Throw a rock and you're bound to hit a Blackstone investment. The Blackstone Group is one of the largest private equity firms and alternative asset managers in the world, with more than $166 billion in assets under management and such notable holdings as Hilton Worldwide, Equity Office Properties Trust, SeaWorld, and The Weather Channel. The company manages investment vehicles including private equity funds, funds of hedge funds, and real estate funds. It also provides mergers and acquisitions, restructuring, and other financial advisory services to corporate clients. Blackstone's clients include public and corporate pensions, financial institutions, individuals, and others.
Blackstone earns the bulk of its revenues from fees. It receives fees from five main divisions: real estate, hedge fund solutions, private equity, credit businesses, and financial advisory. The private equity arm has traditionally been involved in leveraged buyouts of developed companies but has evolved to invest in younger ventures. Its real estate division manages numerous funds that invest in commercial properties around the world, primarily in the US and Europe. Blackstone's hedge fund business, Blackstone Alternative Asset Management (BAAM) has more than $30 billion in assets under management. The company's credit business (GSO Capital Partners) focuses on credit-oriented alternative asset management. Finally, its financial advisory unit provides global corporate advisory services including fund placement services for alternative investment funds.
The economic downturn meant fewer and relatively smaller deals for Blackstone. Revenue plummeted in 2008 and inched up slightly in 2009. By 2010 and 2011 Blackstone's financial results improved significantly, due mostly to an increase in management and advisory fees. This was partially offset by investment income, which fell by about half. The company reported its fourth consecutive loss in 2011 (of $168 million) as a result.
Blackstone's real estate funds began to see opportunities as the economy recovered. And it has made several investments in retail and lodging. In 2010 the company won a bidding war to buy the nearly 600 US retail properties being sold by Australia's Centro Properties. It paid $9.4 billion for a portfolio of 588 properties, mostly strip centers anchored by big-box stores. In a related 2010 deal, Blackstone was one of several investors to take a stake in mall owner General Growth Properties as it exited bankruptcy. In 2012 Blackstone annouced a deal to acquire 46 US shopping centers for $1.4 billion
In the hospitality sector, Blackstone acquired Motel 6 from Accor for some $1.9 billion in October 2012. Accor sold its Motel 6 and Studio 6 hotels in order to reduce debt. Other noteworthy deals include Blackstone's 2011 acquisition of UK hotel group Mint for about $950 million. Blackstone was also part of an investor group that bought Extended Stay Hotels owner HVM, which was in bankruptcy.
The firm's diverse private equity dealings span many different industries. In 2010 Blackstone acquired Polymer Group, a provider of nonwoven materials, and established PBF Energy to invest in oil refineries. The following year, the company acquired a significant stake in medical billing firm Emdeon, and in 2012 it arranged to buy home security and automation firm Vivint for more than $2 billion.
Also in 2011, despite a tough climate for attracting investors, Blackstone completed raising funds for its sixth general private equity fund. It raised what it believes to be the largest amount for a fund of its kind since the economic crisis. (The company has since begun raising funds for a global real estate fund, which it expects to be even larger than the latest general fund.)
Blackstone has also looked overseas for investment opportunities. The firm, which has more than 20 offices around the world, has ramped up its investments in emerging markets such as China. After Blackstone's historic 2007 public offering, the firm became partially owned by China Investment Corporation. The strategic relationship has helped advance Blackstone's investment opportunities in China. The firm is working with the Shanghai-Pudong district government to establish the first foreign-owned local currency private equity fund, which will invest in high growth Chinese companies. In India, Blackstone has committed more than $3 billion in investments. Most recently, it has invested in power generation companies, a hybrid cotton seed company, and an outsourcing company in India. Blackstone also is interested in Brazil. It owns about 40% of Pátria, a large investment management and corporate advisory firm there.
In 2011 Blackstone further diversified its international investments when it acquired Antares Restaurant Group in New Zealand, the franchiser for Burger King in that country. It was Blackstone's first deal in Australia or New Zealand outside of real estate.
Blackstone is known as a hands-on investor that builds up its portfolio companies' values before cutting them loose. In 2011 the company sold its 50% stake in Universal Orlando to NBCUniversal for more than $1 billion.
Founded in 1985 by industry veterans Peter Peterson and CEO Stephen Schwarzman, the once-reclusive Blackstone went public in 2007. The public offering, which was a first among major US private equity firms, valued Blackstone at upwards of $4 billion. – less