The Blackstone Group Reports Third Quarter 2009 Results: Financial News

The Blackstone Group Reports Third Quarter 2009 Results
Friday November 6, 8:32 am ET

NEW YORK--(BUSINESS WIRE)--The Blackstone Group L.P. (NYSE: BX - News):

Economic Net Income After Taxes was $275 million for the third quarter of 2009, up from $181 million for the second quarter of 2009 and a loss of $(503) million for the third quarter of 2008.
Net Fee Related Earnings from Operations were $95 million for the third quarter of 2009, up from $87 million for the second quarter of 2009 and down from $152 million for the third quarter of 2008.
Adjusted Cash Flows From Operations were $132 million during the third quarter of 2009, up from $102 million for the second quarter of 2009 and up from a loss of $(9) million for the third quarter of 2008.
Fee-Earning Assets Under Management totaled $96.3 billion, up from $93.5 billion at June 30, 2009.
GAAP Net Loss Attributable to The Blackstone Group L.P. was $(176) million for the third quarter of 2009, including net IPO and acquisition-related charges of $201 million, compared to a GAAP Net Loss of $(340) million for the third quarter of 2008, which included net IPO and acquisition-related charges of $203 million.
Blackstone received an A+ rating with stable outlook from Fitch and remains A rated with stable outlook from Standard & Poor's. Blackstone executed its first bond issuance in the third quarter of 2009, issuing $600 million 10-year 6.625% notes.
Blackstone declares a quarterly priority distribution of $0.30 per common unit.

The Blackstone Group L.P. (NYSE: BX - News) today reported its third quarter 2009 results.

For the third quarter of 2009, Total Segment Revenues were $603.8 million, up $200.2 million from $403.6 million for the second quarter of 2009 and up $833.0 million from $(229.2) million for the third quarter of 2008. The year-over-year change was driven by net appreciation of the underlying portfolio investments in the Corporate Private Equity and Credit and Marketable Alternatives segments, as well as stabilization in the fair value of the Real Estate segment’s underlying portfolio investments. These increases were partially offset by decreased advisory fees earned in the Financial Advisory segment. For the nine months ended September 30, 2009, Total Segment Revenues were $1.1 billion up significantly from $179.3 million for the same period in 2008.

Total Segment Expenses totaled $325.4 million, up from $230.8 million for the second quarter of 2009 and from $280.0 million for the third quarter of 2008. The largest component of segment expenses, Total Segment Compensation and Benefits was $249.9 million for the third quarter of 2009, up from $159.1 million for the second quarter of 2009 and from $197.9 million for the third quarter of 2008. The change from 2008 was driven by an increase in carried interest related compensation allocations and accruals in the Corporate Private Equity, Credit and Marketable Alternatives and Real Estate segments. Excluding the impact of carried interest allocations, Compensation and Benefits was $199.2 million for the third quarter of 2009, down from $226.1 million for the third quarter of 2008. Compensation and Benefits was $478.6 million for the nine months ended September 30, 2009, an increase from $461.1 million for the nine months ended September 30, 2008, reflecting an increase in carried interest accruals, partially offset by a decrease in personnel compensation of $30.9 million from 2008.

GAAP results for the third quarter of 2009 included Revenues of $597.0 million, up from $406.4 million for the second quarter of 2009 and $(160.3) million for the third quarter of 2008. Net Loss Attributable to The Blackstone Group L.P. was $(176.2) million, compared to $(164.3) million for the second quarter of 2009 and $(340.3) million for the third quarter of 2008. GAAP results for the nine months ended September 30, 2009 included Revenues of $1.0 billion, compared to $261.9 million for the nine months ended September 30, 2008, and Net Loss Attributable to The Blackstone Group L.P. of $(572.0) million, compared to $(747.9) million for the nine months ended September 30, 2008.

Most global equity and debt markets continued to move higher in the third quarter of 2009 as investors anticipated a bottoming of the global economy. Emerging markets experienced the greatest increase consistent with generally more favorable economic growth prospects as compared with the U.S. and Europe. Credit markets experienced similar improvement, as credit spreads tightened sharply. Credit delinquencies and charge-offs continue to be weak and unemployment, particularly in the U.S., remains high.

There has been some improvement in lending markets, with lower borrowing rates and an improved willingness on the part of banks to increase lending. Access to equity capital markets has improved and volumes of both IPOs and secondary equity markets have increased considerably throughout 2009. If these favorable trends are sustained, Blackstone’s funds could participate in an increased number of acquisitions and dispositions.

Commercial real estate trends in the U.S. and Europe continued to worsen in the third quarter of 2009, with lower occupancy and pricing trends. Global hospitality trends also declined, including revenue per available room (“RevPAR”), an important hospitality industry metric. Commodities prices were relatively flat during the third quarter although materially higher than one year ago. The dollar continued to weaken against most global currencies, although it rose modestly against the Pound Sterling.

Stephen A. Schwarzman, Chairman and Chief Executive Officer, said, “It has been just over a year since the onset of the global financial crisis. Equity and debt markets have continued to heal, many companies have reduced expenses and inventory levels, the cost of borrowing has declined and the availability of credit is slowly increasing. We believe the worst is behind us though a recovery could be gradual and uneven. We see many opportunities to deploy our substantial available capital across each of our asset management businesses with attractive potential risk-return for our fund investors.”

The table below details Blackstone’s Economic Net Income, Net Fee Related Earnings from Operations, Adjusted Cash Flows from Operations and Fee-Earning Assets Under Management as of and for the three and nine months ended September 30, 2009 and 2008. Economic Net Income, Total Segments includes unrealized gains (losses) and the direct compensation impact related to those gains/losses, but excludes IPO and acquisition-related charges.

Three Months Ended
September 30,
Variance Nine Months Ended
September 30,
Variance

2009 2008 $ % 2009 2008 $ %

(Dollars in Thousands, Except per Unit Amounts)

Economic Net Income,
Total Segments
$ 278,357 $ (509,266 ) $ 787,623 155 % $ 357,918 $ (502,908 ) $ 860,826 171 %

Provision (Benefit) for
Income Taxes (a)
3,009 (6,720 ) 9,729 145 % (15,836 ) (99,491 ) 83,655 84 %

Economic Net Income,
After Taxes
$ 275,348 $ (502,546 ) $ 777,894 155 % $ 373,754 $ (403,417 ) $ 777,171 193 %

Economic Net Income, After
Taxes per Adjusted Unit (b)
$ 0.25

$ (0.45 ) $ 0.69 NM $ 0.33

$ (0.36 ) $ 0.69 NM

Net Fee Related Earnings from
Operations
$ 94,939 $ 151,810 $ (56,871 ) -37 % $ 271,247 $ 309,814 $ (38,567 ) -12 %

Adjusted Cash Flows from
Operations
$ 131,934

$ (9,001 ) $ 140,935 NM $ 309,014

$ 148,122 $ 160,892 109 %

Fee-Earning Assets Under Management:

Corporate Private Equity $ 25,184,161 $ 25,349,192 $ (165,031 ) -1 %

Real Estate 23,692,257 22,576,659 1,115,598 5 %

Credit and Marketable Alternatives (c) 47,448,212 51,799,414 (4,351,202 ) -8 %

Total Fee-Earning Assets Under
Management
$ 96,324,630 $ 99,725,265 $ (3,400,635 ) -3 %

____________________

^(a) Represents the implied provision (benefit) for income taxes calculated using the same methodology applied in calculating the tax provision for The Blackstone Group L.P.

^(b) Adjusted Units represents the weighted-average fully diluted unit count for Economic Net Income purposes. A reconciliation of this item to the equivalent GAAP measure is presented in Exhibit 5 to this release.

^(c) The variance of $4.4 billion is partially attributed to a $2.8 billion decrease in Fee-Earning Assets Under Management related to Blackstone’s decision to restructure its Credit and Marketable Alternatives segment and liquidate its single manager proprietary hedge funds.

SEGMENT REVIEW

Corporate Private Equity

Corporate Private Equity had revenues of $226.9 million for the third quarter of 2009, compared with revenues of $198.6 million for the second quarter of 2009 and $(68.3) million for the third quarter of 2008. The change from 2008 was driven principally by an increase in performance fees which was attributable to the net appreciation in the fair value of the segment’s underlying portfolio investments, particularly in publicly traded investments and consumer and energy sector investments. The fair value of the Corporate Private Equity portfolio appreciated by 5% in the third quarter of 2009, versus net depreciation of 8% in the third quarter of 2008.

Net Fee Related Earnings from Operations were $21.2 million for the third quarter of 2009, down from $23.9 million for the second quarter of 2009 and up from $16.2 million for the third quarter of 2008. The change from 2008 primarily reflected an increase in fee related revenues. Economic Net Income was $135.7 million for the third quarter of 2009, up from $123.8 million for the second quarter of 2009 and up from negative $(126.5) million for the third quarter of 2008.

Compensation and Benefits expense increased to $69.9 million from $54.3 million for the second quarter of 2009 and $34.2 million for the third quarter of 2008. The change from 2008 was primarily due to an increase in compensation related to carried interest allocations. Other Operating Expenses of $21.3 million remained consistent with the second quarter of 2009 and down from $24.0 million for the third quarter of 2008 reflecting Blackstone’s ongoing focus on non-compensation expenses.

Fee-Earning Assets Under Management were relatively unchanged at $25.2 billion compared with the second quarter of 2009 and the third quarter of 2008.

Transaction activity has increased recently in terms of both new commitments as well as realizations. At September 30, 2009, $1.3 billion of Limited Partner Capital had been committed to deals by the segment’s funds and not yet deployed. Subsequent to the end of the third quarter of 2009, over $600 million of Limited Partner Capital was committed to new transactions. The segment’s funds also closed or announced four realizations in the third quarter of 2009 and subsequently. In addition, the funds are examining several opportunities for initial public offerings.

Limited Partner Capital Deployed totaled $109.1 million for the third quarter of 2009, including new and follow-on investments, a decrease from $338.3 million for the second quarter of 2009 and $1.5 billion deployed for the third quarter of 2008.

Corporate Private Equity had nine-month revenues of $493.6 million, compared with negative revenues of $(92.6) million in the same period of 2008. The principal driver of the year-over-year change was an increase in performance fees and investment income as a result of net appreciation in the fair value of the portfolio investments, principally publicly-traded portfolio investments and certain portfolio investments in the energy, healthcare and consumer sectors, as well as gains related to foreign currency fluctuations.

Real Estate

Real Estate had revenues of $100.2 million for the third quarter of 2009, compared with revenues of negative $(18.9) million for the second quarter of 2009 and $(273.7) million for the third quarter of 2008. The change from 2008 was due to positive performance fees accrued, driven by the performance of certain debt strategy portfolio investments as well as stabilization in the fair value of the segment’s underlying portfolio investments. The fair value of the Real Estate portfolio depreciated by 0.4% in the third quarter of 2009, versus 10% in the third quarter of 2008.

Net Fee Related Earnings from Operations were $33.4 million in the third quarter of 2009, up from $32.9 million for the second quarter of 2009 and $32.7 million for the third quarter of 2008. Economic Net Income was $44.2 million for the third quarter of 2009, an improvement from $(25.1) million for the second quarter of 2009 and $(309.6) million for the third quarter of 2008.

Compensation and Benefits were $42.5 million compared to $(6.8) million for the second quarter of 2009 and $21.1 million for the third quarter of 2008. The change from 2008 was due to a decrease in reversals of prior period carried interest allocations to certain personnel in the third quarter of 2009. Other Operating Expenses of $13.4 million remained consistent with the second quarter of 2009 and down from $14.8 million for the third quarter of 2008 reflecting Blackstone’s ongoing focus on non-compensation expenses.

Fee-Earning Assets Under Management increased $167.1 million from the second quarter of 2009 and $1.1 billion from the third quarter of 2008 to $23.7 billion.

The Real Estate funds have seen an increase in potential investment opportunities in recent months. At September 30, 2009, $179.7 million of Limited Partner Capital had been committed to deals by the segment’s funds and not yet deployed. Subsequent to the end of the third quarter of 2009, over $165 million of the Limited Partner Capital committed has been deployed and over $375 million of Limited Partner Capital was committed to or is under letter of intent by the funds with regard to new transactions.

Limited Partner Capital Deployed totaled $35.0 million for the third quarter of 2009, a decrease from $252.7 million and $131.1 million deployed during the second quarter of 2009 and third quarter of 2008, respectively.

Real Estate had negative nine-month revenues of $(131.3) million, compared with negative revenues of $(240.2) million for the nine months ended September 30, 2008. The principal drivers of the year-over-year change was a reduction in the reversal of Blackstone’s prior period carried interest allocations and an increase in Base Management Fees, a function of an increase in Fee-Earning Assets Under Management.

Credit and Marketable Alternatives (CAMA)

CAMA had revenues of $179.4 million, compared with $140.4 million for the second quarter of 2009 and negative revenues of $(48.0) million for the third quarter of 2008. The change from 2008 was due primarily to improved returns on the segment’s fund of hedge funds and credit-oriented funds, resulting in positive performance fees and allocations and investment income for the third quarter of 2009.

The fund of hedge funds posted a composite net return of 5.5% for the third quarter of 2009 and 12.9% for the nine months ended September 30, 2009. The credit-oriented hedge funds posted a composite net return of 13.0% for the third quarter of 2009 and 22.5% for the nine months ended September 30, 2009. The segment’s mezzanine funds posted a composite net return of 5.7% for the third quarter of 2009 and 11.7% for the nine months ended September 30, 2009.

Net Fee Related Earnings from Operations were $24.0 million for the third quarter of 2009, a decrease from $25.2 million for the second quarter of 2009 and from $42.4 million for the third quarter of 2008. The main driver of the decline from 2008 was a decrease in Base Management Fees, partially attributable to Blackstone’s restructuring of its proprietary single manager hedge funds, partially offset by a reduction in Compensation and Benefits and Other Operating Expenses. Economic Net Income was $81.5 million for the third quarter of 2009 compared to $66.5 million for the second quarter of 2009 and a loss of $(134.3) million for the third quarter of 2008.

Compensation and Benefits were $79.8 million, up from $57.4 million in the second quarter of 2009 and $60.3 million in the third quarter of 2008. The increase from the third quarter of 2008 was principally driven by carried interest allocations to certain personnel due to positive returns on certain of Blackstone’s credit-related funds, partially offset by a decline in personnel compensation. Other Operating Expenses of $18.1 million were down from $26.1 million for the third quarter of 2008 reflecting Blackstone’s ongoing focus on non-compensation expenses.

Fee-Earning Assets Under Management in the third quarter of 2009 totaled $47.4 billion compared with $44.7 billion for the second quarter of 2009 and $51.8 billion for the third quarter of 2008. The decrease from 2008 was principally due to redemptions and the liquidation of certain of Blackstone’s proprietary single manager hedge funds.

Limited Partner Capital Deployed in certain carry credit-oriented funds totaled $87.3 million for the third quarter of 2009, down from $112.1 million for the second quarter of 2009 and $657.6 million for the third quarter of 2008. The decrease was related to a reduction in new investment activity in certain of Blackstone’s credit-oriented funds as a result of a reduction in completed leveraged finance transactions.

CAMA had revenues of $419.0 million for the nine months ended September 30, 2009 compared with revenues of $207.3 million for the same period of 2008. The increase was primarily driven by improved returns on Blackstone’s investment in its funds of hedge funds and its credit-oriented and proprietary hedge funds during the nine months ended September 30, 2009 compared to the nine months ended September 30, 2008.

Financial Advisory

Revenues were $97.3 million for the third quarter of 2009, an increase from $83.5 million for the second quarter of 2009 and a decrease from $160.7 million for the third quarter of 2008. The change from 2008 was primarily driven by a decrease in fees generated by Blackstone’s fund placement business. Fees earned in the fund placement business decreased $41.7 million the market for new capital raising remained challenged with capital raised at cyclical lows. Fees generated by the corporate and mergers and acquisitions advisory services and the restructuring and reorganization advisory services businesses decreased $20.8 million from the third quarter of 2008 due principally to large transactions fees earned in the third quarter of 2008. The fees generated by these businesses increased $7.7 million from the second quarter of 2009 due to continued strong demand for Blackstone’s advisory services.

Net Fee Related Earnings from Operations were $16.4 million for the third quarter of 2009, an increase from $4.9 million for the second quarter of 2009 and a decrease from $60.5 million for the third quarter of 2008. The primary catalyst for the decrease from 2008 was lower advisory fees, partially offset by a decrease in Compensation and Benefits as a portion of compensation is directly related to the profitability of each of the advisory services businesses. Economic Net Income was $17.0 million for the third quarter of 2009 compared to $7.5 million for the second quarter of 2009 and $61.1 million for the third quarter of 2008.

Compensation and Benefits were $57.7 million, up from $54.2 million for the second quarter of 2009 and down from $82.3 million for the third quarter of 2008.

Revenues were $271.9 million for the nine months ended September 30, 2009, a decrease from $304.8 million in the same period of 2008. The change was driven by decreased fees generated by the fund placement business of $84.8 million, partially offset by an increase in fees earned by the restructuring and reorganization advisory services business of $45.0 million and the corporate and mergers and acquisitions advisory services business of $11.2 million.

CAPITAL AND LIQUIDITY

For Economic Net Income purposes, the weighted-average fully diluted unit count (the “Adjusted Units”) for the three and nine month periods ended September 30, 2009 was 1,119.8 million units and 1,125.2 million units, respectively. The weighted-average fully diluted unit count for the three and nine month periods ended September 30, 2008 was 1,129.0 million units and 1,129.0 million units, respectively.

The total number of units used in calculating cash distributions was 1,091.9 million units for the nine month period ended September 30, 2009 and 1,085.8 million units for the nine month period ended September 30, 2008.

On August 13, 2009, Blackstone issued a ten-year debt obligation of $600 million at 6.625% and continues to maintain its $850 million revolving credit-facility, against which it has no outstanding borrowings. As of September 30, 2009, Blackstone had $486.5 million in cash, $1 billion invested in high grade liquid debt strategies and $492.5 million invested in liquid Blackstone Funds, against $673.4 million in outstanding borrowings.

DISTRIBUTION

The Blackstone Group L.P. has declared a quarterly distribution of $0.30 per common unit to record holders of common units at the close of business on November 30, 2009. This distribution will be paid on December 11, 2009.

Public common unitholders will continue to receive a priority distribution ahead of Blackstone personnel and others through 2009, but the amount of those distributions in respect of 2009 will be based on the amount of Adjusted Cash Flows from Operations generated in 2009 available for distributions and could fall below $1.20.

No distributions will be paid in respect of the third quarter of 2009 to Blackstone personnel and others with respect to their Blackstone Holdings partnership units.

# # #

Blackstone will host a conference call on November 6, 2009 at 11:00 a.m. ET to discuss third quarter 2009 results. The conference call can be accessed by dialing (888) 713-4215 (U.S. domestic) or +1 (617) 213-4867 (international) pass code 80408635. Additionally, the conference call will be broadcast live over the internet and can be accessed by all interested parties through the Investor Relations section of The Blackstone Group’s website http://ir.blackstone.com. For those unable to listen to the live broadcast, a replay will be available on Blackstone’s website or by dialing (888) 286-8010 (U.S. domestic) or +1 (617) 801-6888 (international) conference ID number 88974763, beginning approximately two hours after the event.

About The Blackstone Group

Blackstone is one of the world’s leading investment and advisory firms. We seek to create positive economic impact and long-term value for our investors, the companies we invest in, the companies we advise and the broader global economy. We do this through the commitment of our extraordinary people and flexible capital. Our alternative asset management businesses include the management of private equity funds, real estate funds, funds of hedge funds, credit-oriented funds, collateralized loan obligation vehicles (CLOs) and closed-end mutual funds. The Blackstone Group also provides various financial advisory services, including mergers and acquisitions advisory, restructuring and reorganization advisory and fund placement services. Further information is available at www.blackstone.com.

Forward-Looking Statements

This release may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 which reflect Blackstone’s current views with respect to, among other things, Blackstone’s operations and financial performance. You can identify these forward-looking statements by the use of words such as “outlook,” “believes,” “expects,” “potential,” “continues,” “may,” “will,” “should,” “seeks,” “approximately,” “predicts,” “intends,” “plans,” “estimates,” “anticipates” or the negative version of these words or other comparable words. Such forward-looking statements are subject to various risks and uncertainties. Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from those indicated in these statements. Blackstone believes these factors include but are not limited to those described under the section entitled “Risk Factors” in its Annual Report on Form 10-K for the fiscal year ended December 31, 2008, as such factors may be updated from time to time in its periodic filings with the SEC, which are accessible on the SEC’s website at www.sec.gov. These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this release and in the prospectus. Blackstone undertakes no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise.

This release does not constitute an offer of any Blackstone Fund.

THE BLACKSTONE GROUP L.P.

Exhibit 1a.  Condensed Consolidated Statements of Operations

(Dollars in Thousands, Except Per Unit Data)

Three Months Ended September 30,

2009 2008

Revenues

Management and Advisory Fees $ 367,605 $ 447,373

Performance Fees and Allocations 154,013 (416,076 )

Investment Income (Loss) (a) 64,809 (199,485 )

Interest Income and Other 10,596
7,934

Total Revenues 597,023
(160,254
)

Expenses

Compensation and Benefits (b) 980,628 991,521

Interest (c) 5,258
5,893

General, Administrative and Other (d) 110,641 121,842

Fund Expenses 1,267 13,442

Total Expenses 1,097,794
1,132,698

Other Income

Net Gains (Losses) from Fund Investment
Activities
73,812 (550,755 )

Income (Loss) Before Provision (Benefit) for Taxes (e) (426,959 ) (1,843,707 )

Provision (Benefit) for Taxes 52,551 (21,362 )

Net Income (Loss) (479,510 ) (1,822,345 )

Net Income (Loss) Attributable to Redeemable Non-Controlling
Interests in Consolidated Entities
50,281 (441,381 )

Net Income (Loss) Attributable to Non-Controlling Interests in
Consolidated Entities
3,622 (37,208 )

Net Income (Loss) Attributable to Non-Controlling Interests in
Blackstone Holdings
(357,230 ) (1,003,425 )

Net Income (Loss) Attributable to The Blackstone Group L.P. (f) $ (176,183 ) $ (340,331 )

Net Loss per Common Unit, Basic and Diluted

Common Units Entitled to Priority Distributions $ (0.61 ) $ (1.26 )

Common Units Not Entitled to Priority Distributions $ (0.91 ) $ (1.56 )

____________________

Net IPO and acquisition-related charges included above were:

(a) Investment Income (Loss) $ 11,935 $ (9,539 )

(b) Total Compensation and Benefits $ 980,628 $ 991,521

Less: Compensation and Benefits - IPO and acquisition-related $ 730,726 $ 793,665

Compensation - non-IPO and acquisition-related (*) $ 249,902 $ 197,856

(c) Interest $ 902 $ 851

(d) General, Administrative and Other $ 39,527 $ 51,799

(e) Total IPO and acquisition-related charges $ 759,220 $ 855,854

(f) Total IPO and acquisition-related charges attributable to The Blackstone
Group L.P., net of tax
$ 201,141 $ 202,826

____________________

(*) Principally comprised of base pay, bonus, net carried interest allocations,

benefits and non-IPO and acquisition-related equity-based compensation.

THE BLACKSTONE GROUP L.P.

Exhibit 1b.  Condensed Consolidated Statements of Operations

(Dollars in Thousands, Except Per Unit Data)

Nine Months Ended September 30,

2009 2008

Revenues

Management and Advisory Fees $ 1,049,606 $ 1,094,941

Performance Fees and Allocations 10,936 (618,485 )

Investment Income (Loss) (a) (28,593 ) (238,077 )

Interest Income and Other 16,404 23,542

Total Revenues 1,048,353 261,921

Expenses

Compensation and Benefits (b) 2,730,726 2,997,476

Interest (c) 6,744 14,326

General, Administrative and Other (d) 328,517 324,580

Fund Expenses 5,871 58,187

Total Expenses 3,071,858 3,394,569

Other Income (Loss)

Net Gains (Losses) from Fund Investment
Activities
97,353 (576,713 )

Income (Loss) Before Provision (Benefit) for Taxes (e) (1,926,152 ) (3,709,361 )

Provision (Benefit) for Taxes 81,167 (38,232 )

Net Income (Loss) (2,007,319 ) (3,671,129 )

Net Income (Loss) Attributable to Redeemable Non-Controlling
Interests in Consolidated Entities
90,515 (494,207 )

Net Income (Loss) Attributable to Non-Controlling Interests in
Consolidated Entities
(33,450 ) (45,182 )

Net Income (Loss) Attributable to Non-Controlling Interests in
Blackstone Holdings
(1,492,343 ) (2,383,885 )

Net Income (Loss) Attributable to The Blackstone Group L.P. (f) $ (572,041 ) $ (747,855 )

Net Loss per Common Unit, Basic and Diluted

Common Units Entitled to Priority Distributions $ (2.05 ) $ (2.81 )

Common Units Not Entitled to Priority Distributions $ (2.95 ) $ (1.56 )

____________________

Net IPO and acquisition-related charges included above were:

(a) Investment Income (Loss) $ 32,729 $ (1,509 )

(b) Total Compensation and Benefits $ 2,730,726 $ 2,997,476

Less: Compensation and Benefits - IPO and acquisition-related $ 2,252,096 $ 2,536,341

Compensation - non-IPO and acquisition-related (*) $ 478,630 $ 461,135

(c) Interest $ 2,638 $ 3,202

(d) General, Administrative and Other $ 119,130 $ 126,012

(e) Total IPO and acquisition-related charges $ 2,341,135 $ 2,667,064

(f) Total IPO and acquisition-related charges attributable to The Blackstone
Group L.P., net of tax
$ 589,852 $ 635,921

____________________

(*) Principally comprised of base pay, bonus, net carried interest allocations,

benefits and non-IPO and acquisition-related equity-based compensation.

THE BLACKSTONE GROUP L.P.

Exhibit 2a.  Condensed Consolidated Statements of Financial Condition

(Dollars in Thousands)

September 30,
2009
December 31,
2008

Assets

Cash and Cash Equivalents $ 486,470 $ 503,737

Cash Held by Blackstone Funds and Other 73,724 907,324

Investments 3,812,208 2,830,942

Accounts Receivable 243,111 312,067

Due from Brokers 805 48,506

Investment Subscriptions Paid in Advance 238 1,916

Due from Affiliates 353,480 861,434

Intangible Assets, Net 958,989 1,077,526

Goodwill 1,703,602 1,703,602

Other Assets 160,306 169,555

Deferred Tax Assets 937,048 845,578

Total Assets $ 8,729,981 $ 9,262,187

Liabilities and Partners' Capital

Loans Payable $ 673,386 $ 387,000

Amounts Due to Non-Controlling Interest Holders 163,009 1,103,423

Securities Sold, Not Yet Purchased 418 894

Due to Affiliates 1,405,464 1,285,577

Accrued Compensation and Benefits 463,744 413,459

Accounts Payable, Accrued Expenses and Other Liabilities 139,743 180,259

Total Liabilities 2,845,764 3,370,612

Commitments and Contingencies

Redeemable Non-Controlling Interests in Consolidated Entities 466,056 362,462

Partners' Capital

Partners' Capital 3,340,428 3,509,448

Accumulated Other Comprehensive Income (Loss) (177 ) (291 )

Non-Controlling Interests in Consolidated Entities 182,507 198,197

Non-Controlling Interests in Blackstone Holdings 1,895,403 1,821,759

Total Partners' Capital 5,418,161 5,529,113

Total Liabilities and Partners' Capital $ 8,729,981 $ 9,262,187

THE BLACKSTONE GROUP L.P.

Exhibit 2b.  Condensed Consolidating Statements of Financial Condition

(Dollars in Thousands)

September 30, 2009

Consolidated
Operating
Partnerships

Consolidated
Blackstone Funds

Reclasses and
Eliminations
Consolidated

Assets

Cash and Cash Equivalents $ 486,470 $ - $ - $ 486,470

Cash Held by Blackstone Funds
and Other
59,518 14,206 - 73,724

Investments 2,916,909 1,111,956 (216,657 ) 3,812,208

Accounts Receivable 238,203 4,908 - 243,111

Due from Brokers - 805 - 805

Investment Subscriptions Paid in
Advance
238 - - 238

Due from Affiliates 349,559 15,819 (11,898 ) 353,480

Intangible Assets, Net 958,989 - - 958,989

Goodwill 1,703,602 - - 1,703,602

Other Assets 160,053 253 - 160,306

Deferred Tax Assets 937,048 - - 937,048

Total Assets $ 7,810,589 $ 1,147,947 $ (228,555 ) $ 8,729,981

Liabilities and Partners'
Capital

Loans Payable $ 673,386 $ - $ - $ 673,386

Amounts Due to Non-Controlling
Interest Holders
61,582 101,427 - 163,009

Securities Sold, Not Yet
Purchased
- 418 - 418

Due to Affiliates 1,397,305 20,057 (11,898 ) 1,405,464

Accrued Compensation and
Benefits
461,590 2,154 - 463,744

Accounts Payable, Accrued
Expenses and Other Liabilities
135,943 3,800 - 139,743

Total Liabilities 2,729,806 127,856 (11,898 ) 2,845,764

Redeemable Non-Controlling
Interests in Consolidated Entities
- - 466,056 466,056

Partners' Capital

Partners' Capital 3,340,428 682,713 (682,713 ) 3,340,428

Accumulated Other
Comprehensive Income (Loss)
(177 ) - - (177 )

Non-Controlling Interests
in Consolidated Entities
(154,871 ) 337,378 - 182,507

Non-Controlling Interests in
Blackstone Holdings
1,895,403 - - 1,895,403

Total Partners' Capital 5,080,783 1,020,091 (682,713 ) 5,418,161

Total Liabilities and
Partners' Capital
$ 7,810,589 $ 1,147,947 $ (228,555 ) $ 8,729,981

THE BLACKSTONE GROUP L.P.

Exhibit 2b.  Condensed Consolidating Statements of Financial Condition - Continued

(Dollars in Thousands)

December 31, 2008

Consolidated
Operating
Partnerships

Consolidated
Blackstone Funds

Reclasses and
Eliminations
Consolidated

Assets

Cash and Cash Equivalents $ 503,737 $ - $ - $ 503,737

Cash Held by Blackstone Funds
and Other
57,536 849,788 - 907,324

Investments 1,650,071 1,385,132 (204,261 ) 2,830,942

Accounts Receivable 309,201 2,866 - 312,067

Due from Brokers - 48,506 - 48,506

Investment Subscriptions Paid in
Advance
6,697 - (4,781 ) 1,916

Due from Affiliates 1,057,362 216 (196,144 ) 861,434

Intangible Assets, Net 1,077,526 - - 1,077,526

Goodwill 1,703,602 - - 1,703,602

Other Assets 169,333 222 - 169,555

Deferred Tax Assets 845,578 - - 845,578

Total Assets $ 7,380,643 $ 2,286,730 $ (405,186 ) $ 9,262,187

Liabilities and Partners'
Capital

Loans Payable $ 387,000 $ - $ - $ 387,000

Amounts Due to Non-Controlling
Interest Holders
105,942 1,009,780 (12,299 ) 1,103,423

Securities Sold, Not Yet
Purchased
- 894 - 894

Due to Affiliates 1,064,980 362,526 (141,929 ) 1,285,577

Accrued Compensation and
Benefits
410,593 2,866 - 413,459

Accounts Payable, Accrued
Expenses and Other Liabilities
176,418 112,699 (108,858 ) 180,259

Total Liabilities 2,144,933 1,488,765 (263,086 ) 3,370,612

Redeemable Non-Controlling
Interests in Consolidated Entities
- - 362,462 362,462

Partners' Capital

Partners' Capital 3,509,448 504,562 (504,562 ) 3,509,448

Accumulated Other
Comprehensive Income (Loss)
(291 ) - - (291 )

Non-Controlling Interests
in Consolidated Entities
(95,206 ) 293,403 - 198,197

Non-Controlling Interests in
Blackstone Holdings
1,821,759 - - 1,821,759

Total Partners' Capital 5,235,710 797,965 (504,562 ) 5,529,113

Total Liabilities and
Partners' Capital
$ 7,380,643 $ 2,286,730 $ (405,186 ) $ 9,262,187

THE BLACKSTONE GROUP L.P.

Exhibit 3.  Condensed Consolidated Statements of Cash Flows

(Dollars in Thousands)

Three Months Ended Three Months Ended Nine Months Ended

March 31, 2008 June 30,
2008
September 30,
2008
December 31,
2008
Full Year 2008 March 31, 2009 June 30,
2009
September 30,
2009
September 30,
2009
September 30,
2008

Operating Activities

Net Income (Loss) $ (1,254,157 ) $ (594,627 ) $ (1,822,345 ) $ (1,923,025 ) $ (5,594,154 ) $ (929,938 ) $ (597,871 ) $ (479,510 ) $ (2,007,319 ) $ (3,671,129 )

Adjustments to Reconcile Net Income
(Loss) to Net Cash Provided by

Operating Activities:

Blackstone Funds Related:

Non-Controlling Interests in
Income (Loss) of Consolidated

Entities
209,980 (121,292 ) 389,856 202,011 680,555 13,235 (98,161 ) (134,344 ) (219,270 ) 478,544

Net Realized (Gains) Losses on
Investments
256 (118,555 ) 204,373 78,652 164,726 53,190 38,369 48,818 140,377 86,074

Changes in Unrealized (Gains)
Losses on Investments Allocable

to Blackstone Group
62,823 (7,770 ) 182,138 386,870 624,061 78,218 14,758 (51,983 ) 40,993 237,191

Unrealized Depreciation
on Hedge Activities
- - - - - - - 8,799 8,799 -

Non-Cash Performance Fees and
Allocations
76,279 37,343 393,282 579,154 1,086,058 101,770 (89,499 ) (134,248 ) (121,977 ) 506,904

Equity-Based Compensation Expense 914,671 805,597 774,431 807,918 3,302,617 738,045 762,521 738,404 2,238,970 2,494,699

Intangible Amortization 33,528 40,685 39,512 39,512 153,237 39,513 39,511
39,513

118,537
113,725

Other Non-Cash Amounts Included in
Net Income
3,845 5,102 4,470 6,271 19,688 6,006 6,026
5,945

17,977
13,417

Cash Flows Due to Changes in
Operating Assets and Liabilities
316,363 112,039 (96,073 ) 651,625 983,954 182,718 21,332 64,241 268,291 332,329

Investments Purchased - - - - - - - (1,030,000 ) (1,030,000 ) -

Blackstone Funds Related Investment
Activity
(248,434 ) (2,697 ) 351,860 368,964 469,693 273,125 39,718 137,307 450,150 100,729

Net Cash Provided by (Used in)
Operating Activities
115,154 155,825 421,504 1,197,952 1,890,435 555,882 136,704 (787,058 ) (94,472 ) 692,483

Investing Activities

Net Cash Provided by (Used in)
Investing Activities
(388,918 ) 20,210 (9,731 ) (3,241 ) (381,680 ) (2,044 ) (9,450 ) (5,590 ) (17,084 ) (378,439 )

Financing Activities

Net Cash Provided by (Used in)
Financing Activities
77,714 (630,954 ) 505,521 (1,825,928 ) (1,873,647 ) (281,272 ) (118,978 ) 494,539 94,289 (47,719 )

Effect of Exchange Rate Changes on Cash
and Cash Equivalents
90 (90 ) - - - - - - - -

Net Increase (Decrease) in Cash
and Cash Equivalents
(195,960 ) (455,009 ) 917,294 (631,217 ) (364,892 ) 272,566 8,276 (298,109 ) (17,267 ) 266,325

Cash and Cash Equivalents, Beginning of
Period
868,629 672,669 217,660 1,134,954 868,629 503,737 776,303 784,579 503,737 868,629

Cash and Cash Equivalents, End of Period $ 672,669 $ 217,660 $ 1,134,954 $ 503,737 $ 503,737 $ 776,303 $ 784,579 $ 486,470 $ 486,470 $ 1,134,954

THE BLACKSTONE GROUP L.P.

Exhibit 4a.  Economic Net Income and Net Fee Related Earnings from Operations

(Dollars in Thousands)

The tables below detail Blackstone’s Economic Net Income and Net Fee Related Earnings from Operations. Net Fee Related Earnings from Operations is a supplemental measure of after tax performance used to highlight earnings from operations excluding the income from and related profit sharing expenses of Blackstone’s performance fees and allocations and investment income except for interest income. The reconciliation of Economic Net Income to Net Fee Related Earnings from Operations is presented in Exhibit 4b to this release.

Three Months Ended Nine Months Ended

March 31,
2008

June 30,
2008

September 30,
2008

December 31,
2008

March 31,
2009

June 30,
2009

September 30,
2009

September 30,
2009

September 30,
2008

Corporate Private Equity

Revenues

Management Fees

Base Management Fees $ 67,336 $ 66,967 $ 67,009 $ 67,649 $ 68,431 $ 67,740 $ 67,009 $ 203,180 $ 201,312

Transaction and Other Fees * 10,837 19,161 26,090 24,862 13,982 15,711 19,303 48,996 56,088

Management Fee Offsets ** (8,410 ) (15,232 ) (9,330 ) (1,044 ) (3,654 ) (566 ) (935 ) (5,155 ) (32,972 )

Total Management Fees 69,763 70,896 83,769 91,467 78,759 82,885 85,377 247,021 224,428

Performance Fees and Allocations (163,430 ) 21,960 (104,653 ) (184,362 ) 4,818 97,185 110,867 212,870 (246,123 )

Investment Income (Loss) and Other (23,050 ) (408 ) (47,454 ) (100,668 ) (15,481 ) 18,516 30,664 33,699 (70,912 )

Total Revenues (116,717 ) 92,448 (68,338 ) (193,563 ) 68,096 198,586 226,908 493,590 (92,607 )

Expenses

Compensation and Benefits (80,752 ) 40,283 34,192 22,483 (5,124 ) 54,263 69,901 119,040 (6,277 )

Other Operating Expenses 22,200 20,880 23,957 23,093 20,108 20,553 21,318 61,979 67,037

Total Segment Expenses (58,552 ) 61,163 58,149 45,576 14,984 74,816 91,219 181,019 60,760

Economic Net Income (Loss) $ (58,165 ) $ 31,285 $ (126,487 ) $ (239,139 ) $ 53,112 $ 123,770 $ 135,689 $ 312,571 $ (153,367 )

Net Fee Related Earnings from
Operations
$ 18,297 $ 15,871 $ 16,194 $ 31,566 $ 19,883 $ 23,885 $ 21,153 $ 64,921 $ 50,362

Real Estate

Revenues

Management Fees

Base Management Fees $ 66,751 $ 67,977 $ 80,361 $ 80,832 $ 80,198 $ 81,517 $ 83,409 $ 245,124 $ 215,089

Transaction and Other Fees * 11,795 6,854 7,050 10,347 3,140 2,879 3,347 9,366 25,699

Management Fee Offsets ** (404 ) (326 ) (1,435 ) (2,804 ) (1,193 ) (486 ) (415 ) (2,094 ) (2,165 )

Total Management Fees 78,142 74,505 85,976 88,375 82,145 83,910 86,341 252,396 238,623

Performance Fees and Allocations (30,062 ) (77,133 ) (302,448 ) (409,380 ) (228,573 ) (47,370 ) 12,167 (263,776 ) (409,643 )

Investment Income (Loss) and Other (176 ) (11,788 ) (57,180 ) (156,840 ) (66,127 ) (55,461 ) 1,649 (119,939 ) (69,144 )

Total Revenues 47,904 (14,416 ) (273,652 ) (477,845 ) (212,555 ) (18,921 ) 100,157 (131,319 ) (240,164 )

Expenses

Compensation and Benefits 35,688 32,083 21,102 (12,080 ) (37,319 ) (6,824 ) 42,515 (1,628 ) 88,873

Other Operating Expenses 16,160 12,581 14,807 12,234 12,615 12,978 13,437 39,030 43,548

Total Segment Expenses 51,848 44,664 35,909 154 (24,704 ) 6,154 55,952 37,402 132,421

Economic Net Income (Loss) $ (3,944 ) $ (59,080 ) $ (309,561 ) $ (477,999 ) $ (187,851 ) $ (25,075 ) $ 44,205 $ (168,721 ) $ (372,585 )

Net Fee Related Earnings from
Operations
$ 20,317 $ 22,787 $ 32,739 $ 43,778 $ 30,513 $ 32,867 $ 33,376 $ 96,756 $ 75,843

Credit and Marketable Alternatives

Revenues

Management Fees

Base Management Fees $ 103,187 $ 127,465 $ 131,908 $ 114,276 $ 96,503 $ 96,293 $ 105,430 $ 298,226 $ 362,560

Transaction and Other Fees * 1,128 2,884 3,806 698 443 687 778 1,908 7,818

Management Fee Offsets ** - (16 ) (165 ) (6,425 ) (4,213 ) (4,365 ) (4,121 ) (12,699 ) (181 )

Total Management Fees 104,315 130,333 135,549 108,549 92,733 92,615 102,087 287,435 370,197

Performance Fees and Allocations 5,058 45,027 (12,488 ) (35,338 ) 9,922 22,419 43,736 76,077 37,597

Investment Income (Loss) and Other (79,383 ) 49,885 (171,033 ) (128,954 ) (3,452 ) 25,375 33,573 55,496 (200,531 )

Total Revenues 29,990 225,245 (47,972 ) (55,743 ) 99,203 140,409 179,396 419,008 207,263

Expenses

Compensation and Benefits 56,273 84,162 60,268 40,252 61,134 57,406 79,801 198,341 200,703

Other Operating Expenses 18,307 25,158 26,073 36,489 23,645 16,461 18,123 58,229 69,538

Total Segment Expenses 74,580 109,320 86,341 76,741 84,779 73,867 97,924 256,570 270,241

Economic Net Income (Loss) $ (44,590 ) $ 115,925 $ (134,313 ) $ (132,484 ) $ 14,424 $ 66,542 $ 81,472 $ 162,438 $ (62,978 )

Net Fee Related Earnings from
Operations
$ 26,322 $ 40,490 $ 42,417 $ 21,712 $ 14,428 $ 25,164 $ 24,005 $ 63,597 $ 109,229

Financial Advisory

Revenues

Advisory Fees $ 68,563 $ 71,080 $ 157,026 $ 100,850 $ 90,940 $ 82,503 $ 94,566 $ 268,009 $ 296,669

Investment Income and Other 2,597 1,826 3,716 4,908 101 996 2,777 3,874 8,139

Total Revenues 71,160 72,906 160,742 105,758 91,041 83,499 97,343 271,883 304,808

Expenses

Compensation and Benefits 46,967 48,574 82,295 56,919 50,952 54,239 57,686 162,877 177,836

Other Operating Expenses 11,061 12,537 17,352 26,327 12,976 21,734 22,666 57,376 40,950

Total Segment Expenses 58,028 61,111 99,647 83,246 63,928 75,973 80,352 220,253 218,786

Economic Net Income $ 13,132 $ 11,795 $ 61,095 $ 22,512 $ 27,113 $ 7,526 $ 16,991 $ 51,630 $ 86,022

Net Fee Related Earnings from
Operations
$ 2,625 $ 11,295 $ 60,460 $ 20,798 $ 24,694 $ 4,874 $ 16,405 $ 45,973 $ 74,380

Economic Net Income Recap,
Total Segments

Revenues

Management Fees

Base Management Fees $ 237,274 $ 262,409 $ 279,278 $ 262,757 $ 245,132 $ 245,550 $ 255,848 $ 746,530 $ 778,961

Advisory Fees 68,563 71,080 157,026 100,850 90,940 82,503 94,566 268,009 296,669

Transaction and Other Fees * 23,760 28,899 36,946 35,907 17,565 19,277 23,428 60,270 89,605

Management Fee Offsets ** (8,814 ) (15,574 ) (10,930 ) (10,273 ) (9,060 ) (5,417 ) (5,471 ) (19,948 ) (35,318 )

Total Management and
Advisory Fees
320,783 346,814 462,320 389,241 344,577 341,913 368,371 1,054,861 1,129,917

Performance Fees and Allocations (188,434 ) (10,146 ) (419,589 ) (629,080 ) (213,833 ) 72,234 166,770 25,171 (618,169 )

Investment Income (Loss) and Other (100,012 ) 39,515 (271,951 ) (381,554 ) (84,959 ) (10,574 ) 68,663 (26,870 ) (332,448 )

Total Revenues 32,337 376,183 (229,220 ) (621,393 ) 45,785 403,573 603,804 1,053,162 179,300

Expenses

Compensation and Benefits 58,176 205,102 197,857 107,574 69,643 159,084 249,903 478,630 461,135

Other Operating Expenses 67,728 71,156 82,189 98,143 69,344 71,726 75,544 216,614 221,073

Total Segment Expenses 125,904 276,258 280,046 205,717 138,987 230,810 325,447 695,244 682,208

Total Economic Net Income (Loss) $ (93,567 ) $ 99,925 $ (509,266 ) $ (827,110 ) $ (93,202 ) $ 172,763 $ 278,357 $ 357,918 $ (502,908 )

Total Net Fee Related Earnings
from Operations
$ 67,561 $ 90,443 $ 151,810 $ 117,854 $ 89,518 $ 86,790 $ 94,939 $ 271,247 $ 309,814

____________________

* Transaction and Other Fees are net of amounts, if any, shared with limited partners.

** Primarily placement fees and, for Corporate Private Equity, broken deal expenses.

THE BLACKSTONE GROUP L.P.

Exhibit 4b.  Reconciliation of Income (Loss) Before Provision (Benefit) for Taxes to Total Segments Economic Net Income,

of Total Segments, Economic Net Income to Net Fee Related Earnings from Operations, of Net Fee Related Earnings from Operations

to Adjusted Cash Flows from Operations and of Earnings Before Interest, Taxes and Depreciation and Amortization from Net Fee

Related Earnings from Operations to Net Fee Related Earnings from Operations

(Dollars in Thousands)

The tables below reconcile Economic Net Income (Loss) to Net Fee Related Earnings from Operations.

Three Months Ended Nine Months Ended

March 31,
2008

June 30,
2008

September 30,
2008

December 31,
2008

March 31,
2009

June 30,
2009

September 30,
2009

September 30,
2009

September 30,
2008

Corporate Private Equity

Economic Net Income (Loss) $ (58,165 ) $ 31,285 $ (126,487 ) $ (239,139 ) $ 53,112 $ 123,770 $ 135,689 $ 312,571 $ (153,367 )

Performance Fees and Allocations Adjustment (a) 163,430 (21,960 ) 104,653 184,362 (4,818 ) (97,185 ) (110,867 ) (212,870 ) 246,123

Investment Income (Loss) and Other Adjustment (b) 23,050 408 47,454 100,668 15,481 (18,516 ) (30,664 ) (33,699 ) 70,912

Interest Income (c) 874 326 436 9,297 28 1,296 3,230 4,554 1,636

Performance Related Compensation and Benefits Adjustment (d) (109,934 ) 7,678 (6,181 ) (21,908 ) (41,972 ) 13,596 27,890 (486 ) (108,437 )

Taxes Payable (e) (958 ) (1,866 ) (3,681 ) (1,714 ) (1,948 ) 924 (4,125 ) (5,149 ) (6,505 )

Net Fee Related Earnings from Operations $ 18,297 $ 15,871 $ 16,194 $ 31,566 $ 19,883 $ 23,885 $ 21,153 $ 64,921 $ 50,362

Real Estate

Economic Net Income (Loss) $ (3,944 ) $ (59,080 ) $ (309,561 ) $ (477,999 ) $ (187,851 ) $ (25,075 ) $ 44,205 $ (168,721 ) $ (372,585 )

Performance Fees and Allocations Adjustment (a) 30,062 77,133 302,448 409,380 228,573 47,370 (12,167 ) 263,776 409,643

Investment Income (Loss) and Other Adjustment (b) 176 11,788 57,180 156,840 66,127 55,461 (1,649 ) 119,939 69,144

Interest Income (Expense) (c) 2,445 (429 ) 1,511 5,361 (285 ) 2,602 3,485 5,802 3,527

Performance Related Compensation and Benefits Adjustment (d) (1,921 ) (4,759 ) (19,121 ) (48,090 ) (73,321 ) (46,031 ) 4,031 (115,321 ) (25,801 )

Taxes Payable (e) (6,501 ) (1,866 ) 282 (1,714 ) (2,730 ) (1,460 ) (4,529 ) (8,719 ) (8,085 )

Net Fee Related Earnings from Operations $ 20,317 $ 22,787 $ 32,739 $ 43,778 $ 30,513 $ 32,867 $ 33,376 $ 96,756 $ 75,843

Credit and Marketable Alternatives

Economic Net Income (Loss) $ (44,590 ) $ 115,925 $ (134,313 ) $ (132,484 ) $ 14,424 $ 66,542 $ 81,472 $ 162,438 $ (62,978 )

Performance Fees and Allocations Adjustment (a) (5,058 ) (45,027 ) 12,488 35,338 (9,922 ) (22,419 ) (43,736 ) (76,077 ) (37,597 )

Investment Income (Loss) and Other Adjustment (b) 79,383 (49,885 ) 171,033 128,954 3,452 (25,375 ) (33,573 ) (55,496 ) 200,531

Interest Income (c) 2,889 1,836 1,215 3,805 456 594 1,644 2,694 5,940

Performance Related Compensation and Benefits Adjustment (d) 1,360 18,141 (5,798 ) (12,188 ) 7,427 8,102 25,436 40,965 13,703

Taxes Payable (e) (7,662 ) (500 ) (2,208 ) (1,713 ) (1,409 ) (2,280 ) (7,238 ) (10,927 ) (10,370 )

Net Fee Related Earnings from Operations $ 26,322 $ 40,490 $ 42,417 $ 21,712 $ 14,428 $ 25,164 $ 24,005 $ 63,597 $ 109,229

Financial Advisory

Economic Net Income $ 13,132 $ 11,795 $ 61,095 $ 22,512 $ 27,113 $ 7,526 $ 16,991 $ 51,630 $ 86,022

Investment Income (Loss) and Other Adjustment (b) (2,597 ) (1,826 ) (3,716 ) (4,908 ) (101 ) (996 ) (2,777 ) (3,874 ) (8,139 )

Interest Income (c) 2,596 1,826 3,717 4,908 101 996 2,301 3,398 8,139

Taxes Payable (e) (10,506 ) (500 ) (636 ) (1,714 ) (2,419 ) (2,652 ) (110 ) (5,181 ) (11,642 )

Net Fee Related Earnings from Operations $ 2,625 $ 11,295 $ 60,460 $ 20,798 $ 24,694 $ 4,874 $ 16,405 $ 45,973 $ 74,380

____________________

(a) This adjustment removes from ENI the segment amount of Performance Fees and Allocations.

(b) This adjustment removes from ENI the segment amount of Investment Income (Loss) Other.

(c) Represents the Interest Income portion of Investment Income (Loss) and Other.

(d) This adjustment removes from expenses the compensation and benefit amounts related to Blackstone’s profit sharing plans related to Performance Fees and Allocations.

(e) Represents an implied payable for income taxes calculated using the same methodology applied in calculating the provision for The Blackstone Group L.P.

Three Months Ended
Nine Months Ended

March 31,
2008

June 30,
2008

September 30,
2008

December 31,
2008

March 31,
2009

June 30,
2009

September 30,
2009

September 30,
2009

September 30,
2008

Income (Loss) Before Provision (Benefit) for Taxes $ (1,245,176 ) $ (620,478 ) $ (1,843,707 ) $ (1,898,938 ) $ (912,207 ) $ (586,986 ) $ (426,959 ) $ (1,926,152 ) $ (3,709,361 )

IPO and Acquisition-Related Charges (a) 918,971 818,026 816,343 779,381 741,057 761,834 719,708 2,222,599 2,553,340

Amortization of Intangibles (b) 33,528 40,685 39,512 39,512 39,513 39,511 39,512 118,536 113,725

Income (Loss) Associated with Non-Controlling Interests
in Income (Loss) of Consolidated Entities (c)
199,110 (138,308 ) 478,586 252,935 38,435 (41,596 ) (53,904 ) (57,065 ) 539,388

Total Segments

Total Segments, Economic Net Income (Loss) (93,567 ) 99,925 (509,266 ) (827,110 ) (93,202 ) 172,763 278,357 357,918 (502,908 )

Performance Fees and Allocations Adjustment (d) 188,434 10,146 419,589 629,080 213,833 (72,234 ) (166,770 ) (25,171 ) 618,169

Investment Income (Loss) and Other Adjustment (e) 100,012 (39,515 ) 271,951 381,554 84,959 10,574 (68,663 ) 26,870 332,448

Interest Income (f) 8,804 3,559 6,879 23,371 300 5,488 10,660 16,448 19,242

Performance Related Compensation and Benefits
Adjustment (g)
(110,495 ) 21,060 (31,100 ) (82,186 ) (107,866 ) (24,333 ) 57,357 (74,842 ) (120,535 )

Taxes Payable (h) (25,627 ) (4,732 ) (6,243 ) (6,855 ) (8,506 ) (5,468 ) (16,002 ) (29,976 ) (36,602 )

Net Fee Related Earnings from Operations 67,561 90,443 151,810 117,854 89,518 86,790 94,939 271,247 309,814

Realized Performance Fees and Allocations (i) 8,286 15,054 5,237 4,639 - 474 (1,820 ) (1,346 ) 28,577

Realized Investment (Income) Loss (j) (80,249 ) 56,028 (166,047 ) (141,814 ) (14,734 ) 15,032 38,815 39,113 (190,268 )

Adjusted Cash Flows From Operations $ (4,402 ) $ 161,525 $ (9,001 ) $ (19,321 ) $ 74,784 $ 102,296 $ 131,934 $ 309,014 $ 148,122

Earnings Before Interest, Taxes and Depreciation
and Amortization from Net Fee Related Earnings

from Operations (k)
$ 99,923 $ 103,639 $ 167,781 $ 139,413 $ 104,846 $ 97,463 $ 121,259 $ 323,568 $ 371,343

____________________

(a) This adjustment adds back to Income (Loss) Before Provision for Taxes amounts for Transaction-Related Charges which include principally equity-based compensation charges associated with Blackstone’s initial public offering and other corporate actions.

(b) This adjustment adds back to Income (Loss) Before Provision for Taxes amounts for the Amortization of Intangibles which are associated with Blackstone’s initial public offering and other corporate actions.

(c) This adjustment adds back to Income (Loss) Before Provision for Taxes the amount of Income (Loss) Associated with Non-Controlling Interests in Income (Loss) of Consolidated Entities.

(d) This adjustment removes from ENI the segment amount of Performance Fees and Allocations.

(e) This adjustment removes from ENI the segment amount of Investment Income (Loss) Other.

(f) Represents the Interest Income portion of Investment Income (Loss) and Other.

(g) This adjustment removes from expenses the compensation and benefit amounts related to Blackstone’s profit sharing plans related to Performance Fees and Allocations.

(h) Represents an implied payable for income taxes calculated using the same methodology applied in calculating the provision for The Blackstone Group L.P.

(i) Represents the adjustment for realized Performance Fees and Allocations net of corresponding actual amounts due under Blackstone’s profit sharing plans related thereto.

(j) Represents the adjustment for Blackstone’s investment income (realized and unrealized) on its liquid investments from its Credit and Marketable Alternatives segment, as well as its net realized investment income on its illiquid investments, principally from its Corporate Private Equity and Real Estate Segments and permanent impairment charges on certain illiquid investments.

(k)Earnings Before Interest, Taxes and Depreciation and Amortization from Net Fee Related Earnings from Operations represents Net Fee Related Earnings from Operations adding back the implied taxes payable for Net Fee Related Earnings from Operations, see (h), and segment interest and depreciation and amortization.

THE BLACKSTONE GROUP L.P.

Exhibit 5.  Reconciliation of Adjusted Cash Flows from Operations to Net Cash Provided by Operating Activities, of Weighted-Average Economic Net Income Adjusted Units—Diluted to Total GAAP Weighted-Average Common Units Outstanding—Diluted and of Economic Net Income Adjusted Units—Diluted to Total GAAP Common Units Outstanding—Diluted

(Dollars in Thousands, Except Unit Data)

The following table provides a reconciliation of Blackstone’s Adjusted Cash Flows from Operations to Blackstone’s Net Cash Provided by Operating Activities. Adjusted Cash Flows from Operations is a supplemental measure of liquidity to assess liquidity and amounts available for distributions to Blackstone unitholders, including Blackstone personnel.

Three Months Ended September 30, Nine Months Ended September 30,

2009 2008 2009 2008

Net Cash Provided by (Used In) Operating Activities $ (787,058 ) $ 421,504 $ (94,472 ) $ 692,483

Unrealized Depreciation on Hedge Activities (8,799 ) - (8,799 ) -

Changes in Operating Assets and Liabilities (64,241 ) 96,073 (268,291 ) (332,326 )

Investments Purchased 1,030,000 - 1,030,000 -

Blackstone Funds Related Investment Activities (137,307 ) (351,860 ) (450,150 ) (100,729 )

Net Realized Gains (Losses) on Investments (48,818 ) (204,373 ) (140,377 ) (86,074 )

Non-Controlling Interests in Income of Consolidated Entities 437,671 1,092,158 1,654,548 2,444,730

Realized Gains (Losses) - Blackstone Funds 37,061 (31,473 ) 33,602 (11,241 )

Cash Flows from Operations - Adjustments

Interests Held by Blackstone Holdings Limited Partners (a) (357,230 ) (1,003,425 ) (1,492,343 ) (2,383,885 )

Incremental Cash Tax Effect (b) 30,655 (27,605 ) 45,296 (74,836 )

Adjusted Cash Flows from Operations $ 131,934 $ (9,001 ) $ 309,014 $ 148,122

  The following table provides the details of the components of Adjusted Cash Flows from Operations. Adjusted Cash Flows from Operations is the principal factor in determining the amount of distributions to unitholders.

Three Months Ended September 30, Nine Months Ended September 30,

2009 2008 2009 2008

Fee Related Earnings

Total Management and Advisory Fees (c) $ 379,031 $ 469,193 $ 1,071,309 $ 1,149,153

Total Expenses (d) 284,092 317,383 800,062 839,339

Net Fee Related Earnings from Operations 94,939 151,810 271,247 309,814

Performance Fees and Allocations Net of Related
Compensation (e)
(1,820 ) 5,237 (1,346 ) 28,571

Blackstone Investment Income (f)

Liquid 23,183 (167,436 ) 38,430 (204,325 )

Illiquid 15,632 1,389 683 14,062

38,815 (166,047 ) 39,113 (190,263 )

Adjusted Cash Flows from Operations $ 131,934 $ (9,001 ) $ 309,014 $ 148,122

(a) Represents an adjustment to add back net income (loss) allocable to interest holders of Blackstone Holdings Limited Partners after the Reorganization recorded as Non-Controlling Interests.

(b) Represents the provisions for and/or adjustments to income taxes that were calculated using the same methodology applied in calculating such amounts for the period after the reorganization.

(c) Comprised of total segment Management and Advisory Fees plus interest income.

(d) Comprised of total segment compensation expense (excluding compensation expense related to Performance Fees and Allocations pursuant to Blackstone’s profit sharing plans related to carried interest and incentive fees which are included in (e) below), other operating expenses and Blackstone’s estimate of taxes payable.

(e) Represents realized Performance Fees and Allocations net of corresponding actual amounts due under Blackstone’s profit sharing plans related thereto. The negative amounts for the three and nine months ended September 30, 2009 are the result of timing differences between the tax payment due date on certain taxable Performance Fees and Allocations and the cash receipt date of such Performance Fees and Allocations.

(f) Comprised of Blackstone’s investment income (realized and unrealized) on its liquid investments from its Credit and Marketable Alternatives segment, as well as its net realized investment income on its illiquid investments, principally from its Corporate Private Equity and Real Estate Segments and permanent impairment charges on certain illiquid investments.

The following table provides a reconciliation of Blackstone’s Total GAAP Weighted-Average Common Units Outstanding—Diluted to Weighted-Average Economic Net Income Adjusted Units—Diluted.

Three Months Ended September 30, Nine Months Ended September 30,

2009 2008 2009 2008

Total GAAP Weighted-Average Common Units
Outstanding - Diluted
291,554,570 271,184,349 280,856,859 265,999,542

Adjustments:

Weighted-Average Partnership Units 808,479,683 831,014,915 820,944,937 832,994,660

Weighted-Average Unvested Deferred Restricted Common Units 19,750,299 26,844,556 23,353,728 29,983,203

Weighted-Average Economic Net Income Adjusted Units - Diluted 1,119,784,552 1,129,043,820 1,125,155,525 1,128,977,404

The following table provides a reconciliation of Blackstone’s Total GAAP Common Units Outstanding—Diluted to Economic Net Income Adjusted Units—Diluted as of September 30, 2009.

Total GAAP Common Units Outstanding - Diluted 301,651,099

Adjustments:

Partnership Units 796,525,017

Unvested Deferred Restricted Common Units 21,491,469

Economic Net Income Adjusted Units - Diluted 1,119,667,585

THE BLACKSTONE GROUP L.P.

Exhibit 6.  Supplemental Metrics

(Dollars in Thousands)

As of and for the Quarters Ended

September 30,

2009 2008

Total Assets Under Management

(End of Period)

Corporate Private Equity $ 24,308,879 $ 28,390,384

Real Estate 20,434,831 28,738,307

CAMA (a) 52,810,672 59,150,535

$ 97,554,382 $ 116,279,226

Fee-Earning Assets Under Management

(End of Period)

Corporate Private Equity $ 25,184,161 $ 25,349,192

Real Estate 23,692,257 22,576,659

CAMA (b) 47,448,212 51,799,414

$ 96,324,630 $ 99,725,265

Weighted-Average Fee-Earning

Assets Under Management

(For the Three Months Ended)

Corporate Private Equity $ 25,240,130 $ 25,258,457

Real Estate 23,815,694 22,786,022

CAMA (c) 45,739,248 55,065,692

$ 94,795,072 $ 103,110,171

Weighted-Average Fee-Earning

Assets Under Management

(Year to Date Period Ended)

Corporate Private Equity $ 25,298,679 $ 25,130,182

Real Estate 23,292,141 20,284,254

CAMA (d) 44,892,195 53,047,813

$ 93,483,015 $ 98,462,249

(a) Includes a decrease of $3.0 billion, related to Blackstone’s 2008 decision to liquidate its proprietary single manager hedge funds.

(b) Includes a decrease of $2.8 billion, related to the matters discussed in (a).

(c) Includes a decrease of $3.4 billion, related to matters discussed in (a).

(d) Includes a decrease of $3.5 billion, related to the matters discussed in (a).

As of and for the Quarters Ended

September 30,

2009

2008

Limited Partner Capital Deployed

(For the Three Months Ended)

Corporate Private Equity $ 109,082 $ 1,511,065

Real Estate 34,993 131,129

CAMA (a) 87,346 657,610

$ 231,421 $ 2,299,804

Limited Partner Capital Deployed

(Year to Date Period Ended)

Corporate Private Equity $ 643,491 $ 2,627,128

Real Estate 502,803 710,110

CAMA (a) 407,805 1,485,874

$ 1,554,099 $ 4,823,112

Fund Level Unrealized Value (b)

(End of Period)

Corporate Private Equity

Cost $ 19,157,223 $ 17,901,156

Unrealized Value $ 15,771,763 $ 18,023,897

Real Estate

Cost $ 11,802,676 $ 11,224,808

Unrealized Value $ 6,635,416 $ 13,473,939

CAMA (a)

Cost $ 3,001,616 $ 2,539,773

Unrealized Value $ 2,789,529 $ 2,409,760

(a) Limited Partner Capital Deployed and Fund Level Unrealized Value for the CAMA segment represent activity in Blackstone’s mezzanine and credit liquidity funds.

(b) Cost and unrealized value represents the limited partners’ share, including co-investments arranged by Blackstone, of those fund level investments, on which carried interest can be earned, before carried interest allocations to Blackstone when a fund achieves cumulative investment returns in excess of a specified rate.