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Conditions continue to remain favorable for private equity, real estate and alternative asset class investing

More proof there is more security in Real Estate Investing than in other “securities” which, I dare say, are much less secure.  Keep in mind the key with real estate investing is cash flow, not the much less predictable appreciation.  Some may say the key is ROI but your ROI is determined by the cash flow.  Here’s the Bloomberg article:

Blackstone Profit Increases 56% as Value of Real Estate Investments Gains

By Jason Kelly – Bloomberg -Feb 3, 2011

Blackstone Group LP, the world’s largest private-equity firm, said fourth-quarter profit rose 56 percent as the value of its real estate investments gained.

Profit, excluding some costs tied to the firm’s 2007 initial public offering, increased to $512.7 million, or 46 cents a share, from $329.4 million, or 29 cents, a year earlier, New York-based Blackstone said today in a statement. The result beat the 30-cent average estimate of seven analysts in a Bloomberg survey. The shares rose the most in a month.

Chief Executive Officer Stephen Schwarzman’s firm is benefiting from a rebound in commercial real estate, along with higher values tied to its leveraged buyout holdings that include Hilton Worldwide Inc. Blackstone, which Schwarzman created in 1985 with Peter G. Peterson, posted its seventh straight year- over-year increase in quarterly profit.

“Conditions continue to remain favorable for private equity, real estate and alternative asset class investing,” Howard Chen, a Credit Suisse analyst, wrote in a Feb. 2 note to clients. Chen reinstated coverage of Blackstone with an “outperform” rating, saying he expects the shares to reach $20 within a year.

Blackstone rose 69 cents, or 4.1 percent, to $17.36 at 4:15 p.m. in New York Stock Exchange composite trading, after earlier gaining as much as 7.7 percent. The stock has gained more than 20 percent in the past three months amid a broader recovery in the economy and the firm’s private-equity business. It’s still trading below the $31-a-share IPO price.

Assets Rise

Fee-earning assets under management rose to $109.5 billion from $96.1 billion a year earlier. Real estate assets gained 13 percent to $26.8 billion.

“We are pleased with the improving markets and economic environment,” Tony James, Blackstone’s president, said on a conference call today. “We’re still in the early stages of a value recovery.”

Blackstone this year plans to begin raising its seventh real estate fund, which is likely to be similar in size to its current, sixth fund at about $10 billion, James said.

New money for debt investments in real estate and an increase in the value of some properties drove the assets higher, Blackstone said.

Profit in the real estate business surged more than five times to $280.8 million, according to the statement. The firm’s funds tied to real estate rose 19 percent in the fourth quarter and 69 percent in 2010, James said.

Net Loss Narrows

Blackstone had a net loss of $11 million, down from $143.3 million a year earlier. The figure includes costs tied to the IPO that the firm has told investors may be reflected in losses under U.S. generally accepted accounting principals for several years.

Schwarzman, 63, has expanded Blackstone’s fund of hedge fund business, now part of the firm’s largest unit by assets, as well as its advisory group, which counsels companies on mergers and restructuring. Fee-earning assets in the credit and marketable alternatives unit rose 22 percent to $58.5 billion last quarter.

The company’s best-known business remains its private equity unit. Blackstone last year raised about $15 billion for its sixth buyout fund, less than the record-setting $21.7 billion it collected for its fifth pool in 2007.

Fee-earning assets in private equity dropped 1 percent to $24.2 billion as Blackstone sold some investments from its fourth private-equity fund. The firm said the investment period for Blackstone Capital Partners VI began this quarter.

The firm participated in 35 deals valued at a combined $11.85 billion in 2010. That’s more than twice the $5.66 billion in transactions Blackstone was involved in during 2009, according to data compiled by Bloomberg.



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