Blackstone Inc.

Good day and welcome to the Blackstone Third Quarter 2024 Investor Call. Today's conference is being recorded. At this time, all participants are in a listen-only mode. If you require operator assistance at any time, please press star zero. If you'd 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, we'd like to turn the conference over to Weston Tucker. head of shareholder relations. Please go ahead.

Great, thank you, Katie, and good morning, and welcome to Blackstone's third 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 10-Q 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. And for a discussion of some of the factors that could affect results, please see the risk factors 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, please 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. On results, we reported gap net income for the quarter of $1.6 billion. Distributable earnings were $1.3 billion, or $1.1 per common share, and we declared a dividend of 86 cents per share, which will be paid to holders of record as of October 28th. With that, I'll turn the call over to Steve.

Thank you, Weston. Good morning, and thank you for joining our call. Blackstone reported strong third quarter results, including distributable earnings of $1.3 billion, as Weston mentioned, and the highest fee-related earnings in two years. Since the Fed began its interest rate tightening cycle in 2022, we've spent considerable time on our earnings calls discussing how we see the macro environment unfold. This included sharing our view on inflation. when we saw it moderating more quickly than many other market participants, which paved the way for the Fed to begin cutting interest rates last month. We also stated our belief that an easing of the cost of capital would be very positive for Blackstone's asset values and would be a catalyst for transaction activity, including deployment and ultimately realizations, which in turn fuel fundraisers. This is the virtuous cycle that powers our business. We believe we're now advancing towards the stage in the cycle that is always the most fun. In anticipation of improving markets, we substantially increased our investment pace, starting in the fourth quarter of 2023, close to a year ago, which coincided with the peak of the 10-year treasury yields. Since then, over the last 12 months, Blackstone has deployed $123 billion, representing one of the most active periods in our history and double the prior year comparable period. We've been planting the seeds of future value at what we believe is a favorable time. In terms of future harvesting, the third quarter marked the highest amount of overall fund depreciation in three years. Stepping back, this is a time of profound transformation across the economy and markets, as well as geopolitically. Today, more than ever, we believe Blackstone is the partner of choice to help investors navigate a complex world. Our scale and reputation provide the foundation for deep engagement and ongoing dialogue with our limited partners. As the reference firm in our industry, we have a distinctive ability to convene the key decision makers from our limited partners to discuss what's happening around the world. The insights we draw from our expansive platform and portfolio are highly valuable to them. Most recently, we've been engaging with our clients on a number of important areas, including the revolution underway, and artificial intelligence, the build-out of digital energy infrastructure needed to support AI, the renewable energy transition, the rise of private credit, the development of the secondaries market or alternatives, the extraordinary advances in drug development in the life sciences area, the emergence of India as one of the most important major economies, and the cyclical recovery in commercial real estate. I'll spend a moment discussing two of these areas in more detail, the platforms we are building in support of artificial intelligence and the recovery in real estate. First, with respect to AI. On previous calls, we've provided updates on our data center investments. Blackstone is the largest data center provider in the world, with holdings across the U.S., Europe, India, and Japan. Last month, we announced another major expansion by agreeing to acquire AirTrunk, the largest data center operator in the Asia-Pacific region, for $16 billion. We were uniquely positioned to execute on this investment given our expertise in this sector, the scale of our capital, the global integration of our teams, and our connectivity to the world's largest data center customers. Our ability to serve these customers represents a powerful illustration of how Blackstone has become a trusted solutions provider on a massive global scale to many of the largest and most valuable companies in the world. The Blackstone portfolio consists of $70 billion of data centers and over $100 billion in prospective pipeline development, including air trunk and facilities under construction. We've conceptualized this new business area, built conviction, and in only three years scaled it to the largest platform in the world. And there is much more we're doing. and plan to do in this area, including addressing the sector's growing power needs, which we believe will create enormous additional opportunities for investment over time. Turning to the recovery in commercial real estate. With the cost of capital moving lower, we've previously discussed our expectation of a new cycle of increasing values and improving investor sentiment towards the sector. One indication of this shift now underway is the renewed interest in the asset class from limited partners and financial advisors, notably for B-REIT. Repurchase requests in September were down over 90% from their peak, and we're seeing encouraging signs in terms of new sales. B-REIT is clearly moving towards positive net flows based on current trends. The vehicle's largest share class has outperformed the public REIT index by approximately 50% annually since its inception nearly eight years ago. We believe B-REIT's standing as the largest vehicle of its kind by far with strong investment performance and exceptional portfolio construction, including nearly 90% concentrated in warehouses, general housing, and data centers positions the vehicle extremely well in the context of improving flows into private real estate. Historically, in multi-year recovery periods following a downturn, private real estate has delivered approximately double the returns of all periods. As the largest owner of commercial real estate, this dynamic should be quite positive for Blackstone and our investors. Overall, our limited partners have benefited significantly from the exceptional balance of the firm and the careful way we've positioned their capital in a volatile world. Looking forward, our business is accelerating, and we are in the early days of penetrating markets of enormous size and potential growth. We've established leading platforms in what we view as the most compelling high growth areas. The alternative industry still represents a small portion of investable assets globally. And I believe Blackstone is the best position firm in the world to capitalize on its long-term growth trajectory. In closing, we've navigated many cycles since our founding in 1985. While each has presented challenges, they've also created opportunities to invest, expand market share in existing product lines, and to innovate and launch altogether new businesses. Flagstown has emerged from every cycle even stronger than before, with our firm moving on to extraordinary new heights. I fully expect the most recent cycle will lead to the same result. With that, I'll turn it over to John.