(Bloomberg) -- Blackstone Group LP, the largest manager of alternative assets such as private equity and real estate, doubled first-quarter earnings as assets swelled past $300 billion for the first time.
Economic net income, a measure of earnings excluding some costs, rose to a record $1.62 billion, or $1.37 a share, from $813.9 million, or 70 cents, a year earlier, the New York-based firm said today in a statement. Analysts had estimated the firm would earn $1.03 a share, according to the average of 14 estimates in a Bloomberg survey.
Run by billionaire Steve Schwarzman, who co-founded the firm in 1985, Blackstone has sidestepped much of the fallout from slumping oil prices. Its real estate unit, already the biggest of its kind, has raised almost $15 billion in just four months for a new fund. Last week, it led a deal to buy $23 billion in assets from General Electric Co., the largest real estate transaction since the crisis.
Blackstone “has massive scale, an informational advantage and deeper pockets” than peers, said Stephen Ellis, an analyst with Morningstar Inc. in Chicago. “Real estate is going gangbusters.”
Assets under management rose to $310 billion from $290 billion at the end of last year. Its closest competitor, Carlyle Group LP, oversaw $194.5 billion at the end of last year.
Blackstone reported earnings before the start of regular trading in New York. Its shares rose 4 percent to $42.66 at 7:43 a.m. in pre-market trading.
The stock has rallied 21 percent this year as most of its peers have declined. KKR & Co. is down 1.2 percent, Apollo Global Management LLC has lost 7 percent. Carlyle has gained 3 percent.
Blackstone’s market capitalization, at $46.7 billion, exceeds the combined value of Carlyle, KKR, Apollo and Fortress Investment Group LLC.
Much of Blackstone’s dominance reflects the growth of its real estate group, which reported a 99 percent jump in profit from a year earlier. The unit last week spotlighted its clout when it teamed with Wells Fargo & Co. to buy office buildings and other properties from GE in the biggest real estate purchase for Blackstone since its $26 billion takeover of Hilton Worldwide Holdings Inc. in 2007.
Hilton, which went public in 2013, is up 16 percent this year, elevating Blackstone’s gain in the deal to about $14.8 billion, the most ever in private equity.
After sales this year of warehouse owner IndCor Properties Inc., mall operator Kimstone and other holdings, Blackstone real estate chief Jon Gray -- widely viewed as Schwarzman’s eventual successor -- is gathering more investor capital. His newest fund, for which he’s gathered more than $14.5 billion so far, will be the largest real estate pool ever.
He’s putting money to work quickly. Last week, in addition to the GE pact, the group struck a deal to buy shopping-center owner Excel Trust Inc. for about $2 billion. In March it agreed to buy Chicago’s Willis Tower, the second-tallest building in the U.S., for $1.3 billion.
Blackstone’s role as the biggest private equity investor in the real estate industry may hurt the company in the event of a slowdown. Commercial-property prices have climbed about 7 percent past the prior boom’s peak, according to Moody’s Investors Service. The U.S. Federal Reserve may raise its benchmark interest rate later this year, which could hurt real estate along with other investment assets.
The private equity unit, which reported a 160 percent rise in earnings, is benefiting from performance fees earned from a $21.7 billion buyout pool it raised from 2005 to 2007. The fund, which struggled when the financial crisis dragged down holdings, crossed a return threshold in last year’s second quarter that’s allowing Blackstone to collect performance fees at an accelerated rate.
The group’s sales included shares of pharmaceutical company Catalent Inc., U.K.-based theme park operator Merlin Entertainments Plc, Pinnacle Foods Inc. and retailer Michaels Stores Inc. That division too is raising more money from investors, seeking at least $16 billion for its seventh buyout fund.
Blackstone’s credit group, GSO Capital Partners, posted a 3 percent decline in profit from a year ago. Earnings of its hedge fund unit fell 22 percent.