Blackstone Chairman and CEO Stephen Schwarzman called the company's first-quarter 2022 one of the two best performing quarters in the firm's 36-year history. High praise for the already storied alternative asset manager, but the commendation belies the fact that Blackstone's net income in the quarter was lower than at the same time last year—$1.22 billion versus $1.75 billion. On the other hand, distributable earnings, or cash handed back to shareholders, was recorded at $1.94 billion, up from $1.19 billion.
The news sent the stock up pre-market before it retreated and closed the day down more than 6 percent. In sum, Blackstone used a pinch of prestidigitation to mask an uneven quarter. (Blackstone in 2019 made the switch to distributable earnings—a proxy for cash flow favored by analysts—from economic net income. It can improve stock valuations and burnishes a company's overall narrative.)
One place Blackstone doesn't come up short in is its ability to raise capital. In the past three years, Blackstone has raised $500 billion of inflows from its limited partners or LPs. To date, it has more than $900 billion in assets under management (AUM).
"Our investment performance dramatically outperformed the public indices," said Schwarzman. "It's proof of concept that we grow rapidly even in a risky world."
Real estate accounts for $300 billion of Blackstone's business and could grow. "Owning hard assets has provided a strong hedge to inflation," Schwarzman said.
Blackstone has been a premier buyer of late in logistics (which accounts for 40% of Blackstone's current portfolio), rental housing and industrials. The company recently took a lofty position in student housing with the $13-billion acquisition of American Campus Communities and is finalizing a $21-billion recapitalization of European warehouse business Mileway.
Gray matter
Jonathan Gray, the president and COO of Blackstone and also chairman of Hilton, continues to be bullish on the travel space despite the headwinds. Blackstone has completely drawn down from its Hilton investment and redirection of funds to the hospitality space could be afoot. In March, Blackstone senior managing director Tyler Henritze bemoaned the company's slimmer hotel portfolio.
Gray is takes in myriad considerations before deciding how and where to deploy capital. "We are mindful of rising interest rates and its informed our investing," he said. "We've concentrated on hard assets and businesses where revenue could grow faster than inflation."
Deal activity could slow this year, with Gray telling The Financial Times that he expected it to be lower than last year.
The travel sector remains a priority for Blackstone with Gray calling the recovery in global travel "robust."
In February, Australia's Crown Resorts agreed to a $6.3-billion buyout from Blackstone. Gaming is a space Blackstone has previous exposure to, having acquired The Cosmopolitan in Las Vegas for $1.7 billion in 2014 before selling it for more than $5 billion in 2021.
Other recent travel-related acquisitions include UK holiday company Bourne Leisure and Extended Stay America, which Blackstone acquired with partner Starwood Capital for $6 billion.
Blackstone is a proponent of owning assets that have short-duration leases. Hotels have nightly leases that allow for the opportunity to change rates daily. Gray said that 80 percent of the assets Blackstone currently owns are of the short-duration lease variety.