filings.toolsItem 8. Financial Statements and Supplementary Data
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Item 8. Financial Statements and Supplementary Data
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Index to Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Blackstone Inc.:
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated statements of financial condition of Blackstone Inc. and subsidiaries (“Blackstone”) as of December 31, 2022 and 2021, 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, 2022, 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, 2022, 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, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, 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, 2022, 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’s 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 U.S. 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 Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (a) relates 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 matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
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 carry fund and open-ended structures (“Blackstone Funds”) assuming certain investment returns are achieved, referred to as “Performance Allocations”. Performance Allocations in carry fund structures are made based on cumulative fund performance to date, subject to a preferred return to limited partners. Performance Allocations in open-ended structures are based on fund or vehicle performance over a period of time, subject to a high water mark and preferred return to limited partners or investors. 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 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, market impacts and subjectivity of certain unobservable inputs used in the valuation. Auditing the fair value of certain of these investments required a high degree of auditor judgment and increased effort, including the involvement of our internal fair value specialists as needed, who possess significant fair value methodology and modeling expertise.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to testing the fair values of 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. |
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| • | We tested management’s assumptions through independent analysis and comparison to external sources. |
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| • | We utilized our internal fair value specialists, as needed, 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 relevant inputs (e.g., cash flow projections, guideline public companies or transactions, valuation multiples, discount rates, yields, capitalization rates and exit multiples used in the calculation of the terminal value). Our fair value 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. |
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| • | We evaluated management’s valuation methodologies and modeling techniques for consistency with the expected methodologies of market participants in developing an estimate of fair value. |
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| • | We evaluated the impact of current market events and conditions, as well as relevant comparable transactions, on the valuation techniques and assumptions used by management (e.g., sector and geographic location performance, cash flow projections, occupancy rates and other market fundamentals, commodity prices, and interest rates). |
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| • | When applicable, we inspected industry reports for each industry in the portfolio to evaluate the consistency of current valuations with expected industry performance and inclusion of significant economic or industry events. |
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| • | We evaluated management’s ability to accurately estimate fair value by comparing previous estimates of fair value to investment transactions with third parties. |
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| /s/ DELOITTE & TOUCHE LLP |
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| New York, New York |
| February 24, 2023 |
We have served as Blackstone’s auditor since 2006.
Blackstone Inc.
Consolidated Statements of Financial Condition
(Dollars in Thousands, Except Share Data)
| December 31, 2022 | December 31, 2021 | |||||||
| Assets | ||||||||
| Cash and Cash Equivalents | $ | 4,252,003 | $ | 2,119,738 | ||||
| Cash Held by Blackstone Funds and Other | 241,712 | 79,994 | ||||||
| Investments | 27,553,251 | 28,665,043 | ||||||
| Accounts Receivable | 462,904 | 636,616 | ||||||
| Due from Affiliates | 4,146,707 | 4,656,867 | ||||||
| Intangible Assets, Net | 217,287 | 284,384 | ||||||
| Goodwill | 1,890,202 | 1,890,202 | ||||||
| Other Assets | 800,458 | 492,936 | ||||||
| Right-of-Use Assets | 896,981 | 788,991 | ||||||
| Deferred Tax Assets | 2,062,722 | 1,581,637 | ||||||
| Total Assets | $ | 42,524,227 | $ | 41,196,408 | ||||
| Liabilities and Equity | ||||||||
| Loans Payable | $ | 12,349,584 | $ | 7,748,163 | ||||
| Due to Affiliates | 2,118,481 | 1,906,098 | ||||||
| Accrued Compensation and Benefits | 6,101,801 | 7,905,070 | ||||||
| Securities Sold, Not Yet Purchased | 3,825 | 27,849 | ||||||
| Repurchase Agreements | 89,944 | 57,980 | ||||||
| Operating Lease Liabilities | 1,021,454 | 908,033 | ||||||
| Accounts Payable, Accrued Expenses and Other Liabilities | 1,158,071 | 937,169 | ||||||
| Total Liabilities | 22,843,160 | 19,490,362 | ||||||
| Commitments and Contingencies | ||||||||
| Redeemable Non-Controlling Interests in Consolidated Entities | 1,715,006 | 68,028 | ||||||
| Equity | ||||||||
| Stockholders’ Equity of Blackstone Inc. | ||||||||
| Common Stock, $0.00001 par value, 90 billion shares authorized, (710,276,923 shares issued and outstanding as of December 31, 2022; 704,339,774 shares issued and outstanding as of December 31, 2021) | 7 | 7 | ||||||
| Series I Preferred Stock, $0.00001 par value, 999,999,000 shares authorized, (1 share issued and outstanding as of December 31, 2022 and December 31, 2021) | — | — | ||||||
| Series II Preferred Stock, $0.00001 par value, 1,000 shares authorized, (1 share issued and outstanding as of December 31, 2022 and December 31, 2021) | — | — | ||||||
| Additional Paid-in-Capital | 5,935,273 | 5,794,727 | ||||||
| Retained Earnings | 1,748,106 | 3,647,785 | ||||||
| Accumulated Other Comprehensive Loss | (27,475 | ) | (19,626 | ) | ||||
| Total Stockholders’ Equity of Blackstone Inc. | 7,655,911 | 9,422,893 | ||||||
| Non-Controlling Interests in Consolidated Entities | 5,056,480 | 5,600,653 | ||||||
| Non-Controlling Interests in Blackstone Holdings | 5,253,670 | 6,614,472 | ||||||
| Total Equity | 17,966,061 | 21,638,018 | ||||||
| Total Liabilities and Equity | $ | 42,524,227 | $ | 41,196,408 | ||||
continued…
See notes to consolidated financial statements.
Blackstone 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, 2022 | December 31, 2021 | |||||||
| Assets | ||||||||
| Cash Held by Blackstone Funds and Other | $ | 241,712 | $ | 79,994 | ||||
| Investments | 5,136,542 | 2,018,829 | ||||||
| Accounts Receivable | 55,223 | 64,680 | ||||||
| Due from Affiliates | 7,152 | 13,748 | ||||||
| Other Assets | 2,159 | 251 | ||||||
| Total Assets | $ | 5,442,788 | $ | 2,177,502 | ||||
| Liabilities | ||||||||
| Loans Payable | $ | 1,450,000 | $ | 101 | ||||
| Due to Affiliates | 82,345 | 95,204 | ||||||
| Securities Sold, Not Yet Purchased | — | 23,557 | ||||||
| Repurchase Agreements | — | 15,980 | ||||||
| Accounts Payable, Accrued Expenses and Other Liabilities | 25,858 | 10,420 | ||||||
| Total Liabilities | $ | 1,558,203 | $ | 145,262 | ||||
See notes to consolidated financial statements.
Blackstone Inc.
Consolidated Statements of Operations
(Dollars in Thousands, Except Share and Per Share Data)
| Year Ended December 31, | ||||||||||||
| 2022 | 2021 | 2020 | ||||||||||
| Revenues | ||||||||||||
| Management and Advisory Fees, Net | $ | 6,303,315 | $ | 5,170,707 | $ | 4,092,549 | ||||||
| Incentive Fees | 525,127 | 253,991 | 138,661 | |||||||||
| Investment Income (Loss) | ||||||||||||
| Performance Allocations | ||||||||||||
| Realized | 5,381,640 | 5,653,452 | 2,106,000 | |||||||||
| Unrealized | (3,435,056 | ) | 8,675,246 | (384,393 | ) | |||||||
| Principal Investments | ||||||||||||
| Realized | 850,327 | 1,003,822 | 391,628 | |||||||||
| Unrealized | (1,563,849 | ) | 1,456,201 | (114,607 | ) | |||||||
| Total Investment Income | 1,233,062 | 16,788,721 | 1,998,628 | |||||||||
| Interest and Dividend Revenue | 271,612 | 160,643 | 125,231 | |||||||||
| Other | 184,557 | 203,086 | (253,142 | ) | ||||||||
| Total Revenues | 8,517,673 | 22,577,148 | 6,101,927 | |||||||||
| Expenses | ||||||||||||
| Compensation and Benefits | ||||||||||||
| Compensation | 2,569,780 | 2,161,973 | 1,855,619 | |||||||||
| Incentive Fee Compensation | 207,998 | 98,112 | 44,425 | |||||||||
| Performance Allocations Compensation | ||||||||||||
| Realized | 2,225,264 | 2,311,993 | 843,230 | |||||||||
| Unrealized | (1,470,588 | ) | 3,778,048 | (154,516 | ) | |||||||
| Total Compensation and Benefits | 3,532,454 | 8,350,126 | 2,588,758 | |||||||||
| General, Administrative and Other | 1,092,671 | 917,847 | 711,782 | |||||||||
| Interest Expense | 317,225 | 198,268 | 166,162 | |||||||||
| Fund Expenses | 30,675 | 10,376 | 12,864 | |||||||||
| Total Expenses | 4,973,025 | 9,476,617 | 3,479,566 | |||||||||
| Other Income (Loss) | ||||||||||||
| Change in Tax Receivable Agreement Liability | 22,283 | (2,759 | ) | (35,383 | ) | |||||||
| Net Gains (Losses) from Fund Investment Activities | (105,142 | ) | 461,624 | 30,542 | ||||||||
| Total Other Income (Loss) | (82,859 | ) | 458,865 | (4,841 | ) | |||||||
| Income Before Provision for Taxes | 3,461,789 | 13,559,396 | 2,617,520 | |||||||||
| Provision for Taxes | 472,880 | 1,184,401 | 356,014 | |||||||||
| Net Income | 2,988,909 | 12,374,995 | 2,261,506 | |||||||||
| Net Income (Loss) Attributable to Redeemable Non-Controlling Interests in Consolidated Entities | (142,890 | ) | 5,740 | (13,898 | ) | |||||||
| Net Income Attributable to Non-Controlling Interests in Consolidated Entities | 107,766 | 1,625,306 | 217,117 | |||||||||
| Net Income Attributable to Non-Controlling Interests in Blackstone Holdings | 1,276,402 | 4,886,552 | 1,012,924 | |||||||||
| Net Income Attributable to Blackstone Inc. | $ | 1,747,631 | $ | 5,857,397 | $ | 1,045,363 | ||||||
| Net Income Per Share of Common Stock | ||||||||||||
| Basic | $ | 2.36 | $ | 8.14 | $ | 1.50 | ||||||
| Diluted | $ | 2.36 | $ | 8.13 | $ | 1.50 | ||||||
| Weighted-Average Shares of Common Stock Outstanding | ||||||||||||
| Basic | 740,664,038 | 719,766,879 | 696,933,548 | |||||||||
| Diluted | 740,942,399 | 720,125,043 | 697,258,296 | |||||||||
See notes to consolidated financial statements.
Blackstone Inc.
Consolidated Statements of Comprehensive Income
(Dollars in Thousands)
| Year Ended December 31, | ||||||||||||
| 2022 | 2021 | 2020 | ||||||||||
| Net Income | $ | 2,988,909 | $ | 12,374,995 | $ | 2,261,506 | ||||||
| Other Comprehensive Income (Loss) - Currency Translation Adjustment | (32,523 | ) | (5,814 | ) | 23,199 | |||||||
| Comprehensive Income | 2,956,386 | 12,369,181 | 2,284,705 | |||||||||
| Less: | ||||||||||||
| Comprehensive Income (Loss) Attributable to Redeemable Non-Controlling Interests in Consolidated Entities | (163,263 | ) | 5,740 | (13,898 | ) | |||||||
| Comprehensive Income Attributable to Non-Controlling Interests in Consolidated Entities | 107,766 | 1,625,306 | 217,117 | |||||||||
| Comprehensive Income Attributable to Non-Controlling Interests in Blackstone Holdings | 1,272,101 | 4,884,533 | 1,023,459 | |||||||||
| Comprehensive Income Attributable to Non-Controlling Interests | 1,216,604 | 6,515,579 | 1,226,678 | |||||||||
| Comprehensive Income Attributable to Blackstone Inc. | $ | 1,739,782 | $ | 5,853,602 | $ | 1,058,027 | ||||||
See notes to consolidated financial statements.
Blackstone Inc.
Consolidated Statement of Changes in Equity
(Dollars in Thousands, Except Share Data)
| Shares of Blackstone Inc. (a) | Blackstone Inc. (a) | |||||||||||||||||||||||||||||||||||||||
| Common Stock | Common Stock | Additional Paid-in- Capital | Retained Earnings (Deficit) | Accumulated Other Compre- hensive Income (Loss) | Total Stockholders' Equity | Non- Controlling Interests in Consolidated Entities | Non- Controlling Interests in Blackstone Holdings | Total Equity | Redeemable Non- Controlling Interests in Consolidated Entities | |||||||||||||||||||||||||||||||
| 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 | ||||||||||||||||||||
| Transfer Out Due to Deconsolidation of Fund Entities | — | — | — | — | — | — | (216,339 | ) | — | (216,339 | ) | — | ||||||||||||||||||||||||||||
| Net Income (Loss) | — | — | — | 1,045,363 | — | 1,045,363 | 217,117 | 1,012,924 | 2,275,404 | (13,898 | ) | |||||||||||||||||||||||||||||
| Currency Translation Adjustment | — | — | — | — | 12,664 | 12,664 | — | 10,535 | 23,199 | — | ||||||||||||||||||||||||||||||
| Capital Contributions | — | — | — | — | — | — | 600,222 | 5,265 | 605,487 | — | ||||||||||||||||||||||||||||||
| Capital Distributions | — | — | — | (1,319,226 | ) | — | (1,319,226 | ) | (738,899 | ) | (1,071,614 | ) | (3,129,739 | ) | (8,592 | ) | ||||||||||||||||||||||||
| Transfer of Non-Controlling Interests in Consolidated Entities | — | — | — | — | — | — | (6,013 | ) | — | (6,013 | ) | — | ||||||||||||||||||||||||||||
| Deferred Tax Effects Resulting from Acquisition of Ownership Interests from Non-Controlling Interest Holders | — | — | 23,327 | — | — | 23,327 | — | — | 23,327 | — | ||||||||||||||||||||||||||||||
| Equity-Based Compensation | — | — | 250,850 | — | — | 250,850 | — | 188,683 | 439,533 | — | ||||||||||||||||||||||||||||||
| Net Delivery of Vested Blackstone Holdings Partnership Units and Shares of Common Stock | 2,905,220 | — | (30,899 | ) | — | — | (30,899 | ) | — | (7 | ) | (30,906 | ) | — | ||||||||||||||||||||||||||
| Repurchase of Shares of Common Stock and Blackstone Holdings Partnership Units | (8,969,237 | ) | — | (474,006 | ) | — | — | (474,006 | ) | — | — | (474,006 | ) | — | ||||||||||||||||||||||||||
| Change in Blackstone Inc.’s Ownership Interest | — | — | 10,476 | — | — | 10,476 | — | (10,476 | ) | — | — | |||||||||||||||||||||||||||||
| Conversion of Blackstone Holdings Partnership Units to Shares of Common Stock | 18,781,869 | — | 123,710 | — | — | 123,710 | — | (123,710 | ) | — | — | |||||||||||||||||||||||||||||
| Balance at December 31, 2020 | 683,875,544 | $ | 7 | $ | 6,332,105 | $ | 335,762 | $ | (15,831 | ) | $ | 6,652,043 | $ | 4,042,157 | $ | 3,831,148 | $ | 14,525,348 | $ | 65,161 | ||||||||||||||||||||
| (a) | Following the conversion to a corporation, Blackstone also had one share outstanding of each of Series I and Series II preferred stock, with par value of each less than one cent. After initial issuance, there have been no changes to the amounts related to Series I and Series II preferred stock during the period presented. |
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continued…
See notes to consolidated financial statements.
Blackstone Inc.
Consolidated Statement of Changes in Equity
(Dollars in Thousands, Except Share Data)
| Shares of Blackstone Inc. (a) | Blackstone Inc. (a) | |||||||||||||||||||||||||||||||||||||||
| Common Stock | Common Stock | Additional Paid-in- Capital | Retained Earnings (Deficit) | Accumulated Other Compre- hensive Income (Loss) | Total Stockholders' Equity | Non- Controlling Interests in Consolidated Entities | Non- Controlling Interests in Blackstone Holdings | Total Equity | Redeemable Non- Controlling Interests in Consolidated Entities | |||||||||||||||||||||||||||||||
| Balance at December 31, 2020 | 683,875,544 | $ | 7 | $ | 6,332,105 | $ | 335,762 | $ | (15,831 | ) | $ | 6,652,043 | $ | 4,042,157 | $ | 3,831,148 | $ | 14,525,348 | $ | 65,161 | ||||||||||||||||||||
| Net Income | — | — | — | 5,857,397 | — | 5,857,397 | 1,625,306 | 4,886,552 | 12,369,255 | 5,740 | ||||||||||||||||||||||||||||||
| Currency Translation Adjustment | — | — | — | — | (3,795 | ) | (3,795 | ) | — | (2,019 | ) | (5,814 | ) | — | ||||||||||||||||||||||||||
| Capital Contributions | — | — | — | — | — | — | 1,280,938 | 10,187 | 1,291,125 | — | ||||||||||||||||||||||||||||||
| Capital Distributions | — | — | — | (2,545,374 | ) | — | (2,545,374 | ) | (1,344,754 | ) | (2,067,387 | ) | (5,957,515 | ) | (2,873 | ) | ||||||||||||||||||||||||
| Transfer of Non-Controlling Interests in Consolidated Entities | — | — | — | — | — | — | (2,994 | ) | — | (2,994 | ) | — | ||||||||||||||||||||||||||||
| Deferred Tax Effects Resulting from Acquisition of Ownership Interests from Non-Controlling Interest Holders | — | — | 58,788 | — | — | 58,788 | — | — | 58,788 | — | ||||||||||||||||||||||||||||||
| Equity-Based Compensation | — | — | 369,517 | — | — | 369,517 | — | 263,082 | 632,599 | — | ||||||||||||||||||||||||||||||
| Net Delivery of Vested Blackstone Holdings Partnership Units and Shares of Common Stock | 3,982,712 | — | (56,120 | ) | — | — | (56,120 | ) | — | — | (56,120 | ) | — | |||||||||||||||||||||||||||
| Repurchase of Shares of Common Stock and Blackstone Holdings Partnership Units | (10,268,444 | ) | — | (1,216,654 | ) | — | — | (1,216,654 | ) | — | — | (1,216,654 | ) | — | ||||||||||||||||||||||||||
| Change in Blackstone Inc.’s Ownership Interest | — | — | 10,494 | — | — | 10,494 | — | (10,494 | ) | — | — | |||||||||||||||||||||||||||||
| Conversion of Blackstone Holdings Partnership Units to Shares of Common Stock | 26,749,962 | — | 296,597 | — | — | 296,597 | — | (296,597 | ) | — | — | |||||||||||||||||||||||||||||
| Balance at December 31, 2021 | 704,339,774 | $ | 7 | $ | 5,794,727 | $ | 3,647,785 | $ | (19,626 | ) | $ | 9,422,893 | $ | 5,600,653 | $ | 6,614,472 | $ | 21,638,018 | $ | 68,028 | ||||||||||||||||||||
| (a) | During the period presented, Blackstone also had one share outstanding of each of Series I and Series II preferred stock, with par value of each less than one cent. |
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continued…
See notes to consolidated financial statements.
Blackstone Inc.
Consolidated Statement of Changes in Equity
(Dollars in Thousands, Except Share Data)
| Shares of Blackstone Inc. (a) | Blackstone Inc. (a) | |||||||||||||||||||||||||||||||||||||||
| Common Stock | Common Stock | Additional Paid-in- Capital | Retained Earnings (Deficit) | Accumulated Other Compre- hensive Income (Loss) | Total Stockholders' Equity | Non- Controlling Interests in Consolidated Entities | Non- Controlling Interests in Blackstone Holdings | Total Equity | Redeemable Non- Controlling Interests in Consolidated Entities | |||||||||||||||||||||||||||||||
| Balance at December 31, 2021 | 704,339,774 | $ | 7 | $ | 5,794,727 | $ | 3,647,785 | $ | (19,626 | ) | $ | 9,422,893 | $ | 5,600,653 | $ | 6,614,472 | $ | 21,638,018 | $ | 68,028 | ||||||||||||||||||||
| Transfer In Due to Consolidation of Fund Entities | — | — | — | — | — | — | — | — | — | 1,146,410 | ||||||||||||||||||||||||||||||
| Net Income (Loss) | — | — | — | 1,747,631 | — | 1,747,631 | 107,766 | 1,276,402 | 3,131,799 | (142,890 | ) | |||||||||||||||||||||||||||||
| Currency Translation Adjustment | — | — | — | — | (7,849 | ) | (7,849 | ) | — | (4,301 | ) | (12,150 | ) | (20,373 | ) | |||||||||||||||||||||||||
| Capital Contributions | — | — | — | — | — | — | 739,660 | 9,868 | 749,528 | 555,693 | ||||||||||||||||||||||||||||||
| Capital Distributions | — | — | — | (3,647,310 | ) | — | (3,647,310 | ) | (1,091,798 | ) | (2,881,343 | ) | (7,620,451 | ) | (180,200 | ) | ||||||||||||||||||||||||
| Transfer of Non-Controlling Interests in Consolidated Entities | — | — | — | — | — | — | (299,801 | ) | — | (299,801 | ) | 288,338 | ||||||||||||||||||||||||||||
| Deferred Tax Effects Resulting from Acquisition of Ownership Interests from Non-Controlling Interest Holders | — | — | 6,690 | — | — | 6,690 | — | — | 6,690 | — | ||||||||||||||||||||||||||||||
| Equity-Based Compensation | — | — | 504,738 | — | — | 504,738 | — | 333,645 | 838,383 | — | ||||||||||||||||||||||||||||||
| Net Delivery of Vested Blackstone Holdings Partnership Units and Shares of Common Stock | 5,407,340 | — | (73,987 | ) | — | — | (73,987 | ) | — | — | (73,987 | ) | — | |||||||||||||||||||||||||||
| Repurchase of Shares of Common Stock and Blackstone Holdings Partnership Units | (3,850,000 | ) | — | (391,968 | ) | — | — | (391,968 | ) | — | — | (391,968 | ) | — | ||||||||||||||||||||||||||
| Change in Blackstone Inc.’s Ownership Interest | — | — | 36,824 | — | — | 36,824 | — | (36,824 | ) | — | — | |||||||||||||||||||||||||||||
| Conversion of Blackstone Holdings Partnership Units to Shares of Common Stock | 4,379,809 | — | 58,249 | — | — | 58,249 | — | (58,249 | ) | — | — | |||||||||||||||||||||||||||||
| Balance at December 31, 2022 | 710,276,923 | $ | 7 | $ | 5,935,273 | $ | 1,748,106 | $ | (27,475 | ) | $ | 7,655,911 | $ | 5,056,480 | $ | 5,253,670 | $ | 17,966,061 | $ | 1,715,006 | ||||||||||||||||||||
| (a) | During the period presented, Blackstone also had one share outstanding of each of Series I and Series II preferred stock, with par value of each less than one cent. |
|---|
See notes to consolidated financial statements.
Blackstone Inc.
Consolidated Statements of Cash Flows
(Dollars in Thousands)
| Year Ended December 31, | ||||||||||||
| 2022 | 2021 | 2020 | ||||||||||
| Operating Activities | ||||||||||||
| Net Income | $ | 2,988,909 | $ | 12,374,995 | $ | 2,261,506 | ||||||
| Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities | ||||||||||||
| Blackstone Funds Related | ||||||||||||
| Net Realized Gains on Investments | (6,474,051 | ) | (6,949,544 | ) | (2,468,801 | ) | ||||||
| Changes in Unrealized (Gains) Losses on Investments | 1,828,364 | (1,748,824 | ) | 54,244 | ||||||||
| Non-Cash Performance Allocations | 3,435,055 | (8,675,246 | ) | 384,393 | ||||||||
| Non-Cash Performance Allocations and Incentive Fee Compensation | 931,288 | 6,159,529 | 715,587 | |||||||||
| Equity-Based Compensation Expense | 846,349 | 637,441 | 438,341 | |||||||||
| Amortization of Intangibles | 67,097 | 74,871 | 71,053 | |||||||||
| Other Non-Cash Amounts Included in Net Income | (1,341,059 | ) | (77,849 | ) | 58,854 | |||||||
| Cash Flows Due to Changes in Operating Assets and Liabilities | ||||||||||||
| Cash Acquired with Consolidation of Fund Entity | 31,791 | — | — | |||||||||
| Cash Relinquished with Deconsolidation of Fund Entities | — | — | (257,544 | ) | ||||||||
| Accounts Receivable | 177,832 | 288,306 | 70,053 | |||||||||
| Due from Affiliates | 654,290 | (1,124,667 | ) | (402,488 | ) | |||||||
| Other Assets | (26,853 | ) | (4,792 | ) | (22,704 | ) | ||||||
| Accrued Compensation and Benefits | (2,197,446 | ) | (1,692,562 | ) | (1,077,195 | ) | ||||||
| Securities Sold, Not Yet Purchased | (22,964 | ) | (22,418 | ) | (26,840 | ) | ||||||
| Accounts Payable, Accrued Expenses and Other Liabilities | 149,019 | 152,209 | 119,906 | |||||||||
| Repurchase Agreements | 31,964 | (18,828 | ) | (77,310 | ) | |||||||
| Due to Affiliates | 117,219 | 81,922 | 32,415 | |||||||||
| Investments Purchased | (5,228,723 | ) | (7,439,964 | ) | (7,179,951 | ) | ||||||
| Cash Proceeds from Sale of Investments | 10,368,172 | 11,971,409 | 9,242,426 | |||||||||
| Net Cash Provided by Operating Activities | 6,336,253 | 3,985,988 | 1,935,945 | |||||||||
| Investing Activities | ||||||||||||
| Purchase of Furniture, Equipment and Leasehold Improvements | (235,497 | ) | (64,316 | ) | (111,650 | ) | ||||||
| Net Cash Paid for Acquisitions, Net of Cash Acquired | — | — | (55,170 | ) | ||||||||
| Net Cash Used in Investing Activities | (235,497 | ) | (64,316 | ) | (166,820 | ) | ||||||
| Financing Activities | ||||||||||||
| Distributions to Non-Controlling Interest Holders in Consolidated Entities | (1,271,907 | ) | (1,347,631 | ) | (747,491 | ) | ||||||
| Contributions from Non-Controlling Interest Holders in Consolidated Entities | 1,268,297 | 1,275,211 | 581,077 | |||||||||
| Payments Under Tax Receivable Agreement | (46,880 | ) | (51,366 | ) | (73,881 | ) | ||||||
| Net Settlement of Vested Common Stock and Repurchase of Common Stock and Blackstone Holdings Partnership Units | (465,956 | ) | (1,272,774 | ) | (504,912 | ) |
continued…
See notes to consolidated financial statements.
Blackstone Inc.
Consolidated Statements of Cash Flows
(Dollars in Thousands)
| Year Ended December 31, | ||||||||||||
| 2022 | 2021 | 2020 | ||||||||||
| Financing Activities (Continued) | ||||||||||||
| Proceeds from Loans Payable | $ | 3,521,544 | $ | 2,222,544 | $ | 888,636 | ||||||
| Repayment and Repurchase of Loans Payable | (280,768 | ) | — | (1,889 | ) | |||||||
| Dividends/Distributions to Stockholders and Unitholders | (6,518,785 | ) | (4,602,574 | ) | (2,385,576 | ) | ||||||
| Net Cash Used in Financing Activities | (3,794,455 | ) | (3,776,590 | ) | (2,244,036 | ) | ||||||
| Effect of Exchange Rate Changes on Cash and Cash Equivalents and Cash Held by Blackstone Funds and Other | (12,318 | ) | (9,806 | ) | 15,716 | |||||||
| Cash and Cash Equivalents and Cash Held by Blackstone Funds and Other | ||||||||||||
| Net Increase (Decrease) | 2,293,983 | 135,276 | (459,195 | ) | ||||||||
| Beginning of Period | 2,199,732 | 2,064,456 | 2,523,651 | |||||||||
| End of Period | $ | 4,493,715 | $ | 2,199,732 | $ | 2,064,456 | ||||||
| Supplemental Disclosure of Cash Flows Information | ||||||||||||
| Payments for Interest | $ | 261,886 | $ | 194,166 | $ | 176,620 | ||||||
| Payments for Income Taxes | $ | 683,171 | $ | 700,690 | $ | 209,182 | ||||||
| Supplemental Disclosure of Non-Cash Investing and Financing Activities | ||||||||||||
| Non-Cash Contributions from Non-Controlling Interest Holders | $ | 34,286 | $ | 11,647 | $ | 19,202 | ||||||
| Notes Issuance Costs | $ | 30,240 | $ | 16,991 | $ | 8,273 | ||||||
| Transfer of Interests to Non-Controlling Interest Holders | $ | (11,463 | ) | $ | (2,994 | ) | $ | (6,013 | ) | |||
| Change in Blackstone Inc.’s Ownership Interest | $ | 36,824 | $ | 10,494 | $ | 10,476 | ||||||
| Net Settlement of Vested Common Stock | $ | 387,332 | $ | 219,558 | $ | 123,478 | ||||||
| Conversion of Blackstone Holdings Units to Common Stock | $ | 58,249 | $ | 296,597 | $ | 123,710 | ||||||
| Acquisition of Ownership Interests from Non-Controlling Interest Holders | ||||||||||||
| Deferred Tax Asset | $ | (120,167 | ) | $ | (807,309 | ) | $ | (242,282 | ) | |||
| Due to Affiliates | $ | 113,477 | $ | 748,521 | $ | 218,955 | ||||||
| Equity | $ | 6,690 | $ | 58,788 | $ | 23,327 | ||||||
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, 2022 | December 31, 2021 | |||||||
| Cash and Cash Equivalents | $ | 4,252,003 | $ | 2,119,738 | ||||
| Cash Held by Blackstone Funds and Other | 241,712 | 79,994 | ||||||
| $ | 4,493,715 | $ | 2,199,732 | |||||
See notes to consolidated financial statements.
Blackstone Inc.
Notes to Consolidated Financial Statements
(All Dollars are in Thousands, Except Share and Per Share Data, Except Where Noted)
- Organization
Blackstone Inc., together with its consolidated subsidiaries (“Blackstone” or the “Company”), is one of the world’s leading investment firms. Blackstone’s asset management business includes investment vehicles focused on real estate, private equity, infrastructure, life sciences, growth equity, 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, Credit & Insurance and Hedge Fund Solutions.
Effective August 6, 2021, The Blackstone Group Inc. changed its name to Blackstone Inc. Blackstone Inc. was initially formed as The Blackstone Group L.P., a Delaware limited partnership, on March 12, 2007. Prior to its conversion (effective July 1, 2019) to a Delaware corporation, Blackstone Inc. was managed and operated by Blackstone Group Management L.L.C., which is wholly owned by Blackstone's senior managing directors and controlled by one of Blackstone's founders, Stephen A. Schwarzman (the “Founder”). Effective February 26, 2021, the Certificate of Incorporation of Blackstone Inc. was amended and restated to rename Blackstone’s Class A common stock as “common stock” and reclassify Blackstone's Class B common stock and Class C common stock into a new Series I preferred stock and a new Series II preferred stock, respectively. All references to common stock, Series I preferred stock and Series II preferred stock prior to such date refer to Class A, Class B and Class C common stock, respectively. See Note 15. “Income Taxes” and Note 16. “Earnings Per Share and Stockholders’ Equity — Stockholders’ 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 of each of the 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 common stock, on a one-to-one basis, exchanging one Partnership Unit from each of the Holding Partnerships for one share of Blackstone common stock.
- Summary of Significant Accounting Policies
Basis of Presentation
The accompanying consolidated fi
nanc
ial 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.
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.
Blackstone Inc.
Notes to Consolidated Financial Statements - Continued
(All Dollars are in Thousands, Except Share and Per Share Data, Except Where Noted)
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”) for 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.”
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
Blackstone Inc.
Notes to Consolidated Financial Statements—Continued
(All Dollars are in Thousands, Except Share and Per Share Data, Except Where Noted)
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 its customers at a fixed percentage of a calculation base which is typically assets under management, net asset value, gross asset value, total assets, committed capital or invested capital. Blackstone identifies its customers on a fund by fund basis in accordance with the terms and circumstances of the individual fund. Generally the customer is identified as the investors in its managed funds and investment vehicles, but for certain widely held funds or vehicles, the fund or vehicle itself may be identified as the customer. 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 investors 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 investors 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 investors 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 investors of the Blackstone Funds, which are based on the amount such investors 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 investors 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 investors of the funds recorded as Management and Advisory Fees, Net. In cases where the investors 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.
Incentive Fees —
Contractual fees earned based on the performance of Blackstone vehicles (“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 performance of the vehicle during the period, subject to the achievement of minimum return levels, or high water marks, in accordance with the respective terms set out in
Blackstone Inc.
Notes to Consolidated Financial Statements—Continued
(All Dollars are in Thousands, Except Share and Per Share Data, Except Where Noted)
each vehicle’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 vehicles 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 and certain open-ended 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 vehicle (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 in carry fund structures are made to the general partner based on cumulative fund performance to date, subject to a preferred return to limited partners. Performance Allocations in open-ended structures are based on vehicle performance over a period of time, subject to a high water mark and preferred return to investors. 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 in carry fund structures 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 in carry fund structures 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. Performance Allocations in open-ended structures are realized based on the stated time period in the agreements and are generally not subject to clawback once paid.
Blackstone Inc.
Notes to Consolidated Financial Statements—Continued
(All Dollars are in Thousands, Except Share and Per Share Data, Except Where Noted)
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.
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. |
|---|
| • | 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
.
Blackstone Inc.
Notes to Consolidated Financial Statements—Continued
(All Dollars are in Thousands, Except Share and Per Share Data, Except Where Noted)
Level II Valuation Techniques
Financial instruments classified within Level II of the fair value hierarchy comprise debt instruments, including debt securities sold, not yet purchased and certain equity securities and derivative instruments valued using observable inputs are also classified as Level II.
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 including those 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. |
|---|
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 analysis. Where a discounted cash flow method is used, a terminal value is derived by reference to an exit multiple, such as earnings before interest, taxes, depreciation and amortization (“EBITDA”), or a capitalization rate. 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.
Private Equity Investments
— The fair values of private equity investments are determined by reference to projected net earnings, 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. Where a discounted cash flow method is used, a terminal value is derived by reference to EBITDA or price/earnings exit multiples. Valuations may also 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.
Blackstone 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
Generally, 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 (Losses) 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 or other eligible election dates. Blackstone has applied the fair value option for certain loans and receivables, unfunded loan commitments 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 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.”
Blackstone Inc.
Notes to Consolidated Financial Statements— Continued
(All Dollars are in Thousands, Except Share and Per Share Data, Except Where Noted)
Blackstone may elect to measure certain proprietary investments in equity securities without readily determinable fair values under the measurement alternative, which reflects cost less impairment, with adjustments in value resulting from observable price changes arising from orderly transactions of the same or a similar security from the same issuer. If the measurement alternative election is not made, the equity security is measured at fair value. The measurement alternative election is made on an instrument by instrument basis. The election is reassessed each reporting period to determine whether investments under the measurement alternative have readily determinable fair values, in which case they would no longer be eligible for this election.
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
Blackstone Inc.
Notes to Consolidated Financial Statements—Continued
(All Dollars are in Thousands, Except Share and Per Share Data, Except Where Noted)
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. The carrying amounts of equity method investments are reflected in Investments in the Consolidated Statements of Financial Condition.
Strategic Partners’ results presented in Blackstone’s consolidated financial statements are reported on a three month lag from Strategic Partners’ fund financial statements, which report the performance of underlying investments generally on a same quarter basis, if available. Therefore, Strategic Partners’ results presented herein do not reflect the impact of economic and market activity in the current quarter. Current quarter market activity of Strategic Partners’ underlying investments is expected to affect Blackstone’s reported results in upcoming periods.
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. 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 Capital Partners LP in 2008, Strategic Partners in 2013, Harvest Fund Advisors LLC (“Harvest”) in 2017, Clarus Ventures LLC (“Clarus”) in 2018 and DCI LLC (“DCI”) in 2020. 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
Blackstone Inc.
Notes to Consolidated Financial Statements—Continued
(All Dollars are in Thousands, Except Share and Per Share Data, Except Where Noted)
than their respective carrying values. The operating segments are considered the reporting units 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, an impairment loss is recognized to the extent by which the carrying value exceeds the fair value, not to exceed the total amount of goodwill allocated to that reporting unit.
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’ estimated useful economic lives, which for leasehold improvements are the lesser of the lease term 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.
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 and awards settled in a variable number of shares 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.
Blackstone Inc.
Notes to Consolidated Financial Statements—Continued
(All Dollars are in Thousands, Except Share and Per Share Data, Except Where Noted)
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. Performance Allocations Compensation is generally 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.
Non-Controlling Interests in Consolidated Entities
Non-Controlling Interests in Consolidated Entities represent the component of Equity in general partner entities and consolidated Blackstone Funds held by third party investors and employees. The percentage interests in consolidated Blackstone Funds 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. Income (Loss) and other comprehensive income, if applicable, arising from the respective entities 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 Blackstone Inc.
Redeemable Non-Controlling Interests in Consolidated Entities
Investors in certain consolidated vehicles may be granted redemption rights that allow for quarterly or monthly redemption, as outlined in the relevant governing documents. Such redemption rights may be subject to certain limitations, including limits on the aggregate amount of interests that may be redeemed in a given period, may only allow for redemption 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 a result, amounts relating to third party interests in such consolidated vehicles 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 vehicles 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.
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 and unvested participating Holdings Partnership Units held by Blackstone personnel and others who are limited partners of the Blackstone Holdings Partnerships. Unvested participating Holdings Partnership Units are excluded from the attribution in periods of loss as they are not contractually obligated to share in losses of the Holdings Partnerships.
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)
Blackstone Inc.
Notes to Consolidated Financial Statements—Continued
(All Dollars are in Thousands, Except Share and Per Share Data, Except Where Noted)
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 — Change in the Tax Receivable Agreement Liability” for additional information.
Income Taxes
Blackstone 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.
Provision for Income Taxes
Income taxes are provided for using the asset and liability method under which deferred tax assets and liabilities are recognized for temporary differences between the financial reporting and tax bases of assets and liabilities, resulting in all pretax amounts being appropriately tax effected in the period, irrespective of which tax return year items will be reflected. Blackstone reports interest expense and tax penalties related to income tax matters in provision for income taxes.
Deferred Income Taxes
Deferred income taxes reflect the net tax effects of temporary differences between the financial reporting and tax bases of assets and liabilities. These temporary differences result in taxable or deductible amounts in future years and are measured using the tax rates and laws that will be in effect when such differences are expected to reverse. Valuation allowances are established to reduce the deferred tax assets to the amount that is more likely than not to be realized. Deferred tax assets are separately stated, and deferred tax liabilities are included in Accounts Payable, Accrued Expenses, and Other Liabilities in the consolidated financial statements.
Unrecognized Tax Benefits
Blackstone recognizes tax positions in the consolidated financial statements when it is more likely than not that the position will be sustained on examination by the relevant taxing authority based on the technical merits of the position. A position that meets this standard is measured at the largest amount of benefit that will more likely than not be realized on settlement. A liability is established for differences between positions taken in the return and amounts recognized in the consolidated financial statements.
Net Income (Loss) Per Share of Common Stock
Basic Income (Loss) Per Share of Common Stock is calculated by dividing Net Income (Loss) Attributable to Blackstone Inc. by the weighted-average shares of common stock, unvested participating shares of common stock outstanding for the period and vested deferred restricted shares of common stock that have been earned for
Blackstone Inc.
Notes to Consolidated Financial Statements—Continued
(All Dollars are in Thousands, Except Share and Per Share Data, Except Where Noted)
which issuance of the related shares of common stock is deferred until future periods. Diluted Income (Loss) Per Share of Common Stock reflects the impact of all dilutive securities. Unvested participating shares of common stock are excluded from the computation in periods of loss as they are not contractually obligated to share in losses.
Blackstone applies the treasury stock method to determine the dilutive weighted-average common shares 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. Blackstone applies the contingently issuable share model to contracts that may require the issuance of shares.
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.”
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
Blackstone Inc.
Notes to Consolidated Financial Statements—Continued
(All Dollars are in Thousands, Except Share and Per Share Data, Except Where Noted)
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”).
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.
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 in the 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.”
Blackstone Inc.
Notes to Consolidated Financial Statements—Continued
(All Dollars are in Thousands, Except Share and Per Share Data, Except Where Noted)
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.
- Goodwill and Intangible Assets
The carrying value of Goodwill was $1.9 billion as of December 31, 2022 and 2021. At December 31, 2022 and 2021, Blackstone determined there was no evidence of Goodwill impairment.
At December 31, 2022 and 2021, Goodwill has been allocated to each of Blackstone’s four segments as follows: Real Estate ($421.7 million), Private Equity ($870.0 million), Credit & Insurance ($426.4 million) and Hedge Fund Solutions ($172.1 million).
Intangible Assets, Net consists of the following:
| December 31, | ||||||||
| 2022 | 2021 | |||||||
| Finite-Lived Intangible Assets/Contractual Rights | $ | 1,745,376 | $ | 1,745,376 | ||||
| Accumulated Amortization | (1,528,089 | ) | (1,460,992 | ) | ||||
| Intangible Assets, Net | $ | 217,287 | $ | 284,384 | ||||
Changes in Blackstone’s Intangible Assets, Net consists of the following:
| Year Ended December 31, | ||||||||||||
| 2022 | 2021 | 2020 | ||||||||||
| Balance, Beginning of Year | $ | 284,384 | $ | 347,955 | $ | 397,508 | ||||||
| Amortization Expense | (67,097 | ) | (74,871 | ) | (71,053 | ) | ||||||
| Acquisitions (a) | — | 11,300 | 21,500 | |||||||||
| Balance, End of Year | $ | 217,287 | $ | 284,384 | $ | 347,955 | ||||||
| (a) | In December 2020, Blackstone acquired DCI, a San Francisco based systematic credit investment firm. Provisional amounts of Intangible Assets and Goodwill for the acquisition of DCI were reported for the year ended December 31, 2020, which resulted in a $21.5 million increase in Intangible Assets. During the year ended December 31, 2021, Blackstone obtained additional information needed to identify and measure the acquired assets, which resulted in a $11.3 million increase in Intangible Assets. Intangible Assets related to the DCI acquisition are primarily comprised of contractual rights to earn future fee income. |
|---|
Amortization of Intangible Assets held at December 31, 2022 is expected to be $38.1 million, $30.5 million, $30.5 million, $30.4 million and $29.3 million for each of the years ending December 31, 2023, 2024, 2025, 2026 and 2027, respectively. Blackstone’s Intangible Assets as of December 31, 2022 are expected to amortize over a weighted-average period of 7.1 years.
Blackstone Inc.
Notes to Consolidated Financial Statements—Continued
(All Dollars are in Thousands, Except Share and Per Share Data, Except Where Noted)
- Investments
Investments consist of the following:
| December 31, | ||||||||
| 2022 | 2021 | |||||||
| Investments of Consolidated Blackstone Funds | $ | 5,136,966 | $ | 2,018,829 | ||||
| Equity Method Investments | ||||||||
| Partnership Investments | 5,530,419 | 5,635,212 | ||||||
| Accrued Performance Allocations | 12,360,684 | 17,096,873 | ||||||
| Corporate Treasury Investments | 1,053,540 | 658,066 | ||||||
| Other Investments | 3,471,642 | 3,256,063 | ||||||
| $ | 27,553,251 | $ | 28,665,043 | |||||
Blackstone’s share of Investments of Consolidated Blackstone Funds totaled $393.9 million and $375.8 million at December 31, 2022 and December 31, 2021, respectively.
Where appropriate, the accounting for Blackstone’s investments incorporates the changes in fair value of those investments as determined under GAAP. The significant inputs and assumptions required to determine the change in fair value of the investments of Consolidated Blackstone Funds, Corporate Treasury Investments and Other Investments are discussed in more detail in Note 8. “Fair Value Measurements of Financial Instruments.”
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 (Loss) — Net Gains (Losses) from Fund Investment Activities in the Consolidated Statements of Operations:
| Year Ended December 31, | ||||||||||||
| 2022 | 2021 | 2020 | ||||||||||
| Realized Gains (Losses) | $ | 99,457 | $ | 145,305 | $ | (126,397 | ) | |||||
| Net Change in Unrealized Losses | (264,204 | ) | 289,938 | 60,363 | ||||||||
| Realized and Net Change in Unrealized Gains (Losses) from Consolidated Blackstone Funds | (164,747 | ) | 435,243 | (66,034 | ) | |||||||
| Interest and Dividend Revenue Attributable to Consolidated Blackstone Funds | 59,605 | 26,381 | 96,576 | |||||||||
| Other Income (Loss) — Net Gains (Losses) from Fund Investment Activities | $ | (105,142 | ) | $ | 461,624 | $ | 30,542 | |||||
Equity Method Investments
Blackstone’s equity method investments include Partnership Investments, which represent the pro-rata investments, and any associated Accrued Performance Allocations, in Blackstone Funds, excluding any equity method investments for which the fair value option has been elected. Prior to January 26, 2021, Partnership Investments also included the 40% non-controlling interest in Pátria Investments Limited and Pátria Investimentos Ltda. (collectively, “Pátria”).
On January 26, 2021, Pátria completed its IPO, pursuant to which Blackstone sold a portion of its interests and ceased to have representatives or the right to designate representatives on Pátria’s board of directors. As a result
Blackstone Inc.
Notes to Consolidated Financial Statements—Continued
(All Dollars are in Thousands, Except Share and Per Share Data, Except Where Noted)
of Pátria’s pre-IPO reorganization transactions (which included Blackstone’s sale of 10% of Pátria’s pre-IPO shares to Pátria’s controlling shareholder) and the consummation of the IPO, Blackstone was deemed to no longer have significant influence over Pátria due to Blackstone’s decreased ownership and lack of board representation. Following the IPO, the retained interest in Pátria is included in Other Investments and accounted for at fair value in accordance with the GAAP guidance for investments in equity securities with a readily determinable fair value. Blackstone sold its remaining shares of Pátria during the three months ended September 30, 2021.
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, 2022, 2021 and 2020, 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 $292.1 million, $1.9 billion and $320.2 million for the years ended December 31, 2022, 2021 and 2020, respectively.
The summarized financial information of Blackstone’s equity method investments for December 31, 2022 are as follows:
| December 31, 2022 and the Year Then Ended | ||||||||||||||||||||
| Real Estate | Private Equity | Credit & Insurance | Hedge Fund Solutions | Total | ||||||||||||||||
| Statement of Financial Condition | ||||||||||||||||||||
| Assets | ||||||||||||||||||||
| Investments | $ | 295,985,447 | $ | 182,732,362 | $ | 87,362,311 | $ | 38,209,892 | $ | 604,290,012 | ||||||||||
| Other Assets | 13,601,083 | 3,194,088 | 6,345,260 | 4,079,065 | 27,219,496 | |||||||||||||||
| Total Assets | $ | 309,586,530 | $ | 185,926,450 | $ | 93,707,571 | $ | 42,288,957 | $ | 631,509,508 | ||||||||||
| Liabilities and Equity | ||||||||||||||||||||
| Debt | $ | 118,075,949 | $ | 22,779,131 | $ | 39,049,599 | $ | 662,805 | $ | 180,567,484 | ||||||||||
| Other Liabilities | 7,735,780 | 1,310,998 | 5,644,625 | 2,092,757 | 16,784,160 | |||||||||||||||
| Total Liabilities | 125,811,729 | 24,090,129 | 44,694,224 | 2,755,562 | 197,351,644 | |||||||||||||||
| Equity | 183,774,801 | 161,836,321 | 49,013,347 | 39,533,395 | 434,157,864 | |||||||||||||||
| Total Liabilities and Equity | $ | 309,586,530 | $ | 185,926,450 | $ | 93,707,571 | $ | 42,288,957 | $ | 631,509,508 | ||||||||||
| Statement of Operations | ||||||||||||||||||||
| Interest Income | $ | 2,917,115 | $ | 2,012,916 | $ | 5,764,150 | $ | 16,069 | $ | 10,710,250 | ||||||||||
| Other Income | 9,432,802 | 824,779 | 690,193 | 286,444 | 11,234,218 | |||||||||||||||
| Interest Expense | (3,644,118 | ) | (722,626 | ) | (1,450,447 | ) | (41,522 | ) | (5,858,713 | ) | ||||||||||
| Other Expenses | (11,089,520 | ) | (2,132,320 | ) | (1,303,902 | ) | (255,459 | ) | (14,781,201 | ) | ||||||||||
| Net Realized and Unrealized Gain from Investments | 7,807,056 | 2,146,281 | (1,330,895 | ) | 483,946 | 9,106,388 | ||||||||||||||
| Net Income | $ | 5,423,335 | $ | 2,129,030 | $ | 2,369,099 | $ | 489,478 | $ | 10,410,942 | ||||||||||
Blackstone 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, 2021 are as follows:
| December 31, 2021 and the Year Then Ended | ||||||||||||||||||||
| Real Estate | Private Equity | Credit & Insurance | Hedge Fund Solutions | Total | ||||||||||||||||
| Statement of Financial Condition | ||||||||||||||||||||
| Assets | ||||||||||||||||||||
| Investments | $ | 241,808,879 | $ | 175,726,829 | $ | 68,426,090 | $ | 39,691,668 | $ | 525,653,466 | ||||||||||
| Other Assets | 13,463,009 | 5,776,462 | 5,412,041 | 3,020,159 | 27,671,671 | |||||||||||||||
| Total Assets | $ | 255,271,888 | $ | 181,503,291 | $ | 73,838,131 | $ | 42,711,827 | $ | 553,325,137 | ||||||||||
| Liabilities and Equity | ||||||||||||||||||||
| Debt | $ | 76,760,932 | $ | 20,434,354 | $ | 30,792,984 | $ | 1,243,453 | $ | 129,231,723 | ||||||||||
| Other Liabilities | 6,999,032 | 2,153,071 | 3,159,548 | 3,084,558 | 15,396,209 | |||||||||||||||
| Total Liabilities | 83,759,964 | 22,587,425 | 33,952,532 | 4,328,011 | 144,627,932 | |||||||||||||||
| Equity | 171,511,924 | 158,915,866 | 39,885,599 | 38,383,816 | 408,697,205 | |||||||||||||||
| Total Liabilities and Equity | $ | 255,271,888 | $ | 181,503,291 | $ | 73,838,131 | $ | 42,711,827 | $ | 553,325,137 | ||||||||||
| Statement of Operations | ||||||||||||||||||||
| Interest Income | $ | 1,422,743 | $ | 1,640,402 | $ | 2,584,486 | $ | 3,563 | $ | 5,651,194 | ||||||||||
| Other Income | 6,115,960 | 318,485 | 306,490 | 315,894 | 7,056,829 | |||||||||||||||
| Interest Expense | (1,475,065 | ) | (331,350 | ) | (427,459 | ) | (30,073 | ) | (2,263,947 | ) | ||||||||||
| Other Expenses | (6,847,739 | ) | (1,666,930 | ) | (828,689 | ) | (282,474 | ) | (9,625,832 | ) | ||||||||||
| Net Realized and Unrealized Gain from Investments | 31,078,396 | 43,895,781 | 3,562,579 | 4,605,235 | 83,141,991 | |||||||||||||||
| Net Income | $ | 30,294,295 | $ | 43,856,388 | $ | 5,197,407 | $ | 4,612,145 | $ | 83,960,235 | ||||||||||
| (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. |
|---|
Blackstone 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, 2020 are as follows:
| December 31, 2020 and the Year Then Ended | ||||||||||||||||||||||||
| Real Estate | Private Equity | Credit & Insurance | Hedge Fund Solutions | Other (a) | Total | |||||||||||||||||||
| Statement of Financial Condition | ||||||||||||||||||||||||
| Assets | ||||||||||||||||||||||||
| Investments | $ | 140,317,595 | $ | 112,647,584 | $ | 25,473,283 | $ | 32,829,525 | $ | 11,915 | $ | 311,279,902 | ||||||||||||
| Other Assets | 5,234,463 | 2,650,267 | 2,088,882 | 3,047,256 | 95,798 | 13,116,666 | ||||||||||||||||||
| Total Assets | $ | 145,552,058 | $ | 115,297,851 | $ | 27,562,165 | $ | 35,876,781 | $ | 107,713 | $ | 324,396,568 | ||||||||||||
| Liabilities and Equity | ||||||||||||||||||||||||
| Debt | $ | 29,962,733 | $ | 15,928,802 | $ | 7,553,301 | $ | 886,292 | $ | — | $ | 54,331,128 | ||||||||||||
| Other Liabilities | 5,777,808 | 1,657,846 | 1,216,354 | 3,320,551 | 48,275 | 12,020,834 | ||||||||||||||||||
| Total Liabilities | 35,740,541 | 17,586,648 | 8,769,655 | 4,206,843 | 48,275 | 66,351,962 | ||||||||||||||||||
| Equity | 109,811,517 | 97,711,203 | 18,792,510 | 31,669,938 | 59,438 | 258,044,606 | ||||||||||||||||||
| Total Liabilities and Equity | $ | 145,552,058 | $ | 115,297,851 | $ | 27,562,165 | $ | 35,876,781 | $ | 107,713 | $ | 324,396,568 | ||||||||||||
| Statement of Operations | ||||||||||||||||||||||||
| Interest Income | $ | 608,120 | $ | 1,083,534 | $ | 1,196,544 | $ | 22,157 | $ | — | $ | 2,910,355 | ||||||||||||
| Other Income | 1,074,818 | 71,219 | 323,577 | 283,250 | 115,504 | 1,868,368 | ||||||||||||||||||
| Interest Expense | (1,006,311 | ) | (345,060 | ) | (211,507 | ) | (68,887 | ) | — | (1,631,765 | ) | |||||||||||||
| Other Expenses | (1,889,153 | ) | (1,405,029 | ) | (525,456 | ) | (225,384 | ) | (53,292 | ) | (4,098,314 | ) | ||||||||||||
| Net Realized and Unrealized Gain (Losses) from Investments | 5,150,127 | 7,638,733 | (1,965,087 | ) | 2,449,079 | — | 13,272,852 | |||||||||||||||||
| Net Income (Loss) | $ | 3,937,601 | $ | 7,043,397 | $ | (1,181,929 | ) | $ | 2,460,215 | $ | 62,212 | $ | 12,321,496 | |||||||||||
| (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 | Credit & Insurance | Hedge Fund Solutions | Total | ||||||||||||||||
| Accrued Performance Allocations, December 31, 2021 | $ | 8,471,754 | $ | 7,550,468 | $ | 618,246 | $ | 456,405 | $ | 17,096,873 | ||||||||||
| Performance Allocations as a Result of Changes in Fund Fair Values | 2,072,431 | (71,156 | ) | 106,622 | 58,216 | 2,166,113 | ||||||||||||||
| Foreign Exchange Loss | (122,812 | ) | — | — | — | (122,812 | ) | |||||||||||||
| Impact of Consolidation | (10,393 | ) | — | — | — | (10,393 | ) | |||||||||||||
| Fund Distributions | (5,076,863 | ) | (1,441,737 | ) | (154,970 | ) | (95,527 | ) | (6,769,097 | ) | ||||||||||
| Accrued Performance Allocations, December 31, 2022 | $ | 5,334,117 | $ | 6,037,575 | $ | 569,898 | $ | 419,094 | $ | 12,360,684 | ||||||||||
Blackstone 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, | ||||||||||||
| 2022 | 2021 | 2020 | ||||||||||
| Realized Gains (Losses) | $ | (21,511 | ) | $ | 741 | $ | 44,700 | |||||
| Net Change in Unrealized Gains (Losses) | (57,426 | ) | 39,549 | (91,299 | ) | |||||||
| $ | (78,937 | ) | $ | 40,290 | $ | (46,599 | ) | |||||
Other Investments
Other Investments consist of equity method investments where Blackstone has elected the fair value option and other proprietary investment securities held by Blackstone, including equity securities carried at fair value, equity investments without readily determinable fair values, and subordinated notes in non-consolidated CLO vehicles. Equity securities carried at fair value include the ownership of common stock of Corebridge Financial, Inc., formerly known as American International Group, Inc.’s Life and Retirement business (“Corebridge”). Such common stock is subject to certain phased lock-up restrictions that expire over time through five years after the initial public offering (“IPO”) of Corebridge. Equity investments without a readily determinable fair value had a carrying value of $375.5 million as of December 31, 2022. In the period of acquisition and upon remeasurement in connection with an observable transaction, such investments are reported at fair value. See Note 8. “Fair Value Measurements of Financial Instruments” for additional detail. Upward adjustments related to investments held as of December 31, 2022 were $
6.4 million during the year ended December 31, 2022, and $240.2 million on a cumulative basis since the inception of the investments. The following table presents Blackstone’s Realized and Net Change in Unrealized Gains (Losses) in Other Investments:
| Year Ended December 31, | ||||||||||||
| 2022 | 2021 | 2020 | ||||||||||
| Realized Gains | $ | 203,327 | $ | 163,199 | $ | 19,573 | ||||||
| Net Change in Unrealized Gains (Losses) | (1,128,244 | ) | 340,867 | (2,647 | ) | |||||||
| $ | (924,917 | ) | $ | 504,066 | $ | 16,926 | ||||||
Blackstone Inc.
Notes to Consolidated Financial Statements—Continued
(All Dollars are in Thousands, Except Share and Per Share Data, Except Where Noted)
- Net Asset Value as Fair Value
A summary of fair value by strategy type and ability to redeem such investments as of December 31, 2022 is presented below:
| Strategy (a) | Fair Value | Redemption Frequency (if currently eligible) | Redemption Notice Period | |||||
| Equity | $ | 454,212 | (b) | (b) | ||||
| Total Real Estate | 120,632 | (c) | (c) | |||||
| Credit Driven | 26,752 | (d) | (d) | |||||
| Commodities | 1,080 | (e) | (e) | |||||
| Diversified Instruments | 17 | (f) | (f) | |||||
| $ | 602,693 | |||||||
| (a) | As of December 31, 2022, Blackstone had no unfunded commitments. |
|---|
| (b) | The Equity category includes investments in hedge funds that invest primarily in domestic and international equity securities. Investment representing 23% of the fair value of the investments in this category may not be redeemed at, or within three months of, the reporting date. Investments representing 76% of the fair value of the investments in this category are redeemable as of the reporting date. Investments representing less than 1% 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 less than 1% of Blackstone’s investments in the category. |
|---|
| (c) | The Real Estate category includes investments in funds that primarily invest in real estate assets. Investments representing 100% of fair value of the investments in this category are redeemable as of the reporting date. |
|---|
| (d) | The Credit Driven category includes investments in hedge funds that invest primarily in domestic and international bonds. Investments representing 82% of the fair value of the investments in this category are in liquidation. The remaining 18% of investments in this category may not be redeemed at, or within three months of, the reporting date. |
|---|
| (e) | 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. |
|---|
| (f) | Diversified Instruments include investments in funds that invest across multiple 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. |
|---|
- 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 and business 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.
Blackstone Inc.
Notes to Consolidated Financial Statements—Continued
(All Dollars are in Thousands, Except Share and Per Share Data, Except Where Noted)
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, 2022 | December 31, 2021 | |||||||||||||||||||||||||||||||
| Assets | Liabilities | Assets | Liabilities | |||||||||||||||||||||||||||||
| Notional | Fair Value | Notional | Fair Value | Notional | Fair Value | Notional | Fair Value | |||||||||||||||||||||||||
| Freestanding Derivatives | ||||||||||||||||||||||||||||||||
| Blackstone | ||||||||||||||||||||||||||||||||
| Interest Rate Contracts | $ | 789,540 | $ | 188,043 | $ | 621,700 | $ | 83,331 | $ | 609,132 | $ | 143,349 | $ | 692,442 | $ | 138,677 | ||||||||||||||||
| Foreign Currency Contracts | 541,238 | 8,040 | 190,774 | 3,542 | 217,161 | 1,858 | 572,643 | 6,143 | ||||||||||||||||||||||||
| Credit Default Swaps | 2,007 | 384 | 8,768 | 1,309 | 2,007 | 194 | 9,916 | 1,055 | ||||||||||||||||||||||||
| Total Return Swaps | 42,233 | 6,210 | — | — | — | — | — | — | ||||||||||||||||||||||||
| Equity Options | — | — | 996,592 | 48,581 | — | — | — | — | ||||||||||||||||||||||||
| 1,375,018 | 202,677 | 1,817,834 | 136,763 | 828,300 | 145,401 | 1,275,001 | 145,875 | |||||||||||||||||||||||||
| Investments of | ||||||||||||||||||||||||||||||||
| Consolidated Blackstone Funds | ||||||||||||||||||||||||||||||||
| Interest Rate Contracts | 931,752 | 74,926 | — | — | — | — | 14,000 | 764 | ||||||||||||||||||||||||
| Foreign Currency Contracts | — | — | 5,133 | 284 | 20,764 | 339 | 54,300 | 370 | ||||||||||||||||||||||||
| Credit Default Swaps | — | — | — | — | 3,401 | 321 | 22,865 | 799 | ||||||||||||||||||||||||
| 931,752 | 74,926 | 5,133 | 284 | 24,165 | 660 | 91,165 | 1,933 | |||||||||||||||||||||||||
| $ | 2,306,770 | $ | 277,603 | $ | 1,822,967 | $ | 137,047 | $ | 852,465 | $ | 146,061 | $ | 1,366,166 | $ | 147,808 | |||||||||||||||||
Blackstone 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, | ||||||||||||
| 2022 | 2021 | 2020 | ||||||||||
| Freestanding Derivatives | ||||||||||||
| Realized Gains (Losses) | ||||||||||||
| Interest Rate Contracts | $ | 15,319 | $ | 1,727 | $ | (7,643 | ) | |||||
| Foreign Currency Contracts | (8,520 | ) | (1,152 | ) | 1,105 | |||||||
| Credit Default Swaps | (231 | ) | (1,488 | ) | (109 | ) | ||||||
| Total Return Swaps | 1,654 | (1,254 | ) | (1,875 | ) | |||||||
| Other | — | (40 | ) | 14 | ||||||||
| 8,222 | (2,207 | ) | (8,508 | ) | ||||||||
| Net Change in Unrealized Gains (Losses) | ||||||||||||
| Interest Rate Contracts | 167,706 | 89,702 | (117,145 | ) | ||||||||
| Foreign Currency Contracts | 9,666 | 608 | 1,231 | |||||||||
| Credit Default Swaps | 73 | 1,112 | (1,777 | ) | ||||||||
| Total Return Swaps | 5,290 | 2,130 | (1,683 | ) | ||||||||
| Equity Options | 48,581 | — | — | |||||||||
| Other | — | (20 | ) | 57 | ||||||||
| 231,316 | 93,532 | (119,317 | ) | |||||||||
| $ | 239,538 | $ | 91,325 | $ | (127,825 | ) | ||||||
As of December 31, 2022, 2021 and 2020, Blackstone had not designated any derivatives as fair value, cash flow or net investment hedges.
- Fair Value Option
The following table summarizes the financial instruments for which the fair value option has been elected:
| December 31, | ||||||||
| 2022 | 2021 | |||||||
| Assets | ||||||||
| Loans and Receivables | $ | 315,039 | $ | 392,732 | ||||
| Equity and Preferred Securities | 1,868,192 | 516,539 | ||||||
| Debt Securities | 24,784 | 183,877 | ||||||
| $ | 2,208,015 | $ | 1,093,148 | |||||
| Liabilities | ||||||||
| Corporate Treasury Commitments | $ | 8,144 | $ | 636 | ||||
Blackstone 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, | ||||||||||||||||||||||||
| 2022 | 2021 | 2020 | ||||||||||||||||||||||
| Net Change | Net Change | Net Change | ||||||||||||||||||||||
| Realized | in Unrealized | Realized | in Unrealized | Realized | in Unrealized | |||||||||||||||||||
| Gains | Gains | Gains | Gains | Gains | Gains | |||||||||||||||||||
| (Losses) | (Losses) | (Losses) | (Losses) | (Losses) | (Losses) | |||||||||||||||||||
| Assets | ||||||||||||||||||||||||
| Loans and Receivables | $ | (10,733 | ) | $ | (464 | ) | $ | (11,661 | ) | $ | 3,481 | $ | (10,314 | ) | $ | (2,011 | ) | |||||||
| Equity and Preferred Securities | 22,285 | (91,338 | ) | 42,791 | 53,157 | (342 | ) | (67,869 | ) | |||||||||||||||
| Debt Securities | (22,240 | ) | (19,490 | ) | 14,399 | (14,210 | ) | (22,783 | ) | 29,143 | ||||||||||||||
| Assets of Consolidated CLO Vehicles (a) | ||||||||||||||||||||||||
| Corporate Loans | — | — | — | — | (96,194 | ) | (226,542 | ) | ||||||||||||||||
| Other | — | — | — | — | — | (325 | ) | |||||||||||||||||
| $ | (10,688 | ) | $ | (111,292 | ) | $ | 45,529 | $ | 42,428 | $ | (129,633 | ) | $ | (267,604 | ) | |||||||||
| Liabilities | ||||||||||||||||||||||||
| Liabilities of Consolidated CLO Vehicles (a) | ||||||||||||||||||||||||
| Senior Secured Notes | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 199,445 | ||||||||||||
| Subordinated Notes | — | — | — | — | — | 30,046 | ||||||||||||||||||
| Corporate Treasury Commitments | — | (7,508 | ) | — | (383 | ) | — | (244 | ) | |||||||||||||||
| $ | — | $ | (7,508 | ) | $ | — | $ | (383 | ) | $ | — | $ | 229,247 | |||||||||||
| (a) | During the year ended December 31, 2020, Blackstone deconsolidated nine CLO vehicles. |
|---|
The following table presents information for those financial instruments for which the fair value option was elected:
| December 31, 2022 | December 31, 2021 | |||||||||||||||||||||||
| For Financial Assets | For Financial Assets | |||||||||||||||||||||||
| Past Due (a) | Past Due (a) | |||||||||||||||||||||||
| Excess | Excess | Excess | Excess | |||||||||||||||||||||
| (Deficiency) | (Deficiency) | (Deficiency) | (Deficiency) | |||||||||||||||||||||
| of Fair Value | Fair | of Fair Value | of Fair Value | Fair | of Fair Value | |||||||||||||||||||
| Over Principal | Value | Over Principal | Over Principal | Value | Over Principal | |||||||||||||||||||
| Loans and Receivables | $ | (2,861 | ) | $ | — | $ | — | $ | (2,748 | ) | $ | — | $ | — | ||||||||||
| Debt Securities | (48,670 | ) | — | — | (29,475 | ) | — | — | ||||||||||||||||
| $ | (51,531 | ) | $ | — | $ | — | $ | (32,223 | ) | $ | — | $ | — | |||||||||||
As of December 31, 2022 and 2021, no Loans and Receivables for which the fair value option was elected were past due or in non-accrual status.
Blackstone Inc.
Notes to Consolidated Financial Statements—Continued
(All Dollars are in Thousands, Except Share and Per Share Data, Except Where Noted)
- 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, 2022 | ||||||||||||||||||||
| Level I | Level II | Level III | NAV | Total | ||||||||||||||||
| Assets | ||||||||||||||||||||
| Cash and Cash Equivalents | $ | 1,134,733 | $ | — | $ | — | $ | — | $ | 1,134,733 | ||||||||||
| Investments | ||||||||||||||||||||
| Investments of Consolidated Blackstone Funds | ||||||||||||||||||||
| Equity Securities, Partnerships and LLC Interests (a) | 12,024 | 149,689 | 4,195,859 | 596,708 | 4,954,280 | |||||||||||||||
| Debt Instruments | — | 53,787 | 53,973 | — | 107,760 | |||||||||||||||
| Freestanding Derivatives | — | 74,926 | — | — | 74,926 | |||||||||||||||
| Total Investments of Consolidated Blackstone Funds | 12,024 | 278,402 | 4,249,832 | 596,708 | 5,136,966 | |||||||||||||||
| Corporate Treasury Investments | 116,266 | 931,406 | 5,868 | — | 1,053,540 | |||||||||||||||
| Other Investments (b) | 1,473,611 | 1,597,696 | 51,155 | 5,985 | 3,128,447 | |||||||||||||||
| Total Investments | 1,601,901 | 2,807,504 | 4,306,855 | 602,693 | 9,318,953 | |||||||||||||||
| Accounts Receivable — Loans and Receivables | — | — | 315,039 | — | 315,039 | |||||||||||||||
| Other Assets — Freestanding Derivatives | 279 | 196,188 | 6,210 | — | 202,677 | |||||||||||||||
| $ | 2,736,913 | $ | 3,003,692 | $ | 4,628,104 | $ | 602,693 | $ | 10,971,402 | |||||||||||
| Liabilities | ||||||||||||||||||||
| Securities Sold, Not Yet Purchased | $ | 3,825 | $ | — | $ | — | $ | — | $ | 3,825 | ||||||||||
| Accounts Payable, Accrued Expenses and Other Liabilities | ||||||||||||||||||||
| Consolidated Blackstone Funds — Freestanding Derivatives | — | 284 | — | — | 284 | |||||||||||||||
| Freestanding Derivatives (c) | 21 | 88,161 | 48,581 | — | 136,763 | |||||||||||||||
| Corporate Treasury Commitments (d) | — | — | 8,144 | — | 8,144 | |||||||||||||||
| Total Accounts Payable, Accrued Expenses and Other Liabilities | 21 | 88,445 | 56,725 | — | 145,191 | |||||||||||||||
| $ | 3,846 | $ | 88,445 | $ | 56,725 | $ | — | $ | 149,016 | |||||||||||
Blackstone Inc.
Notes to Consolidated Financial Statements—Continued
(All Dollars are in Thousands, Except Share and Per Share Data, Except Where Noted)
| December 31, 2021 | ||||||||||||||||||||
| Level I | Level II | Level III | NAV | Total | ||||||||||||||||
| Assets | ||||||||||||||||||||
| Cash and Cash Equivalents | $ | 173,408 | $ | — | $ | — | $ | — | $ | 173,408 | ||||||||||
| Investments | ||||||||||||||||||||
| Investments of Consolidated Blackstone Funds | ||||||||||||||||||||
| Investment Funds | — | — | — | 18,365 | 18,365 | |||||||||||||||
| Equity Securities, Partnerships and LLC Interests (a) | 70,484 | 122,068 | 1,170,362 | 363,902 | 1,726,816 | |||||||||||||||
| Debt Instruments | 642 | 242,393 | 29,953 | — | 272,988 | |||||||||||||||
| Freestanding Derivatives | — | 660 | — | — | 660 | |||||||||||||||
| Total Investments of Consolidated Blackstone Funds | 71,126 | 365,121 | 1,200,315 | 382,267 | 2,018,829 | |||||||||||||||
| Corporate Treasury Investments | 86,877 | 570,712 | 477 | — | 658,066 | |||||||||||||||
| Other Investments (b) | 478,892 | 210,752 | 2,518,032 | 4,845 | 3,212,521 | |||||||||||||||
| Total Investments | 636,895 | 1,146,585 | 3,718,824 | 387,112 | 5,889,416 | |||||||||||||||
| Accounts Receivable — Loans and Receivables | — | — | 392,732 | — | 392,732 | |||||||||||||||
| Other Assets — Freestanding Derivatives | 113 | 145,288 | — | — | 145,401 | |||||||||||||||
| $ | 810,416 | $ | 1,291,873 | $ | 4,111,556 | $ | 387,112 | $ | 6,600,957 | |||||||||||
| Liabilities | ||||||||||||||||||||
| Securities Sold, Not Yet Purchased | $ | 4,292 | $ | 23,557 | $ | — | $ | — | $ | 27,849 | ||||||||||
| Accounts Payable, Accrued Expenses and Other Liabilities | ||||||||||||||||||||
| Consolidated Blackstone Funds — Freestanding Derivatives | — | 1,933 | — | — | 1,933 | |||||||||||||||
| Freestanding Derivatives | 323 | 145,552 | — | — | 145,875 | |||||||||||||||
| Corporate Treasury Commitments (d) | — | — | 636 | — | 636 | |||||||||||||||
| Total Accounts Payable, Accrued Expenses and Other Liabilities | 323 | 147,485 | 636 | — | 148,444 | |||||||||||||||
| $ | 4,615 | $ | 171,042 | $ | 636 | $ | — | $ | 176,293 | |||||||||||
| LLC | Limited Liability Company. |
|---|
| (a) | Equity Securities, Partnership and LLC Interest includes investments in investment funds. Prior period amounts have been reclassified to this presentation. |
|---|
| (b) | Other Investments includes Blackstone’s ownership of common stock of Corebridge. Following Corebridge’s IPO in September 2022, a quoted price for Corebridge’s common shares exists and as such the investment will be measured at fair value on a recurring basis as a Level I investment. Blackstone’s investment in Corebridge was previously valued as a Level III investment on a nonrecurring basis using the measurement alternative. See Note 4. “Investments — Other Investments” for additional details. |
|---|
| (c) | Level III freestanding derivatives are valued using an option pricing model where the significant inputs include the expected return and expected volatility. |
|---|
| (d) | Corporate Treasury Commitments are measured using third party pricing. |
|---|
Blackstone 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, 2022:
| Impact to | ||||||||||||||
| Valuation | ||||||||||||||
| from an | ||||||||||||||
| Valuation | Unobservable | Weighted- | Increase | |||||||||||
| Fair Value | Techniques | Inputs | Ranges | Average (a) | in Input | |||||||||
| Financial Assets | ||||||||||||||
| Investments of Consolidated Blackstone Funds | ||||||||||||||
| Equity Securities, Partnership and LLC Interests | $ | 4,195,859 | Discounted Cash Flows | Discount Rate | 4.1% - 34.5% | 8.8% | Lower | |||||||
| Exit Multiple - EBITDA | 4.0x - 30.6x | 14.7x | Higher | |||||||||||
| Exit Capitalization Rate | 2.6% - 14.4% | 4.7% | Lower | |||||||||||
| Transaction Price | n/a | |||||||||||||
| Debt Instruments | 53,973 | Transaction Price | n/a | |||||||||||
| Third Party Pricing | n/a | |||||||||||||
| Total Investments of Consolidated Blackstone Funds | 4,249,832 | |||||||||||||
| Corporate Treasury Investments | 5,868 | Third Party Pricing | n/a | |||||||||||
| Loans and Receivables | 315,039 | Discounted Cash Flows | Discount Rate | 7.6% - 11.5% | 9.8% | Lower | ||||||||
| Other Investments (b) | 57,365 | Transaction Price | n/a | |||||||||||
| Third Party Pricing | n/a | |||||||||||||
| $ | 4,628,104 | |||||||||||||
Blackstone 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, 2021:
| Impact to | ||||||||||||||||||
| Valuation | ||||||||||||||||||
| from an | ||||||||||||||||||
| Valuation | Unobservable | Weighted- | Increase | |||||||||||||||
| Fair Value | Techniques | Inputs | Ranges | Average (a) | in Input | |||||||||||||
| Financial Assets | ||||||||||||||||||
| Investments of Consolidated Blackstone Funds | ||||||||||||||||||
| Equity Securities, Partnership and LLC Interests | $ | 1,170,362 | Discounted Cash Flows | Discount Rate | 1.3% - 43.3% | 10.4% | Lower | |||||||||||
| Exit Multiple - EBITDA | 3.7x - 31.4x | 14.7x | Higher | |||||||||||||||
| Exit Capitalization Rate | 1.3% - 17.3% | 4.9% | Lower | |||||||||||||||
| Debt Instruments | 29,953 | Discounted Cash Flows | Discount Rate | 6.5% - 19.3% | 9.0% | Lower | ||||||||||||
| Third Party Pricing | n/a | |||||||||||||||||
| Total Investments of Consolidated Blackstone Funds | 1,200,315 | |||||||||||||||||
| Corporate Treasury Investments | 477 | Discounted Cash Flows | Discount Rate | 9.4 % | n/a | Lower | ||||||||||||
| Third Party Pricing | n/a | |||||||||||||||||
| Loans and Receivables | 392,732 | Discounted Cash Flows | Discount Rate | 6.5% - 12.2% | 7.6% | Lower | ||||||||||||
| Other Investments | 2,518,032 | Third Party Pricing | n/a | |||||||||||||||
| Transaction Price | n/a | |||||||||||||||||
| $ | 4,111,556 | |||||||||||||||||
| n/a | Not applicable. | |
| EBITDA | Earnings before interest, taxes, depreciation and amortization. | |
| Exit Multiple | Ranges include the last twelve months EBITDA and forward EBITDA multiples. | |
| 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. | |
| (b) | As of December 31, 2022, Other Investments includes Level III Freestanding Derivatives. |
During the year ended December 31, 2022, 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. These tables also exclude financial assets and liabilities measured at fair value on a non-recurring basis. 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.
Blackstone Inc.
Notes to Consolidated Financial Statements—Continued
(All Dollars are in Thousands, Except Share and Per Share Data, Except Where Noted)
| Level III Financial Assets at Fair Value | ||||||||||||||||||||||||||||||||
| Year Ended December 31, | ||||||||||||||||||||||||||||||||
| 2022 | 2021 | |||||||||||||||||||||||||||||||
| 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 | $ | 1,200,315 | $ | 392,732 | $ | 43,987 | $ | 1,637,034 | $ | 858,310 | $ | 581,079 | $ | 46,158 | $ | 1,485,547 | ||||||||||||||||
| Transfer In Due to Consolidation and Acquisition | 2,985,171 | — | — | 2,985,171 | — | — | — | — | ||||||||||||||||||||||||
| Transfer In to Level III (b) | 2,040 | — | 2,517 | 4,557 | 8,254 | — | 14,162 | 22,416 | ||||||||||||||||||||||||
| Transfer Out of Level III (b) | (76,621 | ) | — | (19,597 | ) | (96,218 | ) | (111,952 | ) | — | (16,388 | ) | (128,340 | ) | ||||||||||||||||||
| Purchases | 636,338 | 805,375 | 14,524 | 1,456,237 | 381,826 | 955,236 | 225,297 | 1,562,359 | ||||||||||||||||||||||||
| Sales | (428,379 | ) | (882,668 | ) | (3,797 | ) | (1,314,844 | ) | (292,843 | ) | (1,132,405 | ) | (226,866 | ) | (1,652,114 | ) | ||||||||||||||||
| Issuances | — | 39,514 | — | 39,514 | — | 58,221 | — | 58,221 | ||||||||||||||||||||||||
| Settlements | — | (55,308 | ) | (4,433 | ) | (59,741 | ) | — | (85,444 | ) | — | (85,444 | ) | |||||||||||||||||||
| Changes in Gains (Losses) Included in Earnings | (69,032 | ) | 15,394 | (2,230 | ) | (55,868 | ) | 356,720 | 16,045 | 1,624 | 374,389 | |||||||||||||||||||||
| Balance, End of Period | $ | 4,249,832 | $ | 315,039 | $ | 30,971 | $ | 4,595,842 | $ | 1,200,315 | $ | 392,732 | $ | 43,987 | $ | 1,637,034 | ||||||||||||||||
| Changes in Unrealized Gains (Losses) Included in Earnings Related to Financial Assets Still Held at the Reporting Date | $ | (136,037 | ) | $ | (13,384 | ) | $ | (11,271 | ) | $ | (160,692 | ) | $ | 298,740 | $ | (9,005 | ) | $ | 1,412 | $ | 291,147 | |||||||||||
| (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. |
|---|
- Variable Interest Entities
Pursuant to GAAP consolidation guidance, Blackstone consolidates certain VIEs for which it 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 are similar, 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 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.
Blackstone Inc.
Notes to Consolidated Financial Statements—Continued
(All Dollars are in Thousands, Except Share and Per Share Data, Except Where Noted)
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, 2022 | December 31, 2021 | |||||||
| Investments | $ | 3,326,669 | $ | 3,337,757 | ||||
| Due from Affiliates | 189,240 | 179,939 | ||||||
| Potential Clawback Obligation | 384,926 | 44,327 | ||||||
| Maximum Exposure to Loss | $ | 3,900,835 | $ | 3,562,023 | ||||
| Amounts Due to Non-Consolidated VIEs | $ | 6 | $ | 105 | ||||
| 10. | Repurchase Agreements |
|---|
At December 31, 2022 and 2021, Blackstone pledged securities with a carrying value of $89.9 million and $63.0 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, 2022 | ||||||||||||||||||||
| Remaining Contractual Maturity of the Agreements | ||||||||||||||||||||
| Overnight and | Up to | 30 - 90 | Greater than | |||||||||||||||||
| Continuous | 30 Days | Days | 90 days | Total | ||||||||||||||||
| Repurchase Agreements | ||||||||||||||||||||
| Asset-Backed Securities | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||
| Loans | — | 70,776 | — | 19,168 | 89,944 | |||||||||||||||
| $ | — | $ | 70,776 | $ | — | $ | 19,168 | $ | 89,944 | |||||||||||
| Gross Amount of Recognized Liabilities for Repurchase Agreements in Note 12. “Offsetting of Assets and Liabilities” | $ | 89,944 | ||||||||||||||||||
| Amounts Related to Agreements Not Included in Offsetting Disclosure in Note 12. “Offsetting of Assets and Liabilities” | $ | — | ||||||||||||||||||
| December 31, 2021 | ||||||||||||||||||||
| Remaining Contractual Maturity of the Agreements | ||||||||||||||||||||
| Overnight and | Up to | 30 - 90 | Greater than | |||||||||||||||||
| Continuous | 30 Days | Days | 90 days | Total | ||||||||||||||||
| Repurchase Agreements | ||||||||||||||||||||
| Asset-Backed Securities | $ | — | $ | 15,980 | $ | — | $ | — | $ | 15,980 | ||||||||||
| Loans | — | — | 42,000 | — | 42,000 | |||||||||||||||
| $ | — | $ | 15,980 | $ | 42,000 | $ | — | $ | 57,980 | |||||||||||
| Gross Amount of Recognized Liabilities for Repurchase Agreements in Note 12. “Offsetting of Assets and Liabilities” | $ | 57,980 | ||||||||||||||||||
| Amounts Related to Agreements Not Included in Offsetting Disclosure in Note 12. “Offsetting of Assets and Liabilities” | $ | — | ||||||||||||||||||
Blackstone Inc.
Notes to Consolidated Financial Statements—Continued
(All Dollars are in Thousands, Except Share and Per Share Data, Except Where Noted)
| 11. | Other Assets |
|---|
Other Assets consists of the following:
| December 31, | ||||||||
| 2022 | 2021 | |||||||
| Furniture, Equipment and Leasehold Improvements | $ | 748,334 | $ | 523,452 | ||||
| Less: Accumulated Depreciation | (336,621 | ) | (278,844 | ) | ||||
| Furniture, Equipment and Leasehold Improvements, Net | 411,713 | 244,608 | ||||||
| Prepaid Expenses | 165,079 | 92,359 | ||||||
| Freestanding Derivatives | 202,677 | 145,401 | ||||||
| Other | 20,989 | 10,568 | ||||||
| $ | 800,458 | $ | 492,936 | |||||
Depreciation expense of $69.2 million, $52.2 million and $35.1 million related to furniture, equipment and leasehold improvements for the years ended December 31, 2022, 2021 and 2020, respectively, is included in General, Administrative and Other in the Consolidated Statements of Operations.
| 12. | Offsetting of Assets and Liabilities |
|---|
The following tables present the offsetting of assets and liabilities as of December 31, 2022 and 2021:
| December 31, 2022 | ||||||||||||||||
| 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 | $ | 277,603 | $ | 165,897 | $ | 96,436 | $ | 15,270 | ||||||||
| December 31, 2022 | ||||||||||||||||
| Gross and Net Amounts of Liabilities Presented in the Statement of Financial Condition | Gross Amounts Not Offset in the Statement of Financial Condition | Net Amount | ||||||||||||||
| Financial Instruments (a) | Cash Collateral Pledged | |||||||||||||||
| Liabilities | ||||||||||||||||
| Freestanding Derivatives | $ | 88,182 | $ | 85,366 | $ | 1,345 | $ | 1,471 | ||||||||
| Repurchase Agreements | 89,944 | 89,944 | — | — | ||||||||||||
| $ | 178,126 | $ | 175,310 | $ | 1,345 | $ | 1,471 | |||||||||
Blackstone Inc.
Notes to Consolidated Financial Statements—Continued
(All Dollars are in Thousands, Except Share and Per Share Data, Except Where Noted)
| December 31, 2021 | ||||||||||||||||
| Gross and Net Amounts of Assets Presented in the Statement of Financial Condition | Gross Amounts Not Offset in the Statement of Financial Condition | Net Amount | ||||||||||||||
| Financial Instruments (a) | Cash Collateral Received | |||||||||||||||
| Assets | ||||||||||||||||
| Freestanding Derivatives | $ | 146,061 | $ | 137,265 | $ | 41 | $ | 8,755 | ||||||||
| December 31, 2021 | ||||||||||||||||
| Gross and Net Amounts of Liabilities Presented in the Statement of Financial Condition | Gross Amounts Not Offset in the Statement of Financial Condition | Net Amount | ||||||||||||||
| Financial Instruments (a) | Cash Collateral Pledged | |||||||||||||||
| Liabilities | ||||||||||||||||
| Freestanding Derivatives | $ | 147,666 | $ | 118,552 | $ | 1,347 | $ | 27,767 | ||||||||
| Repurchase Agreements | 57,980 | 57,980 | — | — | ||||||||||||
| $ | 205,646 | $ | 176,532 | $ | 1,347 | $ | 27,767 | |||||||||
| (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 in the Consolidated Statements of Financial Condition. Freestanding Derivative assets are included in Other Assets in the Consolidated Statements of Financial Condition. See Note 11. “Other Assets” 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.
Notional Pooling Arrangements
Blackstone has notional cash pooling arrangements with financial institutions for cash management purposes. These arrangements allow 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, 2022, the aggregate cash balance on deposit relating to the cash pooling arrangements was $805.3 million, which was offset and reported net of the accompanying overdraft of $805.2 million.
| 13. | Borrowings |
|---|
On January 10, 2022, Blackstone through its indirect subsidiary Blackstone Holdings Finance Co. L.L.C. (the “Issuer”), issued $500 million aggregate principal amount of senior notes due March 30, 2032 (the “January 2032 Notes”) and $1.0 billion aggregate principal amount of senior notes due January 30, 2052 (the “2052 Notes”). The January 2032 Notes have an interest rate of 2.550% per annum and the 2052 Notes have an interest rate of
Blackstone Inc.
Notes to Consolidated Financial Statements—Continued
(All Dollars are in Thousands, Except Share and Per Share Data, Except Where Noted)
3.200% per annum, in each case accruing from January 10, 2022. Interest on the January 2032 Notes is payable semi-annually in arrears on March 30 and September 30 of each year commencing on March 30, 2022. Interest on the 2052 Notes is payable semi-annually in arrears on January 30 and July 30 of each year commencing on July 30, 2022.
On June 1, 2022, Blackstone through the Issuer, issued
€
500 million aggregate principal amount of senior notes due June 1, 2034 (the “2034 Notes”). The 2034 Notes have an interest rate of 3.500% per annum accruing from June 1, 2022. Interest on the 2034 Notes is payable annually in arrears on June 1 of each year commencing on June 1, 2023.
On June 3, 2022, Blackstone, through the Issuer, entered into an amended and restated $4.135 billion revolving credit facility (the “Credit Facility”) with Citibank, N.A., as administrative agent, and the lenders party thereto. The amendment and restatement, among other things, increased the amount of available borrowings and extended the maturity date from November 24, 2025 to June 3, 2027.
On November 3, 2022, Blackstone through the Issuer, issued $600 million aggregate principal amount of senior notes due November 3, 2027 (the “2027 Notes”) and $900 million aggregate principal amount of senior notes due April 22, 2033 (the “2033 Notes”). The 2027 Notes have an interest rate of 5.900% per annum and the 2033 Notes have an interest rate of 6.200% per annum, in each case accruing from November 3, 2022. Interest on the 2027 Notes is payable semi-annually in arrears on May 3 and November 3 of each year commencing on May 3, 2023. Interest on the 2033 Notes is payable semi-annually in arrears on April 22 and October 22 of each year commencing on April 22, 2023.
All of Blackstone’s outstanding senior notes as of December 31, 2022 are unsecured and unsubordinated obligations of the Issuer that are fully and unconditionally guaranteed by Blackstone Inc. and its indirect subsidiaries, 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. (the “Guarantors”). The guarantees are unsecured and unsubordinated obligations of the Guarantors. Transaction costs related to senior note issuances have been capitalized and are amortized over the life of each respective note.
Blackstone Inc.
Notes to Consolidated Financial Statements—Continued
(All Dollars are in Thousands, Except Share and Per Share Data, Except Where Noted)
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, | ||||||||||||||||||||||||
| 2022 | 2021 | |||||||||||||||||||||||
| Credit Available | Borrowing Outstanding | Effective Interest Rate | Credit Available | Borrowing Outstanding | Effective Interest Rate | |||||||||||||||||||
| Revolving Credit Facility (a) | $ | 4,135,000 | $ | — | - | $ | 2,000,000 | $ | 250,000 | 0.86 | % | |||||||||||||
| Blackstone Issued Senior Notes (b) | ||||||||||||||||||||||||
| 4.750%, Due 2/15/2023 | 400,000 | 400,000 | 5.07 | % | 400,000 | 400,000 | 5.08 | % | ||||||||||||||||
| 2.000%, Due 5/19/2025 | 321,150 | 321,150 | 2.19 | % | 341,100 | 341,100 | 2.11 | % | ||||||||||||||||
| 1.000%, Due 10/5/2026 | 642,300 | 642,300 | 1.16 | % | 682,200 | 682,200 | 1.13 | % | ||||||||||||||||
| 3.150%, Due 10/2/2027 | 300,000 | 300,000 | 3.29 | % | 300,000 | 300,000 | 3.30 | % | ||||||||||||||||
| 5.900%, Due 11/3/2027 | 600,000 | 600,000 | 6.19 | % | — | — | - | |||||||||||||||||
| 1.625%, Due 8/5/2028 | 650,000 | 650,000 | 1.83 | % | 650,000 | 650,000 | 1.68 | % | ||||||||||||||||
| 1.500%, Due 4/10/2029 | 642,300 | 642,300 | 1.61 | % | 682,200 | 682,200 | 1.55 | % | ||||||||||||||||
| 2.500%, Due 1/10/2030 | 500,000 | 500,000 | 2.73 | % | 500,000 | 500,000 | 2.73 | % | ||||||||||||||||
| 1.600%, Due 3/30/2031 | 500,000 | 500,000 | 1.70 | % | 500,000 | 500,000 | 1.70 | % | ||||||||||||||||
| 2.000%, Due 1/30/2032 | 800,000 | 800,000 | 2.18 | % | 800,000 | 800,000 | 2.16 | % | ||||||||||||||||
| 2.550%, Due 3/30/2032 | 500,000 | 500,000 | 2.66 | % | — | — | - | |||||||||||||||||
| 6.200%, Due 4/22/2033 | 900,000 | 900,000 | 6.40 | % | — | — | - | |||||||||||||||||
| 3.500%, Due 6/1/2034 | 535,250 | 535,250 | 3.79 | % | — | — | - | |||||||||||||||||
| 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 | % | 400,000 | 400,000 | 3.61 | % | ||||||||||||||||
| 2.800%, Due 9/30/2050 | 400,000 | 400,000 | 2.88 | % | 400,000 | 400,000 | 2.88 | % | ||||||||||||||||
| 2.850%, Due 8/5/2051 | 550,000 | 550,000 | 2.92 | % | 550,000 | 550,000 | 2.89 | % | ||||||||||||||||
| 3.200%, Due 1/30/2052 | 1,000,000 | 1,000,000 | 3.26 | % | — | — | - | |||||||||||||||||
| 15,176,000 | 11,041,000 | 9,605,500 | 7,855,500 | |||||||||||||||||||||
| Blackstone Fund Facilities (c) | 1,450,000 | 1,450,000 | - | 101 | 101 | 1.61 | % | |||||||||||||||||
| $ | 16,626,000 | $ | 12,491,000 | $ | 9,605,601 | $ | 7,855,601 | |||||||||||||||||
| (a) | As of December 31, 2022, the Issuer has a credit facility with Citibank, N.A., as Administrative Agent in the amount of $4.135 billion with a maturity date of June 3, 2027. Interest on the borrowings is based on an adjusted Secured Overnight Finance Rate (“SOFR”) 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 SOFR used to calculate interest on borrowings was 0.75% plus an additional credit spread adjustment of 0.10 % to account for the difference between London Interbank Offered Rate (“LIBOR”) and SOFR. 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. As of December 31, 2022 and 2021, Blackstone had outstanding but undrawn letters of credit against the Credit Facility of $11.2 million and $10.1 million, respectively. The amount Blackstone can draw from the Credit Facility is reduced by the undrawn letters of credit, however the Credit Available presented herein is not reduced by the undrawn letters of credit. |
|---|
Blackstone 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 may be rolled over until the disposition or 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 or at stated fixed rates that can vary over the borrowing term. Interest may be subject to the performance of the asset and therefore, the stated interest rate and effective interest rate may differ. 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. |
|---|
Blackstone 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 general characteristics of each of Blackstone’s 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.
| December 31, | ||||||||||||||||
| 2022 | 2021 | |||||||||||||||
| Senior Notes | Carrying Value | Fair Value (a) | Carrying Value | Fair Value (a) | ||||||||||||
| 4.750%, Due 2/15/2023 | $ | 399,838 | $ | 399,776 | $ | 398,581 | $ | 415,880 | ||||||||
| 2.000%, Due 5/19/2025 | 325,292 | 305,754 | 338,275 | 362,078 | ||||||||||||
| 1.000%, Due 10/5/2026 | 642,968 | 568,525 | 675,867 | 700,892 | ||||||||||||
| 3.150%, Due 10/2/2027 | 298,101 | 271,284 | 297,738 | 317,610 | ||||||||||||
| 5.900%, Due 11/3/2027 | 594,381 | 606,450 | 643,251 | 629,265 | ||||||||||||
| 1.625%, Due 8/5/2028 | 644,456 | 530,933 | 678,085 | 720,062 | ||||||||||||
| 1.500%, Due 4/10/2029 | 645,819 | 532,043 | 491,662 | 507,350 | ||||||||||||
| 2.500%, Due 1/10/2030 | 492,604 | 405,965 | 495,541 | 467,750 | ||||||||||||
| 1.600%, Due 3/30/2031 | 495,990 | 365,380 | 786,690 | 767,920 | ||||||||||||
| 2.000%, Due 1/30/2032 | 788,082 | 589,407 | — | — | ||||||||||||
| 2.550%, Due 3/30/2032 | 495,207 | 390,370 | — | — | ||||||||||||
| 6.200%, Due 4/22/2033 | 891,277 | 907,965 | — | — | ||||||||||||
| 3.500%, Due 6/1/2034 | 504,695 | 452,934 | — | — | ||||||||||||
| 6.250%, Due 8/15/2042 | 239,176 | 251,480 | 238,914 | 361,775 | ||||||||||||
| 5.000%, Due 6/15/2044 | 489,704 | 441,355 | 489,446 | 648,500 | ||||||||||||
| 4.450%, Due 7/15/2045 | 344,549 | 287,242 | 344,412 | 426,195 | ||||||||||||
| 4.000%, Due 10/2/2047 | 290,935 | 227,946 | 290,730 | 347,370 | ||||||||||||
| 3.500%, Due 9/10/2049 | 392,259 | 275,588 | 392,089 | 431,240 | ||||||||||||
| 2.800%, Due 9/30/2050 | 393,958 | 237,552 | 393,818 | 382,880 | ||||||||||||
| 2.850%, Due 8/5/2051 | 543,162 | 323,527 | 542,963 | 531,355 | ||||||||||||
| 3.200%, Due 1/30/2052 | 987,131 | 646,880 | — | — | ||||||||||||
| $ | 10,899,584 | $ | 9,018,356 | $ | 7,498,062 | $ | 8,018,122 | |||||||||
| (a) | Fair value is determined by broker quote and these notes would be classified as Level II within the fair value hierarchy. |
|---|
Scheduled principal payments for borrowings at December 31, 2022 were as follows:
| Operating Borrowings | Blackstone Fund Facilities | Total Borrowings | ||||||||||
| 2023 | $ | 400,000 | $ | — | $ | 400,000 | ||||||
| 2024 | — | — | — | |||||||||
| 2025 | 321,150 | — | 321,150 | |||||||||
| 2026 | 642,300 | — | 642,300 | |||||||||
| 2027 | 900,000 | — | 900,000 | |||||||||
| Thereafter | 8,777,550 | 1,450,000 | 10,227,550 | |||||||||
| $ | 11,041,000 | $ | 1,450,000 | $ | 12,491,000 | |||||||
- Leases
Blackstone enters into non-cancelable lease and sublease agreements primarily for office space, which expire on various dates through 2043. Occupancy lease agreements, in addition to base rentals, generally are subject to
Blackstone Inc.
Notes to Consolidated Financial Statements—Continued
(All Dollars are in Thousands, Except Share and Per Share Data, Except Where Noted)
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, 2022 and 2021, Blackstone maintained irrevocable standby letters of credit and cash deposits as security for the leases of $12.3 million and $9.4 million, respectively. As of December 31, 2022, the weighted-average remaining lease term was 6.8 years, and the weighted-average discount rate was 1.5%.
The components of lease expense were as follows:
| Year Ended December 31, | ||||||||||||
| 2022 | 2021 | 2020 | ||||||||||
| Operating Lease Cost | ||||||||||||
| Straight-Line Lease Cost (a) | $ | 139,740 | $ | 115,875 | $ | 107,970 | ||||||
| Variable Lease Cost (b) | 12,072 | 10,959 | 15,426 | |||||||||
| Sublease Income | (888 | ) | (1,695 | ) | (2,191 | ) | ||||||
| $ | 150,924 | $ | 125,139 | $ | 121,205 | |||||||
| (a) | Straight-line lease cost includes short-term leases, which are immaterial. |
|---|
| (b) | Variable lease cost approximates variable lease cash payments. |
|---|
Supplemental cash flow information related to leases were as follows:
| Year Ended December 31, | ||||||||||||
| 2022 | 2021 | 2020 | ||||||||||
| Operating Cash Flows for Operating Lease Liabilities | $ | 107,249 | $ | 96,007 | $ | 102,364 | ||||||
| Non-Cash Right-of-Use Assets Obtained in Exchange for New Operating Lease Liabilities | $ | 278,010 | $ | 352,298 | $ | 153,433 |
The following table shows the undiscounted cash flows on an annual basis for Operating Lease
Liabilities
as of December 31, 2022:
| 2023 | $ | 142,159 | ||
| 2024 | 151,807 | |||
| 2025 | 163,407 | |||
| 2026 | 161,642 | |||
| 2027 | 158,244 | |||
| Thereafter | 296,207 | |||
| Total Lease Payments (a) | 1,073,466 | |||
| Less: Imputed Interest | (52,012 | ) | ||
| Present Value of Operating Lease Liabilities | $ | 1,021,454 | ||
| (a) | Excludes signed leases that have not yet commenced. |
|---|
Blackstone 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 for Taxes consists of the following:
| Year Ended December 31, | ||||||||||||
| 2022 | 2021 | 2020 | ||||||||||
| Income Before Provision (Benefit) for Taxes | ||||||||||||
| U.S. Domestic Income | $ | 3,023,588 | $ | 13,275,132 | $ | 2,311,734 | ||||||
| Foreign Income | 438,201 | 284,264 | 305,786 | |||||||||
| $ | 3,461,789 | $ | 13,559,396 | $ | 2,617,520 | |||||||
The Provision for Taxes consists of the following:
| Year Ended December 31, | ||||||||||||
| 2022 | 2021 | 2020 | ||||||||||
| Current | ||||||||||||
| Federal Income Tax | $ | 503,075 | $ | 507,648 | $ | 163,227 | ||||||
| Foreign Income Tax | 75,859 | 55,376 | 38,914 | |||||||||
| State and Local Income Tax | 255,421 | 156,735 | 66,355 | |||||||||
| 834,355 | 719,759 | 268,496 | ||||||||||
| Deferred | ||||||||||||
| Federal Income Tax | (312,961 | ) | 373,223 | 86,958 | ||||||||
| Foreign Income Tax | (3,048 | ) | (2,654 | ) | 870 | |||||||
| State and Local Income Tax | (45,466 | ) | 94,073 | (310 | ) | |||||||
| (361,475 | ) | 464,642 | 87,518 | |||||||||
| Provision for Taxes | $ | 472,880 | $ | 1,184,401 | $ | 356,014 | ||||||
The following table summarizes Blackstone’s tax position:
| Year Ended December 31, | ||||||||||||
| 2022 | 2021 | 2020 | ||||||||||
| Income Before Provision for Taxes | $ | 3,461,789 | $ | 13,559,396 | $ | 2,617,520 | ||||||
| Provision for Taxes | $ | 472,880 | $ | 1,184,401 | $ | 356,014 | ||||||
| Effective Income Tax Rate | 13.7 | % | 8.7 | % | 13.6 | % |
Blackstone 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:
| 2022 | 2021 | |||||||||||||||||||
| Year Ended December 31, | vs. | vs. | ||||||||||||||||||
| 2022 | 2021 | 2020 | 2021 | 2020 | ||||||||||||||||
| Statutory U.S. Federal Income Tax Rate | 21.0 | % | 21.0 | % | 21.0 | % | — | — | ||||||||||||
| Income Passed Through to Non-Controlling Interest Holders | -8.1 | % | -10.2 | % | -10.1 | % | 2.1 | % | -0.1 | % | ||||||||||
| State and Local Income Taxes | 6.0 | % | 2.1 | % | 2.4 | % | 3.9 | % | -0.3 | % | ||||||||||
| Change to a Taxable Corporation | — | — | 1.4 | % | — | -1.4 | % | |||||||||||||
| Change in Valuation Allowance | — | -4.1 | % | -2.8 | % | 4.1 | % | -1.3 | % | |||||||||||
| Basis Adjustment (a) | -4.6 | % | — | — | -4.6 | % | — | |||||||||||||
| Other | -0.6 | % | -0.1 | % | 1.7 | % | -0.5 | % | -1.8 | % | ||||||||||
| Effective Income Tax Rate | 13.7 | % | 8.7 | % | 13.6 | % | 5.0 | % | -4.9 | % | ||||||||||
| (a) | Represents the impact of the out-of-period adjustment made during the year ended December 31, 2022 to revise the book investment basis used to calculate deferred tax assets and the deferred tax provision. |
|---|
Blackstone’s effective tax rate for the year ended December 31, 2022 was impacted by recent increases in Blackstone’s state tax provisions for the jurisdictions in which it operates and larger benefits recorded in December 31, 2021 for valuation allowance releases.
During the year ended December 31, 2022, Blackstone recorded an out-of-period adjustment to revise the book investment basis used to calculate deferred tax assets and the deferred tax provision. The cumulative impact of the correction related to prior years resulted in a decrease of $158.2 million in the Provision for Taxes for the year ended December 31, 2022 and a corresponding increase to Deferred Tax Assets as of December 31, 2022. The impact of the out-of-period adjustment on the effective income tax rate is reflected in the Basis Adjustment row in the effective income tax rate table above. Blackstone concluded the out-of-period adjustment was not material to the current or prior periods.
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:
Blackstone Inc.
Notes to Consolidated Financial Statements—Continued
(All Dollars are in Thousands, Except Share and Per Share Data, Except Where Noted)
| December 31, | ||||||||
| 2022 | 2021 | |||||||
| Deferred Tax Assets | ||||||||
| Investment Basis Differences/Net Unrealized Gains and Losses | $ | 2,031,002 | $ | 1,572,672 | ||||
| Other | 31,720 | 8,965 | ||||||
| Total Deferred Tax Assets | 2,062,722 | 1,581,637 | ||||||
| Deferred Tax Liabilities | ||||||||
| Investment Basis Differences/Net Unrealized Gains and Losses | 15,409 | 15,421 | ||||||
| Other | 31,498 | 16,439 | ||||||
| Total Deferred Tax Liabilities | 46,907 | 31,860 | ||||||
| Net Deferred Tax Assets | $ | 2,015,815 | $ | 1,549,777 | ||||
The net increase in the deferred tax asset for the year ended December 31, 2022, compared to the year ended December 31, 2021, is primarily due to (a) recognition of additional tax basis in certain assets and recording corresponding deferred tax benefits related to quarterly exchanges of Blackstone Holdings Partnership units for common shares of Blackstone Inc., and (b) an out-of-period adjustment that Blackstone recorded to revise the book investment basis used to calculate deferred tax assets and the deferred tax provision. The adjustment was not material to the current or prior periods and reflects the cumulative impact of the correction, which generated an additional deferred tax asset for the year ended December 31, 2022. Realization of deferred tax assets depends on the expectation and character of future taxable income. In addition, Blackstone
has no significant net operating losses carryforward at December 31, 2022.
In evaluating the ability to realize deferred tax assets, Blackstone among other things, 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. To the extent any portion of the deferred tax assets are not considered to be more likely than not to be realized, valuation allowances are 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, if applicable Blackstone recorded a deferred tax liability for any outside basis difference of an investment in a foreign subsidiary.
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 authorities. As of December 31, 2022, the most material jurisdictions where Blackstone entities are under active examination are New York State and City. The following are the major filing jurisdictions and their respective earliest open period subject to examination:
Blackstone Inc.
Notes to Consolidated Financial Statements—Continued
(All Dollars are in Thousands, Except Share and Per Share Data, Except Where Noted)
| Jurisdiction | Year | |||
| Federal | 2019 | |||
| New York City | 2009 | |||
| New York State | 2016 | |||
| United Kingdom | 2011 |
Blackstone’s unrecognized tax benefits, excluding related interest and penalties, were:
| December 31, | ||||||||||||
| 2022 | 2021 | 2020 | ||||||||||
| Unrecognized Tax Benefits — January 1 | $ | 47,501 | $ | 32,933 | $ | 24,958 | ||||||
| Additions for Tax Positions of Prior Years | 106,059 | 14,557 | 7,959 | |||||||||
| Exchange Rate Fluctuations | 64 | 11 | 16 | |||||||||
| Unrecognized Tax Benefits — December 31 | $ | 153,624 | $ | 47,501 | $ | 32,933 | ||||||
If recognized, the above tax benefits of $153.6 million and $47.5 million for the years ended December 31, 2022 and 2021, respectively, would reduce the annual effective rate. It is reasonably possible that significant changes in the balance of unrecognized tax benefits may occur during the twelve months subsequent to December 31, 2022. However, at this time, it is not possible to estimate the expected change to the total Unrecognized Tax Benefits and its impact on Blackstone’s effective tax rate.
The unrecognized tax benefits are recorded in Accounts Payable, Accrued Expenses and Other Liabilities in the Consolidated Statements of Financial Condition.
During the years ended December 31, 2022, 2021 and 2020, Blackstone accrued no penalties and accrued interest expense related to unrecognized tax benefits of $32.6 million, $1.5 million and $1.3 million, respectively.
Other Income — Change in Tax Receivable Agreement Liability
In 2022 and 2021, the $22.3 million and $(2.8) million, respectively, Change in Tax Receivable Agreement Liability was primarily attributable to a change in our state tax apportionment.
Blackstone Inc.
Notes to Consolidated Financial Statements—Continued
(All Dollars are in Thousands, Except Share and Per Share Data, Except Where Noted)
- Earnings Per Share and Stockholders’ Equity
Earnings Per Share
Basic and diluted net income per share of common stock for the years ended December 31, 2022, 2021 and 2020 was calculated as follows:
| Year Ended December 31, | ||||||||||||
| 2022 | 2021 | 2020 | ||||||||||
| Net Income for Per Share of Common Stock Calculations | ||||||||||||
| Net Income Attributable to Blackstone Inc., Basic and Diluted | $ | 1,747,631 | $ | 5,857,397 | $ | 1,045,363 | ||||||
| Shares/Units Outstanding | ||||||||||||
| Weighted-Average Shares of Common Stock Outstanding, Basic | 740,664,038 | 719,766,879 | 696,933,548 | |||||||||
| Weighted-Average Shares of Unvested Deferred Restricted Common Stock | 278,361 | 358,164 | 324,748 | |||||||||
| Weighted-Average Shares of Common Stock Outstanding, Diluted | 740,942,399 | 720,125,043 | 697,258,296 | |||||||||
| Net Income Per Share of Common Stock | ||||||||||||
| Basic | $ | 2.36 | $ | 8.14 | $ | 1.50 | ||||||
| Diluted | $ | 2.36 | $ | 8.13 | $ | 1.50 | ||||||
| Dividends Declared Per Share of Common Stock (a) | $ | 4.94 | $ | 3.57 | $ | 1.91 | ||||||
| (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 Common Stock, Blackstone considered that net income available to holders of shares of 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 Blackstone 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, | ||||||||||||
| 2022 | 2021 | 2020 | ||||||||||
| Weighted-Average Blackstone Holdings Partnership Units | 466,083,269 | 486,157,205 | 504,221,914 |
Stockholders’ Equity
In connection with Blackstone’s conversion from a limited partnership to a corporation, 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 Blackstone’s conversion to a corporation 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 Blackstone’s conversion to a corporation 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.
Blackstone Inc.
Notes to Consolidated Financial Statements—Continued
(All Dollars are in Thousands, Except Share and Per Share Data, Except Where Noted)
In connection with the share reclassification, effective February 26, 2021, the Certificate of Incorporation of Blackstone was amended and restated to: (a) rename the Class A common stock as “common stock,” which has the same rights and powers (including, without limitation, with respect to voting) that Blackstone’s Class A common stock formerly had, (b) reclassify the “Class B common stock” into a new “Series I preferred stock,” which has the same rights and powers that the Class B common stock formerly had, and (c) reclassify the Class C common stock into a new “Series II preferred stock,” which has the same rights and powers that the Class C common stock formerly had. In connection with such share reclassification, the Company authorized 10 billion shares of preferred stock with a par value of $0.00001, of which (a) 999,999,000 shares are designated as Series I preferred stock and (b) 1,000 shares are designated as Series II preferred stock. The remaining 9 billion shares may be designated from time to time in accordance with Blackstone's certificate of incorporation. There was 1 share of Series I preferred stock and 1 share of Series II preferred stock issued and outstanding as of December 31, 2022.
Under Blackstone’s certificate of incorporation and Delaware law, holders of Blackstone’s common stock are entitled to vote, together with holders of Blackstone’s Series I preferred stock, voting as a single class, on a number of significant matters, including certain sales, exchanges or other dispositions of all or substantially all of Blackstone’s assets, a merger, consolidation or other business combination, the removal of the Series II Preferred Stockholder and forced transfer by the Series II Preferred Stockholder of its shares of Series II preferred stock and the designation of a successor Series II Preferred Stockholder. The Series II Preferred Stockholder elects the Company’s directors. Holders of Blackstone’s Series I preferred stock and Series II preferred stock 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 Series I preferred stock and Blackstone Group Management L.L.C. is the sole holder of the Series II preferred stock.
Share Repurchase Program
On December 7, 2021, Blackstone’s board of directors authorized the repurchase of up to $2.0 billion of 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, 2020, Blackstone repurchased 9.0 million shares of common stock at a total cost of $474.0 million. During the year ended December 31, 2021, Blackstone repurchased 10.3 million shares of common stock at a total cost of $1.2 billion. During the year ended December 31, 2022, Blackstone repurchased 3.9 million shares of common stock at a total cost of $392.0 million. As of December 31, 2022, the amount remaining available for repurchases under the program was $1.1 billion.
Blackstone Inc.
Notes to Consolidated Financial Statements—Continued
(All Dollars are in Thousands, Except Share and Per Share Data, Except Where Noted)
Shares Eligible for Dividends and Distributions
As of December 31, 2022, the total shares of common stock and Blackstone Holdings Partnership Units entitled to participate in dividends and distributions were as follows:
| Shares/Units | ||||
| Common Stock Outstanding | 710,276,923 | |||
| Unvested Participating Common Stock | 32,376,835 | |||
| Total Participating Common Stock | 742,653,758 | |||
| Participating Blackstone Holdings Partnership Units | 463,758,383 | |||
| 1,206,412,141 | ||||
- 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 common stock, deferred restricted shares of common stock, phantom restricted shares of common stock or other share-based awards based in whole or in part on the fair value of shares of common stock or Blackstone Holdings Partnership Units) which may contain certain service or performance requirements. As of January 1, 2022, Blackstone had the ability to grant 171,096,250 shares under the Equity Plan.
For the years ended December 31, 2022, 2021 and 2020 Blackstone recorded compensation expense of $846.3 million, $637.4 million, and $438.3 million, respectively, in relation to its equity-based awards with corresponding tax benefits of $135.9 million, $84.3 million, and $51.5 million, respectively.
As of December 31, 2022, there was $2.1
billion of estimated unrecognized compensation expense related to unvested awards, including compensation with performance conditions where it is probable that the performance condition will be met. This cost is expected to be recognized over a weighted-average period
of 3.4 years.
Total vested and unvested outstanding shares, including common stock, Blackstone Holdings Partnership Units and deferred restricted shares of common stock, were 1,206,514,586 as of December 31, 2022. Total outstanding phantom shares were 59,903 as of December 31, 2022.
Blackstone Inc.
Notes to Consolidated Financial Statements—Continued
(All Dollars are in Thousands, Except Share and Per Share Data, Except Where Noted)
A summary of the status of Blackstone’s unvested equity-based awards as of December 31, 2022 and of changes during the period January 1, 2022 through December 31, 2022 is presented below:
| Blackstone Holdings | Blackstone Inc. | |||||||||||||||||||||||
| Equity Settled Awards | Cash Settled Awards | |||||||||||||||||||||||
| Unvested Shares/Units | Partnership Units | Weighted- Average Grant Date Fair Value | Deferred Restricted Shares of Common Stock | Weighted- Average Grant Date Fair Value | Phantom Shares | Weighted- Average Grant Date Fair Value | ||||||||||||||||||
| Balance, December 31, 2021 | 17,344,328 | $ | 37.37 | 26,537,813 | $ | 58.34 | 73,581 | $ | 137.65 | |||||||||||||||
| Granted | 1,172,015 | 33.73 | 12,073,302 | 124.80 | 28,130 | 125.93 | ||||||||||||||||||
| Vested | (6,124,743 | ) | 36.12 | (6,274,790 | ) | 61.73 | (6,413 | ) | 70.73 | |||||||||||||||
| Forfeited | (1,361,604 | ) | 34.73 | (1,334,762 | ) | 75.81 | (46,412 | ) | 130.22 | |||||||||||||||
| Balance, December 31, 2022 | 11,029,996 | $ | 38.02 | 31,001,563 | $ | 82.94 | 48,886 | $ | 85.04 | |||||||||||||||
Shares/Units Expected to Vest
The following unvested shares and units, after expected forfeitures, as of December 31, 2022, are expected to vest:
| Shares/Units | Weighted-Average Service Period in Years | |||||
| Blackstone Holdings Partnership Units | 10,751,742 | 1.3 | ||||
| Deferred Restricted Shares of Common Stock | 27,341,906 | 3.0 | ||||
| Total Equity-Based Awards | 38,093,648 | 2.5 | ||||
| Phantom Shares | 40,471 | 3.0 | ||||
Deferred Restricted Shares of Common Stock and Phantom Shares
Blackstone has granted deferred restricted shares of 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 common stock and phantom shares are not entitled to any voting rights. Only phantom shares are to be settled in cash. Deferred restricted shares of common stock where the number of shares have not been set are liability classified and excluded from the above tables.
The fair values of deferred restricted shares of common stock have been derived based on the closing price of 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 12.8% annually by employee class, and a per share discount, ranging from $1.23 to $21.53.
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 common stock on such date. Additionally, the calculation of the compensation expense assumes a forfeiture rate based on a historical turnover rates, ranging
Blackstone Inc.
Notes to Consolidated Financial Statements—Continued
(All Dollars are in Thousands, Except Share and Per Share Data, Except Where Noted)
from 10.4% to 12.8% annually by employee class. Blackstone is accounting for these cash settled awards as a liability.
Blackstone paid $0.6 million, $1.1 million and $0.4 million to non-senior managing director employees in settlement of phantom shares for the years ended December 31, 2022, 2021 and 2020, respectively.
Performance-Based Compensation
During the year ended December 31, 2021, Blackstone issued performance-based compensation, the dollar value of which is based on the future achievement of established business performance conditions. The number of vested shares of common stock to be issued is variable based on the 30-day volume weighted-average price at the end of the performance period. Due to the nature of settlement, the performance-based compensation is classified as a liability. Compensation expense is recognized over the performance period based upon the probable outcome of the performance condition. Due to the variable share settlement, the tables above exclude the impact of this performance-based compensation, as the number of shares to be issued is not yet set.
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 3 years. Additionally, the calculation of the compensation expense assumes a forfeiture rate of 6.9%, based on historical experience.
- Related Party Transactions
Affiliate Receivables and Payables
Due from Affiliates and Due to Affiliates consisted of the following:
| December 31, | ||||||||
| 2022 | 2021 | |||||||
| Due from Affiliates | ||||||||
| Management Fees, Performance Revenues, Reimbursable Expenses and Other Receivables from Non-Consolidated Entities and Portfolio Companies | $ | 3,344,813 | $ | 3,519,945 | ||||
| Due from Certain Non-Controlling Interest Holders and Blackstone Employees | 741,319 | 1,099,899 | ||||||
| Accrual for Potential Clawback of Previously Distributed Performance Allocations | 60,575 | 37,023 | ||||||
| $ | 4,146,707 | $ | 4,656,867 | |||||
Blackstone Inc.
Notes to Consolidated Financial Statements—Continued
(All Dollars are in Thousands, Except Share and Per Share Data, Except Where Noted)
| December 31, | ||||||||
| 2022 | 2021 | |||||||
| Due to Affiliates | ||||||||
| Due to Certain Non-Controlling Interest Holders in Connection with the Tax Receivable Agreements | $ | 1,602,933 | $ | 1,558,393 | ||||
| Due to Non-Consolidated Entities | 157,982 | 181,341 | ||||||
| Due to Certain Non-Controlling Interest Holders and Blackstone Employees | 198,875 | 77,664 | ||||||
| Accrual for Potential Repayment of Previously Received Performance Allocations | 158,691 | 88,700 | ||||||
| $ | 2,118,481 | $ | 1,906,098 | |||||
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, 2022 and 2021, such investments aggregated $1.6 billion and $1.6 billion, respectively. Their share of the Net Income Attributable to Redeemable Non-Controlling and Non-Controlling Interests in Consolidated Entities aggregated $10.9 million, $471.5 million and $65.2 million for the years ended December 31, 2022, 2021 and 2020, 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, 2022. See Note 19. “Commitments and Contingencies — Contingencies — Contingent Obligations (Clawback).”
Tax Receivable Agreements
Blackstone used a portion of the proceeds from the IPO and other sales of shares 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 Units for shares of Blackstone 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
Blackstone Inc.
Notes to Consolidated Financial Statements—Continued
(All Dollars are in Thousands, Except Share and Per Share Data, Except Where Noted)
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.
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 $1.6 billion over the next 15 years. The after-tax net present value of these estimated payments totals $477.0 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, 2022, payments totaling $67.5 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 2021 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 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.
- Commitments and Contingencies
Commitments
Investment Commitments
Blackstone had $5.0 billion of investment commitments as of December 31, 2022 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 $210.0 million as of December 31, 2022 which includes $81.2 million of signed investment commitments for portfolio company acquisitions in the process of closing.
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.
Blackstone Inc.
Notes to Consolidated Financial Statements—Continued
(All Dollars are in Thousands, Except Share and Per Share Data, Except Where Noted)
These regulatory capital requirements may restrict Blackstone’s ability to withdraw capital from its entities. At December 31, 2022, $106.0 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 ongoing 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 $18.3 million as of December 31, 2022.
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, 2022 was $78.9 million.
Strategic Venture
In December 2022, Blackstone entered into a long-term strategic venture with the Regents of the University of California (“UC Investments”), an institutional investor that subscribed for $4.0 billion of BREIT Class I shares on January 1, 2023. The strategic venture between Blackstone and UC Investments provides a waterfall structure with UC Investments receiving an 11.25% target annualized net return on its $4.0 billion investment in BREIT shares (supported by a pledge by Blackstone of $1.0 billion of its current holdings in BREIT, including any appreciation or dividends received by Blackstone in respect thereof) and upside from its investment. Pursuant to the strategic venture, Blackstone is entitled to receive an incremental 5% cash promote payment from UC Investments on any returns received in excess of the target return. An asset or liability is recognized based on fair value with the maximum potential future obligation capped at the fair value of the assets pledged by Blackstone in the arrangement. As of December 31, 2022, the fair value of the assets pledged was $1.0 billion and the liability recognized was $48.6 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, eight pension plan members of the Kentucky Retirement System (“KRS”) filed a derivative lawsuit on behalf of KRS in the Franklin County Circuit Court of the Commonwealth of Kentucky (the “Mayberry Action”). The Mayberry Action alleged 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. (“BLP”). The suit named more than 30 defendants, including, among others, The Blackstone Group L.P. (now Blackstone Inc.); BLP; Stephen A. Schwarzman, as Chairman and CEO of
Blackstone Inc.
Notes to Consolidated Financial Statements—Continued
(All Dollars are in Thousands, Except Share and Per Share Data, Except Where Noted)
Blackstone; and J. Tomilson Hill, as then-CEO of BLP (collectively, the “Blackstone Defendants”). In July 2020, the Kentucky Supreme Court directed the Circuit Court to dismiss the action due to the plaintiffs’ lack of standing.
Over the objection of the Blackstone Defendants and others, in December 2020, the Circuit Court permitted the Attorney General of the Commonwealth of Kentucky (the “AG”) to intervene in the Mayberry Action. On December 9, 2022, the Mayberry Action was stayed pending resolution of an interlocutory appeal in which the Blackstone Defendants and others are arguing that the Circuit Court did not have jurisdiction to continue the Mayberry Action after the ruling of the Kentucky Supreme Court.
In August 2022, KRS was ordered to disclose, and in September 2022, did disclose, a report prepared in 2021 by a law firm retained by KRS to conduct an investigation into the investment activities underlying the lawsuit. According to the report, the investigators “did not find any violations of fiduciary duty or illegal activity by [BLP]” related to KRS’s due diligence and retention of BLP or KRS’s continued investment with BLP. The report quotes contemporaneous communications by KRS staff during the period of the investment recognizing that BLP was exceeding KRS’s returns benchmark, that BLP was providing KRS with “far fewer negative months than any liquid market comparable,” and that BLP “[h]as killed it.”
In January 2021, certain former plaintiffs in the Mayberry Action filed a separate action (“Taylor I”), against the Blackstone Defendants and other defendants named in the Mayberry Action, asserting allegations substantially similar to those made in the Mayberry Action, and in July 2021 they amended their complaint to add class action allegations. Defendants removed Taylor I to the U.S. District Court for the Eastern District of Kentucky, and in March 2022, the District Court stayed Taylor I pending the resolution of the AG’s suit in the Mayberry Action.
In August 2021, a group of KRS members—including those that filed Taylor I—filed a new action in Franklin County Circuit Court (“Taylor II”), against the Blackstone Defendants, other defendants named in the Mayberry Action, and other KRS officials. The filed complaint is substantially similar to that filed in Taylor I and the Mayberry Action. Motions to dismiss are pending.
In May 2022, the presiding judge recused himself from the Mayberry Action and Taylor II and the cases were reassigned to another judge in the Franklin County Circuit Court.
In April 2021, the AG filed an action (the “Declaratory Judgment Action”), against BLP and the other fund manager defendants from the Mayberry Action in Franklin County Circuit Court. The action sought to have certain provisions in the subscription agreements between KRS and the fund managers declared to be in violation of the Kentucky Constitution. In March 2022, the Circuit Court granted summary judgment to the AG. BLP’s appeal is currently pending.
Blackstone continues to believe that the preceding lawsuits against Blackstone are totally without merit and intends to defend them vigorously.
In July 2021, BLP filed a breach of contract action against defendants affiliated with KRS alleging that the Mayberry Action and the Declaratory Judgment Action breach the parties’ subscription agreements governing KRS’s investment with BLP. The action seeks damages, including legal fees and expenses incurred in defending against the above actions. In April 2022, the Circuit Court dismissed BLP’s complaint without prejudice to refiling, on the grounds that the action was not yet ripe for adjudication. BLP’s appeal is currently pending.
In October 2022, as part of a sweep of private equity and other investment advisory firms, the SEC sent us a request for information relating to the retention of certain types of electronic business communications, including text messages, that may be required to be preserved under certain SEC rules. We are cooperating with the SEC’s inquiry.
Blackstone Inc.
Notes to Consolidated Financial Statements—Continued
(All Dollars are in Thousands, Except Share and Per Share Data, Except Where Noted)
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 2032. 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 segment:
| December 31, | ||||||||||||||||||||||||
| 2022 | 2021 | |||||||||||||||||||||||
| Segment | Blackstone Holdings | Current and Former Personnel (a) | Total (b) | Blackstone Holdings | Current and Former Personnel (a) | Total (b) | ||||||||||||||||||
| Real Estate | $ | 78,644 | $ | 51,771 | $ | 130,415 | $ | 34,080 | $ | 20,186 | $ | 54,266 | ||||||||||||
| Private Equity | 19,279 | 8,569 | 27,848 | 5,158 | 2,196 | 7,354 | ||||||||||||||||||
| Credit & Insurance | 223 | 205 | 428 | 12,439 | 14,641 | 27,080 | ||||||||||||||||||
| $ | 98,146 | $ | 60,545 | $ | 158,691 | $ | 51,677 | $ | 37,023 | $ | 88,700 | |||||||||||||
| (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. |
|---|
| (b) | Total is a component of Due to Affiliates. See Note 18. “Related Party Transactions —Affiliate Receivables and Payables — Due to Affiliates.” |
|---|
During the year ended December 31, 2022, the Blackstone general partners paid a cash clawback obligation of $27.2 million relating to Blackstone Credit of which $12.5 million was paid by Blackstone Holdings and $14.7 million by current and former Blackstone personnel.
For Private Equity, Real Estate, and certain Credit & Insurance 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, 2022, $1.1 billion 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 & Insurance 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.
Blackstone 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, 2022, all of the investments held by Blackstone’s carry funds were deemed worthless, a possibility that management views as remote, the amount of Performance Allocations subject to potential clawback would be $6.0 billion, on an after-tax basis where applicable, of which Blackstone Holdings is potentially liable for $5.7 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 opportunistic real estate funds, Core+ real estate funds, high-yield real estate debt funds, liquid real estate debt funds. |
|---|
| • | Private Equity – Blackstone’s Private Equity segment includes its management of flagship corporate private equity funds, sector and geographically-focused corporate private equity funds, core private equity funds, an opportunistic investment platform, a secondary fund of funds business, infrastructure-focused funds, a life sciences investment platform, a growth equity investment platform, a multi-asset investment program for eligible high net worth investors and a capital markets services business. |
|---|
| • | Credit & Insurance – Blackstone’s Credit & Insurance segment consists principally of Blackstone Credit, which is organized into two overarching strategies: private credit (which includes mezzanine direct lending funds, private placement strategies, stressed/distressed strategies and energy strategies) and liquid credit (which consists of CLOs, closed-ended funds, open-ended funds and separately managed accounts). In addition, the segment includes an insurer-focused platform, an asset-based finance platform and publicly traded master limited partnership investment platform. |
|---|
| • | 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 a GP Stakes business and investment platforms that invest directly, as well as investment platforms that seed new hedge fund businesses and create alternative solutions through daily liquidity products. |
|---|
These business segments are differentiated by their various investment strategies. Each of the segments primarily earns its 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.
For the year ended December 31, 2022, Blackstone Real Estate Investment Trust (“BREIT”), a vehicle in the Real Estate segment accounted for $841.3 million of Blackstone’s Management and Advisory Fees, Net. Generally, Blackstone identifies the customer as the investors in its managed funds and investment vehicles; but for certain widely held vehicles like BREIT, the fund or investment vehicle is determined to be the customer. Blackstone evaluates the major customer disclosure in the context of its revenue streams as determined under the GAAP guidance for contracts with customers which includes Management and Advisory Fees, Net and Incentive Fees. For the years ended December 31, 2021 and 2020, no individual customer constituted more than 10% of Blackstone’s Management and Advisory Fees, Net and Incentive Fees.
Segment Distributable Earnings represents the net realized earnings of Blackstone’s segments and is the sum of Fee Related Earnings and Net Realizations for each segment. Blackstone’s segments are presented on a basis
Blackstone Inc.
Notes to Consolidated Financial Statements—Continued
(All Dollars are in Thousands, Except Share and Per Share Data, Except Where Noted)
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.
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, 2022 and 2021, and for the years ended December 31, 2022, 2021 and 2020.
| December 31, 2022 and the Year Then Ended | ||||||||||||||||||||
| Real Estate | Private Equity | Credit & Insurance | Hedge Fund Solutions | Total Segments | ||||||||||||||||
| Management and Advisory Fees, Net | ||||||||||||||||||||
| Base Management Fees | $ | 2,462,179 | $ | 1,786,923 | $ | 1,230,710 | $ | 565,226 | $ | 6,045,038 | ||||||||||
| Transaction, Advisory and Other Fees, Net | 171,424 | 97,876 | 34,624 | 6,193 | 310,117 | |||||||||||||||
| Management Fee Offsets | (10,538 | ) | (56,062 | ) | (5,432 | ) | (177 | ) | (72,209 | ) | ||||||||||
| Total Management and Advisory Fees, Net | 2,623,065 | 1,828,737 | 1,259,902 | 571,242 | 6,282,946 | |||||||||||||||
| Fee Related Performance Revenues | 1,075,424 | (648 | ) | 374,721 | — | 1,449,497 | ||||||||||||||
| Fee Related Compensation | (1,039,125 | ) | (575,194 | ) | (529,784 | ) | (186,672 | ) | (2,330,775 | ) | ||||||||||
| Other Operating Expenses | (315,331 | ) | (304,177 | ) | (264,181 | ) | (105,334 | ) | (989,023 | ) | ||||||||||
| Fee Related Earnings | 2,344,033 | 948,718 | 840,658 | 279,236 | 4,412,645 | |||||||||||||||
| Realized Performance Revenues | 2,985,713 | 1,191,028 | 147,413 | 137,184 | 4,461,338 | |||||||||||||||
| Realized Performance Compensation | (1,168,045 | ) | (544,229 | ) | (63,846 | ) | (37,977 | ) | (1,814,097 | ) | ||||||||||
| Realized Principal Investment Income | 150,790 | 139,767 | 80,993 | 24,706 | 396,256 | |||||||||||||||
| Total Net Realizations | 1,968,458 | 786,566 | 164,560 | 123,913 | 3,043,497 | |||||||||||||||
| Total Segment Distributable Earnings | $ | 4,312,491 | $ | 1,735,284 | $ | 1,005,218 | $ | 403,149 | $ | 7,456,142 | ||||||||||
| Segment Assets | $ | 14,637,693 | $ | 14,142,313 | $ | 6,346,001 | $ | 2,821,753 | $ | 37,947,760 | ||||||||||
Blackstone Inc.
Notes to Consolidated Financial Statements—Continued
(All Dollars are in Thousands, Except Share and Per Share Data, Except Where
Noted)
| December 31, 2021 and the Year Then Ended | ||||||||||||||||||||
| Real Estate | Private Equity | Credit & Insurance | Hedge Fund Solutions | Total Segments | ||||||||||||||||
| Management and Advisory Fees, Net | ||||||||||||||||||||
| Base Management Fees | $ | 1,895,412 | $ | 1,521,273 | $ | 765,905 | $ | 636,685 | $ | 4,819,275 | ||||||||||
| Transaction, Advisory and Other Fees, Net | 160,395 | 174,905 | 44,868 | 11,770 | 391,938 | |||||||||||||||
| Management Fee Offsets | (3,499 | ) | (33,247 | ) | (6,653 | ) | (572 | ) | (43,971 | ) | ||||||||||
| Total Management and Advisory Fees, Net | 2,052,308 | 1,662,931 | 804,120 | 647,883 | 5,167,242 | |||||||||||||||
| Fee Related Performance Revenues | 1,695,019 | 212,128 | 118,097 | — | 2,025,244 | |||||||||||||||
| Fee Related Compensation | (1,161,349 | ) | (662,824 | ) | (367,322 | ) | (156,515 | ) | (2,348,010 | ) | ||||||||||
| Other Operating Expenses | (234,505 | ) | (264,468 | ) | (199,912 | ) | (94,792 | ) | (793,677 | ) | ||||||||||
| Fee Related Earnings | 2,351,473 | 947,767 | 354,983 | 396,576 | 4,050,799 | |||||||||||||||
| Realized Performance Revenues | 1,119,612 | 2,263,099 | 209,421 | 290,980 | 3,883,112 | |||||||||||||||
| Realized Performance Compensation | (443,220 | ) | (943,199 | ) | (94,450 | ) | (76,701 | ) | (1,557,570 | ) | ||||||||||
| Realized Principal Investment Income | 196,869 | 263,368 | 70,796 | 56,733 | 587,766 | |||||||||||||||
| Total Net Realizations | 873,261 | 1,583,268 | 185,767 | 271,012 | 2,913,308 | |||||||||||||||
| Total Segment Distributable Earnings | $ | 3,224,734 | $ | 2,531,035 | $ | 540,750 | $ | 667,588 | $ | 6,964,107 | ||||||||||
| Segment Assets | $ | 14,866,437 | $ | 15,242,626 | $ | 6,522,091 | $ | 2,791,939 | $ | 39,423,093 | ||||||||||
| Year Ended December 31, 2020 | ||||||||||||||||||||
| Real Estate | Private Equity | Credit & Insurance | Hedge Fund Solutions | Total Segments | ||||||||||||||||
| Management and Advisory Fees, Net | ||||||||||||||||||||
| Base Management Fees | $ | 1,553,483 | $ | 1,232,028 | $ | 603,713 | $ | 582,830 | $ | 3,972,054 | ||||||||||
| Transaction, Advisory and Other Fees, Net | 98,225 | 82,440 | 21,311 | 5,899 | 207,875 | |||||||||||||||
| Management Fee Offsets | (13,020 | ) | (44,628 | ) | (10,466 | ) | (650 | ) | (68,764 | ) | ||||||||||
| Total Management and Advisory Fees, Net | 1,638,688 | 1,269,840 | 614,558 | 588,079 | 4,111,165 | |||||||||||||||
| Fee Related Performance Revenues | 338,161 | — | 40,515 | — | 378,676 | |||||||||||||||
| Fee Related Compensation | (618,105 | ) | (455,538 | ) | (261,214 | ) | (161,713 | ) | (1,496,570 | ) | ||||||||||
| Other Operating Expenses | (183,132 | ) | (195,213 | ) | (165,114 | ) | (79,758 | ) | (623,217 | ) | ||||||||||
| Fee Related Earnings | 1,175,612 | 619,089 | 228,745 | 346,608 | 2,370,054 | |||||||||||||||
| Realized Performance Revenues | 787,768 | 877,493 | 20,943 | 179,789 | 1,865,993 | |||||||||||||||
| Realized Performance Compensation | (312,698 | ) | (366,949 | ) | (3,476 | ) | (31,224 | ) | (714,347 | ) | ||||||||||
| Realized Principal Investment Income | 24,764 | 72,089 | 7,970 | 54,110 | 158,933 | |||||||||||||||
| Total Net Realizations | 499,834 | 582,633 | 25,437 | 202,675 | 1,310,579 | |||||||||||||||
| Total Segment Distributable Earnings | $ | 1,675,446 | $ | 1,201,722 | $ | 254,182 | $ | 549,283 | $ | 3,680,633 | ||||||||||
Blackstone 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, 2022, 2021 and 2020 along with Total Assets as of December 31, 2022 and 2021:
| Year Ended December 31, | ||||||||||||
| 2022 | 2021 | 2020 | ||||||||||
| Revenues | ||||||||||||
| Total GAAP Revenues | $ | 8,517,673 | $ | 22,577,148 | $ | 6,101,927 | ||||||
| Less: Unrealized Performance Revenues (a) | 3,436,978 | (8,675,246 | ) | 384,758 | ||||||||
| Less: Unrealized Principal Investment (Income) Loss (b) | 1,235,529 | (679,767 | ) | 101,742 | ||||||||
| Less: Interest and Dividend Revenue (c) | (285,075 | ) | (163,044 | ) | (130,112 | ) | ||||||
| Less: Other Revenue (d) | (183,754 | ) | (202,885 | ) | 253,693 | |||||||
| Impact of Consolidation (e) | (109,379 | ) | (1,197,854 | ) | (234,148 | ) | ||||||
| Amortization of Intangibles (f) | — | — | 1,548 | |||||||||
| Transaction-Related Charges (g) | (24,656 | ) | 660 | 29,837 | ||||||||
| Intersegment Eliminations | 2,721 | 4,352 | 5,522 | |||||||||
| Total Segment Revenue (h) | $ | 12,590,037 | $ | 11,663,364 | $ | 6,514,767 | ||||||
| Year Ended December 31, | ||||||||||||
| 2022 | 2021 | 2020 | ||||||||||
| Expenses | ||||||||||||
| Total GAAP Expenses | $ | 4,973,025 | $ | 9,476,617 | $ | 3,479,566 | ||||||
| Less: Unrealized Performance Allocations Compensation (i) | 1,470,588 | (3,778,048 | ) | 154,516 | ||||||||
| Less: Equity-Based Compensation (j) | (782,090 | ) | (559,537 | ) | (333,767 | ) | ||||||
| Less: Interest Expense (k) | (316,569 | ) | (196,632 | ) | (165,022 | ) | ||||||
| Impact of Consolidation (e) | (61,644 | ) | (25,673 | ) | (26,088 | ) | ||||||
| Amortization of Intangibles (f) | (60,481 | ) | (68,256 | ) | (64,436 | ) | ||||||
| Transaction-Related Charges (g) | (81,789 | ) | (143,378 | ) | (210,892 | ) | ||||||
| Administrative Fee Adjustment (l) | (9,866 | ) | (10,188 | ) | (5,265 | ) | ||||||
| Intersegment Eliminations | 2,721 | 4,352 | 5,522 | |||||||||
| Total Segment Expenses (m) | $ | 5,133,895 | $ | 4,699,257 | $ | 2,834,134 | ||||||
| Year Ended December 31, | ||||||||||||
| 2022 | 2021 | 2020 | ||||||||||
| Other Income | ||||||||||||
| Total GAAP Other Income | $ | (82,859 | ) | $ | 458,865 | $ | (4,841 | ) | ||||
| Impact of Consolidation (e) | 82,859 | (458,865 | ) | 4,841 | ||||||||
| Total Segment Other Income | $ | — | $ | — | $ | — | ||||||
Blackstone 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, | ||||||||||||
| 2022 | 2021 | 2020 | ||||||||||
| Income Before Provision for Taxes | ||||||||||||
| Total GAAP Income Before Provision for Taxes | $ | 3,461,789 | $ | 13,559,396 | $ | 2,617,520 | ||||||
| Less: Unrealized Performance Revenues (a) | 3,436,978 | (8,675,246 | ) | 384,758 | ||||||||
| Less: Unrealized Principal Investment (Income) Loss (b) | 1,235,529 | (679,767 | ) | 101,742 | ||||||||
| Less: Interest and Dividend Revenue (c) | (285,075 | ) | (163,044 | ) | (130,112 | ) | ||||||
| Less: Other Revenue (d) | (183,754 | ) | (202,885 | ) | 253,693 | |||||||
| Plus: Unrealized Performance Allocations Compensation (i) | (1,470,588 | ) | 3,778,048 | (154,516 | ) | |||||||
| Plus: Equity-Based Compensation (j) | 782,090 | 559,537 | 333,767 | |||||||||
| Plus: Interest Expense (k) | 316,569 | 196,632 | 165,022 | |||||||||
| Impact of Consolidation (e) | 35,124 | (1,631,046 | ) | (203,219 | ) | |||||||
| Amortization of Intangibles (f) | 60,481 | 68,256 | 65,984 | |||||||||
| Transaction-Related Charges (g) | 57,133 | 144,038 | 240,729 | |||||||||
| Administrative Fee Adjustment (l) | 9,866 | 10,188 | 5,265 | |||||||||
| Total Segment Distributable Earnings | $ | 7,456,142 | $ | 6,964,107 | $ | 3,680,633 | ||||||
| As of December 31, | ||||||||
| 2022 | 2021 | |||||||
| Total Assets | ||||||||
| Total GAAP Assets | $ | 42,524,227 | $ | 41,196,408 | ||||
| Impact of Consolidation (e) | (4,576,467 | ) | (1,773,315 | ) | ||||
| Total Segment Assets | $ | 37,947,760 | $ | 39,423,093 | ||||
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, 2022, 2021 and 2020, Other Revenue on a GAAP basis was $184.6 million, $203.1 million and $(253.1) million and included $182.9 million, $200.6 million and $(257.8) 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 was historically accounted for under the equity method. As a result of Pátria’s IPO in January 2021, equity method has been discontinued and there is no longer amortization of intangibles associated with the investment. |
|---|
| (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 |
|---|
Blackstone Inc.
Notes to Consolidated Financial Statements—Continued
(All Dollars are in Thousands, Except Share and Per Share Data, Except Where Noted)
| 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: |
|---|
| Year Ended December 31, | ||||||||||||
| 2022 | 2021 | 2020 | ||||||||||
| Total Segment Management and Advisory Fees, Net | $ | 6,282,946 | $ | 5,167,242 | $ | 4,111,165 | ||||||
| Total Segment Fee Related Performance Revenues | 1,449,497 | 2,025,244 | 378,676 | |||||||||
| Total Segment Realized Performance Revenues | 4,461,338 | 3,883,112 | 1,865,993 | |||||||||
| Total Segment Realized Principal Investment Income | 396,256 | 587,766 | 158,933 | |||||||||
| Total Segment Revenues | $ | 12,590,037 | $ | 11,663,364 | $ | 6,514,767 | ||||||
| (i) | This adjustment removes Unrealized Performance Allocations Compensation. |
|---|
| (j) | This adjustment removes Equity-Based Compensation on a segment basis. |
|---|
| (k) | This adjustment adds back Interest Expense on a segment basis, excluding interest expense related to the Tax Receivable Agreement. |
|---|
| (l) | This adjustment adds an amount equal to an administrative fee collected on a quarterly basis from certain holders of Blackstone Holdings Partnership Units. The administrative fee is accounted for as a capital contribution under GAAP, but is reflected as a reduction of Other Operating Expenses in Blackstone’s segment presentation. |
|---|
| (m) | Total Segment Expenses is comprised of the following: |
|---|
| Year Ended December 31, | ||||||||||||
| 2022 | 2021 | 2020 | ||||||||||
| Total Segment Fee Related Compensation | $ | 2,330,775 | $ | 2,348,010 | $ | 1,496,570 | ||||||
| Total Segment Realized Performance Compensation | 1,814,097 | 1,557,570 | 714,347 | |||||||||
| Total Segment Other Operating Expenses | 989,023 | 793,677 | 623,217 | |||||||||
| Total Segment Expenses | $ | 5,133,895 | $ | 4,699,257 | $ | 2,834,134 | ||||||
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, 2022, 2021 and 2020:
| Year Ended December 31, | ||||||||||||
| 2022 | 2021 | 2020 | ||||||||||
| Management and Advisory Fees, Net | ||||||||||||
| GAAP | $ | 6,303,315 | $ | 5,170,707 | $ | 4,092,549 | ||||||
| Segment Adjustment (a) | (20,369 | ) | (3,465 | ) | 18,616 | |||||||
| Total Segment | $ | 6,282,946 | $ | 5,167,242 | $ | 4,111,165 | ||||||
Blackstone 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, | ||||||||||||
| 2022 | 2021 | 2020 | ||||||||||
| GAAP Realized Performance Revenues to Total Segment Fee Related Performance Revenues | ||||||||||||
| GAAP | ||||||||||||
| Incentive Fees | $ | 525,127 | $ | 253,991 | $ | 138,661 | ||||||
| Investment Income — Realized Performance Allocations | 5,381,640 | 5,653,452 | 2,106,000 | |||||||||
| GAAP | 5,906,767 | 5,907,443 | 2,244,661 | |||||||||
| Total Segment | ||||||||||||
| Less: Realized Performance Revenues | (4,461,338 | ) | (3,883,112 | ) | (1,865,993 | ) | ||||||
| Segment Adjustment (b) | 4,068 | 913 | 8 | |||||||||
| Total Segment | $ | 1,449,497 | $ | 2,025,244 | $ | 378,676 | ||||||
| Year Ended December 31, | ||||||||||||
| 2022 | 2021 | 2020 | ||||||||||
| GAAP Compensation to Total Segment Fee Related Compensation | ||||||||||||
| GAAP | ||||||||||||
| Compensation | $ | 2,569,780 | $ | 2,161,973 | $ | 1,855,619 | ||||||
| Incentive Fee Compensation | 207,998 | 98,112 | 44,425 | |||||||||
| Realized Performance Allocations Compensation | 2,225,264 | 2,311,993 | 843,230 | |||||||||
| GAAP | 5,003,042 | 4,572,078 | 2,743,274 | |||||||||
| Total Segment | ||||||||||||
| Less: Realized Performance Compensation | (1,814,097 | ) | (1,557,570 | ) | (714,347 | ) | ||||||
| Less: Equity-Based Compensation — Fee Related Compensation | (772,170 | ) | (551,263 | ) | (326,116 | ) | ||||||
| Less: Equity-Based Compensation — Performance Compensation | (9,920 | ) | (8,274 | ) | (7,651 | ) | ||||||
| Segment Adjustment (c) | (76,080 | ) | (106,961 | ) | (198,590 | ) | ||||||
| Total Segment | $ | 2,330,775 | $ | 2,348,010 | $ | 1,496,570 | ||||||
| Year Ended December 31, | ||||||||||||
| 2022 | 2021 | 2020 | ||||||||||
| GAAP General, Administrative and Other to Total Segment Other Operating Expenses | ||||||||||||
| GAAP | $ | 1,092,671 | $ | 917,847 | $ | 711,782 | ||||||
| Segment Adjustment (d) | (103,648 | ) | (124,170 | ) | (88,565 | ) | ||||||
| Total Segment | $ | 989,023 | $ | 793,677 | $ | 623,217 | ||||||
Blackstone 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, | ||||||||||||
| 2022 | 2021 | 2020 | ||||||||||
| Realized Performance Revenues | ||||||||||||
| GAAP | ||||||||||||
| Incentive Fees | $ | 525,127 | $ | 253,991 | $ | 138,661 | ||||||
| Investment Income — Realized Performance Allocations | 5,381,640 | 5,653,452 | 2,106,000 | |||||||||
| GAAP | 5,906,767 | 5,907,443 | 2,244,661 | |||||||||
| Total Segment | ||||||||||||
| Less: Fee Related Performance Revenues | (1,449,497 | ) | (2,025,244 | ) | (378,676 | ) | ||||||
| Segment Adjustment (b) | 4,068 | 913 | 8 | |||||||||
| Total Segment | $ | 4,461,338 | $ | 3,883,112 | $ | 1,865,993 | ||||||
| Year Ended December 31, | ||||||||||||
| 2022 | 2021 | 2020 | ||||||||||
| Realized Performance Compensation | ||||||||||||
| GAAP | ||||||||||||
| Incentive Fee Compensation | $ | 207,998 | $ | 98,112 | $ | 44,425 | ||||||
| Realized Performance Allocations Compensation | 2,225,264 | 2,311,993 | 843,230 | |||||||||
| GAAP | 2,433,262 | 2,410,105 | 887,655 | |||||||||
| Total Segment | ||||||||||||
| Less: Fee Related Performance Compensation (e) | (609,245 | ) | (844,261 | ) | (165,657 | ) | ||||||
| Less: Equity-Based Compensation — Performance Compensation | (9,920 | ) | (8,274 | ) | (7,651 | ) | ||||||
| Total Segment | $ | 1,814,097 | $ | 1,557,570 | $ | 714,347 | ||||||
| Year Ended December 31, | ||||||||||||
| 2022 | 2021 | 2020 | ||||||||||
| Realized Principal Investment Income | ||||||||||||
| GAAP | $ | 850,327 | $ | 1,003,822 | $ | 391,628 | ||||||
| Segment Adjustment (f) | (454,071 | ) | (416,056 | ) | (232,695 | ) | ||||||
| Total Segment | $ | 396,256 | $ | 587,766 | $ | 158,933 | ||||||
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 (1) removal of amortization of transaction-related intangibles, (2) removal of 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, and (3) a reduction equal to an administrative fee |
|---|
Blackstone Inc.
Notes to Consolidated Financial Statements—Continued
(All Dollars are in Thousands, Except Share and Per Share Data, Except Where Noted)
| collected on a quarterly basis from certain holders of Blackstone Holdings Partnership Units which is accounted for as a capital contribution under GAAP, but is reflected as a reduction of Other Operating Expenses in Blackstone’s segment presentation. |
|---|
| (e) | Fee related performance compensation may include equity-based compensation based on fee related performance revenues. |
|---|
| (f) | 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, 2022 that require recognition or disclosure in the Consolidated Financial Statements.
Previous: Item 7A. Quantitative and Qualitative Disclosures About Market Risk · Next: Item 8A. Unaudited Supplemental Presentation of Statements of Financial Condition