yet Purchased			19,977				55,569				—				75,546
Accounts Payable, Accrued Expenses and Other Liabilities
Liabilities of Consolidated Blackstone Funds — Freestanding Derivatives (a)
Foreign Currency Contracts			—				1,167				—				1,167
Credit Default Swaps			—				960				—				960
Total Return Swaps			—				464				—				464
Interest Rate Swaps			—				1,728				—				1,728
Other			—				2				—				2
Total Liabilities of Consolidated Blackstone Funds			—				4,321				—				4,321
Freestanding Derivatives
Interest Rate Contracts			150				4,745				—				4,895
Foreign Currency Contracts			—				802				—				802
Credit Default Swaps			—				197				—				197
Total Freestanding Derivatives			150				5,744				—				5,894
Total Accounts Payable, Accrued Expenses and Other Liabilities			150				10,065				—				10,215
		$	20,127			$	6,623,640			$	—			$	6,643,767

The Blackstone Group Inc.

Notes to Consolidated Financial Statements—Continued

(All Dollars Are in Thousands, Except Share and Per Share Data, Except Where Noted)

		December 31, 2018
		Level I				Level II				Level III				NAV				Total
Assets
Cash and Cash Equivalents — Money Market Funds and Short-Term Investments		$	623,526			$	—			$	—			$	—			$	623,526
Investments
Investments of Consolidated Blackstone Funds (a)
Investment Funds			—				—				—				80,726				80,726
Equity Securities			42,937				34,946				201,566				—				279,449
Partnership and LLC Interests			—				7,170				355,273				—				362,443
Debt Instruments			—				752,622				133,819				—				886,441
Freestanding Derivatives
Foreign Currency Contracts			—				524				—				—				524
Credit Default Swaps			—				55				—				—				55
Assets of Consolidated CLO Vehicles
Corporate Loans			—				6,093,342				673,358				—				6,766,700
Total Investments of Consolidated Blackstone Funds			42,937				6,888,659				1,364,016				80,726				8,376,338
Corporate Treasury Investments
Equity Securities			233,834				—				—				—				233,834
Debt Instruments			243,297				1,444,968				24,568				—				1,712,833
Other			—				—				—				259,826				259,826
Total Corporate Treasury Investments			477,131				1,444,968				24,568				259,826				2,206,493
Other Investments			176,432				—				31,617				7,581				215,630
Total Investments			696,500				8,333,627				1,420,201				348,133				10,798,461
Accounts Receivable — Loans and Receivables			—				—				304,173				—				304,173
Other Assets
Freestanding Derivatives
Interest Rate Contracts			1,274				42,358				—				—				43,632
Foreign Currency Contracts			—				1,286				—				—				1,286
Total Other Assets			1,274				43,644				—				—				44,918
		$	1,321,300			$	8,377,271			$	1,724,374			$	348,133			$	11,771,078

The Blackstone Group Inc.

Notes to Consolidated Financial Statements—Continued

(All Dollars Are in Thousands, Except Share and Per Share Data, Except Where Noted)

		December 31, 2018
		Level I				Level II				Level III				Total
Liabilities
Loans Payable — Liabilities of Consolidated CLO Vehicles (a)
Senior Secured Notes (b)		$	—			$	6,473,233			$	—			$	6,473,233
Subordinated Notes (b)			—				7,478				—				7,478
Total Loans Payable			—				6,480,711				—				6,480,711
Due to Affiliates — Liabilities of Consolidated CLO Vehicles (a)
Senior Secured Notes (b)			—				3,201				—				3,201
Subordinated Notes (b)			—				52,811				—				52,811
Total Due to Affiliates			—				56,012				—				56,012
Securities Sold, Not Yet Purchased			35,959				106,658				—				142,617
Accounts Payable, Accrued Expenses and Other Liabilities
Liabilities of Consolidated Blackstone Funds — Freestanding Derivatives (a) Foreign Currency Contracts			—				164				—				164
Credit Default Swaps			—				5,710				—				5,710
Total Return Swaps			—				1,855				—				1,855
Interest Rate Swaps			—				311				—				311
Total Liabilities of Consolidated Blackstone Funds			—				8,040				—				8,040
Freestanding Derivatives
Interest Rate Contracts			3,080				36,084				—				39,164
Foreign Currency Contracts			—				1,636				—				1,636
Credit Default Swaps			—				4,004				—				4,004
Total Freestanding Derivatives			3,080				41,724				—				44,804
Total Accounts Payable, Accrued Expenses and Other Liabilities			3,080				49,764				—				52,844
		$	39,039			$	6,693,145			$	—			$	6,732,184

(a)

Pursuant to GAAP consolidation guidance, Blackstone is required to consolidate all VIEs in which it has been identified as the primary beneficiary, including certain CLO vehicles, and other funds in which a consolidated entity of Blackstone, such as the general partner of the fund, has a controlling financial interest. While Blackstone is required to consolidate certain funds, including CLO vehicles, for GAAP purposes, Blackstone has no ability to utilize the assets of these funds and there is no recourse to Blackstone for their liabilities since these are client assets and liabilities.

(b)	Senior and subordinated notes issued by CLO vehicles are classified based on the more observable fair value of CLO assets less (1) the fair value of any beneficial interests held by Blackstone, and (2) the carrying value of any beneficial interests that represent compensation for services.

The Blackstone Group Inc.

Notes to Consolidated Financial Statements—Continued

(All Dollars Are in Thousands, Except Share and Per Share Data, Except Where Noted)

The following table summarizes the quantitative inputs and assumptions used for items categorized in Level III of the fair value hierarchy as of December 31, 2019:

		Fair Value				Valuation Techniques				Unobservable Inputs				Ranges				Weighted Average (a)
Financial Assets
Investments of Consolidated Blackstone Funds
Equity Securities		$	198,094				Discounted Cash Flows				Discount Rate				7.2% - 40.2%				13.1%
											Revenue CAGR				0.0% - 25.4%				9.1%
											Book Value Multiple				0.9x - 10.0x				6.4x
											EBITDA Multiple				1.1x - 13.5x				8.3x
											Exit Capitalization Rate				5.0% - 11.4%				7.9%
											Exit Multiple - EBITDA				0.1x - 17.0x				9.5x
											Exit Multiple - NOI				14.3x				N/A
											Exit Multiple - P/E				17.0x				N/A
			471				Market Comparable Companies				Book Value Multiple				1.1x				N/A
			30,250				Other				N/A				N/A				N/A
			26,958				Transaction Price				N/A				N/A				N/A
			127				Third Party Pricing				N/A				N/A				N/A
Partnership and LLC Interests			367,308				Discounted Cash Flows				Discount Rate				0.9% - 26.5%				9.2%
											Revenue CAGR				-4.3% - 26.3%				17.1%
											Book Value Multiple				1.0x - 1.1x				1.1x
											EBITDA Multiple				6.5x - 14.0x				9.8x
											Exit Capitalization Rate				2.0% - 27.0%				5.8%
											Exit Multiple - EBITDA				3.5x - 18.6x				10.2x
											Exit Multiple - NOI				13.0x - 15.7x				14.6x
			3,330				Market Comparable Companies				Book Value Multiple				1.2x				N/A
											Dollar/Acre Multiple				$12.0				N/A
			2,637				Other				N/A				N/A				N/A
			44,975				Transaction Price				N/A				N/A				N/A
Debt Instruments			8,628				Discounted Cash Flows				Discount Rate				7.1% - 58.2%				12.1%
											Exit Capitalization Rate				5.5% - 8.0%				6.7%
											Exit Multiple - EBITDA				6.5x				N/A
			69,620				Third Party Pricing				N/A				N/A				N/A
			1,133				Transaction Price				N/A				N/A				N/A
Assets of Consolidated CLO Vehicles			296,741				Third Party Pricing				N/A				N/A				N/A
Total Investments of Consolidated Blackstone Funds			1,050,272

continued ...

The Blackstone Group Inc.

Notes to Consolidated Financial Statements—Continued

(All Dollars Are in Thousands, Except Share and Per Share Data, Except Where Noted)

		Fair Value				Valuation Techniques				Unobservable Inputs				Ranges				Weighted Average (a)
Corporate Treasury Investments		$	10,332				Discounted Cash Flows				Discount Rate				3.2% - 7.1%				5.7%
											Default Rate				2.0%				N/A
											Pre-payment Rate				20.0%				N/A
											Recovery Lag				12 Months				N/A
											Recovery Rate				8.0% - 70.0%				67.9%
											Reinvestment Rate				LIBOR + 400 bps				N/A
			2,944				Market Comparable Companies				EBITDA Multiple				6.2x - 8.8x				8.1x
			16,013				Third Party Pricing				N/A				N/A				N/A
Loans and Receivables			406,498				Discounted Cash Flows				Discount Rate				5.2% - 9.8%				7.7%
			94,253				Transaction Price				N/A				N/A				N/A
		$	1,580,312

The Blackstone Group Inc.

Notes to Consolidated Financial Statements—Continued

(All Dollars Are in Thousands, Except Share and Per Share Data, Except Where Noted)

The following table summarizes the quantitative inputs and assumptions used for items categorized in Level III of the fair value hierarchy as of December 31, 2018:

		Fair Value				Valuation Techniques				Unobservable Inputs				Ranges				Weighted- Average (a)
Financial Assets
Investments of Consolidated Blackstone Funds
Equity Securities		$	138,725				Discounted Cash Flows				Discount Rate				7.1% - 26.1%				12.6%
											Revenue CAGR				-0.8% - 32.4%				6.6%
											Book Value Multiple				0.9x - 9.5x				8.3x
											Exit Capitalization Rate				5.0% - 11.4%				8.0%
											Exit Multiple - EBITDA				0.1x - 17.5x				10.3x
											Exit Multiple - NOI				12.8x				N/A
											Exit Multiple - P/E				17.0x				N/A
			21,050				Market Comparable Companies				Book Value Multiple				0.8x - 8.0x				1.3x
											Dollar/Acre Multiple				$7.0 - $44.1				$32.9
			21,492				Other				N/A				N/A				N/A
			20,250				Transaction Price				N/A				N/A				N/A
			49				Third Party Pricing				N/A				N/A				N/A
Partnership and LLC Interests			295,251				Discounted Cash Flows				Discount Rate				4.1% - 26.5%				9.7%
											Revenue CAGR				-1.1% - 48.4%				26.9%
											Book Value Multiple				8.5x - 9.3x				9.2x
											Exit Capitalization Rate				2.9% - 15.0%				6.3%
											Exit Multiple - EBITDA				0.1x - 15.3x				10.0x
											Exit Multiple - NOI				13.3x				N/A
			9,444				Market Comparable Companies				Book Value Multiple				1.1x				N/A
											Dollar/Acre Multiple				$5.3 - $12.0				$7.5
			9,390				Other				N/A				N/A				N/A
			41,188				Transaction Price				N/A				N/A				N/A
Debt Instruments			8,342				Discounted Cash Flows				Discount Rate				7.0% - 19.3%				9.8%
											Revenue CAGR				0.7%				N/A
											Exit Multiple - EBITDA				6.5x				N/A
			120,843				Third Party Pricing				N/A				N/A				N/A
			4,634				Transaction Price				N/A				N/A				N/A
Assets of Consolidated CLO Vehicles			41				Discounted Cash Flows				Discount Rate				5.0%				N/A
			673,317				Third Party Pricing				N/A				N/A				N/A
Total Investments of Consolidated Blackstone Funds			1,364,016

continued ...

The Blackstone Group Inc.

Notes to Consolidated Financial Statements—Continued

(All Dollars Are in Thousands, Except Share and Per Share Data, Except Where Noted)

		Fair Value				Valuation Techniques				Unobservable Inputs				Ranges				Weighted- Average (a)
Corporate Treasury Investments		$	7,947				Discounted Cash Flows				Discount Rate				4.4% - 7.5%				6.6%
											Default Rate				2.0%				N/A
											Pre-payment Rate				20.0%				N/A
											Recovery Lag				12 Months -				13 Months
															21 Months
											Recovery Rate				17.5% - 70.0%				67.7%
											Reinvestment Rate				LIBOR + 400 bps				N/A
			16,621				Third Party Pricing				N/A				N/A				N/A
Loans and Receivables			304,173				Discounted Cash Flows				Discount Rate				6.1% - 12.8%				8.7%
Other Investments			26,631				Discounted Cash Flows				Discount Rate				1.0% - 15.0%				2.8%
											Default Rate				2.0%				N/A
											Pre-payment Rate				20.0%				N/A
											Recovery Lag				12 Months				N/A
											Recovery Rate				70.0%				N/A
											Reinvestment Rate				LIBOR + 400 bps				N/A
			4,986				Transaction Price				N/A				N/A				N/A
		$	1,724,374

N/A		Not applicable.
CAGR		Compound annual growth rate.
EBITDA		Earnings before interest, taxes, depreciation and amortization.
Exit Multiple		Ranges include the last twelve months EBITDA, forward EBITDA and price/earnings exit multiples.
LIBOR		London Interbank Offered Rate.
NOI		Net operating income.
P/E		Price-earnings ratio.
Third Party Pricing		Third Party Pricing is generally determined on the basis of unadjusted prices between market participants provided by reputable dealers or pricing services.
Transaction Price		Includes recent acquisitions or transactions.
(a)		Unobservable inputs were weighted based on the fair value of the investments included in the range.

The significant unobservable inputs used in the fair value measurement of corporate treasury investments, debt instruments and other investments as of the reporting date are discount rates, default rates, recovery rates, recovery lag,

pre-payment

rates and reinvestment rates. Increases (decreases) in any of the discount rates, default rates, recovery lag and

pre-payment

rates in isolation would have resulted in a lower (higher) fair value measurement. Increases (decreases) in any of the recovery rates and reinvestment rates in isolation would have resulted in a higher (lower) fair value measurement. Generally, a change in the assumption used for default rates may be accompanied by a directionally similar change in the assumption used for recovery lag and a directionally opposite change in the assumption used for recovery rates and

pre-payment

rates.

The significant unobservable inputs used in the fair value measurement of equity securities, partnership and limited liability company (“LLC”) interests, debt instruments, assets of consolidated CLO vehicles and loans and receivables are discount rates, exit capitalization rates, exit multiples, EBITDA multiples and revenue compound annual growth rates. Increases (decreases) in any of discount rates and exit capitalization rates in isolation could have resulted in a lower (higher) fair value measurement. Increases (decreases) in any of exit multiples and revenue compound annual growth rates in isolation could have resulted in a higher (lower) fair value measurement.

The Blackstone Group Inc.

Notes to Consolidated Financial Statements—Continued

(All Dollars Are in Thousands, Except Share and Per Share Data, Except Where Noted)

Since December 31, 2018, there have been no changes in valuation techniques within Level II and Level III that have had a material impact on the valuation of financial instruments.

The following tables summarize the changes in financial assets and liabilities measured at fair value for which Blackstone has used Level III inputs to determine fair value and does not include gains or losses that were reported in Level III in prior years or for instruments that were transferred out of Level III prior to the end of the respective reporting period. Total realized and unrealized gains and losses recorded for Level III investments are reported in either Investment Income (Loss) or Net Gains from Fund Investment Activities in the Consolidated Statements of Operations.

		Level III Financial Assets at Fair Value Year Ended December 31,
		2019																2018
		Investments of Consolidated Funds				Loans and Receivables				Other Investments (a)				Total				Investments of Consolidated Funds				Loans and Receivables				Other Investments (a)				Total
Balance, Beginning of Period		$	1,364,016			$	304,173			$	56,185			$	1,724,374			$	1,029,371			$	239,659			$	119,642			$	1,388,672
Transfer In Due to Consolidation and Acquisition			—				—				—				—				50,043				—				—				50,043
Transfer Out Due to Deconsolidation			—				—				—				—				(217,182	)			—				—				(217,182	)
Transfer In to Level III (b)			154,046				—				29,941				183,987				190,497				—				8,484				198,981
Transfer Out of Level III (b)			(507,546	)			—				(40,426	)			(547,972	)			(127,829	)			—				(56,534	)			(184,363	)
Purchases			510,516				1,037,019				18,816				1,566,351				862,844				1,016,838				28,041				1,907,723
Sales			(536,156	)			(834,145	)			(34,905	)			(1,405,206	)			(457,824	)			(953,538	)			(43,213	)			(1,454,575	)
Settlements			—				(21,262	)			—				(21,262	)			—				(22,285	)			(73	)			(22,358	)
Changes in Gains (Losses) Included in Earnings			65,396				14,966				(322	)			80,040				34,096				23,499				(162	)			57,433
Balance, End of Period		$	1,050,272			$	500,751			$	29,289			$	1,580,312			$	1,364,016			$	304,173			$	56,185			$	1,724,374
Changes in Unrealized Gains (Losses) Included in Earnings Related to Financial Assets Still Held at the Reporting Date		$	33,721			$	(6,533	)		$	588			$	27,776			$	(4,378	)		$	—			$	2,439			$	(1,939	)

(a)	Represents corporate treasury investments and Other Investments.

(b)	Transfers in and out of Level III financial assets and liabilities were due to changes in the observability of inputs used in the valuation of such assets and liabilities.

There were no Level III financial liabilities as of and for the year ended December 31, 2019 and 2018.

9.	Variable Interest Entities

Pursuant to GAAP consolidation guidance, Blackstone consolidates certain VIEs in which it is determined that Blackstone is the primary beneficiary either directly or indirectly, through a consolidated entity or affiliate. VIEs include certain private equity, real estate, credit-focused or funds of hedge funds entities and CLO vehicles. The purpose of such VIEs is to provide strategy specific investment opportunities for investors in exchange for management and performance-based fees. The investment strategies of the Blackstone Funds differ by product; however, the fundamental risks of the Blackstone Funds have similar characteristics, including loss of invested capital and loss of management fees and performance-based fees. In Blackstone’s role as general partner, collateral manager or investment adviser, it generally considers itself the sponsor of the applicable Blackstone Fund. Blackstone does not provide performance guarantees and has no other financial obligation to provide funding to consolidated VIEs other than its own capital commitments.

The Blackstone Group Inc.

Notes to Consolidated Financial Statements—Continued

(All Dollars Are in Thousands, Except Share and Per Share Data, Except Where Noted)

The assets of consolidated variable interest entities may only be used to settle obligations of these entities. In addition, there is no recourse to Blackstone for the consolidated VIEs’ liabilities including the liabilities of the consolidated CLO vehicles.

Blackstone holds variable interests in certain VIEs which are not consolidated as it is determined that Blackstone is not the primary beneficiary. Blackstone’s involvement with such entities is in the form of direct and indirect equity interests and fee arrangements. The maximum exposure to loss represents the loss of assets recognized by Blackstone relating to non-consolidated VIEs and any clawback obligation relating to previously distributed Performance Allocations. Blackstone’s maximum exposure to loss relating to non-consolidated VIEs were as follows:

		December 31, 2019				December 31, 2018
Investments		$	1,216,932			$	942,700
Due from Affiliates			143,949				254,744
Potential Clawback Obligation			109,240				159,691
Maximum Exposure to Loss		$	1,470,121			$	1,357,135
Amounts Due to Non-Consolidated VIEs		$	231			$	207

10. Repurchase Agreements

At December 31, 2019 and 2018, Blackstone pledged securities with a carrying value of $196.1 million and

$

279.5

million, respectively, and cash

,

to collateralize its repurchase agreements. Such securities can be repledged, delivered or otherwise used by the counterparty.

The following tables provide information regarding Blackstone’s Repurchase Agreements obligation by type of collateral pledged:

		December 31, 2019
		Remaining Contractual Maturity of the Agreements
		Overnight and Continuous				Up to 30 Days				30 - 90 Days				Greater than 90 days				Total
Repurchase Agreements
Asset-Backed Securities		$	—			$	42,459			$	88,868			$	22,791			$	154,118
Gross Amount of Recognized Liabilities for Repurchase Agreements in Note 12. “Offsetting of Assets and Liabilities”																		$	154,118
Amounts Related to Agreements Not Included in Offsetting Disclosure in Note 12. “Offsetting of Assets and Liabilities”																		$	—

The Blackstone Group Inc.

Notes to Consolidated Financial Statements—Continued

(All Dollars Are in Thousands, Except Share and Per Share Data, Except Where Noted)

		December 31, 2018
		Remaining Contractual Maturity of the Agreements
		Overnight and Continuous				Up to 30 Days				30 - 90 Days				Greater than 90 days				Total
Repurchase Agreements
Asset-Backed Securities		$	—			$	42,908			$	144,731			$	34,563			$	222,202
Gross Amount of Recognized Liabilities for Repurchase Agreements in Note 12. “Offsetting of Assets and Liabilities”																		$	222,202
Amounts Related to Agreements Not Included in Offsetting Disclosure in Note 12. “Offsetting of Assets and Liabilities”																		$	—

11.	Other Assets and Accounts Payable, Accrued Expenses and Other Liabilities

Other Assets consists of the following:

		December 31,
		2019				2018
Furniture, Equipment and Leasehold Improvements		$	417,373			$	360,571
Less: Accumulated Depreciation			(262,891	)			(240,199	)
Furniture, Equipment and Leasehold Improvements, Net			154,482				120,372
Prepaid Expenses			159,333				110,732
Freestanding Derivatives			54,396				44,918
Other			14,282				18,226
		$	382,493			$	294,248

Depreciation expense of $26.3 million, $23.9 million and $25.2 million related to furniture, equipment and leasehold improvements for the years ended December 31, 2019, 2018 and 2017, respectively, is included in General, Administrative and Other in the Consolidated Statements of Operations.

Accounts Payable, Accrued Expenses and Other Liabilities includes $2.2 million and $15.6 million as of December 31, 2019 and 2018, respectively, relating to redemptions that were legally payable to investors of the consolidated Blackstone Funds and $298.3 million and $311.4 million, respectively, of payables relating to unsettled purchases.

The Blackstone Group Inc.

Notes to Consolidated Financial Statements—Continued

(All Dollars Are in Thousands, Except Share and Per Share Data, Except Where Noted)

12.	Offsetting of Assets and Liabilities

The following tables present the offsetting of assets and liabilities as of December 31, 2019 and 2018:

		December 31, 2019
		Gross and Net Amounts of Assets Presented in the Statement of Financial Condition				Gross Amounts Not Offset in the Statement of Financial Condition
	Financial Instruments (a)				Cash Collateral Received				Net Amount
Assets
Freestanding Derivatives		$	54,479			$	380			$	—			$	54,099

		December 31, 2019
		Gross and Net Amounts of Liabilities Presented in the Statement of Financial Condition				Gross Amounts Not Offset in the Statement of Financial Condition
	Financial Instruments (a)				Cash Collateral Pledged				Net Amount
Liabilities
Freestanding Derivatives		$	10,215			$	380			$	9,198			$	637
Repurchase Agreements			154,118				154,118				—				—
		$	164,333			$	154,498			$	9,198			$	637

		December 31, 2018
		Gross and Net Amounts of Assets Presented in the Statement of Financial Condition				Gross Amounts Not Offset in the Statement of Financial Condition
	Financial Instruments (a)				Cash Collateral Received				Net Amount
Assets
Freestanding Derivatives		$	45,416			$	37,788			$	5,547			$	2,081

The Blackstone Group Inc.

Notes to Consolidated Financial Statements—Continued

(All Dollars Are in Thousands, Except Share and Per Share Data, Except Where Noted)

		December 31, 2018
		Gross and Net Amounts of Liabilities Presented in the Statement of Financial Condition				Gross Amounts Not Offset in the Statement of Financial Condition
	Financial Instruments				Cash Collateral Pledged				Net Amount
Liabilities
Freestanding Derivatives		$	52,844			$	35,905			$	15,377			$	1,562
Repurchase Agreements			222,202				222,202				—				—
		$	275,046			$	258,107			$	15,377			$	1,562

(a)	Amounts presented are inclusive of both legally enforceable master netting agreements, and financial instruments received or pledged as collateral. Financial instruments received or pledged as collateral offset derivative counterparty risk exposure, but do not reduce net balance sheet exposure.

Repurchase Agreements are presented separately on the Statements of Financial Condition. Freestanding Derivative assets are included in Other Assets in the Statements of Financial Condition. See Note 11. “Other Assets and Accounts Payable, Accrued Expenses and Other Liabilities” for the components of Other Assets.

Freestanding Derivative liabilities are included in Accounts Payable, Accrued Expenses and Other Liabilities in the Consolidated Statements of Financial Condition and are not a significant component thereof.

Notional Pooling Arrangement

Blackstone has a notional cash pooling arrangement with a financial institution for cash management purposes. This arrangement allows for cash withdrawals based upon aggregate cash balances on deposit at the same financial institution. Cash withdrawals cannot exceed aggregate cash balances on deposit. The net balance of cash on deposit and overdrafts is used as a basis for calculating net interest expense or income. As of December 31, 2019, the aggregate cash balance on deposit relating to the cash pooling arrangement was $1.0 billion, which was offset with an accompanying overdraft of $1.0 billion.

13.	Borrowings

On April 10, 2019, Blackstone, through its indirect subsidiary Blackstone Holdings Finance Co. L.L.C. (the “Issuer”), issued

€

600 million aggregate principal amount of Senior Notes due April 10, 2029 (the “2029 Notes”). The 2029 Notes have an interest rate of 1.500% per annum, accruing from April 10, 2019. Interest on the 2029 Notes is payable annually in arrears on April 10 of each year, commencing on April 10, 2020.

On September 3, 2019, Blackstone, through the Issuer, commenced a cash tender offer (the “Tender Offer”) for any and all of its 5.875% Senior Notes maturing on March 15, 2021 (the “2021 Notes”). On September 9, 2019, the Tender Offer expired and $175.0 million aggregate principal amount of the 2021 Notes were validly tendered for payment. Payment for the tendered notes was made on September 10, 2019.

On September 10, 2019, the Issuer exercised its rights under the optional redemption provisions of the 2021 Notes to notice all of the outstanding 2021 Notes, that were not previously tendered in the Tender Offer, for redemption. On October 10, 2019, the Issuer redeemed all such remaining 2021 Notes.

On September 10, 2019, the Issuer issued $500 million aggregate principal amount of senior notes maturing January 10, 2030 (the “2030 Notes”) and $400 million aggregate principal amount of senior notes maturing September 10, 2049 (the “2049 Notes”). The 2030 Notes have an interest rate of 2.500% per annum, accruing from

The Blackstone Group Inc.

Notes to Consolidated Financial Statements—Continued

(All Dollars Are in Thousands, Except Share and Per Share Data, Except Where Noted)

September 10, 2019. The 2049 Notes have an interest rate of 3.500% per annum, accruing from September 10, 2019. Interest on the 2030 Notes is payable semi-annually in arrears on January 10 and July 10 of each year, commencing on January 10, 2020. Interest on the 2049 Notes is payable semi-annually in arrears on March 10 and September 10 of each year, commencing on March 10, 2020.

The 2029 Notes, 2030 Notes and 2049 Notes are unsecured and unsubordinated obligations of the Issuer. The 2029 Notes, 2030 Notes and 2049 Notes are fully and unconditionally guaranteed, joint and severally, by The Blackstone Group Inc. and its indirect subsidiaries, Blackstone Holdings Partnerships (the “Guarantors”). The guarantees are unsecured and unsubordinated obligations of the Guarantors. Transaction costs related to the issuance of the 2029 Notes, 2030 Notes and 2049 Notes have been capitalized and are being amortized over the life of the 2029 Notes, 2030 Notes and 2049 Notes.

Blackstone borrows and enters into credit agreements for its general operating and investment purposes and certain Blackstone Funds borrow to meet financing needs of their operating and investing activities. Borrowing facilities have been established for the benefit of selected Blackstone Funds. When a Blackstone Fund borrows from the facility in which it participates, the proceeds from the borrowing are strictly limited for its intended use by the borrowing fund and not available for other Blackstone purposes. Blackstone’s credit facilities consist of the following:

		December 31,
		2019												2018
		Credit Available				Borrowing Outstanding				Effective Interest Rate				Credit Available				Borrowing Outstanding				Effective Interest Rate
Revolving Credit Facility (a)		$	1,600,000			$	—				—			$	1,600,000			$	—				—
Blackstone Issued Senior Notes (b)
5.875%, Due 3/15/2021			—				—				—				400,000				400,000				6.01%
4.750%, Due 2/15/2023			400,000				400,000				5.08%				400,000				400,000				5.08%
2.000%, Due 5/19/2025			336,390				336,390				2.12%				344,010				344,010				2.14%
1.000%, Due 10/5/2026			672,780				672,780				1.13%				688,020				688,020				1.14%
3.150%, Due 10/2/2027			300,000				300,000				3.30%				300,000				300,000				3.30%
1.500%, Due 4/10/2029			672,780				672,780				1.70%				—				—				—
2.500%, Due 1/10/2030			500,000				500,000				2.71%				—				—				—
6.250%, Due 8/15/2042			250,000				250,000				6.65%				250,000				250,000				6.65%
5.000%, Due 6/15/2044			500,000				500,000				5.16%				500,000				500,000				5.16%
4.450%, Due 7/15/2045			350,000				350,000				4.56%				350,000				350,000				4.56%
4.000%, Due 10/2/2047			300,000				300,000				4.20%				300,000				300,000				4.20%
3.500%, Due 9/10/2049			400,000				400,000				3.61%				—				—				—
			6,281,950				4,681,950								5,132,030				3,532,030
Blackstone Fund Facilities (c)			113				113				3.68%				—				—				—
CLO Vehicles (d)			6,859,535				6,859,535				3.55%				6,863,285				6,863,285				4.20%
		$	13,141,598			$	11,541,598							$	11,995,315			$	10,395,315

(a)

The Issuer has a credit facility (the “Credit Facility”) with Citibank, N.A., as Administrative Agent in the amount of $1.6 billion with a maturity date of September 21, 2023. Interest on the borrowings is based on an adjusted LIBOR rate or alternate base rate, in each case plus a margin, and undrawn commitments bear a commitment fee of 0.06%. The margin above adjusted LIBOR used to calculate the interest on borrowings was 0.75% as of December 31, 2019 and 2018. The margin is subject to change based on Blackstone’s credit rating. Borrowings may also be made in U.K. sterling, euros, Swiss francs, Japanese yen or Canadian dollars, in each case subject to certain sub-limits. The Credit Facility contains customary representations, covenants and events of default. Financial covenants consist of a maximum net leverage ratio and a requirement to keep a minimum amount of fee-earning assets under management, each tested quarterly. The Borrowing Outstanding at each date represent outstanding but undrawn letters of credit against the credit facility.

The Blackstone Group Inc.

Notes to Consolidated Financial Statements—Continued

(All Dollars Are in Thousands, Except Share and Per Share Data, Except Where Noted)

(b)

The Issuer has issued long-term borrowings in the form of senior notes (the “Notes”). The Notes are unsecured and unsubordinated obligations of the Issuer. The Notes are fully and unconditionally guaranteed, jointly and severally, by Blackstone, Blackstone Holdings (the “Guarantors”), and the Issuer. The guarantees are unsecured and unsubordinated obligations of the Guarantors. Transaction costs related to the issuance of the Notes have been deducted from the Note liability and are being amortized over the life of the Notes. The indentures include covenants, including limitations on the Issuer’s and the Guarantors’ ability to, subject to exceptions, incur indebtedness secured by liens on voting stock or profit participating equity interests of their subsidiaries or merge, consolidate or sell, transfer or lease assets. The indentures also provide for events of default and further provide that the trustee or the holders of not less than 25% in aggregate principal amount of the outstanding Notes may declare the Notes immediately due and payable upon the occurrence and during the continuance of any event of default after expiration of any applicable grace period. In the case of specified events of bankruptcy, insolvency, receivership or reorganization, the principal amount of the Notes and any accrued and unpaid interest on the Notes automatically become due and payable. All or a portion of the Notes may be redeemed at the Issuer’s option in whole or in part, at any time and from time to time, prior to their stated maturity, at the make-whole redemption price set forth in the Notes. If a change of control repurchase event occurs, the holders of the Notes may require the Issuer to repurchase the Notes at a repurchase price in cash equal to 101% of the aggregate principal amount of the Notes repurchased plus any accrued and unpaid interest on the Notes repurchased to, but not including, the date of repurchase.

(c)

Represents borrowing facilities for the various consolidated Blackstone Funds used to meet liquidity and investing needs. Certain borrowings under these facilities were used for bridge financing and general liquidity purposes. Other borrowings were used to finance the purchase of investments with the borrowing remaining in place until the disposition or refinancing event. Such borrowings have varying maturities and are rolled over until the disposition or a refinancing event. Because the timing of such events is unknown and may occur in the near term, these borrowings are considered short-term in nature. Borrowings bear interest at spreads to market rates. Borrowings were secured according to the terms of each facility and are generally secured by the investment purchased with the proceeds of the borrowing and/or the uncalled capital commitment of each respective fund. Certain facilities have commitment fees. When a fund borrows, the proceeds are available only for use by that fund and are not available for the benefit of other funds. Collateral within each fund is also available only against the borrowings by that fund and not against the borrowings of other funds.

(d)	Represents borrowings due to the holders of debt securities issued by CLO vehicles consolidated by Blackstone. These amounts are included within Loans Payable and Due to Affiliates within the Consolidated Statements of Financial Condition.

The following table presents the general characteristics of each of our notes, as well as their carrying value and fair value. The notes are included in Loans Payable within the Consolidated Statements of Financial Condition. All of the notes were issued at a discount. All of the notes accrue interest from the issue date thereof and all pay interest in arrears on a

semi-annual

basis or annual basis.

The Blackstone Group Inc.

Notes to Consolidated Financial Statements—Continued

(All Dollars Are in Thousands, Except Share and Per Share Data, Except Where Noted)

		December 31,
		2019								2018
Senior Notes		Carrying Value				Fair Value (a)				Carrying Value				Fair Value (a)
5.875%, Due 3/15/2021		$	—			$	—			$	398,947			$	421,720
4.750%, Due 2/15/2023			396,247				429,280				395,166				417,600
2.000%, Due 5/19/2025			332,393				365,521				339,959				352,197
1.000%, Due 10/5/2026			664,229				691,012				679,193				647,564
3.150%, Due 10/2/2027			297,046				309,540				296,717				285,030
1.500%, Due 4/10/2029			667,425				708,841				—				—
2.500%, Due 1/10/2030			489,841				493,500				—				—
6.250%, Due 8/15/2042			238,437				338,200				238,221				289,225
5.000%, Due 6/15/2044			488,968				606,700				488,747				490,150
4.450%, Due 7/15/2045			344,157				396,235				344,038				329,770
4.000%, Due 10/2/2047			290,344				321,780				290,163				262,800
3.500%, Due 9/10/2049			391,769				399,961				—				—
		$	4,600,856			$	5,060,570			$	3,471,151			$	3,496,056

(a)	Fair value is determined by broker quote and these notes would be classified as Level II within the fair value hierarchy.

Included within Loans Payable and Due to Affiliates within the Consolidated Statements of Financial Condition are amounts due to holders of debt securities issued by Blackstone’s consolidated CLO vehicles. Borrowings through the consolidated CLO vehicles consisted of the following:

		December 31,
		2019												2018
		Borrowing Outstanding				Effective Interest Rate				Weighted- Average Remaining Maturity in Years				Borrowing Outstanding				Effective Interest Rate				Weighted- Average Remaining Maturity in Years
Senior Secured Notes		$	6,527,800				3.55%				3.5			$	6,531,550				4.20%				7.5
Subordinated Notes			331,735				(a)				N/A				331,735				(a)				N/A
		$	6,859,535											$	6,863,285

(a)	The Subordinated Notes do not have contractual interest rates but instead receive distributions from the excess cash flows of the CLO vehicles.

The Blackstone Group Inc.

Notes to Consolidated Financial Statements—Continued

(All Dollars Are in Thousands, Except Share and Per Share Data, Except Where Noted)

Senior Secured Notes and Subordinated Notes comprise the following amounts:

		December 31,
		2019												2018
						Amounts Due to Non- Consolidated Affiliates												Amounts Due to Non- Consolidated Affiliates
		Fair Value				Borrowing Outstanding				Fair Value				Fair Value				Borrowing Outstanding				Fair Value
Senior Secured Notes		$	6,512,733			$	57,750			$	57,717			$	6,476,434			$	3,250			$	3,201
Subordinated Notes			45,273				44,734				20,535				60,289				111,659				52,811
		$	6,558,006			$	102,484			$	78,252			$	6,536,723			$	114,909			$	56,012

The Loans Payable of the consolidated CLO vehicles are collateralized by assets held by each respective CLO vehicle and assets of one vehicle may not be used to satisfy the liabilities of another. This collateral consisted of Cash, Corporate Loans, Corporate Bonds and other securities. As of December 31, 2019 and 2018, the fair value of the consolidated CLO assets was $7.2 billion and $7.1 billion, respectively.

As part of Blackstone’s borrowing arrangements, Blackstone is subject to certain financial and operating covenants. Blackstone was in compliance with all of its loan covenants as of December 31, 2019.

Scheduled principal payments for borrowings at December 31, 2019 were as follows:

		Operating Borrowings				Blackstone Fund Facilities / CLO Vehicles				Total Borrowings
2020		$	—			$	113			$	113
2021			—				—				—
2022			—				—				—
2023			400,000				—				400,000
2024			—				—				—
Thereafter			4,281,950				6,859,535				11,141,485
		$	4,681,950			$	6,859,648			$	11,541,598

14.	Leases

Blackstone enters into

non-cancelable

lease and sublease agreements primarily for office space, which expire on various dates through 2030. Occupancy lease agreements, in addition to base rentals, generally are subject to escalation provisions based on certain costs incurred by the landlord, and are recognized on a straight-line basis over the term of the lease agreement. Rent expense includes base contractual rent and variable costs such as building expenses, utilities, taxes and insurance. At December 31, 2019 and 2018, Blackstone maintained irrevocable standby letters of credit and cash deposits as security for the leases of $7.5 million and $7.9 million, respectively. As of December 31, 2019, the weighted-average remaining lease term was 7.3 years, and the weighted-average discount rate was 2.4%.

The Blackstone Group Inc.

Notes to Consolidated Financial Statements—Continued

(All Dollars Are in Thousands, Except Share and Per Share Data, Except Where Noted)

The components of lease expense were as follows:

		Year Ended December 31, 2019
Operating Lease Cost (a)
Straight-Line Lease Cost (b)		$	90,640
Variable Lease Cost			14,574
Sublease Income			(796	)
		$	104,418

(a)	Rent expense for the years ended December 31, 2018 and 2017, was $109.9 million and $104.7 million, respectively.

(b)	Straight-line lease cost includes short-term leases, which are immaterial.

Supplemental cash flow information related to leases were as follows:

		Year Ended December 31, 2019
Operating Cash Flows for Operating Leases		$	94,854
Non-Cash Right-of-Use Assets Obtained in Exchange for New Operating Lease Liabilities			10,053

The following table shows the undiscounted cash flows on an annual basis for Operating Lease Liabilities as of December 31, 2019:

2020		$	84,639
2021			88,638
2022			79,533
2023			77,287
2024			65,289
Thereafter			207,090
Total Lease Payments (a)			602,476
Less: Imputed Interest			(59,482	)
Present Value of Operating Lease Liabilities		$	542,994

(a)	Excludes $138.7 million of lease payments for signed leases that have not yet commenced.

As of December 31, 2018, the aggregate minimum future payments, net of sublease income, required on operating leases are as follows:

2019		$	78,506
2020			72,191
2021			80,914
2022			79,094
2023			77,248
Thereafter			273,347
Total		$	661,300

The Blackstone Group Inc.

Notes to Consolidated Financial Statements—Continued

(All Dollars Are in Thousands, Except Share and Per Share Data, Except Where Noted)

15.	Income Taxes

The Income Before Provision (Benefit) for Taxes consists of the following:

		Year Ended December 31,
		2019				2018				2017
Income Before Provision (Benefit) for Taxes
U.S. Domestic Income		$	3,547,292			$	3,308,202			$	3,956,339
Foreign Income			270,723				204,739				161,750
		$	3,818,015			$	3,512,941			$	4,118,089

The Provision (Benefit) for Taxes consists of the following:

		Year Ended December 31,
		2019				2018				2017
Current
Federal Income Tax		$	74,611			$	73,525			$	31,457
Foreign Income Tax			38,098				42,128				36,083
State and Local Income Tax			19,267				53,961				40,507
			131,976				169,614				108,047
Deferred
Federal Income Tax			(222,790	)			59,924				613,518
Foreign Income Tax			312				(2,518	)			(34	)
State and Local Income Tax			42,550				22,370				21,616
			(179,928	)			79,776				635,100
Provision (Benefit) for Taxes		$	(47,952	)		$	249,390			$	743,147

The following table summarizes Blackstone’s tax position:

		Year Ended December 31,
		2019				2018				2017
Income Before Provision (Benefit) for Taxes		$	3,818,015			$	3,512,941			$	4,118,089
Provision (Benefit) for Taxes		$	(47,952	)		$	249,390			$	743,147
Effective Income Tax Rate			-1.3	%			7.1	%			18.0	%

The Blackstone Group Inc.

Notes to Consolidated Financial Statements—Continued

(All Dollars Are in Thousands, Except Share and Per Share Data, Except Where Noted)

The following table reconciles the effective income tax rate to the U.S. federal statutory tax rate:

														2019				2018
		Year Ended December 31,												vs.				vs.
		2019				2018				2017				2018				2017
Statutory U.S. Federal Income Tax Rate			21.0	%			21.0	%			35.0	%			—				-14.0	%
Income Passed Through to Common Shareholders and Non-Controlling Interest Holders (a)			-13.5	%			-15.5	%			-25.9	%			2.0	%			10.4	%
State and Local Income Taxes			1.6	%			1.8	%			1.5	%			-0.2	%			0.3	%
Equity-Based Compensation			—				—				-0.1	%			—				0.1	%
Change to a Taxable Corporation			-10.3	%			—				—				-10.3	%			—
Impact of the Tax Reform Bill			—				—				8.3	%			—				-8.3	%
Change in Valuation Allowance (b)			-0.8	%			—				—				-0.8	%			—
Other			0.7	%			-0.2	%			-0.8	%			0.9	%			0.6	%
Effective Income Tax Rate			-1.3	%			7.1	%			18.0	%			-8.4	%			-10.9	%

(a)	Includes income that was not taxable to Blackstone and its subsidiaries. Such income was directly taxable to the common unitholders for the period prior to the Conversion and remains taxable to Blackstone’s non-controlling interest holders.

(b)	The Change in Valuation Allowance for the year ended December 31, 2019 represents the change from July 1, 2019 to December 31, 2019, following the change to a taxable corporation.

Prior to the Conversion, Blackstone and certain of its subsidiaries operated in the U.S. as partnerships for income tax purposes (partnerships generally are not subject to federal income taxes) and generally as corporate entities in

non-U.S.

jurisdictions. Subsequent to the Conversion, all income attributable to Blackstone is subject to U.S. corporate income taxes.

The termination of the status of Blackstone as a Partnership in the Conversion has been treated as a change in tax status under GAAP guidance on accounting for income taxes.

These rules require that the deferred tax effects of a change in tax status be recorded to income from continuing operations on the date the Partnership status terminates. Blackstone has calculated the estimated effect of the change in tax status to be a tax benefit of approximately $394.8 million, net of a valuation allowance of approximately $648.2 million.

The Conversion resulted in a

step-up

in the recognition of tax basis of certain assets that will be recovered as those assets are sold or the basis is amortized. The basis information currently available to us represents an estimate of the basis in our subsidiaries at July 1, 2019. The final tax basis may differ as the additional information becomes available and is finalized.

U.S. federal income tax reform legislation, known as the Tax Cuts and Jobs Act, was signed into law on December 22, 2017 (the “Tax Reform Bill”). In December 2017 the SEC staff issued guidance on accounting for the tax effects of the Tax Reform Bill, which provided that the income tax effects of those aspects of the Tax Reform Bill for which Blackstone’s accounting for income taxes was complete must be reflected in that current period. The Tax Reform Bill reduced the corporate federal income tax rate from 35% to 21% effective January 1, 2018. Consequently, Blackstone recorded a decrease related to the net deferred tax assets of $500.6 million with a corresponding net adjustment to deferred income tax expense of $500.6 million for the year ended December 31, 2017. The remeasurement was partially offset by a $160.3 million tax benefit resulting from the $403.9 million reduction to the liability under the Tax Receivable Agreement resulting from the reduction of the federal income tax rate. The net impact to the 2017 effective tax rate was an 8.3% increase. During the quarter ended December 31, 2018 Blackstone completed its accounting for the income tax effects for the Tax Reform Bill, and no significant adjustments were made to the provisional amounts previously recorded.

The Blackstone Group Inc.

Notes to Consolidated Financial Statements—Continued

(All Dollars Are in Thousands, Except Share and Per Share Data, Except Where Noted)

Further, the Tax Reform Bill include

d

a

one-time

deemed repatriation on undistributed foreign earnings and profits (referred to as the transition tax), which was not material to Blackstone.

The Tax Reform Bill also established new tax laws that became effective with the tax year beginning January 1, 2018, including, but not limited to, a new provision designed to tax global intangible

low-taxed

income, a tax determined by base erosion and

anti-tax

abuse tax benefits from certain payments between a U.S. corporation and foreign subsidiaries and interest expense limitation. The net effect on the 2018 provision for income taxes for these provisions

we

re immaterial.

Deferred income taxes reflect the net tax effects of temporary differences that may exist between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes using enacted tax rates in effect for the year in which the differences are expected to reverse. A summary of the tax effects of the temporary differences is as follows:

		December 31,
		2019				2018
Deferred Tax Assets
Fund Management Fees		$	—			$	6,955
Equity-Based Compensation			—				69,484
Amortization and Depreciation			—				768,984
Investment Basis Differences/Net Unrealized Gains and Losses			1,712,982				—
Other			5,342				—
Total Deferred Tax Assets Before Valuation Allowance			1,718,324				845,423
Valuation Allowance			(629,019	)			—
Total Net Deferred Tax Assets			1,089,305				845,423
Deferred Tax Liabilities
Investment Basis Differences/Net Unrealized Gains and Losses			20,267				71,472
Other			—				34,469
Total Deferred Tax Liabilities			20,267				105,941
Net Deferred Tax Asset s		$	1,069,038			$	739,482

The primary reason for the increase in the deferred tax asset balances from the prior year end is the Conversion, in connection with which Blackstone recognized a

step-up

in the tax basis of certain assets and recorded corresponding deferred tax benefits, net of valuation allowances. Future realization of tax benefits depends on the expectation and character of taxable income within a certain period of time. The timing of realizability for certain deferred tax assets is determined by reference to the amortization and depreciation periods of the underlying tax basis of assets and ranges from 15 to 40 years. Blackstone has considered these amortization and depreciation periods as well as the character of income in evaluating whether it should establish valuation allowances. In addition, Blackstone has no taxable loss carryforward at December 31, 2019.

In evaluating the ability to realize deferred tax assets, Blackstone also considers projections of taxable income (including character of such income), beginning with historic results and incorporating assumptions of the amount of future pretax operating income. These assumptions about future taxable income require significant judgment and are consistent with the plans and estimates that Blackstone uses to manage its business. Certain deferred tax assets are not considered to be more likely than not to be realized due to the character of income necessary for realization. For those deferred tax assets, valuation allowances have been recorded.

Currently, Blackstone does not believe it meets the indefinite reversal criteria that would preclude Blackstone from recognizing a deferred tax liability with respect to its foreign subsidiaries. Therefore, Blackstone recorded a deferred tax liability for any outside basis difference of an investment in a foreign subsidiary.

The Blackstone Group Inc.

Notes to Consolidated Financial Statements—Continued

(All Dollars Are in Thousands, Except Share and Per Share Data, Except Where Noted)

Blackstone files its tax returns as prescribed by the tax laws of the jurisdictions in which it operates. In the normal course of business, Blackstone is subject to examination by federal and certain state, local and foreign tax regulators. As of December 31, 2019, Blackstone’s U.S. federal income tax returns for the years 2016 through 2018

are open under the normal three-year statute of limitations and therefore subject to examination. State and local tax returns are generally subject to audit from 2015 through 2018. Certain subsidiaries’ tax returns for the years 2008 through 2017 are currently subject to examination by various regulators. Blackstone believes that during 20

,

certain tax examinations have a reasonable possibility of being completed and does not expect the results of these examinations to have a material impact on the consolidated financial statements.

Blackstone’s unrecognized tax benefits, excluding related interest and penalties, were:

		December 31,
		2019				2018				2017
Unrecognized Tax Benefits — January 1		$	20,864			$	11,454			$	3,581
Additions for Tax Positions of Prior Years			4,908				9,671				11,167
Reductions for Tax Positions of Prior Years			—				(323	)			(1,860	)
Settlements			(829	)			—				(1,382	)
Exchange Rate Fluctuations			15				62				(52	)
Unrecognized Tax Benefits — December 31		$	24,958			$	20,864			$	11,454

If recognized, the above tax benefits of

$25.0 million and $20.9 million for the years ended December 31, 2019 and 2018, respectively, would reduce the annual effective rate. Blackstone does not believe that it will have a material increase or decrease in its unrecognized tax benefits during the coming year.

The unrecognized tax benefits are recorded in Accounts Payable, Accrued Expense and Other Liabilities in the Consolidated Statements of Financial Condition.

Blackstone recognizes interest and penalties accrued related to unrecognized tax benefits in General, Administrative and Other Expenses. During the years ended December 31, 2019, 2018 and 2017, $0.5 million, $1.8 million and $(0.4) million of interest expense were accrued (reversed), respectively. During the years ended December 31, 2019, 2018 and 2017, no penalties were accrued.

Other Income — Change in Tax Receivable Agreement Liability

In 2019, the $161.6 million Change in Tax Receivable Agreement Liability was primarily attributable to the Conversion.

In 2017, the $403.9 million Change in Tax Receivable Agreement Liability was primarily attributable to the reduction in the corporate federal tax rate from 35% to 21% pursuant to the Tax Reform Bill.

The Blackstone Group Inc.

Notes to Consolidated Financial Statements—Continued

(All Dollars Are in Thousands, Except Share and Per Share Data, Except Where Noted)

16.	Earnings Per Share and Stockholder’s Equity

Basic and diluted net income per share of Class A common stock for the years ended December 31, 2019, 2018 and 2017 was calculated as follows:

		Year Ended December 31,
		2019				2018				2017
Net Income for Per Share of Class A Common Stock Calculations
Net Income Attributable to The Blackstone Group Inc., Basic		$	2,049,682			$	1,541,788			$	1,471,374
Incremental Net Income from Assumed Exchange of Blackstone Holdings Partnership Units			—				1,185,799				—
Net Income Attributable to The Blackstone Group Inc., Diluted		$	2,049,682			$	2,727,587			$	1,471,374
Shares/Units Outstanding
Weighted-Average Shares of Class A Common Stock Outstanding, Basic			675,900,466				678,850,245				665,453,198
Weighted-Average Shares of Unvested Deferred Restricted Class A Common Stock			267,385				226,487				793,648
Weighted-Average Blackstone Holdings Partnership Units			—				527,886,114				—
Weighted-Average Shares of Class A Common Stock Outstanding, Diluted			676,167,851				1,206,962,846				666,246,846
Net Income Per Share of Class A Common Stock
Basic		$	3.03			$	2.27			$	2.21
Diluted		$	3.03			$	2.26			$	2.21
Dividends Declared Per Share of Class A Common Stock (a)		$	1.92			$	2.42			$	2.32

(a)	Dividends declared reflects the calendar date of the declaration for each distribution. The fourth quarter dividends, if any, for any fiscal year will be declared and paid in the subsequent fiscal year.

In computing the dilutive effect that the exchange of Blackstone Holdings Partnership Units would have on Net Income Per Share of Class A Common Stock, Blackstone considered that net income available to holders of shares of Class A common stock would increase due to the elimination of

non-controlling

interests in Blackstone Holdings, inclusive of any tax impact. The hypothetical conversion may be dilutive to the extent there is activity at The Blackstone Group Inc. level that has not previously been attributed to the

non-controlling

interests or if there is a change in tax rate as a result of a hypothetical conversion.

The following table summarizes the anti-dilutive securities for the periods indicated:

		Year Ended December 31,
		2019				2018				2017
Weighted-Average Blackstone Holdings Partnership Units			524,211,887				—				533,982,613

Stockholder’s Equity

In connection with the Conversion, effective July 1, 2019, each common unit of the Partnership outstanding immediately prior to the Conversion converted into one issued and outstanding, fully paid and nonassessable share of Class A common stock, $0.00001 par value per share, of the Company. The special voting unit of the Partnership outstanding immediately prior to the Conversion converted into one issued and outstanding, fully paid and nonassessable share of Class B common stock, $0.00001 par value per share, of the Company. The general partner units of the Partnership outstanding immediately prior to the Conversion converted into one issued and outstanding, fully paid and nonassessable share of Class C common stock, $0.00001 par value per share, of the Company.

The Blackstone Group Inc.

Notes to Consolidated Financial Statements—Continued

(All Dollars Are in Thousands, Except Share and Per Share Data, Except Where Noted)

The Class A and Class B common stock generally are

non-voting.

The Class B common stock generally will vote together with the Class A common stock as a single class on those few matters that may be submitted for a vote of the Class A common stock. The Class C common stock is the only class of the Company’s common stock entitled to vote at a meeting of shareholders (or take similar action by written consent) in the election of directors and generally with respect to all other matters submitted to a vote of shareholders. The Class B and Class C common stockholders are not entitled to dividends from the Company, or receipt of any of the Company’s assets in the event of any dissolution, liquidation or winding up. Blackstone Partners L.L.C. is the sole holder of the Class B common stock and Blackstone Group Management L.L.C. is the sole holder of the Class C common stock.

In connection with the Conversion on July 1, 2019, the Company authorized 9 billion shares of preferred stock with a par value of $0.00001. There were no shares of preferred stock issued and outstanding as of December 31, 2019.

Share Repurchase Program

On July 16, 2019, Blackstone’s board of directors authorized the repurchase of up to $1.0 billion of Class A common stock and Blackstone Holdings Partnership Units. Under the repurchase program, repurchases may be made from time to time in open market transactions, in privately negotiated transactions or otherwise. The timing and the actual numbers repurchased will depend on a variety of factors, including legal requirements, price and economic and market conditions. The repurchase program may be changed, suspended or discontinued at any time and does not have a specified expiration date.

During the year ended December 31, 2017, no units were repurchased. During the year ended December 31, 2018, Blackstone repurchased 16.0 million shares of Blackstone Class A common stock at a total cost of $541.5 million. During the year ended December 31, 2019, Blackstone repurchased 12.8 million shares of Blackstone Class A common stock at a total cost of $561.9 million. As of December 31, 2019, the amount remaining available for repurchases under the program was $781.2 million.

Shares Eligible for Dividends and Distributions

As of December 31, 2019, the total number of shares of Class A common stock and Blackstone Holdings Partnership Units entitled to participate in dividends and distributions were as follows:

		Shares/Units
Class A Common Stock Outstanding			671,157,692
Unvested Participating Common Stock			9,299,732
Total Participating Common Stock			680,457,424
Participating Blackstone Holdings Partnership Units			515,973,657
			1,196,431,081

17. Equity-Based Compensation

Blackstone has granted equity-based compensation awards to Blackstone’s senior managing directors,

non-partner

professionals,

non-professionals

and selected external advisers under Blackstone’s Amended and Restated 2007 Equity Incentive Plan (the “Equity Plan”). The Equity Plan allows for the granting of options, share appreciation rights or other share-based awards (shares, restricted shares, restricted shares of Class A common stock, deferred restricted shares of Class A common stock, phantom restricted shares of Class A common stock or other share-based awards based in whole or in part on the fair market value of shares of Blackstone Class A common stock or Blackstone Holdings Partnership Units) which may contain certain service or performance requirements. As of January 1, 2019, Blackstone had the ability to grant 171,502,746 shares under the Equity Plan.

The Blackstone Group Inc.

Notes to Consolidated Financial Statements—Continued

(All Dollars Are in Thousands, Except Share and Per Share Data, Except Where Noted)

For the years ended December 31, 2019, 2018 and 2017 Blackstone recorded compensation expense of $417.1 million, $366.9 million, and $338.7 million, respectively, in relation to its equity-based awards with corresponding tax benefits of $47.8 million, $59.0 million, and $47.1 million, respectively.

As of December 31, 2019, there was $918.0 million of estimated unrecognized compensation expense related to unvested awards. This cost is expected to be recognized over a weighted-average period of 3.7 years.

Total vested and unvested outstanding shares, including Blackstone Class A common stock, Blackstone Holdings Partnership Units and deferred restricted shares of Class A common stock, were 1,196,806,346 as of December 31, 2019. Total outstanding unvested phantom shares were 56,426 as of December 31, 2019.

A summary of the status of Blackstone’s unvested equity-based awards as of December 31, 2019 and of changes during the period January 1, 2019 through December 31, 2019 is presented below:

		Blackstone Holdings								The Blackstone Group Inc.
										Equity Settled Awards								Cash Settled Awards
Unvested Shares/Units		Partnership Units				Weighted- Average Grant Date Fair Value				Deferred Restricted Shares of Class A Common Stock				Weighted- Average Grant Date Fair Value				Phantom Shares				Weighted- Average Grant Date Fair Value
Balance, December 31, 2018			31,554,127			$	34.38				9,312,268			$	31.43				46,808			$	34.66
Granted			9,094,157				43.57				3,639,947				38.80				20,355				50.71
Vested			(6,893,962	)			35.68				(3,272,213	)			31.18				(11,035	)			48.59
Forfeited			(1,595,104	)			31.77				(710,266	)			22.60				(4,787	)			47.95
Balance, December 31, 2019			32,159,218			$	36.25				8,969,736			$	35.26				51,341			$	52.85

Shares/Units Expected to Vest

The following unvested shares and units, after expected forfeitures, as of December 31, 2019, are expected to vest:

		Shares/Units				Weighted-Average Service Period in Years
Blackstone Holdings Partnership Units			25,800,455				3.2
Deferred Restricted Shares of Class A Common Stock			7,465,122				2.2
Total Equity-Based Awards			33,265,577				2.9
Phantom Shares			39,155				2.9

Deferred Restricted Shares of Class A Common Stock and Phantom Shares

Blackstone has granted deferred restricted shares of Class A common stock to certain senior and

non-senior

managing director professionals, analysts and senior finance and administrative personnel and selected external advisers and phantom shares (cash settled equity-based awards) to other senior and

non-senior

managing director employees. Holders of deferred restricted shares of Class A common stock and phantom shares are not entitled to any voting rights. Only phantom shares are to be settled in cash.

The fair values of deferred restricted shares of Class A common stock have been derived based on the closing price of Blackstone’s Class A common stock on the date of the grant, multiplied by the number of unvested awards and expensed over the assumed service period, which ranges from 1 to 5 years. Additionally, the calculation of the compensation expense assumes forfeiture rates based on historical turnover rates, ranging from 1.0% to 13.1% annually by employee class, and a per share discount, ranging from $0.39 to $10.88.

The Blackstone Group Inc.

Notes to Consolidated Financial Statements—Continued

(All Dollars Are in Thousands, Except Share and Per Share Data, Except Where Noted)

The phantom shares vest over the assumed service period, which ranges from 1 to 5 years. On each such vesting date, Blackstone delivered or will deliver cash to the holder in an amount equal to the number of phantom shares held multiplied by the then fair market value of Blackstone’s Class A common stock on such date. Additionally, the calculation of the compensation expense assumes a forfeiture rate based on a historical turnover rate ranging from 9.6% to 13.1% annually by employee class. Blackstone is accounting for these cash settled awards as a liability.

Blackstone paid $0.4 million, $0.2 million and $0.3 million to

non-senior

managing director employees in settlement of phantom shares for the years ended December 31, 2019, 2018 and 2017, respectively.

Blackstone Holdings Partnership Units

Blackstone has granted deferred restricted Blackstone Holdings Partners Units to certain newly hired and

pre-existing

senior managing directors. Holders of deferred restricted Blackstone Holdings Partnership Units are not entitled to any voting rights.

The fair values of deferred restricted Blackstone Holdings Partnership Units have been derived based on the closing price of Blackstone’s common units on the date of the grant, multiplied by the number of unvested awards and expensed over the assumed service period, which ranges from 1 to 8 years. Additionally, the calculation of the compensation expense assumes a forfeiture rate of 5.6%, based on historical experience.

18. Related Party Transactions

Affiliate Receivables and Payables

Due from Affiliates and Due to Affiliates consisted of the following:

		December 31,
		2019				2018
Due from Affiliates
Management Fees, Performance Revenues, Reimbursable Expenses and Other Receivables from Non-Consolidated Entities and Portfolio Companies		$	1,999,568			$	1,520,100
Due from Certain Non-Controlling Interest Holders and Blackstone Employees			573,679				462,475
Accrual for Potential Clawback of Previously Distributed Performance Allocations			21,626				11,548
		$	2,594,873			$	1,994,123

		December 31,
		2019				2018
Due to Affiliates
Due to Certain Non-Controlling Interest Holders in Connection with the Tax Receivable Agreements		$	672,981			$	796,902
Due to Non-Consolidated Entities			100,286				99,728
Due to Note-Holders of Consolidated CLO Vehicles			78,252				56,012
Due to Certain Non-Controlling Interest Holders and Blackstone Employees			48,433				53,613
Accrual for Potential Repayment of Previously Received Performance Allocations			126,919				29,521
		$	1,026,871			$	1,035,776

The Blackstone Group Inc.

Notes to Consolidated Financial Statements—Continued

(All Dollars Are in Thousands, Except Share and Per Share Data, Except Where Noted)

Interests of the Founder, Senior Managing Directors, Employees and Other Related Parties

The Founder, senior managing directors, employees and certain other related parties invest on a discretionary basis in the consolidated Blackstone Funds both directly and through consolidated entities. These investments generally are subject to preferential management fee and performance allocation or incentive fee arrangements. As of December 31, 2019 and 2018, such investments aggregated $969.3 million and $842.9 million, respectively. Their share of the Net Income Attributable to Redeemable

Non-Controlling

and

Non-Controlling

Interests in Consolidated Entities aggregated $78.1 million, $63.6 million and $113.9 million for the years ended December 31, 2019, 2018 and 2017, respectively.

Loans to Affiliates

Loans to affiliates consist of interest bearing advances to certain Blackstone individuals to finance their investments in certain Blackstone Funds. These loans earn interest at Blackstone’s cost of borrowing and such interest totaled $7.0 million, $5.4 million and $3.4 million for the years ended December 31, 2019, 2018 and 2017, respectively.

Contingent Repayment Guarantee

Blackstone and its personnel who have received Performance Allocation distributions have guaranteed payment on a several basis (subject to a cap) to the carry funds of any clawback obligation with respect to the excess Performance Allocation allocated to the general partners of such funds and indirectly received thereby to the extent that either Blackstone or its personnel fails to fulfill its clawback obligation, if any. The Accrual for Potential Repayment of Previously Received Performance Allocations represents amounts previously paid to Blackstone Holdings and

non-controlling

interest holders that would need to be repaid to the Blackstone Funds if the carry funds were to be liquidated based on the fair value of their underlying investments as of December 31, 2019. See Note 19. “Commitments and Contingencies — Contingencies — Contingent Obligations (Clawback)”.

Aircraft and Other Services

In the normal course of business, Blackstone makes use of aircraft owned by Stephen A. Schwarzman; aircraft owned by Jonathan D. Gray; aircraft owned jointly by Joseph P. Baratta and two other individuals; and aircraft owned jointly by Bennett J. Goodman and another individual (each such aircraft, “Personal Aircraft”). Each of Messrs. Schwarzman, Gray, Baratta and Goodman paid for his respective ownership interest in his Personal Aircraft himself and bears his respective share of all operating, personnel and maintenance costs associated with the operation of such Personal Aircraft. The payments Blackstone makes for the use of the Personal Aircraft is based on current market rates.

In addition, on occasion, certain of Blackstone’s executive officers and employee directors and their families may make personal use of aircraft in which Blackstone owns a fractional interest, as well as other assets of Blackstone. Any such personal use of Blackstone assets is charged to the executive officer or employee director based on market rates and usage. Personal use of Blackstone resources is also reimbursed to Blackstone based on market rates.

The transactions described herein are not material to the Consolidated Financial Statements.

Tax Receivable Agreements

Blackstone used a portion of the proceeds from the IPO and the sale of

non-voting

common units to Beijing Wonderful Investments to purchase interests in the predecessor businesses from the predecessor owners. In addition, holders of Blackstone Holdings Partnership Units may exchange their Blackstone Holdings Partnership

The Blackstone Group Inc.

Notes to Consolidated Financial Statements—Continued

(All Dollars Are in Thousands, Except Share and Per Share Data, Except Where Noted)

Units for shares of Blackstone Class A common stock on a

one-for-one

basis. The purchase and subsequent exchanges are expected to result in increases in the tax basis of the tangible and intangible assets of Blackstone Holdings and therefore reduce the amount of tax that Blackstone would otherwise be required to pay in the future.

Blackstone has entered into tax receivable agreements with each of the predecessor owners and additional tax receivable agreements have been executed, and will continue to be executed, with newly-admitted senior managing directors and others who acquire Blackstone Holdings Partnership Units. The agreements provide for the payment by the corporate taxpayer to such owners of 85% of the amount of cash savings, if any, in U.S. federal, state and local income tax that the corporate taxpayers actually realize as a result of the aforementioned increases in tax basis and of certain other tax benefits related to entering into these tax receivable agreements. For purposes of the tax receivable agreements, cash savings in income tax will be computed by comparing the actual income tax liability of the corporate taxpayers to the amount of such taxes that the corporate taxpayers would have been required to pay had there been no increase to the tax basis of the tangible and intangible assets of Blackstone Holdings as a result of the exchanges and had the corporate taxpayers not entered into the tax receivable agreements.

As a result of the Conversion, there was a reduction of $161.6

million of the tax receivable agreement liability during the year ended December 31, 2019.

Assuming no future material changes in the relevant tax law and that the corporate taxpayers earn sufficient taxable income to realize the full tax benefit of the increased amortization of the assets, the expected future payments under the tax receivable agreements (which are taxable to the recipients) will aggregate $672.9 million over the next 15 years. The

after-tax

net present value of these estimated payments totals $191.2 million assuming a 15% discount rate and using Blackstone’s most recent projections relating to the estimated timing of the benefit to be received. Future payments under the tax receivable agreements in respect of subsequent exchanges would be in addition to these amounts. The payments under the tax receivable agreements are not conditioned upon continued ownership of Blackstone equity interests by the

pre-IPO

owners and the others mentioned above. Subsequent to December 31, 2019, payments totaling $73.9 million were made to certain

pre-IPO

owners and others mentioned above in accordance with the tax receivable agreement and related to tax benefits Blackstone received for the 2018 taxable year.

Amounts related to the deferred tax asset resulting from the increase in tax basis from the exchange of Blackstone Holdings Partnership Units to shares of Blackstone Class A common stock, the resulting remeasurement of net deferred tax assets at the Blackstone ownership percentage at the balance sheet date, the due to affiliates for the future payments resulting from the tax receivable agreements and resulting adjustment to partners’ capital are included as Acquisition of Ownership Interests from

Non-Controlling

Interest Holders in the Supplemental Disclosure of

Non-Cash

Investing and Financing Activities in the Consolidated Statements of Cash Flows.

Other

Blackstone does business with and on behalf of some of its Portfolio Companies; all such arrangements are on a negotiated basis.

Additionally, please see Note 19. “Commitments and Contingencies — Contingencies — Guarantees” for information regarding guarantees provided to a lending institution for certain loans held by employees.

19. Commitments and Contingencies

Commitments

Investment Commitments

Blackstone had $3.8 billion of investment commitments as of December 31, 2019 representing general partner capital funding commitments to the Blackstone Funds, limited partner capital funding to other funds and Blackstone principal investment

commitments, including loan commitments.

The consolidated Blackstone Funds had signed investment commitments of $80.0 million as of December 31, 2019 which includes $31.8 million of signed investment commitments for portfolio company acquisitions in the process of closing.

The Blackstone Group Inc.

Notes to Consolidated Financial Statements—Continued

(All Dollars Are in Thousands, Except Share and Per Share Data, Except Where Noted)

Regulated Entities

Certain U.S. and

non-U.S.

entities are subject to various investment adviser and other financial regulatory rules and requirements that may include minimum net capital requirements. These entities have continuously operated in excess of these requirements. This includes a number of U.S. entities that are registered as investment advisers with the SEC.

These regulatory capital requirements may restrict Blackstone’s ability to withdraw capital from its entities. At December 31, 2019, $50.9 million of net assets of consolidated entities may be restricted as to the payment of cash dividends and advances to Blackstone.

Contingencies

Guarantees

Certain of Blackstone’s consolidated real estate funds guarantee payments to third parties in connection with the

on-going

business activities and/or acquisitions of their Portfolio Companies. There is no direct recourse to Blackstone to fulfill such obligations. To the extent that underlying funds are required to fulfill guarantee obligations, Blackstone’s invested capital in such funds is at risk. Total investments at risk in respect of guarantees extended by consolidated real estate funds was $18.5 million as of December 31, 2019.

The Blackstone Holdings Partnerships provided guarantees to a lending institution for certain loans held by employees either for investment in Blackstone Funds or for members’ capital contributions to The Blackstone Group International Partners LLP. The amount guaranteed as of December 31, 2019 was $202.1 million.

Litigation

Blackstone may from time to time be involved in litigation and claims incidental to the conduct of its business. Blackstone’s businesses are also subject to extensive regulation, which may result in regulatory proceedings against Blackstone.

Blackstone accrues a liability for legal proceedings only when those matters present loss contingencies that are both probable and reasonably estimable. In such cases, there may be an exposure to loss in excess of any amounts accrued. Although there can be no assurance of the outcome of such legal actions, based on information known by management, Blackstone does not have a potential liability related to any current legal proceeding or claim that would individually or in the aggregate materially affect its results of operations, financial position or cash flows.

In December 2017, a purported derivative suit (Mayberry v. KKR & Co., L.P., et al.) was filed in the Commonwealth of Kentucky Franklin County Circuit Court on behalf of the Kentucky Retirement System (“KRS”) by eight of its members and beneficiaries alleging various breaches of fiduciary duty and other violations of Kentucky state law in connection with KRS’s investment in three hedge funds of funds, including a fund managed by Blackstone Alternative Asset Management L.P. (“BAAM L.P.”). The suit names more than 30 defendants, including The Blackstone Group L.P.; BAAM L.P.; Stephen A. Schwarzman, as Chairman and CEO of Blackstone; and J. Tomilson Hill, as then-President and CEO of the Hedge Fund Solutions Group, Vice Chairman of Blackstone and CEO of BAAM (collectively, the “Blackstone Defendants”). Aside from the Blackstone Defendants, the action also names current and former KRS trustees and former KRS officers and various other service providers to KRS and their related persons.

The plaintiffs filed an amended complaint in January 2018. In November 2018, the Circuit Court granted one defendant’s motion to dismiss and denied all other defendants’ motions to dismiss, including those of the Blackstone Defendants. In January 2019, certain of the KRS trustee and officer defendants noticed appeals from

The Blackstone Group Inc.

Notes to Consolidated Financial Statements—Continued

(All Dollars Are in Thousands, Except Share and Per Share Data, Except Where Noted)

the denial of the motions to dismiss to the Kentucky Court of Appeals, and also filed a motion to stay the Mayberry proceedings in Circuit Court pending the outcome of those appeals. In addition, several defendants, including Blackstone and BAAM L.P., filed petitions in the Kentucky Court of Appeals for a writ of prohibition against the ongoing Mayberry proceedings on the ground that the plaintiffs lack standing. In April 2019, the KRS trustee and officer defendants’ appeals were transferred to the Kentucky Supreme Court.

On April 23, 2019, the Kentucky Court of Appeals granted the Blackstone Defendants’ petition for a writ of prohibition and vacated the Circuit Court’s November 30, 2018 Opinion and Order denying the motion to dismiss for lack of standing. On April 24, 2019, the Mayberry Plaintiffs filed a notice of appeal of that order to the Kentucky Supreme Court. The Kentucky Supreme Court heard oral argument on the appeal on October 24, 2019.

Blackstone believes that this suit is totally without merit and intends to defend it vigorously.

Contingent Obligations (Clawback)

Performance Allocations are subject to clawback to the extent that the Performance Allocations received to date with respect to a fund exceeds the amount due to Blackstone based on cumulative results of that fund. The actual clawback liability, however, generally does not become realized until the end of a fund’s life except for certain Blackstone real estate funds, multi-asset class investment funds and credit-focused funds, which may have an interim clawback liability. The lives of the carry funds, including available contemplated extensions, for which a liability for potential clawback obligations has been recorded for financial reporting purposes, are currently anticipated to expire at various points through 2028. Further extensions of such terms may be implemented under given circumstances.

For financial reporting purposes, when applicable, the general partners record a liability for potential clawback obligations to the limited partners of some of the carry funds due to changes in the unrealized value of a fund’s remaining investments and where the fund’s general partner has previously received Performance Allocation distributions with respect to such fund’s realized investments.

The following table presents the clawback obligations by are as follows:

		December 31,
		2019												2018
Segment		Blackstone Holdings				Current and Former Personnel (a)				Total				Blackstone Holdings				Current and Former Personnel (a)				Total
Real Estate		$	16,151			$	10,597			$	26,748			$	15,770			$	10,053			$	25,823
Private Equity			82,276				2,860				85,136				13,296				(12,448	)			848
Credit			6,866				8,169				15,035				1,355				1,495				2,850
		$	105,293			$	21,626			$	126,919			$	30,421			$	(900	)		$	29,521

(a)	The split of clawback between Blackstone Holdings and Current and Former Personnel is based on the performance of individual investments held by a fund rather than on a fund by fund basis.

For Private Equity, Real Estate, and certain Credit Funds, a portion of the Performance Allocations paid to current and former Blackstone personnel is held in segregated accounts in the event of a cash clawback obligation. These segregated accounts are not included in the Consolidated Financial Statements of Blackstone, except to the extent a portion of the assets held in the segregated accounts may be allocated to a consolidated Blackstone fund of hedge funds. At December 31, 2019, $731.0 million was held in segregated accounts for the purpose of meeting any clawback obligations of current and former personnel if such payments are required.

In the Credit segment, payment of Performance Allocations to Blackstone by the majority of the stressed/distressed, mezzanine and credit alpha strategies funds are substantially deferred under the terms of the partnership agreements. This deferral mitigates the need to hold funds in segregated accounts in the event of a cash clawback obligation.

The Blackstone Group Inc.

Notes to Consolidated Financial Statements—Continued

(All Dollars Are in Thousands, Except Share and Per Share Data, Except Where Noted)

If, at December 31, 2019, all of the investments held by our carry funds were deemed worthless, a possibility that management views as remote, the amount of Performance Allocations subject to potential clawback would be $7.2 billion, on an

after-tax

basis where applicable, of which Blackstone Holdings is potentially liable for $6.6 billion if current and former Blackstone personnel default on their share of the liability, a possibility that management also views as remote.

Segment Reporting

Blackstone transacts its primary business in the United States and substantially all of its revenues are generated domestically.

Blackstone conducts its alternative asset management businesses through four segments:

	•	Real Estate – Blackstone’s Real Estate segment primarily comprises its management of global, Europe and Asia-focused opportunistic real estate funds, high-yield and high-grade real estate debt funds, liquid real estate debt funds, core+ real estate funds which also include a non-exchange traded REIT and a NYSE-listed REIT.

	•	Private Equity – Blackstone’s Private Equity segment includes its management of flagship corporate private equity funds, sector and geographically-focused corporate private equity funds, including energy and Asia-focused funds, a core private equity fund, an opportunistic investment platform, a secondary fund of funds business, infrastructure-focused funds, a life sciences private investment platform, a multi-asset investment program for eligible high net worth investors and a capital markets services business.

	•	Hedge Fund Solutions – The largest component of Blackstone’s Hedge Fund Solutions segment is Blackstone Alternative Asset Management, which manages a broad range of commingled and customized hedge fund of fund solutions. The segment also includes investment platforms that seed new hedge fund businesses, purchase minority interests in more established general partners and management companies of funds, invest in special situation opportunities, create alternative solutions in the form of daily liquidity products and invest directly.

	•	Credit – Blackstone’s Credit segment consists principally of GSO Capital Partners LP, which is organized into three overarching strategies: performing credit strategies (which include mezzanine lending funds, middle market direct lending funds, including our business development company and other performing credit strategy funds), distressed strategies (which include credit alpha strategies, stressed/distressed funds and energy strategies) and long only strategies (which consist of CLOs, closed - ended funds, open - ended funds and separately managed accounts). In addition, the segment includes a publicly traded master limited partnership investment platform, Harvest, and our insurer-focused platform, Blackstone Insurance Solutions.

These business segments are differentiated by their various investment strategies. The Real Estate, Private Equity, Hedge Fund Solutions and Credit segments primarily earn their income from management fees and investment returns on assets under management.

Segment Distributable Earnings is Blackstone’s segment profitability measure used to make operating decisions and assess performance across Blackstone’s four segments. Blackstone’s segments are presented on a basis that deconsolidates Blackstone Funds, eliminates

non-controlling

ownership interests in Blackstone’s consolidated operating partnerships, removes the amortization of intangible assets and removes Transaction-Related Charges. Transaction-Related Charges arise from corporate actions including acquisitions, divestitures and Blackstone’s initial public offering. They consist primarily of equity-based compensation charges, gains and losses on contingent consideration arrangements, changes in the balance of the Tax Receivable Agreement resulting from a change in tax law or similar event, transaction costs and any gains or losses associated with these corporate actions.

The Blackstone Group Inc.

Notes to Consolidated Financial Statements—Continued

(All Dollars Are in Thousands, Except Share and Per Share Data, Except Where Noted)

For segment reporting purposes, Segment Distributable Earnings is presented along with its major components, Fee Related Earnings and Net Realizations. Fee Related Earnings is used to assess Blackstone’s ability to generate profits from revenues that are measured and received on a recurring basis and not subject to future realization events. Net Realizations is the sum of Realized Principal Investment Income and Realized Performance Revenues less Realized Performance Compensation. Performance Allocations and Incentive Fees are presented together and referred to collectively as Performance Revenues or Performance Compensation.

Segment Presentation

The following tables present the financial data for Blackstone’s four segments as of December 31, 2019 and 2018 and for the years ended December 31, 2019, 2018 and 2017.

		December 31, 2019 and the Year Then Ended
		Real Estate				Private Equity				Hedge Fund Solutions				Credit				Total Segments
Management and Advisory Fees, Net
Base Management Fees		$	1,116,183			$	986,482			$	556,730			$	586,535			$	3,245,930
Transaction, Advisory and Other Fees, Net			175,831				115,174				3,533				19,882				314,420
Management Fee Offsets			(26,836	)			(37,327	)			(138	)			(11,813	)			(76,114	)
Total Management and Advisory Fees, Net			1,265,178				1,064,329				560,125				594,604				3,484,236
Fee Related Performance Revenues			198,237				—				—				13,764				212,001
Fee Related Compensation			(531,259	)			(423,752	)			(151,960	)			(229,607	)			(1,336,578	)
Other Operating Expenses			(168,332	)			(160,010	)			(81,999	)			(160,801	)			(571,142	)
Fee Related Earnings			763,824				480,567				326,166				217,960				1,788,517
Realized Performance Revenues			1,032,337				468,992				126,576				32,737				1,660,642
Realized Performance Compensation			(374,096	)			(192,566	)			(24,301	)			(12,972	)			(603,935	)
Realized Principal Investment Income			79,733				90,249				21,707				32,466				224,155
Total Net Realizations			737,974				366,675				123,982				52,231				1,280,862
Total Segment Distributable Earnings		$	1,501,798			$	847,242			$	450,148			$	270,191			$	3,069,379
Segment Assets		$	9,023,353			$	9,007,658			$	2,238,048			$	4,009,354			$	24,278,413

The Blackstone Group Inc.

Notes to Consolidated Financial Statements—Continued

(All Dollars Are in Thousands, Except Share and Per Share Data, Except Where Noted)

		December 31, 2018 and the Year Then Ended
		Real Estate				Private Equity				Hedge Fund Solutions				Credit				Total Segments
Management and Advisory Fees, Net
Base Management Fees		$	985,399			$	785,223			$	519,782			$	553,921			$	2,844,325
Transaction, Advisory and Other Fees, Net			152,513				58,165				3,180				15,640				229,498
Management Fee Offsets			(11,442	)			(13,504	)			(93	)			(12,332	)			(37,371	)
Total Management and Advisory Fees, Net			1,126,470				829,884				522,869				557,229				3,036,452
Fee Related Performance Revenues			124,502				—				—				(666	)			123,836
Fee Related Compensation			(459,430	)			(375,446	)			(162,172	)			(219,098	)			(1,216,146	)
Other Operating Expenses			(146,260	)			(133,096	)			(77,772	)			(131,200	)			(488,328	)
Fee Related Earnings			645,282				321,342				282,925				206,265				1,455,814
Realized Performance Revenues			914,984				757,406				42,419				96,962				1,811,771
Realized Performance Compensation			(284,319	)			(318,167	)			(21,792	)			(53,863	)			(678,141	)
Realized Principal Investment Income			92,525				109,731				17,039				16,763				236,058
Total Net Realizations			723,190				548,970				37,666				59,862				1,369,688
Total Segment Distributable Earnings		$	1,368,472			$	870,312			$	320,591			$	266,127			$	2,825,502
Segment Assets		$	7,521,117			$	7,548,544			$	1,976,809			$	3,592,356			$	20,638,826

		Year Ended December 31, 2017
		Real Estate				Private Equity				Hedge Fund Solutions				Credit				Total Segments
Management and Advisory Fees, Net
Base Management Fees		$	872,191			$	724,818			$	516,048			$	567,334			$	2,680,391
Transaction, Advisory and Other Fees, Net			82,781				57,624				2,980				13,431				156,816
Management Fee Offsets			(15,934	)			(18,007	)			(93	)			(32,382	)			(66,416	)
Total Management and Advisory Fees, Net			939,038				764,435				518,935				548,383				2,770,791
Fee Related Performance Revenues			79,500				—				—				89,945				169,445
Fee Related Compensation			(437,311	)			(347,562	)			(146,924	)			(253,842	)			(1,185,639	)
Other Operating Expenses			(136,042	)			(120,997	)			(68,265	)			(99,562	)			(424,866	)
Fee Related Earnings			445,185				295,876				303,746				284,924				1,329,731
Realized Performance Revenues			2,141,374				1,157,188				154,343				194,902				3,647,807
Realized Performance Compensation			(751,526	)			(404,544	)			(40,707	)			(100,834	)			(1,297,611	)
Realized Principal Investment Income			255,903				154,837				9,074				16,380				436,194
Total Net Realizations			1,645,751				907,481				122,710				110,448				2,786,390
Total Segment Distributable Earnings		$	2,090,936			$	1,203,357			$	426,456			$	395,372			$	4,116,121

The Blackstone Group Inc.

Notes to Consolidated Financial Statements—Continued

(All Dollars Are in Thousands, Except Share and Per Share Data, Except Where Noted)

Reconciliations of Total Segment Amounts

The following tables reconcile the Total Segment Revenues, Expenses and Distributable Earnings to their equivalent GAAP measure for the years ended December 31, 2019, 2018 and 2017 along with Total Assets as of December 31, 2019 and 2018:

		Year Ended December 31,
		2019				2018				2017
Revenues
Total GAAP Revenues		$	7,338,270			$	6,833,259			$	7,145,015
Less: Unrealized Performance Allocations (a)			(1,126,668	)			(561,163	)			105,432
Less: Unrealized Principal Investment (Income) Loss (b)			(113,327	)			65,851				131,206
Less: Interest and Dividend Revenue (c)			(192,593	)			(181,763	)			(142,920	)
Less: Other Revenue (d)			(79,447	)			(89,468	)			140,051
Impact of Consolidation (e)			(88,164	)			(277,406	)			(322,729	)
Amortization of Intangibles (f)			1,548				1,548				1,548
Transaction-Related Charges (g)			(168,170	)			(588,710	)			(40,153	)
Intersegment Eliminations			9,585				5,969				6,787
Total Segment Revenue (h)		$	5,581,034			$	5,208,117			$	7,024,237

		Year Ended December 31,
		2019				2018				2017
Expenses
Total GAAP Expenses		$	3,964,651			$	3,512,040			$	3,752,378
Less: Unrealized Performance Allocations Compensation (i)			(540,285	)			(319,742	)			(103,794	)
Less: Equity-Based Compensation (j)			(230,194	)			(158,220	)			(107,110	)
Less: Interest Expense (k)			(195,034	)			(159,838	)			(192,838	)
Impact of Consolidation (e)			(55,902	)			(112,354	)			(133,081	)
Amortization of Intangibles (f)			(64,383	)			(58,446	)			(46,749	)
Transaction-Related Charges (g)			(376,783	)			(326,794	)			(267,477	)
Intersegment Eliminations			9,585				5,969				6,787
Total Segment Expenses (l)		$	2,511,655			$	2,382,615			$	2,908,116

		Year Ended December 31,
		2019				2018				2017
Other Income
Total GAAP Other Income		$	444,396			$	191,722			$	725,452
Impact of Consolidation (e)			(444,396	)			(191,722	)			(321,597	)
Transaction-Related Charges (g)			—				—				(403,855	)
Total Segment Other Income		$	—			$	—			$	—

The Blackstone Group Inc.

Notes to Consolidated Financial Statements—Continued

(All Dollars Are in Thousands, Except Share and Per Share Data, Except Where Noted)

		Year Ended December 31,
		2019				2018				2017
Income Before Provision (Benefit) for Taxes
Total GAAP Income Before Provision (Benefit) for Taxes		$	3,818,015			$	3,512,941			$	4,118,089
Less: Unrealized Performance Allocations (a)			(1,126,668	)			(561,163	)			105,432
Less: Unrealized Principal Investment (Income) Loss (b)			(113,327	)			65,851				131,206
Less: Interest and Dividend Revenue (c)			(192,593	)			(181,763	)			(142,920	)
Less: Other Revenue (d)			(79,447	)			(89,468	)			140,051
Plus: Unrealized Performance Allocations Compensation (i)			540,285				319,742				103,794
Plus: Equity-Based Compensation (j)			230,194				158,220				107,110
Plus: Interest Expense (k)			195,034				159,838				192,838
Impact of Consolidation (e)			(476,658	)			(356,774	)			(511,245	)
Amortization of Intangibles (f)			65,931				59,994				48,297
Transaction-Related Charges (g)			208,613				(261,916	)			(176,531	)
Total Segment Distributable Earnings		$	3,069,379			$	2,825,502			$	4,116,121

						As of December 31,
						2019				2018
Total Assets
Total GAAP Assets						$	32,585,506			$	28,924,650
Impact of Consolidation (e)							(8,307,093	)			(8,285,824	)
Total Segment Assets						$	24,278,413			$	20,638,826

Segment basis presents revenues and expenses on a basis that deconsolidates the investment funds Blackstone manages and excludes the amortization of intangibles and Transaction-Related Charges.

(a)	This adjustment removes Unrealized Performance Revenues on a segment basis.

(b)	This adjustment removes Unrealized Principal Investment Income (Loss) on a segment basis.

(c)	This adjustment removes Interest and Dividend Revenue on a segment basis.

(d)	This adjustment removes Other Revenue on a segment basis. For the years ended December 31, 2019, 2018 and 2017, Other Revenue on a GAAP basis was $80.0 million, $672.3 million and $(133.2) million and included $76.4 million, $87.4 million and $(146.5) million of foreign exchange gains (losses), respectively.

(e)

This adjustment reverses the effect of consolidating Blackstone Funds, which are excluded from Blackstone’s segment presentation. This adjustment includes the elimination of Blackstone’s interest in these funds, the removal of revenue from the reimbursement of certain expenses by the Blackstone Funds, which are presented gross under GAAP but netted against Management and Advisory Fees, Net in the Total Segment measures, and the removal of amounts associated with the ownership of Blackstone consolidated operating partnerships held by non-controlling interests.

(f)	This adjustment removes the amortization of transaction-related intangibles, which are excluded from Blackstone’s segment presentation. This amount includes amortization of intangibles associated with Blackstone’s investment in Pátria, which is accounted for under the equity method.

(g)

This adjustment removes Transaction-Related Charges, which are excluded from Blackstone’s segment presentation. Transaction-Related Charges arise from corporate actions including acquisitions, divestitures, and Blackstone’s initial public offering. They consist primarily of equity-based compensation charges, gains and losses on contingent consideration arrangements, changes in the balance of the Tax Receivable Agreement resulting from a change in tax law or similar event, transaction costs and any gains or losses associated with these corporate actions.

(h)	Total Segment Revenues is comprised of the following:

The Blackstone Group Inc.

Notes to Consolidated Financial Statements—Continued

(All Dollars Are in Thousands, Except Share and Per Share Data, Except Where Noted)

		Year Ended December 31,
		2019				2018				2017
Total Segment Management and Advisory Fees, Net		$	3,484,236			$	3,036,452			$	2,770,791
Total Segment Fee Related Performance Revenues			212,001				123,836				169,445
Total Segment Realized Performance Revenues			1,660,642				1,811,771				3,647,807
Total Segment Realized Principal Investment Income			224,155				236,058				436,194
Total Segment Revenues		$	5,581,034			$	5,208,117			$	7,024,237

(i)	This adjustment removes Unrealized Performance Allocations Compensation.

(j)	This adjustment removes Equity-Based Compensation on a segment basis.

(k)	This adjustment removes Interest Expense, excluding interest expense related to the Tax Receivable Agreement.

(l)	Total Segment Expenses is comprised of the following:

		Year Ended December 31,
		2019				2018				2017
Total Segment Fee Related Compensation		$	1,336,578			$	1,216,146			$	1,185,639
Total Segment Realized Performance Compensation			603,935				678,141				1,297,611
Total Segment Other Operating Expenses			571,142				488,328				424,866
Total Segment Expenses		$	2,511,655			$	2,382,615			$	2,908,116

Reconciliations of Total Segment Components

The following tables reconcile the components of Total Segments to their equivalent GAAP measures, reported on the Consolidated Statement of Operations for the years ended December 31, 2019, 2018 and 2017:

		Year Ended December 31,
		2019				2018				2017
Management and Advisory Fees, Net
GAAP		$	3,472,155			$	3,027,796			$	2,751,322
Segment Adjustment (a)			12,081				8,656				19,469
Total Segment		$	3,484,236			$	3,036,452			$	2,770,791

		Year Ended December 31,
		2019				2018				2017
GAAP Realized Performance Revenues to Total Segment Fee Related Performance Revenues
GAAP
Incentive Fees		$	129,911			$	57,540			$	242,514
Investment Income — Realized Performance Allocations			1,739,000				1,876,507				3,571,811
GAAP			1,868,911				1,934,047				3,814,325
Total Segment
Less: Realized Performance Revenues			(1,660,642	)			(1,811,771	)			(3,647,807	)
Segment Adjustment (b)			3,732				1,560				2,927
Total Segment		$	212,001			$	123,836			$	169,445

The Blackstone Group Inc.

Notes to Consolidated Financial Statements—Continued

(All Dollars Are in Thousands, Except Share and Per Share Data, Except Where Noted)

		Year Ended December 31,
		2019				2018				2017
GAAP Compensation to Total Segment Fee Related Compensation
GAAP
Compensation		$	1,820,330			$	1,609,957			$	1,442,485
Incentive Fee Compensation			44,300				33,916				105,279
Realized Performance Allocations Compensation			662,942				711,076				1,281,965
GAAP			2,527,572				2,354,949				2,829,729
Total Segment
Less: Realized Performance Compensation			(603,935	)			(678,141	)			(1,297,611	)
Less: Equity-Based Compensation — Operating Compensation			(221,684	)			(145,213	)			(93,410	)
Less: Equity-Based Compensation — Performance Compensation			(8,510	)			(13,007	)			(13,700	)
Segment Adjustment (c)			(356,865	)			(302,442	)			(239,369	)
Total Segment		$	1,336,578			$	1,216,146			$	1,185,639

		Year Ended December 31,
		2019				2018				2017
GAAP General, Administrative and Other to Total Segment Other Operating Expenses
GAAP		$	679,408			$	594,873			$	488,582
Segment Adjustment (d)			(108,266	)			(106,545	)			(63,716	)
Total Segment		$	571,142			$	488,328			$	424,866

		Year Ended December 31,
		2019				2018				2017
Realized Performance Revenues
GAAP
Incentive Fees		$	129,911			$	57,540			$	242,514
Investment Income — Realized Performance Allocations			1,739,000				1,876,507				3,571,811
GAAP			1,868,911				1,934,047				3,814,325
Total Segment
Less: Fee Related Performance Revenues			(212,001	)			(123,836	)			(169,445	)
Segment Adjustment (b)			3,732				1,560				2,927
Total Segment		$	1,660,642			$	1,811,771			$	3,647,807

The Blackstone Group Inc.

Notes to Consolidated Financial Statements—Continued

(All Dollars Are in Thousands, Except Share and Per Share Data, Except Where Noted)

		Year Ended December 31,
		2019				2018				2017
Realized Performance Compensation
GAAP
Incentive Fee Compensation		$	44,300			$	33,916			$	105,279
Realized Performance Allocations Compensation			662,942				711,076				1,281,965
GAAP			707,242				744,992				1,387,244
Total Segment
Less: Fee Related Performance Compensation			(94,797	)			(53,844	)			(75,933	)
Less: Equity-Based Compensation — Performance Compensation			(8,510	)			(13,007	)			(13,700	)
Total Segment		$	603,935			$	678,141			$	1,297,611

		Year Ended December 31,
		2019				2018				2017
Realized Principal Investment Income
GAAP		$	393,478			$	415,862			$	635,769
Segment Adjustment (e)			(169,323	)			(179,804	)			(199,575	)
Total Segment		$	224,155			$	236,058			$	436,194

Segment basis presents revenues and expenses on a basis that deconsolidates the investment funds Blackstone manages and excludes the amortization of intangibles, the expense of equity-based awards and Transaction-Related Charges.

(a)	Represents (1) the add back of net management fees earned from consolidated Blackstone Funds which have been eliminated in consolidation, and (2) the removal of revenue from the reimbursement of certain expenses by the Blackstone Funds, which are presented gross under GAAP but netted against Management and Advisory Fees, Net in the Total Segment measures.

(b)	Represents the add back of Performance Revenues earned from consolidated Blackstone Funds which have been eliminated in consolidation.

(c)	Represents the removal of Transaction-Related Charges that are not recorded in the Total Segment measures.

(d)	Represents the removal of (1) the amortization of transaction-related intangibles, and (2) certain expenses reimbursed by the Blackstone Funds, which are presented gross under GAAP but netted against Management and Advisory Fees, Net in the Total Segment measures.

(e)	Represents (1) the add back of Principal Investment Income, including general partner income, earned from consolidated Blackstone Funds which have been eliminated in consolidation, and (2) the removal of amounts associated with the ownership of Blackstone consolidated operating partnerships held by non-controlling interests.

21.	Subsequent Events

There have been no events since December 31, 2019 that require recognition or disclosure in the Consolidated Financial Statements.

The Blackstone Group Inc.

Notes to Consolidated Financial Statements—Continued

(All Dollars Are in Thousands, Except Share and Per Share Data, Except Where Noted)

22.	Quarterly Financial Data (Unaudited)

		Three Months Ended
		March 31, 2019				June 30, 2019				September 30, 2019 (a)				December 31, 2019
Revenues		$	2,024,871			$	1,486,806			$	1,735,113			$	2,091,480
Expenses			1,041,164				862,240				947,220				1,114,027
Other Income			130,325				61,131				223,056				29,884
Income Before Provision (Benefit) for Taxes		$	1,114,032			$	685,697			$	1,010,949			$	1,007,337
Net Income		$	1,072,877			$	646,961			$	1,167,735			$	978,394
Net Income Attributable to The Blackstone Group Inc.		$	481,304			$	305,792			$	779,437			$	483,149
Net Income Per Share of Class A Common Stock
Basic		$	0.71			$	0.45			$	1.15			$	0.71
Diluted		$	0.71			$	0.45			$	1.15			$	0.71
Dividends Declared (b)		$	0.58			$	0.37			$	0.48			$	0.49

		Three Months Ended
		March 31, 2018				June 30, 2018 (c)				September 30, 2018				December 31, 2018
Revenues		$	1,769,131			$	2,632,570			$	1,926,580			$	504,978
Expenses			982,931				1,016,381				1,017,632				495,096
Other Income (Loss)			110,599				73,519				66,838				(59,234	)
Income (Loss) Before Provision (Benefit) for Taxes		$	896,799			$	1,689,708			$	975,786			$	(49,352	)
Net Income (Loss)		$	842,304			$	1,550,977			$	948,988			$	(78,718	)
Net Income (Loss) Attributable to The Blackstone Group Inc.		$	367,872			$	742,042			$	442,742			$	(10,868	)
Net Income (Loss) Per Share of Class A Common Stock
Basic		$	0.55			$	1.09			$	0.65			$	(0.02	)
Diluted		$	0.53			$	1.09			$	0.64			$	(0.02	)
Dividends Declared (b)		$	0.85			$	0.35			$	0.58			$	0.64

(a)	As a result of the Conversion, there was a reduction of $174.6 million of the tax receivable agreement liability during the three months ended September 30, 2019. The reduction of the tax receivable agreement liability was included in Other Income.

(b)	Dividends declared reflects the calendar date of the declaration of each dividend.

(c)	For the three months ended June 30, 2018, Revenues included $580.9 million of Transaction-Related Charges recorded in Other Revenues received upon the conclusion of Blackstone’s investment sub-advisory relationship with FS Investments’ funds.