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Cover and table of contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
10-Q
(Mark One)
| ☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2021 |
|---|
OR
| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO |
|---|
Commission File Number:
001-33551
Blackstone Inc.
(Exact name of Registrant as specified in its charter)
| Delaware (State or other jurisdiction of incorporation or organization) | 20-8875684 (I.R.S. Employer Identification No.) |
345 Park Avenue
New York, New York 10154
(Address of principal executive offices)(Zip Code)
(212)
583-5000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| Common Stock | BX | New York Stock Exchange |
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes
☒
No
☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation
S-T
(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes
☒
No
☐
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a
non-accelerated
filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule
12b-2
of the Exchange Act.
| Large accelerated filer ☒ | Accelerated filer ☐ | |||||
| Non-accelerated filer ☐ | Smaller reporting company ☐ | |||||
| Emerging growth company ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a)
of the Exchange Act.
☐
Indicate by
check mark whether the Registrant is a shell company (as defined in Rule
12b-2
of the Exchange Act). Yes
☐
No
☒
As of October 29, 2021, there were 686,871,813 shares of common stock of the registrant outstanding.
Table of Contents
Forward-Looking Statements
This report may contain forward-looking statements within the meaning of Section 27A of the U.S. Securities Act of 1933, as amended, and Section 21E of the U.S. Securities Exchange Act of 1934, as amended, which reflect our current views with respect to, among other things, our operations, taxes, earnings and financial performance, share repurchases and dividends. You can identify these forward-looking statements by the use of words such as “outlook,” “indicator,” “believes,” “expects,” “potential,” “continues,” “may,” “will,” “should,” “seeks,” “approximately,” “predicts,” “intends,” “plans,” “scheduled,” “estimates,” “anticipates” or the negative version of these words or other comparable words. Such forward-looking statements are subject to various risks and uncertainties. Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from those indicated in these statements. We believe these factors include but are not limited to the impact of the novel coronavirus
(“COVID-19”),
as well as those described under the section entitled “Risk Factors” in our Annual Report on
Form 10-K
for the year ended December 31, 2020, as such factors may be updated from time to time in our periodic filings with the United States Securities and Exchange Commission (“SEC”), which are accessible on the SEC’s website at www.sec.gov. These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this report and in our other periodic filings. The forward-looking statements speak only as of the date of this report, and we undertake no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise.
Website and Social Media Disclosure
We use our website (www.blackstone.com), Facebook page (www.facebook.com/blackstone), Twitter (www.twitter.com/blackstone), LinkedIn (www.linkedin.com/company/blackstonegroup), Instagram (www.instagram.com/blackstone), SoundCloud (www.soundcloud.com/blackstone-300250613), PodBean (www.blackstone.podbean.com), Spotify (https://spoti.fi/2LJ1tHG), YouTube (www.youtube.com/user/blackstonegroup) and Apple Podcast (https://apple.co/31Pe1Gg) accounts as channels of distribution of company information. The information we post through these channels may be deemed material. Accordingly, investors should monitor these channels, in addition to following our press releases, SEC filings and public conference calls and webcasts. In addition, you may automatically receive email alerts and other information about Blackstone when you enroll your email address by visiting the “Contact Us/Email Alerts” section of our website at http://ir.blackstone.com. The contents of our website, any alerts and social media channels are not, however, a part of this report.
Effective August 6, 2021, The Blackstone Group Inc. changed its name to Blackstone Inc. In this report, references to “Blackstone,” the “Company,” “we,” “us” or “our” refer to Blackstone Inc. and its consolidated subsidiaries.
Effective February 26, 2021, Blackstone effectuated changes to rename its Class A common stock as “common stock,” and to reclassify its Class B and Class C common stock into a new “Series I preferred stock” and “Series II preferred stock,” respectively (the “share reclassification”). Each new stock has the same rights and powers of its predecessor. All references to common stock, Series I preferred stock and Series II preferred stock prior to the share reclassification refer to Class A, Class B and Class C common stock, respectively. See “Part I. Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Organizational Structure.”
“Series I Preferred Stockholder” refers to Blackstone Partners L.L.C., the holder of the sole outstanding share of our Series I preferred stock.
“Series II Preferred Stockholder” refers to Blackstone Group Management L.L.C., the holder of the sole outstanding share of our Series II preferred stock.
“Blackstone Funds,” “our funds” and “our investment funds” refer to the funds and other vehicles that are managed by Blackstone. “Our carry funds” refers to funds managed by Blackstone that have commitment-based multi-year drawdown structures that pay carry on the realization of an investment.
We refer to our flagship corporate private equity funds as Blackstone Capital Partners (“BCP”) funds, our energy-focused private equity funds as Blackstone Energy Partners (“BEP”) funds, our core private equity funds as Blackstone Core Equity Partners (“BCEP”), our opportunistic investment platform that invests globally across asset classes, industries and geographies as Blackstone Tactical Opportunities (“Tactical Opportunities”), our secondary fund of funds business as Strategic Partners Fund Solutions (“Strategic Partners”), our infrastructure-focused funds as Blackstone Infrastructure Partners (“BIP”), our life sciences private investment platform, Blackstone Life Sciences (“BXLS”), our growth equity investment platform, Blackstone Growth (“BXG”), our multi-asset investment program for eligible high net worth investors offering exposure to certain of our key illiquid investment strategies through a single commitment as Blackstone Total Alternatives Solution (“BTAS”) and our capital markets services business as Blackstone Capital Markets (“BXCM”).
We refer to our real estate opportunistic funds as Blackstone Real Estate Partners (“BREP”) funds and our real estate debt investment funds as Blackstone Real Estate Debt Strategies (“BREDS”) funds. We refer to our real estate investment trusts as “REITs,” to Blackstone Mortgage Trust, Inc., our NYSE-listed REIT, as “BXMT,” and to Blackstone Real Estate Income Trust, Inc., our
non-listed
REIT, as “BREIT.” We refer to our real estate funds which target substantially stabilized assets in prime markets, as Blackstone Property Partners (“BPP”) funds. We refer to BPP and BREIT collectively as our Core+ real estate strategies.
“Our hedge funds” refers to our funds of hedge funds, hedge funds, certain of our real estate debt investment funds, including a registered investment company, and certain other credit-focused funds which are managed by Blackstone.
We refer to our business development companies as “BDCs,” to Blackstone Private Credit Fund as “BCRED” and to Blackstone Secured Lending Fund as “BXSL.”
“BIS” refers to Blackstone Insurance Solutions, which partners with insurers to deliver bespoke, capital-efficient investments tailored to each insurer’s needs and risk profile.
We refer to our separately managed accounts as “SMAs.”
| “Total | Assets Under Management” refers to the assets we manage. Our Total Assets Under Management equals the sum of: |
|---|
| (a) | the fair value of the investments held by our carry funds and our side-by-side and co-investment entities managed by us plus the capital that we are entitled to call from investors in those funds and entities pursuant to the terms of their respective capital commitments, including capital commitments to funds that have yet to commence their investment periods, |
|---|
| (b) | the net asset value of (1) our hedge funds, real estate debt carry funds, BPP, certain co-investments managed by us, certain credit-focused funds, and our Hedge Fund Solutions drawdown funds (plus, in each case, the capital that we are entitled to call from investors in those funds, including commitments yet to commence their investment periods), and (2) our funds of hedge funds, our Hedge Fund Solutions registered investment companies, and BREIT, |
|---|
| (c) | the invested capital, fair value or net asset value of assets we manage pursuant to separately managed accounts, |
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| (d) | the amount of debt and equity outstanding for our collateralized loan obligations (“CLO”) during the reinvestment period, |
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| (e) | the aggregate par amount of collateral assets, including principal cash, for our CLOs after the reinvestment period, |
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| (f) | the gross or net amount of assets (including leverage where applicable) for our credit-focused registered investment companies, |
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| (g) | the fair value of common stock, preferred stock, convertible debt, term loans or similar instruments issued by BXMT, and |
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| (h) | borrowings under and any amounts available to be borrowed under certain credit facilities of our funds. |
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Our carry funds are commitment-based drawdown structured funds that do not permit investors to redeem their interests at their election. Our funds of hedge funds, hedge funds, funds structured like hedge funds and other open-ended funds in our Real Estate, Hedge Fund Solutions and Credit & Insurance segments generally have structures that afford an investor the right to withdraw or redeem their interests on a periodic basis (for example, annually or quarterly), typically with 30 to 95 days’ notice, depending on the fund and the liquidity profile of the underlying assets. Investment advisory agreements related to certain separately managed accounts in our Hedge Fund Solutions and Credit & Insurance segments, excluding our BIS separately managed accounts, may generally be terminated by an investor on 30 to 90 days’ notice.
“Fee-Earning
Assets Under Management” refers to the assets we manage on which we derive management fees and/or performance revenues. Our
Fee-Earning
Assets Under Management equals the sum of:
| (a) | for our Private Equity segment funds and Real Estate segment carry funds, including certain BREDS and Hedge Fund Solutions funds, the amount of capital commitments, remaining invested capital, fair value, net asset value or par value of assets held, depending on the fee terms of the fund, |
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| (b) | for our credit-focused carry funds, the amount of remaining invested capital (which may include leverage) or net asset value, depending on the fee terms of the fund, |
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| (c) | the remaining invested capital or fair value of assets held in co-investment vehicles managed by us on which we receive fees, |
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| (d) | the net asset value of our funds of hedge funds, hedge funds, BPP, certain co-investments managed by us, certain registered investment companies, BREIT, and certain of our Hedge Fund Solutions drawdown funds, |
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| (e) | the invested capital, fair value of assets or the net asset value we manage pursuant to separately managed accounts, |
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| (f) | the net proceeds received from equity offerings and accumulated distributable earnings of BXMT, subject to certain adjustments, |
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| (g) | the aggregate par amount of collateral assets, including principal cash, of our CLOs, and |
|---|
| (h) | the gross amount of assets (including leverage) or the net assets (plus leverage where applicable) for certain of our credit-focused registered investment companies. |
|---|
Each of our segments may include certain
Fee-Earning
Assets Under Management on which we earn performance revenues but not management fees.
Our calculations of Total Assets Under Management and
Fee-Earning
Assets Under Management may differ from the calculations of other asset managers, and as a result this measure may not be comparable to similar measures presented by other asset managers. In addition, our calculation of Total Assets Under Management includes commitments to, and the fair value of, invested capital in our funds from Blackstone and our personnel, regardless of whether such commitments or invested capital are subject to fees. Our definitions of Total Assets Under Management and
Fee-Earning
Assets Under Management are not based on any definition of total assets under management and
fee-earning
assets under management that is set forth in the agreements governing the investment funds that we manage.
For our carry funds, Total Assets Under Management includes the fair value of the investments held and uncalled capital commitments, whereas
Fee-Earning
Assets Under Management may include the total amount of capital commitments or the remaining amount of invested capital at cost, depending on whether the investment period has expired or as specified by the fee terms of the fund. As such, in certain carry funds
Fee-Earning
Assets Under Management may be greater than Total Assets Under Management when the aggregate fair value of the remaining investments is less than the cost of those investments.
“Perpetual Capital” refers to the component of assets under management with an indefinite term, that is not in liquidation, and for which there is no requirement to return capital to investors through redemption requests in the ordinary course of business, except where funded by new capital inflows. Perpetual Capital includes
co-investment
capital with an investor right to convert into Perpetual Capital.
This report does not constitute an offer of any Blackstone Fund.
Part I. Financial Information
| Item 1. | Financial Statements |
|---|
Blackstone Inc.
Condensed Consolidated Statements of Financial Condition (Unaudited)
(Dollars in Thousands, Except Share Data)
| September 30, | December 31, | |||||||
| 2021 | 2020 | |||||||
| Assets | ||||||||
| Cash and Cash Equivalents | $ | 5,011,433 | $ | 1,999,484 | ||||
| Cash Held by Blackstone Funds and Other | 113,731 | 64,972 | ||||||
| Investments (including assets pledged of $50,504 and $110,835 at September 30, 2021 and December 31, 2020, respectively) | 25,104,195 | 15,617,142 | ||||||
| Accounts Receivable | 496,265 | 866,158 | ||||||
| Due from Affiliates | 3,718,119 | 3,221,515 | ||||||
| Intangible Assets, Net | 303,082 | 347,955 | ||||||
| Goodwill | 1,890,202 | 1,901,485 | ||||||
| Other Assets | 538,567 | 481,022 | ||||||
| Right-of-Use Assets | 745,886 | 526,943 | ||||||
| Deferred Tax Assets | 1,116,612 | 1,242,576 | ||||||
| Total Assets | $ | 39,038,092 | $ | 26,269,252 | ||||
| Liabilities and Equity | ||||||||
| Loans Payable | $ | 7,527,576 | $ | 5,644,653 | ||||
| Due to Affiliates | 1,426,209 | 1,135,041 | ||||||
| Accrued Compensation and Benefits | 7,399,559 | 3,433,260 | ||||||
| Securities Sold, Not Yet Purchased | 35,657 | 51,033 | ||||||
| Repurchase Agreements | 36,545 | 76,808 | ||||||
| Operating Lease Liabilities | 863,020 | 620,844 | ||||||
| Accounts Payable, Accrued Expenses and Other Liabilities | 871,661 | 717,104 | ||||||
| Total Liabilities | 18,160,227 | 11,678,743 | ||||||
| Commitments and Contingencies | ||||||||
| Redeemable Non-Controlling Interests in Consolidated Entities | 66,824 | 65,161 | ||||||
| Equity | ||||||||
| Stockholders’ Equity of Blackstone Inc. | ||||||||
| Common Stock, $0.00001 par value, 90 billion shares authorized, (693,612,698 shares issued and outstanding as of September 30, 2021; 683,875,544 shares issued and outstanding as of December 31, 2020) | 7 | 7 | ||||||
| Series I Preferred Stock, $0.00001 par value, 999,999,000 shares authorized, (1 share issued and outstanding as of September 30, 2021 and December 31, 2020) | — | — | ||||||
| Series II Preferred Stock, $0.00001 par value, 1,000 shares authorized, (1 share issued and outstanding as of September 30, 2021 and December 31, 2020) | — | — | ||||||
| Additional Paid-in-Capital | 6,037,628 | 6,332,105 | ||||||
| Retained Earnings | 3,031,765 | 335,762 | ||||||
| Accumulated Other Comprehensive Loss | (15,357 | ) | (15,831 | ) | ||||
| Total Stockholders’ Equity of Blackstone Inc. | 9,054,043 | 6,652,043 | ||||||
| Non-Controlling Interests in Consolidated Entities | 5,638,612 | 4,042,157 | ||||||
| Non-Controlling Interests in Blackstone Holdings | 6,118,386 | 3,831,148 | ||||||
| Total Equity | 20,811,041 | 14,525,348 | ||||||
| Total Liabilities and Equity | $ | 39,038,092 | $ | 26,269,252 | ||||
continued...
See notes to condensed consolidated financial statements.
Blackstone Inc.
Condensed Consolidated Statements of Financial Condition (Unaudited)
(Dollars in Thousands)
The following presents the asset and liability portion of the consolidated balances presented in the Condensed 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.
| September 30, | December 31, | |||||||
| 2021 | 2020 | |||||||
| Assets | ||||||||
| Cash Held by Blackstone Funds and Other | $ | 113,731 | $ | 64,972 | ||||
| Investments | 2,104,705 | 1,455,008 | ||||||
| Accounts Receivable | 64,254 | 120,099 | ||||||
| Due from Affiliates | 11,142 | 8,676 | ||||||
| Other Assets | 262 | 262 | ||||||
| Total Assets | $ | 2,294,094 | $ | 1,649,017 | ||||
| Liabilities | ||||||||
| Loans Payable | $ | 100 | $ | 99 | ||||
| Due to Affiliates | 95,062 | 65,429 | ||||||
| Securities Sold, Not Yet Purchased | 23,745 | 41,709 | ||||||
| Repurchase Agreements | 36,545 | 76,808 | ||||||
| Accounts Payable, Accrued Expenses and Other Liabilities | 34,869 | 37,221 | ||||||
| Total Liabilities | $ | 190,321 | $ | 221,266 | ||||
See notes to condensed consolidated financial statements.
Blackstone Inc.
Condensed Consolidated Statements of Operations (Unaudited)
(Dollars in Thousands, Except Share and Per Share Data)
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Revenues | ||||||||||||||||
| Management and Advisory Fees, Net | $ | 1,320,795 | $ | 1,053,851 | $ | 3,711,159 | $ | 2,958,411 | ||||||||
| Incentive Fees | 48,206 | 13,498 | 117,537 | 40,959 | ||||||||||||
| Investment Income (Loss) | ||||||||||||||||
| Performance Allocations | ||||||||||||||||
| Realized | 1,522,495 | 371,406 | 2,865,482 | 640,846 | ||||||||||||
| Unrealized | 2,724,366 | 1,403,480 | 7,886,033 | (981,678 | ) | |||||||||||
| Principal Investments | ||||||||||||||||
| Realized | 325,414 | 61,017 | 832,512 | 170,814 | ||||||||||||
| Unrealized | 183,754 | 295,308 | 1,151,904 | (332,295 | ) | |||||||||||
| Total Investment Income (Loss) | 4,756,029 | 2,131,211 | 12,735,931 | (502,313 | ) | |||||||||||
| Interest and Dividend Revenue | 35,048 | 26,497 | 97,477 | 85,505 | ||||||||||||
| Other | 64,187 | (192,159 | ) | 152,387 | (109,559 | ) | ||||||||||
| Total Revenues | 6,224,265 | 3,032,898 | 16,814,491 | 2,473,003 | ||||||||||||
| Expenses | ||||||||||||||||
| Compensation and Benefits | ||||||||||||||||
| Compensation | 536,199 | 460,983 | 1,585,941 | 1,395,983 | ||||||||||||
| Incentive Fee Compensation | 21,007 | 7,385 | 48,763 | 22,339 | ||||||||||||
| Performance Allocations Compensation | ||||||||||||||||
| Realized | 631,632 | 142,149 | 1,192,082 | 253,141 | ||||||||||||
| Unrealized | 1,193,853 | 509,474 | 3,394,041 | (433,091 | ) | |||||||||||
| Total Compensation and Benefits | 2,382,691 | 1,119,991 | 6,220,827 | 1,238,372 | ||||||||||||
| General, Administrative and Other | 217,995 | 171,041 | 608,174 | 497,658 | ||||||||||||
| Interest Expense | 52,413 | 39,540 | 141,718 | 120,460 | ||||||||||||
| Fund Expenses | 1,260 | 2,274 | 7,417 | 10,962 | ||||||||||||
| Total Expenses | 2,654,359 | 1,332,846 | 6,978,136 | 1,867,452 | ||||||||||||
| Other Income (Loss) | ||||||||||||||||
| Change in Tax Receivable Agreement Liability | (37,321 | ) | (7,693 | ) | (34,803 | ) | (8,212 | ) | ||||||||
| Net Gains (Losses) from Fund Investment Activities | 132,312 | 108,752 | 379,781 | (60,325 | ) | |||||||||||
| Total Other Income (Loss) | 94,991 | 101,059 | 344,978 | (68,537 | ) | |||||||||||
| Income Before Provision for Taxes | 3,664,897 | 1,801,111 | 10,181,333 | 537,014 | ||||||||||||
| Provision for Taxes | 458,904 | 100,960 | 746,707 | 89,672 | ||||||||||||
| Net Income | 3,205,993 | 1,700,151 | 9,434,626 | 447,342 | ||||||||||||
| Net Income (Loss) Attributable to Redeemable Non-Controlling Interests in Consolidated Entities | 1,550 | 6,868 | 2,816 | (12,027 | ) | |||||||||||
| Net Income (Loss) Attributable to Non-Controlling Interests in Consolidated Entities | 486,907 | 259,761 | 1,305,273 | (90,938 | ) | |||||||||||
| Net Income Attributable to Non-Controlling Interests in Blackstone Holdings | 1,315,641 | 638,803 | 3,667,618 | 253,814 | ||||||||||||
| Net Income Attributable to Blackstone Inc. | $ | 1,401,895 | $ | 794,719 | $ | 4,458,919 | $ | 296,493 | ||||||||
| Net Income Per Share of Common Stock | ||||||||||||||||
| Basic | $ | 1.94 | $ | 1.14 | $ | 6.21 | $ | 0.43 | ||||||||
| Diluted | $ | 1.94 | $ | 1.13 | $ | 6.21 | $ | 0.43 | ||||||||
| Weighted-Average Shares of Common Stock Outstanding | ||||||||||||||||
| Basic | 722,229,117 | 700,184,580 | 717,516,302 | 695,049,997 | ||||||||||||
| Diluted | 722,433,099 | 700,527,966 | 717,918,415 | 695,337,575 | ||||||||||||
See notes to condensed consolidated financial statements.
Blackstone Inc.
Condensed Consolidated Statements of Comprehensive Income (Unaudited)
(Dollars in Thousands)
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Net Income | $ | 3,205,993 | $ | 1,700,151 | $ | 9,434,626 | $ | 447,342 | ||||||||
| Other Comprehensive Income (Loss), Currency Translation Adjustment | (8,689 | ) | 14,791 | 1,366 | 2,888 | |||||||||||
| Comprehensive Income | 3,197,304 | 1,714,942 | 9,435,992 | 450,230 | ||||||||||||
| Less: | ||||||||||||||||
| Comprehensive Income (Loss) Attributable to Redeemable Non-Controlling Interests in Consolidated Entities | 1,550 | 6,868 | 2,816 | (12,027 | ) | |||||||||||
| Comprehensive Income (Loss) Attributable to Non-Controlling Interests in Consolidated Entities | 486,907 | 259,761 | 1,305,273 | (90,938 | ) | |||||||||||
| Comprehensive Income Attributable to Non-Controlling Interests in Blackstone Holdings | 1,312,064 | 644,243 | 3,668,510 | 255,614 | ||||||||||||
| Comprehensive Income Attributable to Non-Controlling Interests | 1,800,521 | 910,872 | 4,976,599 | 152,649 | ||||||||||||
| Comprehensive Income Attributable to Blackstone Inc. | $ | 1,396,783 | $ | 804,070 | $ | 4,459,393 | $ | 297,581 | ||||||||
See notes to condensed consolidated financial statements.
Blackstone Inc.
Condensed Consolidated Statements of Changes in Equity (Unaudited)
(Dollars in Thousands, Except Share Data)
| Shares of Blackstone Inc. (a) | Blackstone Inc. (a) | |||||||||||||||||||||||||||||||||||||||
| Accumulated | Redeemable | |||||||||||||||||||||||||||||||||||||||
| Other | Non- | Non- | Non- | |||||||||||||||||||||||||||||||||||||
| Compre- | Controlling | Controlling | Controlling | |||||||||||||||||||||||||||||||||||||
| Additional | Retained | hensive | Total | Interests in | Interests in | Interests in | ||||||||||||||||||||||||||||||||||
| Common | Common | Paid-in- | Earnings | Income | Stockholders’ | Consolidated | Blackstone | Total | Consolidated | |||||||||||||||||||||||||||||||
| Stock | Stock | Capital | (Deficit) | (Loss) | Equity | Entities | Holdings | Equity | Entities | |||||||||||||||||||||||||||||||
| Balance at June 30, 2021 | 691,093,463 | $ | 7 | $ | 6,282,600 | $ | 2,133,794 | $ | (10,245 | ) | $ | 8,406,156 | $ | 4,860,442 | $ | 5,214,848 | $ | 18,481,446 | $ | 65,568 | ||||||||||||||||||||
| Net Income | — | — | — | 1,401,895 | — | 1,401,895 | 486,907 | 1,315,641 | 3,204,443 | 1,550 | ||||||||||||||||||||||||||||||
| Currency Translation Adjustment | — | — | — | — | (5,112 | ) | (5,112 | ) | — | (3,577 | ) | (8,689 | ) | — | ||||||||||||||||||||||||||
| Capital Contributions | — | — | — | — | — | — | 608,720 | 2,487 | 611,207 | — | ||||||||||||||||||||||||||||||
| Capital Distributions | — | — | — | (503,924 | ) | — | (503,924 | ) | (317,357 | ) | (423,813 | ) | (1,245,094 | ) | (294 | ) | ||||||||||||||||||||||||
| Transfer of Non-Controlling Interests in Consolidated Entities | — | — | — | — | — | — | (100 | ) | — | (100 | ) | — | ||||||||||||||||||||||||||||
| Deferred Tax Effects Resulting from Acquisition of Ownership Interests from Non-Controlling Interest Holders | — | — | 10,734 | — | — | 10,734 | — | — | 10,734 | — | ||||||||||||||||||||||||||||||
| Equity-Based Compensation | — | — | 81,616 | — | — | 81,616 | — | 57,914 | 139,530 | — | ||||||||||||||||||||||||||||||
| Net Delivery of Vested Blackstone Holdings Partnership Units and Shares of Common Stock | 1,815,907 | — | (26,583 | ) | — | — | (26,583 | ) | — | — | (26,583 | ) | — | |||||||||||||||||||||||||||
| Repurchase of Shares of Common Stock and Blackstone Holdings Partnership Units | (2,875,000 | ) | — | (355,853 | ) | — | — | (355,853 | ) | — | — | (355,853 | ) | — | ||||||||||||||||||||||||||
| Change in Blackstone Inc.’s Ownership Interest | — | — | 6,617 | — | — | 6,617 | — | (6,617 | ) | — | — | |||||||||||||||||||||||||||||
| Conversion of Blackstone Holdings Partnership Units to Shares of Common Stock | 3,578,328 | — | 38,497 | — | — | 38,497 | — | (38,497 | ) | — | — | |||||||||||||||||||||||||||||
| Balance at September 30, 2021 | 693,612,698 | $ | 7 | $ | 6,037,628 | $ | 3,031,765 | $ | (15,357 | ) | $ | 9,054,043 | $ | 5,638,612 | $ | 6,118,386 | $ | 20,811,041 | $ | 66,824 | ||||||||||||||||||||
| (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. |
|---|
continued...
See notes to condensed consolidated financial statements.
Blackstone Inc.
Condensed Consolidated Statements of Changes in Equity (Unaudited)
(Dollars in Thousands, Except Share Data)
| Shares of Blackstone Inc. (a) | Blackstone Inc. (a) | |||||||||||||||||||||||||||||||||||||||
| Accumulated | Redeemable | |||||||||||||||||||||||||||||||||||||||
| Other | Non- | Non- | Non- | |||||||||||||||||||||||||||||||||||||
| Compre- | Controlling | Controlling | Controlling | |||||||||||||||||||||||||||||||||||||
| Additional | Retained | hensive | Total | Interests in | Interests in | Interests in | ||||||||||||||||||||||||||||||||||
| Common | Common | Paid-in- | Earnings | Income | Stockholders’ | Consolidated | Blackstone | Total | Consolidated | |||||||||||||||||||||||||||||||
| Stock | Stock | Capital | (Deficit) | (Loss) | Equity | Entities | Holdings | Equity | Entities | |||||||||||||||||||||||||||||||
| Balance at June 30, 2020 | 676,874,583 | $ | 7 | $ | 6,272,040 | $ | (574,295 | ) | $ | (36,758 | ) | $ | 5,660,994 | $ | 3,900,429 | $ | 2,866,043 | $ | 12,427,466 | $ | 68,564 | |||||||||||||||||||
| Transfer Out Due to Deconsolidation of Fund Entities | — | — | — | — | — | — | (216,339 | ) | — | (216,339 | ) | — | ||||||||||||||||||||||||||||
| Net Income | — | — | — | 794,719 | — | 794,719 | 259,761 | 638,803 | 1,693,283 | 6,868 | ||||||||||||||||||||||||||||||
| Currency Translation Adjustment | — | — | — | — | 9,351 | 9,351 | — | 5,440 | 14,791 | — | ||||||||||||||||||||||||||||||
| Capital Contributions | — | — | — | — | — | — | 74,762 | 2,719 | 77,481 | — | ||||||||||||||||||||||||||||||
| Capital Distributions | — | — | — | (256,856 | ) | — | (256,856 | ) | (69,761 | ) | (217,337 | ) | (543,954 | ) | (12,048 | ) | ||||||||||||||||||||||||
| Transfer of Non-Controlling Interests in Consolidated Entities | — | — | — | — | — | — | (2,662 | ) | — | (2,662 | ) | — | ||||||||||||||||||||||||||||
| Deferred Tax Effects Resulting from Acquisition of Ownership Interests from Non-Controlling Interest Holders | — | — | 4,392 | — | — | 4,392 | — | — | 4,392 | — | ||||||||||||||||||||||||||||||
| Equity-Based Compensation | — | — | 57,098 | — | — | 57,098 | — | 42,812 | 99,910 | — | ||||||||||||||||||||||||||||||
| Net Delivery of Vested Blackstone Holdings Partnership Units and Shares of Common Stock | 1,002,685 | — | (12,430 | ) | — | — | (12,430 | ) | — | — | (12,430 | ) | — | |||||||||||||||||||||||||||
| Repurchase of Shares of Common Stock and Blackstone Holdings Partnership Units | (2,000,000 | ) | — | (105,644 | ) | — | — | (105,644 | ) | — | — | (105,644 | ) | — | ||||||||||||||||||||||||||
| Change in Blackstone Inc.’s Ownership Interest | — | — | 862 | — | — | 862 | — | (862 | ) | — | — | |||||||||||||||||||||||||||||
| Conversion of Blackstone Holdings Partnership Units to Shares of Common Stock | 4,803,480 | — | 27,404 | — | — | 27,404 | — | (27,404 | ) | — | — | |||||||||||||||||||||||||||||
| Balance at September 30, 2020 | 680,680,748 | $ | 7 | $ | 6,243,722 | $ | (36,432 | ) | $ | (27,407 | ) | $ | 6,179,890 | $ | 3,946,190 | $ | 3,310,214 | $ | 13,436,294 | $ | 63,384 | |||||||||||||||||||
| (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. |
|---|
continued...
See notes to condensed consolidated financial statements.
Blackstone Inc.
Condensed Consolidated Statements of Changes in Equity (Unaudited)
(Dollars in Thousands, Except Share Data)
| Shares of Blackstone Inc. (a) | Blackstone Inc. (a) | |||||||||||||||||||||||||||||||||||||||
| Accumulated | Redeemable | |||||||||||||||||||||||||||||||||||||||
| Other | Non- | Non- | Non- | |||||||||||||||||||||||||||||||||||||
| Compre- | Controlling | Controlling | Controlling | |||||||||||||||||||||||||||||||||||||
| Additional | Retained | hensive | Total | Interests in | Interests in | Interests in | ||||||||||||||||||||||||||||||||||
| Common | Common | Paid-in- | Earnings | Income | Stockholders’ | Consolidated | Blackstone | Total | Consolidated | |||||||||||||||||||||||||||||||
| Stock | Stock | Capital | (Deficit) | (Loss) | Equity | Entities | Holdings | Equity | 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 | — | — | — | 4,458,919 | — | 4,458,919 | 1,305,273 | 3,667,618 | 9,431,810 | 2,816 | ||||||||||||||||||||||||||||||
| Currency Translation Adjustment | — | — | — | — | 474 | 474 | — | 892 | 1,366 | — | ||||||||||||||||||||||||||||||
| Capital Contributions | — | — | — | — | — | — | 1,020,950 | 7,746 | 1,028,696 | — | ||||||||||||||||||||||||||||||
| Capital Distributions | — | — | — | (1,762,916 | ) | — | (1,762,916 | ) | (726,075 | ) | (1,448,470 | ) | (3,937,461 | ) | (1,153 | ) | ||||||||||||||||||||||||
| Transfer of Non-Controlling Interests in Consolidated Entities | — | — | — | — | — | — | (3,693 | ) | — | (3,693 | ) | — | ||||||||||||||||||||||||||||
| Deferred Tax Effects Resulting from Acquisition of Ownership Interests from Non-Controlling Interest Holders | — | — | 30,448 | — | — | 30,448 | — | — | 30,448 | — | ||||||||||||||||||||||||||||||
| Equity-Based Compensation | — | — | 250,222 | — | — | 250,222 | — | 178,855 | 429,077 | — | ||||||||||||||||||||||||||||||
| Net Delivery of Vested Blackstone Holdings Partnership Units and Shares of Common Stock | 3,802,879 | — | (49,642 | ) | — | — | (49,642 | ) | — | — | (49,642 | ) | — | |||||||||||||||||||||||||||
| Repurchase of Shares of Common Stock and Blackstone Holdings Partnership Units | (6,049,598 | ) | — | (644,908 | ) | — | — | (644,908 | ) | — | — | (644,908 | ) | — | ||||||||||||||||||||||||||
| Change in Blackstone Inc.’s Ownership Interest | — | — | 10,494 | — | — | 10,494 | — | (10,494 | ) | — | — | |||||||||||||||||||||||||||||
| Conversion of Blackstone Holdings Partnership Units to Shares of Common Stock | 11,983,873 | — | 108,909 | — | — | 108,909 | — | (108,909 | ) | — | — | |||||||||||||||||||||||||||||
| Balance at September 30, 2021 | 693,612,698 | $ | 7 | $ | 6,037,628 | $ | 3,031,765 | $ | (15,357 | ) | $ | 9,054,043 | $ | 5,638,612 | $ | 6,118,386 | $ | 20,811,041 | $ | 66,824 | ||||||||||||||||||||
| (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. |
|---|
continued...
See notes to condensed consolidated financial statements.
Blackstone Inc.
Condensed Consolidated Statements of Changes in Equity (Unaudited)
(Dollars in Thousands, Except Share Data)
| Shares of Blackstone Inc. (a) | Blackstone Inc. (a) | |||||||||||||||||||||||||||||||||||||||
| Accumulated | Redeemable | |||||||||||||||||||||||||||||||||||||||
| Other | Non- | Non- | Non- | |||||||||||||||||||||||||||||||||||||
| Compre- | Controlling | Controlling | Controlling | |||||||||||||||||||||||||||||||||||||
| Additional | Retained | hensive | Total | Interests in | Interests in | Interests in | ||||||||||||||||||||||||||||||||||
| Common | Common | Paid-in- | Earnings | Income | Stockholders’ | Consolidated | Blackstone | Total | Consolidated | |||||||||||||||||||||||||||||||
| Stock | Stock | Capital | (Deficit) | (Loss) | Equity | Entities | Holdings | Equity | 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) | — | — | — | 296,493 | — | 296,493 | (90,938 | ) | 253,814 | 459,369 | (12,027 | ) | ||||||||||||||||||||||||||||
| Currency Translation Adjustment | — | — | — | — | 1,088 | 1,088 | — | 1,800 | 2,888 | — | ||||||||||||||||||||||||||||||
| Capital Contributions | — | — | — | — | — | — | 447,723 | 2,719 | 450,442 | — | ||||||||||||||||||||||||||||||
| Capital Distributions | — | — | — | (942,550 | ) | — | (942,550 | ) | (375,558 | ) | (786,392 | ) | (2,104,500 | ) | (12,240 | ) | ||||||||||||||||||||||||
| Transfer of Non-Controlling Interests in Consolidated Entities | — | — | — | — | — | — | (4,767 | ) | — | (4,767 | ) | — | ||||||||||||||||||||||||||||
| Deferred Tax Effects Resulting from Acquisition of Ownership Interests from Non-Controlling Interest Holders | — | — | 19,592 | — | — | 19,592 | — | — | 19,592 | — | ||||||||||||||||||||||||||||||
| Equity-Based Compensation | — | — | 181,377 | — | — | 181,377 | — | 136,912 | 318,289 | — | ||||||||||||||||||||||||||||||
| Net Delivery of Vested Blackstone Holdings Partnership Units and Shares of Common Stock | 2,742,841 | — | (30,069 | ) | — | — | (30,069 | ) | — | (7 | ) | (30,076 | ) | — | ||||||||||||||||||||||||||
| Repurchase of Shares of Common Stock and Blackstone Holdings Partnership Units | (8,969,237 | ) | — | (474,005 | ) | — | — | (474,005 | ) | — | — | (474,005 | ) | — | ||||||||||||||||||||||||||
| Change in Blackstone Inc.’s Ownership Interest | — | — | 14,647 | — | — | 14,647 | — | (14,647 | ) | — | — | |||||||||||||||||||||||||||||
| Conversion of Blackstone Holdings Partnership Units to Shares of Common Stock | 15,749,452 | — | 103,533 | — | — | 103,533 | — | (103,533 | ) | — | — | |||||||||||||||||||||||||||||
| Balance at September 30, 2020 | 680,680,748 | $ | 7 | $ | 6,243,722 | $ | (36,432 | ) | $ | (27,407 | ) | $ | 6,179,890 | $ | 3,946,190 | $ | 3,310,214 | $ | 13,436,294 | $ | 63,384 | |||||||||||||||||||
| (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 condensed consolidated financial statements.
Blackstone Inc.
Condensed Consolidated Statements of Cash Flows (Unaudited)
(Dollars in Thousands)
| Nine Months Ended September 30, | ||||||||
| 2021 | 2020 | |||||||
| Operating Activities | ||||||||
| Net Income | $ | 9,434,626 | $ | 447,342 | ||||
| Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities | ||||||||
| Blackstone Funds Related | ||||||||
| Net Realized Gains on Investments | (3,851,756 | ) | (696,453 | ) | ||||
| Changes in Unrealized (Gains) Losses on Investments | (1,411,164 | ) | 351,987 | |||||
| Non-Cash Performance Allocations | (7,886,033 | ) | 981,678 | |||||
| Non-Cash Performance Allocations and Incentive Fee Compensation | 4,619,216 | (168,571 | ) | |||||
| Equity-Based Compensation Expense | 454,110 | 349,472 | ||||||
| Amortization of Intangibles | 56,174 | 53,250 | ||||||
| Other Non-Cash Amounts Included in Net Income | 62,730 | (77,813 | ) | |||||
| Cash Flows Due to Changes in Operating Assets and Liabilities | ||||||||
| Cash Relinquished with Deconsolidation of Fund Entities | — | (257,544 | ) | |||||
| Accounts Receivable | 437,030 | 464,997 | ||||||
| Due from Affiliates | (419,569 | ) | (177,850 | ) | ||||
| Other Assets | (54,140 | ) | (125,442 | ) | ||||
| Accrued Compensation and Benefits | (677,951 | ) | (309,237 | ) | ||||
| Securities Sold, Not Yet Purchased | (14,924 | ) | (26,840 | ) | ||||
| Accounts Payable, Accrued Expenses and Other Liabilities | (4,020 | ) | 98,983 | |||||
| Repurchase Agreements | (40,263 | ) | (73,522 | ) | ||||
| Due to Affiliates | 63,888 | 9,207 | ||||||
| Investments Purchased | (4,175,221 | ) | (4,947,832 | ) | ||||
| Cash Proceeds from Sale of Investments | 8,207,202 | 5,730,106 | ||||||
| Net Cash Provided by Operating Activities | 4,799,935 | 1,625,918 | ||||||
| Investing Activities | ||||||||
| Purchase of Furniture, Equipment and Leasehold Improvements | (44,456 | ) | (70,896 | ) | ||||
| Net Cash Used in Investing Activities | (44,456 | ) | (70,896 | ) | ||||
| Financing Activities | ||||||||
| Distributions to Non-Controlling Interest Holders in Consolidated Entities | (727,228 | ) | (387,798 | ) | ||||
| Contributions from Non-Controlling Interest Holders in Consolidated Entities | 1,016,285 | 431,874 | ||||||
| Payments Under Tax Receivable Agreement | (51,366 | ) | (73,881 | ) | ||||
| Net Settlement of Vested Common Stock and Repurchase of Common Stock and Blackstone Holdings Partnership Units | (694,550 | ) | (504,081 | ) | ||||
| Proceeds from Loans Payable | 1,973,969 | 890,159 |
continued...
See notes to condensed consolidated financial statements.
Blackstone Inc.
Condensed Consolidated Statements of Cash Flows (Unaudited)
(Dollars in Thousands)
| Nine Months Ended September 30, | ||||||||
| 2021 | 2020 | |||||||
| Financing Activities (Continued) | ||||||||
| Repayment and Repurchase of Loans Payable | $ | — | $ | (1,890 | ) | |||
| Dividends/Distributions to Shareholders and Unitholders | (3,203,640 | ) | (1,726,223 | ) | ||||
| Net Cash Used in Financing Activities | (1,686,530 | ) | (1,371,840 | ) | ||||
| Effect of Exchange Rate Changes on Cash and Cash Equivalents and Cash Held by Blackstone Funds and Other | (8,241 | ) | 7,280 | |||||
| Cash and Cash Equivalents and Cash Held by Blackstone Funds and Other | ||||||||
| Net Increase | 3,060,708 | 190,462 | ||||||
| Beginning of Period | 2,064,456 | 2,523,651 | ||||||
| End of Period | $ | 5,125,164 | $ | 2,714,113 | ||||
| Supplemental Disclosure of Cash Flows Information | ||||||||
| Payments for Interest | $ | 154,162 | $ | 137,031 | ||||
| Payments for Income Taxes | $ | 454,212 | $ | 115,859 | ||||
| Supplemental Disclosure of Non-Cash Investing and Financing Activities | ||||||||
| Non-Cash Contributions from Non-Controlling Interest Holders | $ | 8,636 | $ | 14,557 | ||||
| Notes Issuance Costs | $ | 16,991 | $ | 6,750 | ||||
| Transfer of Interests to Non-Controlling Interest Holders | $ | (3,693 | ) | $ | (4,767 | ) | ||
| Change in Blackstone Inc.’s Ownership Interest | $ | 10,494 | $ | 14,647 | ||||
| Net Settlement of Vested Common Stock | $ | 199,325 | $ | 113,368 | ||||
| Conversion of Blackstone Holdings Units to Common Stock | $ | 108,909 | $ | 103,533 | ||||
| Acquisition of Ownership Interests from Non-Controlling Interest Holders | ||||||||
| Deferred Tax Asset | $ | (278,795 | ) | $ | (201,188 | ) | ||
| Due to Affiliates | $ | 248,347 | $ | 181,596 | ||||
| Equity | $ | 30,448 | $ | 19,592 | ||||
The following table provides a reconciliation of Cash and Cash Equivalents and Cash Held by Blackstone Funds and Other reported within the Condensed Consolidated Statements of Financial Condition:
| September 30, | December 31, | |||||||
| 2021 | 2020 | |||||||
| Cash and Cash Equivalents | $ | 5,011,433 | $ | 1,999,484 | ||||
| Cash Held by Blackstone Funds and Other | 113,731 | 64,972 | ||||||
| $ | 5,125,164 | $ | 2,064,456 | |||||
See notes to condensed consolidated financial statements.
Blackstone Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(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, public debt and equity, growth equity, opportunistic,
non-investment
grade credit, real assets and secondary funds, all on a global basis. “Blackstone Funds” refers to the funds and other vehicles that are managed by Blackstone. Blackstone’s business is organized into four segments: Real Estate, Private Equity, Hedge Fund Solutions and Credit & Insurance.
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 (the “Conversion”), 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 13. “Income Taxes” and Note 14. “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 unaudited condensed consolidated financial statements of Blackstone have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and the instructions to
Form 10-Q.
The condensed consolidated financial statements, including these notes, are unaudited and exclude some of the disclosures required in audited financial statements. Management believes it has made all necessary adjustments (consisting of only normal recurring items) so that the condensed consolidated financial statements are presented fairly and that estimates made in preparing its condensed consolidated financial statements are reasonable and prudent. The operating results presented for interim periods are not necessarily indicative of the results that may be expected for any other interim period or for the entire year. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in Blackstone’s Annual Report on
Form 10-K
for the year ended December 31, 2020 filed with the Securities and Exchange Commission.
The condensed 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.
Blackstone Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued
(All Dollars are in Thousands, Except Share and Per Share Data, Except Where Noted)
Restructurings within consolidated collateralized loan obligations (“CLOs”) are treated as investment purchases or sales, as applicable, in the Condensed Consolidated Statements of Cash Flows.
COVID-19
and Global Economic Market Conditions
The ongoing novel coronavirus
(“COVID-19”)
pandemic has caused disruption in the U.S. and global economies. More recently, robust economic activity in the U.S. has supported a continued recovery, which nevertheless may remain uneven with dispersion across sectors and regions. The estimates and assumptions underlying these consolidated financial statements are based on the information available as of September 30, 2021 for the current period and as of September 30, 2020 or December 31, 2020, as applicable. The estimates and assumptions include judgments about financial market and economic conditions which have changed, and may continue to change, over time.
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 Condensed Consolidated Statements of Financial Condition.
Blackstone’s other disclosures regarding VIEs are discussed in Note 9. “Variable Interest Entities.”
Blackstone Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued
(All Dollars are in Thousands, Except Share and Per Share Data, Except Where Noted)
Revenue Recognition
Revenues primarily consist of management and advisory fees, incentive fees, investment income, interest and dividend revenue and other.
Management and advisory fees and incentive fees are accounted for as contracts with customers. Under the guidance for contracts with customers, an entity is required to (a) identify the contract(s) with a customer, (b) identify the performance obligations in the contract, (c) determine the transaction price, (d) allocate the transaction price to the performance obligations in the contract, and (e) recognize revenue when (or as) the entity satisfies a performance obligation. In determining the transaction price, an entity may include variable consideration only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized would not occur when the uncertainty associated with the variable consideration is resolved. See Note 18. “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 the investors in its managed funds and investment vehicles, at a fixed percentage of a calculation base, which is typically assets under management, net asset value, total assets, committed capital or invested capital. These customer contracts require Blackstone to provide investment management services, which represents a performance obligation that Blackstone satisfies over time. Management fees are a form of variable consideration because the fees Blackstone is entitled to vary based on fluctuations in the basis for the management fee. The amount recorded as revenue is generally determined at the end of the period because these management fees are payable on a regular basis (typically quarterly) and are not subject to clawback once paid.
Transaction, advisory and other fees are principally fees charged to the limited partners of funds indirectly through the managed funds and portfolio companies. The investment advisory agreements generally require that the investment adviser reduce the amount of management fees payable by the limited partners to Blackstone (“management fee reductions”) by an amount equal to a portion of the transaction and other fees paid to Blackstone by the portfolio companies. The amount of the reduction varies by fund, the type of fee paid by the portfolio company and the previously incurred expenses of the fund. These fees and associated management fee reductions are a component of the transaction price for Blackstone’s performance obligation to provide investment management services to the limited partners of funds and are recognized as changes to the transaction price in the period in which they are charged and the services are performed.
Management fee offsets are reductions to management fees payable by the limited partners of the Blackstone Funds, which are based on the amount such limited partners reimburse the Blackstone Funds or Blackstone primarily for placement fees. Providing investment management services requires Blackstone to arrange for services on behalf of its customers. In those situations where Blackstone is acting as an agent on behalf of the limited partners of funds, it presents the cost of services as net against management fee revenue. In all other situations, Blackstone is primarily responsible for fulfilling the services and is therefore acting as a principal for those arrangements. As a result, the cost of those services is presented as Compensation or General, Administrative and Other expense, as appropriate, with any reimbursement from the limited partners of the funds recorded as Management and Advisory Fees, Net. In cases where the limited partners of the funds are determined to be the customer in an arrangement, placement fees may be capitalized as a cost to acquire a customer contract. Capitalized placement fees are amortized over the life of the customer contract, are recorded within Other Assets in the Condensed Consolidated Statements of Financial Condition and amortization is recorded within General, Administrative and Other within the Condensed Consolidated Statements of Operations.
Blackstone Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued
(All Dollars are in Thousands, Except Share and Per Share Data, Except Where Noted)
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 Condensed Consolidated Statements of Financial Condition.
Incentive Fees
— Contractual fees earned based on the performance of Blackstone Funds (“Incentive Fees”) are a form of variable consideration in Blackstone’s contracts with customers to provide investment management services. Incentive Fees are earned based on fund performance during the period, subject to the achievement of minimum return levels, or high water marks, in accordance with the respective terms set out in each fund’s governing agreements. Incentive Fees will not be recognized as revenue until (a) it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur, or (b) the uncertainty associated with the variable consideration is subsequently resolved. Incentive Fees are typically recognized as revenue when realized at the end of the measurement period. Once realized, such fees are not subject to clawback or reversal. Accrued but unpaid Incentive Fees charged directly to investors in Blackstone Funds as of the reporting date are recorded within Due from Affiliates in the Condensed Consolidated Statements of Financial Condition.
Investment Income (Loss)
— Investment Income (Loss) represents the unrealized and realized gains and losses on Blackstone’s Performance Allocations and Principal Investments.
In carry fund structures, Blackstone, through its subsidiaries, invests alongside its limited partners in a partnership and is entitled to its
pro-rata
share of the results of the fund (a
“pro-rata
allocation”). In addition to a
pro-rata
allocation, and assuming certain investment returns are achieved, Blackstone is entitled to a disproportionate allocation of the income otherwise allocable to the limited partners, commonly referred to as carried interest (“Performance Allocations”).
Performance Allocations are made to the general partner based on cumulative fund performance to date, subject to a preferred return to limited partners. At the end of each reporting period, Blackstone calculates the balance of accrued Performance Allocations (“Accrued Performance Allocations”) that would be due to Blackstone for each fund, pursuant to the fund agreements, as if the fair value of the underlying investments were realized as of such date, irrespective of whether such amounts have been realized. As the fair value of underlying investments varies between reporting periods, it is necessary to make adjustments to amounts recorded as Accrued Performance Allocations to reflect either (a) positive performance resulting in an increase in the Accrued Performance Allocation to the general partner or (b) negative performance that would cause the amount due to Blackstone to be less than the amount previously recognized as revenue, resulting in a negative adjustment to the Accrued Performance Allocation to the general partner. In each scenario, it is necessary to calculate the Accrued Performance Allocation on cumulative results compared to the Accrued Performance Allocation recorded to date and make the required positive or negative adjustments. Blackstone ceases to record negative Performance Allocations once previously Accrued Performance Allocations for such fund have been fully reversed. Blackstone is not obligated to pay guaranteed returns or hurdles, and therefore, cannot have negative Performance Allocations over the life of a fund. Accrued Performance Allocations as of the reporting date are reflected in Investments in the Condensed Consolidated Statements of Financial Condition.
Performance Allocations are realized when an underlying investment is profitably disposed of and the fund’s cumulative returns are in excess of the preferred return or, in limited instances, after certain thresholds for return of capital are met. Performance Allocations are subject to clawback to the extent that the Performance Allocation received to date exceeds the amount due to Blackstone based on cumulative results. As such, the accrual for potential repayment of previously received Performance Allocations, which is a component of Due to Affiliates, represents all amounts previously distributed to Blackstone Holdings and
non-controlling
interest holders that would need to be repaid to the Blackstone carry funds if the Blackstone carry funds were to be liquidated based on the current fair value of the underlying funds’ investments as of the reporting date. The actual clawback liability, however, generally does not become realized until the end of a fund’s life except for certain funds, including certain Blackstone real estate funds, multi-asset class investment funds and credit-focused funds, which may have an interim clawback liability.
Blackstone Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited) - 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. Senior and subordinated notes issued by CLO vehicles are classified within Level II of the fair value hierarchy. |
|---|
| ● | Level III – Pricing inputs are unobservable for the financial instruments and includes situations where there is little, if any, market activity for the financial instrument. The inputs into the determination of fair value require significant management judgment or estimation. Financial instruments that are included in this category generally include general and limited partnership interests in private equity and real estate funds, credit-focused funds, distressed debt and non-investment grade residual interests in securitizations, certain corporate bonds and loans held within CLO vehicles and certain over-the-counter derivatives where the fair value is based on unobservable inputs. |
|---|
Blackstone Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued
(All Dollars are in Thousands, Except Share and Per Share Data, Except Where Noted)
In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the determination of which category within the fair value hierarchy is appropriate for any given financial instrument is based on the lowest level of input that is significant to the fair value measurement. Blackstone’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the financial instrument.
Level II Valuation Techniques
Financial instruments classified within Level II of the fair value hierarchy comprise debt instruments, including certain corporate loans and bonds held by Blackstone’s consolidated CLO vehicles and debt securities sold, not yet purchased. Certain equity securities and derivative instruments valued using observable inputs are also classified as Level II.
The valuation techniques used to value financial instruments classified within Level II of the fair value hierarchy are as follows:
| ● | Debt Instruments and Equity Securities are valued on the basis of prices from an orderly transaction between market participants provided by reputable dealers or pricing services. In determining the value of a particular investment, pricing services may use certain information with respect to transactions in such investments, quotations from dealers, pricing matrices and market transactions in comparable investments and various relationships between investments. The valuation of certain equity securities is based on an observable price for an identical security adjusted for the effect of a restriction. |
|---|
| ● | Freestanding Derivatives are valued using contractual cash flows and observable inputs comprising yield curves, foreign currency rates and credit spreads. |
|---|
| ● | Senior and subordinate notes issued by CLO vehicles are classified based on the more observable fair value of CLO assets less (a) the fair value of any beneficial interests held by Blackstone, and (b) the carrying value of any beneficial interests that represent compensation for services. |
|---|
Level III Valuation Techniques
In the absence of observable market prices, Blackstone values its investments using valuation methodologies applied on a consistent basis. For some investments little market activity may exist; management’s determination of fair value is then based on the best information available in the circumstances, and may incorporate management’s own assumptions and involves a significant degree of judgment, taking into consideration a combination of internal and external factors, including the appropriate risk adjustments for
non-performance
and liquidity risks. Investments for which market prices are not observable include private investments in the equity of operating companies, real estate properties, certain funds of hedge funds and credit-focused investments.
Real Estate Investments –
The fair values of real estate investments are determined by considering projected operating cash flows, sales of comparable assets, if any, and replacement costs, among other measures. The methods used to estimate the fair value of real estate investments include the discounted cash flow method and/or capitalization rates (“cap rates”) analysis. Valuations may be derived by reference to observable valuation measures for comparable companies or assets (for example, multiplying a key performance metric of the investee company or asset, such as EBITDA, by a relevant valuation multiple observed in the range of comparable companies or transactions), adjusted by management for differences between the investment and the referenced comparables, and in some instances by reference to option pricing models or other similar methods. Where a discounted cash flow method is used, a terminal value is derived by reference to an exit EBITDA multiple or capitalization rate. Additionally, where applicable, projected distributable cash flow-through debt maturity will be considered in support of the investment’s fair value.
Blackstone Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued
(All Dollars are in Thousands, Except Share and Per Share Data, Except Where Noted)
Private Equity Investments –
The fair values of private equity investments are determined by reference to projected net earnings, earnings before interest, taxes, depreciation and amortization (“EBITDA”), the discounted cash flow method, public market or private transactions, valuations for comparable companies and other measures which, in many cases, are based on unaudited information at the time received. Valuations may be derived by reference to observable valuation measures for comparable companies or transactions (for example, multiplying a key performance metric of the investee company, such as EBITDA, by a relevant valuation multiple observed in the range of comparable companies or transactions), adjusted by management for differences between the investment and the referenced comparables, and in some instances by reference to option pricing models or other similar methods. Where a discounted cash flow method is used, a terminal value is derived by reference to EBITDA or price/earnings exit multiples.
Credit-Focused Investments
– The fair values of credit-focused investments are generally determined on the basis of prices between market participants provided by reputable dealers or pricing services. For credit-focused investments that are not publicly traded or whose market prices are not readily available, Blackstone may utilize other valuation techniques, including the discounted cash flow method or a market approach. The discounted cash flow method projects the expected cash flows of the debt instrument based on contractual terms, and discounts such cash flows back to the valuation date using a market-based yield. The market-based yield is estimated using yields of publicly traded debt instruments issued by companies operating in similar industries as the subject investment, with similar leverage statistics and time to maturity.
The market approach is generally used to determine the enterprise value of the issuer of a credit investment, and considers valuation multiples of comparable companies or transactions. The resulting enterprise value will dictate whether or not such credit investment has adequate enterprise value coverage. In cases of distressed credit instruments, the market approach may be used to estimate a recovery value in the event of a restructuring.
Investments, at Fair Value
The Blackstone Funds are accounted for as investment companies under the American Institute of Certified Public Accountants Accounting and Auditing Guide,
Investment Companies
, and in accordance with the GAAP guidance on investment companies and reflect their investments, including majority owned and controlled investments (the “Portfolio Companies”), at fair value. Such consolidated funds’ investments are reflected in Investments on the Condensed Consolidated Statements of Financial Condition at fair value, with unrealized gains and losses resulting from changes in fair value reflected as a component of Net Gains from Fund Investment Activities in the Condensed 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 Condensed Consolidated Statements of Operations within Investment Income (Loss).
For certain instruments, Blackstone has elected the fair value option. Such election is irrevocable and is applied on an investment by investment basis at initial recognition. Blackstone has applied the fair value option for certain loans and receivables, 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 Condensed 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 Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued
(All Dollars are in Thousands, Except Share and Per Share Data, Except Where Noted)
Blackstone has elected the fair value option for the assets of consolidated CLO vehicles. As permitted under GAAP, Blackstone measures the liabilities of consolidated CLO vehicles as (a) the sum of the fair value of the consolidated CLO assets and the carrying value of any
non-financial
assets held temporarily, less (b) the sum of the fair value of any beneficial interests retained by Blackstone (other than those that represent compensation for services) and Blackstone’s carrying value of any beneficial interests that represent compensation for services. As a result of this measurement alternative, there is no attribution of amounts to
Non-Controlling
Interests for consolidated CLO vehicles. Assets of the consolidated CLOs are presented within Investments within the Condensed Consolidated Statements of Financial Condition and Liabilities within Loans Payable for the amounts due to unaffiliated third parties and Due to Affiliates for the amounts held by
non-consolidated
affiliates. Changes in the fair value of consolidated CLO assets and liabilities and related interest, dividend and other income are presented within Net Gains from Fund Investment Activities. Expenses of consolidated CLO vehicles are presented in Fund Expenses.
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 Condensed Consolidated Statements of Operations.
Further disclosure on instruments for which the fair value option has been elected is presented in Note 7. “Fair Value Option.”
The investments of consolidated Blackstone Funds in funds of hedge funds (“Investee Funds”) are valued at net asset value (“NAV”) per share of the Investee Fund. In limited circumstances, Blackstone may determine, based on its own due diligence and investment procedures, that NAV per share does not represent fair value. In such circumstances, Blackstone will estimate the fair value in good faith and in a manner that it reasonably chooses, in accordance with the requirements of GAAP.
Certain investments of Blackstone and of the consolidated Blackstone funds of hedge funds and credit-focused funds measure their investments in underlying funds at fair value using NAV per share without adjustment. The terms of the investee’s investment generally provide for minimum holding periods or
lock-ups,
the institution of gates on redemptions or the suspension of redemptions or an ability to side-pocket investments, at the discretion of the investee’s fund manager, and as a result, investments may not be redeemable at, or within three months of, the reporting date. A side-pocket is used by hedge funds and funds of hedge funds to separate investments that may lack a readily ascertainable value, are illiquid or are subject to liquidity restriction. Redemptions are generally not permitted until the investments within a side-pocket are liquidated or it is deemed that the conditions existing at the time that required the investment to be included in the side-pocket no longer exist. As the timing of either of these events is uncertain, the timing at which Blackstone may redeem an investment held in a side-pocket cannot be estimated. Further disclosure on instruments for which fair value is measured using NAV per share is presented in Note 5. “Net Asset Value as Fair Value.”
Security and loan transactions are recorded on a trade date basis.
Equity Method Investments
Investments in which Blackstone is deemed to exert significant influence, but not control, are accounted for using the equity method of accounting except in cases where the fair value option has been elected. Blackstone has significant influence over all Blackstone Funds in which it invests but does not consolidate. Therefore, its investments in such Blackstone Funds, which include both a proportionate and disproportionate allocation of the profits and losses (as is the case with carry funds that include a Performance Allocation), are accounted for under the equity method. Under the equity method of accounting, Blackstone’s share of earnings (losses) from equity method investments is included in Investment Income (Loss) in the Condensed Consolidated Statements of Operations.
Blackstone Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued
(All Dollars are in Thousands, Except Share and Per Share Data, Except Where Noted)
In cases where Blackstone’s equity method investments provide for a disproportionate allocation of the profits and losses (as is the case with carry funds that include a Performance Allocation), Blackstone’s share of earnings (losses) from equity method investments is determined using a balance sheet approach referred to as the hypothetical liquidation at book value (“HLBV”) method. Under the HLBV method, at the end of each reporting period, Blackstone calculates the Accrued Performance Allocations that would be due to Blackstone for each fund pursuant to the fund agreements as if the fair value of the underlying investments were realized as of such date, irrespective of whether such amounts have been realized. As the fair value of underlying investments varies between reporting periods, it is necessary to make adjustments to amounts recorded as Accrued Performance Allocations to reflect either (a) positive performance resulting in an increase in the Accrued Performance Allocation to the general partner, or (b) negative performance that would cause the amount due to Blackstone to be less than the amount previously recognized as revenue, resulting in a negative adjustment to the Accrued Performance Allocation to the general partner. In each scenario, it is necessary to calculate the Accrued Performance Allocation on cumulative results compared to the Accrued Performance Allocation recorded to date and make the required positive or negative adjustments. Blackstone ceases to record negative Performance 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 Condensed Consolidated Statements of Financial Condition.
Strategic Partners’ results presented in Blackstone’s 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. Effective September 30, 2021, Strategic Partners’ fund financial reporting process was updated to report the performance of underlying fund investments generally on a same-quarter basis, if available. Previously, such fund financial reporting in Strategic Partners’ fund financial statements generally reported on a three month lag. This update to Strategic Partners’ fund financial reporting process has permitted Strategic Partners’ appreciation to be reported in Blackstone’s financial statements on a more current basis. As a result of the reporting process change, for the three months and nine months ended September 30, 2021, Strategic Partners’ results presented in Blackstone’s financial statements reflect the market activity of two quarters and four quarters, respectively.
Compensation and Benefits
Compensation and Benefits
—
Compensation
— Compensation consists of (a) salary and bonus, and benefits paid and payable to employees and senior managing directors and (b) equity-based compensation associated with the grants of equity-based awards to employees and senior managing directors. Compensation cost relating to the issuance of equity-based awards to senior managing directors and employees is measured at fair value at the grant date, and expensed over the vesting period on a straight-line basis, taking into consideration expected forfeitures, except in the case of (a) equity-based awards that do not require future service, which are expensed immediately, and (b) certain awards to recipients that meet criteria making them eligible for retirement (allowing such recipient to keep a percentage of those awards upon departure from Blackstone after becoming eligible for retirement), for which the expense for the portion of the award that would be retained in the event of retirement is either expensed immediately or amortized to the retirement date. Cash settled equity-based awards are classified as liabilities and are remeasured at the end of each reporting period.
Blackstone Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued
(All Dollars are in Thousands, Except Share and Per Share Data, Except Where Noted)
Compensation and Benefits
— Incentive Fee Compensation
—
Incentive Fee Compensation consists of compensation paid based on Incentive Fees.
Compensation and Benefits
— Performance Allocations Compensation
—
Performance Allocation Compensation consists of compensation paid based on Performance Allocations (which may be distributed in cash or
in-kind).
Such compensation expense is subject to both positive and negative adjustments. Unlike Performance Allocations, compensation expense is based on the performance of individual investments held by a fund rather than on a fund by fund basis. These amounts may also include allocations of investment income from Blackstone’s principal investments, to senior managing directors and employees participating in certain profit sharing initiatives.
Non-Controlling
Interests in Consolidated Entities
Non-Controlling
Interests in Consolidated Entities represent the component of Equity in consolidated Blackstone Funds held by third party investors and employees. The percentage interests held by third parties and employees is adjusted for general partner allocations and by subscriptions and redemptions in funds of hedge funds and certain credit-focused funds which occur during the reporting period. In addition, all
non-controlling
interests in consolidated Blackstone Funds are attributed a share of income (loss) arising from the respective funds and a share of other comprehensive income, if applicable. Income (Loss) is allocated to
non-controlling
interests in consolidated entities based on the relative ownership interests of third party investors and employees after considering any contractual arrangements that govern the allocation of income (loss) such as fees allocable to Blackstone Inc.
Redeemable
Non-Controlling
Interests in Consolidated Entities
Non-controlling
interests related to funds of hedge funds are subject to annual, semi-annual or quarterly redemption by investors in these funds following the expiration of a specified period of time, or may be withdrawn subject to a redemption fee during the period when capital may not be withdrawn. As limited partners in these types of funds have been granted redemption rights, amounts relating to third party interests in such consolidated funds are presented as Redeemable
Non-Controlling
Interests in Consolidated Entities within the Condensed 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 Condensed Consolidated Statements of Financial Condition. For all consolidated funds in which redemption rights have not been granted,
non-controlling
interests are presented within Equity in the Condensed 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.
Blackstone Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued
(All Dollars are in Thousands, Except Share and Per Share Data, Except Where Noted)
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 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.
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 Condensed 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 Condensed 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 Condensed Consolidated Statements of Financial Condition. Additional disclosures relating to offsetting are discussed in Note 11. “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 Condensed Consolidated Statements of Financial Condition.
Blackstone Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued
(All Dollars are in Thousands, Except Share and Per Share Data, Except Where Noted)
Derivative Instruments
Blackstone recognizes all derivatives as assets or liabilities on its Condensed Consolidated Statements of Financial Condition at fair value. On the date Blackstone enters into a derivative contract, it designates and documents each derivative contract as one of the following: (a) a hedge of a recognized asset or liability (“fair value hedge”), (b) a hedge of a forecasted transaction or of the variability of cash flows to be received or paid related to a recognized asset or liability (“cash flow hedge”), (c) a hedge of a net investment in a foreign operation, or (d) a derivative instrument not designated as a hedging instrument (“freestanding derivative”). Gains or losses on a derivative instrument that is designated as, and is effective as, an economic hedge of a net investment in a foreign operation are reported in the cumulative translation adjustment section of other comprehensive income to the extent it is effective as a hedge. The ineffective portion of a net investment hedge is recognized in current period earnings.
Blackstone formally documents at inception its hedge relationships, including identification of the hedging instruments and the hedged items, its risk management objectives, strategy for undertaking the hedge transaction and Blackstone’s evaluation of effectiveness of its hedged transaction. At least monthly, Blackstone also formally assesses whether the derivative it designated in each hedging relationship is expected to be, and has been, highly effective in offsetting changes in estimated fair values or cash flows of the hedged items using either the regression analysis or the dollar offset method. For net investment hedges, Blackstone uses a method based on changes in spot rates to measure effectiveness. If it is determined that a derivative is not highly effective at hedging the designated exposure, hedge accounting is discontinued. The fair values of hedging derivative instruments are reflected within Other Assets in the Condensed Consolidated Statements of Financial Condition.
For freestanding derivative contracts, Blackstone presents changes in fair value in current period earnings. Changes in the fair value of derivative instruments held by consolidated Blackstone Funds are reflected in Net Gains from Fund Investment Activities or, where derivative instruments are held by Blackstone, within Investment Income (Loss) in the Condensed 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 Condensed Consolidated Statements of Financial Condition.
Blackstone has elected to not offset derivative assets and liabilities or financial assets in its Condensed 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 11. “Offsetting of Assets and Liabilities.”
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 condensed consolidated financial statements when declared.
Blackstone Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued
(All Dollars are in Thousands, Except Share and Per Share Data, Except Where Noted)
- Intangible Assets
Intangible Assets, Net consists of the following:
| September 30, | December 31, | |||||||
| 2021 | 2020 | |||||||
| Finite-Lived Intangible Assets/Contractual Rights | $ | 1,745,376 | $ | 1,734,076 | ||||
| Accumulated Amortization | (1,442,294 | ) | (1,386,121 | ) | ||||
| Intangible Assets, Net | $ | 303,082 | $ | 347,955 | ||||
Amortization expense associated with Blackstone’s intangible assets was $18.7 million and $56.2 million for the three and nine month periods ended September 30, 2021, respectively, and $17.7 million and $53.2 million for the three and nine month periods ended September 30, 2020, respectively.
Amortization of Intangible Assets held at September 30, 2021 is expected to be $74.9 million, $67.1 million, $38.1 million, $30.5 million, and $30.5 million for each of the years ending December 31, 2021, 2022, 2023, 2024 and 2025, respectively. Blackstone’s Intangible Assets as of September 30, 2021 are expected to amortize over a weighted-average period of 7.3 years.
- Investments
Investments consist of the following:
| September 30, | December 31, | |||||||
| 2021 | 2020 | |||||||
| Investments of Consolidated Blackstone Funds | $ | 2,104,705 | $ | 1,455,008 | ||||
| Equity Method Investments | ||||||||
| Partnership Investments | 5,303,334 | 4,353,234 | ||||||
| Accrued Performance Allocations | 15,063,648 | 6,891,262 | ||||||
| Corporate Treasury Investments | 1,520,426 | 2,579,716 | ||||||
| Other Investments | 1,112,082 | 337,922 | ||||||
| $ | 25,104,195 | $ | 15,617,142 | |||||
Blackstone’s share of Investments of Consolidated Blackstone Funds totaled $403.2 million and $198.3 million at September 30, 2021 and December 31, 2020, 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.”
Blackstone Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued
(All Dollars are in Thousands, Except Share and Per Share Data, Except Where Noted)
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 Condensed Consolidated Statements of Operations:
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Realized Gains (Losses) | $ | 37,697 | $ | 3,946 | $ | 99,692 | $ | (131,026 | ) | |||||||
| Net Change in Unrealized Gains (Losses) | 86,303 | 97,097 | 259,259 | (19,693 | ) | |||||||||||
| Realized and Net Change in Unrealized Gains (Losses) from Consolidated Blackstone Funds | 124,000 | 101,043 | 358,951 | (150,719 | ) | |||||||||||
| Interest and Dividend Revenue Attributable to Consolidated Blackstone Funds | 8,312 | 7,709 | 20,830 | 90,394 | ||||||||||||
| Other Income (Loss) – Net Gains (Losses) from Fund Investment Activities | $ | 132,312 | $ | 108,752 | $ | 379,781 | $ | (60,325 | ) | |||||||
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. 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 initial public offering (“IPO”), pursuant to which Blackstone sold a portion of its interests and no longer has representatives or the right to designate representatives on Pátria’s board of directors. As a result 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 is deemed to no longer have significant influence over Pátria due to Blackstone’s decreased ownership and lack of board representation. Following the IPO, Blackstone will account for its retained interest in Pátria at fair value in accordance with the GAAP guidance for investments in equity securities with a readily determinable fair value.
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. As of and for the nine months ended September 30, 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 $469.0 million and $305.2 million for the three months ended September 30, 2021 and 2020, respectively. Blackstone recognized net gains (losses) related to its equity method investments of $1.6 billion and $(13.5) million for the nine months ended September 30, 2021 and 2020, respectively.
Blackstone Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued
(All Dollars are in Thousands, Except Share and Per Share Data, Except Where Noted)
Accrued Performance Allocations
Accrued Performance Allocations to Blackstone were as follows:
| Real | Private | Hedge Fund | Credit & | |||||||||||||||||
| Estate | Equity | Solutions | Insurance | Total | ||||||||||||||||
| Accrued Performance Allocations, December 31, 2020 | $ | 3,033,462 | $ | 3,487,206 | $ | 42,293 | $ | 328,301 | $ | 6,891,262 | ||||||||||
| Performance Allocations as a Result of Changes in Fund Fair Values | 4,700,366 | 5,277,832 | 511,027 | 309,445 | 10,798,670 | |||||||||||||||
| Foreign Exchange Loss | (53,944 | ) | — | — | — | (53,944 | ) | |||||||||||||
| Fund Distributions | (899,426 | ) | (1,571,531 | ) | (19,405 | ) | (81,978 | ) | (2,572,340 | ) | ||||||||||
| Accrued Performance Allocations, September 30, 2021 | $ | 6,780,458 | $ | 7,193,507 | $ | 533,915 | $ | 555,768 | $ | 15,063,648 | ||||||||||
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:
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Realized Gains (Losses) | $ | (359) | $ | (1,431 | ) | $ | 5,526 | $ | (3,187) | |||||||
| Net Change in Unrealized Gains (Losses) | 3,196 | 48,480 | 42,648 | (94,917) | ||||||||||||
| $ | 2,837 | $ | 47,049 | $ | 48,174 | $ | (98,104) | |||||||||
Other Investments
Other Investments consist primarily of proprietary investment securities held by Blackstone, including subordinated notes in
non-consolidated
CLO vehicles and the retained interest in Pátria following Pátria’s IPO. Other Investments include equity investments without readily determinable fair values which have a carrying value of $211.4 million as of September 30, 2021. The following table presents Blackstone’s Realized and Net Change in Unrealized Gains (Losses) in Other Investments:
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Realized Gains | $ | 100,289 | $ | 3,830 | $ | 129,711 | $ | 17,163 | ||||||||
| Net Change in Unrealized Gains (Losses) | (51,380 | ) | 7,268 | 234,187 | (66,096) | |||||||||||
| $ | 48,909 | $ | 11,098 | $ | 363,898 | $ | (48,933) | |||||||||
Blackstone Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited) - 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 September 30, 2021 is presented below:
| Redemption | ||||||||
| Frequency | Redemption | |||||||
| Strategy (a) | Fair Value | (if currently eligible) | Notice Period | |||||
| Diversified Instruments | $ | 33 | (b) | (b) | ||||
| Credit Driven | 390,629 | (c) | (c) | |||||
| Equity | 53,406 | (d) | (d) | |||||
| Commodities | 971 | (e) | (e) | |||||
| $ | 445,039 | |||||||
| (a) | As of September 30, 2021, Blackstone had no unfunded commitments. |
|---|
| (b) | 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. |
|---|
| (c) | The Credit Driven category includes investments in hedge funds that invest primarily in domestic and international bonds. Investments representing 4% of the fair value of the investments in this category are in liquidation. The remaining 96% of investments in this category may not be redeemed at, or within three months of, the reporting date. |
|---|
| (d) | The Equity category includes investments in hedge funds that invest primarily in domestic and international equity securities. Investments representing 1% of the fair value of the investments in this category are in liquidation. The remaining 99% of investments in this category are redeemable as of the reporting date. As of the reporting date, the investee fund manager had elected to side-pocket 1% of Blackstone’s investments in the category. |
|---|
| (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. |
|---|
- Derivative Financial Instruments
Blackstone and the consolidated Blackstone Funds enter into derivative contracts in the normal course of business to achieve certain risk management objectives and for general investment purposes. Blackstone may enter into derivative contracts in order to hedge its interest rate risk exposure against the effects of interest rate changes. Additionally, Blackstone may also enter into derivative contracts in order to hedge its foreign currency risk exposure against the effects of a portion of its
non-U.S.
dollar denominated currency net investments. As a result of the use of derivative contracts, Blackstone and the consolidated Blackstone Funds are exposed to the risk that counterparties will fail to fulfill their contractual obligations. To mitigate such counterparty risk, Blackstone and the consolidated Blackstone Funds enter into contracts with certain major financial institutions, all of which have investment grade ratings. Counterparty credit risk is evaluated in determining the fair value of derivative instruments.
Blackstone Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited) - 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.
| September 30, 2021 | December 31, 2020 | |||||||||||||||||||||||||||||||
| Assets | Liabilities | Assets | Liabilities | |||||||||||||||||||||||||||||
| Fair | Fair | Fair | Fair | |||||||||||||||||||||||||||||
| Notional | Value | Notional | Value | Notional | Value | Notional | Value | |||||||||||||||||||||||||
| Freestanding Derivatives | ||||||||||||||||||||||||||||||||
| Blackstone | ||||||||||||||||||||||||||||||||
| Interest Rate Contracts | $ | 685,429 | $ | 75,042 | $ | 768,260 | $ | 83,903 | $ | 684,320 | $ | 113,072 | $ | 862,887 | $ | 190,342 | ||||||||||||||||
| Foreign Currency Contracts | 386,404 | 6,814 | 248,554 | 4,152 | 316,787 | 7,392 | 334,015 | 3,941 | ||||||||||||||||||||||||
| Credit Default Swaps | 2,007 | 160 | 9,916 | 981 | 2,706 | 331 | 9,158 | 1,350 | ||||||||||||||||||||||||
| Other | — | — | — | — | 5,000 | 5,227 | — | — | ||||||||||||||||||||||||
| 1,073,840 | 82,016 | 1,026,730 | 89,036 | 1,008,813 | 126,022 | 1,206,060 | 195,633 | |||||||||||||||||||||||||
| Investments of Consolidated Blackstone Funds | ||||||||||||||||||||||||||||||||
| Foreign Currency Contracts | 75,919 | 1,569 | — | — | — | — | 66,431 | 2,651 | ||||||||||||||||||||||||
| Interest Rate Contracts | — | — | 14,000 | 984 | — | — | 14,000 | 1,485 | ||||||||||||||||||||||||
| Credit Default Swaps | 3,786 | 288 | 23,250 | 1,077 | 8,282 | 542 | 41,290 | 1,558 | ||||||||||||||||||||||||
| Total Return Swaps | — | — | — | — | — | — | 19,275 | 2,125 | ||||||||||||||||||||||||
| 79,705 | 1,857 | 37,250 | 2,061 | 8,282 | 542 | 140,996 | 7,819 | |||||||||||||||||||||||||
| $ | 1,153,545 | $ | 83,873 | $ | 1,063,980 | $ | 91,097 | $ | 1,017,095 | $ | 126,564 | $ | 1,347,056 | $ | 203,452 | |||||||||||||||||
Blackstone Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued
(All Dollars are in Thousands, Except Share and Per Share Data, Except Where Noted)
The table below summarizes the impact to the Condensed Consolidated Statements of Operations from derivative financial instruments:
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Freestanding Derivatives | ||||||||||||||||
| Realized Gains (Losses) | ||||||||||||||||
| Interest Rate Contracts | $ | (4,181 | ) | $ | (221 | ) | $ | (2,883 | ) | $ | (8,135 | ) | ||||
| Foreign Currency Contracts | (4,812 | ) | 6,889 | (389 | ) | 1,749 | ||||||||||
| Credit Default Swaps | 10 | (8 | ) | (980 | ) | (120 | ) | |||||||||
| Total Return Swaps | 161 | (113 | ) | (1,254 | ) | (1,644 | ) | |||||||||
| Other | — | 26 | (40 | ) | (12 | ) | ||||||||||
| (8,822 | ) | 6,573 | (5,546 | ) | (8,162 | ) | ||||||||||
| Net Change in Unrealized Gains (Losses) | ||||||||||||||||
| Interest Rate Contracts | 27,025 | (124,934 | ) | 72,210 | (44,599 | ) | ||||||||||
| Foreign Currency Contracts | 6,807 | (5,887 | ) | 3,431 | (2,300 | ) | ||||||||||
| Credit Default Swaps | 106 | (732 | ) | 948 | (2,103 | ) | ||||||||||
| Total Return Swaps | — | 856 | 2,130 | (3,243 | ) | |||||||||||
| Other | — | (4 | ) | (20 | ) | 32 | ||||||||||
| 33,938 | (130,701 | ) | 78,699 | (52,213 | ) | |||||||||||
| $ | 25,116 | $ | (124,128 | ) | $ | 73,153 | $ | (60,375 | ) | |||||||
As of September 30, 2021 and December 31, 2020, Blackstone had not designated any derivatives as cash flow hedges.
- Fair Value Option
The following table summarizes the financial instruments for which the fair value option has been elected:
| September 30, | December 31, | |||||||
| 2021 | 2020 | |||||||
| Assets | ||||||||
| Loans and Receivables | $ | 239,766 | $ | 581,079 | ||||
| Equity and Preferred Securities | 763,876 | 532,790 | ||||||
| Debt Securities | 336,360 | 448,352 | ||||||
| $ | 1,340,002 | $ | 1,562,221 | |||||
| Liabilities | ||||||||
| Corporate Treasury Commitments | $ | 366 | $ | 244 | ||||
Blackstone Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued
(All Dollars are in Thousands, Except Share and Per Share Data, Except Where Noted)
The following tables present the Realized and Net Change in Unrealized Gains (Losses) on financial instruments on which the fair value option was elected:
| Three Months Ended September 30, | ||||||||||||||||
| 2021 | 2020 | |||||||||||||||
| Net Change | Net Change | |||||||||||||||
| Realized | in Unrealized | Realized | in Unrealized | |||||||||||||
| Gains (Losses) | Gains (Losses) | Gains (Losses) | Gains (Losses) | |||||||||||||
| Assets | ||||||||||||||||
| Loans and Receivables | $ | (2,631 | ) | $ | (509 | ) | $ | (2,443 | ) | $ | 3,681 | |||||
| Equity and Preferred Securities | 989 | 2,914 | — | (11,207 | ) | |||||||||||
| Debt Securities | 909 | (2,303 | ) | (2,807 | ) | 23,901 | ||||||||||
| $ | (733 | ) | $ | 102 | $ | (5,250 | ) | $ | 16,375 | |||||||
| Liabilities | ||||||||||||||||
| Corporate Treasury Commitments | $ | — | $ | 80 | $ | — | $ | 1,325 | ||||||||
| Nine Months Ended September 30, | ||||||||||||||||
| 2021 | 2020 | |||||||||||||||
| Net Change | Net Change | |||||||||||||||
| Realized | in Unrealized | Realized | in Unrealized | |||||||||||||
| Gains (Losses) | Gains (Losses) | Gains (Losses) | Gains (Losses) | |||||||||||||
| Assets | ||||||||||||||||
| Loans and Receivables | $ | (10,527 | ) | $ | 4,574 | $ | (8,213 | ) | $ | 3,413 | ||||||
| Equity and Preferred Securities | 19,433 | 43,315 | (342 | ) | (114,954 | ) | ||||||||||
| Debt Securities | 10,879 | (6,538 | ) | (23,909 | ) | 14,772 | ||||||||||
| Assets of Consolidated CLO Vehicles (a) | ||||||||||||||||
| Corporate Loans | — | — | (96,194 | ) | (226,542 | ) | ||||||||||
| Other | — | — | — | (325 | ) | |||||||||||
| $ | 19,785 | $ | 41,351 | $ | (128,658 | ) | $ | (323,636 | ) | |||||||
| Liabilities | ||||||||||||||||
| Liabilities of Consolidated CLO Vehicles (a) | ||||||||||||||||
| Senior Secured Notes | $ | — | $ | — | $ | — | $ | 199,445 | ||||||||
| Subordinated Notes | — | — | — | 30,046 | ||||||||||||
| Corporate Treasury Commitments | — | (113 | ) | — | (705 | ) | ||||||||||
| $ | — | $ | (113 | ) | $ | — | $ | 228,786 | ||||||||
| (a) | During the year ended December 31, 2020, Blackstone deconsolidated nine CLO vehicles. See Note 9. “Variable Interest Entities” for additional details. |
|---|
Blackstone Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued
(All Dollars are in Thousands, Except Share and Per Share Data, Except Where Noted)
The following table presents information for those financial instruments for which the fair value option was elected:
| September 30, 2021 | December 31, 2020 | |||||||||||||||||||||||
| For Financial Assets | For Financial Assets | |||||||||||||||||||||||
| Past Due | Past Due | |||||||||||||||||||||||
| (Deficiency) | Excess | (Deficiency) | Excess | |||||||||||||||||||||
| 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 | $ | (1,634 | ) | $ | — | $ | — | $ | (7,807 | ) | $ | — | $ | — | ||||||||||
| Debt Securities | (28,679 | ) | — | — | (29,359 | ) | — | — | ||||||||||||||||
| $ | (30,313 | ) | $ | — | $ | — | $ | (37,166 | ) | $ | — | $ | — | |||||||||||
As of September 30, 2021 and December 31, 2020, no Loans and Receivables for which the fair value option was elected were past due or in
non-accrual
status.
Blackstone Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited) - 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:
| September 30, 2021 | ||||||||||||||||||||
| Level I | Level II | Level III | NAV | Total | ||||||||||||||||
| Assets | ||||||||||||||||||||
| Cash and Cash Equivalents | $ | 2,251,662 | $ | — | $ | — | $ | — | $ | 2,251,662 | ||||||||||
| Investments | ||||||||||||||||||||
| Investments of Consolidated Blackstone Funds | ||||||||||||||||||||
| Investment Funds | — | — | — | 15,165 | 15,165 | |||||||||||||||
| Equity Securities, Partnerships and LLC Interests | 32,316 | 190,439 | 1,050,488 | 372,301 | 1,645,544 | |||||||||||||||
| Debt Instruments | 656 | 393,017 | 48,466 | — | 442,139 | |||||||||||||||
| Freestanding Derivatives | — | 1,857 | — | — | 1,857 | |||||||||||||||
| Total Investments of Consolidated Blackstone Funds | 32,972 | 585,313 | 1,098,954 | 387,466 | 2,104,705 | |||||||||||||||
| Corporate Treasury Investments | 267,377 | 1,234,284 | 18,765 | — | 1,520,426 | |||||||||||||||
| Other Investments | 367,623 | 246,783 | 228,740 | 57,573 | 900,719 | |||||||||||||||
| Total Investments | 667,972 | 2,066,380 | 1,346,459 | 445,039 | 4,525,850 | |||||||||||||||
| Accounts Receivable - Loans and Receivables | — | — | 239,766 | — | 239,766 | |||||||||||||||
| Other Assets - Freestanding Derivatives | 2,365 | 79,651 | — | — | 82,016 | |||||||||||||||
| $ | 2,921,999 | $ | 2,146,031 | $ | 1,586,225 | $ | 445,039 | $ | 7,099,294 | |||||||||||
| Liabilities | ||||||||||||||||||||
| Securities Sold, Not Yet Purchased | $ | 11,912 | $ | 23,745 | $ | — | $ | — | $ | 35,657 | ||||||||||
| Accounts Payable, Accrued Expenses and Other Liabilities | ||||||||||||||||||||
| Consolidated Blackstone Funds - Freestanding Derivatives | — | 2,061 | — | — | 2,061 | |||||||||||||||
| Freestanding Derivatives | 219 | 88,817 | — | — | 89,036 | |||||||||||||||
| Corporate Treasury Commitments (a) | — | — | 366 | — | 366 | |||||||||||||||
| Total Accounts Payable, Accrued Expenses and Other Liabilities | 219 | 90,878 | 366 | — | 91,463 | |||||||||||||||
| $ | 12,131 | $ | 114,623 | $ | 366 | $ | — | $ | 127,120 | |||||||||||
Blackstone Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued
(All Dollars are in Thousands, Except Share and Per Share Data, Except Where Noted)
| December 31, 2020 | ||||||||||||||||||||
| Level I | Level II | Level III | NAV | Total | ||||||||||||||||
| Assets | ||||||||||||||||||||
| Cash and Cash Equivalents | $ | 597,130 | $ | 15,606 | $ | — | $ | — | $ | 612,736 | ||||||||||
| Investments | ||||||||||||||||||||
| Investments of Consolidated Blackstone Funds | ||||||||||||||||||||
| Investment Funds | — | — | — | 15,711 | 15,711 | |||||||||||||||
| Equity Securities, Partnerships and LLC Interests | 39,694 | 48,471 | 792,958 | — | 881,123 | |||||||||||||||
| Debt Instruments | — | 492,280 | 65,352 | — | 557,632 | |||||||||||||||
| Freestanding Derivatives | — | 542 | — | — | 542 | |||||||||||||||
| Total Investments of Consolidated Blackstone Funds | 39,694 | 541,293 | 858,310 | 15,711 | 1,455,008 | |||||||||||||||
| Corporate Treasury Investments | 996,516 | 1,517,809 | 7,899 | 57,492 | 2,579,716 | |||||||||||||||
| Other Investments | 187,089 | — | 61,053 | 4,762 | 252,904 | |||||||||||||||
| Total Investments | 1,223,299 | 2,059,102 | 927,262 | 77,965 | 4,287,628 | |||||||||||||||
| Accounts Receivable - Loans and Receivables | — | — | 581,079 | — | 581,079 | |||||||||||||||
| Other Assets - Freestanding Derivatives | 162 | 125,860 | — | — | 126,022 | |||||||||||||||
| $ | 1,820,591 | $ | 2,200,568 | $ | 1,508,341 | $ | 77,965 | $ | 5,607,465 | |||||||||||
| Liabilities | ||||||||||||||||||||
| Securities Sold, Not Yet Purchased | $ | 9,324 | $ | 41,709 | $ | — | $ | — | $ | 51,033 | ||||||||||
| Accounts Payable, Accrued Expenses and Other Liabilities | ||||||||||||||||||||
| Consolidated Blackstone Funds - Freestanding Derivatives | — | 7,819 | — | — | 7,819 | |||||||||||||||
| Freestanding Derivatives | 373 | 195,260 | — | — | 195,633 | |||||||||||||||
| Corporate Treasury Commitments (a) | — | — | 244 | — | 244 | |||||||||||||||
| Total Accounts Payable, Accrued Expenses and Other Liabilities | 373 | 203,079 | 244 | — | 203,696 | |||||||||||||||
| $ | 9,697 | $ | 244,788 | $ | 244 | $ | — | $ | 254,729 | |||||||||||
LLC Limited Liability Company.
| (a) | Corporate Treasury Commitments are measured using third party pricing. |
|---|
Blackstone Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited) - 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 September 30,
2021:
| Fair Value | Valuation Techniques | Unobservable Inputs | Ranges | Weighted- Average (a) | Impact to Valuation from an Increase in Input | |||||||||||||||||||
| Financial Assets | ||||||||||||||||||||||||
| Investments of Consolidated Blackstone Funds | ||||||||||||||||||||||||
| Equity Securities, Partnership and LLC Interests | $ | 1,050,488 | Discounted Cash Flows | Discount Rate | 2.9% - 44.1% | 10.5% | Lower | |||||||||||||||||
| Exit Multiple - EBITDA | 3.7x - 31.4x | 13.5x | Higher | |||||||||||||||||||||
| Exit Capitalization Rate | 2.8% - 15.0% | 5.0% | Lower | |||||||||||||||||||||
| Transaction Price | n/a | |||||||||||||||||||||||
| Debt Instruments | 48,466 | Discounted Cash Flows | Discount Rate | 6.6% - 19.3% | 9.4% | Lower | ||||||||||||||||||
| Third Party Pricing | n/a | |||||||||||||||||||||||
| Total Investments of Consolidated Blackstone Funds | 1,098,954 | |||||||||||||||||||||||
| Corporate Treasury Investments | 18,765 | Discounted Cash Flows | Discount Rate | 5.2% - 8.2% | 6.6% | Lower | ||||||||||||||||||
| Third Party Pricing | n/a | |||||||||||||||||||||||
| Loans and Receivables | 239,766 | Discounted Cash Flows | Discount Rate | 6.8% - 8.6% | 7.6% | Lower | ||||||||||||||||||
| Other Investments | 228,740 | Third Party Pricing | n/a | |||||||||||||||||||||
| Transaction Price | n/a | |||||||||||||||||||||||
| $ | 1,586,225 | |||||||||||||||||||||||
Blackstone Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited) - 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, 2020:
| Fair Value | Valuation Techniques | Unobservable Inputs | Ranges | Weighted- Average (a) | Impact to Valuation from an Increase in Input | |||||||||||||||||||
| Financial Assets | ||||||||||||||||||||||||
| Investments of Consolidated Blackstone Funds | ||||||||||||||||||||||||
| Equity Securities, Partnership and LLC Interests | $ | 792,958 | Discounted Cash Flows | Discount Rate | 3.8% - 42.1% | 10.8% | Lower | |||||||||||||||||
| Exit Multiple - EBITDA | 1.7x - 24.0x | 13.2x | Higher | |||||||||||||||||||||
| Exit Capitalization Rate | 2.7% - 14.9% | 5.4% | Lower | |||||||||||||||||||||
| Transaction Price | n/a | |||||||||||||||||||||||
| Other | n/a | |||||||||||||||||||||||
| Debt Instruments | 65,352 | Discounted Cash Flows | Discount Rate | 6.3% - 19.3% | 8.6% | Lower | ||||||||||||||||||
| Third Party Pricing | n/a | |||||||||||||||||||||||
| Total Investments of Consolidated Blackstone Funds | 858,310 | |||||||||||||||||||||||
| Corporate Treasury Investments | 7,899 | Discounted Cash Flows | Discount Rate | 3.3% - 7.4% | 6.4% | Lower | ||||||||||||||||||
| Third Party Pricing | n/a | |||||||||||||||||||||||
| Loans and Receivables | 581,079 | Discounted Cash Flows | Discount Rate | 6.7% - 10.3% | 7.8% | Lower | ||||||||||||||||||
| Other Investments | 61,053 | Third Party Pricing | n/a | |||||||||||||||||||||
| Transaction Price | n/a | |||||||||||||||||||||||
| Other | n/a | |||||||||||||||||||||||
| $ | 1,508,341 | |||||||||||||||||||||||
| 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. |
Since December 31, 2020, 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 Condensed Consolidated Statements of Operations.
Blackstone Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued
(All Dollars are in Thousands, Except Share and Per Share Data, Except Where Noted)
| Level III Financial Assets at Fair Value | ||||||||||||||||||||||||||||||||
| Three Months Ended September 30, | ||||||||||||||||||||||||||||||||
| 2021 | 2020 | |||||||||||||||||||||||||||||||
| Investments | Investments | |||||||||||||||||||||||||||||||
| of | Loans | Other | of | Loans | Other | |||||||||||||||||||||||||||
| Consolidated | and | Investments | Consolidated | and | Investments | |||||||||||||||||||||||||||
| Funds | Receivables | (a) | Total | Funds | Receivables | (a) | Total | |||||||||||||||||||||||||
| Balance, Beginning of Period | $ | 982,984 | $ | 223,796 | $ | 73,475 | $ | 1,280,255 | $ | 1,215,374 | $ | 162,368 | $ | 33,697 | $ | 1,411,439 | ||||||||||||||||
| Transfer In (Out) Due to Deconsolidation | — | — | — | — | (471,591 | ) | — | 39,875 | (431,716 | ) | ||||||||||||||||||||||
| Transfer Into Level III (b) | — | — | 8,018 | 8,018 | 26,710 | — | 3,172 | 29,882 | ||||||||||||||||||||||||
| Transfer Out of Level III (b) | (18,239 | ) | — | (14,400 | ) | (32,639 | ) | (8,444 | ) | — | (8,845 | ) | (17,289 | ) | ||||||||||||||||||
| Purchases | 85,581 | 326,937 | 191,610 | 604,128 | 21,542 | 79,061 | 3,861 | 104,464 | ||||||||||||||||||||||||
| Sales | (56,063 | ) | (333,041 | ) | (13,250 | ) | (402,354 | ) | (36,592 | ) | (59,929 | ) | (6,436 | ) | (102,957 | ) | ||||||||||||||||
| Issuances | — | 24,138 | — | 24,138 | — | 36,171 | — | 36,171 | ||||||||||||||||||||||||
| Settlements | — | (1,093 | ) | — | (1,093 | ) | — | (20,705 | ) | — | (20,705 | ) | ||||||||||||||||||||
| Changes in Gains (Losses) Included in Earnings | 104,691 | (971 | ) | 1,950 | 105,670 | 59,300 | 3,074 | 5,656 | 68,030 | |||||||||||||||||||||||
| Balance, End of Period | $ | 1,098,954 | $ | 239,766 | $ | 247,403 | $ | 1,586,123 | $ | 806,299 | $ | 200,040 | $ | 70,980 | $ | 1,077,319 | ||||||||||||||||
| Changes in Unrealized Gains (Losses) Included in Earnings Related to Financial Assets Still Held at the Reporting Date | $ | 96,160 | $ | (3,732 | ) | $ | 1,940 | $ | 94,368 | $ | 59,693 | $ | 3,681 | $ | 7,027 | $ | 70,401 | |||||||||||||||
| Level III Financial Assets at Fair Value | ||||||||||||||||||||||||||||||||
| Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||
| 2021 | 2020 | |||||||||||||||||||||||||||||||
| Investments | Investments | |||||||||||||||||||||||||||||||
| of | Loans | Other | of | Loans | Other | |||||||||||||||||||||||||||
| Consolidated | and | Investments | Consolidated | and | Investments | |||||||||||||||||||||||||||
| Funds | Receivables | (a) | Total | Funds | Receivables | (a) | Total | |||||||||||||||||||||||||
| Balance, Beginning of Period | $ | 858,310 | $ | 581,079 | $ | 46,158 | $ | 1,485,547 | $ | 1,050,272 | $ | 500,751 | $ | 29,289 | $ | 1,580,312 | ||||||||||||||||
| Transfer In (Out) Due to Deconsolidation | — | — | — | — | (296,741 | ) | — | 39,875 | (256,866 | ) | ||||||||||||||||||||||
| Transfer Into Level III (b) | 302 | — | 8,018 | 8,320 | 26,176 | — | 23,293 | 49,469 | ||||||||||||||||||||||||
| Transfer Out of Level III (b) | (105,547 | ) | — | (14,400 | ) | (119,947 | ) | (27,022 | ) | — | (23,791 | ) | (50,813 | ) | ||||||||||||||||||
| Purchases | 265,947 | 683,700 | 225,070 | 1,174,717 | 142,455 | 249,960 | 9,632 | 402,047 | ||||||||||||||||||||||||
| Sales | (178,397 | ) | (1,034,253 | ) | (19,414 | ) | (1,232,064 | ) | (80,197 | ) | (566,810 | ) | (11,797 | ) | (658,804 | ) | ||||||||||||||||
| Issuances | — | 43,478 | — | 43,478 | — | 36,171 | — | 36,171 | ||||||||||||||||||||||||
| Settlements | — | (46,649 | ) | — | (46,649 | ) | — | (24,355 | ) | — | (24,355 | ) | ||||||||||||||||||||
| Changes in Gains (Losses) Included in Earnings | 258,339 | 12,411 | 1,971 | 272,721 | (8,644 | ) | 4,323 | 4,479 | 158 | |||||||||||||||||||||||
| Balance, End of Period | $ | 1,098,954 | $ | 239,766 | $ | 247,403 | $ | 1,586,123 | $ | 806,299 | $ | 200,040 | $ | 70,980 | $ | 1,077,319 | ||||||||||||||||
| Changes in Unrealized Gains (Losses) Included in Earnings Related to Financial Assets Still Held at the Reporting Date | $ | 222,541 | $ | (6,842 | ) | $ | 1,919 | $ | 217,618 | $ | (26,821 | ) | $ | 4,824 | $ | 5,363 | $ | (16,634 | ) | |||||||||||||
| (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. |
|---|
Blackstone Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued
(All Dollars are in Thousands, Except Share and Per Share Data, Except Where Noted)
- 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.
During the year ended December 31, 2020, Blackstone determined that it was no longer the primary beneficiary and deconsolidated nine CLO vehicles as a result of an ownership reorganization and the ongoing decline in Blackstone’s economic exposure to these vehicles. Following the ownership reorganization, there are no remaining consolidated CLO vehicles. As of the date of deconsolidation, Blackstone’s Total Assets, Total Liabilities and
Non-Controlling
Interests in Consolidated Entities were reduced by $6.8 billion, $6.6 billion and $216.3 million, respectively. Blackstone continues to receive management fees and Performance Allocations from these vehicles following the dilution of its ownership interests.
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:
| September 30, | December 31, | |||||||
| 2021 | 2020 | |||||||
| Investments | $ | 2,659,578 | $ | 1,307,292 | ||||
| Due from Affiliates | 172,741 | 262,815 | ||||||
| Potential Clawback Obligation | 44,045 | 38,679 | ||||||
| Maximum Exposure to Loss | $ | 2,876,364 | $ | 1,608,786 | ||||
| Amounts Due to Non-Consolidated VIEs | $ | 157 | $ | 241 | ||||
- Repurchase Agreements
At September 30, 2021 and December 31, 2020, Blackstone pledged securities with a carrying value of $50.5 million and $110.8 million, respectively, and cash to collateralize its repurchase agreements. Such securities can be repledged, delivered or otherwise used by the counterparty.
Blackstone Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued
(All Dollars are in Thousands, Except Share and Per Share Data, Except Where Noted)
The following tables provide information regarding Blackstone’s Repurchase Agreements obligation by type of collateral pledged:
| September 30, 2021 | ||||||||||||||||||||
| Remaining Contractual Maturity of the Agreements | ||||||||||||||||||||
| Overnight | Greater | |||||||||||||||||||
| and | Up to | 30 - 90 | than | |||||||||||||||||
| Continuous | 30 Days | Days | 90 days | Total | ||||||||||||||||
| Repurchase Agreements | ||||||||||||||||||||
| Asset-Backed Securities | $ | — | $ | — | $ | 36,545 | $ | — | $ | 36,545 | ||||||||||
| Gross Amount of Recognized Liabilities for Repurchase Agreements in Note 11. “Offsetting of Assets and Liabilities” | $ | 36,545 | ||||||||||||||||||
| Amounts Related to Agreements Not Included in Offsetting Disclosure in Note 11. “Offsetting of Assets and Liabilities” | $ | — | ||||||||||||||||||
| December 31, 2020 | ||||||||||||||||||||
| Remaining Contractual Maturity of the Agreements | ||||||||||||||||||||
| Overnight | Greater | |||||||||||||||||||
| and | Up to | 30 - 90 | than | |||||||||||||||||
| Continuous | 30 Days | Days | 90 days | Total | ||||||||||||||||
| Repurchase Agreements | ||||||||||||||||||||
| Asset-Backed Securities | $ | — | $ | 15,345 | $ | 32,759 | $ | 28,704 | $ | 76,808 | ||||||||||
| Gross Amount of Recognized Liabilities for Repurchase Agreements in Note 11. “Offsetting of Assets and Liabilities” | $ | 76,808 | ||||||||||||||||||
| Amounts Related to Agreements Not Included in Offsetting Disclosure in Note 11. “Offsetting of Assets and Liabilities” | $ | — | ||||||||||||||||||
- Offsetting of Assets and Liabilities
The following tables present the offsetting of assets and liabilities as of September 30, 2021 and December 31, 2020:
| September 30, 2021 | ||||||||||||||||
| Gross and Net | ||||||||||||||||
| Amounts of | Gross Amounts Not Offset | |||||||||||||||
| Assets Presented | in the Statement of | |||||||||||||||
| in the Statement | Financial Condition | |||||||||||||||
| of Financial | Financial | Cash Collateral | ||||||||||||||
| Condition | Instruments (a) | Received | Net Amount | |||||||||||||
| Assets | ||||||||||||||||
| Freestanding Derivatives | $ | 83,194 | $ | 73,804 | $ | 45 | $ | 9,345 | ||||||||
Blackstone Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued
(All Dollars are in Thousands, Except Share and Per Share Data, Except Where Noted)
| September 30, 2021 | ||||||||||||||||
| Gross and Net | ||||||||||||||||
| Amounts of | ||||||||||||||||
| Liabilities | Gross Amounts Not Offset | |||||||||||||||
| Presented in the | in the Statement of | |||||||||||||||
| Statement of | Financial Condition | |||||||||||||||
| Financial | Financial | Cash Collateral | ||||||||||||||
| Condition | Instruments (a) | Pledged | Net Amount | |||||||||||||
| Liabilities | ||||||||||||||||
| Freestanding Derivatives | $ | 91,097 | $ | 79,415 | $ | 7,769 | $ | 3,913 | ||||||||
| Repurchase Agreements | 36,545 | 36,545 | — | — | ||||||||||||
| $ | 127,642 | $ | 115,960 | $ | 7,769 | $ | 3,913 | |||||||||
| December 31, 2020 | ||||||||||||||||
| Gross and Net | ||||||||||||||||
| Amounts of | Gross Amounts Not Offset | |||||||||||||||
| Assets Presented | in the Statement of | |||||||||||||||
| in the Statement | Financial Condition | |||||||||||||||
| of Financial | Financial | Cash Collateral | ||||||||||||||
| Condition | Instruments (a) | Received | Net Amount | |||||||||||||
| Assets | ||||||||||||||||
| Freestanding Derivatives | $ | 126,564 | $ | 114,673 | $ | 53 | $ | 11,838 | ||||||||
| December 31, 2020 | ||||||||||||||||
| Gross and Net | ||||||||||||||||
| Amounts of | ||||||||||||||||
| Liabilities | Gross Amounts Not Offset | |||||||||||||||
| Presented in the | in the Statement of | |||||||||||||||
| Statement of | Financial Condition | |||||||||||||||
| Financial | Financial | Cash Collateral | ||||||||||||||
| Condition | Instruments (a) | Pledged | Net Amount | |||||||||||||
| Liabilities | ||||||||||||||||
| Freestanding Derivatives | $ | 202,188 | $ | 174,623 | $ | 19,194 | $ | 8,371 | ||||||||
| Repurchase Agreements | 76,808 | 76,808 | — | — | ||||||||||||
| $ | 278,996 | $ | 251,431 | $ | 19,194 | $ | 8,371 | |||||||||
| (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. |
|---|
Blackstone Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued
(All Dollars are in Thousands, Except Share and Per Share Data, Except Where Noted)
Repurchase Agreements are presented separately on the Condensed Consolidated Statements of Financial Condition. Freestanding Derivative assets are included in Other Assets in the Condensed Consolidated Statements of Financial Condition. The following table presents the components of Other Assets:
| September 30, | December 31, | |||||||
| 2021 | 2020 | |||||||
| Furniture, Equipment and Leasehold Improvements, Net | $ | 239,117 | $ | 231,807 | ||||
| Prepaid Expenses | 203,123 | 105,248 | ||||||
| Freestanding Derivatives | 82,016 | 126,022 | ||||||
| Other | 14,311 | 17,945 | ||||||
| $ | 538,567 | $ | 481,022 | |||||
Freestanding Derivative liabilities are included in Accounts Payable, Accrued Expenses and Other Liabilities in the Condensed Consolidated Statements of Financial Condition and are not a significant component thereof.
Notional Pooling Arrangement
Blackstone has a notional cash pooling arrangement with a financial institution for cash management purposes. This arrangement allows for cash withdrawals based upon aggregate cash balances on deposit at the same financial institution. Cash withdrawals cannot exceed aggregate cash balances on deposit. The net balance of cash on deposit and overdrafts is used as a basis for calculating net interest expense or income. As of September 30, 2021, the aggregate cash balance on deposit relating to the cash pooling arrangement was $976.4 million, which was offset with an accompanying overdraft of $976.3 million.
- Borrowings
On August 5, 2021, Blackstone, through its indirect subsidiary Blackstone Holdings Finance Co. L.L.C. (the “Issuer”), issued $650 million aggregate principal amount of senior notes due August 5, 2028 (the “2028 Notes”), $800 million aggregate principal amount of senior notes due January 30, 2032 (the “2032 Notes”) and $550 million aggregate principal amount of senior notes due August 5, 2051 (the “2051 Notes”). The 2028 Notes have an interest rate of 1.625% per annum, the 2032 Notes have an interest rate of 2.000% per annum and the 2051 Notes have an interest rate of 2.850% per annum, in each case accruing from August 5, 2021. Interest on the 2028 Notes and the 2051 Notes is payable semi-annually in arrears on February 5 and August 5 of each year commencing on February 5, 2022. Interest on the 2032 Notes is payable semi-annually in arrears on January 30 and July 30 of each year commencing on January 30, 2022.
All of Blackstone’s outstanding senior notes, including the 2028 Notes, 2032 Notes and 2051 Notes 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 the issuance of the 2028 Notes, 2032 Notes and 2051 Notes have been capitalized and will be amortized over the life of the 2028 Notes, 2032 Notes and 2051 Notes.
The following table presents the general characteristics of each of Blackstone’s outstanding notes as of September 30, 2021 and December 31, 2020, as well as their carrying value and fair value. The notes are included in Loans Payable within the Condensed 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.
Blackstone Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued
(All Dollars are in Thousands, Except Share and Per Share Data, Except Where Noted)
| September 30, 2021 | December 31, 2020 | |||||||||||||||
| Carrying | Fair | Carrying | Fair | |||||||||||||
| Senior Notes | Value | Value (a) | Value | Value (a) | ||||||||||||
| 4.750%, Due 2/15/2023 | $ | 398,276 | $ | 422,920 | $ | 397,385 | $ | 434,400 | ||||||||
| 2.000%, Due 5/19/2025 | 376,543 | 373,281 | 362,947 | 398,620 | ||||||||||||
| 1.000%, Due 10/5/2026 | 696,508 | 720,646 | 724,646 | 770,707 | ||||||||||||
| 3.150%, Due 10/2/2027 | 297,649 | 323,520 | 297,387 | 332,370 | ||||||||||||
| 1.625%, Due 8/5/2028 | 643,188 | 635,440 | — | — | ||||||||||||
| 1.500%, Due 4/10/2029 | 649,836 | 743,089 | 728,054 | 805,744 | ||||||||||||
| 2.500%, Due 1/10/2030 | 491,431 | 512,600 | 490,745 | 538,200 | ||||||||||||
| 1.600%, Due 3/30/2031 | 495,430 | 471,650 | 495,100 | 497,950 | ||||||||||||
| 2.000%, Due 1/30/2032 | 786,536 | 770,400 | — | — | ||||||||||||
| 6.250%, Due 8/15/2042 | 238,851 | 366,000 | 238,668 | 372,250 | ||||||||||||
| 5.000%, Due 6/15/2044 | 489,383 | 661,000 | 489,201 | 684,800 | ||||||||||||
| 4.450%, Due 7/15/2045 | 344,379 | 431,340 | 344,282 | 449,645 | ||||||||||||
| 4.000%, Due 10/2/2047 | 290,680 | 348,120 | 290,533 | 364,590 | ||||||||||||
| 3.500%, Due 9/10/2049 | 392,048 | 431,280 | 391,925 | 460,120 | ||||||||||||
| 2.800%, Due 9/30/2050 | 393,783 | 381,880 | 393,681 | 406,280 | ||||||||||||
| 2.850%, Due 8/5/2051 | 542,955 | 527,890 | — | — | ||||||||||||
| $ | 7,527,476 | $ | 8,121,056 | $ | 5,644,554 | $ | 6,515,676 | |||||||||
| (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 as of September 30, 2021 were as follows:
| Operating | Blackstone Fund | Total | ||||||||||
| Borrowings | Facilities | Borrowings | ||||||||||
| 2021 | $ | — | $ | 100 | $ | 100 | ||||||
| 2022 | — | — | — | |||||||||
| 2023 | 400,000 | — | 400,000 | |||||||||
| 2024 | — | — | — | |||||||||
| 2025 | 347,400 | — | 347,400 | |||||||||
| Thereafter | 6,889,600 | — | 6,889,600 | |||||||||
| $ | 7,637,000 | $ | 100 | $ | 7,637,100 | |||||||
- Income Taxes
Prior to the Conversion, Blackstone and certain of its subsidiaries operated in the U.S. as partnerships for income tax purposes (partnerships generally are not subject to federal income taxes) and generally as corporate entities in
non-U.S.
jurisdictions. Subsequent to the Conversion, all income attributable to Blackstone is subject to U.S. corporate income taxes.
The Conversion resulted in a
step-up
in the tax basis of certain assets that will be recovered as those assets are sold or the basis is amortized.
Blackstone Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued
(All Dollars are in Thousands, Except Share and Per Share Data, Except Where Noted)
Blackstone was a cash taxpayer for the three and nine months ended September 30, 2021. Blackstone’s effective tax rate was 12.5% and 5.6% for the three months ended September 30, 2021 and 2020, respectively, and 7.3% and 16.7% for the nine months ended September 30, 2021 and 2020, respectively. Blackstone’s income tax provision was $458.9 million and $101.0 million for the three months ended September 30, 2021 and 2020, respectively, and $746.7 million and $89.7 million for the nine months ended September 30, 2021 and 2020, respectively. For the three months ended September 30, 2021, the effective tax rate differs from the statutory rate primarily due to a portion of the reported net income (loss) before taxes is attributable to
non-controlling
interest holders. For the nine months ended September 30, 2021, the effective tax rate differs from the statutory rate primarily due to: (a) a portion of the reported net income (loss) before taxes is attributable to
non-controlling
interest holders and (b) the net change to the valuation allowance related to the
step-up
in the tax basis of investment tax assets. For the three and nine months ended September 30, 2020, the effective tax rate differs from the statutory rate primarily due to: (a) a portion of the reported net income (loss) before taxes is attributable to
non-controlling
interest holders and (b) the net change to the valuation allowance related to the
step-up
in the tax basis of investment tax assets.
- Earnings Per Share and Stockholders’ Equity
Earnings Per Share
Basic and diluted net income per share of common stock for the three and nine months ended September 30, 2021 and 2020 was calculated as follows:
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Net Income for Per Share of Common Stock Calculations | ||||||||||||||||
| Net Income Attributable to Blackstone Inc., Basic and Diluted | $ | 1,401,895 | $ | 794,719 | $ | 4,458,919 | $ | 296,493 | ||||||||
| Shares/Units Outstanding | ||||||||||||||||
| Weighted-Average Shares of Common Stock Outstanding, Basic | 722,229,117 | 700,184,580 | 717,516,302 | 695,049,997 | ||||||||||||
| Weighted-Average Shares of Unvested Deferred Restricted Common Stock | 203,982 | 343,386 | 402,113 | 287,578 | ||||||||||||
| Weighted-Average Shares of Common Stock Outstanding, Diluted | 722,433,099 | 700,527,966 | 717,918,415 | 695,337,575 | ||||||||||||
| Net Income Per Share of Common Stock | ||||||||||||||||
| Basic | $ | 1.94 | $ | 1.14 | $ | 6.21 | $ | 0.43 | ||||||||
| Diluted | $ | 1.94 | $ | 1.13 | $ | 6.21 | $ | 0.43 | ||||||||
| Dividends Declared Per Share of Common Stock (a) | $ | 0.70 | $ | 0.37 | $ | 2.48 | $ | 1.37 | ||||||||
| (a) | Dividends declared reflects the calendar date of the declaration for each dividend. |
|---|
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.
Blackstone Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued
(All Dollars are in Thousands, Except Share and Per Share Data, Except Where Noted)
The following table summarizes the anti-dilutive securities for the three and nine months ended September 30, 2021 and 2020:
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Weighted-Average Blackstone Holdings Partnership Units | 484,991,263 | 501,898,454 | 488,880,363 | 506,274,987 |
Stockholders’ Equity
In connection with the Conversion, effective July 1, 2019, each common unit of the Partnership outstanding immediately prior to the Conversion converted into one issued and outstanding, fully paid and nonassessable share of Class A common stock, $0.00001 par value per share, of the Company. The special voting unit of the Partnership outstanding immediately prior to the Conversion converted into one issued and outstanding, fully paid and nonassessable share of Class B common stock, $0.00001 par value per share, of the Company. The general partner units of the Partnership outstanding immediately prior to the Conversion converted into one issued and outstanding, fully paid and nonassessable share of Class C common stock, $0.00001 par value per share, of the Company.
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 September 30, 2021.
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 May 6, 2021, Blackstone’s board of directors authorized the repurchase of up to $1.0 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.
Blackstone Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued
(All Dollars are in Thousands, Except Share and Per Share Data, Except Where Noted)
During the three and nine months ended September 30, 2021, Blackstone repurchased 2.9 million and 6.0 million shares of common stock at a total cost of $355.9 million and $644.9 million, respectively. During the three and nine months ended September 30, 2020, Blackstone repurchased 2.0 million and 9.0 million shares, respectively, of common stock at a total cost of $105.6 million and $474.0 million, respectively. As of September 30, 2021, the amount remaining available for repurchases under the repurchase program was $402.6 million.
Shares Eligible for Dividends and Distributions
As of September 30, 2021, 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 | 693,612,698 | |||
| Unvested Participating Common Stock | 27,756,700 | |||
| Total Participating Common Stock | 721,369,398 | |||
| Participating Blackstone Holdings Partnership Units | 483,553,949 | |||
| 1,204,923,347 | ||||
| 15. | 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, 2021, Blackstone had the ability to grant 171,130,080 shares under the Equity Plan.
For the three and nine months ended September 30, 2021, Blackstone recorded compensation expense of $148.7 million and $454.1 million, respectively, in relation to its equity-based awards with corresponding tax benefits of $19.4 million and $60.1 million, respectively. For the three and nine months ended September 30, 2020, Blackstone recorded compensation expense of 110.8 million and $349.5 million, respectively, in relation to its equity-based awards with corresponding tax benefits of $12.5 million and $40.9 million, respectively.
As of September 30, 2021, there was $1.4 billion of estimated unrecognized compensation expense related to unvested awards. This cost is expected to be recognized over a weighted-average period of 3.5 years.
Total vested and unvested outstanding shares, including common stock, Blackstone Holdings Partnership Units and deferred restricted shares of common stock, were 1,205,088,544 as of September 30, 2021. Total outstanding phantom shares were 83,032 as of September 30, 2021.
Blackstone Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited) - 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 September 30, 2021 and of changes during the period January 1, 2021 through September 30, 2021 is presented below:
| Blackstone Holdings | Blackstone Inc. | |||||||||||||||||||||||
| Equity Settled Awards | Cash Settled Awards | |||||||||||||||||||||||
| Weighted- | Weighted- | Weighted- | ||||||||||||||||||||||
| Average | Deferred | Average | Average | |||||||||||||||||||||
| Partnership | Grant Date | Restricted Shares | Grant Date | Phantom | Grant Date | |||||||||||||||||||
| Unvested Shares/Units | Units | Fair Value | of Common Stock | Fair Value | Shares | Fair Value | ||||||||||||||||||
| Balance, December 31, 2020 | 23,771,136 | $ | 36.33 | 19,512,034 | $ | 42.60 | 65,284 | $ | 60.42 | |||||||||||||||
| Granted | — | — | 12,564,765 | 74.26 | 22,841 | 91.07 | ||||||||||||||||||
| Vested | (4,015,497 | ) | 33.44 | (4,645,664 | ) | 42.91 | (13,655 | ) | 122.42 | |||||||||||||||
| Forfeited | (684,072 | ) | 40.40 | (650,753 | ) | 49.25 | (526 | ) | 127.52 | |||||||||||||||
| Balance, September 30, 2021 | 19,071,567 | $ | 37.11 | 26,780,382 | $ | 57.25 | 73,944 | $ | 127.52 | |||||||||||||||
Shares/Units Expected to Vest
The following unvested shares and units, after expected forfeitures, as of September 30, 2021, are expected to vest:
| Weighted- | ||||||
| Average | ||||||
| Service Period | ||||||
| Shares/Units | in Years | |||||
| Blackstone Holdings Partnership Units | 17,095,569 | 2.2 | ||||
| Deferred Restricted Shares of Common Stock | 22,608,020 | 3.5 | ||||
| Total Equity-Based Awards | 39,703,589 | 2.9 | ||||
| Phantom Shares | 54,966 | 3.3 | ||||
| 16. | Related Party Transactions |
|---|
Affiliate Receivables and Payables
Due from Affiliates and Due to Affiliates consisted of the following:
| September 30, | December 31, | |||||||
| 2021 | 2020 | |||||||
| Due from Affiliates | ||||||||
| Management Fees, Performance Revenues, Reimbursable Expenses and Other Receivables from Non-Consolidated Entities and Portfolio Companies | $ | 2,953,930 | $ | 2,637,055 | ||||
| Due from Certain Non-Controlling Interest Holders and Blackstone Employees | 727,736 | 548,897 | ||||||
| Accrual for Potential Clawback of Previously Distributed Performance Allocations | 36,453 | 35,563 | ||||||
| $ | 3,718,119 | $ | 3,221,515 | |||||
Blackstone Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued
(All Dollars are in Thousands, Except Share and Per Share Data, Except Where Noted)
| September 30, | December 31, | |||||||
| 2021 | 2020 | |||||||
| Due to Affiliates | ||||||||
| Due to Certain Non-Controlling Interest Holders in Connection with the Tax Receivable Agreements | $ | 1,090,164 | $ | 857,523 | ||||
| Due to Non-Consolidated Entities | 177,507 | 107,410 | ||||||
| Due to Certain Non-Controlling Interest Holders and Blackstone Employees | 73,120 | 61,539 | ||||||
| Accrual for Potential Repayment of Previously Received Performance Allocations | 85,418 | 108,569 | ||||||
| $ | 1,426,209 | $ | 1,135,041 | |||||
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 September 30, 2021 and December 31, 2020, such investments aggregated $1.6 billion and $1.1 billion, respectively. Their share of the Net Income (Loss) Attributable to Redeemable
Non-Controlling
and
Non-Controlling
Interests in Consolidated Entities aggregated to $137.7 million and $94.5 million for the three months ended September 30, 2021 and 2020, respectively, and $371.3 million and $(19.8) million for the nine months ended September 30, 2021 and 2020, respectively.
Loans to Affiliates
Loans to affiliates consist of interest bearing advances to certain Blackstone individuals to finance their investments in certain Blackstone Funds. These loans earn interest at Blackstone’s cost of borrowing and such interest totaled $1.0 million and $0.7 million for the three months ended September 30, 2021 and 2020, respectively, and $4.2 million and $4.7 million for the nine months ended September 30, 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 September 30, 2021. See Note 17. “Commitments and Contingencies — Contingencies — Contingent Obligations (Clawback).”
Aircraft and Other Services
In the normal course of business, Blackstone makes use of aircraft owned by Stephen A. Schwarzman; aircraft owned by Jonathan D. Gray; and aircraft owned jointly by Joseph P. Baratta and two other individuals (each such aircraft, “Personal Aircraft”). Each of Messrs. Schwarzman, Gray and Baratta paid for his respective ownership interest in his Personal Aircraft himself and bears his respective share of all operating, personnel and maintenance costs associated with the operation of such Personal Aircraft. The payments Blackstone makes for the use of the Personal Aircraft are based on current market rates.
Blackstone Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued
(All Dollars are in Thousands, Except Share and Per Share Data, Except Where Noted)
In addition, on occasion, certain of Blackstone’s executive officers and employee directors and their families may make personal use of aircraft in which Blackstone owns a fractional interest, as well as other assets of Blackstone. Any such personal use of Blackstone assets is charged to the executive officer or employee director based on market rates and usage. Personal use of Blackstone resources is also reimbursed to Blackstone based on market rates.
The transactions described herein are not material to the Condensed Consolidated Financial Statements.
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 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 $1.1 billion over the next 15 years. The
after-tax
net present value of these estimated payments totals $312.2 million assuming a 15% discount rate and using Blackstone’s most recent projections relating to the estimated timing of the benefit to be received. Future payments under the tax receivable agreements in respect of subsequent exchanges would be in addition to these amounts. The payments under the tax receivable agreements are not conditioned upon continued ownership of Blackstone equity interests by the
pre-IPO
owners and the others mentioned above.
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 Condensed 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.
Blackstone Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued
(All Dollars are in Thousands, Except Share and Per Share Data, Except Where Noted)
Additionally, please see Note 17. “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 $3.8 billion of investment commitments as of September 30, 2021 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 $299.6 million as of September 30, 2021, which includes $181.4 million of signed investment commitments for portfolio company acquisitions in the process of closing.
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 $15.1 million as of September 30, 2021.
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 September 30, 2021 was $238.7 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.
Blackstone continues to believe that the following suits against Blackstone are totally without merit and intends to defend them vigorously.
In December 2017, a purported derivative suit (Mayberry v. KKR & Co., L.P., et al., or “Mayberry Action”) was filed in the Commonwealth of Kentucky Franklin County Circuit Court on behalf of the Kentucky Retirement System (“KRS”) by eight of its members and beneficiaries (the “Mayberry Plaintiffs”) alleging various breaches of fiduciary duty and other violations of Kentucky state law in connection with KRS’s investment in three hedge funds of funds, including a fund managed by Blackstone Alternative Asset Management L.P. (“BLP”). The suit named more than 30 defendants, including, among others, The Blackstone Group L.P.; BLP; Stephen A. Schwarzman, as Chairman and CEO of Blackstone; and J. Tomilson Hill, as then-CEO of BLP (collectively, the “Blackstone Defendants”), as well as entities and individuals that provided services to or were affiliated with KRS.
Blackstone Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued
(All Dollars are in Thousands, Except Share and Per Share Data, Except Where Noted)
In November 2018, the Circuit Court granted one defendant’s motion to dismiss and denied all other defendants’ (including the Blackstone Defendants’) motions to dismiss. In January 2019, certain defendants, including the Blackstone Defendants, filed petitions in the Kentucky Court of Appeals for a writ of prohibition against the Mayberry proceedings on the ground that the Mayberry Plaintiffs lack standing.
In April 2019, the Kentucky Court of Appeals granted the Blackstone Defendants’ petition for a writ of prohibition and vacated the Circuit Court’s November 2018 denial of a motion to dismiss. The Mayberry Plaintiffs appealed that order to the Kentucky Supreme Court.
In July 2020, the Kentucky Supreme Court unanimously held that the Mayberry Plaintiffs lack constitutional standing to bring their claims and remanded the case to the Circuit Court with direction to dismiss the complaint. The Kentucky Attorney General (the “AG”) subsequently filed a motion to intervene and a proposed intervening complaint in the Mayberry Action on behalf of the Commonwealth of Kentucky. The Blackstone Defendants filed an objection to that motion. The AG subsequently filed a separate action in Franklin County Circuit Court that is nearly identical to the proposed intervening complaint.
In addition, in July 2020, certain of the Mayberry Plaintiffs filed a motion for leave to amend their complaint. In December 2020, the Circuit Court dismissed the Mayberry Plaintiffs’ complaint for lack of standing, denied the Mayberry Plaintiffs’ motion for leave to amend, and granted the AG’s motion to intervene. The action was recaptioned as Commonwealth of Kentucky v. KKR & Co. L.P., et al. In May 2021, the AG filed its first amended complaint, which generally asserts the same allegations and claims as the AG’s proposed intervening complaint and the Mayberry Plaintiffs’ original complaint. The Blackstone Defendants filed a motion to dismiss the first amended complaint and briefing on this motion was completed on October 29, 2021.
In December 2020, three potentially new derivative plaintiffs brought a motion in the Circuit Court for leave to file a third amended complaint alleging that they had standing. They also filed a motion to intervene in February 2021. The Circuit Court denied both motions.
On August 31, 2021, the Mayberry Plaintiffs and a KRS beneficiary who had not previously been involved in the suit filed another motion to intervene. The Circuit Court denied this motion. On October 19, 2021, the various purported derivative plaintiffs who had been denied a role in the AG’s litigation appealed the Circuit Court’s orders denying their motions to intervene and for leave to file amended complaints. On November 1, 2021, the Blackstone Defendants filed a cross-appeal of those orders.
In January 2021, certain derivative plaintiffs who had previously attempted to intervene in the AG’s action filed a separate derivative action (Taylor et al. v. KKR & Co., L.P. et al. or “Taylor I”) in Franklin County Circuit Court that is substantially the same as the amended complaint they had sought to file in the AG’s action. In July 2021, these plaintiffs filed their first amended complaint, which is styled as a purported “class” complaint brought on behalf of certain KRS beneficiaries. The Blackstone Defendants and other defendants removed this purported class action to federal court in the United States District Court for the Eastern District of Kentucky and the plaintiffs moved to remand back to state court. Briefing on that motion was completed on September 7, 2021.
On August 19, 2021, certain KRS beneficiaries (including the derivative plaintiffs whose action was removed to federal court) filed a separate action (Taylor et al. v. KKR & Co., L.P. et al. or “Taylor II”) in Franklin County Circuit Court in their capacity as beneficiaries, allegedly suing for the benefit of the pension and insurance trust funds administered by KRS. The Taylor II complaint named the same defendants who were sued in Taylor I, as well as additional current and former KRS officers and trustees. No deadline for responding to the complaint has yet been set.
Blackstone Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued
(All Dollars are in Thousands, Except Share and Per Share Data, Except Where Noted)
In April 2021, the AG filed a declaratory judgment action (Commonwealth of Kentucky v. KKR & Co. Inc. or “Declaratory Judgment Action”) in Franklin County Circuit Court on behalf of the Commonwealth of Kentucky. The AG’s complaint alleges that certain provisions in the subscription agreements between KRS and the managers of the three funds at issue in the Mayberry Action violate the Kentucky Constitution. The suit names as defendants BLP, Blackstone Inc., and others named in the Mayberry Action. On August 23, 2021, the AG filed an amended complaint that no longer stated claims against Blackstone Inc., but added claims against a BLP affiliate and a
BLP-managed
fund. The parties filed a stipulation dismissing with prejudice claims against these two entities, and withdrawing a separate newly added claim. The AG moved for summary judgment, and the defendants—including BLP—filed motions to dismiss. Briefing on these motions was completed on October 14, 2021.
In July 2021, BLP filed a complaint in the Franklin County Circuit Court (Blackstone Alternative Asset Management L.P. v. Kentucky Public Pensions Authority et al. or “the Breach of Contract Action”) asserting claims for breach of contract against Kentucky Public Pensions Authority, Board of Trustees of KRS, Board of Trustees of the County Employees Retirement System (“CERS”), KRS Insurance Fund, and KRS Pension Fund. The complaint alleges that KRS’s support and prosecution of the Mayberry Action and the Declaratory Judgment Action breaches the parties’ subscription agreements governing KRS’s investment with BLP and seeks damages flowing from that breach, including legal fees and expenses incurred in defending against the above actions. The KRS defendants and CERS filed motions to dismiss BLP’s complaint. Briefing on these motions was completed on October 22, 2021.
Contingent Obligations (Clawback)
Performance Allocations are subject to clawback to the extent that the Performance Allocations received to date with respect to a fund exceeds the amount due to Blackstone based on cumulative results of that fund. The actual clawback liability, however, generally does not become realized until the end of a fund’s life except for certain Blackstone real estate funds, multi-asset class investment funds and credit-focused funds, which may have an interim clawback liability. The lives of the carry funds, including available contemplated extensions, for which a liability for potential clawback obligations has been recorded for financial reporting purposes, are currently anticipated to expire at various points through 2028. Further extensions of such terms may be implemented under given circumstances.
For financial reporting purposes, when applicable, the general partners record a liability for potential clawback obligations to the limited partners of some of the carry funds due to changes in the unrealized value of a fund’s remaining investments and where the fund’s general partner has previously received Performance Allocation distributions with respect to such fund’s realized investments.
The following table presents the clawback obligations by segment:
| September 30, 2021 | December 31, 2020 | |||||||||||||||||||||||
| Current and | Current and | |||||||||||||||||||||||
| Blackstone | Former | Blackstone | Former | |||||||||||||||||||||
| Segment | Holdings | Personnel (a) | Total (b) | Holdings | Personnel (a) | Total (b) | ||||||||||||||||||
| Real Estate | $ | 29,896 | $ | 18,113 | $ | 48,009 | $ | 28,283 | $ | 17,102 | $ | 45,385 | ||||||||||||
| Private Equity | 5,213 | 2,337 | 7,550 | 41,722 | (8,623 | ) | 33,099 | |||||||||||||||||
| Credit & Insurance | 13,856 | 16,003 | 29,859 | 13,935 | 16,150 | 30,085 | ||||||||||||||||||
| $ | 48,965 | $ | 36,453 | $ | 85,418 | $ | 83,940 | $ | 24,629 | $ | 108,569 | |||||||||||||
| (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 16. “Related Party Transactions — Affiliate Receivables and Payables — Due to Affiliates.” |
|---|
Blackstone Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued
(All Dollars are in Thousands, Except Share and Per Share Data, Except Where Noted)
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 Condensed 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 September 30, 2021, $917.3 million was held in segregated accounts for the purpose of meeting any clawback obligations of current and former personnel if such payments are required.
In the Credit & 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.
If, at September 30, 2021, 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 $4.8 billion, on an
after-tax
basis where applicable, of which Blackstone Holdings is potentially liable for $4.4 billion if current and former Blackstone personnel default on their share of the liability, a possibility that management also views as remote.
| 18. | Segment Reporting |
|---|
Blackstone transacts its primary business in the United States and substantially all of its revenues are generated domestically.
Blackstone conducts its alternative asset management businesses through four segments:
| • | Real Estate – Blackstone’s Real Estate segment primarily comprises its management of global, Europe and Asia-focused opportunistic real estate funds, high-yield real estate debt funds, liquid real estate debt funds, North America, Europe, Asia and life science-focused Core+ real estate funds, which also include a non-listed REIT, and a NYSE-listed REIT. |
|---|
| • | Private Equity – Blackstone’s Private Equity segment includes its management of flagship corporate private equity funds, sector and geographically-focused corporate private equity funds, including energy and Asia-focused funds, core private equity funds, an opportunistic investment platform, a secondary fund of funds business, infrastructure-focused funds, a life sciences private investment platform, a growth equity investment platform, a multi-asset investment program for eligible high net worth investors and a capital markets services business. |
|---|
| • | Hedge Fund Solutions – The largest component of Blackstone’s Hedge Fund Solutions segment is Blackstone Alternative Asset Management, which manages a broad range of commingled and customized hedge fund of fund solutions. The segment also includes investment platforms that seed new hedge fund businesses, purchase minority interests in more established general partners and management companies of funds, invest in special situation opportunities, create alternative solutions through daily liquidity products and invest directly. |
|---|
| • | Credit & Insurance – Blackstone’s Credit & Insurance segment consists principally of Blackstone Credit, which is organized into two overarching strategies: private credit (which includes mezzanine lending funds, middle market direct lending funds, including Blackstone’s business development companies, structured products group, 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 a publicly traded master limited partnership investment platform, Harvest, and Blackstone’s insurer-focused platform, Blackstone Insurance Solutions. |
|---|
Blackstone Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued
(All Dollars are in Thousands, Except Share and Per Share Data, Except Where Noted)
These business segments are differentiated by their various investment strategies. The Real Estate, Private Equity, Hedge Fund Solutions and Credit & Insurance segments primarily earn their income from management fees and investment returns on assets under management.
Segment Distributable Earnings is Blackstone’s segment profitability measure used to make operating decisions and assess performance across Blackstone’s four segments. 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 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.
Blackstone Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued
(All Dollars are in Thousands, Except Share and Per Share Data, Except Where Noted)
Segment Presentation
The following tables present the financial data for Blackstone’s four segments for the three months ended September 30, 2021 and 2020:
| Three Months Ended September 30, 2021 | ||||||||||||||||||||
| Real | Private | Hedge Fund | Credit & | Total | ||||||||||||||||
| Estate | Equity | Solutions | Insurance | Segments | ||||||||||||||||
| Management and Advisory Fees, Net | ||||||||||||||||||||
| Base Management Fees | $ | 485,308 | $ | 370,083 | $ | 154,884 | $ | 197,591 | $ | 1,207,866 | ||||||||||
| Transaction, Advisory and Other Fees, Net | 53,876 | 50,241 | 2,535 | 8,132 | 114,784 | |||||||||||||||
| Management Fee Offsets | (446 | ) | 10 | (255 | ) | (1,884 | ) | (2,575 | ) | |||||||||||
| Total Management and Advisory Fees, Net | 538,738 | 420,334 | 157,164 | 203,839 | 1,320,075 | |||||||||||||||
| Fee Related Performance Revenues | 35,625 | — | — | 37,688 | 73,313 | |||||||||||||||
| Fee Related Compensation | (137,313 | ) | (139,211 | ) | (35,092 | ) | (107,865 | ) | (419,481 | ) | ||||||||||
| Other Operating Expenses | (61,398 | ) | (56,792 | ) | (25,476 | ) | (51,276 | ) | (194,942 | ) | ||||||||||
| Fee Related Earnings | 375,652 | 224,331 | 96,596 | 82,386 | 778,965 | |||||||||||||||
| Realized Performance Revenues | 495,727 | 988,331 | 7,271 | 6,148 | 1,497,477 | |||||||||||||||
| Realized Performance Compensation | (199,100 | ) | (417,386 | ) | (1,443 | ) | (1,145 | ) | (619,074 | ) | ||||||||||
| Realized Principal Investment Income | 42,677 | 77,570 | 14,943 | 15,820 | 151,010 | |||||||||||||||
| Total Net Realizations | 339,304 | 648,515 | 20,771 | 20,823 | 1,029,413 | |||||||||||||||
| Total Segment Distributable Earnings | $ | 714,956 | $ | 872,846 | $ | 117,367 | $ | 103,209 | $ | 1,808,378 | ||||||||||
Blackstone Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued
(All Dollars are in Thousands, Except Share and Per Share Data, Except Where Noted)
| Three Months Ended September 30, 2020 | ||||||||||||||||||||
| Real | Private | Hedge Fund | Credit & | Total | ||||||||||||||||
| Estate | Equity | Solutions | Insurance | Segments | ||||||||||||||||
| Management and Advisory Fees, Net | ||||||||||||||||||||
| Base Management Fees | $ | 392,785 | $ | 352,866 | $ | 146,082 | $ | 152,037 | $ | 1,043,770 | ||||||||||
| Transaction, Advisory and Other Fees, Net | 17,464 | 11,571 | 1,255 | 3,338 | 33,628 | |||||||||||||||
| Management Fee Offsets | (1,039 | ) | (16,264 | ) | (22 | ) | (2,233 | ) | (19,558 | ) | ||||||||||
| Total Management and Advisory Fees, Net | 409,210 | 348,173 | 147,315 | 153,142 | 1,057,840 | |||||||||||||||
| Fee Related Performance Revenues | 55,327 | — | — | 9,623 | 64,950 | |||||||||||||||
| Fee Related Compensation | (138,342 | ) | (119,301 | ) | (41,405 | ) | (61,585 | ) | (360,633 | ) | ||||||||||
| Other Operating Expenses | (42,566 | ) | (45,702 | ) | (19,652 | ) | (43,293 | ) | (151,213 | ) | ||||||||||
| Fee Related Earnings | 283,629 | 183,170 | 86,258 | 57,887 | 610,944 | |||||||||||||||
| Realized Performance Revenues | 18,872 | 295,239 | 5,618 | 225 | 319,954 | |||||||||||||||
| Realized Performance Compensation | (7,343 | ) | (112,713 | ) | (1,257 | ) | (417 | ) | (121,730 | ) | ||||||||||
| Realized Principal Investment Income (Loss) | 4,946 | 10,248 | (150 | ) | 840 | 15,884 | ||||||||||||||
| Total Net Realizations | 16,475 | 192,774 | 4,211 | 648 | 214,108 | |||||||||||||||
| Total Segment Distributable Earnings | $ | 300,104 | $ | 375,944 | $ | 90,469 | $ | 58,535 | $ | 825,052 | ||||||||||
Blackstone Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued
(All Dollars are in Thousands, Except Share and Per Share Data, Except Where Noted)
The following tables present the financial data for Blackstone’s four segments as of September 30, 2021 and for the nine months ended September 30, 2021 and 2020:
| September 30, 2021 and the Nine Months Then Ended | ||||||||||||||||||||
| Real | Private | Hedge Fund | Credit & | Total | ||||||||||||||||
| Estate | Equity | Solutions | Insurance | Segments | ||||||||||||||||
| Management and Advisory Fees, Net | ||||||||||||||||||||
| Base Management Fees | $ | 1,366,158 | $ | 1,112,349 | $ | 460,661 | $ | 526,039 | $ | 3,465,207 | ||||||||||
| Transaction, Advisory and Other Fees, Net | 117,975 | 125,220 | 8,439 | 19,915 | 271,549 | |||||||||||||||
| Management Fee Offsets | (2,562 | ) | (17,510 | ) | (516 | ) | (5,146 | ) | (25,734 | ) | ||||||||||
| Total Management and Advisory Fees, Net | 1,481,571 | 1,220,059 | 468,584 | 540,808 | 3,711,022 | |||||||||||||||
| Fee Related Performance Revenues | 224,793 | — | — | 66,577 | 291,370 | |||||||||||||||
| Fee Related Compensation | (447,762 | ) | (416,575 | ) | (112,580 | ) | (263,059 | ) | (1,239,976 | ) | ||||||||||
| Other Operating Expenses | (160,520 | ) | (168,888 | ) | (66,521 | ) | (142,615 | ) | (538,544 | ) | ||||||||||
| Fee Related Earnings | 1,098,082 | 634,596 | 289,483 | 201,711 | 2,223,872 | |||||||||||||||
| Realized Performance Revenues | 935,418 | 1,627,186 | 55,900 | 73,234 | 2,691,738 | |||||||||||||||
| Realized Performance Compensation | (376,790 | ) | (687,970 | ) | (13,977 | ) | (29,532 | ) | (1,108,269 | ) | ||||||||||
| Realized Principal Investment Income | 171,626 | 220,769 | 52,618 | 67,285 | 512,298 | |||||||||||||||
| Total Net Realizations | 730,254 | 1,159,985 | 94,541 | 110,987 | 2,095,767 | |||||||||||||||
| Total Segment Distributable Earnings | $ | 1,828,336 | $ | 1,794,581 | $ | 384,024 | $ | 312,698 | $ | 4,319,639 | ||||||||||
| Segment Assets | $ | 14,186,289 | $ | 16,326,287 | $ | 2,678,251 | $ | 3,966,069 | $ | 37,156,896 | ||||||||||
Blackstone Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued
(All Dollars are in Thousands, Except Share and Per Share Data, Except Where Noted)
| Nine Months Ended September 30, 2020 | ||||||||||||||||||||
| Real | Private | Hedge Fund | Credit & | Total | ||||||||||||||||
| Estate | Equity | Solutions | Insurance | Segments | ||||||||||||||||
| Management and Advisory Fees, Net | ||||||||||||||||||||
| Base Management Fees | $ | 1,146,927 | $ | 874,910 | $ | 431,193 | $ | 442,930 | $ | 2,895,960 | ||||||||||
| Transaction, Advisory and Other Fees, Net | 72,527 | 42,505 | 2,872 | 14,681 | 132,585 | |||||||||||||||
| Management Fee Offsets | (11,816 | ) | (33,510 | ) | (60 | ) | (8,019 | ) | (53,405 | ) | ||||||||||
| Total Management and Advisory Fees, Net | 1,207,638 | 883,905 | 434,005 | 449,592 | 2,975,140 | |||||||||||||||
| Fee Related Performance Revenues | 66,383 | — | — | 26,066 | 92,449 | |||||||||||||||
| Fee Related Compensation | (375,278 | ) | (322,494 | ) | (127,949 | ) | (188,080 | ) | (1,013,801 | ) | ||||||||||
| Other Operating Expenses | (127,567 | ) | (131,530 | ) | (56,126 | ) | (118,458 | ) | (433,681 | ) | ||||||||||
| Fee Related Earnings | 771,176 | 429,881 | 249,930 | 169,120 | 1,620,107 | |||||||||||||||
| Realized Performance Revenues | 96,801 | 471,828 | 8,867 | 11,868 | 589,364 | |||||||||||||||
| Realized Performance Compensation | (33,282 | ) | (192,372 | ) | (2,202 | ) | (2,963 | ) | (230,819 | ) | ||||||||||
| Realized Principal Investment Income Income (Loss) | 13,819 | 38,011 | (1,090 | ) | 4,372 | 55,112 | ||||||||||||||
| Total Net Realizations | 77,338 | 317,467 | 5,575 | 13,277 | 413,657 | |||||||||||||||
| Total Segment Distributable Earnings | $ | 848,514 | $ | 747,348 | $ | 255,505 | $ | 182,397 | $ | 2,033,764 | ||||||||||
Reconciliations of Total Segment Amounts
The following tables reconcile the Total Segment Revenues, Expenses and Distributable Earnings to their equivalent GAAP measure for the three and nine months ended September 30, 2021 and 2020 along with Total Assets as of September 30, 2021:
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Revenues | ||||||||||||||||
| Total GAAP Revenues | $ | 6,224,265 | $ | 3,032,898 | $ | 16,814,491 | $ | 2,473,003 | ||||||||
| Less: Unrealized Performance Revenues (a) | (2,724,366 | ) | (1,403,480 | ) | (7,886,033 | ) | 982,043 | |||||||||
| Less: Unrealized Principal Investment (Income) Loss (b) | 2,343 | (177,125 | ) | (526,249 | ) | 216,169 | ||||||||||
| Less: Interest and Dividend Revenue (c) | (35,535 | ) | (26,497 | ) | (99,878 | ) | (90,386 | ) | ||||||||
| Less: Other Revenue (d) | (64,109 | ) | 192,623 | (152,252 | ) | 110,078 | ||||||||||
| Impact of Consolidation (e) | (398,786 | ) | (167,654 | ) | (980,178 | ) | 11,865 | |||||||||
| Amortization of Intangibles (f) | — | 387 | — | 1,161 | ||||||||||||
| Transaction-Related Charges (g) | 36,797 | 6,084 | 33,186 | 3,944 | ||||||||||||
| Intersegment Eliminations | 1,266 | 1,392 | 3,341 | 4,188 | ||||||||||||
| Total Segment Revenue (h) | $ | 3,041,875 | $ | 1,458,628 | $ | 7,206,428 | $ | 3,712,065 | ||||||||
Blackstone Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued
(All Dollars are in Thousands, Except Share and Per Share Data, Except Where Noted)
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Expenses | ||||||||||||||||
| Total GAAP Expenses | $ | 2,654,359 | $ | 1,332,846 | $ | 6,978,136 | $ | 1,867,452 | ||||||||
| Less: Unrealized Performance Allocations Compensation (i) | (1,193,853 | ) | (509,474 | ) | (3,394,041 | ) | 433,091 | |||||||||
| Less: Equity-Based Compensation (j) | (129,254 | ) | (89,862 | ) | (394,948 | ) | (266,675 | ) | ||||||||
| Less: Interest Expense (k) | (51,773 | ) | (39,228 | ) | (140,245 | ) | (119,692 | ) | ||||||||
| Impact of Consolidation (e) | (5,320 | ) | (2,084 | ) | (17,067 | ) | (22,563 | ) | ||||||||
| Amortization of Intangibles (f) | (17,044 | ) | (16,096 | ) | (51,212 | ) | (48,288 | ) | ||||||||
| Transaction-Related Charges (g) | (22,396 | ) | (41,199 | ) | (89,428 | ) | (166,493 | ) | ||||||||
| Administrative Fee Adjustment (l) | (2,488 | ) | (2,719 | ) | (7,747 | ) | (2,719 | ) | ||||||||
| Intersegment Eliminations | 1,266 | 1,392 | 3,341 | 4,188 | ||||||||||||
| Total Segment Expenses (m) | $ | 1,233,497 | $ | 633,576 | $ | 2,886,789 | $ | 1,678,301 | ||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Other Income | ||||||||||||||||
| Total GAAP Other Income | $ | 94,991 | $ | 101,059 | $ | 344,978 | $ | (68,537 | ) | |||||||
| Impact of Consolidation (e) | (94,991 | ) | (101,059 | ) | (344,978 | ) | 68,537 | |||||||||
| Total Segment Other Income | $ | — | $ | — | $ | — | $ | — | ||||||||
Blackstone Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued
(All Dollars are in Thousands, Except Share and Per Share Data, Except Where Noted)
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Income Before Provision for Taxes | ||||||||||||||||
| Total GAAP Income Before Provision for Taxes | $ | 3,664,897 | $ | 1,801,111 | $ | 10,181,333 | $ | 537,014 | ||||||||
| Less: Unrealized Performance Revenues (a) | (2,724,366 | ) | (1,403,480 | ) | (7,886,033 | ) | 982,043 | |||||||||
| Less: Unrealized Principal Investment (Income) Loss (b) | 2,343 | (177,125 | ) | (526,249 | ) | 216,169 | ||||||||||
| Less: Interest and Dividend Revenue (c) | (35,535 | ) | (26,497 | ) | (99,878 | ) | (90,386 | ) | ||||||||
| Less: Other Revenue (d) | (64,109 | ) | 192,623 | (152,252 | ) | 110,078 | ||||||||||
| Plus: Unrealized Performance Allocations Compensation (i) | 1,193,853 | 509,474 | 3,394,041 | (433,091 | ) | |||||||||||
| Plus: Equity-Based Compensation (j) | 129,254 | 89,862 | 394,948 | 266,675 | ||||||||||||
| Plus: Interest Expense (k) | 51,773 | 39,228 | 140,245 | 119,692 | ||||||||||||
| Impact of Consolidation (e) | (488,457 | ) | (266,629 | ) | (1,308,089 | ) | 102,965 | |||||||||
| Amortization of Intangibles (f) | 17,044 | 16,483 | 51,212 | 49,449 | ||||||||||||
| Transaction-Related Charges (g) | 59,193 | 47,283 | 122,614 | 170,437 | ||||||||||||
| Administrative Fee Adjustment (l) | 2,488 | 2,719 | 7,747 | 2,719 | ||||||||||||
| Total Segment Distributable Earnings | $ | 1,808,378 | $ | 825,052 | $ | 4,319,639 | $ | 2,033,764 | ||||||||
| As of | ||||
| September 30, | ||||
| 2021 | ||||
| Total Assets | ||||
| Total GAAP Assets | $ | 39,038,092 | ||
| Impact of Consolidation (e) | (1,881,196 | ) | ||
| Total Segment Assets | $ | 37,156,896 | ||
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 three months ended September 30, 2021 and 2020, Other Revenue on a GAAP basis was $64.2 million and $(192.2) million, and included $63.5 million and $(193.5) million of foreign exchange gains (losses), respectively. For the nine months ended September 30, 2021 and 2020, Other Revenue on a GAAP basis was $152.4 million and $(109.6) million, and included $150.4 million and $(113.2) 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. |
|---|
Blackstone Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued
(All Dollars are in Thousands, Except Share and Per Share Data, Except Where Noted)
| (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 will no longer be 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 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: |
|---|
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Total Segment Management and Advisory Fees, Net | $ | 1,320,075 | $ | 1,057,840 | $ | 3,711,022 | $ | 2,975,140 | ||||||||
| Total Segment Fee Related Performance Revenues | 73,313 | 64,950 | 291,370 | 92,449 | ||||||||||||
| Total Segment Realized Performance Revenues | 1,497,477 | 319,954 | 2,691,738 | 589,364 | ||||||||||||
| Total Segment Realized Principal Investment Income | 151,010 | 15,884 | 512,298 | 55,112 | ||||||||||||
| Total Segment Revenues | $ | 3,041,875 | $ | 1,458,628 | $ | 7,206,428 | $ | 3,712,065 | ||||||||
| (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. |
|---|
Blackstone Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued
(All Dollars are in Thousands, Except Share and Per Share Data, Except Where Noted)
| (m) | Total Segment Expenses is comprised of the following: |
|---|
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Total Segment Fee Related Compensation | $ | 419,481 | $ | 360,633 | $ | 1,239,976 | $ | 1,013,801 | ||||||||
| Total Segment Realized Performance Compensation | 619,074 | 121,730 | 1,108,269 | 230,819 | ||||||||||||
| Total Segment Other Operating Expenses | 194,942 | 151,213 | 538,544 | 433,681 | ||||||||||||
| Total Segment Expenses | $ | 1,233,497 | $ | 633,576 | $ | 2,886,789 | $ | 1,678,301 | ||||||||
Reconciliations of Total Segment Components
The following tables reconcile the components of Total Segments to their equivalent GAAP measures, reported on the Condensed Consolidated Statement of Operations for the three and nine months ended September 30, 2021 and 2020:
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Management and Advisory Fees, Net | ||||||||||||||||
| GAAP | $ | 1,320,795 | $ | 1,053,851 | $ | 3,711,159 | $ | 2,958,411 | ||||||||
| Segment Adjustment (a) | (720 | ) | 3,989 | (137 | ) | 16,729 | ||||||||||
| Total Segment | $ | 1,320,075 | $ | 1,057,840 | $ | 3,711,022 | $ | 2,975,140 | ||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| GAAP Realized Performance Revenues to Total Segment Fee Related Performance Revenues | ||||||||||||||||
| GAAP | ||||||||||||||||
| Incentive Fees | $ | 48,206 | $ | 13,498 | $ | 117,537 | $ | 40,959 | ||||||||
| Investment Income - Realized Performance Allocations | 1,522,495 | 371,406 | 2,865,482 | 640,846 | ||||||||||||
| GAAP | 1,570,701 | 384,904 | 2,983,019 | 681,805 | ||||||||||||
| Total Segment | ||||||||||||||||
| Less: Realized Performance Revenues | (1,497,477 | ) | (319,954 | ) | (2,691,738 | ) | (589,364 | ) | ||||||||
| Segment Adjustment (b) | 89 | — | 89 | 8 | ||||||||||||
| Total Segment | $ | 73,313 | $ | 64,950 | $ | 291,370 | $ | 92,449 | ||||||||
Blackstone Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued
(All Dollars are in Thousands, Except Share and Per Share Data, Except Where Noted)
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| GAAP Compensation to Total Segment Fee Related Compensation | ||||||||||||||||
| GAAP | ||||||||||||||||
| Compensation | $ | 536,199 | $ | 460,983 | $ | 1,585,941 | $ | 1,395,983 | ||||||||
| Incentive Fee Compensation | 21,007 | 7,385 | 48,763 | 22,339 | ||||||||||||
| Realized Performance Allocations Compensation | 631,632 | 142,149 | 1,192,082 | 253,141 | ||||||||||||
| GAAP | 1,188,838 | 610,517 | 2,826,786 | 1,671,463 | ||||||||||||
| Total Segment | ||||||||||||||||
| Less: Realized Performance Compensation | (619,074 | ) | (121,730 | ) | (1,108,269 | ) | (230,819 | ) | ||||||||
| Less: Equity-Based Compensation - Operating Compensation | (127,442 | ) | (88,180 | ) | (388,607 | ) | (260,719 | ) | ||||||||
| Less: Equity-Based Compensation - Performance Compensation | (1,812 | ) | (1,682 | ) | (6,341 | ) | (5,956 | ) | ||||||||
| Segment Adjustment (c) | (21,029 | ) | (38,292 | ) | (83,593 | ) | (160,168 | ) | ||||||||
| Total Segment | $ | 419,481 | $ | 360,633 | $ | 1,239,976 | $ | 1,013,801 | ||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| GAAP General, Administrative and Other to Total Segment Other Operating Expenses | ||||||||||||||||
| GAAP | $ | 217,995 | $ | 171,041 | $ | 608,174 | $ | 497,658 | ||||||||
| Segment Adjustment (d) | (23,053 | ) | (19,828 | ) | (69,630 | ) | (63,977 | ) | ||||||||
| Total Segment | $ | 194,942 | $ | 151,213 | $ | 538,544 | $ | 433,681 | ||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Realized Performance Revenues | ||||||||||||||||
| GAAP | ||||||||||||||||
| Incentive Fees | $ | 48,206 | $ | 13,498 | $ | 117,537 | $ | 40,959 | ||||||||
| Investment Income - Realized Performance Allocations | 1,522,495 | 371,406 | 2,865,482 | 640,846 | ||||||||||||
| GAAP | 1,570,701 | 384,904 | 2,983,019 | 681,805 | ||||||||||||
| Total Segment | ||||||||||||||||
| Less: Fee Related Performance Revenues | (73,313 | ) | (64,950 | ) | (291,370 | ) | (92,449 | ) | ||||||||
| Segment Adjustment (b) | 89 | — | 89 | 8 | ||||||||||||
| Total Segment | $ | 1,497,477 | $ | 319,954 | $ | 2,691,738 | $ | 589,364 | ||||||||
Blackstone Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued
(All Dollars are in Thousands, Except Share and Per Share Data, Except Where Noted)
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Realized Performance Compensation | ||||||||||||||||
| GAAP | ||||||||||||||||
| Incentive Fee Compensation | $ | 21,007 | $ | 7,385 | $ | 48,763 | $ | 22,339 | ||||||||
| Realized Performance Allocation Compensation | 631,632 | 142,149 | 1,192,082 | 253,141 | ||||||||||||
| GAAP | 652,639 | 149,534 | 1,240,845 | 275,480 | ||||||||||||
| Total Segment | ||||||||||||||||
| Less: Fee Related Performance Compensation | (31,753 | ) | (26,122 | ) | (126,235 | ) | (38,705 | ) | ||||||||
| Less: Equity-Based Compensation - Performance Compensation | (1,812 | ) | (1,682 | ) | (6,341 | ) | (5,956 | ) | ||||||||
| Total Segment | $ | 619,074 | $ | 121,730 | $ | 1,108,269 | $ | 230,819 | ||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Realized Principal Investment Income | ||||||||||||||||
| GAAP | $ | 325,414 | $ | 61,017 | $ | 832,512 | $ | 170,814 | ||||||||
| Segment Adjustment (e) | (174,404 | ) | (45,133 | ) | (320,214 | ) | (115,702 | ) | ||||||||
| Total Segment | $ | 151,010 | $ | 15,884 | $ | 512,298 | $ | 55,112 | ||||||||
Segment basis presents revenues and expenses on a basis that deconsolidates the investment funds Blackstone manages and excludes the amortization of intangibles, the expense of equity-based awards and Transaction-Related Charges.
| (a) | Represents (1) the add back of net management fees earned from consolidated Blackstone Funds which have been eliminated in consolidation, and (2) the removal of revenue from the reimbursement of certain expenses by the Blackstone Funds, which are presented gross under GAAP but netted against Management and Advisory Fees, Net in the Total Segment measures. |
|---|
| (b) | Represents the add back of Performance Revenues earned from consolidated Blackstone Funds which have been eliminated in consolidation. |
|---|
| (c) | Represents the removal of Transaction-Related Charges that are not recorded in the Total Segment measures. |
|---|
| (d) | Represents the removal of (1) the amortization of transaction-related intangibles, and (2) certain expenses reimbursed by the Blackstone Funds, which are presented gross under GAAP but netted against Management and Advisory Fees, Net in the Total Segment measures. This adjustment includes a reduction equal to an administrative fee 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) | 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. |
|---|
Blackstone Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued
(All Dollars are in Thousands, Except Share and Per Share Data, Except Where Noted)
| 19. | Subsequent Events |
|---|
There have been no events since September 30, 2021 that require recognition or disclosure in the Condensed Consolidated Financial Statements.
Next: Item 1A. Unaudited Supplemental Presentation of Statements of Financial Condition