Blackstone Scores on Real Estate Investments

Blackstone is bullish on private equity and real estate again, as market gains in these areas boosted the company's 2010 profit. Blackstone said its net income more than doubled last year on private equity gains.

Blackstone recorded fourth quarter adjusted economic net income of $0.46 per share against analyst estimates of $0.30.

Company COO Tony James said limited partners' investments in its private equity funds are now worth 1.5 times their original value. The firm is in the process of closing a fifth fund with $15 billion and will be raising a sixth fund of a similar size.

As for real estate it remains a juggernaut at the firm. Some 70 percent of Blackstone's current real estate fund is invested, and it plans to raise a new fund in 2011.

Investors are getting 1.4 times their original investment in the company's real estate funds. The firm expects rampant activity in Europe, which may explain CEO Steve Schwarzman’s recent relocation to Paris.

James called the company’s position in real estate a “privileged” one: “The value of property dwarfs the value of equity,” and there are only a few funds doing exactly what Blackstone does, he said.

So if there’s so much confidence in real estate, why not shift some of the private equity resources? Because big deals still exist on the private equity side—and will exist, James said.

A deal of $10 billion or more could get done “tomorrow”, James added. Blackstone already has “two big deals” in the bag this year.

Debt levels are expected to rise throughout the year, but 25 to 40 percent equity in deals will still be “the new normal,” according to James. Geographically, he expects to do more deals in the US and fewer in Asia this year. Not that Asia isn't hot, but the U.S. is coming back.