Blackstone 1Q16 Earnings Call Notes

Stephen A. Schwarzman – Chairman, Chief Executive Officer & Co-Founder

The market tantrum resulted in lots of dislocation

“The market tantrum in the first part of the year resulted in lots of dislocation, some of which has normalized, some of which has not. For example, many hedge funds were caught wrong footed in a classic short squeeze when the markets rebounded in March. Segments of the debt market still remain under considerable pressure. Investment sentiment is fragile and characterized by significant caution around choppy economic data, negative rates, political rhetoric and other factors.”

Not seeing any softness

” Secondly, on the assets we’re selling, I would say the bids are still very good. We’re seeing no softness whatsoever. We’re seeing no turn in rents or occupancies. So, it all feels good to us.”

Only buy prime real estate

“I’d say that we’re not big buyers in Real Estate in secondary and tertiary markets. And one of the reasons we’ve been able to have really remarkable results in Real Estate is you have to pick your asset class but you got to pick your regions where you’re doing things. So, I would say, we are dramatically underrepresented in secondary markets and I don’t know of any part of our Real Estate business that even touches a tertiary market from like being involved with approving all the deals. So, our business is not Real Estate across the board, everywhere. ”

The biggest risk in real estate is over building

“I think the biggest risk in Real Estate are over building. And when you get excess supply, and particularly if demand turns down, that’s when you get crushed in Real Estate and we don’t see that happening right now.”

Michael S. Chae – Senior Managing Director and Chief Financial Officer

Deals are coming back

“with the sort of revival of the markets in the past few weeks, deals are coming back. And GSO had an investor conference yesterday, and we’re talking about how their pipeline has never been stronger actually. They’re really, really excited, chomping at the bit around the market opportunity Steve and I talked about. And the pipeline and the backlogs are picking up, and the pricing in terms available to them are quite attractive. ”

Hamilton E. James – President, Chief Operating Officer & Director

We have to be able to add value in the investments that we make

“Yeah. Well, in general, remember that when we buy a company, we’re supposed to bring value added. And I’ve said before, if we can’t bring value add and we can’t – there’s not enough opportunities out there that the world’s overlooked, and we’re not enough smarter than other people just to find them and make a lot of money on huge amounts of capital. That’s not really – that’s not a sustainable business model. So what we have to do is buy companies and make them better run, higher margin, faster growing, better invested, better management teams, more productive, et cetera.”