Blackstone Profit Down On Big IPO Charge

Nov 12 2007 | 10:36am ET

The Blackstone Group swung to a third-quarter loss after taking a big charge relating to its initial public offering this summer.

Overall, revenue grew 14% to $526.7 million, as three of its four divisions enjoyed revenue spikes, but an $802.6 million non-cash charge—due to compensation costs from IPO unit awards, as well as amortization of intangibles—sent the private equity giant to a $113.2 million loss in the quarter. The company said it made a $372.5 million profit in the year-ago period, when it was still a private concern.

Blackstone also said the subprime mess contributed to the loss, as its real estate group saw revenue fall by almost half, to $109.1 million from $196.1 million. The firm said the credit crunch had spread to the general commercial real estate lending market.

“While it will be difficult to structure very large leveraged transactions in corporate private equity and real estate until the credit markets improve, pricing of assets is more favorable,” CEO Stephen Schwarzman, the beneficiary of more than $1 billion from IPO proceeds, said.

And indeed, all three of its other divisions—including corporate private equity—enjoyed big gains on the quarter. Corporate private equity revenue rose 42% to $227.3 million. Asset management revenue, which includes the firm’s hedge fund operations, soared 88% to $124.9 million. And its mergers and acquisitions advisory’s revenue rose 60% to $84.3 million.


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