Blackstone Inc.

Good day and welcome to the Blackstone second quarter 2024 investor call. Today's call is being recorded. At this time, all participants are in listen-only mode. If you require operator assistance at any time, please press star zero. If you would like to ask a question, please signal by pressing star one on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. At this time, I'd like to turn the conference over to Weston Tucker. Head of Shareholder Relations, please go ahead.

Great, thank you and good morning and welcome to Blackstone's second quarter conference call. Joining today are Steve Schwarzman, Chairman and CEO, John Gray, President and Chief Operating Officer, and Michael Che, Chief Financial Officer. Earlier this morning, we issued a press release and slide presentation, which are available on our website. We expect to file our 10Q report in a few weeks. I'd like to remind you that today's call may include forward-looking statements which are uncertain and may differ from actual results materially. We do not undertake any duty to update these statements. For a discussion of some of the factors that could affect results, please see the risk factor section of our 10-K. We'll also refer to non-GAAP measures and you'll find reconciliations in the press release on the shareholders page of our website. Also note that nothing on this call constitutes an offer to sell or a solicitation of an offer to purchase an interest in any Blackstone fund. This audio cast is copyrighted material of Blackstone and may not be duplicated without consent. So quickly on results. We reported GAAP net income for the quarter of $948 million. Distributable earnings were $1.3 billion, or 96 cents per common share. And we declared a dividend of 82 cents, which will be paid to holders of record as of July 29th. With that, I'll turn the call over to Steve.

Good morning, and thank you for joining our call. On our last several earnings calls, we spent a good deal of time talking about how we saw inflation compared to many other market participants. We took a strong view that we were seeing different outcomes with inflation moderating more quickly, in part because of our unique position in the real estate area and our understanding of the shelter component of the consumer price index. As a result of our convictions, we decided to adopt a more aggressive approach to new investments. I'm pleased to report that in the second quarter, we deployed $34 billion, the highest level in two years, and nearly $90 billion in the last three quarters since the 10-year Treasury yield peaked. With inflation continuing to recede, We expect the Fed to begin cutting interest rates later this year. This should be very positive for Blackstone's asset values and provide the foundation for a significant realization cycle over time. As the largest alternatives firm in the world with nearly $1.1 trillion of AUM, the real-time data collected across our global portfolio provides insights that help us decide in which areas to concentrate our investments. This data also alerts us to major paradigm shifts, which is essential for any top performing asset manager. Our firm has demonstrated this foresight repeatedly since our founding, including the decision to extend our private equity business into real estate in 1991 when values collapsed following the savings and loan crisis. By significantly expanding our credit platform in 2008 in advance of the extraordinary investment opportunities that arose from the global financial crisis. Being the first investment alternatives firm to start and develop a dedicated private wealth business in 2011. and introducing the first large-scale perpetual product for that channel in 2017. And our decision later the same year to create a perpetual infrastructure strategy for institutional investors, which now anchors an overall infrastructure platform across Blackstone of over $100 billion. This demonstrated ability to be in the right place at the right time continues on an accelerated basis today. This includes our investments and innovation in all types of private credit, where we're one of the world's largest managers. In global logistics, as the largest private owner of warehouses in the world. In the energy transition field, where we own the largest private renewables developer in the United States. In India, where we believe Blackstone is the largest alternatives investor in what has become the fastest growing major economy. And of course, in data centers, where we own the fastest growing platform in the world. I'd like to take a moment to discuss what Blackstone is doing today in artificial intelligence, specifically in data centers, which is an essential part of that breakthrough area. AI is widely acknowledged as having the potential to be one of the greatest drivers of transformation in a generation. I have personally been active in this field since 2015. I believe the consequences of AI are as profound as what occurred in 1880 when Thomas Edison patented the electric light bulb. While it took years to develop commercially viable products, the subsequent build-out of the electric grid over the following decades has parallels to the creation of data centers today to power the AI revolution. Current expectations that there will be approximately $1 trillion of capital expenditures in the United States over the next five years to build and facilitate new data centers with another $1 trillion of capital expenditures outside the United States. And the need to provide power for these data centers is a major contributor to an expected 40% increase and electricity demand in the United States over the next decade compared to minimal growth in the last decade. We believe these explosive trends will lead to unprecedented investment opportunities for our firm. Blackstone is positioning itself to be the largest financial investor in AI infrastructure in the world as a result of our platform, capital, and expertise. Our portfolio today consists of $55 billion of data centers, including facilities under construction, along with over $70 billion in prospective pipeline development. Our largest data center portfolio company, QTS, has grown lease capacity seven times since we took it private in 2021. Through QTS and our other holdings, we have a robust, ongoing dialogue with the world's largest data center customers. We're also providing equity and debt capital to other AI-related companies. For example, in the second quarter, we committed to provide AI-focused cloud service provider CoreWeave with $4.5 billion of a $7.5 billion financing package. the largest debt financing in our history. And we're now focusing on addressing the sector's power needs in many differentiated ways. With large-scale platforms in infrastructure, real estate, private credit, and renewable energy, we are extremely well positioned to be the partner of choice in this rapidly growing area. In another important area where Blackstone once again has been in the right place at the right time is real estate. During the global financial crisis, most competitors were forced out of business or delivered mediocre results, in fact, sometimes losing money for their customers, where Blackstone, for our investors, ultimately doubled their money. How did we do it? We own the right assets in the right sectors with the right capital structures, enabling us to emerge from the crisis as the clear market leader. As a result, institutional limited partners and subsequently individual investors allocated significant capital to Blackstone Real Estate in contrast to most other real estate managers. With that capital, We repositioned our portfolio over time by selling U.S. office buildings and instead bought warehouses, rental housing, and eventually data centers. These three sectors comprise approximately 75% of our global real estate equity portfolio today compared to 2% in 2007. This repositioning drove the outperformance and extraordinary growth of our real estate business over the last decade and a half. Real estate markets, of course, are cyclical. And over the past two and a half years, the increase in interest rates and borrowing costs has created a more challenging environment. Even through this period, Blackstone Real Estate has delivered differentiated performance. VREIT, for example, has generated a cumulative return of 10% net in its largest share class since the beginning of 2022, and 10% plus net returns annually since inception seven and a half years ago, more than double the return of the public REIT market. Nearly 90% of BREIT's portfolio is in warehouse, rental housing, and data centers, with data centers alone contributing almost 500 basis points to returns in the last 12 months. The performance B-REIT has achieved is the key reason it is three times larger today than the next five largest non-traded REITs combined. Now the cost of capital has begun to decline. which should be further helped by Fed cuts later this year. We believe creating the basis for a new cycle of increasing values in real estate. At the same time, new construction for most types of real estate is declining dramatically, down 40 to 70% year over year, depending on the asset class. Looking forward, we are confident The outcomes experienced by our investors in this cycle will further reinforce our leadership position and will result in higher allocations to Blackstone from both institutional and private wealth channels in the future. Real estate is one of the largest asset classes in the world, and having the largest business when the cycle is turning should be very advantageous for our shareholders. Blackstone is the reference firm in the alternatives industry. And for nearly four decades, we've been an essential partner to our investors, helping them navigate a dynamic world. The Blackstone brand engenders deep trust with our clients, allowing us to innovate and build leading businesses across asset classes. We now have 75 individual investment strategies, and we are working on many more currently. Our near-term plans include launching several new products in the private wealth channel, the global expansion of our infrastructure platform, further deepening our penetration of the private credit and insurance markets, and expanding our business in Asia. Our firm is as innovative today as at any point in our history. Innovation in finance done correctly is essential to create the virtuous cycle of satisfied investors who provide more and more capital for future growth. I have great confidence that we are firmly on this path. And with that, I'd like to turn it over to John.