Edgar Filing: Blackstone Group L.P.

10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2016

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO

Commission File Number: 001-33551

LOGO

The Blackstone Group L.P.

(Exact name of Registrant as specified in its charter)

Delaware

20-8875684

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

345 Park Avenue

New York, New York 10154

(Address of principal executive offices)(Zip Code)

(212) 583-5000

(Registrant’s telephone number, including area code)

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer x		Accelerated filer ¨
Non-accelerated filer ¨		Smaller reporting company ¨
(Do not check if a smaller reporting company)

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

The number of the Registrant’s voting common units representing limited partner interests outstanding as of April 29, 2016 was 565,579,839. The number of the Registrant’s non-voting common units representing limited partner interests outstanding as of April 29, 2016 was 59,083,468.

TABLE OF CONTENTS


		Page
PART I.	FINANCIAL INFORMATION

ITEM 1.	FINANCIAL STATEMENTS		5

	Unaudited Condensed Consolidated Financial Statements — March 31, 2016 and 2015:

	Condensed Consolidated Statements of Financial Condition as of March 31, 2016 and December 31, 2015		5

	Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2016 and 2015		7

	Condensed Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2016 and 2015		8

	Condensed Consolidated Statements of Changes in Partners’ Capital for the Three Months Ended March 31, 2016 and 2015		9

	Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2016 and 2015		11

	Notes to Condensed Consolidated Financial Statements		13

ITEM 1A.	UNAUDITED SUPPLEMENTAL PRESENTATION OF STATEMENTS OF FINANCIAL CONDITION		53

ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		55

ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		115

ITEM 4.	CONTROLS AND PROCEDURES		118

PART II.	OTHER INFORMATION

ITEM 1.	LEGAL PROCEEDINGS		119

ITEM 1A.	RISK FACTORS		119

ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS		119

ITEM 3.	DEFAULTS UPON SENIOR SECURITIES		120

ITEM 4.	MINE SAFETY DISCLOSURES		120

ITEM 5.	OTHER INFORMATION		120

ITEM 6.	EXHIBITS		120

SIGNATURES			122

Forward-Looking Statements

This report may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 which reflect our current views with respect to, among other things, our operations and financial performance. You can identify these forward-looking statements by the use of words such as “outlook,” “indicator,” “believes,” “expects,” “potential,” “continues,” “may,” “will,” “should,” “seeks,” “approximately,” “predicts,” “intends,” “plans,” “estimates,” “anticipates” or the negative version of these words or other comparable words. Such forward-looking statements are subject to various risks and uncertainties. Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from those indicated in these statements. We believe these factors include but are not limited to those described under the section entitled “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2015 and in this report, as such factors may be updated from time to time in our periodic filings with the United States Securities and Exchange Commission (“SEC”), which are accessible on the SEC’s website at www.sec.gov. These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this report and in our other periodic filings. The forward-looking statements speak only as of the date of this report, and we undertake no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise.

Website and Social Media Disclosure

We use our website (www.blackstone.com), Facebook page (www.facebook.com/blackstone), Twitter (www.twitter.com/blackstone), LinkedIn (www.linkedin.com/company/the-blackstone-group), Instagram (instagram.com/Blackstone) and YouTube (www.youtube.com/user/blackstonegroup) accounts as channels of distribution of company information. The information we post through these channels may be deemed material. Accordingly, investors should monitor these channels, in addition to following our press releases, SEC filings and public conference calls and webcasts. In addition, you may automatically receive e-mail alerts and other information about Blackstone when you enroll your e-mail address by visiting the “Contact Us/Email Alerts” section of our website at http://ir.blackstone.com. The contents of our website, any alerts and social media channels are not, however, a part of this report.

In this report, references to “Blackstone,” the “Partnership”, “we,” “us” or “our” refer to The Blackstone Group L.P. and its consolidated subsidiaries. Unless the context otherwise requires, references in this report to the ownership of Mr. Stephen A. Schwarzman, our founder, and other Blackstone personnel include the ownership of personal planning vehicles and family members of these individuals.

“Blackstone Funds,” “our funds” and “our investment funds” refer to the private equity funds, real estate funds, funds of hedge funds, credit-focused funds, collateralized loan obligation (“CLO”) and collateralized debt obligation (“CDO”) vehicles, real estate investment trusts and registered investment companies that are managed by Blackstone. “Our carry funds” refers to the private equity funds, real estate funds and certain of the credit-focused funds (with multi-year drawdown, commitment-based structures that only pay carry on the realization of an investment) that are managed by Blackstone. Blackstone’s Private Equity segment comprises its management of corporate private equity funds (including our sector and regional focused funds), which we refer to collectively as our Blackstone Capital Partners (“BCP”) funds, our Blackstone Core Equity Partners (“BCEP”) fund, our opportunistic investment platform that invests globally across asset classes, industries and geographies, which we collectively refer to as Blackstone Tactical Opportunities (“Tactical Opportunities”), and Strategic Partners Fund Solutions (“Strategic Partners”), a secondary private fund of funds business. We refer to our real estate opportunistic funds as our Blackstone Real Estate Partners (“BREP”) funds and our real estate debt investment funds as our Blackstone Real Estate Debt Strategies (“BREDS”) funds. We refer to our core+ real estate funds, which target substantially stabilized assets generating relatively stable cash flow, as Blackstone Property Partners (“BPP”) funds. We refer to our listed real estate investment trusts as “REITs.” “Our hedge funds” refers to our funds of hedge funds, certain of our real estate debt investment funds, including a registered investment company, and certain other credit-focused funds which are managed by Blackstone.

“Assets Under Management” refers to the assets we manage. Our Assets Under Management equals the sum of:

(a)

the fair value of the investments held by our carry funds and our side-by-side and co-investment entities managed by us, plus the capital that we are entitled to call from investors in those funds and entities pursuant to the terms of their respective capital commitments, including capital commitments to funds that have yet to commence their investment periods,

(b)

the net asset value of our funds of hedge funds, hedge funds and certain registered investment companies,

(c)

the invested capital or fair value of assets we manage pursuant to separately managed accounts,

(d)

the amount of debt and equity outstanding for our CLOs and CDOs during the reinvestment period,

(e)

the aggregate par amount of collateral assets, including principal cash, for our CLOs and CDOs after the reinvestment period,

(f)

the gross amount of assets (including leverage) for certain of our credit-focused registered investment companies, and

(g)

the fair value of common stock, preferred stock, convertible debt, or similar instruments issued by our public REIT.

Our carry funds are commitment-based drawdown structured funds that do not permit investors to redeem their interests at their election. Our funds of hedge funds and hedge funds generally have structures that afford an investor the right to withdraw or redeem their interests on a periodic basis (for example, annually or quarterly), with the majority of our funds requiring from 60 days to 95 days’ notice, depending on the fund and the liquidity profile of the underlying assets. Investment advisory agreements related to separately managed accounts may generally be terminated by an investor on 30 to 90 days’ notice.

“Fee-Earning Assets Under Management” refers to the assets we manage on which we derive management and/or performance fees. Our Fee-Earning Assets Under Management equals the sum of:

(a)

for our Private Equity segment funds and Real Estate segment carry funds including certain real estate debt investment funds and certain of our Hedge Fund Solutions funds, the amount of capital commitments, remaining invested capital, fair value or par value of assets held, depending on the fee terms of the fund,

(b)

for our credit-focused carry funds, the amount of remaining invested capital (which may include leverage) or net asset value, depending on the fee terms of the fund,

(c)

the remaining invested capital of co-investments managed by us on which we receive fees,

(d)

the net asset value of our funds of hedge funds, hedge funds and certain registered investment companies,

(e)

the invested capital, fair value of assets or the net asset value we manage pursuant to separately managed accounts,

(f)

the net proceeds received from equity offerings and accumulated core earnings of our REITs, subject to certain adjustments,

(g)

the aggregate par amount of collateral assets, including principal cash, of our CLOs, CDOs, and certain credit-focused separately managed accounts, and

(h)

the gross amount of assets (including leverage) or the net assets (plus leverage where applicable) for certain of our credit-focused registered investment companies.

Our calculations of assets under management and fee-earning assets under management may differ from the calculations of other asset managers, and as a result this measure may not be comparable to similar measures presented by other asset managers. In addition, our calculation of assets under management includes commitments

to, and the fair value of, invested capital in our funds from Blackstone and our personnel, regardless of whether such commitments or invested capital are subject to fees. Our definitions of assets under management or fee-earning assets under management are not based on any definition of assets under management or fee-earning assets under management that is set forth in the agreements governing the investment funds that we manage.

For our carry funds, total assets under management includes the fair value of the investments held, whereas fee-earning assets under management includes the amount of capital commitments, the remaining amount of invested capital at cost depending on whether the investment period has or has not expired or the fee terms of the fund. As such, fee-earning assets under management may be greater than total assets under management when the aggregate fair value of the remaining investments is less than the cost of those investments.

This report does not constitute an offer of any Blackstone Fund.

PART I. FINANCIAL INFORMATION

ITEM 1.

FINANCIAL STATEMENTS

THE BLACKSTONE GROUP L.P.

Condensed Consolidated Statements of Financial Condition (Unaudited)

(Dollars in Thousands, Except Unit Data)


	March 31, 2016			December 31, 2015
Assets
Cash and Cash Equivalents	$	1,372,552		$	1,837,324
Cash Held by Blackstone Funds and Other		548,591			587,132
Investments (including assets pledged of $75,668 and $64,535 at March 31, 2016 and December 31, 2015, respectively)		14,625,032			14,324,097
Accounts Receivable		660,853			613,153
Reverse Repurchase Agreements		45,301			204,893
Due from Affiliates		1,139,526			1,240,797
Intangible Assets, Net		322,719			345,547
Goodwill		1,718,519			1,718,519
Other Assets		316,196			377,189
Deferred Tax Assets		1,301,615			1,277,429

Total Assets	$	22,050,904		$	22,526,080

Liabilities and Partners’ Capital
Loans Payable	$	6,357,782		$	6,116,747
Due to Affiliates		1,219,184			1,282,700
Accrued Compensation and Benefits		1,846,059			2,029,918
Securities Sold, Not Yet Purchased		105,857			176,667
Repurchase Agreements		49,540			40,929
Accounts Payable, Accrued Expenses and Other Liabilities		561,402			648,662

Total Liabilities		10,139,824			10,295,623

Commitments and Contingencies

Redeemable Non-Controlling Interests in Consolidated Entities		177,054			183,459

Partners’ Capital
The Blackstone Group L.P. Partners’ Capital
Partners’ Capital (common units: 631,548,955 issued and outstanding as of March 31, 2016; 624,450,162 issued and outstanding as of December 31, 2015)		6,136,475			6,322,307
Accumulated Other Comprehensive Loss		(46,064	)		(52,519	)

Total The Blackstone Group L.P. Partners’ Capital		6,090,411			6,269,788
Non-Controlling Interests in Consolidated Entities		2,480,358			2,408,701
Non-Controlling Interests in Blackstone Holdings		3,163,257			3,368,509

Total Partners’ Capital		11,734,026			12,046,998

Total Liabilities and Partners’ Capital	$	22,050,904		$	22,526,080

continued…

See notes to condensed consolidated financial statements.

THE BLACKSTONE GROUP L.P.

Condensed Consolidated Statements of Financial Condition (Unaudited)

(Dollars in Thousands)

The following presents the portion of the consolidated balances presented above attributable to consolidated Blackstone Funds which are variable interest entities. The following assets may only be used to settle obligations of these consolidated Blackstone Funds and these liabilities are only the obligations of these consolidated Blackstone Funds and they do not have recourse to the general credit of Blackstone.


	March 31, 2016		December 31, 2015
Assets
Cash Held by Blackstone Funds and Other	$	305,421	$	435,775
Investments		4,846,561		4,558,216
Accounts Receivable		129,634		122,077
Due from Affiliates		25,153		25,561
Other Assets		6,338		12,693

Total Assets	$	5,313,107	$	5,154,322

Liabilities
Loans Payable	$	3,550,109	$	3,319,656
Due to Affiliates		40,511		39,532
Accounts Payable, Accrued Expenses and Other		267,262		316,498

Total Liabilities	$	3,857,882	$	3,675,686

See notes to condensed consolidated financial statements.

THE BLACKSTONE GROUP L.P.

Condensed Consolidated Statements of Operations (Unaudited)

(Dollars in Thousands, Except Unit and Per Unit Data)


	Three Months Ended March 31,
	2016			2015
Revenues
Management and Advisory Fees, Net	$	608,906		$	616,768

Performance Fees
Realized
Carried Interest		230,909			1,207,594
Incentive Fees		28,419			29,638
Unrealized
Carried Interest		47,586			373,840
Incentive Fees		7,579			62,036

Total Performance Fees		314,493			1,673,108

Investment Income (Loss)
Realized		(12,001	)		187,930
Unrealized		3,493			18,273

Total Investment Income (Loss)		(8,508	)		206,203

Interest and Dividend Revenue		23,075			21,920
Other		(5,612	)		(5,641	)

Total Revenues		932,354			2,512,358

Expenses
Compensation and Benefits
Compensation		346,003			559,559
Performance Fee Compensation
Realized
Carried Interest		58,504			292,248
Incentive Fees		14,124			12,227
Unrealized
Carried Interest		30,001			74,380
Incentive Fees		3,448			24,961

Total Compensation and Benefits		452,080			963,375
General, Administrative and Other		123,045			130,973
Interest Expense		37,356			31,370
Fund Expenses		5,229			16,850

Total Expenses		617,710			1,142,568

Other Income
Net Gains from Fund Investment Activities		19,142			93,555

Income Before Provision for Taxes		333,786			1,463,345
Provision for Taxes		18,866			99,344

Net Income		314,920			1,364,001
Net Income (Loss) Attributable to Redeemable Non-Controlling Interests in Consolidated Entities		(6,401	)		7,527
Net Income Attributable to Non-Controlling Interests in Consolidated Entities		40,086			81,796
Net Income Attributable to Non-Controlling Interests in Blackstone Holdings		131,202			645,230

Net Income Attributable to The Blackstone Group L.P.	$	150,033		$	629,448

Distributions Declared Per Common Unit	$	0.61		$	0.78

Net Income Per Common Unit
Common Units, Basic	$	0.23		$	1.01

Common Units, Diluted	$	0.23		$	1.00

Weighted-Average Common Units Outstanding
Common Units, Basic		644,897,849			625,276,969

Common Units, Diluted		1,194,570,331			631,232,041

Revenues Earned from Affiliates
Management and Advisory Fees, Net	$	56,675		$	48,112

See notes to condensed consolidated financial statements.

THE BLACKSTONE GROUP L.P.

Condensed Consolidated Statements of Comprehensive Income (Unaudited)

(Dollars in Thousands)


	Three Months Ended March 31,
	2016			2015
Net Income	$	314,920		$	1,364,001
Other Comprehensive Income (Loss), Net of Tax — Currency Translation Adjustment		17,612			(47,788	)

Comprehensive Income		332,532			1,316,213
Less:
Comprehensive Income (Loss) Attributable to Redeemable Non-Controlling Interests in Consolidated Entities		(6,401	)		7,527
Comprehensive Income Attributable to Non-Controlling Interests in Consolidated Entities		51,243			55,158
Comprehensive Income Attributable to Non-Controlling Interests in Blackstone Holdings		131,202			645,230

Comprehensive Income Attributable to The Blackstone Group L.P.	$	156,488		$	608,298

See notes to condensed consolidated financial statements.

THE BLACKSTONE GROUP L.P.

Condensed Consolidated Statements of Changes in Partners’ Capital (Unaudited)

(Dollars in Thousands, Except Unit Data)


			The Blackstone Group L.P.
	Common Units		Partners’ Capital			Accumulated Other Compre- hensive Income (Loss)			Total			Non- Controlling Interests in Consolidated Entities			Non- Controlling Interests in Blackstone Holdings			Total Partners’ Capital			Redeemable Non- Controlling Interests in Consolidated Entities
Balance at December 31, 2015		624,450,162	$	6,322,307		$	(52,519	)	$	6,269,788		$	2,408,701		$	3,368,509		$	12,046,998		$	183,459
Net Income (Loss)		—		150,033			—			150,033			40,086			131,202			321,321			(6,401	)
Currency Translation Adjustment		—		—			6,455			6,455			11,157			—			17,612			—
Capital Contributions		—		—			—			—			94,418			—			94,418			—
Capital Distributions		—		(389,780	)		—			(389,780	)		(68,692	)		(355,360	)		(813,832	)		(4	)
Transfer of Non-Controlling Interests in Consolidated Entities		—		—			—			—			(5,312	)		—			(5,312	)		—
Deferred Tax Effects Resulting from Acquisition of Ownership Interests from Non-Controlling Interest Holders		—		(1,145	)		—			(1,145	)		—			—			(1,145	)		—
Equity-Based Compensation		—		36,053			—			36,053			—			41,455			77,508			—
Net Delivery of Vested Blackstone Holdings Partnership Units and Blackstone Common Units		4,025,507		(13,262	)		—			(13,262	)		—			—			(13,262	)		—
Excess Tax Benefits Related to Equity-Based Compensation, Net		—		9,720			—			9,720			—			—			9,720			—
Change in The Blackstone Group L.P.’s Ownership Interest		—		3,618			—			3,618			—			(3,618	)		—			—
Conversion of Blackstone Holdings Partnership Units to Blackstone Common Units		3,073,286		18,931			—			18,931			—			(18,931	)		—			—

Balance at March 31, 2016		631,548,955	$	6,136,475		$	(46,064	)	$	6,090,411		$	2,480,358		$	3,163,257		$	11,734,026		$	177,054

continued…

See notes to condensed consolidated financial statements

THE BLACKSTONE GROUP L.P.

Condensed Consolidated Statements of Changes in Partners’ Capital (Unaudited)

(Dollars in Thousands, Except Unit Data)


	Common Units		The Blackstone Group L.P.												Non- Controlling Interests in Consolidated Entities			Non- Controlling Interests in Blackstone Holdings			Total Partners’ Capital			Redeemable Non- Controlling Interests in Consolidated Entities
	Common Units		Partners’ Capital			Appro- priated Partners’ Capital			Accumulated Other Compre- hensive (Loss)			Total			Non- Controlling Interests in Consolidated Entities			Non- Controlling Interests in Blackstone Holdings			Total Partners’ Capital
Balance at December 31, 2014		595,624,855	$	6,999,830		$	81,301		$	(20,864	)	$	7,060,267		$	3,415,356		$	4,416,070		$	14,891,693		$	2,441,854
Deconsolidation of CLOs and Funds on Adoption of ASU 2015-02		—		—			(90,928	)		—			(90,928	)		(1,002,728	)		—			(1,093,656	)		(2,258,289	)
Adjustment to Appropriated Partners’ Capital on Adoption of ASU 2014-13		—		—			9,627			—			9,627			—			—			9,627			—
Net Income		—		629,448			—			—			629,448			81,796			645,230			1,356,474			7,527
Currency Translation Adjustment		—		—			—			(22,178	)		(22,178	)		(48,530	)		—			(70,708	)		—
Capital Contributions		—		—			—			—			—			63,910			—			63,910			2,000
Capital Distributions		—		(482,249	)		—			—			(482,249	)		(228,800	)		(488,711	)		(1,199,760	)		(440	)
Transfer of Non-Controlling Interests in Consolidated Entities		—		—			—			—			—			(10,163	)		—			(10,163	)		—
Deferred Tax Effects Resulting from Acquisition of Ownership Interests from Non- Controlling Interest Holders		—		9,113			—			—			9,113			—			—			9,113			—
Equity-Based Compensation		—		130,134			—			—			130,134			—			122,236			252,370			—
Net Delivery of Vested Blackstone Holdings Partnership Units and Blackstone Common Units		7,956,871		(27,632	)		—			—			(27,632	)		—			—			(27,632	)		—
Excess Tax Benefits Related to Equity-Based Compensation, Net		—		23,834			—			—			23,834			—			—			23,834			—
Change in The Blackstone Group L.P.’s Ownership Interest		—		68,361			—			—			68,361			—			(68,361	)		—			—
Conversion of Blackstone Holdings Partnership Units to Blackstone Common Units		5,603,820		46,123			—			—			46,123			—			(46,123	)		—			—

Balance at March 31, 2015		609,185,546	$	7,396,962		$	—		$	(43,042	)	$	7,353,920		$	2,270,841		$	4,580,341		$	14,205,102		$	192,652

See notes to condensed consolidated financial statements

THE BLACKSTONE GROUP L.P.

Condensed Consolidated Statements of Cash Flows (Unaudited)

(Dollars in Thousands)


	Three Months Ended March 31,
	2016			2015
Operating Activities
Net Income	$	314,920		$	1,364,001
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities
Blackstone Funds Related
Unrealized Appreciation on Investments Allocable to Non-Controlling Interests in Consolidated Entities		(35,684	)		(87,529	)
Net Realized Gains on Investments		(253,857	)		(1,479,010	)
Changes in Unrealized (Gains) Losses on Investments Allocable to The Blackstone Group L.P.		17,363			(61,239	)
Non-Cash Performance Fees		(15,077	)		(315,065	)
Non-Cash Performance Fee Compensation		106,076			403,816
Equity-Based Compensation Expense		79,840			272,335
Excess Tax Benefits Related to Equity-Based Compensation		(11,690	)		(23,834	)
Amortization of Intangibles		22,828			24,800
Other Non-Cash Amounts Included in Net Income		17,372			107,020
Cash Flows Due to Changes in Operating Assets and Liabilities
Cash Held by Blackstone Funds and Other		51,134			350,505
Cash Relinquished in Deconsolidation and Liquidation of Partnership		—			(442,370	)
Accounts Receivable		(21,063	)		(47,474	)
Reverse Repurchase Agreements		159,592			(79,628	)
Due from Affiliates		124,519			(1,928	)
Other Assets		52,381			(109,651	)
Accrued Compensation and Benefits		(289,532	)		(436,354	)
Securities Sold, Not Yet Purchased		(76,620	)		76,698
Accounts Payable, Accrued Expenses and Other Liabilities		(264,198	)		(528,826	)
Repurchase Agreements		8,620			57,152
Due to Affiliates		(3,642	)		(90,700	)
Treasury Cash Management Strategies
Investments Purchased		(590,772	)		(1,063,714	)
Cash Proceeds from Sale of Investments		590,649			1,120,428
Blackstone Funds Related
Investments Purchased		(742,280	)		(195,719	)
Cash Proceeds from Sale or Pay Down of Investments		967,652			1,665,572

Net Cash Provided by Operating Activities		208,531			479,286

Investing Activities
Purchase of Furniture, Equipment and Leasehold Improvements		(9,934	)		(3,275	)
Changes in Restricted Cash		5,843			5,843

Net Cash Provided by (Used in) Investing Activities		(4,091	)		2,568

continued…

See notes to condensed consolidated financial statements.

THE BLACKSTONE GROUP L.P.

Condensed Consolidated Statements of Cash Flows (Unaudited)—Continued

(Dollars in Thousands)


	Three Months Ended March 31,
	2016			2015
Financing Activities
Distributions to Non-Controlling Interest Holders in Consolidated Entities	$	(68,696	)	$	(229,240	)
Contributions from Non-Controlling Interest Holders in Consolidated Entities		88,079			55,274
Payments Under Tax Receivable Agreement		(78,985	)		(82,830	)
Net Settlement of Vested Common Units and Repurchase of Common and Blackstone Holdings Partnership Units		(13,262	)		(27,632	)
Excess Tax Benefits Related to Equity-Based Compensation		11,690			23,834
Proceeds from Loans Payable		—			23
Repayment and Repurchase of Loans Payable		—			(2,410	)
Distributions to Unitholders		(745,140	)		(970,960	)
Blackstone Funds Related
Proceeds from Loans Payable		158,456			507,832
Repayment of Loans Payable		(21,327	)		(32,805	)

Net Cash Used in Financing Activities		(669,185	)		(758,914	)

Effect of Exchange Rate Changes on Cash and Cash Equivalents		(27	)		60

Net Decrease in Cash and Cash Equivalents		(464,772	)		(277,000	)
Cash and Cash Equivalents, Beginning of Period		1,837,324			1,412,472

Cash and Cash Equivalents, End of Period	$	1,372,552		$	1,135,472

Supplemental Disclosure of Cash Flows Information
Payments for Interest	$	60,907		$	49,484

Payments for Income Taxes	$	6,995		$	70,609

Supplemental Disclosure of Non-Cash Investing and Financing Activities
Non-Cash Contributions from Non-Controlling Interest Holders	$	967		$	601

Transfer of Interests to Non-Controlling Interest Holders	$	(5,312	)	$	(10,163	)

Change in The Blackstone Group L.P.’s Ownership Interest	$	3,618		$	68,361

Net Settlement of Vested Common Units	$	59,605		$	51,228

Conversion of Blackstone Holdings Partnership Units to Common Units	$	18,931		$	46,123

Acquisition of Ownership Interests from Non-Controlling Interest Holders
Deferred Tax Asset	$	(14,427	)	$	(54,313	)

Due to Affiliates	$	15,572		$	45,200

Partners’ Capital	$	(1,145	)	$	9,113

See notes to condensed consolidated financial statements.

THE BLACKSTONE GROUP L.P.

Notes to Condensed Consolidated Financial Statements

(All Dollars Are in Thousands, Except Unit and Per Unit Data, Except Where Noted)

1.	ORGANIZATION

The Blackstone Group L.P., together with its subsidiaries (“Blackstone” or the “Partnership”), is a leading global manager of private capital. The alternative asset management business includes the management of private equity funds, real estate funds, real estate investment trusts (“REITs”), funds of hedge funds, hedge funds, credit-focused funds, collateralized loan obligation (“CLO”) vehicles, collateralized debt obligation (“CDO”) vehicles, separately managed accounts and registered investment companies (collectively referred to as the “Blackstone Funds”). Blackstone’s business is organized into four segments: private equity, real estate, hedge fund solutions and credit.

On October 1, 2015, Blackstone completed the spin-off of the operations that historically constituted Blackstone’s Financial Advisory segment, other than Blackstone’s capital markets services business. Blackstone’s capital markets services business was retained and was not part of the spin-off. These historical operations included various financial advisory services, including financial and strategic advisory, restructuring and reorganization advisory and fund placement services. As of October 1, 2015, Blackstone no longer reported a Financial Advisory segment.

The Partnership was formed as a Delaware limited partnership on March 12, 2007. The Partnership is managed and operated by its general partner, Blackstone Group Management L.L.C., which is in turn wholly owned and controlled by one of Blackstone’s founders, Stephen A. Schwarzman (the “Founder”), and Blackstone’s other senior managing directors. The activities of the Partnership are conducted through its holding partnerships: Blackstone Holdings I L.P., Blackstone Holdings AI L.P., Blackstone Holdings II L.P., Blackstone Holdings III L.P. and Blackstone Holdings IV L.P. (collectively, “Blackstone Holdings”, “Blackstone Holdings Partnerships” or the “Holding Partnerships”). The Partnership, through its wholly owned subsidiaries, is the sole general partner in each of these Holding Partnerships.

Generally, holders of the limited partner interests in the Holding Partnerships may, four times each year, exchange their limited partnership interests (“Partnership Units”) for Blackstone common units, on a one-to-one basis, exchanging one Partnership Unit from each of the Holding Partnerships for one Blackstone common unit.

2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of the Partnership have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and the instructions to Form 10-Q. The condensed consolidated financial statements, including these notes, are unaudited and exclude some of the disclosures required in audited financial statements. Management believes it has made all necessary adjustments (consisting of only normal recurring items) so that the condensed consolidated financial statements are presented fairly and that estimates made in preparing its condensed consolidated financial statements are reasonable and prudent. The operating results presented for interim periods are not necessarily indicative of the results that may be expected for any other interim period or for the entire year. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in the Partnership’s Annual Report on Form 10-K for the year ended December 31, 2015 filed with the Securities and Exchange Commission. As disclosed in the audited consolidated financial statements, the Partnership adopted certain accounting guidance for the quarter ended June 30, 2015 and applied a modified retrospective approach as of January 1, 2015. As such, the condensed consolidated financial statements for the three months ended March 31, 2015 were recast from the amounts originally reported in the Partnership’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015.

THE BLACKSTONE GROUP L.P.

Notes to Condensed Consolidated Financial Statements—Continued

(All Dollars Are in Thousands, Except Unit and Per Unit Data, Except Where Noted)

The condensed consolidated financial statements include the accounts of the Partnership, its wholly owned or majority-owned subsidiaries, the consolidated entities which are considered to be variable interest entities and for which the Partnership is considered the primary beneficiary, and certain partnerships or similar entities which are not considered variable interest entities but in which the general partner has a controlling financial interest.

All intercompany balances and transactions have been eliminated in consolidation.

Restructurings within consolidated CLOs are treated as investment purchases or sales, as applicable, in the Condensed Consolidated Statements of Cash Flows.

Consolidation

The Partnership consolidates all entities that it controls through a majority voting interest or otherwise, including those Blackstone Funds in which the general partner has a controlling financial interest. The Partnership has a controlling interest in Blackstone Holdings because the limited partners do not have the right to dissolve the partnerships or have substantive kick out rights or participating rights that would overcome the presumption of control by the Partnership. Accordingly, the Partnership consolidates Blackstone Holdings and records non-controlling interests to reflect the economic interests of the limited partners of Blackstone Holdings.

In addition, the Partnership consolidates all variable interest entities (“VIE”) in which it is the primary beneficiary. An enterprise is determined to be the primary beneficiary if it holds a controlling financial interest. A controlling financial interest is defined as (a) the power to direct the activities of a VIE that most significantly impact the entity’s economic performance and (b) the obligation to absorb losses of the entity or the right to receive benefits from the entity that could potentially be significant to the VIE. The consolidation guidance requires an analysis to determine (a) whether an entity in which the Partnership holds a variable interest is a VIE and (b) whether the Partnership’s involvement, through holding interests directly or indirectly in the entity or contractually through other variable interests (for example, management and performance related fees), would give it a controlling financial interest. Performance of that analysis requires the exercise of judgment.

The Partnership determines whether it is the primary beneficiary of a VIE at the time it becomes involved with a variable interest entity and reconsiders that conclusion continually. In evaluating whether the Partnership is the primary beneficiary, Blackstone evaluates its economic interests in the entity held either directly or indirectly by the Partnership. The consolidation analysis can generally be performed qualitatively; however, if it is not readily apparent that the Partnership is not the primary beneficiary, a quantitative analysis may also be performed. Investments and redemptions (either by the Partnership, affiliates of the Partnership or third parties) or amendments to the governing documents of the respective Blackstone Funds could affect an entity’s status as a VIE or the determination of the primary beneficiary. At each reporting date, the Partnership assesses whether it is the primary beneficiary and will consolidate or deconsolidate accordingly.

Assets of consolidated VIEs that can only be used to settle obligations of the consolidated VIE and liabilities of a consolidated VIE for which creditors (or beneficial interest holders) do not have recourse to the general credit of Blackstone are presented in a separate section in the Condensed Consolidated Statements of Financial Condition.

Blackstone’s other disclosures regarding VIEs are discussed in Note 9. “Variable Interest Entities”.

Fair Value of Financial Instruments

GAAP establishes a hierarchical disclosure framework which prioritizes and ranks the level of market price observability used in measuring financial instruments at fair value. Market price observability is affected by a

THE BLACKSTONE GROUP L.P.

Notes to Condensed Consolidated Financial Statements—Continued

(All Dollars Are in Thousands, Except Unit and Per Unit Data, Except Where Noted)

number of factors, including the type of financial instrument, the characteristics specific to the financial instrument and the state of the marketplace, including the existence and transparency of transactions between market participants. Financial instruments with readily available quoted prices in active markets generally will have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value.

Financial instruments measured and reported at fair value are classified and disclosed based on the observability of inputs used in the determination of fair values, as follows:

•

Level I — Quoted prices are available in active markets for identical financial instruments as of the reporting date. The types of financial instruments in Level I include listed equities, listed derivatives and mutual funds with quoted prices. The Partnership does not adjust the quoted price for these investments, even in situations where Blackstone holds a large position and a sale could reasonably impact the quoted price.

•

Level II — Pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reporting date, and fair value is determined through the use of models or other valuation methodologies. Financial instruments which are generally included in this category include corporate bonds and loans, including corporate bonds and loans held within CLO vehicles, government and agency securities, less liquid and restricted equity securities, and certain over-the-counter derivatives where the fair value is based on observable inputs. Senior and subordinated notes issued by CLO vehicles are classified within Level II of the fair value hierarchy.

•

Level III — Pricing inputs are unobservable for the financial instruments and includes situations where there is little, if any, market activity for the financial instrument. The inputs into the determination of fair value require significant management judgment or estimation. Financial instruments that are included in this category generally include general and limited partnership interests in private equity and real estate funds, credit-focused funds, distressed debt and non-investment grade residual interests in securitizations, certain corporate bonds and loans held within CLO vehicles, and certain over-the-counter derivatives where the fair value is based on unobservable inputs.

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the determination of which category within the fair value hierarchy is appropriate for any given financial instrument is based on the lowest level of input that is significant to the fair value measurement. The Partnership’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the financial instrument.

Transfers between levels of the fair value hierarchy are recognized at the beginning of the reporting period.

Level II Valuation Techniques

Financial instruments classified within Level II of the fair value hierarchy comprise debt instruments, including certain corporate loans and bonds held by Blackstone’s consolidated CLO vehicles, those held within Blackstone’s Treasury Cash Management Strategies and debt securities sold, not yet purchased and interests in investment funds. Certain equity securities and derivative instruments valued using observable inputs are also classified as Level II.

The valuation techniques used to value financial instruments classified within Level II of the fair value hierarchy are as follows:

•

Debt Instruments and Equity Securities are valued on the basis of prices from an orderly transaction between market participants provided by reputable dealers or pricing services. In determining the value of a particular investment, pricing services may use certain information with respect to transactions in such

THE BLACKSTONE GROUP L.P.

Notes to Condensed Consolidated Financial Statements—Continued

(All Dollars Are in Thousands, Except Unit and Per Unit Data, Except Where Noted)

investments, quotations from dealers, pricing matrices and market transactions in comparable investments and various relationships between investments. The valuation of certain equity securities is based on an observable price for an identical security adjusted for the effect of a restriction.

•

Freestanding Derivatives are valued using contractual cash flows and observable inputs comprising yield curves, foreign currency rates and credit spreads.

•

Senior and subordinate notes issued by CLO vehicles are classified based on the more observable fair value of CLO assets less (a) the fair value of any beneficial interests held by Blackstone, and (b) the carrying value of any beneficial interests that represent compensation for services.

Level III Valuation Techniques

In the absence of observable market prices, Blackstone values its investments using valuation methodologies applied on a consistent basis. For some investments little market activity may exist; management’s determination of fair value is then based on the best information available in the circumstances, and may incorporate management’s own assumptions and involves a significant degree of judgment, taking into consideration a combination of internal and external factors, including the appropriate risk adjustments for non-performance and liquidity risks. Investments for which market prices are not observable include private investments in the equity of operating companies, real estate properties, certain funds of hedge funds and credit-focused investments.

Private Equity Investments — The fair values of private equity investments are determined by reference to projected net earnings, earnings before interest, taxes, depreciation and amortization (“EBITDA”), the discounted cash flow method, public market or private transactions, valuations for comparable companies and other measures which, in many cases, are based on unaudited information at the time received. Valuations may be derived by reference to observable valuation measures for comparable companies or transactions (for example, multiplying a key performance metric of the investee company, such as EBITDA, by a relevant valuation multiple observed in the range of comparable companies or transactions), adjusted by management for differences between the investment and the referenced comparables, and in some instances by reference to option pricing models or other similar methods. Where a discounted cash flow method is used, a terminal value is derived by reference to EBITDA or price/earnings exit multiples.

Real Estate Investments — The fair values of real estate investments are determined by considering projected operating cash flows, sales of comparable assets, if any, and replacement costs, among other measures. The methods used to estimate the fair value of real estate investments include the discounted cash flow method and/or capitalization rates (“cap rates”) analysis. Valuations may be derived by reference to observable valuation measures for comparable companies or assets (for example, multiplying a key performance metric of the investee company or asset, such as EBITDA, by a relevant valuation multiple observed in the range of comparable companies or transactions), adjusted by management for differences between the investment and the referenced comparables, and in some instances by reference to option pricing models or other similar methods. Where a discounted cash flow method is used, a terminal value is derived by reference to an exit EBITDA multiple or capitalization rate. Additionally, where applicable, projected distributable cash flow through debt maturity will be considered in support of the investment’s fair value.

Credit-Focused Investments — The fair values of credit-focused investments are generally determined on the basis of prices between market participants provided by reputable dealers or pricing services. In some instances, Blackstone may utilize other valuation techniques, including the discounted cash flow method or a market approach.

THE BLACKSTONE GROUP L.P.

Notes to Condensed Consolidated Financial Statements—Continued

(All Dollars Are in Thousands, Except Unit and Per Unit Data, Except Where Noted)

Level III Valuation Process

Investments classified within Level III of the fair value hierarchy are valued on a quarterly basis, taking into consideration factors including any changes in Blackstone’s weighted-average cost of capital assumptions, discounted cash flow projections and exit multiple assumptions, as well as any changes in economic and other relevant conditions, and valuation models are updated accordingly. The valuation process also includes a review by an independent valuation party, at least annually for all investments, and quarterly for certain investments, to corroborate the values determined by management. The valuations of Blackstone’s investments are reviewed quarterly by a valuation committee chaired by Blackstone’s Vice Chairman and includes senior heads of each of Blackstone’s businesses, as well as representatives of legal and finance. Each quarter, the valuations of Blackstone’s investments are also reviewed by the Audit Committee in a meeting attended by the chairman of the valuation committee. The valuations are further tested by comparison to actual sales prices obtained on disposition of the investments.

Investments, at Fair Value

The Blackstone Funds are accounted for as investment companies under the American Institute of Certified Public Accountants Accounting and Auditing Guide, Investment Companies, and reflect their investments, including majority-owned and controlled investments (the “Portfolio Companies”), at fair value. Such consolidated funds’ investments are reflected in Investments on the Condensed Consolidated Statements of Financial Condition at fair value, with unrealized gains and losses resulting from changes in fair value reflected as a component of Net Gains (Losses) from Fund Investment Activities in the Condensed Consolidated Statements of Operations. Fair value is the amount that would be received to sell an asset or paid to transfer a liability, in an orderly transaction between market participants at the measurement date, at current market conditions (i.e., the exit price).

Blackstone’s principal investments are presented at fair value with unrealized appreciation or depreciation and realized gains and losses recognized in the Condensed Consolidated Statements of Operations within Investment Income (Loss).

For certain instruments, the Partnership has elected the fair value option. Such election is irrevocable and is applied on an investment by investment basis at initial recognition. The Partnership has applied the fair value option for certain loans and receivables and certain investments in private debt securities that otherwise would not have been carried at fair value with gains and losses recorded in net income. Accounting for these financial instruments at fair value is consistent with how the Partnership accounts for its other principal investments. Loans extended to third parties are recorded within Accounts Receivable within the Condensed Consolidated Statements of Financial Condition. Debt securities for which the fair value option has been elected are recorded within Investments. The methodology for measuring the fair value of such investments is consistent with the methodology applied to private equity, real estate, credit-focused and funds of hedge funds investments. Changes in the fair value of such instruments are recognized in Investment Income (Loss) in the Condensed Consolidated Statements of Operations. Interest income on interest bearing loans and receivables and debt securities on which the fair value option has been elected is based on stated coupon rates adjusted for the accretion of purchase discounts and the amortization of purchase premiums. This interest income is recorded within Interest and Dividend Revenue.

In addition, the Partnership has elected the fair value option for the assets and liabilities of CLO vehicles that are consolidated as of January 1, 2010, as a result of the initial adoption of variable interest entity consolidation guidance. The Partnership has also elected the fair value option for CLO vehicles consolidated as a result of the acquisitions of CLO management contracts or the acquisition of the share capital of CLO managers. Historically, the adjustment resulting from the difference between the fair value of assets and liabilities for each of these events was presented as a transition and acquisition adjustment to Appropriated Partners’ Capital. Assets of the consolidated

THE BLACKSTONE GROUP L.P.

Notes to Condensed Consolidated Financial Statements—Continued

(All Dollars Are in Thousands, Except Unit and Per Unit Data, Except Where Noted)

CLOs are presented within Investments within the Condensed Consolidated Statements of Financial Condition and Liabilities within Loans Payable for the amounts due to unaffiliated third parties and Due to Affiliates for the amounts held by non-consolidated affiliates. Changes in the fair value of consolidated CLO assets and liabilities and related interest, dividend and other income subsequent to adoption and acquisition are presented within Net Gains (Losses) from Fund Investment Activities. Expenses of consolidated CLO vehicles are presented in Fund Expenses. Historically, amounts attributable to Non-Controlling Interests in Consolidated Entities had a corresponding adjustment to Appropriated Partners’ Capital. On the adoption of the new CLO measurement guidance, there is no attribution of amounts to Non-Controlling Interests and no corresponding adjustments to Appropriated Partners’ Capital.

The Partnership has elected the fair value option for certain proprietary investments that would otherwise have been accounted for using the equity method of accounting. The fair value of such investments is based on quoted prices in an active market or using the discounted cash flow method. Changes in fair value are recognized in Investment Income (Loss) in the Condensed Consolidated Statements of Operations.

Further disclosure on instruments for which the fair value option has been elected is presented in Note 7. “Fair Value Option” to the Condensed Consolidated Financial Statements.

The investments of consolidated Blackstone Funds in funds of hedge funds (“Investee Funds”) are valued at net asset value (“NAV”) per share of the Investee Fund. In limited circumstances, the Partnership may determine, based on its own due diligence and investment procedures, that NAV per share does not represent fair value. In such circumstances, the Partnership will estimate the fair value in good faith and in a manner that it reasonably chooses, in accordance with the requirements of GAAP.

Certain investments of Blackstone and of the consolidated Blackstone funds of hedge funds and credit-focused funds measure their investments in underlying funds at fair value using NAV per share without adjustment. The terms of the investee’s investment generally provide for minimum holding periods or lock-ups, the institution of gates on redemptions or the suspension of redemptions or an ability to side pocket investments, at the discretion of the investee’s fund manager, and as a result, investments may not be redeemable at, or within three months of, the reporting date. A side pocket is used by hedge funds and funds of hedge funds to separate investments that may lack a readily ascertainable value, are illiquid or are subject to liquidity restriction. Redemptions are generally not permitted until the investments within a side pocket are liquidated or it is deemed that the conditions existing at the time that required the investment to be included in the side pocket no longer exist. As the timing of either of these events is uncertain, the timing at which the Partnership may redeem an investment held in a side pocket cannot be estimated. Further disclosure on instruments for which fair value is measured using NAV per share is presented in Note 5. “Net Asset Value as Fair Value”.

Security and loan transactions are recorded on a trade date basis.

Equity Method Investments

Investments in which the Partnership is deemed to exert significant influence, but not control, are accounted for using the equity method of accounting. Under the equity method of accounting, the Partnership’s share of earnings (losses) from equity method investments is included in Investment Income (Loss) in the Condensed Consolidated Statements of Operations. The carrying amounts of equity method investments are reflected in Investments in the Condensed Consolidated Statements of Financial Condition. As the underlying investments of the Partnership’s equity method investments in Blackstone Funds are reported at fair value, the carrying value of the Partnership’s equity method investments approximates fair value.

THE BLACKSTONE GROUP L.P.

Notes to Condensed Consolidated Financial Statements—Continued

(All Dollars Are in Thousands, Except Unit and Per Unit Data, Except Where Noted)

Repurchase and Reverse Repurchase Agreements

Securities purchased under agreements to resell (“reverse repurchase agreements”) and securities sold under agreements to repurchase (“repurchase agreements”), comprised primarily of U.S. and non-U.S. government and agency securities, asset-backed securities and corporate debt, represent collateralized financing transactions. Such transactions are recorded in the Condensed Consolidated Statements of Financial Condition at their contractual amounts and include accrued interest. The carrying value of repurchase and reverse repurchase agreements approximates fair value.

The Partnership manages credit exposure arising from reverse repurchase agreements and repurchase agreements by, in appropriate circumstances, entering into master netting agreements and collateral arrangements with counterparties that provide the Partnership, in the event of a counterparty default, the right to liquidate collateral and the right to offset a counterparty’s rights and obligations.

The Partnership takes possession of securities purchased under reverse repurchase agreements and is permitted to repledge, deliver or otherwise use such securities. The Partnership also pledges its financial instruments to counterparties to collateralize repurchase agreements. Financial instruments pledged that can be repledged, delivered or otherwise used by the counterparty are recorded in Investments in the Condensed Consolidated Statements of Financial Condition. Additional disclosures relating to reverse repurchase and repurchase agreements are discussed in Note 10. “Reverse Repurchase and Repurchase Agreements”.

Blackstone does not offset assets and liabilities relating to reverse repurchase agreements and repurchase agreements in its Condensed Consolidated Statements of Financial Condition. Additional disclosures relating to offsetting are discussed in Note 11. “Offsetting of Assets and Liabilities”.

Securities Sold, Not Yet Purchased

Securities Sold, Not Yet Purchased consist of equity and debt securities that the Partnership has borrowed and sold. The Partnership is required to “cover” its short sale in the future by purchasing the security at prevailing market prices and delivering it to the counterparty from which it borrowed the security. The Partnership is exposed to loss in the event that the price at which a security may have to be purchased to cover a short sale exceeds the price at which the borrowed security was sold short.

Securities Sold, Not Yet Purchased are recorded at fair value in the Condensed Consolidated Statements of Financial Condition.

Derivative Instruments

The Partnership recognizes all derivatives as assets or liabilities on its Condensed Consolidated Statements of Financial Condition at fair value. On the date the Partnership enters into a derivative contract, it designates and documents each derivative contract as one of the following: (a) a hedge of a recognized asset or liability (“fair value hedge”), (b) a hedge of a forecasted transaction or of the variability of cash flows to be received or paid related to a recognized asset or liability (“cash flow hedge”), (c) a hedge of a net investment in a foreign operation, or (d) a derivative instrument not designated as a hedging instrument (“freestanding derivative”). For a fair value hedge, Blackstone records changes in the fair value of the derivative and, to the extent that it is highly effective, changes in the fair value of the hedged asset or liability attributable to the hedged risk, in current period earnings in General, Administrative and Other in the Condensed Consolidated Statements of Operations. Changes in the fair value of derivatives designated as hedging instruments caused by factors other than changes in the risk being hedged, which

THE BLACKSTONE GROUP L.P.

Notes to Condensed Consolidated Financial Statements—Continued

(All Dollars Are in Thousands, Except Unit and Per Unit Data, Except Where Noted)

are excluded from the assessment of hedge effectiveness, are recognized in current period earnings. Gains or losses on a derivative instrument that is designated as, and is effective as, an economic hedge of a net investment in a foreign operation are reported in the cumulative translation adjustment section of other comprehensive income to the extent it is effective as a hedge. The ineffective portion of a net investment hedge is recognized in current period earnings.

The Partnership formally documents at inception its hedge relationships, including identification of the hedging instruments and the hedged items, its risk management objectives, strategy for undertaking the hedge transaction and the Partnership’s evaluation of effectiveness of its hedged transaction. At least monthly, the Partnership also formally assesses whether the derivative it designated in each hedging relationship is expected to be, and has been, highly effective in offsetting changes in estimated fair values or cash flows of the hedged items using either the regression analysis or the dollar offset method. For net investment hedges, the Partnership uses a method based on changes in spot rates to measure effectiveness. If it is determined that a derivative is not highly effective at hedging the designated exposure, hedge accounting is discontinued. The Partnership may also at any time remove a designation of a fair value hedge. The fair values of hedging derivative instruments are reflected within Other Assets in the Condensed Consolidated Statements of Financial Condition.

For freestanding derivative contracts, the Partnership presents changes in fair value in current period earnings. Changes in the fair value of derivative instruments held by consolidated Blackstone Funds are reflected in Net Gains (Losses) from Fund Investment Activities or, where derivative instruments are held by the Partnership, within Investment Income (Loss) in the Condensed Consolidated Statements of Operations. The fair value of freestanding derivative assets are recorded within Investments and freestanding derivative liabilities are recorded within Accounts Payable, Accrued Expenses and Other Liabilities in the Condensed Consolidated Statements of Financial Condition.

The Partnership has elected to not offset derivative assets and liabilities or financial assets in its Condensed Consolidated Statements of Financial Condition, including cash, that may be received or paid as part of collateral arrangements, even when an enforceable master netting agreement is in place that provides the Partnership, in the event of counterparty default, the right to liquidate collateral and the right to offset a counterparty’s rights and obligations.

Blackstone’s other disclosures regarding derivative financial instruments are discussed in Note 6. “Derivative Financial Instruments”.

Blackstone’s disclosures regarding offsetting are discussed in Note 11. “Offsetting of Assets and Liabilities”.

Affiliates

Blackstone considers its Founder, senior managing directors, employees, the Blackstone Funds and the Portfolio Companies to be affiliates.

Distributions

Distributions are reflected in the condensed consolidated financial statements when declared.

Recent Accounting Developments

In June 2014, the Financial Accounting Standards Board (“FASB”) issued amended guidance on revenue from contracts with customers. The guidance requires that an entity should recognize revenue to depict the transfer of

THE BLACKSTONE GROUP L.P.

Notes to Condensed Consolidated Financial Statements—Continued

(All Dollars Are in Thousands, Except Unit and Per Unit Data, Except Where Noted)

promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. An entity is required to (a) identify the contract(s) with a customer, (b) identify the performance obligations in the contract, (c) determine the transaction price, (d) allocate the transaction price to the performance obligations in the contract, and (e) recognize revenue when (or as) the entity satisfies a performance obligation. In determining the transaction price, an entity may include variable consideration only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized would not occur when the uncertainty associated with the variable consideration is resolved.

The guidance introduces new qualitative and quantitative disclosure requirements about contracts with customers including revenue and impairments recognized, disaggregation of revenue and information about contract balances and performance obligations. Information is required about significant judgments and changes in judgments in determining the timing of satisfaction of performance obligations and determining the transaction price and amounts allocated to performance obligations. Additional disclosures are required about assets recognized from the costs to obtain or fulfill a contract.

In August 2015, the FASB issued new guidance deferring the effective date of the new revenue recognition standard by one year. The new guidance should be applied for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period.

The new revenue guidance may have a material impact on Blackstone’s consolidated financial statements if it is determined that both performance fees and carried interest are forms of variable consideration that may not be included in the transaction price. This may significantly delay the recognition of carried interest income and performance fees.

In February 2016, the FASB issued amended guidance on the accounting for leases. The guidance requires the recognition of lease assets and lease liabilities for those leases classified as operating leases under previous GAAP. The guidance retains a distinction between finance leases and operating leases. The classification criteria for distinguishing between finance leases and operating leases are substantially similar to the classification criteria for distinguishing between capital leases and operating leases under previous GAAP. The recognition, measurement and presentation of expenses and cash flows arising from a lease by a lessee have not changed significantly from previous GAAP.

For operating leases, a lessee is required to do the following: (a) recognize a right-of-use asset and a lease liability, initially measured at the present value of the lease payments, in the Statement of Financial Condition, (b) recognize a single lease cost, calculated so that the cost of the lease is allocated over the lease term on a generally straight-line basis, and (c) classify all cash payments within operating activities in the statement of cash flows.

The guidance is effective for fiscal periods beginning after December 15, 2018. Early application is permitted. Blackstone is evaluating the impact of the amended guidance on the Consolidated Statement of Financial Condition. It is not expected to have a material impact on the Consolidated Statements of Operations or the Consolidated Statements of Cash Flows.

In March 2016, the FASB issued amended guidance on stock compensation. The amendments simplify several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, accounting for forfeitures, and classification of excess tax benefits and employee taxes paid on the statement of cash flows. The guidance is effective for annual periods beginning after December 15, 2016 and interim periods within those annual periods. Early adoption is permitted. The guidance is not expected to have a material impact on Blackstone’s financial statements.

THE BLACKSTONE GROUP L.P.

Notes to Condensed Consolidated Financial Statements—Continued

(All Dollars Are in Thousands, Except Unit and Per Unit Data, Except Where Noted)

3.	INTANGIBLE ASSETS

Intangible Assets, Net consists of the following:


	March 31, 2016			December 31, 2015
Finite-Lived Intangible Assets/Contractual Rights	$	1,424,226		$	1,424,226
Accumulated Amortization		(1,101,507	)		(1,078,679	)

Intangible Assets, Net	$	322,719		$	345,547

Amortization expense associated with Blackstone’s intangible assets was $22.8 million for the three months ended March 31, 2016 and $24.8 million for the three months ended March 31, 2015.

Amortization of Intangible Assets held at March 31, 2016 is expected to be $82.9 million, $43.9 million, $43.8 million, $43.8 million, and $43.8 million for each of the years ending December 31, 2016, 2017, 2018, 2019, and 2020, respectively. Blackstone’s intangible assets as of March 31, 2016 are expected to amortize over a weighted-average period of 6.3 years.

4.	INVESTMENTS

Investments consist of the following:


	March 31, 2016		December 31, 2015
Investments of Consolidated Blackstone Funds	$	4,885,584	$	4,613,944
Equity Method Investments		3,116,125		3,110,810
Blackstone’s Treasury Cash Management Strategies		1,588,194		1,682,259
Performance Fees		4,782,046		4,757,932
Other Investments		253,083		159,152

	$	14,625,032	$	14,324,097

Blackstone’s share of Investments of Consolidated Blackstone Funds totaled $405.9 million and $451.9 million at March 31, 2016 and December 31, 2015, respectively.

Investments of Consolidated Blackstone Funds

The following table presents the Realized and Net Change in Unrealized Gains (Losses) on investments held by the consolidated Blackstone Funds and a reconciliation to Other Income — Net Gains from Fund Investment Activities in the Condensed Consolidated Statements of Operations:


	Three Months Ended March 31,
	2016			2015
Realized Gains	$	13,382		$	67,039
Net Change in Unrealized Gains (Losses)		(25,241	)		3,933

Realized and Net Change in Unrealized Gains (Losses) from Consolidated Blackstone Funds		(11,859	)		70,972
Interest and Dividend Revenue Attributable to Consolidated Blackstone Funds		31,001			22,583

Other Income — Net Gains from Fund Investment Activities	$	19,142		$	93,555

THE BLACKSTONE GROUP L.P.

Notes to Condensed Consolidated Financial Statements—Continued

(All Dollars Are in Thousands, Except Unit and Per Unit Data, Except Where Noted)

Equity Method Investments

Blackstone’s equity method investments include its investments in private equity funds, real estate funds, funds of hedge funds and credit-focused funds and other proprietary investments, which are not consolidated but in which the Partnership exerts significant influence.

Blackstone evaluates each of its equity method investments to determine if any were significant as defined by guidance from the United States Securities and Exchange Commission. As of and for the three months ended March 31, 2016 and 2015, no individual equity method investment held by Blackstone met the significance criteria. As such, Blackstone is not required to present separate financial statements for any of its equity method investments.

The Partnership recognized net gains related to its equity method investments of $17.6 million and $162.1 million for the three months ended March 31, 2016 and 2015, respectively.

Blackstone’s Treasury Cash Management Strategies

The portion of Blackstone’s Treasury Cash Management Strategies included in Investments represents the Partnership’s liquid investments into primarily fixed income securities, mutual fund interests, and other fund interests. These strategies are managed by a combination of Blackstone personnel and third party advisers. The following table presents the Realized and Net Change in Unrealized Gains (Losses) on investments held by Blackstone’s Treasury Cash Management Strategies:


	Three Months Ended March 31,
	2016			2015
Realized Losses	$	(18,609	)	$	(161	)
Net Change in Unrealized Gains		1,783			11,111

	$	(16,826	)	$	10,950

Performance Fees

Performance Fees allocated to the general partner in respect of performance of certain Carry Funds, funds of hedge funds and credit-focused funds were as follows:


	Private Equity			Real Estate			Hedge Fund Solutions			Credit			Total
Performance Fees, December 31, 2015	$	1,479,443		$	3,101,688		$	9,747		$	167,054		$	4,757,932
Performance Fees Allocated as a Result of Changes in Fund Fair Values		104,602			179,842			(891	)		(4	)		283,549
Foreign Exchange Gain		—			18,631			—			—			18,631
Fund Distributions		(29,345	)		(222,978	)		(6,363	)		(19,380	)		(278,066	)

Performance Fees, March 31, 2016	$	1,554,700		$	3,077,183		$	2,493		$	147,670		$	4,782,046

THE BLACKSTONE GROUP L.P.

Notes to Condensed Consolidated Financial Statements—Continued

(All Dollars Are in Thousands, Except Unit and Per Unit Data, Except Where Noted)

Other Investments

Other Investments consist primarily of proprietary investment securities held by Blackstone. The following table presents Blackstone’s Realized and Net Change in Unrealized Gains (Losses) in other investments:


	Three Months Ended March 31,
	2016			2015
Realized Gains	$	4,733		$	22
Net Change in Unrealized Gains (Losses)		(6,235	)		371

	$	(1,502	)	$	393

5.	NET ASSET VALUE AS FAIR VALUE

A summary of fair value by strategy type alongside the remaining unfunded commitments and ability to redeem such investments as of March 31, 2016 is presented below:


Strategy	Fair Value		Unfunded Commitments		Redemption Frequency (if currently eligible)	Redemption Notice Period
Diversified Instruments	$	153,867	$	142	(a)	(a)
Credit Driven		257,775		268	(b)	(b)
Event Driven		64,773		—	(c)	(c)
Equity		227		—	(d)	(d)
Commodities		1,977		—	(e)	(e)

	$	478,619	$	410

(a)

Diversified Instruments include investments in funds that invest across multiple strategies. Investments representing 4% of the fair value of the investments in this category may not be redeemed at, or within three months of, the reporting date. The remaining 96% of investments in this category are redeemable as of the reporting date.

(b)

The Credit Driven category includes investments in hedge funds that invest primarily in domestic and international bonds. Investments representing 32% of the fair value of the investments in this category may not be redeemed at, or within three months of, the reporting date. Investments representing 64% of the fair value of the investments in this category are redeemable as of the reporting date. Investments representing 4% of the total fair value in the credit driven category are subject to redemption restrictions such as the investee fund manager’s ability to limit the amount of redemptions.

(c)	The Event Driven category includes investments in hedge funds whose primary investing strategy is to identify certain event-driven investments. Withdrawals are generally not permitted for the investments in this category. Distributions will be received as the underlying investments are liquidated.

(d)	The Equity category includes investments in hedge funds that invest primarily in domestic and international equity securities. Withdrawals are generally not permitted for the investments in this category. Distributions will be received as the underlying investments are liquidated.

(e)

The Commodities category includes investments in commodities-focused funds that primarily invest in futures and physical-based commodity driven strategies. Withdrawals are generally not permitted for the investments in this category. Distributions will be received as the underlying investments are liquidated.

THE BLACKSTONE GROUP L.P.

Notes to Condensed Consolidated Financial Statements—Continued

(All Dollars Are in Thousands, Except Unit and Per Unit Data, Except Where Noted)

6.	DERIVATIVE FINANCIAL INSTRUMENTS

Blackstone and the consolidated Blackstone Funds enter into derivative contracts in the normal course of business to achieve certain risk management objectives and for general investment purposes. Blackstone may enter into derivative contracts in order to hedge its interest rate risk exposure against the effects of interest rate changes. Additionally, Blackstone may also enter into derivative contracts in order to hedge its foreign currency risk exposure against the effects of a portion of its non-U.S. dollar denominated currency net investments. As a result of the use of derivative contracts, Blackstone and the consolidated Blackstone Funds are exposed to the risk that counterparties will fail to fulfill their contractual obligations. To mitigate such counterparty risk, Blackstone and the consolidated Blackstone Funds enter into contracts with certain major financial institutions, all of which have investment grade ratings. Counterparty credit risk is evaluated in determining the fair value of derivative instruments.

Net Investment Hedges

To manage the potential exposure from adverse changes in currency exchange rates arising from Blackstone’s net investment in foreign operations, during December 2014, Blackstone entered into several foreign currency forward contracts to hedge a portion of the net investment in Blackstone’s non-U.S. dollar denominated foreign operations.

Blackstone uses foreign currency forward contracts to hedge portions of Blackstone’s net investments in foreign operations. The gains and losses due to change in fair value attributable to changes in spot exchange rates on foreign currency derivatives designated as net investment hedges were recognized in Other Comprehensive Income (Loss), Net of Tax — Currency Translation Adjustment. For the three months ended March 31, 2016 the resulting loss was $2.1 million.

Freestanding Derivatives

Freestanding derivatives are instruments that Blackstone and certain of the consolidated Blackstone Funds have entered into as part of their overall risk management and investment strategies. These derivative contracts are not designated as hedging instruments for accounting purposes. Such contracts may include interest rate swaps, foreign exchange contracts, equity swaps, options, futures and other derivative contracts.

In June 2012, Blackstone removed the fair value hedge designation of its interest rate swaps that were previously used to hedge a portion of the interest rate risk on the Partnership’s fixed rate borrowings. Changes in the fair value of the interest rate swaps subsequent to the date of de-designation are reflected within Freestanding Derivatives within Interest Rate Contracts in the table below.

THE BLACKSTONE GROUP L.P.

Notes to Condensed Consolidated Financial Statements—Continued

(All Dollars Are in Thousands, Except Unit and Per Unit Data, Except Where Noted)

The table below summarizes the aggregate notional amount and fair value of the derivative financial instruments. The notional amount represents the absolute value amount of all outstanding derivative contracts.


	March 31, 2016								December 31, 2015
	Assets				Liabilities				Assets				Liabilities
	Notional		Fair Value		Notional		Fair Value		Notional		Fair Value		Notional		Fair Value
Net Investment Hedges
Foreign Currency Contracts	$	6,087	$	9	$	53,191	$	1,677	$	53,627	$	319	$	138	$	1

Freestanding Derivatives
Blackstone
Interest Rate Contracts		603,327		900		724,087		5,765		1,681,533		2,212		1,054,465		4,288
Foreign Currency Contracts		163,031		2,902		127,891		1,063		158,684		2,088		271,891		2,042
Credit Default Swaps		2,275		12		—		—		—		—		19,250		2,411
Investments of Consolidated Blackstone Funds
Foreign Currency Contracts		197,087		11,562		26,253		2,846		124,595		1,400		92,094		6,490
Credit Default Swaps		—		—		122,682		7,647		—		—		108,786		6,275

		965,720		15,376		1,000,913		17,321		1,964,812		5,700		1,546,486		21,506

Total	$	971,807	$	15,385	$	1,054,104	$	18,998	$	2,018,439	$	6,019	$	1,546,624	$	21,507

The table below summarizes the impact to the Condensed Consolidated Statements of Operations from derivative financial instruments:


	Three Months Ended March 31,
	2016			2015
Net Investment Hedges — Foreign Currency Contracts
Hedge Ineffectiveness	$	129		$	240

Freestanding Derivatives
Realized Gains (Losses)
Interest Rate Contracts	$	(7,358	)	$	(3,735	)
Foreign Currency Contracts		(4,310	)		12,064
Credit Default Swaps		(3,811	)		1,826

Total	$	(15,479	)	$	10,155

Freestanding Derivatives
Net Change in Unrealized Gains (Losses)
Interest Rate Contracts	$	(2,666	)	$	(746	)
Foreign Currency Contracts		15,322			(11,024	)
Credit Default Swaps		(4,276	)		(2,922	)

Total	$	8,380		$	(14,692	)

As of March 31, 2016 and December 31, 2015, the Partnership had not designated any derivatives as cash flow hedges.

THE BLACKSTONE GROUP L.P.

Notes to Condensed Consolidated Financial Statements—Continued

(All Dollars Are in Thousands, Except Unit and Per Unit Data, Except Where Noted)

7.	FAIR VALUE OPTION

The following table summarizes the financial instruments for which the fair value option has been elected:


	March 31, 2016		December 31, 2015
Assets
Loans and Receivables	$	287,858	$	261,994
Equity and Preferred Securities		280,028		280,879
Debt Securities		14,487		15,176
Assets of Consolidated CLO Vehicles
Corporate Loans		3,363,794		3,087,563
Corporate Bonds		412,073		379,000

	$	4,358,240	$	4,024,612

Liabilities
Liabilities of Consolidated CLO Vehicles
Senior Secured Notes	$	3,467,956	$	3,225,064
Subordinated Notes		86,063		98,371

	$	3,554,019	$	3,323,435

The following table presents the Realized and Net Change in Unrealized Gains (Losses) on financial instruments on which the fair value option was elected:


	Three Months Ended March 31,
	2016						2015
	Realized Gains (Losses)			Net Change in Unrealized Gains (Losses)			Realized Gains (Losses)			Net Change in Unrealized Gains (Losses)
Assets
Loans and Receivables	$	—		$	(3,778	)	$	—		$	(1,875	)
Equity and Preferred Securities		3			(3,832	)		(185	)		(2,828	)
Debt Securities		—			(689	)		—			—
Assets of Consolidated CLO Vehicles
Corporate Loans		(13,707	)		957			(7,208	)		22,557
Corporate Bonds		190			271			30			1,135
Other		178			—			1,955			(2,491	)

	$	(13,336	)	$	(7,071	)	$	(5,408	)	$	16,498

Liabilities
Liabilities of Consolidated CLO Vehicles
Senior Secured Notes	$	—		$	—		$	—		$	(3,794	)
Subordinated Notes		—			12,413			—			754

	$	—		$	12,413		$	—		$	(3,040	)

THE BLACKSTONE GROUP L.P.

Notes to Condensed Consolidated Financial Statements—Continued

(All Dollars Are in Thousands, Except Unit and Per Unit Data, Except Where Noted)

The following table presents information for those financial instruments for which the fair value option was elected:


	March 31, 2016								December 31, 2015
				For Financial Assets Past Due (a)								For Financial Assets Past Due (a)
	(Deficiency) of Fair Value Over Principal			Fair Value		(Deficiency) of Fair Value Over Principal			(Deficiency) of Fair Value Over Principal			Fair Value		(Deficiency) of Fair Value Over Principal
Loans and Receivables	$	(13,806	)	$	—	$	—		$	(8,845	)	$	—	$	—
Debt Securities		(1,115	)		—		—			(426	)		—		—
Assets of Consolidated CLO Vehicles
Corporate Loans		(71,562	)		—		(1,784	)		(77,900	)		1,088		(5,620	)
Corporate Bonds		(6,588	)		—		—			(6,046	)		—		—

	$	(93,071	)	$	—	$	(1,784	)	$	(93,217	)	$	1,088	$	(5,620	)

(a)	Corporate Loans and Corporate Bonds within CLO assets are classified as past due if contractual payments are more than one day past due.

As of December 31, 2015, no Loans and Receivables for which the fair value option was elected were past due or in non-accrual status. As of March 31, 2016 and December 31, 2015, no Corporate Bonds included within the Assets of Consolidated CLO Vehicles for which the fair value option was elected were past due or in non-accrual status.

THE BLACKSTONE GROUP L.P.

Notes to Condensed Consolidated Financial Statements—Continued

(All Dollars Are in Thousands, Except Unit and Per Unit Data, Except Where Noted)

8.	FAIR VALUE MEASUREMENTS OF FINANCIAL INSTRUMENTS

The following tables summarize the valuation of the Partnership’s financial assets and liabilities by the fair value hierarchy:


	March 31, 2016
	Level I		Level II		Level III		NAV		Total
Assets
Investments of Consolidated Blackstone Funds (a)
Investment Funds	$	—	$	—	$	—	$	149,071	$	149,071
Equity Securities		71,851		53,317		82,724		—		207,892
Partnership and LLC Interests		32,642		75,005		445,697		—		553,344
Debt Instruments		—		168,597		19,251		—		187,848
Assets of Consolidated CLO Vehicles
Corporate Loans		—		3,174,768		189,026		—		3,363,794
Corporate Bonds		—		412,073		—		—		412,073
Freestanding Derivatives — Foreign
Currency Contracts		—		11,562		—		—		11,562

Total Investments of Consolidated Blackstone Funds		104,493		3,895,322		736,698		149,071		4,885,584

Blackstone’s Treasury Cash Management Strategies
Equity Securities		143,882		—		—		—		143,882
Debt Instruments		—		1,101,627		30,855		116,544		1,249,026
Other		—		—		—		195,286		195,286

Total Blackstone’s Treasury Cash
Management Strategies		143,882		1,101,627		30,855		311,830		1,588,194
Money Market Funds		170,680		—		—		—		170,680
Net Investment Hedges — Foreign Currency Contracts		—		9		—		—		9
Freestanding Derivatives
Interest Rate Contracts		452		448		—		—		900
Foreign Currency Contracts		—		2,902		—		—		2,902
Credit Default Swaps		—		12		—		—		12
Loans and Receivables		—		—		287,858		—		287,858
Other Investments		135,956		—		99,409		17,718		253,083

	$	555,463	$	5,000,320	$	1,154,820	$	478,619	$	7,189,222


	March 31, 2016
	Level I		Level II		Level III		Total
Liabilities
Liabilities of Consolidated CLO Vehicles (a)
Senior Secured Notes (b)	$	—	$	3,467,956	$	—	$	3,467,956
Subordinated Notes (b)		—		86,063		—		86,063
Freestanding Derivatives — Foreign Currency Contracts		—		2,846		—		2,846
Freestanding Derivatives — Credit Default Swaps		—		7,647		—		7,647
Net Investment Hedges — Foreign Currency Contracts		—		1,677		—		1,677
Freestanding Derivatives
Interest Rate Contracts		1,899		3,866		—		5,765
Foreign Currency Contracts		—		1,063		—		1,063
Securities Sold, Not Yet Purchased		—		105,857		—		105,857

	$	1,899	$	3,676,975	$	—	$	3,678,874

THE BLACKSTONE GROUP L.P.

Notes to Condensed Consolidated Financial Statements—Continued

(All Dollars Are in Thousands, Except Unit and Per Unit Data, Except Where Noted)


	December 31, 2015
	Level I		Level II		Level III		NAV		Total
Assets
Investments of Consolidated Blackstone Funds (a)
Investment Funds	$	—	$	—	$	—	$	155,512	$	155,512
Equity Securities		82,734		53,250		80,849		—		216,833
Partnership and LLC Interests		—		101,399		472,391		—		573,790
Debt Instruments		—		179,465		20,381		—		199,846
Assets of Consolidated CLO Vehicles
Corporate Loans		—		2,886,792		200,771		—		3,087,563
Corporate Bonds		—		379,000		—		—		379,000
Freestanding Derivatives — Foreign Currency Contracts		—		1,400		—		—		1,400

Total Investments of Consolidated Blackstone Funds		82,734		3,601,306		774,392		155,512		4,613,944

Blackstone’s Treasury Cash Management Strategies
Equity Securities		240,464		—		—		—		240,464
Debt Instruments		—		1,069,915		54,657		115,657		1,240,229
Other		—		—		—		201,566		201,566

Total Blackstone’s Treasury Cash Management Strategies		240,464		1,069,915		54,657		317,223		1,682,259
Money Market Funds		460,233		—		—		—		460,233
Net Investment Hedges — Foreign Currency Contracts		—		319		—		—		319
Freestanding Derivatives
Interest Rate Contracts		1,806		406		—		—		2,212
Foreign Currency Contracts		—		2,088		—		—		2,088
Loans and Receivables		—		—		261,994		—		261,994
Other Investments		40,261		—		101,184		17,707		159,152

	$	825,498	$	4,674,034	$	1,192,227	$	490,442	$	7,182,201


	December 31, 2015
	Level I		Level II		Level III		Total
Liabilities
Liabilities of Consolidated CLO Vehicles (a)
Senior Secured Notes (b)	$	—	$	3,225,064	$	—	$	3,225,064
Subordinated Notes (b)		—		98,371		—		98,371
Freestanding Derivatives — Foreign Currency Contracts		—		6,490		—		6,490
Freestanding Derivatives — Credit Default Swaps		—		6,275		—		6,275
Net Investment Hedges — Foreign Currency Contracts		—		1		—		1
Freestanding Derivatives
Interest Rate Contracts		835		3,453		—		4,288
Foreign Currency Contracts		—		2,042		—		2,042
Credit Default Swaps		—		2,411		—		2,411
Securities Sold, Not Yet Purchased		—		176,667		—		176,667


	$	835	$	3,520,774	$	—	$	3,521,609

THE BLACKSTONE GROUP L.P.

Notes to Condensed Consolidated Financial Statements—Continued

(All Dollars Are in Thousands, Except Unit and Per Unit Data, Except Where Noted)

(a)

Pursuant to GAAP consolidation guidance, the Partnership is required to consolidate all VIEs in which it has been identified as the primary beneficiary, including certain CLO vehicles, and other funds in which a consolidated entity of the Partnership, as the general partner of the fund, has a controlling financial interest. While the Partnership is required to consolidate certain funds, including CLO vehicles, for GAAP purposes, the Partnership has no ability to utilize the assets of these funds and there is no recourse to the Partnership for their liabilities since these are client assets and liabilities.

(b)	Senior and subordinate notes issued by CLO vehicles are classified based on the more observable fair value of CLO assets less (a) the fair value of any beneficial interests held by Blackstone, and (b) the carrying value of any beneficial interests that represent compensation for services.

The following table summarizes the fair value transfers between Level I and Level II for positions that existed as of March 31, 2016 and 2015, respectively:


	Three Months Ended March 31,
	2016		2015
Transfers from Level I into Level II (a)	$	2,114	$	—
Transfers from Level II into Level I (b)	$	28,346	$	5,688

(a)	Transfers out of Level I represent those financial instruments for which restrictions exist and adjustments were made to an otherwise observable price to reflect fair value at the reporting date.

(b)	Transfers into Level I represent those financial instruments for which an unadjusted quoted price in an active market became available for the identical asset.

THE BLACKSTONE GROUP L.P.

Notes to Condensed Consolidated Financial Statements—Continued

(All Dollars Are in Thousands, Except Unit and Per Unit Data, Except Where Noted)

The following table summarizes the quantitative inputs and assumptions used for items categorized in Level III of the fair value hierarchy as of March 31, 2016:

Fair
Value

Valuation
Techniques

Unobservable
Inputs

Ranges

Weighted-
Average (a)

Financial Assets

Investments of Consolidated Blackstone Funds

Equity Securities

69,289

Discounted Cash Flows

Discount Rate

7.4% - 25.0%

13.1%

Revenue CAGR

-1.5% - 20.2%

8.1%

Exit Multiple - EBITDA

4.0x - 18.2x

9.6x

Exit Multiple - P/E

10.5x - 17.0x

11.3x

Exit Capitalization Rate

5.5% - 11.4%

8.9%

5,878

Other

N/A

5,869

Transaction Price

N/A

1,661

Market Comparable Companies

EBITDA Multiple

6.1x

N/A

Book Value Multiple

0.9x

N/A

Third Party Pricing

N/A

Partnership and LLC Interests

413,719

Discounted Cash Flows

Discount Rate

2.1% - 29.2%

9.5%

Revenue CAGR

-13.8% - 67.1%

8.4%

Exit Multiple - EBITDA

0.1x - 23.5x

10.3x

Exit Multiple - P/E

9.3x

N/A

Exit Capitalization Rate

3.0% - 12.1%

6.4%

14,342

Third Party Pricing

N/A

9,671

Transaction Price

N/A

7,965

Other

N/A

Debt Instruments

14,794

Third Party Pricing

N/A

4,071

Discounted Cash Flows

Discount Rate

8.3% - 52.7%

14.4%

Revenue CAGR

6.8%

N/A

Exit Multiple - EBITDA

12.0x

N/A

Exit Capitalization Rate

1.0% - 8.3%

5.3%

386

Transaction Pricing

N/A

Assets of Consolidated CLO Vehicles

172,442

Third Party Pricing

N/A

16,584

Market Comparable Companies

EBITDA Multiple

4.0x - 15.0x

7.2x

Total Investments of Consolidated Blackstone Funds

736,698

continued ....

THE BLACKSTONE GROUP L.P.

Notes to Condensed Consolidated Financial Statements—Continued

(All Dollars Are in Thousands, Except Unit and Per Unit Data, Except Where Noted)

Fair Value

Valuation
Techniques

Unobservable
Inputs

Ranges

Weighted-
Average (a)

Blackstone’s Treasury Cash Management Strategies

15,663

Discounted Cash Flows

Default Rate

1.0% - 2.0%

1.9%

Recovery Rate

30.0% - 70.0%

69.4%

Recovery Lag

12 Months

N/A

Pre-payment Rate

20.0%

N/A

Reinvestment Rate

LIBOR + 350 bps

LIBOR + 394 bps

LIBOR + 400 bps

Discount Rate

8.4% - 13.5%

9.5%

15,192

Third Party Pricing

N/A

Loans and Receivables

222,726

Discounted Cash Flows

Discount Rate

6.8% - 24.8%

12.2%

47,514

Transaction Price

N/A

17,618

Third Party Pricing

N/A

Other Investments

83,210

Discounted Cash Flows

Discount Rate

1.7% - 19.7%

3.9%

Default Rate

2.0%

N/A

Recovery Rate

70.0%

N/A

Recovery Lag

12 Months

N/A

Pre-payment Rate

20.0%

N/A

Reinvestment Rate

LIBOR + 400 bps

N/A

16,199

Transaction Price

N/A

Total

1,154,820

The following table summarizes the quantitative inputs and assumptions used for items categorized in Level III of the fair value hierarchy as of December 31, 2015:

Fair Value

Valuation
Techniques

Unobservable
Inputs

Ranges

Weighted
Average (a)

Financial Assets

Investments of Consolidated Blackstone Funds

Equity Securities

66,962

Discounted Cash Flows

Discount Rate

7.8% - 25.0%

13.6%

Revenue CAGR

-5.0% - 61.5%

10.2%

Exit Multiple - EBITDA

5.0x - 18.2x

9.6x

Exit Multiple - P/E

10.5x - 17.0x

11.2x

Exit Capitalization Rate

5.5% - 11.4%

5,426

Other

N/A

6,722

Transaction Price

N/A

1,710

Market Comparable

EBITDA Multiple

6.5x - 8.0x

6.6x

Companies

Book Value Multiple

0.9x

N/A

Third Party Pricing

N/A

Partnership and LLC Interests

423,588

Discounted Cash Flows

Discount Rate

2.1% - 25.8%

9.3%

Revenue CAGR

-24.1% - 31.8%

8.6%

Exit Multiple - EBITDA

0.1x - 23.8x

9.8x

Exit Multiple - P/E

9.3x

N/A

Exit Capitalization Rate

2.7% - 12.1%

6.3%

30,437

Transaction Price

N/A

16,963

Third Party Pricing

N/A

1,403

Other

N/A

continued ...

THE BLACKSTONE GROUP L.P.

Notes to Condensed Consolidated Financial Statements—Continued

(All Dollars Are in Thousands, Except Unit and Per Unit Data, Except Where Noted)

Fair Value

Valuation
Techniques

Unobservable
Inputs

Ranges

Weighted
Average (a)

Debt Instruments

16,217

Third Party Pricing

N/A

4,086

Discounted Cash Flows

Discount Rate

6.5% - 52.7%

14.1%

Revenue CAGR

16.8%

N/A

Exit Multiple -
EBITDA

12.0x

N/A

Exit
Capitalization
Rate

1.0% - 8.3%

5.8%

Transaction Price

N/A

Assets of Consolidated CLO Vehicles

180,988

Third Party Pricing

N/A

19,783

Market Comparable
Companies

EBITDA Multiple

4.5x - 7.0x

6.5x

Total Investments of Consolidated Blackstone Funds

774,392

Blackstone’s Treasury Cash Management Strategies

32,004

Discounted Cash Flows

Default Rate

1.0% - 2.0%

1.9%

Recovery Rate

30.0% - 70.0%

67.0%

Recovery Lag

12 months

N/A

Pre-payment Rate

20.0%

N/A

Reinvestment Rate

LIBOR + 400 bps

N/A

Discount Rate

5.8% - 14.0%

8.6%

22,653

Third Party Pricing

N/A

Loans and Receivables

241,897

Discounted Cash Flows

Discount Rate

6.7% - 20.6%

11.0%

20,097

Third Party Pricing

N/A

Other Investments

81,984

Discounted Cash Flows

Discount Rate

1.4% - 12.5%

3.3%

Default Rate

2.0%

N/A

Recovery Rate

70.0%

N/A

Recovery Lag

12 months

N/A

Pre-payment Rate

20.0%

N/A

Reinvestment Rate

LIBOR + 400 bps

N/A

19,200

Transaction Price

N/A

Total

1,192,227

N/A	Not applicable.

CAGR	Compound annual growth rate.

EBITDA

Earnings before interest, taxes, depreciation and amortization.

Exit Multiple

Ranges include the last twelve months EBITDA, forward EBITDA and price/earnings exit multiples.

Third Party Pricing

Third Party Pricing is generally determined on the basis of prices between market participants provided by reputable dealers or pricing services.

(a)	Unobservable inputs were weighted based on the fair value of the investments included in the range.

The significant unobservable inputs used in the fair value measurement of the Blackstone’s Treasury Cash Management Strategies, debt instruments and other investments are discount rates, default rates, recovery rates, recovery lag, pre-payment rates and reinvestment rates. Increases (decreases) in any of the discount rates, default rates, recovery lag and pre-payment rates in isolation would result in a lower (higher) fair value measurement. Increases (decreases) in any of the recovery rates and reinvestment rates in isolation would result in a higher (lower) fair value measurement. Generally, a change in the assumption used for default rates may be accompanied by a

THE BLACKSTONE GROUP L.P.

Notes to Condensed Consolidated Financial Statements—Continued

(All Dollars Are in Thousands, Except Unit and Per Unit Data, Except Where Noted)

directionally similar change in the assumption used for recovery lag and a directionally opposite change in the assumption used for recovery rates and pre-payment rates.

The significant unobservable inputs used in the fair value measurement of equity securities, partnership and LLC interests, debt instruments, assets of consolidated CLO vehicles and loans and receivables are discount rates, exit capitalization rates, exit multiples, EBITDA multiples and revenue compound annual growth rates. Increases (decreases) in any of discount rates and exit capitalization rates in isolation can result in a lower (higher) fair value measurement. Increases (decreases) in any of exit multiples and revenue compound annual growth rates in isolation can result in a higher (lower) fair value measurement.

Since December 31, 2015, there have been no changes in valuation techniques within Level II and Level III that have had a material impact on the valuation of financial instruments.

The following tables summarize the changes in financial assets and liabilities measured at fair value for which the Partnership has used Level III inputs to determine fair value and does not include gains or losses that were reported in Level III in prior years or for instruments that were transferred out of Level III prior to the end of the respective reporting period. Total realized and unrealized gains and losses recorded for Level III investments are reported in Investment Income (Loss) and Net Gains (Losses) from Fund Investment Activities in the Condensed Consolidated Statements of Operations.


	Level III Financial Assets at Fair Value Three Months Ended March 31,
	2016												2015
	Investments of Consolidated Funds			Loans and Receivables			Other Investments (a)			Total			Investments of Consolidated Funds			Loans and Receivables			Other Investments (a)			Total
Balance, Beginning of Period	$	774,392		$	261,994		$	155,841		$	1,192,227		$	2,394,823		$	40,397		$	189,385		$	2,624,605
Transfer Out Due to Deconsolidation		—			—			—			—			(1,460,538	)		—			—			(1,460,538	)
Transfer In to Level III (b)		54,626			—			290			54,916			9,314			—			17,125			26,439
Transfer Out of Level III (b)		(61,879	)		—			(4,005	)		(65,884	)		(12,353	)		—			(22,684	)		(35,037	)
Purchases		63,932			298,381			—			362,313			83,503			6,186			24,933			114,622
Sales		(92,578	)		(267,556	)		(20,007	)		(380,141	)		(92,074	)		(4,071	)		(35,153	)		(131,298	)
Settlements		—			(4,294	)		(140	)		(4,434	)		—			(1,144	)		(103	)		(1,247	)
Changes in Gains (Losses) Included in Earnings and Other Comprehensive Income (Loss)		(1,795	)		(667	)		(1,715	)		(4,177	)		(2,227	)		(677	)		(9,705	)		(12,609	)

Balance, End of Period	$	736,698		$	287,858		$	130,264		$	1,154,820		$	920,448		$	40,691		$	163,798		$	1,124,937

Changes in Unrealized Gains (Losses) Included in Earnings Related to Investments Still Held at the Reporting Date	$	(18,484	)	$	(667	)	$	(1,300	)	$	(20,451	)	$	6,352		$	(806	)	$	1,348		$	6,894

THE BLACKSTONE GROUP L.P.

Notes to Condensed Consolidated Financial Statements—Continued

(All Dollars Are in Thousands, Except Unit and Per Unit Data, Except Where Noted)


	Level III Financial Liabilities at Fair Value Three Months Ended March 31, 2015 (c)
	Collateralized Loan Obligations Senior Notes			Collateralized Loan Obligations Subordinated Notes			Total
Balance, Beginning of Period	$	6,448,352		$	348,752		$	6,797,104
Transfer Out Due to Deconsolidation		(4,168,405	)		(261,934	)		(4,430,339	)
Transfer Out Due to Amended CLO Guidance (d)		(2,279,947	)		(86,818	)		(2,366,765	)

Balance, End of Period	$	—		$	—		$	—

(a)	Represents Blackstone’s Treasury Cash Management Strategies and Other Investments.

(b)	Transfers in and out of Level III financial assets and liabilities were due to changes in the observability of inputs used in the valuation of such assets and liabilities.

(c)	There were no Level III financial liabilities as of and for the three months ended March 31, 2016. There were no changes in unrealized (gains) losses included in earnings related to liabilities still held at either March 31, 2016 or March 31, 2015.

(d)	Transfers out due to amended CLO measurement guidance represents the transfer out of Level III for liabilities of consolidated CLO vehicles for which fair value is based on the more observable fair value of CLO assets. Such liabilities are classified as Level II within the fair value hierarchy.

9.	VARIABLE INTEREST ENTITIES

Pursuant to GAAP consolidation guidance, the Partnership consolidates certain VIEs in which it is determined that the Partnership is the primary beneficiary either directly or indirectly, through a consolidated entity or affiliate. VIEs include certain private equity, real estate, credit-focused or funds of hedge funds entities and CLO vehicles. The purpose of such VIEs is to provide strategy specific investment opportunities for investors in exchange for management and performance based fees. The investment strategies of the Blackstone Funds differ by product; however, the fundamental risks of the Blackstone Funds have similar characteristics, including loss of invested capital and loss of management fees and performance based fees. In Blackstone’s role as general partner, collateral manager or investment adviser, it generally considers itself the sponsor of the applicable Blackstone Fund. The Partnership does not provide performance guarantees and has no other financial obligation to provide funding to consolidated VIEs other than its own capital commitments.

The assets of consolidated variable interest entities may only be used to settle obligations of these consolidated Blackstone Funds. In addition, there is no recourse to the Partnership for the consolidated VIEs’ liabilities including the liabilities of the consolidated CLO vehicles.

THE BLACKSTONE GROUP L.P.

Notes to Condensed Consolidated Financial Statements—Continued

(All Dollars Are in Thousands, Except Unit and Per Unit Data, Except Where Noted)

The Partnership holds variable interests in certain VIEs which are not consolidated as it is determined that the Partnership is not the primary beneficiary. The Partnership’s involvement with such entities is in the form of direct equity interests and fee arrangements. The maximum exposure to loss represents the loss of assets recognized by Blackstone relating to non-consolidated entities, any amounts due to non-consolidated entities and any clawback obligation relating to previously distributed Carried Interest. The assets and liabilities recognized in the Partnership’s Condensed Consolidated Statements of Financial Condition related to the Partnership’s interest in these non-consolidated VIEs and the Partnership’s maximum exposure to loss relating to non-consolidated VIEs were as follows:


	March 31, 2016		December 31, 2015
Investments	$	517,284	$	466,651
Accounts Receivable		14,593		11,726
Due from Affiliates		45,314		51,029

Total VIE Assets		577,191		529,406
Due to Affiliates		652		586
Accounts Payable, Accrued Expenses and Other Liabilities		122		88
Potential Clawback Obligation		74,676		73,450

Maximum Exposure to Loss	$	652,641	$	603,530

10.

REVERSE REPURCHASE AND REPURCHASE AGREEMENTS

At March 31, 2016, the Partnership received securities, primarily U.S. and non-U.S. government and agency securities, asset-backed securities and corporate debt, with a fair value of $45.2 million as collateral for reverse repurchase agreements that could be repledged, delivered or otherwise used. Securities with a fair value of $32.1 million and cash were used to cover Securities Sold, Not Yet Purchased. The Partnership also pledged securities with a carrying value of $75.7 million and cash to collateralize its repurchase agreements. Such securities can be repledged, delivered or otherwise used by the counterparty.

At December 31, 2015, the Partnership pledged securities with a carrying value of $64.5 million and cash to collateralize its repurchase agreements. Such securities can be repledged, delivered or otherwise used by the counterparty.

The following table provides information regarding the Partnership’s Repurchase Agreements obligation by type of collateral pledged as of March 31, 2016:


	March 31, 2016
	Remaining Contractual Maturity of the Agreements
	Overnight and Continuous		Up to 30 Days		30 - 90 Days		Greater than 90 days		Total
Repurchase Agreements
Asset-Backed Securities	$	—	$	5,148	$	40,260	$	4,132	$	49,540

Gross Amount of Recognized Liabilities for Repurchase Agreements in Note 11. “Offsetting of Assets and Liabilities”									$	49,540

Amounts Related to Agreements Not Included in Offsetting Disclosure in Note 11. “Offsetting of Assets and Liabilities”									$	—

THE BLACKSTONE GROUP L.P.

Notes to Condensed Consolidated Financial Statements—Continued

(All Dollars Are in Thousands, Except Unit and Per Unit Data, Except Where Noted)

11.

OFFSETTING OF ASSETS AND LIABILITIES

The following tables present the offsetting of assets and liabilities as of March 31, 2016:


	Gross and Net Amounts of Assets Presented in the Statement of Financial Condition		Gross Amounts Not Offset in the Statement of Financial Condition
			Financial Instruments		Cash Collateral Received		Net Amount
Assets
Net Investment Hedges	$	9	$	9	$	—	$	—
Freestanding Derivatives		3,814		1,215		1,174		1,425
Reverse Repurchase Agreements		45,301		45,151		—		150

Total	$	49,124	$	46,375	$	1,174	$	1,575


	Gross and Net Amounts of Liabilities Presented in the Statement of Financial Condition		Gross Amounts Not Offset in the Statement of Financial Condition
			Financial Instruments		Cash Collateral Pledged		Net Amount
Liabilities
Net Investment Hedges	$	1,677	$	9	$	—	$	1,668
Freestanding Derivatives		14,475		1,215		12,909		351
Repurchase Agreements		49,540		46,573		2,967		—

Total	$	65,692	$	47,797	$	15,876	$	2,019

The following tables present the offsetting of assets and liabilities as of December 31, 2015:


	Gross and Net Amounts of Assets Presented in the Statement of Financial Condition		Gross Amounts Not Offset in the Statement of Financial Condition
			Financial Instruments		Cash Collateral Received		Net Amount
Assets
Net Investment Hedges	$	319	$	1	$	—	$	318
Freestanding Derivatives		4,300		2,149		1,310		841
Reverse Repurchase Agreements		204,893		203,938		—		955

Total	$	209,512	$	206,088	$	1,310	$	2,114


	Gross and Net Amounts of Liabilities Presented in the Statement of Financial Condition		Gross Amounts Not Offset in the Statement of Financial Condition
			Financial Instruments		Cash Collateral Pledged		Net Amount
Liabilities
Net Investment Hedges	$	1	$	1	$	—	$	—
Freestanding Derivatives		15,016		2,149		12,076		791
Repurchase Agreements		40,929		40,259		670		—

Total	$	55,946	$	42,409	$	12,746	$	791

THE BLACKSTONE GROUP L.P.

Notes to Condensed Consolidated Financial Statements—Continued

(All Dollars Are in Thousands, Except Unit and Per Unit Data, Except Where Noted)

Reverse Repurchase Agreements and Repurchase Agreements are presented separately on the Condensed Consolidated Statements of Financial Condition. Freestanding Derivative assets are included in Other Assets in the Condensed Consolidated Statements of Financial Condition. The following table presents the components of Other Assets:


	March 31, 2016		December 31, 2015
Furniture, Equipment and Leasehold Improvements, Net	$	139,318	$	135,543
Prepaid Expenses		144,887		190,241
Other Assets		28,168		46,786
Freestanding Derivatives		3,814		4,300
Net Investment Hedges		9		319

	$	316,196	$	377,189

Freestanding Derivative liabilities are included in Accounts Payable, Accrued Expenses and Other Liabilities in the Condensed Consolidated Statements of Financial Condition and are not a significant component thereof.

Notional Pooling Arrangement

Blackstone has a notional cash pooling arrangement with a financial institution for cash management purposes. This arrangement allows for cash withdrawals based upon aggregate cash balances on deposit at the same financial institution. Cash withdrawals cannot exceed aggregate cash balances on deposit. The net balance of cash on deposit and overdrafts is used as a basis for calculating net interest expense or income. As of March 31, 2016, the aggregate cash balance on deposit relating to the cash pooling arrangement was $952.1 million, which was fully offset with an accompanying overdraft.

12.

BORROWINGS

The following table presents the general characteristics of each of our Notes, as well as their carrying value and fair value. The Notes are included in Loans Payable within the Condensed Consolidated Statements of Financial Condition. All of the Notes were issued at a discount. All of the Notes accrue interest from the Issue Date and all pay interest in arrears on a semi-annual basis or annual basis.


	March 31, 2016				December 31, 2015
Senior Notes	Carrying Value		Fair Value (a)		Carrying Value		Fair Value (a)
6.625%, Due 8/15/2019 (b)	$	613,047	$	667,485	$	614,996	$	665,438
5.875%, Due 3/15/2021	$	397,814	$	459,880	$	397,720	$	458,680
4.750%, Due 2/15/2023	$	392,452	$	436,560	$	392,224	$	430,560
6.250%, Due 8/15/2042	$	237,692	$	297,200	$	237,648	$	297,575
5.000%, Due 6/15/2044	$	488,204	$	510,750	$	488,119	$	515,050
4.450%, Due 7/15/2045	$	343,737	$	330,365	$	343,689	$	332,640
2.000%, Due 5/19/2025	$	334,697	$	351,977	$	322,664	$	327,465

(a)	Fair value is determined by broker quote and these notes would be classified as Level II within the fair value hierarchy.

(b)	The carrying and fair values are determined using the original $600 million par amount less $15 million attributable to these notes which were acquired but not retired by Blackstone during 2012.

THE BLACKSTONE GROUP L.P.

Notes to Condensed Consolidated Financial Statements—Continued

(All Dollars Are in Thousands, Except Unit and Per Unit Data, Except Where Noted)

Included within Loans Payable and Due to Affiliates within the Condensed Consolidated Statements of Financial Condition are amounts due to holders of debt securities issued by Blackstone’s consolidated CLO vehicles. Borrowings through the consolidated CLO vehicles consisted of the following:


	March 31, 2016							December 31, 2015
	Borrowing Outstanding		Weighted- Average Interest Rate			Weighted- Average Remaining Maturity in Years		Borrowing Outstanding		Weighted- Average Interest Rate			Weighted- Average Remaining Maturity in Years
Senior Secured Notes	$	3,786,464		1.94	%		5.5	$	3,687,976		1.93	%		5.4
Subordinated Notes		234,071		(a	)		N/A		226,350		(a	)		N/A

	$	4,020,535						$	3,914,326

(a)	The Subordinated Notes do not have contractual interest rates but instead receive distributions from the excess cash flows of the CLO vehicles.

Senior Secured Notes and Subordinated Notes comprise the following amounts:


	March 31, 2016						December 31, 2015
			Amounts Due to Non- Consolidated Affiliates						Amounts Due to Non- Consolidated Affiliates
	Fair Value		Borrowing Outstanding		Fair Value		Fair Value		Borrowing Outstanding		Fair Value
Senior Secured Notes	$	3,467,956	$	—	$	—	$	3,225,064	$	—	$	—
Subordinated Notes	$	86,063	$	10,000	$	8,164	$	98,371	$	10,000	$	8,231

The Loans Payable of the consolidated CLO vehicles are collateralized by assets held by each respective CLO vehicle and assets of one vehicle may not be used to satisfy the liabilities of another. As of March 31, 2016 and December 31, 2015, the fair value of the consolidated CLO assets was $4.1 billion and $3.9 billion, respectively. This collateral consisted of Cash, Corporate Loans, Corporate Bonds, other securities and receivables.

Scheduled principal payments for borrowings as of March 31, 2016 were as follows:


	Operating Borrowings		Blackstone Fund Facilities/CLO Vehicles		Total Borrowings
2016	$	—	$	4,253	$	4,253
2017		—		538,555		538,555
2018		—		—		—
2019		585,000		—		585,000
2020		—		—		—
Thereafter		2,240,140		3,481,980		5,722,120

Total	$	2,825,140	$	4,024,788	$	6,849,928

13.

INCOME TAXES

Blackstone’s effective tax rate was 5.7% and 6.8% for the three months ended March 31, 2016 and 2015, respectively. Blackstone’s income tax provision was $18.9 million and $99.3 million for the three months ended March 31, 2016 and 2015, respectively.

THE BLACKSTONE GROUP L.P.

Notes to Condensed Consolidated Financial Statements—Continued

(All Dollars Are in Thousands, Except Unit and Per Unit Data, Except Where Noted)

The Blackstone Group L.P. and certain of its subsidiaries operate in the U.S. as partnerships for U.S. federal income tax purposes and generally as corporate entities in non-U.S. jurisdictions. Blackstone’s effective tax rate for the three months ended March 31, 2016 and 2015 was substantially due to the fact that certain corporate subsidiaries are subject to federal, state, local and foreign income taxes (as applicable) and other subsidiaries are subject to New York City unincorporated business taxes.

14.

NET INCOME PER COMMON UNIT

Basic and diluted net income per common unit for the three months ended March 31, 2016 and March 31, 2015 was calculated as follows:


	Three Months Ended March 31,
	2016		2015
Net Income for Per Common Unit Calculation
Net Income Attributable to The Blackstone Group L.P., Basic	$	150,033	$	629,448
Incremental Net Income from Assumed Exchange of Blackstone Holdings Partnership Units		119,594		—

Net Income Attributable to The Blackstone Group L.P., Diluted	$	269,627	$	629,448

Units Outstanding
Weighted-Average Common Units Outstanding, Basic		644,897,849		625,276,969
Weighted-Average Unvested Deferred Restricted Common Units		1,629,702		5,955,072
Weighted-Average Blackstone Holdings Partnership Units