Published On: Mon, Feb 3rd, 2014

Blackstone Reports Record Year : Jonathan Gray’s Real Estate Group Chips In 60% Of The Profits

Last week the Blackstone Group reported its full year and fourth quarter results for 2013, which were pretty much excellent all round.

Full year revenues reported were US$6.6 billion in 2013, up more than 60% year over year. On a regular GAAP basis net income, excluding amounts attributable to non-controlling entities, was US$1.2 billion for the year, compared to US$0.2 billion in 2012.

Using Blackstone’s own term “economic” net income, which instead includes such non-controlling amounts, the company made US$3.6 billion for the year, i.e. both for itself and for its partners, compared with just US$2 billion in 2012.

The company ended the year with a US$266 billion in total assets under management, up 26% year-over-year.

Jonathan Gray  Blackston
Jonathan Gray  / Getty


Stephen A. Schwarzman, Chairman and Chief Executive Officer, reported :“I am very pleased with our fourth quarter results, which capped a record year for Blackstone. Strong growth and investment performance across all of our businesses drove record full year revenues…” and he continued,

“… 2013 was also one of the firm’s best years in terms of investment performance, helped by four successful initial public offerings in the fourth quarter. These investments provide a good illustration of how our long-term fund structures benefit our investors, and how our patient approach toward improving assets can ultimately drive better earnings growth and fund performance

Two features stand out from their results. First, fully 60% of their total “economic income”, which is a pre-tax version of the term they use came from Blackstone’s real estate division, led by Jonathan Gray. Second, a good portion – over US$2 billion of their total economic income came from, so far unrealized, continuing carried interests.

A big chunk of Blackstone’s success came from four strong IPO’s in the fourth quarter of the year, in which they realized some gains to be sure, but also kept considerable remaining interests in the entities taken public. This therefore gave them substantial unrealized gains as well.

As Blackstone President Tony James put it a few months ago in a conference call with shareholders, “You can’t look at IPOs for us as exits, ”… “You can look at it as the appetizer before the meal.”

Such IPOs were indeed the source of some both of their 2013 realized income, and their huge income from continuing unrealized carried interests in 2013. They included three huge real estate IPOs: Brixmore shopping centres in October; Extended Stay America in November; and Hilton Worldwide in December.

All three of these companies fall into Jonathan Gray’s real estate group and underpinned his results for the year. Jewish Business News reported extensively on the Extended Stay America and Hilton Worldwide IPOs at the time, as they proceeded en route to market.

 

 

Now a billionaire in his own right, Jonathan Gray is even being touted as a potential future successor to Steven Schwarzman as CEO of the whole firm. I imagine the quiet spoken Jonathan Gray is having far too much fun, however, simply making money, to want to take on the administrative burdens of running the whole group, after all he is still only 43.

About Jonathan Gray

Jonathan Gray is Global Head of Real Estate, and a member of the Board of Directors of Blackstone Group.

After growing up in Chicago he graduated from the University of Pennsylvania and from the Wharton Business school.

Aged 22 he joined Blackstone’s M&A and private equity team in 1992, and shortly afterwards came in on the ground floor when they launched their real estate group. By 2005 he was co-head of the group and took it on completely in 2011. By 2013 the group was managing nearly US$70 billion of assets worldwide, and close to a quarter of Blackstone’s total assets under management.

Jonathan Gray married Mindy Basser in 1995 in Philadelphia, at Temple Beth Zion. They live in Manhattan with their four daughters.

Gray serves on the board of The Trinity School and is Chairman of the Board of Harlem Village Academies, a group of charter schools in New York City. He recently donated US$10 million to purchase a building in northern Manhattan which will serve become their second elementary school.

In May 2012, Gray and his wife, Mindy founded the Basser Research Center named in honor of Mindy’s sister, Faith Basser, who died of ovarian cancer at age 44. The Grays have to date donated US$30 million to the Center, which focuses on cancer prevention, treatment, and research of certain genetically-inherited cancers.

 

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