BX - The Blackstone Group L.P. - 2013 Morgan Stanley Financials Conference Transcript

    Company Name:The Blackstone Group L.P.
    Event Title:2013 Morgan Stanley Financials Conference Transcript
    Event Date:11-Jun-2013
    Event Time:01:55 PM ET


    Michael Heaney

    Analyst, Morgan Stanley
    Hi everyone we'll get started in here. So, I am Mike Haley the Morgan Stanley Asset Manager Analyst, I have the pleasure of hosting the key notes along side Steve Schwarzman, CEO and Co-Founder of Blackstone very timely topics -- right now and Steve thanks for joining us. Blackstone has been public for almost six years now and firm has grown to $218 billion of assets under management as of the latest quarter, across four distinct operating segments of asset management. So with that Steve, welcome, thanks for joining us.

    Stephen A. Schwarzman

    Chairman, Chief Executive Officer & Co-Founder
    Thank you.

    Michael Heaney

    Analyst, Morgan Stanley
    We'll dive into few questions before I give the audience the chance to ask some later in the presentation. So first I wanted to ask you, kind of from the perspective Jamie is like seeing a robot aircraft carrier. So I doubly appreciate you being here. He's always very colorful.

    A lot of run I remember when Jamie came to work right after business tour and just starting Blackstone and we have office 3,000 square feet for two of us. Two people in search of a strategy and Sandy just last American Express sort of had been marginalized pushed out of and he hired younger guy right form Harbor business School. Who's name was Jamie and they has nothing to do either. And so we've both the four seasons we only and try and get somebody to do something with us and if that didn't worked for us afterwards and just we were all going and so it's interesting over the course of time to watch what happened with Jamie Sandy as well.

    It's been really interesting I think for everybody and he's done a terrific job with JP very close relations. So our question what's going on in the world, its pretty easy to see it we have a lot of different damage points in our private equity business. So alone we've got like $120 billion of revenue and 730,000 people working at our companies and its global. So we get really good seats in the real-estate business we are the largest owner of real-estate in the world. And so you get to see all kinds of stuff among other things that we do.

    What we think seeing is that the States has real pocket of strength, residential housing is for real, obviously some is stimulated by the Fed but they're coming out of the wood work in the markets where we've been active over the last year. You have that just 13, 14 markets and housing, you had increases of 20%. We take the good ones because average house prices have been up around 10 you've had new house construction up around 950,000 up from 500 and some odd thousand at the bottom of the crisis on their way to some place it's more normal. It will be around $1.5.

    So you're seeing a lot of strength in housing and it's coming from almost every place geographically you even had in double-digit I don't know how that happens but apparently there you are. So that's sort of the big winner. And that whole complex is a big winner, they're doing over 15 million cars this year up from 8.5 at the bottom and then you have the energy complex which is really a revolution this is hard to underestimate the impact of energy and all the natural gas that's being produced and all the subsidiary types of things that come from that activity.

    And if you add on top of that technology which is still a very big pocket of strength and quite robust in the United States, you've got some really good stuff happening. On the other hand we do have the U.S. Government at work, trying to decrease growth as rapidly as they can. And so they have unfortunately had some success in that area.

    And that leaves somewhere in the two plus area. Nobody is smart enough to know exactly we're in the twos, could be the lowers, could be little towards the middle, I do not know. There is nothing too much running away at the same time. You see people like Walmart Cosco with pressure at the bottom on same store sales and that kind of stuff.

    So when we look at it there is good forward momentum real-estate generally and the states doing well which we can talk about some other point. Europe is really fighting enormous headwinds just as a finance or maybe in second sense Europeans didn't quite figure this out, that you can't shrink your financial institutions and have the economic growth and credit extension correlate almost one to one Basel III is shrinking and almost to design to unique system to European financial institutions and it's being successful. And so you have some of the northern countries doing okay, the southern countries quite badly as you know with huge unemployment that's probably close to a bottom actually but when we buy things now in Europe.

    We do it with the expectation that nothing good is going to happen for quite a while. If the deal works under that scenario, the investment works, that's fine. So we're finding in terms of areas of opportunity, we can buy warehouses for example with sort of close to filled, they don't have to be filled because you can fill in more when you do better. But yields unleveraged of 9% to 10%, if you can do that put some debt on top of it you got a 19% or 20% return.

    Now I probably make a fair bet, if I bet with you that whenever you go to the place you do another 19% or 20%. By warehouse in north of Paris you can do that. And there's not a lot of risk with that other than the euro staying together which we believe is going to happen. So there are some very interesting things to do there but it's not because of the economy. In Asia you've got a much more complex picture just because you've got a lot of different economies there, they are not always in sink.

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