By Miriam Gottfried 

Blackstone Group Inc.'s second-quarter results rebounded as the surging stock market lifted the value of the private-equity giant's portfolio.

The New York company swung to a profit after posting a steep loss in the first quarter as the S&P 500 recorded its biggest percentage gain in more than two decades and finished up 20% in the period. The value of its private-equity portfolio climbed by 12.8% compared with a 21.6% decline in the first quarter.

Blackstone said Thursday that it posted net income of $568.3 million, or 81 cents a share, for the second quarter. That compares with a profit of $305.8 million, or 45 cents, a year earlier.

Blackstone's distributable earnings, or the amount of cash that could be returned to shareholders, fell to $548 million, or 43 cents a share, from $708.9 million, or 57 cents, as the company sold off fewer investments.

Assets under management were about $564 billion, up from $538 billion at the end of the first quarter. The company has set a goal of reaching $1 trillion in assets by 2026.

Blackstone raised $20 billion during the quarter, leaving it with a record $156 billion of unspent cash. It has put some of that to work, continuing a focus on investing in fast-growing companies, one of President Jonathan Gray's strategies for navigating an expensive market.

In June, Blackstone's real-estate business said it was taking a 49% stake in a venture that will own three Hollywood film-studio lots and five adjacent office buildings, valuing the properties at $1.65 billion. Last week, the company said it was the lead investor in a $200 million fundraising round for oat-milk maker Oatly AB. Blackstone's life-sciences business has also been active.

But opportunities to write big checks have been limited.

In an interview, Mr. Gray said the large leveraged buyouts the company has traditionally been known for are still challenging to get done.

"It felt before the resurgence of the pandemic that deal activity was really going to pick up," he said. "Right now, it feels like it might take a little more time because there's a lot of uncertainty out there."

Mr. Gray, heir-apparent to Chief Executive Stephen Schwarzman after making a name for himself building Blackstone's formidable real-estate operation, said he sees opportunity longer term in offices and hotels, which have been severely affected by coronavirus shutdowns.

About 80% of Blackstone's existing real-estate portfolio has been resilient to the virus, including its significant holdings of warehouses used by e-commerce companies, Chief Financial Officer Michael Chae said on a call with analysts to discuss the results. Roughly 90% of Blackstone's office holdings target tenants in sectors the company says have remained strong, including life sciences, Indian technology companies and tech hubs on the West coast of the U.S.

Much of the company's U.S. residential portfolio is concentrated in suburban garden-style apartments where occupancy has remained more stable. Hospitality and retail, two of the most coronavirus-affected areas, make up 13% of Blackstone's portfolio, The company's retail properties include grocery stores and Asian malls, which have held up better. Blackstone owns no enclosed U.S. malls, Mr. Chae said.

The company's hedge-fund business posted a gross return of 6%, its highest quarterly return since 2000.

Blackstone distributed $590 million through dividends and share repurchases during the quarter. It said it would pay a dividend of 37 cents a share, versus 48 cents a year earlier.

Blackstone shares were little changed in midday trading.

Write to Miriam Gottfried at Miriam.Gottfried@wsj.com

 

(END) Dow Jones Newswires

July 23, 2020 12:11 ET (16:11 GMT)

Copyright (c) 2020 Dow Jones & Company, Inc.
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