UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2017

OR

☐ 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

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  ☒    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  ☒    No  ☐

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

Large accelerated filer  ☒	Accelerated filer  ☐
Non-accelerated filer  ☐	Smaller reporting company  ☐
(Do not check if a smaller reporting company)	Emerging growth company  ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

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

The number of the Registrant’s voting common units representing limited partner interests outstanding as of November 1, 2017 was 630,715,641. The number of the Registrant’s non-voting common units representing limited partner interests outstanding as of November 1, 2017 was 20,891,886.

TABLE OF CONTENTS

		Page
PART I.	FINANCIAL INFORMATION
ITEM 1.	FINANCIAL STATEMENTS		5
	Unaudited Condensed Consolidated Financial Statements — September 30, 2017 and 2016:
	Condensed Consolidated Statements of Financial Condition as of September 30, 2017 and December  31, 2016		5
	Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September  30, 2017 and 2016		7
	Condensed Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2017 and 2016		8
	Condensed Consolidated Statements of Changes in Partners’ Capital for the Nine Months Ended September 30, 2017 and 2016		9
	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September  30, 2017 and 2016		11
	Notes to Condensed Consolidated Financial Statements		13
ITEM 1A.	UNAUDITED SUPPLEMENTAL PRESENTATION OF STATEMENTS OF FINANCIAL CONDITION		60
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		62
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		132
ITEM 4.	CONTROLS AND PROCEDURES		136
PART II.	OTHER INFORMATION
ITEM 1.	LEGAL PROCEEDINGS		137
ITEM 1A.	RISK FACTORS		137
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS		137
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES		137
ITEM 4.	MINE SAFETY DISCLOSURES		138
ITEM 5.	OTHER INFORMATION		138
ITEM 6.	EXHIBITS		138
SIGNATURES			139

1

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, 2016 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 (www.instagram.com/blackstone), YouTube (www.youtube.com/user/blackstonegroup) and Medium (www.medium.com/@blackstonebx) 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”), 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 hedge fund solutions and 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. We refer to our general corporate private equity funds as Blackstone Capital Partners (“BCP”) funds, our energy-focused private equity funds as Blackstone Energy Partners (“BEP”) funds, our core private equity fund as Blackstone Core Equity Partners (“BCEP”), our opportunistic investment platform that invests globally across asset classes, industries and geographies as Blackstone Tactical Opportunities (“Tactical Opportunities”), our secondary private equity fund of funds business as Strategic Partners Fund Solutions (“Strategic Partners”), a multi-asset investment program for eligible high net worth investors offering exposure to certain of our key illiquid investment strategies through a single commitment as Blackstone Total Alternatives Solution (“BTAS”) and our capital markets services business as Blackstone Capital Markets (“BXCM”). We refer to our real estate opportunistic funds as Blackstone Real Estate Partners (“BREP”) funds and our real estate debt investment funds as Blackstone Real Estate Debt Strategies (“BREDS”) funds. We refer to our core+ real estate funds, which target substantially stabilized assets in prime markets, as Blackstone Property Partners (“BPP”) funds. We refer to our real

2

estate investment trusts as “REITs”, to Blackstone Mortgage Trust, Inc., our NYSE-listed REIT, as “BXMT”, and to Blackstone Real Estate Income Trust, Inc., our non-exchange traded REIT, as “BREIT”. “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, plus for certain credit-oriented funds the amounts available to be borrowed under asset based credit facilities,

(b) the net asset value of (1) our hedge funds, real estate debt carry funds, open ended core+ real estate fund, certain co-investments managed by us, and our Hedge Fund Solutions carry and drawdown funds (plus, in each case, the capital that we are entitled to call from investors in those funds, including commitments yet to commence their investment periods), and (2) our funds of hedge funds, our Hedge Fund Solutions registered investment companies, and our non-exchange traded REIT,

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

(d) the amount of debt and equity outstanding for our CLOs during the reinvestment period,

(e) the aggregate par amount of collateral assets, including principal cash, for our CLOs after the reinvestment period,

(f) the gross or net amount of assets (including leverage where applicable) for our credit-focused registered investment companies, and

(g) the fair value of common stock, preferred stock, convertible debt, or similar instruments issued by BXMT.

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, hedge funds, funds structured like hedge funds and other open ended funds in our Hedge Fund Solutions, Credit and Real Estate segments generally have structures that afford an investor the right to withdraw or redeem their interests on a periodic basis (for example, annually or quarterly), typically with 30 to 95 days’ notice, depending on the fund and the liquidity profile of the underlying assets. Investment advisory agreements related to certain separately managed accounts in our Hedge Fund Solutions and Credit segments 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, net asset 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 or fair value of assets held in co-investment vehicles managed by us on which we receive fees,

(d) the net asset value of our funds of hedge funds, hedge funds, open ended core+ real estate fund, certain co-investments managed by us, certain registered investment companies, our non-exchange traded REIT, and certain of our Hedge Fund Solutions drawdown funds,

3

(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 BXMT, subject to certain adjustments,

(g) the aggregate par amount of collateral assets, including principal cash, of our CLOs, 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.

Each of our segments may include certain Fee-Earning Assets Under Management on which we earn performance fees but not management fees.

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.

4

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)

	September 30, 2017			December 31, 2016
Assets
Cash and Cash Equivalents	$	1,315,687		$	1,837,253
Cash Held by Blackstone Funds and Other		1,665,730			1,005,161
Investments (including assets pledged of $105,607 and $119,139 at September 30, 2017 and December 31, 2016, respectively)		22,385,192			17,694,975
Accounts Receivable		906,315			772,695
Reverse Repurchase Agreements		—			118,495
Due from Affiliates		2,026,751			1,442,378
Intangible Assets, Net		229,713			262,604
Goodwill		1,718,519			1,718,519
Other Assets		253,173			264,788
Deferred Tax Assets		1,260,907			1,286,469
Total Assets	$	31,761,987		$	26,403,337
Liabilities and Partners’ Capital
Loans Payable	$	12,581,638		$	8,866,366
Due to Affiliates		1,319,679			1,321,772
Accrued Compensation and Benefits		2,823,773			2,327,762
Securities Sold, Not Yet Purchased		105,517			215,398
Repurchase Agreements		74,728			75,324
Accounts Payable, Accrued Expenses and Other Liabilities		1,395,030			1,081,782
Total Liabilities		18,300,365			13,888,404
Commitments and Contingencies
Redeemable Non-Controlling Interests in Consolidated Entities		201,377			185,390
Partners’ Capital
The Blackstone Group L.P. Partners’ Capital
Partners’ Capital (common units: 657,637,533 issued and outstanding as of September 30, 2017; 643,459,542 issued and outstanding as of December 31, 2016)		6,620,434			6,523,929
Accumulated Other Comprehensive Loss		(34,421	)		(62,887	)
Total The Blackstone Group L.P. Partners’ Capital		6,586,013			6,461,042
Non-Controlling Interests in Consolidated Entities		3,174,680			2,428,964
Non-Controlling Interests in Blackstone Holdings		3,499,552			3,439,537
Total Partners’ Capital		13,260,245			12,329,543
Total Liabilities and Partners’ Capital	$	31,761,987		$	26,403,337

continued…

See notes to condensed consolidated financial statements.

5

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, after intercompany eliminations, 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.

	September 30, 2017		December 31, 2016
Assets
Cash Held by Blackstone Funds and Other	$	1,475,964	$	740,760
Investments		10,261,638		6,459,355
Accounts Receivable		362,707		355,364
Due from Affiliates		27,709		21,300
Other Assets		4,048		2,602
Total Assets	$	12,132,066	$	7,579,381
Liabilities
Loans Payable	$	9,070,061	$	5,466,444
Due to Affiliates		75,696		72,609
Securities Sold, Not Yet Purchased		75,589		81,309
Repurchase Agreements		74,728		66,221
Accounts Payable, Accrued Expenses and Other Liabilities		959,576		545,481
Total Liabilities	$	10,255,650	$	6,232,064

See notes to condensed consolidated financial statements.

6

THE BLACKSTONE GROUP L.P.

Condensed Consolidated Statements of Operations (Unaudited)

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

	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
Revenues
Management and Advisory Fees, Net	$	680,641		$	596,154		$	2,009,369		$	1,812,883
Performance Fees
Realized
Carried Interest		369,309			503,990			2,082,725			1,058,633
Incentive Fees		101,186			30,295			189,151			88,155
Unrealized
Carried Interest		432,590			106,202			343,104			242,080
Incentive Fees		(9,241	)		30,545			98,403			45,900
Total Performance Fees		893,844			671,032			2,713,383			1,434,768
Investment Income
Realized		74,805			119,351			451,207			172,387
Unrealized		96,085			23,752			63,172			67,347
Total Investment Income		170,890			143,103			514,379			239,734
Interest and Dividend Revenue		36,974			21,819			99,172			67,180
Other		(35,572	)		(423	)		(99,448	)		1,900
Total Revenues		1,746,777			1,431,685			5,236,855			3,556,465
Expenses
Compensation and Benefits
Compensation		359,209			329,634			1,078,001			1,031,061
Performance Fee Compensation
Realized
Carried Interest		134,014			168,427			695,494			314,511
Incentive Fees		46,823			15,436			91,056			44,810
Unrealized
Carried Interest		187,158			70,044			257,271			175,247
Incentive Fees		(7,094	)		13,508			36,645			19,645
Total Compensation and Benefits		720,110			597,049			2,158,467			1,585,274
General, Administrative and Other		115,755			124,322			337,080			378,355
Interest Expense		41,545			37,278			122,880			111,512
Fund Expenses		26,350			15,128			100,095			28,949
Total Expenses		903,760			773,777			2,718,522			2,104,090
Other Income
Net Gains from Fund Investment Activities		63,448			61,395			239,634			111,240
Income Before Provision for Taxes		906,465			719,303			2,757,967			1,563,615
Provision for Taxes		59,512			27,714			146,557			84,275
Net Income		846,953			691,589			2,611,410			1,479,340
Net Income Attributable to Redeemable
Non-Controlling Interests in Consolidated Entities		3,215			10,764			6,206			2,314
Net Income Attributable to Non-Controlling
Interests in Consolidated Entities		113,446			82,653			365,075			187,468
Net Income Attributable to Non-Controlling
Interests in Blackstone Holdings		345,650			285,267			1,050,887			618,274
Net Income Attributable to The Blackstone Group L.P.	$	384,642		$	312,905		$	1,189,242		$	671,284
Net Income Per Common Unit
Common Units, Basic	$	0.58		$	0.48		$	1.79		$	1.04
Common Units, Diluted	$	0.56		$	0.47		$	1.76		$	1.01
Weighted-Average Common Units Outstanding
Common Units, Basic		667,384,727			650,917,510			664,331,632			647,595,189
Common Units, Diluted		1,200,502,292			1,195,805,315			1,200,092,676			1,194,862,252
Distributions Declared Per Common Unit	$	0.54		$	0.36		$	1.88		$	1.25
Revenues Earned from Affiliates
Management and Advisory Fees, Net	$	35,928		$	39,073		$	100,376		$	139,896

See notes to condensed consolidated financial statements.

7

THE BLACKSTONE GROUP L.P.

Condensed Consolidated Statements of Comprehensive Income (Unaudited)

(Dollars in Thousands)

	Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016
Net Income	$	846,953	$	691,589	$	2,611,410	$	1,479,340
Other Comprehensive Income, Net of Tax — Currency Translation Adjustment		26,761		1,138		73,354		12,982
Comprehensive Income		873,714		692,727		2,684,764		1,492,322
Less:
Comprehensive Income Attributable to Redeemable Non-Controlling Interests in Consolidated Entities		3,215		10,764		6,206		2,314
Comprehensive Income Attributable to Non-Controlling Interests in Consolidated Entities		127,149		85,375		409,963		195,401
Comprehensive Income Attributable to Non-Controlling Interests in Blackstone Holdings		345,650		285,267		1,050,887		618,274
Comprehensive Income Attributable to The Blackstone Group L.P.	$	397,700	$	311,321	$	1,217,708	$	676,333

See notes to condensed consolidated financial statements.

8

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, 2016		643,459,542	$	6,523,929		$	(62,887	)	$	6,461,042		$	2,428,964		$	3,439,537		$	12,329,543		$	185,390
Net Income		—		1,189,242			—			1,189,242			365,075			1,050,887			2,605,204			6,206
Currency Translation Adjustment		—		—			28,466			28,466			44,888			—			73,354			—
Consolidation of a Fund Entity		—		—			—			—			387,006			—			387,006			—
Capital Contributions		—		—			—			—			507,001			—			507,001			30,294
Capital Distributions		—		(1,241,717	)		—			(1,241,717	)		(552,440	)		(1,068,553	)		(2,862,710	)		(20,513	)
Transfer of Non-Controlling Interests in Consolidated Entities		—		—			—			—			(5,814	)		—			(5,814	)		—
Deferred Tax Effects Resulting from Acquisition of Ownership Interests from Non-Controlling Interest Holders		—		7,992			—			7,992			—			—			7,992			—
Equity-Based Compensation		—		135,292			—			135,292			—			112,109			247,401			—
Net Delivery of Vested Blackstone Holdings Partnership Units and Blackstone Common Units		6,985,219		(27,027	)		—			(27,027	)		—			(1,705	)		(28,732	)		—
Change in The Blackstone Group L.P.’s Ownership Interest		—		(14,850	)		—			(14,850	)		—			14,850			—			—
Conversion of Blackstone Holdings Partnership Units to Blackstone Common Units		7,192,772		47,573			—			47,573			—			(47,573	)		—			—
Balance at September 30, 2017		657,637,533	$	6,620,434		$	(34,421	)	$	6,586,013		$	3,174,680		$	3,499,552		$	13,260,245		$	201,377

continued…

See notes to condensed consolidated financial statements.

9

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		—		671,284			—			671,284			187,468			618,274			1,477,026			2,314
Currency Translation Adjustment		—		—			5,049			5,049			7,933			—			12,982			—
Capital Contributions		—		—			—			—			242,773			—			242,773			15,000
Capital Distributions		—		(801,952	)		—			(801,952	)		(319,242	)		(707,129	)		(1,828,323	)		(6,623	)
Transfer of Non-Controlling Interests in Consolidated Entities		—		—			—			—			(7,915	)		—			(7,915	)		—
Deferred Tax Effects Resulting from Acquisition of Ownership Interests from Non-Controlling Interest Holders		—		2,250			—			2,250			—			—			2,250			—
Equity-Based Compensation		—		123,300			—			123,300			—			117,256			240,556			—
Net Delivery of Vested Blackstone Holdings Partnership Units and Blackstone Common Units		6,131,764		(26,426	)		—			(26,426	)		—			(36	)		(26,462	)		—
Change in The Blackstone Group L.P.’s Ownership Interest		—		7,929			—			7,929			—			(7,929	)		—			—
Conversion of Blackstone Holdings Partnership Units to Blackstone Common Units		7,669,834		46,100			—			46,100			—			(46,100	)		—			—
Balance at September 30, 2016		638,251,760	$	6,344,792		$	(47,470	)	$	6,297,322		$	2,519,718		$	3,342,845		$	12,159,885		$	194,150

See notes to condensed consolidated financial statements.

10

THE BLACKSTONE GROUP L.P.

Condensed Consolidated Statements of Cash Flows (Unaudited)

(Dollars in Thousands)

	Nine Months Ended September 30,
	2017			2016
Operating Activities
Net Income	$	2,611,410		$	1,479,340
Adjustments to Reconcile Net Income to Net Cash Provided by (Used in) Operating Activities
Blackstone Funds Related
Net Realized Gains on Investments		(2,833,208	)		(1,368,591	)
Change in Unrealized Gains on Investments		(71,122	)		(153,931	)
Non-Cash Performance Fees		(441,507	)		(166,283	)
Non-Cash Performance Fee Compensation		1,080,466			554,213
Equity-Based Compensation Expense		262,773			242,204
Amortization of Intangibles		32,891			67,328
Other Non-Cash Amounts Included in Net Income		209,605			53,920
Cash Flows Due to Changes in Operating Assets and Liabilities
Cash Held by Blackstone Funds and Other		(558,646	)		(509,486	)
Cash Relinquished in Deconsolidation and Liquidation of Fund Entity		(33,566	)		—
Accounts Receivable		141,312			145,131
Reverse Repurchase Agreements		118,495			115,567
Due from Affiliates		(386,037	)		21,484
Other Assets		237			(15,957	)
Accrued Compensation and Benefits		(594,610	)		(285,953	)
Securities Sold, Not Yet Purchased		(112,921	)		(7,253	)
Accounts Payable, Accrued Expenses and Other Liabilities		(735,929	)		(189,234	)
Repurchase Agreements		(597	)		21,153
Due to Affiliates		(15,433	)		22,324
Investments Purchased		(12,853,487	)		(4,511,740	)
Cash Proceeds from Sale of Investments		12,375,565			5,148,058
Net Cash Provided by (Used in) Operating Activities		(1,804,309	)		662,294
Investing Activities
Purchase of Furniture, Equipment and Leasehold Improvements		(20,405	)		(18,458	)
Changes in Restricted Cash		11,442			5,843
Net Cash Used in Investing Activities		(8,963	)		(12,615	)

continued…

See notes to condensed consolidated financial statements.

11

THE BLACKSTONE GROUP L.P.

Condensed Consolidated Statements of Cash Flows (Unaudited)

(Dollars in Thousands)

	Nine Months Ended September 30,
	2017			2016
Financing Activities
Distributions to Non-Controlling Interest Holders in Consolidated Entities	$	(535,072	)	$	(325,865	)
Contributions from Non-Controlling Interest Holders in Consolidated Entities		528,175			248,665
Payments Under Tax Receivable Agreement		(59,667	)		(78,985	)
Net Settlement of Vested Common Units and Repurchase of Common and Blackstone Holdings Partnership Units		(28,732	)		(26,462	)
Proceeds from Loans Payable		3,846,577			1,302,353
Repayment and Repurchase of Loans Payable		(166,920	)		(315,733	)
Distributions to Unitholders		(2,310,270	)		(1,509,081	)
Net Cash Provided by (Used in) Financing Activities		1,274,091			(705,108	)
Effect of Exchange Rate Changes on Cash and Cash Equivalents		17,615			(13	)
Net Decrease in Cash and Cash Equivalents		(521,566	)		(55,442	)
Cash and Cash Equivalents, Beginning of Period		1,837,253			1,837,324
Cash and Cash Equivalents, End of Period	$	1,315,687		$	1,781,882
Supplemental Disclosure of Cash Flows Information
Payments for Interest	$	133,535		$	138,605
Payments for Income Taxes	$	77,059		$	52,029
Supplemental Disclosure of Non-Cash Investing and Financing Activities
Non-Cash Contributions from Non-Controlling Interest Holders	$	1,746		$	—
Non-Cash Distributions to Non-Controlling Interest Holders	$	(37,881	)	$	—
Net Assets Related to the Consolidation of a Fund Entity	$	387,006		$	—
Transfer of Interests to Non-Controlling Interest Holders	$	(5,814	)	$	(7,915	)
Change in The Blackstone Group L.P.’s Ownership Interest	$	(14,850	)	$	7,929
Net Settlement of Vested Common Units	$	122,590		$	100,301
Conversion of Blackstone Holdings Partnership Units to Common Units	$	47,573		$	46,100
Acquisition of Ownership Interests from Non-Controlling Interest Holders
Deferred Tax Asset	$	(53,151	)	$	(40,034	)
Due to Affiliates	$	45,159		$	37,784
Partners’ Capital	$	7,992		$	2,250

See notes to condensed consolidated financial statements.

12

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, 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.

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 by Blackstone’s senior managing directors and controlled by one of Blackstone’s founders, Stephen A. Schwarzman (the “Founder”). 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, 2016 filed with the Securities and Exchange Commission.

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 is presumed to have control.

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.

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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)

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 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

14

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)

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 and debt securities sold, not yet purchased. 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 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.

15

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 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. For credit-focused investments that are not publicly traded or whose market prices are not readily available, Blackstone may utilize other valuation techniques, including the discounted cash flow method or a market approach. The discounted cash flow method projects the expected cash flows of the debt instrument based on contractual terms, and discounts such cash flows back to the valuation date using a market-based yield. The market-based yield is estimated using yields of publicly traded debt instruments issued by companies operating in similar industries as the subject investment, with similar leverage statistics and time to maturity.

The market approach is generally used to determine the enterprise value of the issuer of a credit investment, and considers valuation multiples of comparable companies or transactions. The resulting enterprise value will dictate whether or not such credit investment has adequate enterprise value coverage. In cases of distressed credit instruments, the market approach may be used to estimate a recovery value in the event of a restructuring.

16

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

17

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)

presented as a transition and acquisition adjustment to Appropriated Partners’ Capital. Assets of the consolidated 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”.

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.

18

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

19

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 of the consolidated Blackstone Funds are recorded within Investments, the fair value of freestanding derivative assets that are not part of the consolidated Blackstone Funds are recorded within Other Assets and the fair value of 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 May 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

20

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.

Blackstone has concluded that capital allocation-based Performance Fees (“Capital Allocation-Based Arrangements”) represent equity method investments that are not in the scope of the amended revenue recognition guidance. Therefore, effective January 1, 2018, Blackstone will amend the recognition and measurement of Capital Allocation-Based Arrangements. This accounting change will not change the timing or amount of revenue recognized related to Capital Allocation-Based Arrangements. These amounts are currently recognized within Realized and Unrealized Performance Fees — Carried Interest and Incentive Fees in the Condensed Consolidated Statements of Operations. Under the equity method of accounting Blackstone will recognize its allocations of Carried Interest or Incentive Fees within Investment Income along with the allocations proportionate to Blackstone’s ownership interests in the Blackstone Funds. Blackstone will apply a retrospective application and prior periods shall be restated. The impact of adoption is a reclassification of Carried Interest to Investment Income. This change will have no impact on Net Income Attributable to The Blackstone Group L.P. Blackstone has concluded that the majority of its Incentive Fees are not part of a Capital Allocation-Based Arrangement (“Contractual Incentive Fees”), and are within the scope of the amended revenue recognition guidance. This accounting change will delay recognition of Contractual Incentive Fees compared to our current accounting treatment, and it is not expected to have a material impact on Blackstone’s financial statements.

The Partnership has evaluated the impact of the amended revenue recognition guidance on other revenue streams including management fees and it is not expected to have a material impact on Blackstone’s financial statements. The Partnership is still evaluating considerations for reporting revenue gross versus net.

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,

21

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)

(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 Condensed Consolidated Statement of Financial Condition. It is not expected to have a material impact on the Condensed Consolidated Statements of Operations or the Condensed Consolidated Statements of Cash Flows.

In November 2016, the FASB issued amended guidance on classification and presentation of restricted cash on the statement of cash flows. Under the new guidance, reporting entities are required to explain the changes in the combined total of restricted and unrestricted balances in the statement of cash flows. Therefore, amounts generally described as restricted cash or restricted cash equivalents (hereinafter referred to as “restricted cash”) should be combined with unrestricted cash and cash equivalents when reconciling the beginning and end of period balances on the statement of cash flows. Reporting entities will also be required to disclose how the statement of cash flows reconciles to the balance sheet in any situation in which the balance sheet includes more than one line item of cash, cash equivalents, and restricted cash. The new guidance should be applied for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period using a retrospective transition method to each period presented. Early application is permitted. The Partnership is currently evaluating the impact of this guidance on the financial statements.

3. INTANGIBLE ASSETS

Intangible Assets, Net consists of the following:

	September 30, 2017			December 31, 2016
Finite-Lived Intangible Assets/Contractual Rights	$	1,400,876		$	1,400,876
Accumulated Amortization		(1,171,163	)		(1,138,272	)
Intangible Assets, Net	$	229,713		$	262,604

Amortization expense associated with Blackstone’s intangible assets was $11.0 million and $32.9 million for the three and nine month periods ended September 30, 2017, respectively, and $21.7 million and $67.3 million for the three and nine month periods ended September 30, 2016, respectively.

Amortization of Intangible Assets held at September 30, 2017 is expected to be $43.9 million, $43.8 million, $43.8 million, $43.8 million, and $43.8 million for each of the years ending December 31, 2017, 2018, 2019, 2020 and 2021, respectively. Blackstone’s intangible assets as of September 30, 2017 are expected to amortize over a weighted-average period of 5.4 years.

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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)

4. INVESTMENTS

Investments consist of the following:

	September 30, 2017		December 31, 2016
Investments of Consolidated Blackstone Funds	$	10,272,075	$	6,480,674
Equity Method Investments		3,114,059		3,092,378
Corporate Treasury Investments		2,937,993		2,518,438
Performance Fees		5,761,285		5,320,994
Other Investments		299,780		282,491
	$	22,385,192	$	17,694,975

Blackstone’s share of Investments of Consolidated Blackstone Funds totaled $466.5 million and $384.4 million at September 30, 2017 and December 31, 2016, 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 September 30,					Nine Months Ended September 30,
	2017		2016			2017		2016
Realized Gains	$	2,664	$	52,046		$	110,349	$	62,993
Net Change in Unrealized Gains (Losses)		16,990		(26,764	)		7,951		(35,112	)
Realized and Net Change in Unrealized Gains from Consolidated Blackstone Funds		19,654		25,282			118,300		27,881
Interest and Dividend Revenue Attributable to Consolidated Blackstone Funds		43,794		36,113			121,334		83,359
Other Income — Net Gains from Fund Investment Activities	$	63,448	$	61,395		$	239,634	$	111,240

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 nine months ended September 30, 2017 and 2016, 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 $152.1 million and $50.6 million for the three months ended September 30, 2017 and 2016, respectively. The Partnership recognized

23

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)

net gains related to its equity method investments of $444.7 million and $120.3 million for the nine months ended September 30, 2017 and 2016, respectively.

Corporate Treasury Investments

The portion of corporate treasury investments included in Investments represents the Partnership’s 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 advisors. The following table presents the Realized and Net Change in Unrealized Gains (Losses) on these investments:

	Three Months Ended September 30,					Nine Months Ended September 30,
	2017		2016			2017		2016
Realized Gains (Losses)	$	7,424	$	(3,159	)	$	3,995	$	(12,404	)
Net Change in Unrealized Gains		8,258		17,689			51,553		32,384
	$	15,682	$	14,530		$	55,548	$	19,980

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			Real			Hedge Fund
	Equity			Estate			Solutions			Credit			Total
Performance Fees, December 31, 2016	$	1,984,792		$	2,970,448		$	6,132		$	359,622		$	5,320,994
Performance Fees Allocated as a Result of Changes in Fund Fair Values		781,247			1,456,472			47,944			131,781			2,417,444
Foreign Exchange Gain		—			103,542			—			—			103,542
Fund Distributions		(936,507	)		(1,108,704	)		(4,760	)		(30,724	)		(2,080,695	)
Performance Fees, September 30, 2017	$	1,829,532		$	3,421,758		$	49,316		$	460,679		$	5,761,285

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 September 30,					Nine Months Ended September 30,
	2017			2016		2017		2016
Realized Gains	$	2,955		$	83	$	5,825	$	4,560
Net Change in Unrealized Gains (Losses)		(1,783	)		10,039		8,508		7,087
	$	1,172		$	10,122	$	14,333	$	11,647

24

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)

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 September 30, 2017 is presented below:

Strategy	Fair Value		Unfunded Commitments		Redemption Frequency (if  currently eligible)			Redemption Notice Period
Diversified Instruments	$	262,922	$	133		(a	)		(a	)
Credit Driven		155,584		268		(b	)		(b	)
Equity		57,552		—		(c	)		(c	)
Commodities		1,981		—		(d	)		(d	)
	$	478,039	$	401

(a) Diversified Instruments include investments in funds that invest across multiple strategies. Investments representing 3% 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 97% 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 58% 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 42% of investments in this category are redeemable as of the reporting date.

(c) The Equity category includes investments in hedge funds that invest primarily in domestic and international equity securities. Investments representing 100% of the fair value of the investments in this category may not be redeemed at, or within three months of, the reporting date.

(d) The Commodities category includes investments in commodities-focused funds that primarily invest in futures and physical-based commodity driven strategies. Investments representing 100% of the fair value of the investments in this category may not be redeemed at, or within three months of, the reporting date.

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.

25

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)

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, Net of Tax — Currency Translation Adjustment. For the three months ended September 30, 2017 the resulting loss was $1.1 million. For the nine months ended September 30, 2017 the resulting loss was $6.3 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.

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.

	September 30, 2017								December 31, 2016
	Assets				Liabilities				Assets				Liabilities
	Notional		Fair Value		Notional		Fair Value		Notional		Fair Value		Notional		Fair Value
Net Investment Hedges
Foreign Currency Contracts	$	53,837	$	29	$	287	$	—	$	—	$	—	$	51,267	$	587
Freestanding Derivatives
Blackstone
Interest Rate Contracts		374,980		2,980		1,834,280		3,991		2,651,583		2,356		546,211		2,355
Foreign Currency Contracts		383,381		3,448		236,688		1,860		164,247		1,037		127,444		966
Credit Default Swaps		2,073		315		2,073		315		—		—		3,819		215
Investments of Consolidated Blackstone Funds
Foreign Currency Contracts		594,214		38,292		92,298		1,356		254,162		25,050		136,025		3,903
Credit Default Swaps		25,170		3,410		42,036		4,908		—		—		113,057		3,350
Total Return Swaps		24,221		559		—		—		—		—		—		—
Equity Options		1		84		—		16		—		—		—		—
		1,404,040		49,088		2,207,375		12,446		3,069,992		28,443		926,556		10,789
	$	1,457,877	$	49,117	$	2,207,662	$	12,446	$	3,069,992	$	28,443	$	977,823	$	11,376

26

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 impact to the Condensed Consolidated Statements of Operations from derivative financial instruments:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
Net Investment Hedges — Foreign Currency Contracts
Hedge Ineffectiveness	$	(37	)	$	—		$	(72	)	$	(128	)
Freestanding Derivatives
Realized Gains (Losses)
Interest Rate Contracts	$	(1,195	)	$	(3,493	)	$	(5,142	)	$	(10,305	)
Foreign Currency Contracts		17,002			(4,704	)		13,690			(9,424	)
Credit Default Swaps		(1,964	)		(241	)		(3,622	)		(4,790	)
Total Return Swaps		293			—			293			—
Equity Options		(258	)		—			(258	)		—
	$	13,878		$	(8,438	)	$	4,961		$	(24,519	)
Net Change in Unrealized Gains (Losses)
Interest Rate Contracts	$	(6,273	)	$	4,893		$	(6,916	)	$	(2,349	)
Foreign Currency Contracts		4,638			13,801			17,320			37,992
Credit Default Swaps		1,966			(719	)		5,127			(4,201	)
Total Return Swaps		(397	)		—			(397	)		—
Equity Options		38			—			38			—
	$	(28	)	$	17,975		$	15,172		$	31,442

As of September 30, 2017 and December 31, 2016, the Partnership had not designated any derivatives as cash flow hedges.

7. FAIR VALUE OPTION

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

	September 30, 2017		December 31, 2016
Assets
Loans and Receivables	$	371,732	$	211,359
Equity and Preferred Securities		473,270		444,713
Debt Securities		380,556		—
Assets of Consolidated CLO Vehicles
Corporate Loans		8,270,151		4,762,071
Corporate Bonds		601,756		710,947
Other		500		—
	$	10,097,965	$	6,129,090
Liabilities
Liabilities of Consolidated CLO Vehicles
Senior Secured Notes	$	8,580,092	$	5,125,804
Subordinated Notes
Loans Payable		487,160		337,846
Due to Affiliates		41,189		7,748
	$	9,108,441	$	5,471,398

27

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 tables present the Realized and Net Change in Unrealized Gains (Losses) on financial instruments on which the fair value option was elected:

	Three Months Ended September 30,
	2017						2016
	Realized Gains (Losses)			Net Change in Unrealized Gains (Losses)			Realized Gains (Losses)			Net Change in Unrealized Gains (Losses)
Assets
Loans and Receivables	$	—		$	—		$	—		$	298
Equity and Preferred Securities		18			3,599			27			10,200
Debt Securities		3,171			(1,425	)		—			(281	)
Assets of Consolidated CLO Vehicles
Corporate Loans		(4,358	)		(29,172	)		16,672			33,071
Corporate Bonds		326			(12,732	)		(662	)		7,491
Other		—			356			(2,643	)		—
	$	(843	)	$	(39,374	)	$	13,394		$	50,779
Liabilities
Liabilities of Consolidated CLO Vehicles
Subordinated Notes	$	—		$	39,007		$	—		$	(56,690	)

	Nine Months Ended September 30,
	2017						2016
	Realized Gains (Losses)			Net Change in Unrealized Gains (Losses)			Realized Gains (Losses)			Net Change in Unrealized Gains (Losses)
Assets
Loans and Receivables	$	—		$	7,418		$	—		$	(2,395	)
Equity and Preferred Securities		19			23,824			(266	)		11,624
Debt Securities		3,515			(3,300	)		—			(1,335	)
Assets of Consolidated CLO Vehicles
Corporate Loans		(2,778	)		(16,974	)		(12,288	)		70,592
Corporate Bonds		8,011			(19,477	)		(225	)		6,548
Other		—			500			(2,377	)		—
	$	8,767		$	(8,009	)	$	(15,156	)	$	85,034
Liabilities
Liabilities of Consolidated CLO Vehicles —
Subordinated Notes	$	—		$	71,719		$	—		$	(58,558	)

28

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:

	September 30, 2017							December 31, 2016
				For Financial Assets Past Due (a)							For Financial Assets Past Due (a)
	Excess (Deficiency) of Fair Value Over Principal			Fair Value		Excess of Fair Value Over Principal		Excess (Deficiency) of Fair Value Over Principal			Fair Value		Excess of Fair Value Over Principal
Loans and Receivables	$	1,501		$	—	$	—	$	(6,476	)	$	—	$	—
Debt Securities		(930	)		—		—		—			—		—
Assets of Consolidated CLO Vehicles
Corporate Loans		(31,386	)		—		—		2,616			—		—
Corporate Bonds		(6,387	)		—		—		7,259			—		—
	$	(37,202	)	$	—	$	—	$	3,399		$	—	$	—

(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 September 30, 2017 and December 31, 2016, no Loans and Receivables for which the fair value option was elected were past due or in non-accrual status. As of September 30, 2017 and December 31, 2016, 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.

29

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:

	September 30, 2017
	Level I		Level II		Level III		NAV		Total
Assets
Cash and Cash Equivalents — Money Market Funds	$	431,772	$	—	$	—	$	—	$	431,772
Investments
Investments of Consolidated Blackstone Funds (a)
Investment Funds		—		—		—		149,238		149,238
Equity Securities		62,396		44,142		127,408		—		233,946
Partnership and LLC Interests		3,974		1,741		356,324		—		362,039
Debt Instruments		—		562,974		49,126		—		612,100
Freestanding Derivatives
Credit Default Swaps		—		3,410		—		—		3,410
Total Return Swaps		—		559		—		—		559
Equity Options		—		84		—		—		84
Assets of Consolidated CLO Vehicles
Corporate Loans		—		7,831,754		438,397		—		8,270,151
Corporate Bonds		—		601,756		—		—		601,756
Freestanding Derivatives — Foreign Currency Contracts		—		38,292		—		—		38,292
Other		—		—		500		—		500
Total Investments of Consolidated Blackstone Funds		66,370		9,084,712		971,755		149,238		10,272,075
Corporate Treasury Investments
Equity Securities		300,884		—		—		—		300,884
Debt Instruments		—		2,302,498		25,735		—		2,328,233
Other		—		—		—		308,876		308,876
Total Corporate Treasury Investments		300,884		2,302,498		25,735		308,876		2,937,993
Other Investments		172,761		12,613		94,481		19,925		299,780
Total Investments		540,015		11,399,823		1,091,971		478,039		13,509,848
Accounts Receivable — Loans and Receivables		—		—		371,732		—		371,732
Other Assets
Freestanding Derivatives
Interest Rate Contracts		1,762		1,218		—		—		2,980
Foreign Currency Contracts		—		3,448		—		—		3,448
Credit Default Swaps		—		315		—		—		315
Total Freestanding Derivatives		1,762		4,981		—		—		6,743
Net Investment Hedges — Foreign Currency Contracts		—		29		—		—		29
Total Other Assets		1,762		5,010		—		—		6,772
	$	973,549	$	11,404,833	$	1,463,703	$	478,039	$	14,320,124

30

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)

	September 30, 2017
	Level I		Level II		Level III		Total
Liabilities
Loans Payable — Liabilities of Consolidated CLO Vehicles (a)
Senior Secured Notes (b)	$	—	$	8,580,092	$	—	$	8,580,092
Subordinated Notes (b)		—		487,160		—		487,160
Total Loans Payable		—		9,067,252		—		9,067,252
Due to Affiliates — Liabilities of Consolidated CLO Vehicles (a)
Subordinated Notes (b)		—		41,189		—		41,189
Total Due to Affiliates		—		41,189		—		41,189
Securities Sold, Not Yet Purchased		—		105,517		—		105,517
Accounts Payable, Accrued Expenses and Other Liabilities
Liabilities of Consolidated Blackstone Funds — Freestanding Derivatives (a)
Foreign Currency Contracts		—		1,356		—		1,356
Credit Default Swaps		—		4,908		—		4,908
Equity Options		—		16		—		16
Total Liabilities of Consolidated Blackstone Funds		—		6,280		—		6,280
Freestanding Derivatives
Interest Rate Contracts		608		3,383		—		3,991
Foreign Currency Contracts		—		1,860		—		1,860
Credit Default Swaps		—		315		—		315
Total Freestanding Derivatives		608		5,558		—		6,166
Total Accounts Payable, Accrued Expenses and Other Liabilities		608		11,838		—		12,446
	$	608	$	9,225,796	$	—	$	9,226,404

31

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, 2016
	Level I		Level II		Level III		NAV		Total
Assets
Cash and Cash Equivalents — Money Market Funds	$	443,442	$	—	$	—	$	—	$	443,442
Investments
Investments of Consolidated Blackstone Funds (a)
Investment Funds		—		—		—		148,993		148,993
Equity Securities		76,381		70,544		93,657		—		240,582
Partnership and LLC Interests		—		29,430		337,230		—		366,660
Debt Instruments		—		219,049		7,322		—		226,371
Freestanding Derivatives — Foreign Currency Contracts		—		2,327		—		—		2,327
Assets of Consolidated CLO Vehicles
Corporate Loans		—		4,514,407		247,664		—		4,762,071
Corporate Bonds		—		710,947		—		—		710,947
Freestanding Derivatives — Foreign Currency Contracts		—		22,723		—		—		22,723
Total Investments of Consolidated Blackstone Funds		76,381		5,569,427		685,873		148,993		6,480,674
Corporate Treasury Investments
Equity Securities		281,505		—		—		—		281,505
Debt Instruments		—		1,944,171		30,424		54,907		2,029,502
Other		—		—		—		207,431		207,431
Total Corporate Treasury Investments		281,505		1,944,171		30,424		262,338		2,518,438
Other Investments		163,548		—		100,164		18,779		282,491
Total Investments		521,434		7,513,598		816,461		430,110		9,281,603
Accounts Receivable — Loans and Receivables		—		—		211,359		—		211,359
Other Assets
Freestanding Derivatives
Interest Rate Contracts		1,883		473		—		—		2,356
Foreign Currency Contracts		—		1,037		—		—		1,037
Total Freestanding Derivatives		1,883		1,510		—		—		3,393
Total Other Assets		1,883		1,510		—		—		3,393
	$	966,759	$	7,515,108	$	1,027,820	$	430,110	$	9,939,797

32

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, 2016
	Level I		Level II		Level III		Total
Liabilities
Loans Payable — Liabilities of Consolidated CLO Vehicles (a)
Senior Secured Notes (b)	$	—	$	5,125,804	$	—	$	5,125,804
Subordinated Notes (b)		—		337,846		—		337,846
Total Loans Payable		—		5,463,650		—		5,463,650
Due to Affiliates — Liabilities of Consolidated CLO Vehicles (a)
Subordinated Notes (b)		—		7,748		—		7,748
Total Due to Affiliates		—		7,748		—		7,748
Securities Sold, Not Yet Purchased		—		215,398		—		215,398
Accounts Payable, Accrued Expenses and Other Liabilities
Liabilities of Consolidated Blackstone Funds — Freestanding Derivatives (a)
Foreign Currency Contracts		—		3,903		—		3,903
Credit Default Swaps		—		3,350		—		3,350
Total Liabilities of Consolidated Blackstone Funds		—		7,253		—		7,253
Freestanding Derivatives
Interest Rate Contracts		750		1,605		—		2,355
Foreign Currency Contracts		—		966		—		966
Credit Default Swaps		—		215		—		215
Total Freestanding Derivatives		750		2,786		—		3,536
Net Investment Hedges — Foreign Currency Contracts		—		587		—		587
Total Accounts Payable, Accrued Expenses and Other Liabilities		750		10,626		—		11,376
	$	750	$	5,697,422	$	—	$	5,698,172

(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 September 30, 2017 and 2016, respectively:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016
Transfers from Level I into Level II (a)	$	177	$	—	$	938	$	2,114
Transfers from Level II into Level I (b)	$	—	$	—	$	—	$	28,346

33

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) 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 following table summarizes the quantitative inputs and assumptions used for items categorized in Level III of the fair value hierarchy as of September 30, 2017:

	Fair Value		Valuation Techniques		Unobservable Inputs		Ranges		Weighted Average (a)
Financial Assets
Investments of Consolidated Blackstone Funds
Equity Securities	$	82,674		Discounted Cash Flows		Discount Rate		7.3% - 31.6%		12.6%
						Revenue CAGR		1.0% - 31.3%		7.2%
						Exit Capitalization Rate		5.3% - 11.4%		8.4%
						Exit Multiple - EBITDA		4.0x - 17.1x		10.0x
						Exit Multiple - NOI		8.8x - 12.5x		10.1x
						Exit Multiple - P/E		9.5x - 17.0x		11.2x
		3,400		Market Comparable Companies		Book Value Multiple		0.8x - 0.9x		0.9x
						Exit Multiple - EBITDA		8.0x		N/A
		18,860		Other		N/A		N/A		N/A
		20,892		Transaction Price		N/A		N/A		N/A
		1,582		Third Party Pricing		N/A		N/A		N/A
Partnership and LLC Interests		311,489		Discounted Cash Flows		Discount Rate		4.6% - 25.3%		9.3%
						Revenue CAGR		-7.4% - 89.3%		5.5%
						Exit Capitalization Rate		1.6% - 11.8%		5.8%
						Exit Multiple - EBITDA		7.0x - 15.4x		9.7x
						Exit Multiple - NOI		12.5x		N/A
		530		Market Comparable Companies		Book Value Multiple		1.0x		N/A
		22,619		Other		N/A		N/A		N/A
		265		Third Party Pricing		N/A		N/A		N/A
		21,421		Transaction Price		N/A		N/A		N/A
Debt Instruments		8,562		Discounted Cash Flows		Discount Rate		6.6% - 18.4%		10.2%
						Revenue CAGR		-13.4% - 5.1%		-2.7%
						Exit Capitalization Rate		3.1% - 8.3%		6.0%
						Exit Multiple - NOI		12.0x		N/A
		39,279		Third Party Pricing		N/A		N/A		N/A
		1,285		Transaction Price		N/A		N/A		N/A
Assets of Consolidated CLO Vehicles		438,897		Third Party Pricing		N/A		N/A		N/A
Total Investments of Consolidated Blackstone Funds		971,755

continued …

34

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)
Corporate Treasury Investments	$	6,503		Discounted Cash Flows		Discount Rate		5.7% - 6.3%		5.9%
						Default Rate		2.0%		N/A
						Pre-payment Rate		20.0%		N/A
						Recovery Lag		12 Months		N/A
						Recovery Rate		30.0% - 70.0%		69.2%
						Reinvestment Rate		LIBOR + 400 bps		N/A
		15,982		Third Party Pricing		N/A		N/A		N/A
		3,250		Transaction Price		N/A		N/A		N/A
Loans and Receivables		337,037		Discounted Cash Flows		Discount Rate		7.0% - 13.0%		9.8%
		34,695		Transaction Price		N/A		N/A		N/A
Other Investments		64,908		Discounted Cash Flows		Discount Rate		0.9% - 18.2%		2.6%
						Default Rate		2.0%		N/A
						Pre-payment Rate		20.0%		N/A
						Recovery Lag		12 Months		N/A
						Recovery Rate		70.0%		N/A
						Reinvestment Rate		LIBOR + 400 bps -		LIBOR + 401
								LIBOR + 413 bps		bps
		29,573		Transaction Price		N/A		N/A		N/A
	$	1,463,703

35

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 December 31, 2016:

	Fair Value		Valuation Techniques		Unobservable Inputs		Ranges		Weighted Average (a)
Financial Assets
Investments of Consolidated Blackstone Funds
Equity Securities	$	58,826		Discounted Cash Flows		Discount Rate		7.3% - 28.7%		12.7%
						Revenue CAGR		-0.2% - 20.1%		6.3%
						Exit Capitalization Rate		5.0% - 11.4%		8.5%
						Exit Multiple - EBITDA		4.0x - 20.0x		10.0x
						Exit Multiple - P/E		10.5x - 17.0x		11.0x
		2,032		Market Comparable Companies		Book Value Multiple		0.9x		N/A
		22,843		Other		N/A		N/A		N/A
		9,956		Transaction Price		N/A		N/A		N/A
Partnership and LLC Interests		303,281		Discounted Cash Flows		Discount Rate		3.4% - 27.6%		9.4%
						Revenue CAGR		-27.1% - 47.3%		7.2%
						Exit Capitalization Rate		3.0% - 11.0%		6.0%
						Exit Multiple - EBITDA		3.9x - 18.3x		10.5x
						Exit Multiple - P/E		9.3x		N/A
		13,945		Market Comparable Companies		Capitalization Rate		5.0% - 5.6%		5.2%
		12,916		Other		N/A		N/A		N/A
		1,238		Third Party Pricing		N/A		N/A		N/A
		5,850		Transaction Price		N/A		N/A		N/A
Debt Instruments		5,002		Discounted Cash Flows		Discount Rate		8.3% - 20.0%		12.9%
						Revenue CAGR		4.8% - 70.8%		33.8%
						Exit Capitalization Rate		4.7% - 8.3%		7.5%
						Exit Multiple - EBITDA		9.6x - 12.0x		11.0x
		2,227		Third Party Pricing		N/A		N/A		N/A
		93		Transaction Price		N/A		N/A		N/A
Assets of Consolidated CLO Vehicles		13,723		Market Comparable Companies		EBITDA Multiple		9.6x		N/A
		233,941		Third Party Pricing		N/A		N/A		N/A
Total Investments of Consolidated Blackstone Funds		685,873
Corporate Treasury Investments		9,783		Discounted Cash Flows		Discount Rate		6.1% - 10.0%		7.1%
						Default Rate		1.0% - 2.0%		1.8%
						Pre-payment Rate		20.0%		N/A
						Recovery Lag		12 Months		N/A
						Recovery Rate		18.5% - 76.5%		66.4%
						Reinvestment Rate		LIBOR + 350 bps -		LIBOR
								LIBOR + 400 bps		+ 390 bps
		20,641		Third Party Pricing		N/A		N/A		N/A
Loans and Receivables		211,359		Discounted Cash Flows		Discount Rate		12.0% - 16.4%		13.3%
Other Investments		78,619		Discounted Cash Flows		Discount Rate		1.2% - 15.0%		3.1%
						Default Rate		2.0%		N/A
						Pre-payment Rate		20.0%		N/A
						Recovery Lag		12 Months		N/A
						Recovery Rate		70.0%		N/A
						Reinvestment Rate		LIBOR + 400 bps		N/A
		21,545		Transaction Price		N/A		N/A		N/A
	$	1,027,820

36

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)

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.
NOI	Net operating income.
P/E	Price-earnings ratio.
Third Party Pricing	Third Party Pricing is generally determined on the basis of unadjusted prices between market participants provided by reputable dealers or pricing services.
Transaction Price	Includes recent acquisitions or transactions.
(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 corporate treasury investments, 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 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 limited liability company (“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, 2016, 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 either Investment

37

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)

Income (Loss) or Net Gains (Losses) from Fund Investment Activities in the Condensed Consolidated Statements of Operations.

	Level III Financial Assets at Fair Value Three Months Ended September 30,
	2017												2016
	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	$	715,744		$	306,279		$	115,689		$	1,137,712		$	706,432		$	207,519		$	128,054		$	1,042,005
Transfer In to Level III (b)		145,810			—			5,859			151,669			50,836			—			5,188			56,024
Transfer Out of Level III (b)		(62,821	)		—			(721	)		(63,542	)		(41,852	)		—			(5,917	)		(47,769	)
Purchases		300,037			241,006			3,250			544,293			174,939			44,988			12,454			232,381
Sales		(154,131	)		(174,814	)		(6,723	)		(335,668	)		(151,701	)		(175,914	)		(284	)		(327,899	)
Settlements		—			(4,469	)		(370	)		(4,839	)		—			(2,983	)		(140	)		(3,123	)
Changes in Gains (Losses) Included in Earnings and Other Comprehensive Income (Loss)		27,116			3,730			3,232			34,078			22,336			2,291			3,370			27,997
Balance, End of Period	$	971,755		$	371,732		$	120,216		$	1,463,703		$	760,990		$	75,901		$	142,725		$	979,616
Changes in Unrealized Gains (Losses) Included in Earnings Related to Investments Still Held at the Reporting Date	$	20,207		$	3,730		$	(446	)	$	23,491		$	(16,130	)	$	2,292		$	2,627		$	(11,211	)
	Level III Financial Assets at Fair Value Nine Months Ended September 30,
	2017												2016
	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	$	685,873		$	211,359		$	130,588		$	1,027,820		$	774,392		$	261,994		$	155,841		$	1,192,227
Transfer In Due to Consolidation and Acquisition		34,651			—			—			34,651			—			—			—			—
Transfer Out Due to Deconsolidation		(38,629	)		—			—			(38,629	)		—			—			—			—
Transfer In to Level III (b)		99,042			—			22,254			121,296			76,564			—			14,515			91,079
Transfer Out of Level III (b)		(138,299	)		—			(18,732	)		(157,031	)		(80,550	)		—			(16,121	)		(96,671	)
Purchases		584,519			578,711			24,853			1,188,083			266,229			348,645			19,427			634,301
Sales		(319,350	)		(426,315	)		(50,769	)		(796,434	)		(305,502	)		(531,165	)		(30,975	)		(867,642	)
Settlements		—			(8,362	)		(1,463	)		(9,825	)		—			(8,157	)		(394	)		(8,551	)
Changes in Gains (Losses) Included in Earnings and Other Comprehensive Income (Loss)		63,948			16,339			13,485			93,772			29,857			4,584			432			34,873
Balance, End of Period	$	971,755		$	371,732		$	120,216		$	1,463,703		$	760,990		$	75,901		$	142,725		$	979,616
Changes in Unrealized Gains (Losses) Included in Earnings Related to Investments Still Held at the Reporting Date	$	19,854		$	16,340		$	16		$	36,210		$	(32,299	)	$	4,626		$	2,581		$	(25,092	)

38

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) Represents corporate treasury investments 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.

There were no Level III financial liabilities as of and for the three and nine months ended September 30, 2017 and 2016.

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 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:

	September 30, 2017		December 31, 2016
Cash Held by Blackstone Funds and Other	$	42,795	$	—
Investments		776,135		644,546
Accounts Receivable		19,836		12,308
Due from Affiliates		53,358		35,099
Total VIE Assets		892,124		691,953
Due to Affiliates		131		577
Accounts Payable, Accrued Expenses and Other Liabilities		100		38
Potential Clawback Obligation		96,691		81,936
Maximum Exposure to Loss	$	989,046	$	774,504

39

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)

10. REVERSE REPURCHASE AND REPURCHASE AGREEMENTS

At September 30, 2017, the Partnership pledged securities with a carrying value of $105.6 million and cash to collateralize its repurchase agreements. Such securities can be repledged, delivered or otherwise used by the counterparty.

At December 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 $117.8 million as collateral for reverse repurchase agreements that could be repledged, delivered or otherwise used. Securities with a fair value of $68.8 million and cash were used to cover Securities Sold, Not Yet Purchased. The Partnership also pledged securities with a carrying value of $119.1 million and cash to collateralize its repurchase agreements. Such securities can be repledged, delivered or otherwise used by the counterparty.

The following tables provide information regarding the Partnership’s Repurchase Agreements obligation by type of collateral pledged:

	September 30, 2017
	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	$	—	$	12,033	$	31,834	$	30,861	$	74,728
Gross Amount of Recognized Liabilities for Repurchase Agreements in Note 11. “Offsetting of Assets and Liabilities”									$	74,728
Amounts Related to Agreements Not Included in Offsetting Disclosure in Note 11. “Offsetting of Assets and Liabilities”									$	—

	December 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
U.S. Treasury and Agency Securities	$	7,034	$	—	$	—	$	—	$	7,034
Asset-Backed Securities		—		12,805		30,796		24,689		68,290
	$	7,034	$	12,805	$	30,796	$	24,689	$	75,324
Gross Amount of Recognized Liabilities for Repurchase Agreements in Note 11. “Offsetting of Assets and Liabilities”									$	75,324
Amounts Related to Agreements Not Included in Offsetting Disclosure in Note 11. “Offsetting of Assets and Liabilities”									$	—

40

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 September 30, 2017:

	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	$	29	$	—	$	—	$	29
Freestanding Derivatives		10,796		2,464		—		8,332
	$	10,825	$	2,464	$	—	$	8,361

	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
Freestanding Derivatives	$	11,803	$	2,464	$	8,503	$	836
Repurchase Agreements		74,728		74,728		—		—
	$	86,531	$	77,192	$	8,503	$	836

The following tables present the offsetting of assets and liabilities as of December 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
Freestanding Derivatives	$	5,720	$	1,064	$	2,892	$	1,764
Reverse Repurchase Agreements		118,495		117,775		—		720
	$	124,215	$	118,839	$	2,892	$	2,484

	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	$	587	$	—	$	—	$	587
Freestanding Derivatives		6,886		1,064		5,638		184
Repurchase Agreements		75,324		72,195		3,129		—
	$	82,797	$	73,259	$	8,767	$	771

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

41

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)

Condensed Consolidated Statements of Financial Condition. The following table presents the components of Other Assets:

	September 30, 2017		December 31, 2016
Furniture, Equipment and Leasehold Improvements, Net	$	128,910	$	126,784
Prepaid Expenses		90,779		96,888
Other Assets		26,712		37,723
Freestanding Derivatives		6,743		3,393
Net Investment Hedges		29		—
	$	253,173	$	264,788

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 September 30, 2017, the aggregate cash balance on deposit relating to the cash pooling arrangement was $1.3 billion, which was offset with an accompanying overdraft of $1.3 billion.

12. BORROWINGS

On September 25, 2017, Blackstone, through its indirect subsidiary Blackstone Holdings Finance Co. L.L.C. (the “Issuer”), commenced a cash tender offer for any and all of its 6.625% senior notes maturing on August 15, 2019 (the “2019 Notes”). On September 29, 2017, the cash tender offer expired and $259.7 million aggregate principal amount of the 2019 Notes were validly tendered. Payment for the tendered notes was made on October 4, 2017. Accordingly, the tendered notes remained outstanding as of September 30, 2017 and are included in these condensed consolidated financial statements. On November 1, 2017, in accordance with the make-whole provision under the indenture governing the 2019 Notes, Blackstone redeemed the remainder of the 2019 Notes that were not tendered.

On October 2, 2017, the Issuer issued $300 million aggregate principal amount of senior notes maturing October 2, 2027 (the “2027 Notes”) and $300 million aggregate principal amount of senior notes maturing October 2, 2047 (the “2047 Notes”). The 2027 Notes have an interest rate of 3.150% per annum, accruing from October 2, 2017. The 2047 Notes have an interest rate of 4.000% per annum, accruing from October 2, 2017. Interest on the 2027 Notes and 2047 Notes is payable semi-annually in arrears on October 2 and April 2 of each year, commencing on April 2, 2018. The 2027 Notes and 2047 Notes are unsecured and unsubordinated obligations of the Issuer. The 2027 Notes and 2047 Notes are fully and unconditionally guaranteed, jointly and severally, by the Partnership and its indirect subsidiaries, 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. (the “Guarantors”). The guarantees are unsecured and unsubordinated obligations of the Guarantors. Transaction costs related to the issuance of the 2027 Notes and 2047 Notes have been capitalized and are being amortized over the life of the 2027 Notes and 2047 Notes. The 2027 Notes and 2047 Notes are not included in the September 30, 2017 Condensed Consolidated Statement of Financial Condition.

42

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 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.

	September 30, 2017				December 31, 2016
Senior Notes	Carrying Value		Fair Value (a)		Carrying Value		Fair Value (a)
6.625%, Due 8/15/2019 (b)	$	601,028	$	632,502	$	607,121	$	648,765
5.875%, Due 3/15/2021		398,409		443,440		398,105		447,600
4.750%, Due 2/15/2023		393,887		438,920		393,158		426,520
6.250%, Due 8/15/2042		237,971		319,050		237,830		285,450
5.000%, Due 6/15/2044		488,485		556,950		488,337		497,200
4.450%, Due 7/15/2045		343,897		359,625		343,816		322,525
2.000%, Due 5/19/2025		349,985		375,650		310,805		331,096
1.000%, Due 10/5/2026		697,915		683,393		620,750		598,270
	$	3,511,577	$	3,809,530	$	3,399,922	$	3,557,426

(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.

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:

	September 30, 2017							December 31, 2016
	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	$	8,712,030		2.22	%		5.2	$	5,124,241		2.17	%		5.4
Subordinated Notes		646,059		(a	)		N/A		382,735		(a)			N/A
	$	9,358,089						$	5,506,976

(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:

	September 30, 2017						December 31, 2016
	Fair Value		Amounts Due to Non- Consolidated Affiliates				Fair Value		Amounts Due to Non- Consolidated Affiliates
			Borrowing Outstanding		Fair Value				Borrowing Outstanding		Fair Value
Senior Secured Notes	$	8,580,092	$	—	$	—	$	5,125,804	$	—	$	—
Subordinated Notes		528,349		53,400		41,189		345,594		10,000		7,748
	$	9,108,441	$	53,400	$	41,189	$	5,471,398		$10,000		$7,748

43

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 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 September 30, 2017 and December 31, 2016, the fair value of the consolidated CLO assets was $10.5 billion and $6.4 billion, respectively. This collateral consisted of Cash, Corporate Loans, Corporate Bonds and other securities.

Scheduled principal payments for borrowings as of September 30, 2017 were as follows:

	Operating Borrowings		Blackstone Fund Facilities/CLO Vehicles		Total Borrowings
2017	$	—	$	149,309	$	149,309
2018		—		—		—
2019		585,000		—		585,000
2020		—		531,630		531,630
2021		400,000		—		400,000
Thereafter		2,563,260		8,679,959		11,243,219
	$	3,548,260	$	9,360,898	$	12,909,158

13. INCOME TAXES

Blackstone’s effective tax rate was 6.6% and 3.9% for the three months ended September 30, 2017 and 2016, respectively, and 5.3% and 5.4% for the nine months ended September 30, 2017 and 2016, respectively. Blackstone’s income tax provision was $59.5 million and $27.7 million for the three months ended September 30, 2017 and 2016, respectively, and $146.6 million and $84.3 million for the nine months ended September 30, 2017 and 2016, respectively.

The Blackstone Group L.P. and certain of its subsidiaries operate in the U.S. as partnerships for income tax purposes (partnerships generally are not subject to federal income taxes) and generally as corporate entities in non-U.S. jurisdictions. Blackstone’s effective tax rate for the three and nine months ended September 30, 2017 and 2016 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.

44

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)

14. NET INCOME PER COMMON UNIT

Basic and diluted net income per common unit for the three and nine months ended September 30, 2017 and September 30, 2016 was calculated as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016
Net Income for Per Common Unit Calculation
Net Income Attributable to The Blackstone Group L.P., Basic	$	384,642	$	312,905	$	1,189,242	$	671,284
Incremental Net Income from Assumed Exchange of Blackstone Holdings Partnership Units		289,134		246,086		924,406		532,116
Net Income Attributable to The Blackstone Group L.P., Diluted	$	673,776	$	558,991	$	2,113,648	$	1,203,400
Units Outstanding
Weighted-Average Common Units Outstanding, Basic		667,384,727		650,917,510		664,331,632		647,595,189
Weighted-Average Unvested Deferred Restricted Common Units		663,474		1,495,331		823,877		1,379,168
Weighted-Average Blackstone Holdings Partnership Units		532,454,091		543,392,474		534,937,167		545,887,895
Weighted-Average Common Units Outstanding, Diluted		1,200,502,292		1,195,805,315		1,200,092,676		1,194,862,252
Net Income Per Common Unit, Basic	$	0.58	$	0.48	$	1.79	$	1.04
Net Income Per Common Unit, Diluted	$	0.56	$	0.47	$	1.76	$	1.01
Distributions Declared Per Common Unit (a)	$	0.54	$	0.36	$	1.88	$	1.25

(a) Distributions declared reflects the calendar date of the declaration for each distribution.

Unit Repurchase Program

In January 2008, Blackstone announced that the Board of Directors of its general partner, Blackstone Group Management L.L.C., had authorized the repurchase by Blackstone of up to $500 million of Blackstone common units and Blackstone Holdings Partnership Units. Under this unit repurchase program, units may be repurchased from time to time in open market transactions, in privately negotiated transactions or otherwise. The timing and the actual number of Blackstone common units and Blackstone Holdings Partnership Units repurchased will depend on a variety of factors, including legal requirements, price and economic and market conditions. This unit repurchase program may be suspended or discontinued at any time and does not have a specified expiration date.

During the nine months ended September 30, 2017 and 2016, no units were repurchased. As of September 30, 2017, the amount remaining available for repurchases under this program was $335.8 million.

45

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)

15. EQUITY-BASED COMPENSATION

The Partnership has granted equity-based compensation awards to Blackstone’s senior managing directors, non-partner professionals, non-professionals and selected external advisers under the Partnership’s 2007 Equity Incentive Plan (the “Equity Plan”), the majority of which to date were granted in connection with Blackstone’s initial public offering (“IPO”). The Equity Plan allows for the granting of options, unit appreciation rights or other unit-based awards (units, restricted units, restricted common units, deferred restricted common units, phantom restricted common units or other unit-based awards based in whole or in part on the fair value of the Blackstone common units or Blackstone Holdings Partnership Units) which may contain certain service or performance requirements. As of January 1, 2017, the Partnership had the ability to grant 170,379,944 units under the Equity Plan.

For the three and nine months ended September 30, 2017, the Partnership recorded compensation expense of $83.0 million and $262.8 million, respectively, in relation to its equity-based awards with corresponding tax benefits of $16.9 million and $53.7 million, respectively. For the three and nine months ended September 30, 2016, the Partnership recorded compensation expense of $78.1 million and $242.2 million, respectively, in relation to its equity-based awards with corresponding tax benefits of $8.2 million and $24.8 million, respectively. As of September 30, 2017, there was $800.2 million of estimated unrecognized compensation expense related to unvested awards. This cost is expected to be recognized over a weighted-average period of 4.2 years.

Total vested and unvested outstanding units, including Blackstone common units, Blackstone Holdings Partnership Units and deferred restricted common units, were 1,200,789,318 as of September 30, 2017. Total outstanding unvested phantom units were 46,941 as of September 30, 2017.

A summary of the status of the Partnership’s unvested equity-based awards as of September 30, 2017 and of changes during the period January 1, 2017 through September 30, 2017 is presented below:

	Blackstone Holdings					The Blackstone Group L.P.
						Equity Settled Awards					Cash Settled Awards
Unvested Units	Partnership Units			Weighted- Average Grant Date Fair Value		Deferred Restricted Common Units and Options			Weighted- Average Grant Date Fair Value		Phantom Units			Weighted- Average Grant Date Fair Value
Balance, December 31, 2016		34,568,726		$	33.58		12,206,016		$	24.65		40,460		$	28.14
Granted		2,380,539			32.87		3,390,206			29.47		12,214			30.79
Vested		(5,334,789	)		27.10		(6,094,335	)		20.12		(3,080	)		30.16
Forfeited		(318,879	)		25.28		(294,728	)		29.31		(3,770	)		33.32
Balance, September 30, 2017		31,295,597		$	35.31		9,207,159		$	29.99		45,824		$	31.78

46

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)

Units Expected to Vest

The following unvested units, after expected forfeitures, as of September 30, 2017, are expected to vest:

	Units		Weighted-Average Service Period in Years
Blackstone Holdings Partnership Units		26,297,212		3.9
Deferred Restricted Blackstone Common Units		7,701,863		2.2
Total Equity-Based Awards		33,999,075		3.5
Phantom Units		35,368		3.1

16. RELATED PARTY TRANSACTIONS

Affiliate Receivables and Payables

Due from Affiliates and Due to Affiliates consisted of the following:

	September 30, 2017		December 31, 2016
Due from Affiliates
Advances Made on Behalf of Certain Non-Controlling Interest Holders and Blackstone Employees Principally for Investments in Blackstone Funds	$	393,525	$	342,943
Amounts Due from Portfolio Companies and Funds		646,252		456,469
Management and Performance Fees Due from Non-Consolidated Funds		632,445		445,280
Payments Made on Behalf of Non-Consolidated Entities		345,704		196,134
Investments Redeemed in Non-Consolidated Funds of Hedge Funds		7,713		1,552
Accrual for Potential Clawback of Previously Distributed Carried Interest		1,112		—
	$	2,026,751	$	1,442,378

	September 30, 2017		December 31, 2016
Due to Affiliates
Due to Certain Non-Controlling Interest Holders in Connection with the Tax Receivable Agreements	$	1,175,223	$	1,186,145
Distributions Received on Behalf of Certain Non-Controlling Interest Holders and Blackstone Employees		53,421		28,012
Distributions Received on Behalf of Blackstone Entities		6,473		80,034
Payments Made by Non-Consolidated Entities		41,202		19,833
Due to Note Holders of Consolidated CLO Vehicles		41,189		7,748
Accrual for Potential Repayment of Previously Received Performance Fees		2,171		—
	$	1,319,679	$	1,321,772

Interests of the Founder, Senior Managing Directors, Employees and Other Related Parties

The Founder, senior managing directors, employees and certain other related parties invest on a discretionary basis in the consolidated Blackstone Funds both directly and through consolidated entities. These investments generally are subject to preferential management fee and performance fee arrangements. As of September 30, 2017

47

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)

and December 31, 2016, such investments aggregated $834.4 million and $740.3 million, respectively. Their share of the Net Income Attributable to Redeemable Non-Controlling and Non-Controlling Interests in Consolidated Entities aggregated $32.6 million and $24.5 million for the three months ended September 30, 2017 and 2016, respectively, and $83.1 million and $53.0 million for the nine months ended September 30, 2017 and 2016, respectively.

Revenues Earned from Affiliates

Management and Advisory Fees, Net earned from affiliates totaled $35.9 million and $39.1 million for the three months ended September 30, 2017 and 2016, respectively. Management and Advisory Fees, Net earned from affiliates totaled $100.4 million and $139.9 million for the nine months ended September 30, 2017 and 2016, respectively. Fees relate primarily to transaction and monitoring fees which are negotiated in the ordinary course of fundraising and investment activities.

Loans to Affiliates

Loans to affiliates consist of interest bearing advances to certain Blackstone individuals to finance their investments in certain Blackstone Funds. These loans earn interest at Blackstone’s cost of borrowing and such interest totaled $1.1 million and $0.6 million for the three months ended September 30, 2017 and 2016, respectively, and $2.4 million and $0.9 million for the nine months ended September 30, 2017 and 2016, respectively.

Contingent Repayment Guarantee

Blackstone and its personnel who have received carried interest distributions have guaranteed payment on a several basis (subject to a cap) to the carry funds of any clawback obligation with respect to the excess carried interest allocated to the general partners of such funds and indirectly received thereby to the extent that either Blackstone or its personnel fails to fulfill its clawback obligation, if any. The Accrual for Potential Repayment of Previously Received Performance Fees represents amounts previously paid to Blackstone Holdings and non-controlling interest holders that would need to be repaid to the Blackstone Funds if the carry funds were to be liquidated based on the fair value of their underlying investments as of September 30, 2017. See Note 17. “Commitments and Contingencies — Contingencies — Contingent Obligations (Clawback)”.

Aircraft and Other Services

In the normal course of business, Blackstone personnel make use of aircraft owned as personal assets by Stephen A. Schwarzman; an aircraft owned jointly as a personal asset by Hamilton E. James, Blackstone’s President and Chief Operating Officer, and a Director of Blackstone, and another senior managing director; an aircraft owned as a personal asset by Jonathan D. Gray, Blackstone’s Global Head of Real Estate and a Director of Blackstone; and an aircraft owned jointly as a personal asset by Bennett J. Goodman, Co-Founder of GSO Capital and a Director of Blackstone, and another senior managing director (each such aircraft, “Personal Aircraft”). Mr. Schwarzman paid for his purchases of his Personal Aircraft himself. Mr. James paid for his interest in his jointly owned Personal Aircraft. Mr. Goodman paid for his interest in his jointly owned Personal Aircraft. Mr. Gray paid for his purchase of his Personal Aircraft himself. Mr. Schwarzman, Mr. James, Mr. Goodman and Mr. Gray respectively bear operating, personnel and maintenance costs associated with the operation of such Personal Aircraft. Payment by Blackstone for the use of the Personal Aircraft by Blackstone employees is made based on market rates.

In addition, on occasion, certain of Blackstone’s executive officers and employee directors and their families may make personal use of aircraft owned by Blackstone or in which Blackstone owns a fractional interest, as well as other assets of Blackstone. Any such personal use of Blackstone assets is charged to the executive officer or

48

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)

employee director based on market rates and usage. Personal use of Blackstone resources is also reimbursed to Blackstone based on market rates.

The transactions described herein are not material to the Condensed Consolidated Financial Statements.

Tax Receivable Agreements

Blackstone used a portion of the proceeds from the IPO and the sale of non-voting common units to Beijing Wonderful Investments to purchase interests in the predecessor businesses from the predecessor owners. In addition, holders of Blackstone Holdings Partnership Units may exchange their Blackstone Holdings Partnership Units for Blackstone common units on a one-for-one basis. The purchase and subsequent exchanges are expected to result in increases in the tax basis of the tangible and intangible assets of Blackstone Holdings and therefore reduce the amount of tax that Blackstone’s wholly owned subsidiaries would otherwise be required to pay in the future.

One of the subsidiaries of the Partnership which is a corporate taxpayer has entered into tax receivable agreements with each of the predecessor owners and additional tax receivable agreements have been executed, and will continue to be executed, with newly-admitted senior managing directors and others who acquire Blackstone Holdings Partnership Units. The agreements provide for the payment by the corporate taxpayer to such owners of 85% of the amount of cash savings, if any, in U.S. federal, state and local income tax that the corporate taxpayers actually realize as a result of the aforementioned increases in tax basis and of certain other tax benefits related to entering into these tax receivable agreements. For purposes of the tax receivable agreements, cash savings in income tax will be computed by comparing the actual income tax liability of the corporate taxpayers to the amount of such taxes that the corporate taxpayers would have been required to pay had there been no increase to the tax basis of the tangible and intangible assets of Blackstone Holdings as a result of the exchanges and had the corporate taxpayers not entered into the tax receivable agreements.

Assuming no future material changes in the relevant tax law and that the corporate taxpayers earn sufficient taxable income to realize the full tax benefit of the increased amortization of the assets, the expected future payments under the tax receivable agreements (which are taxable to the recipients) will aggregate $1.2 billion over the next 15 years. The after-tax net present value of these estimated payments totals $397.3 million assuming a 15% discount rate and using Blackstone’s most recent projections relating to the estimated timing of the benefit to be received. Future payments under the tax receivable agreements in respect of subsequent exchanges would be in addition to these amounts. The payments under the tax receivable agreements are not conditioned upon continued ownership of Blackstone equity interests by the pre-IPO owners and the others mentioned above.

Amounts related to the deferred tax asset resulting from the increase in tax basis from the exchange of Blackstone Holdings Partnership Units to Blackstone common units, the resulting remeasurement of net deferred tax assets at the Blackstone ownership percentage at the balance sheet date, the due to affiliates for the future payments resulting from the tax receivable agreements and resulting adjustment to partners’ capital are included as Acquisition of Ownership Interests from Non-Controlling Interest Holders in the Supplemental Disclosure of Non-Cash Investing and Financing Activities in the Condensed Consolidated Statements of Cash Flows.

Other

Blackstone does business with and on behalf of some of its Portfolio Companies; all such arrangements are on a negotiated basis.

Additionally, please see Note 17. “Commitments and Contingencies — Contingencies — Guarantees” for information regarding guarantees provided to a lending institution for certain loans held by employees.

49

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)

17. COMMITMENTS AND CONTINGENCIES

Commitments

Investment Commitments

Blackstone had $2.7 billion of investment commitments as of September 30, 2017 representing general partner capital funding commitments to the Blackstone Funds, limited partner capital funding to other funds and Blackstone principal investment commitments. The consolidated Blackstone Funds had signed investment commitments of $644.5 million as of September 30, 2017 which includes $150.9 million of signed investment commitments for portfolio company acquisitions in the process of closing.

Contingencies

Guarantees

Certain of Blackstone’s consolidated real estate funds guarantee payments to third parties in connection with the on-going business activities and/or acquisitions of their Portfolio Companies. There is no direct recourse to the Partnership to fulfill such obligations. To the extent that underlying funds are required to fulfill guarantee obligations, the Partnership’s invested capital in such funds is at risk. Total investments at risk in respect of guarantees extended by consolidated real estate funds was $3.5 million as of September 30, 2017.

The Blackstone Holdings Partnerships provided guarantees to a lending institution for certain loans held by employees either for investment in Blackstone Funds or for members’ capital contributions to Blackstone Group International Partners LLP. The amount guaranteed as of September 30, 2017 was $175.2 million.

Litigation

From time to time, Blackstone is named as a defendant in legal actions relating to transactions conducted in the ordinary course of business. Although there can be no assurance of the outcome of such legal actions, in the opinion of management, Blackstone does not have a potential liability related to any current legal proceeding or claim that would individually or in the aggregate materially affect its results of operations, financial position or cash flows.

Contingent Obligations (Clawback)

Carried Interest is subject to clawback to the extent that the Carried Interest received to date with respect to a fund exceeds the amount due to Blackstone based on cumulative results of that fund. The actual clawback liability, however, generally does not become realized until the end of a fund’s life except for certain Blackstone real estate funds, multi-asset class investment funds and credit-focused funds, which may have an interim clawback liability. The lives of the carry funds, including available contemplated extensions, for which a liability for potential clawback obligations has been recorded for financial reporting purposes, are currently anticipated to expire at various points through 2028. Further extensions of such terms may be implemented under given circumstances.

For financial reporting purposes, when applicable, the general partners record a liability for potential clawback obligations to the limited partners of some of the carry funds due to changes in the unrealized value of a fund’s remaining investments and where the fund’s general partner has previously received Carried Interest distributions with respect to such fund’s realized investments.

50

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 the clawback obligations by segment:

	September 30, 2017						December 31, 2016
Segment	Blackstone Holdings		Current and Former Personnel		Total		Blackstone Holdings		Current and Former Personnel		Total
Credit	$	1,059	$	1,112	$	2,171	$	—	$	—	$	—

For Private Equity, Real Estate, and certain Credit Funds, a portion of the carried interest paid to current and former Blackstone personnel is held in segregated accounts in the event of a cash clawback obligation. These segregated accounts are not included in the Condensed Consolidated Financial Statements of the Partnership, except to the extent a portion of the assets held in the segregated accounts may be allocated to a consolidated Blackstone fund of hedge funds. At September 30, 2017, $585.6 million was held in segregated accounts for the purpose of meeting any clawback obligations of current and former personnel if such payments are required.

In the Credit segment, payment of carried interest to the Partnership by the majority of the stressed/distressed, mezzanine and event-driven credit strategies funds are substantially deferred under the terms of the partnership agreements. This deferral mitigates the need to hold funds in segregated accounts in the event of a cash clawback obligation.

If, at September 30, 2017, all of the investments held by our carry funds were deemed worthless, a possibility that management views as remote, the amount of Carried Interest subject to potential clawback would be $5.4 billion, on an after-tax basis where applicable, of which Blackstone Holdings is potentially liable for $5.0 billion if current and former Blackstone personnel default on their share of the liability, a possibility that management also views as remote.

18. SEGMENT REPORTING

Blackstone transacts its primary business in the United States and substantially all of its revenues are generated domestically.

Blackstone conducts its alternative asset management businesses through four segments:

• Private Equity — Blackstone’s Private Equity segment primarily comprises its management of flagship corporate private equity funds, sector-focused corporate private equity funds, including energy-focused funds, a core private equity fund, an opportunistic investment platform, a secondary private equity fund of funds business, a multi-asset investment program for eligible high net worth investors and a capital markets services business.

• Real Estate — Blackstone’s Real Estate segment primarily comprises its management of global, European focused and Asian focused opportunistic real estate funds, high yield real estate debt funds, liquid real estate debt funds, core+ real estate funds, a NYSE-listed REIT and a non-exchange traded REIT.

• Hedge Fund Solutions — Blackstone’s Hedge Fund Solutions segment is comprised principally of Blackstone Alternative Asset Management (“BAAM”), which manages a broad range of commingled and customized hedge fund of fund solutions and also includes investment platforms that seed new hedge fund businesses, purchase minority ownership interests in more established hedge funds, invest in special situation opportunities, create alternative solutions in regulated structures and trade directly.

• Credit — Blackstone’s Credit segment consists principally of GSO Capital Partners LP (“GSO”), which is organized into performing credit strategies (which include mezzanine lending funds, business

51

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)

development companies and other performing credit strategies), distressed strategies (which include event-driven credit strategies, stressed/distressed funds and distressed energy strategies) and long only strategies (which consist of CLOs, closed-end funds, commingled funds and separately managed accounts).

These business segments are differentiated by their various sources of income. The Private Equity, Real Estate, Hedge Fund Solutions and Credit segments primarily earn their income from management fees and investment returns on assets under management.

Blackstone uses Economic Income as a key measure of value creation, a benchmark of its performance and in making resource deployment and compensation decisions across its four segments. Economic Income represents segment net income before taxes excluding transaction-related charges. Transaction-related charges arise from Blackstone’s IPO and certain long-term retention programs outside of annual deferred compensation and other corporate actions, including acquisitions. Transaction-related charges include certain equity-based compensation charges, the amortization of intangible assets and contingent consideration associated with acquisitions. Economic Income presents revenues and expenses on a basis that deconsolidates the investment funds Blackstone manages. Economic Net Income (“ENI”) represents Economic Income adjusted to include current period taxes. Taxes represent the total GAAP tax provision adjusted to include only the current tax provision (benefit) calculated on Income (Loss) Before Provision for Taxes.

Senior management makes operating decisions and assesses the performance of each of Blackstone’s business segments based on financial and operating metrics and data that is presented without the consolidation of any of the Blackstone Funds that are consolidated into the Condensed Consolidated Financial Statements. Consequently, all segment data excludes the assets, liabilities and operating results related to the Blackstone Funds.

52

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 tables present the financial data for Blackstone’s four segments for the three months ended September 30, 2017 and 2016:

	Three Months Ended September 30, 2017
	Private Equity			Real Estate			Hedge Fund Solutions			Credit			Total Segments
Segment Revenues
Management and Advisory Fees, Net
Base Management Fees	$	182,108		$	224,048		$	129,410		$	134,336		$	669,902
Transaction, Advisory and Other Fees, Net		10,269			20,616			48			1,362			32,295
Management Fee Offsets		(1,088	)		(4,232	)		(28	)		(4,867	)		(10,215	)
Total Management and Advisory Fees, Net		191,289			240,432			129,430			130,831			691,982
Performance Fees
Realized
Carried Interest		101,918			261,122			—			6,269			369,309
Incentive Fees		—			50,588			14,217			36,393			101,198
Unrealized
Carried Interest		80,003			292,544			635			59,415			432,597
Incentive Fees		—			(21,977	)		29,349			(15,844	)		(8,472	)
Total Performance Fees		181,921			582,277			44,201			86,233			894,632
Investment Income (Loss)
Realized		7,077			44,449			1,316			7,346			60,188
Unrealized		17,440			(8,319	)		12,723			(4,460	)		17,384
Total Investment Income		24,517			36,130			14,039			2,886			77,572
Interest and Dividend Revenue		15,089			24,283			10,594			14,132			64,098
Other		(8,346	)		(13,108	)		(5,859	)		(6,831	)		(34,144	)
Total Revenues		404,470			870,014			192,405			227,251			1,694,140
Expenses
Compensation and Benefits Compensation		96,409			105,753			44,347			56,289			302,798
Performance Fee Compensation
Realized
Carried Interest		48,019			84,192			—			1,803			134,014
Incentive Fees		—			21,887			6,884			18,052			46,823
Unrealized
Carried Interest		45,484			113,731			216			27,727			187,158
Incentive Fees		—			(10,005	)		10,397			(7,486	)		(7,094	)
Total Compensation and Benefits		189,912			315,558			61,844			96,385			663,699
Other Operating Expenses		49,773			58,012			29,047			36,747			173,579
Total Expenses		239,685			373,570			90,891			133,132			837,278
Economic Income	$	164,785		$	496,444		$	101,514		$	94,119		$	856,862

53

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)

	Three Months Ended September 30, 2016
	Private Equity			Real Estate			Hedge Fund Solutions			Credit			Total Segments
Segment Revenues
Management and Advisory Fees, Net
Base Management Fees	$	131,708		$	197,629		$	130,305		$	133,867		$	593,509
Transaction, Advisory and Other Fees, Net		12,892			14,190			116			1,823			29,021
Management Fee Offsets		(12,917	)		(842	)		—			(7,091	)		(20,850	)
Total Management and Advisory Fees, Net		131,683			210,977			130,421			128,599			601,680
Performance Fees
Realized
Carried Interest		26,398			461,980			—			15,644			504,022
Incentive Fees		—			3,857			4,572			21,866			30,295
Unrealized
Carried Interest		144,597			(113,449	)		(84	)		75,093			106,157
Incentive Fees		—			14,445			12,038			5,689			32,172
Total Performance Fees		170,995			366,833			16,526			118,292			672,646
Investment Income (Loss)
Realized		15,469			46,704			(1,211	)		(328	)		60,634
Unrealized		8,884			(6,725	)		12,219			12,875			27,253
Total Investment Income		24,353			39,979			11,008			12,547			87,887
Interest and Dividend Revenue		9,160			12,460			4,692			6,769			33,081
Other		411			(548	)		(260	)		(28	)		(425	)
Total Revenues		336,602			629,701			162,387			266,179			1,394,869
Expenses
Compensation and Benefits Compensation		73,889			99,886			47,206			47,614			268,595
Performance Fee Compensation
Realized
Carried Interest		13,741			147,419			—			7,267			168,427
Incentive Fees		—			1,764			2,902			10,770			15,436
Unrealized
Carried Interest		69,300			(38,972	)		35			39,681			70,044
Incentive Fees		—			6,229			4,557			2,722			13,508
Total Compensation and Benefits		156,930			216,326			54,700			108,054			536,010
Other Operating Expenses		47,534			47,908			27,432			28,016			150,890
Total Expenses		204,464			264,234			82,132			136,070			686,900
Economic Income	$	132,138		$	365,467		$	80,255		$	130,109		$	707,969

54

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 reconciles the Total Segments to Blackstone’s Income (Loss) Before Provision for Taxes for the three months ended September 30, 2017 and 2016:

	Three Months Ended September 30, 2017						Three Months Ended September 30, 2016
	Total Segments		Consolidation Adjustments and Reconciling Items		Blackstone Consolidated		Total Segments		Consolidation Adjustments and Reconciling Items		Blackstone Consolidated
Revenues	$	1,694,140	$	52,637(a)	$	1,746,777	$	1,394,869	$	36,816(a)	$	1,431,685
Expenses	$	837,278	$	66,482(b)	$	903,760	$	686,900	$	86,877(b)	$	773,777
Other Income	$	—	$	63,448(c)	$	63,448	$	—	$	61,395(c)	$	61,395
Economic Income	$	856,862	$	49,603(d)	$	906,465	$	707,969	$	11,334(d)	$	719,303

(a) The Revenues adjustment represents management and performance fees earned from Blackstone Funds that were eliminated in consolidation to arrive at Blackstone consolidated revenues, non-segment related Investment Income (Loss), which is included in Blackstone consolidated revenues and the elimination of inter-segment interest income.

(b) The Expenses adjustment represents the addition of expenses of the consolidated Blackstone Funds to the Blackstone unconsolidated expenses, amortization of intangibles, expenses related to transaction-related equity-based compensation and the elimination of inter-segment interest expense to arrive at Blackstone consolidated expenses.

(c) The Other Income adjustment results from the following:

	Three Months Ended September 30,
	2017			2016
Fund Management Fees and Performance Fees Eliminated in Consolidation and Transactional Investment Loss	$	(51,984	)	$	(37,835	)
Fund Expenses Added in Consolidation		931			5,141
Income Associated with Non-Controlling Interests of Consolidated Entities		116,661			93,417
Transaction-Related Other Income (Loss)		(2,160	)		672
Total Consolidation Adjustments and Reconciling Items	$	63,448		$	61,395

(d) The reconciliation of Economic Income to Income Before Provision for Taxes as reported in the Condensed Consolidated Statements of Operations consists of the following:

	Three Months Ended September 30,
	2017			2016
Economic Income	$	856,862		$	707,969
Adjustments
Amortization of Intangibles		(11,344	)		(22,054	)
Transaction-Related Charges		(55,714	)		(60,029	)
Income Associated with Non-Controlling Interests of Consolidated Entities		116,661			93,417
Total Consolidation Adjustments and Reconciling Items		49,603			11,334
Income Before Provision for Taxes	$	906,465		$	719,303

55

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 tables present the financial data for Blackstone’s four segments as of and for the nine months ended September 30, 2017 and 2016:

	September 30, 2017 and the Nine Months Then Ended
	Private Equity			Real Estate			Hedge Fund Solutions			Credit			Total Segments
Segment Revenues
Management and Advisory Fees, Net
Base Management Fees	$	536,127		$	649,792		$	386,576		$	411,733		$	1,984,228
Transaction, Advisory and Other Fees, Net		46,416			57,982			2,003			5,008			111,409
Management Fee Offsets		(17,031	)		(12,800	)		(28	)		(27,379	)		(57,238	)
Total Management and Advisory Fees, Net		565,512			694,974			388,551			389,362			2,038,399
Performance Fees
Realized
Carried Interest		881,856			1,169,967			—			31,101			2,082,924
Incentive Fees		—			58,817			35,896			94,728			189,441
Unrealized
Carried Interest		(104,230	)		347,476			4,575			95,109			342,930
Incentive Fees		—			19,344			92,118			(11,391	)		100,071
Total Performance Fees		777,626			1,595,604			132,589			209,547			2,715,366
Investment Income (Loss)
Realized		129,134			221,627			909			12,299			363,969
Unrealized		(48,398	)		(112,691	)		42,594			3,777			(114,718	)
Total Investment Income		80,736			108,936			43,503			16,076			249,251
Interest and Dividend Revenue		38,462			63,448			26,917			34,402			163,229
Other		(26,270	)		(39,223	)		(18,189	)		(21,218	)		(104,900	)
Total Revenues		1,436,066			2,423,739			573,371			628,169			5,061,345
Expenses
Compensation and Benefits Compensation		270,995			318,721			139,312			168,054			897,082
Performance Fee Compensation
Realized
Carried Interest		292,712			388,409			—			14,373			695,494
Incentive Fees		—			26,182			18,563			46,311			91,056
Unrealized
Carried Interest		28,347			184,703			1,603			42,618			257,271
Incentive Fees		—			8,184			33,643			(5,182	)		36,645
Total Compensation and Benefits		592,054			926,199			193,121			266,174			1,977,548
Other Operating Expenses		140,260			165,354			81,087			105,854			492,555
Total Expenses		732,314			1,091,553			274,208			372,028			2,470,103
Economic Income	$	703,752		$	1,332,186		$	299,163		$	256,141		$	2,591,242
Segment Assets as of September 30, 2017	$	6,102,906		$	8,152,984		$	2,363,565		$	3,558,146		$	20,177,601

56

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)

	Nine Months Ended September 30, 2016
	Private Equity			Real Estate			Hedge Fund Solutions			Credit			Total Segments
Segment Revenues
Management and Advisory Fees, Net
Base Management Fees	$	393,833		$	598,540		$	390,586		$	391,249		$	1,774,208
Transaction, Advisory and Other Fees, Net		32,901			71,096			654			4,589			109,240
Management Fee Offsets		(23,960	)		(5,656	)		—			(26,731	)		(56,347	)
Total Management and Advisory Fees, Net		402,774			663,980			391,240			369,107			1,827,101
Performance Fees
Realized
Carried Interest		113,736			928,989			—			15,940			1,058,665
Incentive Fees		—			14,025			7,005			67,078			88,108
Unrealized
Carried Interest		303,519			(209,846	)		749			147,609			242,031
Incentive Fees		—			30,152			10,139			6,988			47,279
Total Performance Fees		417,255			763,320			17,893			237,615			1,436,083
Investment Income (Loss)
Realized		23,038			79,608			(6,471	)		8,028			104,203
Unrealized		21,558			(17,764	)		9,285			3,726			16,805
Total Investment Income		44,596			61,844			2,814			11,754			121,008
Interest and Dividend Revenue		28,525			38,732			15,193			20,945			103,395
Other		2,219			(226	)		(523	)		403			1,873
Total Revenues		895,369			1,527,650			426,617			639,824			3,489,460
Expenses
Compensation and Benefits Compensation		237,303			303,352			145,811			155,687			842,153
Performance Fee Compensation
Realized
Carried Interest		60,114			246,936			—			7,461			314,511
Incentive Fees		—			7,197			6,090			31,523			44,810
Unrealized
Carried Interest		98,046			2,988			273			73,940			175,247
Incentive Fees		—			12,929			3,842			2,874			19,645
Total Compensation and Benefits		395,463			573,402			156,016			271,485			1,396,366
Other Operating Expenses		143,968			148,206			80,796			83,700			456,670
Total Expenses		539,431			721,608			236,812			355,185			1,853,036
Economic Income	$	355,938		$	806,042		$	189,805		$	284,639		$	1,636,424

57

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 reconciles the Total Segments to Blackstone’s Income (Loss) Before Provision for Taxes and Total Assets as of and for the nine months ended September 30, 2017 and 2016:

	September 30, 2017 and the Nine Months Then  Ended						Nine Months Ended September 30, 2016
	Total Segments		Consolidation Adjustments and Reconciling Items		Blackstone Consolidated		Total Segments		Consolidation Adjustments and Reconciling Items		Blackstone Consolidated
Revenues	$	5,061,345	$	175,510(a)	$	5,236,855	$	3,489,460	$	67,005(a)	$	3,556,465
Expenses	$	2,470,103	$	248,419(b)	$	2,718,522	$	1,853,036	$	251,054(b)	$	2,104,090
Other Income	$	—	$	239,634(c)	$	239,634	$	—	$	111,240(c)	$	111,240
Economic Income	$	2,591,242	$	166,725(d)	$	2,757,967	$	1,636,424	$	(72,809)(d)	$	1,563,615
Total Assets	$	20,177,601	$	11,584,386(e)	$	31,761,987

(a) The Revenues adjustment represents management and performance fees earned from Blackstone Funds that were eliminated in consolidation to arrive at Blackstone consolidated revenues, non-segment related Investment Income (Loss), which is included in Blackstone consolidated revenues and the elimination of inter-segment interest income.

(b) The Expenses adjustment represents the addition of expenses of the consolidated Blackstone Funds to the Blackstone unconsolidated expenses, amortization of intangibles, expenses related to transaction-related equity-based compensation and the elimination of inter-segment interest expense to arrive at Blackstone consolidated expenses.

(c) The Other Income adjustment results from the following:

	Nine Months Ended September 30,
	2017			2016
Fund Management Fees and Performance Fees Eliminated in Consolidation and Transactional Investment Loss	$	(174,261	)	$	(68,308	)
Fund Expenses Added in Consolidation		39,334			(4,016	)
Income Associated with Non-Controlling Interests of Consolidated Entities		371,281			189,782
Transaction-Related Other Income (Loss)		3,280			(6,218	)
Total Consolidation Adjustments and Reconciling Items	$	239,634		$	111,240

(d) The reconciliation of Economic Income to Income Before Provision for Taxes as reported in the Condensed Consolidated Statements of Operations consists of the following:

	Nine Months Ended September 30,
	2017			2016
Economic Income	$	2,591,242		$	1,636,424
Adjustments
Amortization of Intangibles		(34,032	)		(68,470	)
Transaction-Related Charges		(170,524	)		(194,121	)
Income Associated with Non-Controlling Interests of Consolidated Entities		371,281			189,782
Total Consolidation Adjustments and Reconciling Items		166,725			(72,809	)
Income Before Provision for Taxes	$	2,757,967		$	1,563,615

58

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)

(e) The Total Assets adjustment represents the addition of assets of the consolidated Blackstone Funds to the Blackstone unconsolidated assets to arrive at Blackstone consolidated assets.

19. SUBSEQUENT EVENTS

On September 25, 2017, Blackstone commenced a cash tender offer for any and all of its 2019 Notes. On September 29, 2017, the cash tender offer expired and $259.7 million aggregate principal amount of the 2019 Notes were validly tendered. Payment for the tendered notes was made on October 4, 2017. On November 1, 2017, in accordance with the make-whole provision under the indenture governing the 2019 Notes, Blackstone redeemed the remainder of the 2019 Notes that were not tendered.

On October 2, 2017, Blackstone issued $300 million in aggregate principal amount of 3.150% Senior Notes which will mature on October 2, 2027 and $300 million in aggregate principal amount of 4.000% Senior Notes which will mature on October 2, 2047.

See Note 12. “Borrowings” for additional information.

On October 16, 2017, Blackstone closed on its previously announced acquisition of Harvest Fund Advisors LLC (“Harvest”). Harvest primarily invests capital raised from institutional investors in separately managed accounts and pooled vehicles, investing in public master limited partnerships holding U.S. midstream energy assets.

59

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

THE BLACKSTONE GROUP L.P.

Unaudited Consolidating Statements of Financial Condition

(Dollars in Thousands)

	September 30, 2017
	Consolidated Operating Partnerships			Consolidated Blackstone Funds (a)		Reclasses and Eliminations			Consolidated
Assets
Cash and Cash Equivalents	$	1,315,687		$	—	$	—		$	1,315,687
Cash Held by Blackstone Funds and Other		187,903			1,477,827		—			1,665,730
Investments		12,652,040			10,357,899		(624,747	)		22,385,192
Accounts Receivable		542,909			363,406		—			906,315
Due from Affiliates		2,022,422			28,985		(24,656	)		2,026,751
Intangible Assets, Net		229,713			—		—			229,713
Goodwill		1,718,519			—		—			1,718,519
Other Assets		247,501			5,672		—			253,173
Deferred Tax Assets		1,260,907			—		—			1,260,907
Total Assets	$	20,177,601		$	12,233,789	$	(649,403	)	$	31,761,987
Liabilities and Partners’ Capital
Loans Payable	$	3,511,577		$	9,070,061	$	—		$	12,581,638
Due to Affiliates		1,248,560			237,514		(166,395	)		1,319,679
Accrued Compensation and Benefits		2,823,773			—		—			2,823,773
Securities Sold, Not Yet Purchased		29,928			75,589		—			105,517
Repurchase Agreements		—			74,728		—			74,728
Accounts Payable, Accrued Expenses and Other Liabilities		433,492			961,538		—			1,395,030
Total Liabilities		8,047,330			10,419,430		(166,395	)		18,300,365
Redeemable Non-Controlling Interests in Consolidated Entities		—			201,377		—			201,377
Partners’ Capital
Partners’ Capital		6,621,217			388,195		(388,978	)		6,620,434
Accumulated Other Comprehensive Income (Loss)		(35,204	)		—		783			(34,421	)
Non-Controlling Interests in Consolidated Entities		2,044,706			1,224,787		(94,813	)		3,174,680
Non-Controlling Interests in Blackstone Holdings		3,499,552			—		—			3,499,552
Total Partners’ Capital		12,130,271			1,612,982		(483,008	)		13,260,245
Total Liabilities and Partners’ Capital	$	20,177,601		$	12,233,789	$	(649,403	)	$	31,761,987

continued…

60

THE BLACKSTONE GROUP L.P.

Unaudited Consolidating Statements of Financial Condition

(Dollars in Thousands)

	December 31, 2016
	Consolidated Operating Partnerships			Consolidated Blackstone Funds (a)		Reclasses and Eliminations			Consolidated
Assets
Cash and Cash Equivalents	$	1,837,253		$	—	$	—		$	1,837,253
Cash Held by Blackstone Funds and Other		261,909			743,252		—			1,005,161
Investments		11,618,729			6,474,168		(397,922	)		17,694,975
Accounts Receivable		404,843			367,852		—			772,695
Reverse Repurchase Agreements		118,495			—		—			118,495
Due from Affiliates		1,433,612			27,473		(18,707	)		1,442,378
Intangible Assets, Net		262,604			—		—			262,604
Goodwill		1,718,519			—		—			1,718,519
Other Assets		259,695			5,093		—			264,788
Deferred Tax Assets		1,286,469			—		—			1,286,469
Total Assets	$	19,202,128		$	7,617,838	$	(416,629	)	$	26,403,337
Liabilities and Partners’ Capital
Loans Payable	$	3,399,922		$	5,466,444	$	—		$	8,866,366
Due to Affiliates		1,253,791			86,688		(18,707	)		1,321,772
Accrued Compensation and Benefits		2,327,762			—		—			2,327,762
Securities Sold, Not Yet Purchased		127,710			87,688		—			215,398
Repurchase Agreements		7,034			68,290		—			75,324
Accounts Payable, Accrued Expenses and Other Liabilities		533,101			548,681		—			1,081,782
Total Liabilities		7,649,320			6,257,791		(18,707	)		13,888,404
Redeemable Non-Controlling Interests in Consolidated Entities		—			185,390		—			185,390
Partners’ Capital
Partners’ Capital		6,524,607			398,001		(398,679	)		6,523,929
Accumulated Other Comprehensive Income (Loss)		(63,644	)		—		757			(62,887	)
Non-Controlling Interests in Consolidated Entities		1,652,308			776,656		—			2,428,964
Non-Controlling Interests in Blackstone Holdings		3,439,537			—		—			3,439,537
Total Partners’ Capital		11,552,808			1,174,657		(397,922	)		12,329,543
Total Liabilities and Partners’ Capital	$	19,202,128		$	7,617,838	$	(416,629	)	$	26,403,337

(a) The Consolidated Blackstone Funds consisted of the following:

Blackstone Real Estate Partners VI.C — ESH L.P.

Blackstone Real Estate Special Situations Fund L.P.

Blackstone Real Estate Special Situations Offshore Fund Ltd.

Blackstone Strategic Alliance Fund L.P.

Blackstone / GSO Global Dynamic Credit Feeder Fund (Cayman) LP

Blackstone / GSO Global Dynamic Credit Funding Designated Activity Company

Blackstone / GSO Global Dynamic Credit Master Fund

Blackstone / GSO Global Dynamic Credit USD Feeder Fund Ireland

Blackstone / GSO Loan Financing Limited

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BSSF I AIV L.P.

BTD CP Holdings LP

GSO Legacy Associates 2 LLC

GSO Legacy Associates LLC

Private equity side-by-side investment vehicles

Real estate side-by-side investment vehicles

Mezzanine side-by-side investment vehicles

Collateralized loan obligation vehicles

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

The following discussion and analysis should be read in conjunction with The Blackstone Group L.P.’s condensed consolidated financial statements and the related notes included within this Quarterly Report on Form 10-Q.

Our Business

Blackstone is one of the largest independent managers of private capital in the world. Our business is organized into four segments:

• Private Equity. We are a world leader in private equity investing, having managed seven general private equity funds, as well as three sector-focused funds, since we established this business in 1987. Our Private Equity segment includes our corporate private equity business, which consists of our flagship corporate private equity funds, Blackstone Capital Partners (“BCP”) funds, our sector-focused corporate private equity funds, including our energy-focused funds, Blackstone Energy Partners (“BEP”) funds and our core private equity fund, Blackstone Core Equity Partners (“BCEP”). In addition, our Private Equity segment includes our opportunistic investment platform that invests globally across asset classes, industries and geographies, Blackstone Tactical Opportunities (“Tactical Opportunities”), our secondary private equity fund of funds business, Strategic Partners Fund Solutions (“Strategic Partners”), a multi-asset investment program for eligible high net worth investors offering exposure to certain of Blackstone’s key illiquid investment strategies through a single commitment, Blackstone Total Alternatives Solution (“BTAS”) and our capital markets services business, Blackstone Capital Markets (“BXCM”).

Our corporate private equity business pursues transactions throughout the world across a variety of transaction types, including large buyouts, mid-cap buyouts, buy and build platforms (which involve multiple acquisitions behind a single management team and platform) and growth equity/development projects (which involve significant minority investments in mature companies and greenfield development projects in energy and power). Tactical Opportunities invests globally across asset classes, industries and geographies, seeking to identify and execute on attractive, differentiated investment opportunities, leveraging the intellectual capital across our various businesses while continuously optimizing its approach in the face of ever-changing market conditions. Strategic Partners focuses on delivering access to a range of opportunities, leveraging its proprietary database to acquire single fund interests or complex portfolios in an efficient and timely manner.

• Real Estate. Our Real Estate group is one of the largest real estate investment managers in the world. We operate as one globally integrated business, with investments in North America, Europe, Asia and Latin America.

Our Blackstone Real Estate Partners (“BREP”) funds are geographically diversified and target a broad range of “opportunistic” real estate and real estate related investments. The BREP funds include global funds as well as funds focused specifically on Europe or Asia investments. We seek to acquire high quality, well-located yet undermanaged assets at an attractive basis, address any property or business issues through active asset management and sell the assets once our business plan is accomplished. BREP

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has made significant investments in hotels, office buildings, shopping centers, residential and industrial assets, as well as a variety of real estate operating companies.

Our Blackstone Real Estate Debt Strategies (“BREDS”) vehicles target debt investment opportunities collateralized by commercial real estate in both public and private markets, primarily in the U.S. and Europe. BREDS’ scale and investment mandates enable it to provide a variety of lending and investment options including mezzanine loans, senior loans and liquid securities. The BREDS platform includes a number of high yield real estate debt funds, liquid real estate debt funds and BXMT, a NYSE-listed real estate investment trust (“REIT”).

Our core+ real estate business, Blackstone Property Partners (“BPP”) has assembled a global portfolio of high quality core+ investments across the U.S., Europe and Asia. Our BPP vehicles target substantially stabilized assets in prime markets with a focus on office, multifamily, industrial and retail assets. We manage several core+ real estate funds and BREIT, a non-exchange traded REIT, which targets primarily stabilized income-oriented commercial real estate in the U.S.

• Hedge Fund Solutions. Blackstone’s Hedge Fund Solutions segment is comprised principally of Blackstone Alternative Asset Management (“BAAM”). BAAM is the world’s largest discretionary allocator to hedge funds, managing a broad range of commingled and customized hedge fund of fund solutions since its inception in 1990. The Hedge Fund Solutions segment also includes investment platforms that seed new hedge fund businesses, purchase minority ownership interests in more established hedge funds, invest in special situation opportunities, create alternative solutions in regulated structures and trade directly.

• Credit. Our credit business consists principally of GSO Capital Partners LP (“GSO”) which was founded in 2005 and subsequently acquired by Blackstone in 2008. GSO is one of the largest leveraged finance-focused alternative asset managers in the world and is the largest manager of collateralized loan obligations (“CLOs”) globally. The investment portfolios of the funds we manage or sub-advise predominantly consist of loans and securities of non-investment grade companies spread across the capital structure including senior debt, subordinated debt, preferred stock and common equity.

The GSO business is organized into three overarching strategies: performing credit, distressed and long only. Our performing credit strategies include mezzanine lending funds, business development companies that we sub-advise (“BDCs”) and other performing credit strategy funds. Our distressed strategies include event-driven credit strategies, stressed/distressed funds and distressed energy strategies. GSO’s long only strategies consist of CLOs, closed-end funds, commingled funds and separately managed accounts.

We generate revenue from fees earned pursuant to contractual arrangements with funds, fund investors and fund portfolio companies (including management, transaction and monitoring fees), and from capital markets services. We invest in the funds we manage and, in most cases, receive a preferred allocation of income (i.e., a carried interest) or an incentive fee from an investment fund in the event that specified cumulative investment returns are achieved (generally collectively referred to as “Performance Fees”). The composition of our revenues will vary based on market conditions and the cyclicality of the different businesses in which we operate. Net investment gains and investment income generated by the Blackstone Funds, principally private equity and real estate funds, are driven by value created by our operating and strategic initiatives as well as overall market conditions. Fair values are affected by changes in the fundamentals of the portfolio company, the portfolio company’s industry, the overall economy and other market conditions.

Business Environment

Blackstone’s businesses are materially affected by conditions in the financial markets and economic conditions in the U.S., Europe, Asia and, to a lesser extent, elsewhere in the world.

The third quarter of 2017 marked another period of continued global economic expansion and positive equity market performance. Nearly all major global indices increased for the quarter, with the S&P 500 up 4% to new

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record levels, the MSCI World index up 4% and the MSCI Europe and Asia indices up 6% and 5%, respectively. Emerging market equities continued to outperform developed markets, supported by a healthy rebound in global trade and a weaker U.S. dollar, with the MSCI Emerging Markets Index up 7% for the quarter. Stock market volatility remains subdued, with the CBOE Volatility Index continuing to trade at its lowest level in over 20 years, ending the third quarter down another 15%.

Though equities outperformed most asset classes, fixed income posted modest gains driven by strong investor demand and low volatility, with the Bloomberg Barclays U.S. Aggregate index up 0.8%, U.S. investment grade corporates up 1.3% and high yield corporates up 2% for the third quarter of 2017. The U.S. Federal Reserve held rates steady in September, keeping the targeted range for its benchmark interest rate at 1.0-1.25%, and also announced the beginning of a plan to shrink the central bank’s $4.5 trillion balance sheet, leading to rising treasury yields across the curve. High yield spreads tightened 26 basis points and while issuance volume declined 2% from the second quarter, year to date issuance volume was still up 13% year over year. Global equity capital markets activity for both initial public offerings and follow-on offerings hit a two year high, with year to date activity up 20% year over year, driven by continued strong market conditions and investor optimism.

Energy markets also rebounded significantly during the third quarter, with West Texas Intermediate Crude up 12% to $52 per barrel, driven by unexpectedly strong demand and signs of slowing U.S. production. The S&P 500 Energy Index was up 6% for the quarter while other commodities saw more subdued performance, with the Bloomberg Commodity Index up 2% and the Henry Hub Natural Gas spot price ended the third quarter of 2017 slightly down by 1%. Despite overall positive momentum in the third quarter of 2017, however, oil and gas prices remain at relatively low levels.

While the overall economic backdrop is positive, the U.S. dollar continued to weaken, with the U.S. dollar index down 3% during the quarter. The euro was up 4% versus the U.S. dollar, while the pound rose 3% and the Japanese yen was flat.

Political uncertainty, notably in the U.S. and Europe, also weighed on worldwide merger and acquisition (“M&A”) activity, particularly for larger transactions, with announced volume declining 5% year over year to the lowest third-quarter level since 2013. However, global private equity-backed M&A volume increased 25% year over year, reaching $212 billion, the highest level since 2007.

Although geopolitical risks continue to influence outlook, the general view for continued global economic expansion is positive, bolstered by historically low volatility and inflation and strong corporate earnings. Near-term risk of a recession is generally viewed as low, although less accommodative monetary policy may constrain growth potential. Although there continues to be uncertainty regarding regulatory and tax policy reform in the U.S., such reform could be a potential driver of growth in the medium-term.

Significant Transactions

On September 25, 2017, Blackstone commenced a cash tender offer for any and all of its 6.625% senior notes maturing on August 15, 2019 (the “2019 Notes”). On September 29, 2017, the cash tender offer expired and $259.7 million aggregate principal amount of the 2019 Notes were validly tendered. Payment for the tendered notes was made on October 4, 2017. On November 1, 2017, in accordance with the make-whole provision under the indenture governing the 2019 Notes, Blackstone redeemed the remainder of the 2019 Notes that were not tendered.

On October 2, 2017, Blackstone issued $300 million in aggregate principal amount of 3.150% senior notes maturing on October 2, 2027 and $300 million in aggregate principal amount of 4.000% senior notes maturing on October 2, 2047. Blackstone intends to use the proceeds from these notes, together with cash on hand or available liquidity, to repurchase all of its 2019 Notes.

On October 16, 2017, Blackstone closed on its previously announced acquisition of Harvest Fund Advisors LLC (“Harvest”). Harvest primarily invests capital raised from institutional investors in separately managed accounts and pooled vehicles, investing in public master limited partnerships holding U.S. midstream energy assets.

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Organizational Structure

The simplified diagram below depicts our current organizational structure. The diagram does not depict all of our subsidiaries, including intermediate holding companies through which certain of the subsidiaries depicted are held.

Key Financial Measures and Indicators

We manage our business using traditional financial measures and key operating metrics since we believe these metrics measure the productivity of our investment activities. Our key financial measures and indicators are discussed below.

Revenues

Revenues primarily consist of management and advisory fees, performance fees, investment income, interest and dividend revenue and other. Please refer to “Part I. Item 1. Business — Incentive Arrangements / Fee Structure” in our Annual Report on Form 10-K for the year ended December 31, 2016 and “Critical Accounting Policies — Revenue Recognition” for additional information regarding the manner in which Base Management Fees and Performance Fees are generated.

Management and Advisory Fees, Net — Management and Advisory Fees, Net are comprised of management fees, including base management fees, transaction and other fees and advisory fees net of management fee reductions and offsets.

The Partnership earns base management fees from limited partners of funds in each of its managed funds, at a fixed percentage of assets under management, net asset value, total assets, committed capital or invested capital, or in some cases, a fixed fee. Base management fees are recognized based on contractual terms specified in the underlying investment advisory agreements.

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Transaction and other fees (including monitoring fees) are fees charged directly to managed funds and portfolio companies. The investment advisory agreements generally require that the investment adviser reduce the amount of management fees payable by the limited partners to the Partnership (“management fee reductions”) by an amount equal to a portion of the transaction and other fees directly paid to the Partnership by the portfolio companies. The amount of the reduction varies by fund, the type of fee paid by the portfolio company and the previously incurred expenses of the fund.

Management fee offsets are reductions to management fees payable by the limited partners of the Blackstone Funds, which are granted based on the amount such limited partners reimburse the Blackstone Funds for placement fees.

Advisory fees consist of transaction-based fee arrangements. Transaction-based fees are recognized when (a) there is evidence of an arrangement with a client, (b) agreed upon services have been provided, (c) fees are fixed or determinable, and (d) collection is reasonably assured.

Accrued but unpaid Management and Advisory Fees, net of management fee reductions and management fee offsets, as of the reporting date are included in Accounts Receivable or Due from Affiliates in the Condensed Consolidated Statements of Financial Condition. Management fees paid by limited partners to the Blackstone Funds and passed on to Blackstone are not considered affiliate revenues.

Performance Fees — Performance Fees earned on the performance of Blackstone’s hedge fund structures (“Incentive Fees”) are recognized based on fund performance during the period, subject to the achievement of minimum return levels, or high water marks, in accordance with the respective terms set out in each hedge fund’s governing agreements. Accrued but unpaid Incentive Fees charged directly to investors in Blackstone’s offshore hedge funds as of the reporting date are recorded within Due from Affiliates in the Condensed Consolidated Statements of Financial Condition. Accrued but unpaid Incentive Fees on onshore funds as of the reporting date are reflected in Investments in the Condensed Consolidated Statements of Financial Condition. Incentive Fees are realized at the end of a measurement period, typically annually. Once realized, such fees are not subject to clawback or reversal.

In certain fund structures, specifically in private equity, real estate and certain hedge fund solutions and credit-focused funds (“carry funds”), performance fees (“Carried Interest”) are allocated to the general partner based on cumulative fund performance to date, subject to a preferred return to limited partners. At the end of each reporting period, the Partnership calculates the Carried Interest that would be due to the Partnership for each fund, pursuant to the fund agreements, as if the fair value of the underlying investments were realized as of such date, irrespective of whether such amounts have been realized. As the fair value of underlying investments varies between reporting periods, it is necessary to make adjustments to amounts recorded as Carried Interest to reflect either (a) positive performance resulting in an increase in the Carried Interest allocated to the general partner or (b) negative performance that would cause the amount due to the Partnership to be less than the amount previously recognized as revenue, resulting in a negative adjustment to Carried Interest allocated to the general partner. In each scenario, it is necessary to calculate the Carried Interest on cumulative results compared to the Carried Interest recorded to date and make the required positive or negative adjustments. The Partnership ceases to record negative Carried Interest allocations once previously recognized Carried Interest allocations for such fund have been fully reversed. The Partnership is not obligated to pay guaranteed returns or hurdles, and therefore, cannot have negative Carried Interest over the life of a fund. Accrued but unpaid Carried Interest as of the reporting date is reflected in Investments in the Condensed Consolidated Statements of Financial Condition.

Carried Interest is realized when an underlying investment is profitably disposed of and the fund’s cumulative returns are in excess of the preferred return or, in limited instances, after certain thresholds for return of capital are met. Carried Interest is subject to clawback to the extent that the Carried Interest received to date exceeds the amount due to Blackstone based on cumulative results. As such, the accrual for potential repayment of previously received Carried Interest, which is a component of Due to Affiliates, represents all amounts previously distributed to

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Blackstone Holdings and non-controlling interest holders that would need to be repaid to the Blackstone carry funds if the Blackstone carry funds were to be liquidated based on the current fair value of the underlying funds’ investments as of the reporting date. The actual clawback liability, however, generally does not become realized until the end of a fund’s life except for certain funds, including certain Blackstone real estate funds, multi-asset class investment funds and credit-focused funds, which may have an interim clawback liability.

Investment Income (Loss) — Investment Income (Loss) represents the unrealized and realized gains and losses on the Partnership’s principal investments, including its investments in Blackstone Funds that are not consolidated, its equity method investments, and other principal investments. Investment Income (Loss) is realized when the Partnership redeems all or a portion of its investment or when the Partnership receives cash income, such as dividends or distributions. Unrealized Investment Income (Loss) results from changes in the fair value of the underlying investment as well as the reversal of unrealized gain (loss) at the time an investment is realized.

Interest and Dividend Revenue — Interest and Dividend Revenue comprises primarily interest and dividend income earned on principal investments held by Blackstone.

Other Revenue — Other Revenue consists of miscellaneous income and foreign exchange gains and losses arising on transactions denominated in currencies other than U.S. dollars.

Expenses

Compensation and Benefits — Compensation — Compensation and Benefits consists of (a) employee compensation, comprising salary and bonus, and benefits paid and payable to employees and senior managing directors and (b) equity-based compensation associated with the grants of equity-based awards to employees and senior managing directors. Compensation cost relating to the issuance of equity-based awards to senior managing directors and employees is measured at fair value at the grant date, taking into consideration expected forfeitures, and expensed over the vesting period on a straight-line basis, except in the case of (a) equity-based awards that do not require future service, which are expensed immediately and (b) certain awards to recipients that meet specified criteria making them eligible for retirement treatment (allowing such recipient to keep a percentage of those awards upon departure from Blackstone after becoming eligible for retirement), for which the expense for the portion of the award that would be retained in the event of retirement is either expensed immediately or amortized to the retirement date. Cash settled equity-based awards are classified as liabilities and are remeasured at the end of each reporting period.

Compensation and Benefits — Performance Fee — Performance Fee Compensation consists of Carried Interest (which may be distributed in cash or in-kind) and Incentive Fee allocations, and may in future periods also include allocations of investment income from Blackstone’s firm investments, to employees and senior managing directors participating in certain profit sharing initiatives. Such compensation expense is subject to both positive and negative adjustments. Unlike Carried Interest and Incentive Fees, compensation expense is based on the performance of individual investments held by a fund rather than on a fund by fund basis.

Other Operating Expenses — Other Operating Expenses represents general and administrative expenses including interest expense, occupancy and equipment expenses and other expenses, which consist principally of professional fees, public company costs, travel and related expenses, communications and information services and depreciation and amortization.

Fund Expenses — The expenses of our consolidated Blackstone Funds consist primarily of interest expense, professional fees and other third party expenses.

Non-Controlling Interests in Consolidated Entities

Non-Controlling Interests in Consolidated Entities represent the component of Partners’ Capital in consolidated Blackstone Funds held by third party investors and employees. The percentage interests held by third parties and

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employees is adjusted for general partner allocations and by subscriptions and redemptions in funds of hedge funds and certain credit-focused funds which occur during the reporting period. In addition, all non-controlling interests in consolidated Blackstone Funds are attributed a share of income (loss) arising from the respective funds and a share of other comprehensive income, if applicable. Income (Loss) is allocated to non-controlling interests in consolidated entities based on the relative ownership interests of third party investors and employees after considering any contractual arrangements that govern the allocation of income (loss) such as fees allocable to The Blackstone Group L.P.

Redeemable Non-Controlling Interests in Consolidated Entities

Non-controlling interests related to funds of hedge funds are subject to annual, semi-annual or quarterly redemption by investors in these funds following the expiration of a specified period of time, or may be withdrawn subject to a redemption fee during the period when capital may not be withdrawn. As limited partners in these types of funds have been granted redemption rights, amounts relating to third party interests in such consolidated funds are presented as Redeemable Non-Controlling Interests in Consolidated Entities within the Condensed Consolidated Statements of Financial Condition. When redeemable amounts become legally payable to investors, they are classified as a liability and included in Accounts Payable, Accrued Expenses and Other Liabilities in the Condensed Consolidated Statements of Financial Condition. For all consolidated funds in which redemption rights have not been granted, non-controlling interests are presented within Partners’ Capital in the Condensed Consolidated Statements of Financial Condition as Non-Controlling Interests in Consolidated Entities.

Non-Controlling Interests in Blackstone Holdings

Non-Controlling Interests in Blackstone Holdings represent the component of Partners’ Capital in the consolidated Blackstone Holdings Partnerships held by Blackstone personnel and others who are limited partners of the Blackstone Holdings Partnerships.

Certain costs and expenses are borne directly by the Holdings Partnerships. Income (Loss), excluding those costs directly borne by and attributable to the Holdings Partnerships, is attributable to Non-Controlling Interests in Blackstone Holdings. This residual attribution is based on the year to date average percentage of Blackstone Holdings Partnership Units held by Blackstone personnel and others who are limited partners of the Blackstone Holdings Partnerships.

Income Taxes

The Blackstone Holdings Partnerships and certain of their 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. Accordingly, these entities in some cases are subject to New York City unincorporated business taxes or non-U.S. income taxes. In addition, certain of the wholly owned subsidiaries of the Partnership and the Blackstone Holdings Partnerships will be subject to federal, state and local corporate income taxes at the entity level and the related tax provision attributable to the Partnership’s share of this income tax is reflected in the Condensed Consolidated Financial Statements.

Income taxes are accounted for using the asset and liability method of accounting. Under this method, deferred tax assets and liabilities are recognized for the expected future tax consequences of differences between the carrying amounts of assets and liabilities and their respective tax basis, using tax rates in effect for the year in which the differences are expected to reverse. The effect on deferred assets and liabilities of a change in tax rates is recognized in income in the period when the change is enacted. Deferred tax assets are reduced by a valuation allowance when it is more likely than not that some portion or all of the deferred tax assets will not be realized. Current and deferred tax liabilities are recorded within Accounts Payable, Accrued Expenses and Other Liabilities in the Condensed Consolidated Statements of Financial Condition.

Blackstone uses the flow through method to account for investment tax credits. Under this method, the investment tax credits are recognized as a reduction to income tax expense.

Blackstone analyzes its tax filing positions in all of the U.S. federal, state, local and foreign tax jurisdictions where it is required to file income tax returns, as well as for all open tax years in these jurisdictions. Blackstone

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records uncertain tax positions on the basis of a two-step process: (a) a determination is made whether it is more likely than not that the tax positions will be sustained based on the technical merits of the position and (b) those tax positions that meet the more likely than not threshold are recognized as the largest amount of tax benefit that is greater than 50 percent likely to be realized upon ultimate settlement with the related tax authority. Blackstone recognizes accrued interest and penalties related to uncertain tax positions in General, Administrative, and Other expenses within the Condensed Consolidated Statements of Operations.

There remains some uncertainty regarding Blackstone’s future taxation levels. Over the past several years, members of Congress and the administration of former President Obama have made a number of legislative proposals to change the taxation of carried interest that would have, in general, treated income and gains, including gain on sale, attributable to an investment services partnership interest, or “ISPI,” as income subject to a new blended tax rate that is higher than the capital gains rate applicable to such income under current law, except to the extent such ISPI would have been considered under the legislation to be a qualified capital interest. Our common units and the interests that we hold in entities that are entitled to receive carried interest would likely have been classified as ISPIs for purposes of this legislation. During his presidential campaign, President Trump expressed his support for legislation ending treatment of carried interest as capital gain. Whether or when the U.S. Congress will pass such legislation or what provisions will be included in any final legislation if enacted is unclear.

Some of the above legislative proposals have provided that, for taxable years beginning ten years after the date of enactment, income derived with respect to an ISPI that is not a qualified capital interest and that is subject to the foregoing rules would not meet the qualifying income requirements under the publicly traded partnership rules. Therefore, if similar legislation were to be enacted, following such ten-year period, we would be precluded from qualifying as a partnership for U.S. federal income tax purposes or be required to hold all such ISPIs through corporations.

Both President Trump and the Republican members of the U.S. House of Representatives have publicly stated that one of their top legislative priorities is significant reform of the Internal Revenue Code, including significant changes to taxation of business entities. On November 2, 2017, Republican members of the U.S. House of Representatives introduced their bill for tax reform, and on November 3, 2017, the Chairman’s mark of the bill (the “Tax Cuts and Jobs Act”) was released. Elements of the Tax Cuts and Jobs Act include, among other things: (a) a reduction in corporate tax rates to 20% and partial limitation on the deductibility of interest for certain businesses, (b) a shift to a modified “territorial” regime of corporate taxation that eliminates tax on dividends from foreign subsidiaries but imposes a one-time tax on the untaxed historical earnings and profits of foreign subsidiaries at a rate of 12% (for cash or cash equivalents) or 5% (for everything else) and also imposes a special 10% tax on high-profit foreign subsidiaries, (c) a 20% excise tax on payments by domestic corporations to certain related foreign corporations and partial limitation on interest deductions by domestic corporations that are members of an “international financial reporting group”, (d) immediate expensing of certain capital expenses for five years, (e) a 25% maximum tax rate applicable to income derived from certain businesses conducted through pass-through entities or sole proprietorships, (f) subjecting all entities exempt from tax under section 501(a) (including state and local government pension plans) to tax on unrelated business taxable income, and (g) an increase in the standard deduction and the elimination of most itemized deductions (including the deduction for state and local income taxes). Further changes to the tax reform bill are possible, and the Republican members of the U.S. Senate are expected to introduce their own tax reform bill which may differ from the Tax Cuts and Jobs Act in many respects. Both the timing and details of any tax reform remain unclear. The impact of any potential tax reform on us, our portfolio companies and our investors is uncertain and could be adverse. Prospective investors should consult their own tax advisors regarding potential changes in tax laws.

States and other jurisdictions have also considered legislation to increase taxes with respect to carried interest. For example, New York has considered legislation, which could have caused a non-resident of New York who holds our common units to be subject to New York state income tax on carried interest earned by entities in which we hold an indirect interest, thereby requiring the non-resident to file a New York state income tax return reporting such carried interest income. Whether or when similar legislation will be enacted is unclear. Finally, several state and local jurisdictions have evaluated ways to subject partnerships to entity level taxation through the imposition of state or local income, franchise or other forms of taxation or to increase the amount of such taxation.

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If we were taxed as a corporation or were forced to hold interests in entities earning income from carried interest through taxable subsidiary corporations, our effective tax rate could increase significantly. The federal statutory rate for corporations is currently 35% (although the Tax Cuts and Jobs Act, if enacted, would reduce that rate to 20%), and the state and local tax rates, net of the federal benefit, aggregate approximately 5%. If a variation of the above described legislation or any other change in the tax laws, rules, regulations or interpretations preclude us from qualifying for treatment as a partnership for U.S. federal income tax purposes under the publicly traded partnership rules or force us to hold interests in entities earning income from carried interest through taxable subsidiary corporations, this could materially increase our tax liability, and could well result in a reduction in the market price of our common units.

Meaningfully quantifying the potential impact on Blackstone of this potential future legislation or any similar legislation is not possible at this time. Multiple versions of legislation in this area have been proposed over the last few years that have included significantly different provisions regarding effective dates and the treatment of invested capital, tiered entities and cross-border operations, among other matters. Depending upon what version of the legislation, if any, were enacted, the potential impact on a public company such as Blackstone in a given year could differ significantly and could be material. In addition, even if these legislative proposals would not themselves impose a tax on a publicly traded partnership such as Blackstone, they could force Blackstone and other publicly traded partnerships to restructure their operations so as to prevent disqualifying income from reaching the publicly traded partnership in amounts that would disqualify the partnership from treatment as a partnership for U.S. federal income tax purposes. Such a restructuring could result in more income being earned in corporate subsidiaries, thereby increasing corporate income tax liability indirectly borne by the publicly traded partnership. In addition, we, and our common unitholders, could be taxed on any such restructuring. The nature of any such restructuring would depend on the precise provisions of the legislation that was ultimately enacted, as well as the particular facts and circumstances of Blackstone’s operations at the time any such legislation were to take effect, making the task of predicting the amount of additional tax highly speculative.

Congress, the Organization for Economic Co-operation and Development (“OECD”) and other government agencies in jurisdictions in which we and our affiliates invest or do business have maintained a focus on issues related to the taxation of multinational companies. The OECD, which represents a coalition of member countries, is contemplating changes to numerous long-standing tax principles through its base erosion and profit shifting project, which is focused on a number of issues, including the shifting of profits between affiliated entities in different tax jurisdictions, interest deductibility and eligibility for the benefits of double tax treaties. A number of European jurisdictions have enacted taxes on financial transactions, and the European Commission has proposed legislation to harmonize these taxes under the so-called “enhanced cooperation procedure,” which provides for adoption of EU-level legislation applicable to some but not all EU Member States. These contemplated changes, if adopted by individual countries, could increase tax uncertainty and/or costs faced by us, our portfolio companies and our investors, change our business model and cause other adverse consequences. The timing or impact of these proposals is unclear at this point. In addition, tax laws, regulations and interpretations are subject to continual changes, which could adversely affect our structures or returns to our investors. For instance, various countries have adopted or proposed tax legislation that may adversely affect portfolio companies and investment structures in countries in which our funds have invested and may limit the benefits of additional investments in those countries.

In addition, legislation enacted in 2015 significantly changed the rules for U.S. federal income tax audits of partnerships. Such audits will continue to be conducted at the partnership level, but with respect to tax returns for taxable years beginning after December 31, 2017, and unless a partnership qualifies for and affirmatively elects an alternative procedure, any adjustments to the amount of tax due (including interest and penalties) will be payable by the partnership. Under the elective alternative procedure, a partnership would issue information returns to persons who were partners in the audited year, who would then be required to take the adjustments into account in calculating their own tax liability, and the partnership would not be liable for the adjustments. If a partnership elects the alternative procedure for a given adjustment, the amount of taxes for which its partners would be liable would be increased by any applicable penalties and a special interest charge. There can be no assurance that we will be eligible to make such an election or that we will, in fact, make such an election for any given adjustment. If we do not or are not able to make such an election, then (a) our then-current common unitholders, in the aggregate, could indirectly bear income tax

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liabilities in excess of the aggregate amount of taxes that would have been due had we elected the alternative procedure, and (b) a given common unitholder may indirectly bear taxes attributable to income allocable to other common unitholders or former common unitholders, including taxes (as well as interest and penalties) with respect to periods prior to such holder’s ownership of common units. Amounts available for distribution to our common unitholders may be reduced as a result of our obligation to pay any taxes associated with an adjustment. Many issues with respect to, and the overall effect of, this legislation on us are uncertain, and common unitholders should consult their own tax advisors regarding all aspects of this legislation as it affects their particular circumstances.

Economic Income

Blackstone uses Economic Income as a key measure of value creation, a benchmark of its performance and in making resource deployment and compensation decisions across its four segments. Economic Income represents segment net income before taxes excluding transaction-related charges. Transaction-related charges arise from Blackstone’s IPO and certain long-term retention programs outside of annual deferred compensation and other corporate actions, including acquisitions. Transaction-related charges include certain equity-based compensation charges, the amortization of intangible assets and contingent consideration associated with acquisitions. Economic Income presents revenues and expenses on a basis that deconsolidates the investment funds Blackstone manages. Economic Net Income (“ENI”) represents Economic Income adjusted to include current period taxes. Taxes represent the total tax provision calculated under accounting principles generally accepted in the United States of America (“GAAP”) adjusted to include only the current tax provision (benefit) calculated on Income (Loss) Before Provision for Taxes. Economic Income, our principal segment measure, is derived from and reconciled to, but not equivalent to, its most directly comparable GAAP measure of Income (Loss) Before Provision for Taxes. (See Note 18. “Segment Reporting” in the “Notes to Condensed Consolidated Financial Statements” in Part I. Item 1. Financial Statements.)

Fee Related Earnings

Blackstone uses Fee Related Earnings, which is derived from Economic Income, as a measure to highlight earnings from operations excluding: (a) the income related to performance fees and related performance fee compensation, (b) income earned from Blackstone’s investments in the Blackstone Funds, (c) net interest income (loss), (d) equity-based compensation, and (e) Other Revenue. Management uses Fee Related Earnings as a measure to assess whether recurring revenue from our businesses is sufficient to adequately cover all of our operating expenses and generate profits. Fee Related Earnings equals contractual fee revenues, less (a) compensation expenses (which excludes amortization of equity-based awards, Carried Interest and Incentive Fee compensation), and (b) non-interest operating expenses. See “— Liquidity and Capital Resources — Sources and Uses of Liquidity” below for our discussion of Fee Related Earnings.

Distributable Earnings

Distributable Earnings, which is derived from our segment reported results, is a supplemental measure to assess performance and amounts available for distributions to Blackstone unitholders, including Blackstone personnel and others who are limited partners of the Blackstone Holdings partnerships. Distributable Earnings, which is a measure not prepared under GAAP (a “non-GAAP” measure), is intended to show the amount of net realized earnings without the effects of the consolidation of the Blackstone Funds. Distributable Earnings is derived from and reconciled to, but not equivalent to, its most directly comparable GAAP measure of Income (Loss) Before Provision for Taxes. See “— Liquidity and Capital Resources — Sources and Uses of Liquidity” below for our discussion of Distributable Earnings.

Distributable Earnings, which is a component of Economic Net Income, is the sum across all segments of: (a) Total Management, Advisory and Other Fees, Net, (b) Interest and Dividend Revenue, (c) Realized Performance Fees, and (d) Realized Investment Income (Loss); less (a) Compensation, excluding the expense of equity-based awards, (b) Realized Performance Fee Compensation, (c) Other Operating Expenses, and (d) Taxes and Related Payables Under the Tax Receivable Agreement.

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Adjusted Earnings Before Interest, Taxes and Depreciation and Amortization

Adjusted Earnings Before Interest, Taxes and Depreciation and Amortization (“Adjusted EBITDA”), is a supplemental non-GAAP measure derived from our segment reported results and may be used to assess our ability to service our borrowings. Adjusted EBITDA represents Distributable Earnings plus the addition of (a) Interest Expense (including inter-segment interest related expenses), (b) Taxes and Related Payables Including Payable Under Tax Receivable Agreement, and (c) Depreciation and Amortization. See “— Liquidity and Capital Resources — Sources and Uses of Liquidity” below for our calculation of Adjusted EBITDA.

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Summary Walkdown of GAAP to Non-GAAP Financial Metrics

The relationship of our GAAP to non-GAAP financial measures is presented in the summary walkdown below. The summary walkdown shows how each non-GAAP financial measure is related to the other non-GAAP financial measures. This presentation is not meant to be a detailed calculation of each measure, but to show the relationship between the measures. For the calculation of each of these non-GAAP financial measures and a full reconciliation of Income Before Provision for Taxes to Distributable Earnings, please see “— Liquidity and Capital Resources — Sources and Uses of Liquidity.”

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Operating Metrics

The alternative asset management business is a complex business that is primarily based on managing third party capital and does not require substantial capital investment to support rapid growth. However, there also can be volatility associated with its earnings and cash flows. Since our inception, we have developed and used various key operating metrics to assess and monitor the operating performance of our various alternative asset management businesses in order to monitor the effectiveness of our value creating strategies.

Assets Under Management. 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, plus for certain credit-oriented funds the amounts available to be borrowed under asset based credit facilities,

(b) the net asset value of (1) our hedge funds, real estate debt carry funds, open ended core+ real estate fund, certain co-investments managed by us, and our Hedge Fund Solutions carry and drawdown funds (plus, in each case, the capital that we are entitled to call from investors in those funds, including commitments yet to commence their investment periods), and (2) our funds of hedge funds, our Hedge Fund Solutions registered investment companies, and our non-exchange traded REIT,

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

(d) the amount of debt and equity outstanding for our CLOs during the reinvestment period,

(e) the aggregate par amount of collateral assets, including principal cash, for our CLOs after the reinvestment period,

(f) the gross or net amount of assets (including leverage where applicable) for our credit-focused registered investment companies, and

(g) the fair value of common stock, preferred stock, convertible debt, or similar instruments issued by BXMT.

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, hedge funds, funds structured like hedge funds and other open ended funds in our Hedge Fund Solutions, Credit and Real Estate segments generally have structures that afford an investor the right to withdraw or redeem their interests on a periodic basis (for example, annually or quarterly), typically with 30 to 95 days’ notice, depending on the fund and the liquidity profile of the underlying assets. Investment advisory agreements related to certain separately managed accounts in our Hedge Fund Solutions and Credit segments may generally be terminated by an investor on 30 to 90 days’ notice.

Fee-Earning Assets Under Management. 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, net asset 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 or fair value of assets held in co-investment vehicles managed by us on which we receive fees,

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(d) the net asset value of our funds of hedge funds, hedge funds, open ended core+ real estate fund, certain co-investments managed by us, certain registered investment companies, our non-exchange traded REIT, and certain of our Hedge Fund Solutions drawdown funds,

(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 BXMT, subject to certain adjustments,

(g) the aggregate par amount of collateral assets, including principal cash, of our CLOs, 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.

Each of our segments may include certain Fee-Earning Assets Under Management on which we earn performance fees but not management fees.

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 and fee-earning assets under management are not based on any definition of assets under management and 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.

Limited Partner Capital Invested. Limited Partner Capital Invested represents the amount of Limited Partner capital commitments which were invested by our carry and drawdown funds during each period presented, plus the capital invested through co-investments arranged by us that were made by limited partners in investments of our carry funds on which we receive fees or a Carried Interest allocation or Incentive Fee.

The amount of committed undrawn capital available for investment, including general partner and employee commitments, is known as dry powder and is an indicator of the capital we have available for future investments.

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Consolidated Results of Operations

Following is a discussion of our consolidated results of operations for the three and nine months ended September 30, 2017 and 2016. For a more detailed discussion of the factors that affected the results of our four business segments (which are presented on a basis that deconsolidates the investment funds we manage) in these periods, see “— Segment Analysis” below.

The following table sets forth information regarding our consolidated results of operations and certain key operating metrics for the three and nine months ended September 30, 2017 and 2016:

	Three Months Ended September 30,						2017 vs. 2016						Nine Months Ended September 30,					2017 vs. 2016
	2017			2016			$			%			2017			2016		$			%
	(Dollars in Thousands)
Revenues
Management and Advisory Fees, Net	$	680,641		$	596,154		$	84,487			14	%	$	2,009,369		$	1,812,883	$	196,486			11	%
Performance Fees
Realized
Carried Interest		369,309			503,990			(134,681	)		-27	%		2,082,725			1,058,633		1,024,092			97	%
Incentive Fees		101,186			30,295			70,891			234	%		189,151			88,155		100,996			115	%
Unrealized
Carried Interest		432,590			106,202			326,388			307	%		343,104			242,080		101,024			42	%
Incentive Fees		(9,241	)		30,545			(39,786	)		N/M			98,403			45,900		52,503			114	%
Total Performance Fees		893,844			671,032			222,812			33	%		2,713,383			1,434,768		1,278,615			89	%
Investment Income
Realized		74,805			119,351			(44,546	)		-37	%		451,207			172,387		278,820			162	%
Unrealized		96,085			23,752			72,333			305	%		63,172			67,347		(4,175	)		-6	%
Total Investment Income		170,890			143,103			27,787			19	%		514,379			239,734		274,645			115	%
Interest and Dividend Revenue		36,974			21,819			15,155			69	%		99,172			67,180		31,992			48	%
Other		(35,572	)		(423	)		(35,149	)		N/M			(99,448	)		1,900		(101,348	)		N/M
Total Revenues		1,746,777			1,431,685			315,092			22	%		5,236,855			3,556,465		1,680,390			47	%
Expenses
Compensation and Benefits
Compensation		359,209			329,634			29,575			9	%		1,078,001			1,031,061		46,940			5	%
Performance Fee Compensation
Realized
Carried Interest		134,014			168,427			(34,413	)		-20	%		695,494			314,511		380,983			121	%
Incentive Fees		46,823			15,436			31,387			203	%		91,056			44,810		46,246			103	%
Unrealized
Carried Interest		187,158			70,044			117,114			167	%		257,271			175,247		82,024			47	%
Incentive Fees		(7,094	)		13,508			(20,602	)		N/M			36,645			19,645		17,000			87	%
Total Compensation and Benefits		720,110			597,049			123,061			21	%		2,158,467			1,585,274		573,193			36	%
General, Administrative and Other		115,755			124,322			(8,567	)		-7	%		337,080			378,355		(41,275	)		-11	%
Interest Expense		41,545			37,278			4,267			11	%		122,880			111,512		11,368			10	%
Fund Expenses		26,350			15,128			11,222			74	%		100,095			28,949		71,146			246	%
Total Expenses		903,760			773,777			129,983			17	%		2,718,522			2,104,090		614,432			29	%
Other Income
Net Gains from Fund Investment Activities		63,448			61,395			2,053			3	%		239,634			111,240		128,394			115	%
Income Before Provision for Taxes		906,465			719,303			187,162			26	%		2,757,967			1,563,615		1,194,352			76	%
Provision for Taxes		59,512			27,714			31,798			115	%		146,557			84,275		62,282			74	%
Net Income		846,953			691,589			155,364			22	%		2,611,410			1,479,340		1,132,070			77	%
Net Income Attributable to Redeemable Non-Controlling Interests in Consolidated Entities		3,215			10,764			(7,549	)		-70	%		6,206			2,314		3,892			168	%
Net Income Attributable to Non-Controlling Interests in Consolidated Entities		113,446			82,653			30,793			37	%		365,075			187,468		177,607			95	%
Net Income Attributable to Non-Controlling Interests in Blackstone Holdings		345,650			285,267			60,383			21	%		1,050,887			618,274		432,613			70	%
Net Income Attributable to The Blackstone Group L.P.	$	384,642		$	312,905		$	71,737			23	%	$	1,189,242		$	671,284	$	517,958			77	%

N/M    Not meaningful.

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Three Months Ended September 30, 2017 Compared to Three Months Ended September 30, 2016

Revenues

Total Revenues were $1.7 billion for the three months ended September 30, 2017, an increase of $315.1 million compared to $1.4 billion for the three months ended September 30, 2016. The increase in revenues was primarily attributable to increases of $222.8 million in Performance Fees and $84.5 million in Management and Advisory Fees, Net, partially offset by a decrease of $35.1 million in Other Revenue.

The increase in Performance Fees was primarily attributable to increases in our Real Estate and Hedge Fund Solutions segments of $215.4 million and $27.7 million, respectively, partially offset by a decrease in our Credit segment of $32.1 million. The increase in Performance Fees in our Real Estate segment was primarily due to an increase in the net appreciation of investment holdings within our opportunistic funds, which appreciated 5.5% versus 3.7% in the comparable 2016 quarter. Our core+ real estate funds, real estate debt drawdown and hedge funds appreciated 3.2%, 3.7% and 2.1%, respectively. The increase in Performance Fees in our Hedge Fund Solutions segment was primarily driven by a greater percentage of our Fee-Earning Assets Under Management earning Performance Fees, on comparable returns, for the three months ended September 30, 2017 compared to the three months ended September 30, 2016. The decrease in Performance Fees in our Credit segment was primarily due to greater appreciation in the third quarter of 2016 as a result of the recovery from market dislocation that was experienced at the end of 2015 and early 2016.

The increase in Management and Advisory Fees, Net was primarily due to increases in our Private Equity and Real Estate segments. The increase in our Private Equity segment of $59.6 million was primarily due to assets earning higher base management fees, principally due to the conclusion of a six month fee holiday for BCP VII in the fourth quarter of 2016. The increase of $29.5 million in our Real Estate segment was primarily due to the launch of BREP Europe V in the fourth quarter of 2016 and the corresponding expiration of its fee holiday in the second quarter of 2017.

The decrease in Other Revenue was primarily the result of a foreign exchange loss on our euro denominated bond.

Expenses

Expenses were $903.8 million for the three months ended September 30, 2017, an increase of $130.0 million compared to $773.8 million for the three months ended September 30, 2016. The increase was primarily attributable to increases in Performance Fee Compensation and Compensation of $93.5 million and $29.6 million, respectively. The increases in Performance Fee Compensation in our Real Estate, Private Equity and Hedge Fund Solutions segments of $93.4 million, $10.5 million and $10.0 million, respectively, were due to related increases in Performance Fees Revenue in each of the segments. The increase of $29.6 million in Compensation was primarily due to increases in Management and Advisory Fees, Net in our Private Equity and Real Estate segments, on which a portion of compensation is based.

Nine Months Ended September 30, 2017 Compared to Nine Months Ended September 30, 2016

Revenues

Total Revenues were $5.2 billion for the nine months ended September 30, 2017, an increase of $1.7 billion compared to Total Revenues for the nine months ended September 30, 2016 of $3.6 billion. The increase in Total Revenues was attributable to increases of $1.3 billion in Performance Fees, $274.6 million in Investment Income, and $196.5 million in Management and Advisory Fees, Net, partially offset by a decrease in Other Revenue of $101.3 million.

The increase in Performance Fees was principally due to increases in our Real Estate, Private Equity and Hedge Fund Solutions segments of $832.3 million, $360.4 million and $114.7 million, respectively. The increase in our Real Estate segment was primarily attributable to a net increase in the appreciation of investment holdings in

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our opportunistic funds. For the nine months ended September 30, 2017, the carrying value of investments for our opportunistic funds increased 15.0% versus 7.3% for the comparable 2016 period. Our core+ real estate funds, real estate debt drawdown funds and real estate hedge funds appreciated 9.1%, 11.5% and 7.8%, respectively for the nine months ended September 30, 2017. The increase in our Private Equity segment was driven by corporate private equity and Tactical Opportunities. The increase in Performance Fees in our Hedge Fund Solutions segment was primarily driven by higher returns in our BPS Composite, 6.6% gross (5.8% net) for the nine months ended September 30, 2017 compared to 1.2% gross (0.6% net) in the comparable 2016 year to date period.

The increase in Investment Income was primarily attributable to increases in our Real Estate, Hedge Fund Solutions and Private Equity segments of $47.1 million, $40.7 million and $36.1 million, respectively. The increase in our Real Estate segment was primarily due to the net increase in appreciation of Blackstone’s investments across the various real estate funds. The increase in our Hedge Fund Solutions segment was primarily attributable to the year over year net appreciation of investments of which Blackstone owns a share. The increase in our Private Equity segment was due to higher returns compared to the third quarter of 2016.

The increase in Management and Advisory Fees, Net was primarily due to increases in our Private Equity and Real Estate segments of $162.7 million and $31.0 million, respectively. The increase in our Private Equity segment was primarily due to assets earning higher base management fees, principally due to the conclusion of a six month fee holiday for BCP VII in the fourth quarter of 2016. The increase in our Real Estate segment was primarily due to the launch of BREP Europe V in the fourth quarter of 2016 and the corresponding expiration of its fee holiday in the second quarter of 2017.

The decrease in Other Revenue was primarily the result of a foreign exchange loss on our euro denominated bond.

Expenses

Expenses were $2.7 billion for the nine months ended September 30, 2017, an increase of $614.4 million compared to $2.1 billion for the nine months ended September 30, 2016. The increase was primarily attributable to increases in Performance Fee Compensation, Fund Expenses and Compensation. The increase of $526.3 million in Performance Fee Compensation was due to related increases in Performance Fees Revenue in our Real Estate, Private Equity and Hedge Fund Solutions segments. The increase of $71.1 million in Fund Expenses was due to an increase of $64.0 million in our Credit segment. The increase in our Credit segment was primarily the result of newly launched CLOs. The increase of $46.9 million in Compensation was primarily due to the increase in Management and Advisory Fees, Net in our Private Equity, Real Estate and Credit segments, on which a portion of compensation is based.

Other Income

Other Income — Net Gains from Fund Investment Activities is attributable to the consolidated Blackstone Funds which are largely held by third party investors. As such, most of this Other Income is eliminated from the results attributable to The Blackstone Group L.P. through the redeemable non-controlling interests and non-controlling interests items in the Condensed Consolidated Statements of Operations.

Three Months Ended September 30, 2017 Compared to Three Months Ended September 30, 2016

Other Income — Net Gains from Fund Investment Activities was $63.4 million for the three months ended September 30, 2017, an increase of $2.1 million compared to $61.4 million for the three months ended September 30, 2016. The increase was due to increases in our Real Estate and Private Equity segments of $8.4 million and $2.8 million, respectively, partially offset by a decrease in our Hedge Fund Solutions segment of $9.3 million. The increase in our Real Estate segment was primarily due to a quarter over quarter net increase in the appreciation of investments across the Real Estate funds. The increase in our Private Equity segment was primarily

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the result of a quarter over quarter net increase in the appreciation of investments. The decrease in our Hedge Fund Solutions segment was primarily the result of lower appreciation for the three months ended September 30, 2017 compared to the three months ended September 30, 2016.

Nine Months Ended September 30, 2017 Compared to Nine Months Ended September 30, 2016

Other Income — Net Gains from Fund Investment Activities was $239.6 million for the nine months ended September 30, 2017, an increase of $128.4 million compared to $111.2 million for the nine months ended September 30, 2016. The increase was principally driven by increases in our Credit, Real Estate and Private Equity segments of $61.4 million, $56.4 million and $11.6 million, respectively. The increase in our Credit segment was primarily due to newly launched CLOs. The increase in our Real Estate segment was primarily the result of a year over year net increase in the appreciation of investments across the Real Estate funds. The increase in Private Equity was the result of a year over year net increase in the appreciation of investments.

Provision for Taxes

The following table summarizes Blackstone’s tax position:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
Income Before Provision for Taxes	$	906,465		$	719,303		$	2,757,967		$	1,563,615
Provision for Taxes	$	59,512		$	27,714		$	146,557		$	84,275
Effective Income Tax Rate		6.6	%		3.9	%		5.3	%		5.4	%

The following table reconciles the effective income tax rate to the U.S. federal statutory tax rate:

	Three Months Ended September 30,						2017 vs. 2016			Nine Months Ended September 30,						2017 vs. 2016
	2017			2016						2017			2016
Statutory U.S. Federal Income Tax Rate		35.0	%		35.0	%		—			35.0	%		35.0	%		—
Income Passed Through to Common Unitholders and Non-Controlling Interest Holders (a)		-27.9	%		-28.2	%		0.3	%		-29.2	%		-29.0	%		-0.2	%
Foreign Income Taxes		-0.6	%		-1.9	%		1.3	%		-1.0	%		-1.1	%		0.1	%
Other		0.1	%		-1.0	%		1.1	%		0.5	%		0.5	%		0.0	%
Effective Income Tax Rate		6.6	%		3.9	%		2.7	%		5.3	%		5.4	%		-0.1	%

(a) Includes income that is not taxable to the Partnership and its subsidiaries. Such income is directly taxable to the Partnership’s unitholders and the non-controlling interest holders.

Three Months Ended September 30, 2017 Compared to Three Months Ended September 30, 2016

Blackstone’s Provision for Taxes for the three months ended September 30, 2017 and 2016 was $59.5 million and $27.7 million, respectively, resulting in effective tax rates of 6.6% and 3.9%, respectively.

The increase in Blackstone’s effective tax rate for the three months ended September 30, 2017 compared to the three months ended September 30, 2016 resulted primarily from the decrease in the favorable rate differential in foreign income taxes, which were $(5.0) million on pre-tax book income of $906.5 million for the three months ended September 30, 2017, compared to $(13.8) million on pre-tax book income of $719.3 million for the three months ended September 30, 2016.

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Nine Months Ended September 30, 2017 Compared to Nine Months Ended September 30, 2016    

Blackstone’s Provision for Taxes for the nine months ended September 30, 2017 and 2016 was $146.6 million and $84.3 million, respectively, resulting in effective tax rates of 5.3% and 5.4%, respectively.

The decrease in Blackstone’s effective tax rate for the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016 resulted primarily from a relative increase in the amount of income not taxable to the Partnership and its subsidiaries, which was therefore passed through to common unitholders and non-controlling interest holders. For the nine months ended September 30, 2017, $2.3 billion of Blackstone’s Income Before Provision for Taxes of $2.8 billion was not taxable to the Partnership, compared to $1.3 billion of Blackstone’s Income Before Provision for Taxes of $1.6 billion for the prior year period.

Non-Controlling Interests in Consolidated Entities

The Net Income Attributable to Redeemable Non-Controlling Interests in Consolidated Entities and Net Income Attributable to Non-Controlling Interests in Consolidated Entities is attributable to the consolidated Blackstone Funds. The amounts of these items vary directly with the performance of the consolidated Blackstone Funds and largely eliminate the amount of Other Income – Net Gains from Fund Investment Activities from the Net Income (Loss) Attributable to The Blackstone Group L.P.

Net Income Attributable to Non-Controlling Interests in Blackstone Holdings is derived from the Income Before Provision for Taxes, excluding the Net Gains from Fund Investment Activities and the percentage allocation of the income between Blackstone Holdings and The Blackstone Group L.P. after considering any contractual arrangements that govern the allocation of income (loss) such as fees allocable to The Blackstone Group L.P.

For the three months ended September 30, 2017 and 2016, the Net Income Before Taxes allocated to Blackstone Holdings was 44.8% and 46.0%, respectively. For the nine months ended September 30, 2017 and 2016, the net income before taxes allocated to Blackstone Holdings was 45.0% and 46.2%, respectively. The decreases of 1.2% in the three month period and 1.2% in the nine month period were primarily due to conversions of Blackstone Holdings Partnership Units to Blackstone common units and the vesting of common units.

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Operating Metrics

The following graphs and tables summarize the Fee-Earning Assets Under Management by Segment and Total Assets Under Management by Segment, followed by a rollforward of activity for the three and nine months ended September 30, 2017 and 2016. For a description of how Assets Under Management and Fee-Earning Assets Under Management are determined, please see “— Key Financial Measures and Indicators — Operating Metrics — Assets Under Management and Fee-Earning Assets Under Management”:

Note:    Totals may not add due to rounding.

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	Three Months Ended
	September 30, 2017															September 30, 2016
	Private Equity			Real Estate			Hedge Fund Solutions			Credit			Total			Private Equity			Real Estate			Hedge Fund Solutions			Credit			Total
	(Dollars in Thousands)
Fee-Earning Assets Under Management
Balance, Beginning of Period	$	68,030,331		$	73,710,243		$	67,824,464		$	72,369,473		$	281,934,511		$	69,467,174		$	66,744,550		$	64,973,999		$	64,820,990		$	266,006,713
Inflows, including Commitments (a)		611,338			2,039,360			1,563,231			4,278,639			8,492,568			2,535,887			1,035,730			2,453,519			2,869,704			8,894,840
Outflows, including Distributions (b)		(108,254	)		(310,235	)		(1,329,425	)		(773,842	)		(2,521,756	)		(208,579	)		(7,769	)		(2,058,447	)		(1,038,592	)		(3,313,387	)
Realizations (c)		(1,110,822	)		(1,257,364	)		(79,094	)		(2,711,900	)		(5,159,180	)		(2,620,097	)		(2,385,487	)		(16,792	)		(1,613,894	)		(6,636,270	)
Net Inflows (Outflows)		(607,738	)		471,761			154,712			792,897			811,632			(292,789	)		(1,357,526	)		378,280			217,218			(1,054,817	)
Market Appreciation (d)(f)		117,806			899,517			1,058,785			876,174			2,952,282			173,525			398,059			1,082,692			1,151,555			2,805,831
Balance, End of Period	$	67,540,399		$	75,081,521		$	69,037,961		$	74,038,544		$	285,698,425		$	69,347,910		$	65,785,083		$	66,434,971		$	66,189,763		$	267,757,727
Increase (Decrease)	$	(489,932	)	$	1,371,278		$	1,213,497		$	1,669,071		$	3,763,914		$	(119,264	)	$	(959,467	)	$	1,460,972		$	1,368,773		$	1,751,014
Increase (Decrease)		-1	%		2	%		2	%		2	%		1	%		-0	%		-1	%		2	%		2	%		1	%
	Nine Months Ended
	September 30, 2017															September 30, 2016
	Private Equity			Real Estate			Hedge Fund Solutions			Credit			Total			Private Equity			Real Estate			Hedge Fund Solutions			Credit			Total
	(Dollars in Thousands)
Fee-Earning Assets Under Management
Balance, Beginning of Period	$	69,113,409		$	72,030,054		$	66,987,553		$	68,961,656		$	277,092,672		$	51,451,196		$	67,345,357		$	65,665,439		$	61,684,380		$	246,146,372
Inflows, including Commitments (a)		3,988,647			7,540,881			6,551,829			14,623,448			32,704,805			26,781,314			3,512,067			7,335,367			9,193,534			46,822,282
Outflows, including Distributions (b)		(1,277,782	)		(505,558	)		(6,928,753	)		(2,464,609	)		(11,176,702	)		(2,876,562	)		(151,284	)		(6,633,452	)		(3,201,410	)		(12,862,708	)
Realizations (c)		(4,674,190	)		(6,408,375	)		(702,786	)		(8,785,664	)		(20,571,015	)		(6,027,971	)		(5,891,068	)		(193,746	)		(3,919,818	)		(16,032,603	)
Net Inflows (Outflows)		(1,963,325	)		626,948			(1,079,710	)		3,373,175			957,088			17,876,781			(2,530,285	)		508,169			2,072,306			17,926,971
Market Appreciation (d)(g)		390,315			2,424,519			3,130,118			1,703,713			7,648,665			19,933			970,011			261,363			2,433,077			3,684,384
Balance, End of Period	$	67,540,399		$	75,081,521		$	69,037,961		$	74,038,544		$	285,698,425		$	69,347,910		$	65,785,083		$	66,434,971		$	66,189,763		$	267,757,727
Increase (Decrease)	$	(1,573,010	)	$	3,051,467		$	2,050,408		$	5,076,888		$	8,605,753		$	17,896,714		$	(1,560,274	)	$	769,532		$	4,505,383		$	21,611,355
Increase (Decrease)		-2	%		4	%		3	%		7	%		3	%		35	%		-2	%		1	%		7	%		9	%
Annualized Base Management Fee Rate (e)		1.08	%		1.19	%		0.75	%		0.73	%		0.94	%		0.76	%		1.20	%		0.78	%		0.81	%		0.89	%

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	Three Months Ended
	September 30, 2017															September 30, 2016
	Private Equity			Real Estate			Hedge Fund Solutions			Credit			Total			Private Equity			Real Estate			Hedge Fund Solutions			Credit			Total
	(Dollars in Thousands)
Total Assets Under Management
Balance, Beginning of Period	$	100,020,379		$	104,034,287		$	72,476,444		$	94,525,171		$	371,056,281		$	99,685,655		$	103,197,060		$	68,649,878		$	84,749,076		$	356,281,669
Inflows, including Commitments (a)		3,281,100			6,435,310			2,412,443			7,570,037			19,698,890			3,360,901			3,232,770			2,425,207			5,713,711			14,732,589
Outflows, including Distributions (b)		(186,692	)		(202,085	)		(1,683,872	)		(852,142	)		(2,924,791	)		(270,260	)		(22,466	)		(2,057,563	)		(1,050,396	)		(3,400,685	)
Realizations (c)		(2,392,756	)		(3,084,117	)		(101,503	)		(3,243,203	)		(8,821,579	)		(4,468,641	)		(7,345,682	)		(19,885	)		(1,794,410	)		(13,628,618	)
Net Inflows (Outflows)		701,652			3,149,108			627,068			3,474,692			7,952,520			(1,378,000	)		(4,135,378	)		347,759			2,868,905			(2,296,714	)
Market Appreciation (d)(h)		1,734,291			4,115,449			1,116,051			1,475,154			8,440,945			1,414,667			2,814,880			1,115,871			1,709,800			7,055,218
Balance, End of Period	$	102,456,322		$	111,298,844		$	74,219,563		$	99,475,017		$	387,449,746		$	99,722,322		$	101,876,562		$	70,113,508		$	89,327,781		$	361,040,173
Increase (Decrease)	$	2,435,943		$	7,264,557		$	1,743,119		$	4,949,846		$	16,393,465		$	36,667		$	(1,320,498	)	$	1,463,630		$	4,578,705		$	4,758,504
Increase (Decrease)		2	%		7	%		2	%		5	%		4	%		0	%		-1	%		2	%		5	%		1	%
	Nine Months Ended
	September 30, 2017															September 30, 2016
	Private Equity			Real Estate			Hedge Fund Solutions			Credit			Total			Private Equity			Real Estate			Hedge Fund Solutions			Credit			Total
	(Dollars in Thousands)
Total Assets Under Management
Balance, Beginning of Period	$	100,192,950		$	101,963,652		$	71,119,718		$	93,277,145		$	366,553,465		$	94,280,074		$	93,917,824		$	69,105,425		$	79,081,252		$	336,384,575
Inflows, including Commitments (a)		7,684,272			12,964,567			8,022,108			17,056,477			45,727,424			13,707,852			16,732,593			7,631,278			14,911,678			52,983,401
Outflows, including Distributions (b)		(746,931	)		(1,279,329	)		(7,546,464	)		(4,024,871	)		(13,597,595	)		(1,118,263	)		(436,663	)		(6,685,818	)		(3,938,193	)		(12,178,937	)
Realizations (c)		(11,355,668	)		(14,333,301	)		(790,623	)		(10,056,112	)		(36,535,704	)		(10,401,999	)		(14,281,911	)		(202,983	)		(4,444,865	)		(29,331,758	)
Net Inflows (Outflows)		(4,418,327	)		(2,648,063	)		(314,979	)		2,975,494			(4,405,875	)		2,187,590			2,014,019			742,477			6,528,620			11,472,706
Market Appreciation (d)(i)		6,681,699			11,983,255			3,414,824			3,222,378			25,302,156			3,254,658			5,944,719			265,606			3,717,909			13,182,892
Balance, End of Period	$	102,456,322		$	111,298,844		$	74,219,563		$	99,475,017		$	387,449,746		$	99,722,322		$	101,876,562		$	70,113,508		$	89,327,781		$	361,040,173
Increase	$	2,263,372		$	9,335,192		$	3,099,845		$	6,197,872		$	20,896,281		$	5,442,248		$	7,958,738		$	1,008,083		$	10,246,529		$	24,655,598
Increase		2	%		9	%		4	%		7	%		6	%		6	%		8	%		1	%		13	%		7	%

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(a) Inflows represent contributions in our hedge funds and closed-end mutual funds, increases in available capital for our carry funds (capital raises, recallable capital and increased side-by-side commitments) and CLOs, increases in the capital we manage pursuant to separately managed account programs, allocations from multi-asset products to other strategies and acquisitions.

(b) Outflows represent redemptions in our hedge funds and closed-end mutual funds, client withdrawals from our separately managed account programs and decreases in available capital for our carry funds (expired capital, expense drawdowns and decreased side-by-side commitments).

(c) Realizations represent realizations from the disposition of assets or capital returned to investors from CLOs.

(d) Market appreciation (depreciation) includes realized and unrealized gains (losses) on portfolio investments and the impact of foreign exchange rate fluctuations.

(e) Represents the annualized current quarter’s Base Management Fee divided by period end Fee-Earning Assets Under Management.

(f) For the three months ended September 30, 2017, the impact to Fee-Earning Assets Under Management due to foreign exchange rate fluctuations was $0.1 million, $481.4 million, $383.9 million and $865.4 million for the Private Equity, Real Estate, Credit and Total segments, respectively. For the three months ended September 30, 2016, such impact was $5.2 million, $63.1 million, $83.1 million and $151.5 million for the Private Equity, Real Estate, Credit and Total segments, respectively.

(g) For the nine months ended September 30, 2017, the impact to Fee-Earning Assets Under Management due to foreign exchange rate fluctuations was $1.3 million, $1.3 billion, $1.2 billion and $2.5 billion for the Private Equity, Real Estate, Credit and Total segments, respectively. For the nine months ended September 30, 2016, such impact was $6.3 million, $83.5 million, $286.4 million and $376.2 million for the Private Equity, Real Estate, Credit and Total segments, respectively.

(h) For the three months ended September 30, 2017, the impact to Total Assets Under Management due to foreign exchange rate fluctuations was $233.8 million, $1.3 billion, $494.3 million and $2.0 billion for the Private Equity, Real Estate, Credit and Total segments, respectively. For the three months ended September 30, 2016, such impact was $342.6 million, $188.0 million, $97.8 million and $628.3 billion for the Private Equity, Real Estate, Credit and Total segments, respectively.

(i) For the nine months ended September 30, 2017, the impact to Total Assets Under Management due to foreign exchange rate fluctuations was $839.8 million, $3.0 billion, $1.6 billion and $5.4 billion for the Private Equity, Real Estate, Credit and Total segments, respectively. For the nine months ended September 30, 2016, such impact was $353.5 million, $145.8 million, $350.4 million and $849.7 million for the Private Equity, Real Estate, Credit and Total segments, respectively.

Fee-Earning Assets Under Management

Fee-Earning Assets Under Management were $285.7 billion at September 30, 2017, an increase of $3.8 billion, compared to $281.9 billion at June 30, 2017. The net increase was due to:

• Inflows of $8.5 billion related to:

• $4.3 billion in our Credit segment principally related to $1.3 billion from distressed strategies, $1.1 billion raised from two new CLO products, $769.8 million from mezzanine funds, $648.0 million from BDCs and $493.1 million from the long only platform,

• $2.0 billion in our Real Estate segment primarily related to $720.6 million from BPP U.S. and co-investment, $718.2 million from BREDS, $199.5 million from BREP opportunistic funds and $375.1 million from BREIT,

• $1.6 billion in our Hedge Fund Solutions segment primarily related to $1.1 billion from individual investor and specialized solutions, $399.7 million from commingled products and $100.2 million from customized solutions, and

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• $611.3 million in our Private Equity segment primarily related to $514.6 million from Tactical Opportunities and $398.8 million from Strategic Partners, partially offset by $339.7 million of allocations from multi-asset products to other strategies.

• Market appreciation of $3.0 billion due to:

• $1.1 billion in our Hedge Fund Solutions segment due to solid returns from BAAM’s Principal Solutions Composite of 2.3% gross (2.0% net),

• $899.5 million in our Real Estate segment due to $481.4 million of foreign exchange appreciation as well as appreciation of $286.8 million, $63.3 million and $58.2 million from other core+ real estate funds, BXMT and BREIT, respectively, and

• $876.2 million in our Credit segment due to $281.3 million of market appreciation from BDCs, $235.3 million of appreciation from the long only platform ($135.2 million from market appreciation and $100.1 million from foreign exchange appreciation) and $167.5 million of appreciation from CLOs ($237.5 million from foreign exchange appreciation, partially offset by $70.0 million of market depreciation).

Offsetting these increases were:

• Realizations of $5.2 billion primarily driven by:

• $2.7 billion in our Credit segment primarily due to $988.4 million from distressed strategies, $800.8 million of capital returned to investors in CLO products, $588.6 million from mezzanine funds and $249.2 million in dividends from BDCs,

• $1.3 billion in our Real Estate segment primarily attributable to $766.5 million from BREP opportunistic funds and co-invest, $352.9 million from BREDS and $132.8 million from core+ real estate funds, and

• $1.1 billion in our Private Equity segment primarily due to $625.3 million return of capital from Strategic Partners, $272.8 million from Tactical Opportunities and $190.1 million from corporate private equity.

• Outflows of $2.5 billion primarily attributable to:

• $1.3 billion in our Hedge Fund Solutions segment with outflows of $723.6 million from individual investor and specialized solutions and $572.3 million from customized solutions,

• $773.8 million in our Credit segment primarily due to $336.8 million from the long only platform and $244.1 million from BDCs, and

• $310.2 million in our Real Estate segment primarily due to redemptions from the BREDS liquids funds and the crystallization of the BPP U.S. incentive fee.

BAAM had net inflows of $1.3 billion from October 1 through November 1, 2017.

Fee-Earning Assets Under Management were $285.7 billion at September 30, 2017, an increase of $8.6 billion, compared to $277.1 billion at December 31, 2016. The net increase was due to:

• Inflows of $32.7 billion related to:

• $14.6 billion in our Credit segment principally related to capital raised of $3.7 billion from new CLO launches, $3.1 billion of inflows from mezzanine strategies, $3.0 billion of inflows from distressed strategies, $2.9 billion of inflows from the long only platform and $2.0 billion of inflows from BDCs,

• $7.5 billion in our Real Estate segment primarily related to $3.4 billion from BREDS, $1.6 billion from BREP, $1.3 billion from BREIT and $1.3 billion from other core+ real estate funds,

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• $6.6 billion in our Hedge Fund Solutions segment mainly related to growth of $2.8 billion from individual investor and specialized solutions, $2.5 billion from customized solutions and $1.3 billion from commingled products, and

• $4.0 billion in our Private Equity segment primarily due to $1.3 billion from core private equity, $1.3 billion from Tactical Opportunities and $959.0 million from Strategic Partners.

• Market appreciation of $7.6 billion due to:

• $3.1 billion in our Hedge Fund Solutions segment primarily due to solid returns from BAAM’s Principal Solutions Composite of 6.6% gross (5.8% net),

• $2.4 billion in our Real Estate segment primarily due to $1.3 billion of foreign exchange appreciation as well as appreciation of $877.3 million from core+ real estate funds, and

• $1.7 billion in our Credit segment primarily due to $624.4 million of appreciation from the long only platform ($355.7 million from market appreciation and $268.7 million from foreign exchange appreciation), $492.9 million of market appreciation from BDCs and $347.1 million of appreciation from CLOs.

Offsetting these increases were:

• Realizations of $20.6 billion primarily driven by:

• $8.8 billion in our Credit segment primarily due to $4.3 billion of capital returned to CLO investors from CLOs that are post their re-investment periods, $2.4 billion of realizations from distressed strategies, $1.1 billion of realizations from mezzanine funds and $741.2 million in dividends paid to investors from BDCs,

• $6.4 billion in our Real Estate segment primarily attributable to $3.3 billion from BREP opportunistic funds, $1.8 billion from BREDS and $780.7 million from BREP co-investment,

• $4.7 billion in our Private Equity segment primarily due to $2.5 billion from corporate private equity and $1.7 billion from Strategic Partners, and

• $702.8 million in our Hedge Fund Solutions segment primarily due to $682.3 million from individual investor and specialized solutions.

• Outflows of $11.2 billion primarily attributable to:

• $6.9 billion in our Hedge Fund Solutions segment with outflows of $3.1 billion from individual investor and specialized solutions, $2.4 billion from customized solutions and $1.4 billion from commingled products,

• $2.5 billion in our Credit segment primarily attributable to $1.0 billion from the long only platform, $828.5 million from BDCs and $616.2 million from distressed strategies, and

• $1.3 billion in our Private Equity segment primarily due to reductions of $467.4 million from Strategic Partners and $452.5 million from corporate private equity assets that no longer earn fees.

Total Assets Under Management

Total Assets Under Management were $387.4 billion at September 30, 2017, an increase of $16.4 billion, compared to $371.1 billion at June 30, 2017. The net increase was due to:

• Inflows of $19.7 billion related to:

• $7.6 billion in our Credit segment primarily due to $4.8 billion of inflows from distressed strategies, capital raised of $1.1 billion from two new CLO launches, $648.0 million of inflows from BDCs, $593.2 million of inflows from the long only platform and $329.6 million from mezzanine funds,

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• $6.4 billion in our Real Estate segment primarily due to $5.0 billion from the second Asian opportunistic fund, $490.2 million from BPP U.S. and co-investment, $375.1 million from BREIT and $309.8 million from BREDS,

• $3.3 billion in our Private Equity segment primarily due to $3.7 billion from Tactical Opportunities, $424.2 million from Strategic Partners, partially offset by $997.2 million of allocations from multi-asset products to other strategies, and

• $2.4 billion in our Hedge Fund Solutions segment primarily related to capital raised of $1.5 billion from individual investor and specialized solutions, $548.3 million from commingled products and $317.3 million from customized solutions.

• Market appreciation of $8.4 billion due to:

• $4.1 billion in our Real Estate segment due to foreign exchange appreciation of $1.3 billion and carrying value increases in the opportunistic and core+ real estate funds of 5.5% and 3.2%, respectively, which includes the effect of foreign exchange,

• $1.7 billion in our Private Equity segment primarily due to foreign exchange appreciation of $233.8 million and carrying value increases in corporate private equity of 3.3%,

• $1.5 billion in our Credit segment primarily due to $373.8 million of appreciation from mezzanine funds ($219.5 million from market appreciation and $154.3 million from foreign exchange appreciation), $344.0 million of market appreciation from distressed strategies and $281.3 million of market appreciation from the BDCS, and

• $1.1 billion in our Hedge Fund Solutions segment due to reasons noted above in Fee-Earning Assets Under Management.

Total Assets Under Management market appreciation (depreciation) in our Private Equity and Real Estate segments generally represents the change in fair value of the investments held and typically exceeds the Fee-Earning Assets Under Management market appreciation (depreciation) which generally represents only the invested capital.

Offsetting these increases were:

• Realizations of $8.8 billion primarily driven by:

• $3.2 billion in our Credit segment primarily due to $1.4 billion of realizations from distressed strategies, $732.3 million of capital returned to investors in CLO products, $778.6 million from mezzanine funds and $249.2 million in dividends from BDCs,

• $3.1 billion in our Real Estate segment primarily due to $2.6 billion from BREP opportunistic funds and BREP co-investment, $299.2 million from BREDS and $168.0 million from the core+ real estate funds, and

• $2.4 billion in our Private Equity segment primarily due to $851.9 million return of capital from Strategic Partners, $715.5 million from corporate private equity and $638.0 million from Tactical Opportunities.

Total Assets Under Management realizations in our Private Equity and Real Estate segments generally represent the total proceeds and typically exceed the Fee-Earning Assets Under Management realizations which generally represent only the invested capital.

• Outflows of $2.9 billion primarily attributable to:

• $1.7 billion in our Hedge Fund Solutions segment with outflows of $1.0 billion from individual investor and specialized solutions and $622.4 million from customized solutions,

• $852.1 million in our Credit segment primarily due to $356.3 million from the long only platform and $244.1 million from BDCs, and

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• $202.1 million in our Real Estate segment primarily due to redemptions from the BREDS liquids funds and the crystallization of the BPP U.S. incentive fee.

Total Assets Under Management were $387.4 billion at September 30, 2017, an increase of $20.9 billion, compared to $366.6 billion at December 31, 2016. The net increase was due to:

• Inflows of $45.7 billion related to:

• $17.1 billion in our Credit segment primarily due to $6.6 billion of inflows from distressed strategies, $3.7 billion of capital raised from CLO launches, $3.1 billion of inflows from the long only platform, $2.0 billion of inflows from BDCs and $1.4 billion from mezzanine funds,

• $13.0 billion in our Real Estate segment due to $5.0 billion from the second Asian opportunistic fund, $2.5 billion from BREP opportunistic funds, $2.1 billion from BREDS, $1.3 billion from BREIT and $2.0 billion from other core+ real estate funds,

• $8.0 billion in our Hedge Fund Solutions segment primarily related to capital raised of $3.7 billion from individual investor and specialized solutions, $2.8 billion from customized solutions and $1.5 billion from commingled products, and

• $7.7 billion in our Private Equity segment primarily related to $4.8 billion from Tactical Opportunities, $1.8 billion from BCP co-investment, $1.4 billion from Strategic Partners and $883.4 million from core private equity.

• Market appreciation of $25.3 billion due to:

• $12.0 billion in our Real Estate segment due to foreign exchange appreciation of $3.0 billion and carrying value increases in opportunistic and core+ real estate funds of 15.0% and 9.1%, respectively, which includes the effect of foreign exchange,

• $6.7 billion in our Private Equity segment primarily due to foreign exchange appreciation of $839.8 million and strong fund performance, with an increase in carrying value of 12.1% in corporate private equity, 15.2% in Strategic Partners and 11.5% in Tactical Opportunities,

• $3.4 billion in our Hedge Fund Solutions segment due to the reasons noted above in Fee-Earning Assets Under Management, and

• $3.2 billion in our Credit segment primarily due to $865.4 million of appreciation from mezzanine funds ($484.3 million from market appreciation and $381.1 million from foreign exchange appreciation), $696.2 million of appreciation from the long only platform ($360.2 million from market appreciation and $336.0 million from foreign exchange appreciation), $572.3 million of appreciation from CLOs and $443.9 million of market appreciation from distressed strategies.

Offsetting these increases were:

• Realizations of $36.5 billion primarily driven by:

• $14.3 billion in our Real Estate segment primarily due to $10.8 billion from BREP opportunistic funds, $2.0 billion from BREP co-investment and $926.6 million from BREDS,

• $11.4 billion in our Private Equity segment primarily due to continued disposition activity across the segment, mainly $7.2 billion from corporate private equity, $2.0 billion from Strategic Partners and $1.1 billion from Tactical Opportunities,

• $10.1 billion in our Credit segment primarily due to $4.3 billion of capital returned to CLO investors, $3.2 billion of realizations from distressed strategies, $1.6 billion of realizations from mezzanine funds and $741.2 million in dividends paid to investors from BDCs, and

• $790.6 million in our Hedge Fund Solutions segment primarily due to $751.1 million of realizations from individual investor and specialized solutions.

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• Outflows of $13.6 billion primarily attributable to:

• $7.5 billion in our Hedge Fund Solutions segment with outflows of $3.6 billion from individual investor and specialized solutions, $2.5 billion from customized solutions and $1.4 billion from commingled products,

• $4.0 billion in our Credit segment primarily due to $1.7 billion from distressed strategies, $988.4 million from the long only platform and $828.5 million from BDCs, and

• $1.3 billion in our Real Estate segment primarily due to $760.4 million release of reserves in BREDS II.

Limited Partner Capital Invested

The following presents the limited partner capital invested during the respective three month periods:

Note: Totals in graph may not add due to rounding.

	Three Months Ended September 30,				Nine Months Ended September 30,
	2016 (a)		2017		2016 (a)		2017 (a)
	(Dollars in Thousands)
Limited Partner Capital Invested
Private Equity	$	1,683,747	$	3,725,919	$	5,087,881	$	12,309,148
Real Estate		1,719,764		3,778,790		6,991,360		8,741,127
Hedge Fund Solutions		144,505		360,748		493,066		572,590
Credit		588,389		2,177,565		1,874,840		5,929,711
	$	4,136,405	$	10,043,022	$	14,447,147	$	27,552,576

(a) Reflects an adjustment to the amounts of Limited Partner Capital Invested previously reported for the Hedge Fund Solutions segment and total segments for the three months ended September 30, 2016 and March 31, 2017.

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The following presents the dry powder as of quarter end of each period:

Note: Totals may not add due to rounding.

(a) Represents illiquid drawdown funds only; excludes marketable vehicles; includes both Fee-Earning (third party) capital and general partner and employee commitments that do not earn fees. Amounts are reduced by outstanding commitments to invest, but for which capital has not been called.

	September 30,
	2016		2017
	(Dollars in Thousands)
Dry Powder Available for Investment
Private Equity	$	44,847,156	$	34,910,956
Real Estate		33,224,323		32,888,192
Hedge Fund Solutions		3,962,663		3,915,873
Credit		20,160,648		20,217,968
	$	102,194,790	$	91,932,989

Net Accrued Performance Fees

The following table presents the accrued performance fees, net of performance fee compensation, of the Blackstone Funds as of September 30, 2017 and 2016. Net accrued performance fees presented do not include clawback amounts, if any, which are disclosed in Note 17. “Commitments and Contingencies — Contingencies — Contingent Obligations (Clawback)” in the “Notes to Condensed Consolidated Financial Statements” in “Part I. Item 1. Financial Statements” of this filing. The net accrued performance fees as of each reporting date are

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principally unrealized carried interest and incentive fees which, if realized, can be a significant component of Distributable Earnings.

	September 30,
	2017		2016
	(Dollars in Millions)
Private Equity
BCP IV Carried Interest	$	96	$	158
BCP V Carried Interest		75		306
BCP VI Carried Interest		618		484
BEP I Carried Interest		77		70
BEP II Carried Interest		14		—
Tactical Opportunities Carried Interest		119		79
BTAS Carried Interest		14		10
Strategic Partners Carried Interest		56		35
Other Carried Interest		2		2
Total Private Equity (a)		1,071		1,144
Real Estate
BREP IV Carried Interest		8		8
BREP V Carried Interest		241		331
BREP VI Carried Interest		247		488
BREP VII Carried Interest		612		551
BREP VIII Carried Interest		248		132
BREP Europe III Carried Interest		182		152
BREP Europe IV Carried Interest		402		150
BREP Europe V Carried Interest		9		—
BREP Asia Carried Interest		85		102
BPP Carried Interest		86		52
BPP Incentive Fees		56		28
BREIT Incentive Fees		6		—
BREDS Carried Interest		20		14
BREDS Incentive Fees		12		2
Asia Platform Incentive Fees		9		7
Total Real Estate (a)		2,223		2,017
Hedge Fund Solutions
Carried Interest		5		—
Incentive Fees		69		15
Total Hedge Fund Solutions		74		15
Credit
Carried Interest		224		139
Incentive Fees		18		20
Total Credit		242		159
Total Blackstone
Carried Interest		3,440		3,263
Incentive Fees		170		72
Net Accrued Performance Fees	$	3,610	$	3,335

(a) Private Equity and Real Estate include Co-Investments, as applicable.

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Performance Fee Eligible Assets Under Management

The following represents our Performance Fee Eligible Assets Under Management as of September 30, 2017:

Note: Totals may not add due to rounding.

(a) Represents invested and to be invested capital at fair value, including closed commitments for funds whose investment period has not yet commenced, on which performance fees could be earned if certain hurdles are met.

(b) Represents dry powder exclusive of non-fee earning general partner and employee commitments.

Investment Record

Fund returns information for our significant funds is included throughout this discussion and analysis to facilitate an understanding of our results of operations for the periods presented. The fund returns information reflected in this discussion and analysis is not indicative of the financial performance of The Blackstone Group L.P. and is also not necessarily indicative of the future performance of any particular fund. An investment in The Blackstone Group L.P. is not an investment in any of our funds. There can be no assurance that any of our funds or our other existing and future funds will achieve similar returns.

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The following table presents the investment record of our significant drawdown funds from inception through September 30, 2017:

					Unrealized Investments							Realized Investments				Total Investments				Net IRRs (c)
Fund (Investment Period)	Committed Capital		Available Capital (a)		Value		MOIC (b)		% Public			Value		MOIC (b)		Value		MOIC (b)		Realized			Total
	(Dollars in Thousands, Except Where Noted)
Private Equity
BCP I (Oct 1987 / Oct 1993)	$	859,081	$	—	$	—		N/A		—		$	1,741,738		2.6x	$	1,741,738		2.6x		19	%		19	%
BCP II (Oct 1993 / Aug 1997)		1,361,100		—		—		N/A		—			3,256,819		2.5x		3,256,819		2.5x		32	%		32	%
BCP III (Aug 1997 / Nov 2002)		3,967,422		—		—		N/A		—			9,184,688		2.3x		9,184,688		2.3x		14	%		14	%
BCOM (Jun 2000 / Jun 2006)		2,137,330		24,575		20,537		1.6x		—			2,951,018		1.4x		2,971,555		1.4x		6	%		6	%
BCP IV (Nov 2002 / Dec 2005)		6,773,182		209,846		1,175,372		1.2x		36	%		20,314,898		3.1x		21,490,270		2.8x		41	%		36	%
BCP V (Dec 2005 / Jan 2011)		21,024,904		1,246,115		2,532,571		1.1x		43	%		35,584,157		2.0x		38,116,728		1.9x		9	%		8	%
BCP VI (Jan 2011 / May 2016)		15,189,742		1,888,759		15,561,103		1.6x		18	%		6,855,306		1.8x		22,416,409		1.6x		17	%		12	%
BEP I (Aug 2011 / Feb 2015)		2,437,608		165,197		2,697,741		1.4x		29	%		944,061		1.9x		3,641,802		1.5x		37	%		12	%
BEP II (Feb 2015 / Feb 2021)		4,847,703		2,104,568		2,110,159		1.3x		—			—		N/A		2,110,159		1.3x		N/A			15	%
BCP VII (May 2016 / May 2022)		18,546,060		14,233,167		2,630,834		1.1x		—			12,597		1.0x		2,643,431		1.1x		N/M			N/M
Total Corporate Private Equity	$	77,144,132	$	19,872,227	$	26,728,317		1.4x		19	%	$	80,845,282		2.2x	$	107,573,599		1.9x		17	%		15	%
Tactical Opportunities	$	16,171,484	$	7,168,854	$	9,821,610		1.2x		6	%	$	2,976,806		1.5x	$	12,798,416		1.3x		24	%		11	%
Tactical Opportunities Co-Investment and Other		4,690,335		2,255,630		2,261,966		1.2x		—			598,913		1.7x		2,860,879		1.3x		N/A			16	%
Strategic Partners I-V and Co-Investment (d)		11,862,571		1,814,378		2,505,236		N/M		—			14,833,270		N/M		17,338,506		1.5x		N/A			13	%
Strategic Partners VI LBO, RE and SMA (d)		7,402,171		2,595,063		3,384,834		N/M		—			1,943,750		N/M		5,328,584		1.4x		N/A			21	%
Strategic Partners VII (d)		7,489,970		4,670,462		1,595,269		N/M		—			152,414		N/M		1,747,683		1.4x		N/A			82	%
Strategic Partners RA II (d)		495,204		220,389		209,874		N/M		—			—		N/M		209,874		1.0x		N/A			N/M
BCEP (e)		4,755,133		3,380,911		1,374,222		1.0x		—			—		N/A		1,374,222		1.0x		N/A			N/M
Other Funds and Co-Investment (f)		454,483		N/M		45,521		0.8x		40	%		636,117		0.9x		681,638		0.9x		N/M			N/M
Real Estate
Pre-BREP	$	140,714	$	—	$	—		N/A		—		$	345,190		2.5x	$	345,190		2.5x		33	%		33	%
BREP I (Sep 1994 / Oct 1996)		380,708		—		—		N/A		—			1,327,708		2.8x		1,327,708		2.8x		40	%		40	%
BREP II (Oct 1996 / Mar 1999)		1,198,339		—		—		N/A		—			2,531,614		2.1x		2,531,614		2.1x		19	%		19	%
BREP III (Apr 1999 / Apr 2003)		1,522,708		—		—		N/A		—			3,330,406		2.4x		3,330,406		2.4x		21	%		21	%
BREP IV (Apr 2003 / Dec 2005)		2,198,694		—		379,551		0.5x		34	%		4,160,228		2.2x		4,539,779		1.7x		31	%		12	%
BREP V (Dec 2005 / Feb 2007)		5,539,418		—		2,236,033		2.1x		22	%		11,078,880		2.3x		13,314,913		2.3x		12	%		11	%
BREP VI (Feb 2007 / Aug 2011)		11,060,444		557,525		2,307,696		2.0x		27	%		25,016,549		2.5x		27,324,245		2.5x		14	%		13	%
BREP VII (Aug 2011 / Apr 2015)		13,495,032		2,061,915		14,435,174		1.7x		17	%		12,920,004		1.9x		27,355,178		1.8x		27	%		18	%
BREP VIII (Apr 2015 / Oct 2020)		16,427,724		9,656,801		9,223,720		1.4x		1	%		2,559,094		1.3x		11,782,814		1.3x		19	%		18	%
Total Global BREP	$	51,963,781	$	12,276,241	$	28,582,174		1.6x		13	%	$	63,269,673		2.2x	$	91,851,847		2.0x		19	%		16	%
BREP Int’l (Jan 2001 / Sep 2005)	€	824,172	€	—	€	—		N/A		—		€	1,369,016		2.1x	€	1,369,016		2.1x		23	%		23	%
BREP Int’l II (Sep 2005 / Jun 2008)		1,629,748		—		209,701		0.7x		28	%		2,181,999		2.0x		2,391,700		1.7x		8	%		6	%
BREP Europe III (Jun 2008 / Sep 2013)		3,205,140		459,583		2,772,915		2.0x		—			3,452,579		2.2x		6,225,494		2.1x		21	%		16	%
BREP Europe IV (Sep 2013 / Dec 2016)		6,707,816		1,433,722		8,660,125		1.6x		3	%		1,531,055		1.7x		10,191,180		1.6x		26	%		18	%
BREP Europe V (Dec 2016 / Jun 2022)		7,807,139		5,925,061		1,841,685		1.1x		—			—		N/A		1,841,685		1.1x		N/A			22	%
Total Euro BREP	€	20,174,015	€	7,818,366	€	13,484,426		1.6x		3	%	€	8,534,649		2.0x	€	22,019,075		1.7x		16	%		14	%
BREP Asia (Jun 2013 / Dec 2017)	$	5,089,703	$	2,607,059	$	3,375,019		1.4x		1	%	$	2,225,256		1.7x	$	5,600,275		1.5x		21	%		17	%
BREP Asia II (TBD)		5,032,145		5,032,145		—		N/A		N/A			—		N/A		—		N/A		N/A			N/A
BREP Co-Investment (g)		6,819,065		146,573		2,488,446		1.8x		58	%		11,146,852		2.1x		13,635,298		2.0x		16	%		16	%
Total BREP	$	93,606,713	$	29,405,748	$	50,753,493		1.6x		11	%	$	87,949,272		2.2x	$	138,702,765		1.9x		18	%		16	%
BPP (h)	$	14,810,971	$	3,062,857	$	15,258,841		1.3x		—		$	107,286		1.9x	$	15,366,127		1.3x		36	%		12	%
BREDS (i)		12,893,818		5,922,509		3,409,185		1.2x		—			7,402,762		1.3x		10,811,947		1.3x		12	%		11	%
																					continued ...

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					Unrealized Investments						Realized Investments				Total Investments				Net IRRs (c)
Fund (Investment Period)	Committed Capital		Available Capital (a)		Value		MOIC (b)		% Public		Value		MOIC (b)		Value		MOIC (b)		Realized		Total
	(Dollars in Thousands, Except Where Noted)
Hedge Fund Solutions
BSCH (Dec 2013 / Jun 2020) (j)	$	3,298,575	$	2,599,011	$	722,732		1.0x		—	$	153,615		N/A	$	876,347		1.3x		N/A		5	%
BSCH Co-Investment		276,000		211,687		62,320		1.0x		—		4,298		N/A		66,618		1.0x		N/A		1	%
Total Hedge Fund Solutions	$	3,574,575	$	2,810,698	$	785,052		1.0x		—	$	157,913		N/A	$	942,965		1.2x		N/A		4	%
Credit (k)
Mezzanine I (Jul 2007 / Oct 2011)	$	2,000,000	$	99,280	$	146,603		1.2x		—	$	4,679,765		1.6x	$	4,826,368		1.6x		N/A		17	%
Mezzanine II (Nov 2011 / Nov 2016)		4,120,000		1,155,092		3,262,282		1.2x		—		3,035,304		1.4x		6,297,586		1.3x		N/A		13	%
Mezzanine III (Sep 2016 / Sep 2021)		6,639,133		4,252,938		2,120,486		1.1x		—		203,029		1.1x		2,323,515		1.1x		N/A		13	%
Stressed / Distressed Investing I (Sep 2009 / May 2013)		3,253,143		275,335		808,796		1.1x		—		5,120,819		1.5x		5,929,615		1.4x		N/A		11	%
Stressed / Distressed Investing II (Jun 2013 / Jun 2018)		5,125,000		907,391		3,652,108		1.2x		—		1,584,226		1.2x		5,236,334		1.2x		N/A		14	%
Stressed / Distressed Investing III (TBD)		6,004,072		6,004,072		—		N/A		—		—		N/A		—		N/A		N/A		N/A
Energy Select Opportunities (Nov 2015 / Nov 2018)		2,856,866		1,143,357		1,614,309		1.1x		—		172,602		1.5x		1,786,911		1.2x		N/A		22	%
Euro
European Senior Debt Fund (Feb 2015 / Feb 2018)	€	1,964,689	€	2,032,669	€	1,538,527		1.0x		—	€	371,825		1.2x	€	1,910,352		1.1x		N/A		9	%
Total Credit	$	32,264,624	$	16,240,486	$	13,417,332		1.1x		—	$	15,215,191		1.5x	$	28,632,523		1.3x		N/A		14	%

N/M Not meaningful.

N/A Not applicable.

(a) Available Capital represents total investable capital commitments, including side-by-side, adjusted for certain expenses and expired or recallable capital and may include leverage, less invested capital. This amount is not reduced by outstanding commitments to investments.

(b) Multiple of Invested Capital (“MOIC”) represents carrying value, before management fees, expenses and Carried Interest, divided by invested capital.

(c) Net Internal Rate of Return (“IRR”) represents the annualized inception to September 30, 2017 IRR on total invested capital based on realized proceeds and unrealized value, as applicable, after management fees, expenses and Carried Interest.

(d) Realizations are treated as return of capital until fully recovered and therefore unrealized and realized MOICs are not meaningful.

(e) BCEP, or Blackstone Core Equity Partners, is a core private equity fund which invests with a more modest risk profile and longer hold period.

(f) Returns for Other Funds and Co-Investment are not meaningful as these funds have limited transaction activity.

(g) BREP Co-Investment represents co-investment capital raised for various BREP investments. The Net IRR reflected is calculated by aggregating each co-investment’s realized proceeds and unrealized value, as applicable, after management fees, expenses and Carried Interest.

(h) BPP represents the core+ real estate funds which invest with a more modest risk profile and lower leverage. Excludes BREIT.

(i) Excludes Capital Trust drawdown funds.

(j) BSCH, or Blackstone Strategic Capital Holdings, is a permanent capital vehicle focused on acquiring strategic minority positions in alternative asset managers.

(k) Funds presented represent the flagship credit drawdown funds only. The Total Credit Net IRR is the combined IRR of the eight credit drawdown funds presented.

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Segment Analysis

Discussed below is our Economic Income for each of our segments. This information is reflected in the manner utilized by our senior management to make operating decisions, assess performance and allocate resources. References to “our” sectors or investments may also refer to portfolio companies and investments of the underlying funds that we manage.

For segment reporting purposes, revenues and expenses are presented on a basis that deconsolidates the investment funds we manage. As a result, segment revenues are greater than those presented on a consolidated GAAP basis because fund management fees recognized in certain segments are received from the Blackstone Funds and eliminated in consolidation when presented on a consolidated GAAP basis. Furthermore, segment expenses are lower than related amounts presented on a consolidated GAAP basis due to the exclusion of fund expenses that are paid by Limited Partners and the elimination of non-controlling interests.

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Private Equity

The following table presents the results of operations for our Private Equity segment:

	Three Months Ended September 30,						2017 vs. 2016						Nine Months Ended September 30,						2017 vs. 2016
	2017			2016			$			%			2017			2016			$			%
	(Dollars in Thousands)
Segment Revenues
Management and Advisory Fees, Net
Base Management Fees	$	182,108		$	131,708		$	50,400			38	%	$	536,127		$	393,833		$	142,294			36	%
Transaction, Advisory and Other Fees, Net		10,269			12,892			(2,623	)		-20	%		46,416			32,901			13,515			41	%
Management Fee Offsets		(1,088	)		(12,917	)		11,829			-92	%		(17,031	)		(23,960	)		6,929			-29	%
Total Management and Advisory Fees, Net		191,289			131,683			59,606			45	%		565,512			402,774			162,738			40	%
Performance Fees
Realized
Carried Interest		101,918			26,398			75,520			286	%		881,856			113,736			768,120			675	%
Unrealized
Carried Interest		80,003			144,597			(64,594	)		-45	%		(104,230	)		303,519			(407,749	)		N/M
Total Performance Fees		181,921			170,995			10,926			6	%		777,626			417,255			360,371			86	%
Investment Income (Loss)
Realized		7,077			15,469			(8,392	)		-54	%		129,134			23,038			106,096			461	%
Unrealized		17,440			8,884			8,556			96	%		(48,398	)		21,558			(69,956	)		N/M
Total Investment Income		24,517			24,353			164			1	%		80,736			44,596			36,140			81	%
Interest and Dividend Revenue		15,089			9,160			5,929			65	%		38,462			28,525			9,937			35	%
Other		(8,346	)		411			(8,757	)		N/M			(26,270	)		2,219			(28,489	)		N/M
Total Revenues		404,470			336,602			67,868			20	%		1,436,066			895,369			540,697			60	%
Expenses
Compensation and Benefits
Compensation		96,409			73,889			22,520			30	%		270,995			237,303			33,692			14	%
Performance Fee Compensation
Realized
Carried Interest		48,019			13,741			34,278			249	%		292,712			60,114			232,598			387	%
Unrealized
Carried Interest		45,484			69,300			(23,816	)		-34	%		28,347			98,046			(69,699	)		-71	%
Total Compensation and Benefits		189,912			156,930			32,982			21	%		592,054			395,463			196,591			50	%
Other Operating Expenses		49,773			47,534			2,239			5	%		140,260			143,968			(3,708	)		-3	%
Total Expenses		239,685			204,464			35,221			17	%		732,314			539,431			192,883			36	%
Economic Income	$	164,785		$	132,138		$	32,647			25	%	$	703,752		$	355,938		$	347,814			98	%

N/M Not meaningful.

Three Months Ended September 30, 2017 Compared to Three Months Ended September 30, 2016

Revenues

Revenues were $404.5 million for the three months ended September 30, 2017, an increase of $67.9 million compared to $336.6 million for the three months ended September 30, 2016. The increase in Revenues was primarily attributable to increases of $59.6 million in Total Management and Advisory Fees, Net and $10.9 million in Performance Fees, partially offset by a decrease of $8.8 million in Other Revenue.

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Revenues in our Private Equity segment in the third quarter of 2017 were higher compared to the third quarter of 2016, driven primarily by an increase in corporate private equity management fees and appreciation in Strategic Partners and corporate private equity private investments. In the third quarter of 2017, our Private Equity segment deployed $4.3 billion of capital, committed an additional $3.2 billion and had realizations of $2.4 billion. The market environment continues to be generally characterized by high prices and competition for new investments and as a result, the outlook for capital deployment is challenging. Our portfolio companies operate in a business environment characterized by slow but improving growth in most major economies and industries. The global economic environment is generally positive, although global geopolitical concerns and uncertainty regarding governmental and tax policy in the United States continue to influence outlook. Revenues in the Private Equity segment would likely be negatively impacted if the capital markets experienced a prolonged period of volatility, including as a result of geopolitical concerns or uncertainty regarding governmental and tax policy; oil and gas prices remained depressed for a sustained period; or market and/or macroeconomic conditions were to deteriorate.

Total Management and Advisory Fees, Net were $191.3 million for the three months ended September 30, 2017, an increase of $59.6 million compared to $131.7 million for the three months ended September 30, 2016, primarily driven by an increase in Base Management Fees. Base Management Fees were $182.1 million for the three months ended September 30, 2017, an increase of $50.4 million compared to the $131.7 million for the three months ended September 30, 2016, primarily due to assets earning higher base management fees, principally due to the conclusion of a six month fee holiday for BCP VII in the fourth quarter of 2016.

Performance Fees were $181.9 million for the three months ended September 30, 2017, an increase of $10.9 million compared to $171.0 million for the three months ended September 30, 2016. The increase was driven by Strategic Partners and corporate private equity.

Other Revenue was $(8.3) million for the three months ended September 30, 2017, a decrease of $8.8 million compared to $0.4 million for the three months ended September 30, 2016, primarily driven by foreign exchange loss on our euro denominated bond.

The annualized Base Management Fee Rate increased from 0.76% at September 30, 2016 to 1.08% at September 30, 2017. The increase was principally due to the conclusion of a six month fee holiday for BCP VII, which commenced its investment period in the second quarter of 2016.

Expenses

Expenses were $239.7 million for the three months ended September 30, 2017, an increase of $35.2 million compared to $204.5 million for the three months ended September 30, 2016. The increase was primarily attributable to an increase of $33.0 million in Total Compensation and Benefits. The increase in Total Compensation and Benefits was primarily due to increases of $22.5 million in Compensation and $10.5 million in Performance Fee Compensation. Compensation increased primarily due to the increase in Management and Advisory Fees, Net, on which a portion of compensation is based. Performance Fee Compensation increased as a result of the increase in Performance Fees.

Nine Months Ended September 30, 2017 Compared to Nine Months Ended September 30, 2016

Revenues

Revenues were $1.4 billion for the nine months ended September 30, 2017, an increase of $540.7 million compared to $895.4 million for the nine months ended September 30, 2016. The increase in Revenues was primarily attributable to increases of $360.4 million in Performance Fees, $162.7 million in Total Management and Advisory Fees, Net and $36.1 million in Investment Income.

Performance Fees were $777.6 million for the nine months ended September 30, 2017, an increase of $360.4 million, compared to $417.3 million for the nine months ended September 30, 2016. The increase was driven by corporate private equity and Tactical Opportunities.

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Total Management and Advisory Fees, Net were $565.5 million for the nine months ended September 30, 2017, an increase of $162.7 million compared to $402.8 million for the nine months ended September 30, 2016, primarily driven by an increase in Base Management Fees. Base Management Fees were $536.1 million for the nine months ended September 30, 2017, an increase of $142.3 million compared to $393.8 million for the nine months ended September 30, 2016, primarily due to assets earning higher base management fees, principally due to the conclusion of a six month fee holiday for BCP VII in the fourth quarter of 2016.

Investment Income was $80.7 million for the nine months ended September 30, 2017, an increase of $36.1 million, compared to $44.6 million for the nine months ended September 30, 2016. The increase was due to higher returns compared to the third quarter of 2016.

Expenses

Expenses were $732.3 million for the nine months ended September 30, 2017, an increase of $192.9 million compared to $539.4 million for the nine months ended September 30, 2016. The increase was primarily attributable to an increase of $196.6 million in Total Compensation and Benefits. The increase in Total Compensation and Benefits was primarily due to an increase in Performance Fee Compensation of $162.9 million. Performance Fee Compensation increased as a result of the increase in Performance Fees Revenue.

Fund Returns

Fund returns information for our significant funds is included throughout this discussion and analysis to facilitate an understanding of our results of operations for the periods presented. The fund returns information reflected in this discussion and analysis is not indicative of the financial performance of The Blackstone Group L.P. and is also not necessarily indicative of the future performance of any particular fund. An investment in The Blackstone Group L.P. is not an investment in any of our funds. There can be no assurance that any of our funds or our other existing and future funds will achieve similar returns.

The following table presents the internal rates of return of our significant private equity funds:

	Three Months Ended September 30,												Nine Months Ended September 30,												September 30, 2017 Inception to Date
	2017						2016 (a)						2017						2016 (a)						Realized						Total
Fund (a)	Gross			Net			Gross			Net			Gross			Net			Gross			Net			Gross			Net			Gross			Net
BCP IV		10	%		9	%		6	%		5	%		7	%		6	%		10	%		9	%		55	%		41	%		50	%		36	%
BCP V		5	%		4	%		-4	%		-3	%		9	%		7	%		6	%		5	%		11	%		9	%		10	%		8	%
BCP VI		3	%		3	%		6	%		5	%		18	%		14	%		7	%		6	%		25	%		17	%		18	%		12	%
BCP VII		4	%		N/M			N/A			N/A			11	%		N/M			N/A			N/A			5	%		N/M			16	%		N/M
BEP I		-2	%		-2	%		3	%		3	%		6	%		5	%		8	%		6	%		41	%		37	%		16	%		12	%
BEP II (b)		4	%		1	%		N/M			N/M			17	%		8	%		N/M			N/M			N/A			N/A			35	%		15	%
BCOM		4	%		4	%		-30	%		-30	%		-10	%		-11	%		11	%		9	%		13	%		6	%		13	%		6	%
Tactical Opportunities		4	%		3	%		5	%		4	%		12	%		13	%		8	%		6	%		31	%		24	%		15	%		11	%
Strategic Partners		6	%		5	%		—			—			16	%		14	%		2	%		—			N/A			N/A			17	%		14	%

The returns presented herein represent those of the applicable Blackstone Funds and not those of The Blackstone Group L.P.

N/M Not meaningful.

N/A Not applicable.

(a) Net returns are based on the change in carrying value (realized and unrealized) after management fees, expenses and carried interest allocations.

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(b) BEP II’s 2016 investment returns are presented as N/M due to the early stage nature and limited operations of the fund’s investments. Accordingly, the 2016 returns would only be reflective of the impact of fees and expenses incurred to date.

The corporate private equity funds within the Private Equity segment have five funds with closed investment periods: BCP IV, BCP V, BCP VI, BCOM and BEP I. As of September 30, 2017, BCP IV was above its carried interest threshold (i.e., the preferred return payable to its limited partners before the general partner is eligible to receive carried interest) and would still be above its carried interest threshold even if all remaining investments were valued at zero. BCP V is comprised of two fund classes based on the timings of fund closings, the BCP V “main fund” and BCP V-AC fund. Within these fund classes, the general partner is subject to equalization such that (a) the general partner accrues carried interest when the respective carried interest for either fund class is positive and (b) the general partner realizes carried interest so long as clawback obligations, if any, for either of the respective fund classes are fully satisfied. During the quarter, both fund classes in aggregate were above their respective carried interest thresholds. BCP VI is currently above its carried interest threshold. BCOM is currently above its carried interest threshold and has generated inception to date positive returns. We are entitled to retain previously realized carried interest up to 20% of BCOM’s net gains. As a result, Performance Fees are recognized from BCOM on current period gains and losses. BEP I is currently above its carried interest threshold.

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Real Estate

The following table presents the results of operations for our Real Estate segment:

	Three Months Ended September 30,						2017 vs. 2016						Nine Months Ended September 30,						2017 vs. 2016
	2017			2016			$			%			2017			2016			$			%
	(Dollars in Thousands)
Segment Revenues
Management Fees, Net
Base Management Fees	$	224,048		$	197,629		$	26,419			13	%	$	649,792		$	598,540		$	51,252			9	%
Transaction and Other Fees, Net		20,616			14,190			6,426			45	%		57,982			71,096			(13,114	)		-18	%
Management Fee Offsets		(4,232	)		(842	)		(3,390	)		403	%		(12,800	)		(5,656	)		(7,144	)		126	%
Total Management Fees, Net		240,432			210,977			29,455			14	%		694,974			663,980			30,994			5	%
Performance Fees
Realized
Carried Interest		261,122			461,980			(200,858	)		-43	%		1,169,967			928,989			240,978			26	%
Incentive Fees		50,588			3,857			46,731			N/M			58,817			14,025			44,792			319	%
Unrealized
Carried Interest		292,544			(113,449	)		405,993			N/M			347,476			(209,846	)		557,322			N/M
Incentive Fees		(21,977	)		14,445			(36,422	)		N/M			19,344			30,152			(10,808	)		-36	%
Total Performance Fees		582,277			366,833			215,444			59	%		1,595,604			763,320			832,284			109	%
Investment Income (Loss)
Realized		44,449			46,704			(2,255	)		-5	%		221,627			79,608			142,019			178	%
Unrealized		(8,319	)		(6,725	)		(1,594	)		24	%		(112,691	)		(17,764	)		(94,927	)		534	%
Total Investment Income		36,130			39,979			(3,849	)		-10	%		108,936			61,844			47,092			76	%
Interest and Dividend Revenue		24,283			12,460			11,823			95	%		63,448			38,732			24,716			64	%
Other		(13,108	)		(548	)		(12,560	)		N/M			(39,223	)		(226	)		(38,997	)		N/M
Total Revenues		870,014			629,701			240,313			38	%		2,423,739			1,527,650			896,089			59	%
Expenses
Compensation and Benefits
Compensation		105,753			99,886			5,867			6	%		318,721			303,352			15,369			5	%
Performance Fee Compensation
Realized
Carried Interest		84,192			147,419			(63,227	)		-43	%		388,409			246,936			141,473			57	%
Incentive Fees		21,887			1,764			20,123			N/M			26,182			7,197			18,985			264	%
Unrealized
Carried Interest		113,731			(38,972	)		152,703			N/M			184,703			2,988			181,715			N/M
Incentive Fees		(10,005	)		6,229			(16,234	)		N/M			8,184			12,929			(4,745	)		-37	%
Total Compensation and Benefits		315,558			216,326			99,232			46	%		926,199			573,402			352,797			62	%
Other Operating Expenses		58,012			47,908			10,104			21	%		165,354			148,206			17,148			12	%
Total Expenses		373,570			264,234			109,336			41	%		1,091,553			721,608			369,945			51	%
Economic Income	$	496,444		$	365,467		$	130,977			36	%	$	1,332,186		$	806,042		$	526,144			65	%

N/M Not meaningful.

Three Months Ended September 30, 2017 Compared to Three Months Ended September 30, 2016

Revenues

Revenues were $870.0 million for the three months ended September 30, 2017, an increase of $240.3 million compared to $629.7 million for the three months ended September 30, 2016. The increase in Revenues was

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primarily attributable to increases of $215.4 million in Performance Fees and $29.5 million in Total Management Fees, Net.

In the third quarter of 2017, revenues in our Real Estate segment increased primarily due to greater appreciation in private investments in our BREP opportunistic funds compared to the third quarter of 2016. In the third quarter of 2017, our Real Estate segment deployed or committed a total of $6.7 billion and had realizations of $3.1 billion. Overall, operating trends in our Real Estate portfolio remain stable and supply-demand fundamentals remain solid in most markets, although we continue to see decelerating growth in certain geographies and sectors, notably retail. As a result of less distress and rising asset values, the current environment and outlook for opportunistic capital deployment in the U.S. has become increasingly challenging, although opportunities in other geographic markets, most notably Europe, remain strong. In our real estate debt funds, liquid fund performance was stable in the third quarter of 2017. Revenues in our Real Estate segment would likely be negatively impacted if the capital markets experienced a period of prolonged volatility, including as a result of geopolitical concerns or uncertainty regarding governmental and tax policy, or market and/or macroeconomic conditions were to deteriorate.

Performance Fees were $582.3 million for the three months ended September 30, 2017, an increase of $215.4 million compared to $366.8 million for the three months ended September 30, 2016. The increase in Performance Fees was primarily due to an increase in the net appreciation of investment holdings in our opportunistic funds, which appreciated 5.5% versus 3.7% in the comparable 2016 quarter. Our core+ real estate funds, real estate debt drawdown and hedge funds appreciated 3.2%, 3.7% and 2.1%, respectively.

Total Management Fees, Net were $240.4 million for the three months ended September 30, 2017, an increase of $29.5 million compared to $211.0 million for the three months ended September 30, 2016, driven primarily by an increase in Base Management Fees. Base Management Fees were $224.0 million for the three months ended September 30, 2017, an increase of $26.4 million compared to $197.6 million for the three months ended September 30, 2016, primarily due to the launch of BREP Europe V in the fourth quarter of 2016.

Expenses

Expenses were $373.6 million for the three months ended September 30, 2017, an increase of $109.3 million compared to $264.2 million for the three months ended September 30, 2016. The increase was primarily attributable to an increase in Performance Fee Compensation of $93.4 million. Performance Fee Compensation increased as a result of the increase in Performance Fees Revenue.

Nine Months Ended September 30, 2017 Compared to Nine Months Ended September 30, 2016

Revenues

Revenues were $2.4 billion for the nine months ended September 30, 2017, an increase of $896.1 million compared to $1.5 billion for the nine months ended September 30, 2016. The increase in Revenues was primarily attributable to increases of $832.3 million in Performance Fees, $47.1 million in Investment Income and $31.0 million in Total Management Fees, Net, partially offset by a decrease of $39.0 million in Other Revenue.

Performance Fees were $1.6 billion for the nine months ended September 30, 2017, an increase of $832.3 million compared to $763.3 million for the nine months ended September 30, 2016. Performance Fees increased due to the net increase in the appreciation of investment holdings within our opportunistic funds. For the nine months ended September 30, 2017, the carrying value of investments for our opportunistic funds increased 15.0% versus 7.3% for the comparable 2016 period. Our core+ real estate funds, real estate debt drawdown funds and real estate hedge funds appreciated 9.1%, 11.5% and 7.8%, respectively.

Investment Income was $108.9 million for the nine months ended September 30, 2017, an increase of $47.1 million compared to $61.8 million for the nine months ended September 30, 2016, primarily due to the net

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increase in the appreciation of investment holdings in our opportunistic funds and the net increase in the appreciation of the Partnership’s principal investments.

Total Management Fees, Net were $695.0 million for the nine months ended September 30, 2017, an increase of $31.0 million compared to $664.0 million for the nine months ended September 30, 2016, primarily driven by an increase in Base Management Fees, partially offset by a decrease in Transactions and Other Fees, Net. Base Management Fees were $649.8 million for the nine months ended September 30, 2017, an increase of $51.3 million compared to $598.5 million for the nine months ended September 30, 2016, primarily due to the launch of BREP Europe V in the fourth quarter of 2016 and the corresponding expiration of its fee holiday in the second quarter of 2017. Transaction and Other Fees, Net were $58.0 million for the nine months ended September 30, 2017, a decrease of $13.1 million compared to $71.1 million for the nine months ended September 30, 2016, primarily due to the timing of investment closings in our BREP global funds.

Other Revenue was $(39.2) million for the nine months ended September 30, 2017, a decrease of $39.0 million compared to $(0.2) million for the nine months ended September 30, 2016, primarily driven by foreign exchange loss on our euro denominated bond.

Expenses

Expenses were $1.1 billion for the nine months ended September 30, 2017, an increase of $369.9 million compared to $721.6 million for the nine months ended September 30, 2016. The increase was primarily attributable to an increase in Performance Fee Compensation of $337.4 million. Performance Fee Compensation increased as a result of the increase in Performance Fees Revenue.

Fund Returns

Fund return information for our significant funds is included throughout this discussion and analysis to facilitate an understanding of our results of operations for the periods presented. The fund returns information reflected in this discussion and analysis is not indicative of the financial performance of The Blackstone Group L.P. and is also not necessarily indicative of the future performance of any particular fund. An investment in The Blackstone Group L.P. is not an investment in any of our funds. There can be no assurance that any of our funds or our other existing and future funds will achieve similar returns.

The following table presents the internal rates of return of our significant real estate funds:

	Three Months Ended September 30,												Nine Months Ended September 30,												September 30, 2017 Inception to Date
	2017						2016						2017						2016						Realized						Total
Fund (a)	Gross			Net			Gross			Net			Gross			Net			Gross			Net			Gross			Net			Gross			Net
BREP IV		—			—			-3	%		-2	%		1	%		1	%		-11	%		-9	%		52	%		31	%		22	%		12	%
BREP V		8	%		7	%		5	%		5	%		11	%		10	%		5	%		5	%		15	%		12	%		14	%		11	%
BREP VI		11	%		10	%		3	%		3	%		21	%		17	%		8	%		7	%		18	%		14	%		17	%		13	%
BREP VII		8	%		6	%		3	%		2	%		15	%		12	%		6	%		4	%		38	%		27	%		26	%		18	%
BREP VIII		4	%		3	%		8	%		5	%		18	%		12	%		23	%		15	%		35	%		19	%		29	%		18	%
BREP International II (b)		7	%		7	%		-1	%		-1	%		13	%		12	%		2	%		2	%		10	%		8	%		8	%		6	%
BREP Europe III (b)		4	%		3	%		-2	%		-2	%		19	%		15	%		-7	%		-7	%		35	%		21	%		24	%		16	%
BREP Europe IV (b)		2	%		2	%		3	%		2	%		26	%		20	%		6	%		4	%		40	%		26	%		25	%		18	%
BREP Europe V (b)		10	%		6	%		N/A			N/A			N/M			N/M			N/A			N/A			N/A			N/A			53	%		22	%
BREP Co-Investment (c)		9	%		8	%		5	%		4	%		16	%		15	%		10	%		9	%		18	%		16	%		18	%		16	%
BREP Asia		3	%		2	%		10	%		8	%		19	%		13	%		25	%		18	%		30	%		21	%		26	%		17	%
BPP		3	%		3	%		3	%		3	%		10	%		8	%		10	%		8	%		37	%		36	%		14	%		12	%
BREDS Drawdown		4	%		3	%		4	%		3	%		12	%		11	%		10	%		6	%		17	%		12	%		16	%		11	%
BREDS Liquid		3	%		2	%		3	%		2	%		10	%		8	%		2	%		—			N/A			N/A			12	%		8	%

102

The returns presented herein represent those of the applicable Blackstone Funds and not those of The Blackstone Group L.P.

N/M Not meaningful.

N/A Not applicable.

(a) Net returns are based on the change in carrying value (realized and unrealized) after management fees, expenses and performance fee allocations.

(b) Euro-based internal rates of return.

(c) Excludes fully realized co-investments prior to Blackstone’s IPO.

The following table presents the carried interest status of our real estate carry funds with expired investment periods which are currently not generating performance fees as of September 30, 2017:

	Gain to Cross Carried Interest Threshold (a)
Fully Invested Funds	Amount		% Change in Total Enterprise Value (b)			% Change in Equity Value
	(Amounts in Millions)
BREP International II (Sep 2005 / Jun 2008)	€	838		129	%		454	%

(a) The general partner of each fund is allocated carried interest when the annualized returns, net of management fees and expenses, exceed the preferred return as dictated by the fund agreements. The preferred return is calculated for each limited partner individually. The Gain to Cross carried interest Threshold represents the increase in equity at the fund level (excluding our side-by-side investments) that is required for the general partner to begin accruing carried interest, assuming the gain is earned pro rata across the fund’s investments and is achieved at the reporting date.

(b) Total Enterprise Value is the respective fund’s pro rata ownership of the privately held portfolio companies’ Enterprise Value.

The Real Estate segment has four funds in their investment period, which were above their respective carried interest thresholds as of September 30, 2017: BREP VIII, BREP Europe V, BREP Asia and BREDS III.

103

Hedge Fund Solutions

The following table presents the results of operations for our Hedge Fund Solutions segment:

	Three Months Ended September 30,						2017 vs. 2016						Nine Months Ended September 30,						2017 vs. 2016
	2017			2016			$			%			2017			2016			$			%
	(Dollars in Thousands)
Segment Revenues
Management Fees, Net
Base Management Fees	$	129,410		$	130,305		$	(895	)		-1	%	$	386,576		$	390,586		$	(4,010	)		-1	%
Transaction and Other Fees, Net		48			116			(68	)		-59	%		2,003			654			1,349			206	%
Management Fee Offsets		(28	)		—			(28	)		N/M			(28	)		—			(28	)		N/M
Total Management Fees, Net		129,430			130,421			(991	)		-1	%		388,551			391,240			(2,689	)		-1	%
Performance Fees
Realized
Incentive Fees		14,217			4,572			9,645			211	%		35,896			7,005			28,891			412	%
Unrealized
Carried Interest		635			(84	)		719			N/M			4,575			749			3,826			511	%
Incentive Fees		29,349			12,038			17,311			144	%		92,118			10,139			81,979			809	%
Total Performance Fees		44,201			16,526			27,675			167	%		132,589			17,893			114,696			641	%
Investment Income (Loss)
Realized		1,316			(1,211	)		2,527			N/M			909			(6,471	)		7,380			N/M
Unrealized		12,723			12,219			504			4	%		42,594			9,285			33,309			359	%
Total Investment Income		14,039			11,008			3,031			28	%		43,503			2,814			40,689			N/M
Interest and Dividend Revenue		10,594			4,692			5,902			126	%		26,917			15,193			11,724			77	%
Other		(5,859	)		(260	)		(5,599	)		N/M			(18,189	)		(523	)		(17,666	)		N/M
Total Revenues		192,405			162,387			30,018			18	%		573,371			426,617			146,754			34	%
Expenses
Compensation and Benefits
Compensation		44,347			47,206			(2,859	)		-6	%		139,312			145,811			(6,499	)		-4	%
Performance Fee Compensation
Realized
Incentive Fees		6,884			2,902			3,982			137	%		18,563			6,090			12,473			205	%
Unrealized
Carried Interest		216			35			181			517	%		1,603			273			1,330			487	%
Incentive Fees		10,397			4,557			5,840			128	%		33,643			3,842			29,801			776	%
Total Compensation and Benefits		61,844			54,700			7,144			13	%		193,121			156,016			37,105			24	%
Other Operating Expenses		29,047			27,432			1,615			6	%		81,087			80,796			291			0	%
Total Expenses		90,891			82,132			8,759			11	%		274,208			236,812			37,396			16	%
Economic Income	$	101,514		$	80,255		$	21,259			26	%	$	299,163		$	189,805		$	109,358			58	%

N/M Not meaningful.

Three Months Ended September 30, 2017 Compared to Three Months Ended September 30, 2016

Revenues

Revenues were $192.4 million for the three months ended September 30, 2017, an increase of $30.0 million compared to $162.4 million for the three months ended September 30, 2016. The increase in Revenues was primarily attributable to an increase of $27.7 million in Performance Fees.

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Revenues in our Hedge Fund Solutions segment in the third quarter of 2017 increased compared to the third quarter of 2016, primarily due to an increase in Incentive Fees as a result of positive performance across multiple strategies along with the fact that a significantly higher percentage of Fee-Earning Assets Under Management eligible for Incentive Fees was above the high water mark as of the end of the third quarter of 2017 (89%) as compared to the end of the third quarter of 2016 (67%). Hedge Fund Solutions revenues would likely be negatively impacted if global asset prices experienced a period of decline, including as a result of geopolitical concerns or uncertainty regarding governmental and tax policy, or liquidity needs caused investors to withdraw assets.

Performance Fees were $44.2 million for the three months ended September 30, 2017, an increase of $27.7 million compared to $16.5 million for the three months ended September 30, 2016. The increase in Performance Fees in our Hedge Fund Solutions segment was primarily driven by a greater percentage of our Fee-Earning Assets Under Management earning Performance Fees, on comparable returns, for the three months ended September 30, 2017 compared to the three months ended September 30, 2016.

Expenses

Expenses were $90.9 million for the three months ended September 30, 2017, an increase of $8.8 million compared to $82.1 million for the three months ended September 30, 2016. The increase in expenses was primarily attributable to an increase of $10.0 million in Performance Fee Compensation, partially offset by a decrease of $2.9 million in Compensation. The increase in Performance Fee Compensation was due to the increase in Performance Fees Revenue. The decrease in Compensation was primarily due to the decrease in Management Fees, Net, on which a portion of compensation is based.

Nine Months Ended September 30, 2017 Compared to Nine Months Ended September 30, 2016

Revenues

Revenues were $573.4 million for the nine months ended September 30, 2017, an increase of $146.8 million compared to $426.6 million for the nine months ended September 30, 2016. The increase in Revenues was primarily attributable to increases of $114.7 million in Performance Fees and $40.7 million in Investment Income.

Performance Fees were $132.6 million for the nine months ended September 30, 2017, an increase of $114.7 million compared to $17.9 million for the nine months ended September 30, 2016. The increase in Performance Fees in our Hedge Fund Solutions segment was primarily driven by higher returns in our BPS Composite, 6.6% gross (5.8% net) for the nine months ended September 30, 2017 compared to 1.2% gross (0.6% net) in the comparable 2016 year to date period.

Investment Income was $43.5 million for the nine months ended September 30, 2017, an increase of $40.7 million compared to $2.8 million for the nine months ended September 30, 2016. The increase in Investment Income was primarily driven by the year over year net appreciation of investments of which Blackstone owns a share.

Expenses

Expenses were $274.2 million for the nine months ended September 30, 2017, an increase of $37.4 million compared to $236.8 million for the nine months ended September 30, 2016. The increase in expenses was primarily due to an increase in Performance Fee Compensation of $43.6 million, partially offset by a decrease in Compensation of $6.5 million. The increase in Performance Fee Compensation was due to the increase in Performance Fees Revenue. The decrease in Compensation was primarily due to the decrease in Management Fees Revenue, on which a portion of compensation is based.

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Operating Metrics

The following table presents information regarding our Incentive Fee-Earning Assets Under Management:

	Fee-Earning Assets Under Management Eligible for Incentive Fees				Estimated % Above High Water Mark / Benchmark (a)
	As of September 30,				As of September 30,
	2016		2017		2016			2017
	(Dollars in Thousands)
BAAM-Managed Funds (b)	$	37,149,111	$	39,369,024		67	%		89	%

(a) Estimated % Above High Water Mark/Benchmark represents the percentage of Fee-Earning Assets Under Management Eligible for Incentive Fees that as of the dates presented would earn incentive fees when the applicable BAAM-managed fund has positive investment performance relative to a benchmark, where applicable. Incremental positive performance in the applicable Blackstone Funds may cause additional assets to reach their respective High Water Mark or clear a benchmark return, thereby resulting in an increase in Estimated % Above High Water Mark/Benchmark.

(b) For the BAAM-managed funds, at September 30, 2017 the incremental appreciation needed for the 11% of Fee-Earning Assets Under Management below their respective High Water Marks/Benchmarks to reach their respective High Water Marks/Benchmarks was $363.5 million, a decrease of $306.3 million, compared to $669.7 million at September 30, 2016. Of the Fee-Earning Assets Under Management below their respective High Water Marks/Benchmarks as of September 30, 2017, 40% were within 5% of reaching their respective High Water Mark.

Composite Returns

Composite returns information is included throughout this discussion and analysis to facilitate an understanding of our results of operations for the periods presented. The composite returns information reflected in this discussion and analysis is not indicative of the financial performance of The Blackstone Group L.P. and is also not necessarily indicative of the future results of any particular fund. An investment in The Blackstone Group L.P. is not an investment in any of our funds or composites. There can be no assurance that any of our funds or composites or our other existing and future funds or composites will achieve similar returns.

The following table presents the return information of the BAAM Principal Solutions Composite:

	Three Months Ended September 30,												Nine Months Ended September 30,												Average Annual Returns (a)
																									Periods Ended September 30, 2017
	2017						2016						2017						2016						One Year						Three Year						Five Year						Historical
Composite	Gross			Net			Gross			Net			Gross			Net			Gross			Net			Gross			Net			Gross			Net			Gross			Net			Gross			Net
BAAM Principal Solutions Composite (b)		2	%		2	%		3	%		3	%		7	%		6	%		1	%		1	%		9	%		8	%		5	%		4	%		7	%		6	%		7	%		6	%

The returns presented represent those of the applicable Blackstone Funds and not those of The Blackstone Group L.P.

(a) Composite returns present a summarized asset-weighted return measure to evaluate the overall performance of the applicable class of Blackstone Funds.

(b) BAAM’s Principal Solutions (“BPS”) Composite covers the period from January 2000 to present, although BAAM’s inception date is September 1990. BPS Composite does not include BAAM’s individual investor solutions (i.e., liquid alternatives), long-biased commodities, ventures (i.e., seeding and minority interests), strategic opportunities (i.e., co-investments), Senfina (i.e., direct trading) and advisory (non-discretionary)

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platforms, except for investments by BPS funds directly into those platforms. BAAM-managed funds in liquidation and non fee-paying assets (net returns only) are also excluded. The historical return is from January 1, 2000.

Credit

The following table presents the results of operations for our Credit segment:

	Three Months Ended September 30,						2017 vs. 2016						Nine Months Ended September 30,						2017 vs. 2016
	2017			2016			$			%			2017			2016			$			%
	(Dollars in Thousands)
Segment Revenues
Management Fees, Net
Base Management Fees	$	134,336		$	133,867		$	469			0	%	$	411,733		$	391,249		$	20,484			5	%
Transaction and Other Fees, Net		1,362			1,823			(461	)		-25	%		5,008			4,589			419			9	%
Management Fee Offsets		(4,867	)		(7,091	)		2,224			-31	%		(27,379	)		(26,731	)		(648	)		2	%
Total Management Fees, Net		130,831			128,599			2,232			2	%		389,362			369,107			20,255			5	%
Performance Fees
Realized
Carried Interest		6,269			15,644			(9,375	)		-60	%		31,101			15,940			15,161			95	%
Incentive Fees		36,393			21,866			14,527			66	%		94,728			67,078			27,650			41	%
Unrealized
Carried Interest		59,415			75,093			(15,678	)		-21	%		95,109			147,609			(52,500	)		-36	%
Incentive Fees		(15,844	)		5,689			(21,533	)		N/M			(11,391	)		6,988			(18,379	)		N/M
Total Performance Fees		86,233			118,292			(32,059	)		-27	%		209,547			237,615			(28,068	)		-12	%
Investment Income (Loss)
Realized		7,346			(328	)		7,674			N/M			12,299			8,028			4,271			53	%
Unrealized		(4,460	)		12,875			(17,335	)		N/M			3,777			3,726			51			1	%
Total Investment Income		2,886			12,547			(9,661	)		-77	%		16,076			11,754			4,322			37	%
Interest and Dividend Revenue		14,132			6,769			7,363			109	%		34,402			20,945			13,457			64	%
Other		(6,831	)		(28	)		(6,803	)		N/M			(21,218	)		403			(21,621	)		N/M
Total Revenues		227,251			266,179			(38,928	)		-15	%		628,169			639,824			(11,655	)		-2	%
Expenses
Compensation and Benefits
Compensation		56,289			47,614			8,675			18	%		168,054			155,687			12,367			8	%
Performance Fee Compensation
Realized
Carried Interest		1,803			7,267			(5,464	)		-75	%		14,373			7,461			6,912			93	%
Incentive Fees		18,052			10,770			7,282			68	%		46,311			31,523			14,788			47	%
Unrealized
Carried Interest		27,727			39,681			(11,954	)		-30	%		42,618			73,940			(31,322	)		-42	%
Incentive Fees		(7,486	)		2,722			(10,208	)		N/M			(5,182	)		2,874			(8,056	)		N/M
Total Compensation and Benefits		96,385			108,054			(11,669	)		-11	%		266,174			271,485			(5,311	)		-2	%
Other Operating Expenses		36,747			28,016			8,731			31	%		105,854			83,700			22,154			26	%
Total Expenses		133,132			136,070			(2,938	)		-2	%		372,028			355,185			16,843			5	%
Economic Income	$	94,119		$	130,109		$	(35,990	)		-28	%	$	256,141		$	284,639		$	(28,498	)		-10	%

N/M Not meaningful.

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Three Months Ended September 30, 2017 Compared to Three Months Ended September 30, 2016

Revenues

Revenues were $227.3 million for the three months ended September 30, 2017, a decrease of $38.9 million compared to $266.2 million for the three months ended September 30, 2016. This change was primarily attributable to decreases of $32.1 million in Performance Fees and $9.7 million in Investment Income, partially offset by an increase of $7.4 million in Interest and Dividend Revenue.

Revenues in our Credit segment decreased in the third quarter of 2017 compared to the third quarter of 2016, driven primarily by greater appreciation in the third quarter of 2016 as a result of recovery from market dislocation experienced at the end of 2015 and early 2016. Despite the continuing low interest rate environment and depressed commodity prices, our Credit funds were able to identify attractive investment opportunities, particularly in Europe and the energy sector, deploying or committing a total of $3.0 billion in the third quarter of 2017. Our Credit segment revenues may, however, be negatively impacted by prolonged periods of market pressure; a sustained period of depressed energy prices; market volatility; geopolitical concerns or uncertainty regarding governmental and tax policy.

Performance Fees were $86.2 million for the three months ended September 30, 2017, a decrease of $32.1 million compared to $118.3 million for the three months ended September 30, 2016. This change was primarily attributable to greater appreciation in the third quarter of 2016 as a result of the recovery from market dislocation that was experienced at the end of 2015 and early 2016.

Investment Income was $2.9 million for the three months ended September 30, 2017, a decrease of $9.7 million compared to $12.5 million for the three months ended September 30, 2016. The decrease in Investment Income was generally driven by depreciation in Blackstone’s investments in the Credit funds, as well as lower investment balances following distributions during the period.

Interest and Dividend Revenue was $14.1 million for the three months ended September 30, 2017, an increase of $7.4 million compared to $6.8 million for the three months ended September 30, 2016. The increase was primarily attributable to higher interest income earned by Blackstone on larger investment balances and an increase in interest rates, which is then allocated to the segment.

Expenses

Expenses were $133.1 million for the three months ended September 30, 2017, a decrease of $2.9 million compared to $136.1 million for the three months ended September 30, 2016. The decrease in expenses was primarily attributable to a decrease of $20.3 million in Performance Fee Compensation, partially offset by increases of $8.7 million in Other Operating Expenses and $8.7 million in Compensation. The decrease in Performance Fee Compensation was due to the decrease in Performance Fees Revenue. The increase in Other Operating Expenses was primarily due to increases in interest expenses allocated to the segment and fundraising costs. The increase in Compensation was primarily due to the increase in Management Fees, Net, on which a portion of compensation is based.

Nine Months Ended September 30, 2017 Compared to Nine Months Ended September 30, 2016

Revenues

Revenues were $628.2 million for the nine months ended September 30, 2017, a decrease of $11.7 million compared to $639.8 million for the nine months ended September 30, 2016. This change was primarily attributable to decreases of $28.1 in Performance Fees and $21.6 million in Other Revenue, partially offset by increase of $20.3 million in Total Management Fees, Net and $13.5 million in Interest and Dividend Revenue.

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Performance Fees were $209.5 million for the nine months ended September 30, 2017, a decrease of $28.1 million compared to $237.6 million for the nine months ended September 30, 2016, primarily driven by greater appreciation in the third quarter of 2016 as a result of the recovery from market dislocation that was experienced at the end of 2015 and early 2016.

Other Revenue was $(21.2) million for the nine months ended September 30, 2017, a decrease of $21.6 million compared to the nine months ended September 30, 2016, primarily driven by foreign exchange loss on our euro denominated bond.

Total Management Fees, Net were $389.4 million for the nine months ended September 30, 2017, an increase of $20.3 million compared to $369.1 million for the nine months ended September 30, 2016. The increase was primarily attributable to our long only and performing credit strategies.

Interest and Dividend Revenue was $34.4 million for the nine months ended September 30, 2017, an increase of $13.5 million compared to $20.9 million for the nine months ended September 30, 2016. The increase was primarily attributable to higher interest income earned by Blackstone on larger investment balances and an increase in interest rates, which is then allocated to the segment.

Expenses

Expenses were $372.0 million for the nine months ended September 30, 2017, an increase of $16.8 million compared to $355.2 million for the nine months ended September 30, 2016. The increase in expenses was primarily attributable to increases of $22.2 million in Other Operating Expenses and $12.4 million in Compensation, partially offset by a decrease of $17.7 million in Performance Fee Compensation. The increase in Other Operating Expenses was driven by increases in interest expenses allocated to the segment and fundraising costs. The increase in Compensation was primarily due to an increase in Management Fees Revenue, on which a portion of compensation is based. The decrease in Performance Fee Compensation was due to the decrease in Performance Fees Revenue.

Fund Returns

Fund return information for our significant businesses is included throughout this discussion and analysis to facilitate an understanding of our results of operations for the periods presented. The fund returns information reflected in this discussion and analysis is not indicative of the financial performance of The Blackstone Group L.P. and is also not necessarily indicative of the future results of any particular fund. An investment in The Blackstone Group L.P. is not an investment in any of our funds. There can be no assurance that any of our funds or our other existing and future funds will achieve similar returns.

The following table presents combined internal rates of return of the segment’s performing credit and distressed strategies funds:

	Three Months Ended September 30,												Nine Months Ended September 30,												September 30,  2017 Inception to Date
	2017						2016						2017						2016
Composite (a)	Gross			Net			Gross			Net			Gross			Net			Gross			Net			Gross			Net
Performing Credit Strategies (b)		4	%		3	%		6	%		5	%		9	%		6	%		17	%		13	%		15	%		9	%
Distressed Strategies (c)		3	%		2	%		6	%		5	%		4	%		2	%		11	%		8	%		11	%		7	%

The returns presented herein represent those of the applicable Blackstone Funds and not those of The Blackstone Group L.P.

(a) Net returns are based on the change in carrying value (realized and unrealized) after management fees, expenses and performance fee allocations, net of tax advances.

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(b) Performing Credit Strategies include mezzanine lending funds, BDCs and other performing credit strategy funds. Performing Credit Strategies’ returns represent the IRR of the combined cash flows of the fee-earning funds exceeding $100 million of fair value at each respective quarter end excluding the Blackstone Funds that were contributed to GSO as part of Blackstone’s acquisition of GSO in March 2008. The inception to date returns are from July 16, 2007.

(c) Distressed Strategies include stressed/distressed funds, event-driven credit strategies and energy strategies. Distressed Strategies’ returns represent the IRR of the combined cash flows of the fee-earning funds exceeding $100 million of fair value at each respective quarter end. The inception to date returns are from August 1, 2005.

As of September 30, 2017, there was $27.5 billion of Performance Fee eligible assets under management invested in Credit strategies that were above the hurdle necessary to generate Incentive Fees or carried interest. This represented 47% of the total Performance Fee eligible assets at fair value across all Credit strategies.

Liquidity and Capital Resources

General

Blackstone’s business model derives revenue primarily from third party assets under management. Blackstone is not a capital or balance sheet intensive business and targets operating expense levels such that total management and advisory fees exceed total operating expenses each period. As a result, we require limited capital resources to support the working capital or operating needs of our businesses. We draw primarily on the long-term committed capital of our limited partner investors to fund the investment requirements of the Blackstone Funds and use our own realizations and cash flows to invest in growth initiatives, make commitments to our own funds, where our minimum general partner commitments are generally less than 5% of the limited partner commitments of a fund, and pay distributions to unitholders.

Fluctuations in our statement of financial condition result primarily from activities of the Blackstone Funds which are consolidated as well as business transactions, such as the issuance of senior notes described below. The majority economic ownership interests of the Blackstone Funds are reflected as Redeemable Non-Controlling Interests in Consolidated Entities and Non-Controlling Interests in Consolidated Entities in the Condensed Consolidated Financial Statements. The consolidation of these Blackstone Funds has no net effect on the Partnership’s Net Income or Partners’ Capital. Additionally, fluctuations in our statement of financial condition also include appreciation or depreciation in Blackstone investments in the Blackstone Funds, additional investments and redemptions of such interests in the Blackstone Funds and the collection of receivables related to management and advisory fees.

Total assets were $31.8 billion as of September 30, 2017, an increase of $5.4 billion from December 31, 2016.

Total liabilities were $18.3 billion as of September 30, 2017, an increase of $4.4 billion from December 31, 2016. The increase in total liabilities was primarily due to an increase in Loans Payable of $3.7 billion, primarily due to new CLO vehicles.

For the three months ended September 30, 2017, we had Total Fee Related Revenues of $692.0 million and related expenses of $385.3 million, generating Fee Related Earnings of $306.7 million and Distributable Earnings of $625.6 million. For the nine months ended September 30, 2017, we had Total Fee Related Revenues of $2.0 billion and related expenses of $1.1 billion, generating Fee Related Earnings of $908.6 million and Distributable Earnings of $2.6 billion.

Sources and Uses of Liquidity

We have multiple sources of liquidity to meet our capital needs, including annual cash flows, accumulated earnings in the businesses, the proceeds from our issuances of senior notes, liquid investments we hold on our

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balance sheet for our own use and access to our $1.5 billion committed revolving credit facility. As of September 30, 2017, Blackstone had $1.3 billion in cash and cash equivalents, $3.7 billion invested in corporate treasury investment, $1.9 billion invested in Blackstone Funds and other investments, against $3.5 billion in borrowings from our bond issuances, and no borrowings outstanding under our revolving credit facility.

On September 25, 2017, Blackstone commenced a cash tender offer for any and all of its 2019 Notes. On September 29, 2017, the cash tender offer expired and $259.7 million aggregate principal amount of the 2019 Notes were validly tendered. Payment for the tendered notes was made on October 4, 2017. On November 1, 2017, in accordance with the make-whole provision under the indenture governing the 2019 Notes, Blackstone redeemed the remainder of the 2019 Notes that were not tendered.

On October 2, 2017, Blackstone issued $300 million in aggregate principal amount of 3.150% senior notes maturing on October 2, 2027 and $300 million in aggregate principal amount of 4.000% senior notes maturing on October 2, 2047.

In addition to the cash we received from our debt offerings and availability under our committed revolving credit facility, we expect to receive (a) cash generated from operating activities, (b) carried interest and incentive income realizations, and (c) realizations on the carry and hedge fund investments that we make. The amounts received from these three sources in particular may vary substantially from year to year and quarter to quarter depending on the frequency and size of realization events or net returns experienced by our investment funds. Our available capital could be adversely affected if there are prolonged periods of few substantial realizations from our investment funds accompanied by substantial capital calls for new investments from those investment funds. Therefore, Blackstone’s commitments to our funds are taken into consideration when managing our overall liquidity and cash position.

We expect that our primary liquidity needs will be cash to (a) provide capital to facilitate the growth of our existing businesses which principally includes funding our general partner and co-investment commitments to our funds, (b) provide capital to facilitate our expansion into new businesses that are complementary, (c) pay operating expenses, including cash compensation to our employees and other obligations as they arise, (d) fund modest capital expenditures, (e) repay borrowings and related interest costs, (f) pay income taxes, and (g) make distributions to our

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unitholders and the holders of Blackstone Holdings Partnership Units. Our own capital commitments to our funds, the funds we invest in and our investment strategies as of September 30, 2017 consisted of the following:

	Blackstone and General Partner				Senior Managing Directors and Certain Other Professionals (a)
Fund	Original Commitment		Remaining Commitment		Original Commitment		Remaining Commitment
	(Dollars in Thousands)
Private Equity
BCP VII	$	500,000	$	436,474	$	225,000	$	196,413
BCP VI		719,718		126,919		250,000		44,086
BCP V		629,356		39,938		—		—
BEP I		50,000		4,853		—		—
BEP II		80,000		51,873		26,667		17,291
BCEP		120,000		86,023		18,992		13,503
Tactical Opportunities		334,293		181,377		75,331		40,872
Strategic Partners		368,323		254,347		58,627		43,209
Other (b)		236,525		25,356		—		—
Real Estate
BREP VI		750,000		36,809		150,000		7,362
BREP VII		300,000		45,401		100,000		15,134
BREP VIII		300,000		176,527		100,000		58,842
BREP Europe III		100,000		13,231		35,000		4,631
BREP Europe IV		130,000		26,082		43,333		8,694
BREP Europe V		150,000		118,866		43,333		34,339
BREP Asia		50,000		23,654		16,667		7,885
BREP Asia II		50,000		50,000		16,667		16,667
BREDS II		50,000		11,696		16,667		3,899
BREDS III		50,000		39,100		16,667		13,033
Other (b)		152,098		37,350		—		—
Hedge Fund Solutions
Strategic Alliance		50,000		2,033		—		—
Strategic Alliance II		50,000		1,482		—		—
Strategic Alliance III		22,000		19,769		—		—
Strategic Holdings LP		49,500		38,943		—		—
Other (b)		2,300		1,358		—		—
Credit
Capital Opportunities Fund II LP		120,000		34,439		110,094		31,596
Capital Opportunities Fund III LP		130,783		99,167		29,854		22,753
GSO Euro Senior Debt Fund LP		63,000		42,164		56,928		38,100
BMezz II		17,692		3,085		—		—
GSO Capital Solutions		50,000		6,552		27,666		3,625
GSO Capital Solutions II		125,000		59,718		120,064		57,360
GSO Capital Solutions III		126,782		126,782		29,766		29,766
GSO Energy Select Opportunities Fund		80,000		53,184		74,694		49,657
GSO Credit Alpha Fund LP		52,102		20,852		50,217		20,098
Other (b)		84,236		35,359		15,923		4,660
Other
Treasury		523,094		398,608		—		—
	$	6,666,802	$	2,729,371	$	1,708,157	$	783,475

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(a) For some of the general partner commitments shown in the table above, we require our senior managing directors and certain other professionals to fund a portion of the commitment even though the ultimate obligation to fund the aggregate commitment is ours pursuant to the governing agreements of the respective funds. The amounts of the aggregate applicable general partner original and remaining commitment are shown in the table above. In addition, certain senior managing directors and other professionals are required to fund a de minimis amount of the commitment in the other private equity, real estate and credit-focused carry funds. We expect our commitments to be drawn down over time and to be funded by available cash and cash generated from operations and realizations. Taking into account prevailing market conditions and both the liquidity and cash or liquid investment balances, we believe that the sources of liquidity described above will be more than sufficient to fund our working capital requirements.

(b) Represents capital commitments to a number of other funds in each respective segment.

As of September 30, 2017, Blackstone Holdings Finance Co. L.L.C. (the “Issuer”), an indirect subsidiary of the Partnership, had issued and outstanding the following senior notes (collectively the “Notes”):

Senior Notes (a)	Issue Date	Aggregate Principal Amount (Dollars/Euros in Thousands)
6.625%, Due 8/15/2019	8/20/2009	$	600,000
5.875%, Due 3/15/2021	9/15/2010	$	400,000
4.750%, Due 2/15/2023	8/17/2012	$	400,000
6.250%, Due 8/15/2042	8/17/2012	$	250,000
5.000%, Due 6/15/2044	4/7/2014	$	500,000
4.450%, Due 7/15/2045	4/27/2015	$	350,000
2.000%, Due 5/19/2025	5/19/2015	€	300,000
1.000%, Due 10/5/2026	10/5/2016	€	600,000

(a) The Notes are unsecured and unsubordinated obligations of the Issuer and are fully and unconditionally guaranteed, jointly and severally, by The Blackstone Group L.P. and each of the Blackstone Holdings Partnerships. The Notes contain customary covenants and financial restrictions that, among other things, limit the Issuer and the guarantors’ ability, subject to certain exceptions, to incur indebtedness secured by liens on voting stock or profit participating equity interests of their subsidiaries or merge, consolidate or sell, transfer or lease assets. The Notes also contain customary events of default. All or a portion of the Notes may be redeemed at our option, in whole or in part, at any time and from time to time, prior to their stated maturity, at the make-whole redemption price set forth in the Notes. If a change of control repurchase event occurs, the Notes are subject to repurchase at the repurchase price as set forth in the Notes.

Blackstone, through indirect subsidiaries, has a $1.5 billion unsecured revolving credit facility (the “Credit Facility”) with Citibank, N.A., as Administrative Agent with a maturity date of August 31, 2021. Borrowings may also be made in U.K. sterling, euros, Swiss francs or Japanese yen, in each case subject to certain sub-limits. The Credit Facility contains customary representations, covenants and events of default. Financial covenants consist of a maximum net leverage ratio and a requirement to keep a minimum amount of fee-earning assets under management, each tested quarterly.

In January 2008, the Board of Directors of our general partner, Blackstone Group Management L.L.C., authorized the repurchase of up to $500 million of our common units and Blackstone Holdings Partnership Units. Under this unit repurchase program, units may be repurchased from time to time in open market transactions, in privately negotiated transactions or otherwise. The timing and the actual number of Blackstone common units and Blackstone Holdings Partnership Units repurchased will depend on a variety of factors, including legal requirements, price and economic and market conditions. This unit repurchase program may be suspended or discontinued at any time and does not have a specified expiration date. During the three months ended

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September 30, 2017, no units were repurchased. As of September 30, 2017, the amount remaining under this program available for repurchases was $335.8 million.

Distributable Earnings, Fee Related Earnings and Economic Net Income

We use Distributable Earnings, which is derived from our segment reported results, as a supplemental non-GAAP measure to assess performance and amounts available for distributions to Blackstone unitholders, including Blackstone personnel and others who are limited partners of the Blackstone Holdings partnerships. Distributable Earnings is intended to show the amount of net realized earnings without the effects of the consolidation of the Blackstone Funds. Distributable Earnings is derived from and reconciled to, but not equivalent to, its most directly comparable GAAP measure of Income (Loss) Before Provision for Taxes. Distributable Earnings, which is a component of Economic Net Income, is the sum across all segments of: (a) Total Management, Advisory and Other Fees, Net, (b) Interest and Dividend Revenue, (c) Realized Performance Fees, and (d) Realized Investment Income (Loss); less (a) Compensation, excluding the expense of equity-based awards, (b) Realized Performance Fee Compensation, (c) Other Operating Expenses, and (d) Taxes and Related Payables Under the Tax Receivable Agreement.

Effective January 1, 2017, Fee Related Earnings was redefined to exclude all Equity-Based Compensation and Other Revenue. Distributable Earnings was redefined to exclude Other Revenue. All prior periods have been recast to reflect this reclassification. Equity-Based Compensation and Other Revenue both continue to be included in Economic Income and Economic Net Income.

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The following table calculates Blackstone’s Fee Related Earnings, Distributable Earnings and Economic Net Income:

(a) Represents the total segment amounts of the respective captions. See Note 18. “Segment Reporting” in the “Notes to Condensed Consolidated Financial Statements” in “Part I. Item 1. Financial Statements” of this filing.

(b) Detail on this amount is included in the table below.

(c) Taxes and Related Payables Including Payable Under Tax Receivable Agreement represents the total GAAP tax provision adjusted to include only the current tax provision (benefit) calculated on Income (Loss) Before Provision for Taxes and the Payable Under Tax Receivable Agreement.

(d) Represents tax-related payables including the Payable Under Tax Receivable Agreement, which is a component of Taxes and Related Payables.

(e) Represents equity-based award expense included in Economic Income, which excludes all transaction-related equity-based charges.

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The following calculates the components of Fee Related Earnings, Distributable Earnings and Economic Net Income in the above table identified by note (b):

(a) Represents the total segment amounts of the respective captions. See Note 18. “Segment Reporting” in the “Notes to Condensed Consolidated Financial Statements” in “Part I. Item 1. Financial Statements” of this filing.

(b) Represents Interest Expense, including inter-segment interest related expense.

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(c) Taxes and Related Payables Including Payable Under Tax Receivable Agreement represent the total GAAP tax provision adjusted to include only the current tax provision (benefit) calculated on Income (Loss) Before Provision for Taxes and the Payable Under Tax Receivable Agreement.

(d) Represents tax-related payables including the Payable Under Tax Receivable Agreement, which is a component of Taxes and Related Payables.

(e) Represents equity-based award expense included in Economic Income, which excludes all transaction-related equity-based charges.

The following table is a reconciliation of Net Income (Loss) Attributable to The Blackstone Group L.P. to Economic Income, of Economic Income to Economic Net Income, of Economic Net Income to Fee Related Earnings, of Fee Related Earnings to Distributable Earnings and of Distributable Earnings to Adjusted Earnings Before Interest, Taxes and Depreciation and Amortization:

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(a) This adjustment adds back to Income (Loss) Before Provision (Benefit) for Taxes amounts for Transaction-Related Charges which include principally equity-based compensation charges associated with Blackstone’s IPO and certain long-term retention programs outside of annual deferred compensation and other corporate actions.

(b) This adjustment adds back to Income (Loss) Before Provision (Benefit) for Taxes amounts for the Amortization of Intangibles which are associated with Blackstone’s IPO and other corporate actions.

(c) This adjustment adds back to Income (Loss) Before Provision (Benefit) for Taxes the amount of (Income) Loss Associated with Non-Controlling Interests of Consolidated Entities and includes the amount of Management Fee Revenues associated with consolidated CLO entities.

(d) Taxes represent the total GAAP tax provision adjusted to include only the current tax provision (benefit) calculated on Income (Loss) Before Provision (Benefit) for Taxes.

(e) This adjustment removes from Economic Income the total segment amount of Performance Fees.

(f) This adjustment removes from Economic Income the total segment amount of Investment Income (Loss).

(g) This adjustment removes from Economic Income the total segment amount of Other Revenue.

(h) This adjustment represents Interest Income and Dividend Revenue less Interest Expense.

(i) This adjustment removes from expenses the compensation and benefit amounts related to Blackstone’s profit sharing plans related to Performance Fees, including Incentive Fee Related equity-based award expense.

(j) Represents Non-Incentive Fee Related equity-based award expense and excludes all transaction-related equity-based charges.

(k) Represents the adjustment for realized Performance Fees net of corresponding actual amounts due under Blackstone’s profit sharing plans related thereto. Equals the sum of Net Realized Incentive Fees and Net Realized Carried Interest.

(l) Represents the adjustment for Blackstone’s Realized Investment Income (Loss).

(m) Taxes and Related Payables Including Payable Under Tax Receivable Agreement represent the total GAAP tax provision adjusted to include only the current tax provision (benefit) calculated on Income (Loss) Before Provision (Benefit) for Taxes and the Payable Under Tax Receivable Agreement.

(n) Represents Interest Expense, including inter-segment interest related expense.

Distributions

Distributable Earnings, which is derived from Blackstone’s segment reported results, is a supplemental measure to assess performance and amounts available for distributions to Blackstone unitholders, including Blackstone personnel and others who are limited partners of the Blackstone Holdings partnerships. Distributable Earnings is intended to show the amount of net realized earnings without the effects of the consolidation of the Blackstone Funds. Distributable Earnings, which is a component of Economic Net Income, is the sum across all segments of: (a) Total Management, Advisory and Other Fees, Net, (b) Interest and Dividend Revenue, (c) Realized Performance Fees, and (d) Realized Investment Income (Loss); less (a) Compensation, excluding the expense of equity-based awards, (b) Realized Performance Fee Compensation, (c) Other Operating Expenses, and (d) Taxes and Related Payables Under the Tax Receivable Agreement

Our intention is to distribute quarterly to common unitholders approximately 85% of The Blackstone Group L.P.’s share of Distributable Earnings, subject to adjustment by amounts determined by Blackstone’s general partner to be necessary or appropriate to provide for the conduct of its business, to make appropriate investments in its business and funds, to comply with applicable law, any of its debt instruments or other agreements, or to provide for future cash requirements such as tax-related payments, clawback obligations and distributions to unitholders for any ensuing quarter. The amount to be distributed could also be adjusted upward in any one quarter.

All of the foregoing is subject to the qualification that the declaration and payment of any distributions are at the sole discretion of our general partner and our general partner may change our distribution policy at any time, including, without limitation, to reduce the quarterly distribution payable to our common unitholders or even to eliminate such distributions entirely.

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Because the subsidiaries of The Blackstone Group L.P. must pay taxes and make payments under the tax receivable agreements, the amounts ultimately distributed by The Blackstone Group L.P. to its common unitholders in respect of each fiscal year are generally expected to be less, on a per unit basis, than the amounts distributed by the Blackstone Holdings Partnerships to the Blackstone personnel and others who are limited partners of the Blackstone Holdings Partnerships in respect of their Blackstone Holdings Partnership Units.

The following graph shows fiscal quarterly and annual per common unitholder distributions for 2016 and 2017. Distributions are declared and paid in the quarter subsequent to the quarter in which they are earned.

With respect to the third quarter of fiscal year 2017, we have paid to common unitholders a distribution of $0.44 per common unit, aggregating $1.85 per common unit in respect of the nine months ended September 30, 2017. With respect to fiscal year 2016, we paid common unitholders aggregate distributions of $1.52 per common unit.

Leverage

We may under certain circumstances use leverage opportunistically and over time to create the most efficient capital structure for Blackstone and our public common unitholders. In addition to the borrowings from our bond issuances and our revolving credit facility, we may use reverse repurchase agreements, repurchase agreements and securities sold, not yet purchased. All of these positions are held in a separately managed portfolio. Reverse repurchase agreements are entered into primarily to take advantage of opportunistic yields otherwise absent in the overnight markets and also to use the collateral received to cover securities sold, not yet purchased. Repurchase agreements are entered into primarily to opportunistically yield higher spreads on purchased securities. The balances held in these financial instruments fluctuate based on Blackstone’s liquidity needs, market conditions and investment risk profiles.

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Generally our funds in our private equity segment, our opportunistic real estate funds, funds of hedge funds and certain credit-focused funds have not utilized substantial leverage at the fund level other than for (a) short-term borrowings between the date of an investment and the receipt of capital from the investing fund’s investors, and (b) long-term borrowings for certain investments in aggregate amounts which are generally 1% to 25% of the capital commitments of the respective fund. Our carry funds make direct or indirect investments in companies that utilize leverage in their capital structure. The degree of leverage employed varies among portfolio companies.

Certain of our Real Estate debt hedge funds, Hedge Fund Solutions funds and credit-focused funds use leverage in order to obtain additional market exposure, enhance returns on invested capital and/or to bridge short-term cash needs. The forms of leverage primarily employed by these funds include purchasing securities on margin, utilizing collateralized financing and using derivative instruments.

The following table presents information regarding these financial instruments in our Condensed Consolidated Statements of Financial Condition:

	Reverse Repurchase Agreements		Repurchase Agreements		Securities Sold, Not Yet Purchased
	(Dollars in Millions)
Balance, September 30, 2017	$	—	$	74.7	$	105.5
Balance, December 31, 2016	$	118.5	$	75.3	$	215.4
Nine Months Ended September 30, 2017
Average Daily Balance	$	33.6	$	87.8	$	165.7
Maximum Daily Balance	$	118.5	$	152.7	$	262.1

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Contractual Obligations, Commitments and Contingencies

The following table sets forth information relating to our contractual obligations as of September 30, 2017 on a consolidated basis and on a basis deconsolidating the Blackstone Funds:

Contractual Obligations	October 1, 2017 to December 31, 2017			2018-2019			2020-2021			Thereafter			Total
	(Dollars in Thousands)
Operating Lease Obligations (a)	$	19,830		$	146,611		$	143,612		$	419,457		$	729,510
Purchase Obligations		9,181			24,588			4,689			—			38,458
Blackstone Issued Notes and Revolving Credit Facility (b)		—			585,000			400,000			2,563,260			3,548,260
Interest on Blackstone Issued Notes and Revolving Credit Facility (c)		19,590			303,266			214,004			1,356,721			1,893,581
Blackstone Funds and CLO Vehicles Debt Obligations Payable (d)		149,309			—			531,630			8,679,959			9,360,898
Interest on Blackstone Funds and CLO Vehicles Debt Obligations Payable (e)		47,766			378,946			365,741			1,337,460			2,129,913
Blackstone Funds Capital Commitments to Investee Funds (f)		644,521			—			—			—			644,521
Due to Certain Non-Controlling Interest Holders in Connection with Tax Receivable Agreements (g)		—			164,171			192,538			843,538			1,200,247
Unrecognized Tax Benefits, Including Interest and Penalties (h)		6,548			—			—			—			6,548
Blackstone Operating Entities Capital Commitments to Blackstone Funds and Other (i)		2,729,371			—			—			—			2,729,371
Consolidated Contractual Obligations		3,626,116			1,602,582			1,852,214			15,200,395			22,281,307
Blackstone Funds and CLO Vehicles Debt Obligations Payable (d)		(149,309	)		—			(531,630	)		(8,679,959	)		(9,360,898	)
Interest on Blackstone Funds and CLO Vehicles Debt Obligations Payable (e)		(47,766	)		(378,946	)		(365,741	)		(1,337,460	)		(2,129,913	)
Blackstone Funds Capital Commitments to Investee Funds (f)		(644,521	)		—			—			—			(644,521	)
Blackstone Operating Entities Contractual Obligations	$	2,784,520		$	1,223,636		$	954,843		$	5,182,976		$	10,145,975

(a) We lease our primary office space and certain office equipment under agreements that expire through 2030. In connection with certain office space lease agreements, we are responsible for escalation payments. The contractual obligation table above includes only guaranteed minimum lease payments for such leases and does not project potential escalation or other lease-related payments. These leases are classified as operating leases for financial statement purposes and as such are not recorded as liabilities on the Condensed Consolidated Statements of Financial Condition. The amounts are presented net of contractual sublease commitments.

(b) Represents the principal amount due on the senior notes we issued. As of September 30, 2017, we had no outstanding borrowings under our revolver. See “— Significant Transactions” for events occurring after September 30, 2017 related to our senior notes.

(c) Represents interest to be paid over the maturity of our senior notes and borrowings under our revolving credit facility which has been calculated assuming no pre-payments are made and debt is held until its final maturity date. These amounts exclude commitment fees for unutilized borrowings under our revolver.

(d) These obligations are those of the Blackstone Funds including the consolidated CLO vehicles.

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(e) Represents interest to be paid over the maturity of the related consolidated Blackstone Funds’ and CLO vehicles’ debt obligations which has been calculated assuming no pre-payments will be made and debt will be held until its final maturity date. The future interest payments are calculated using variable rates in effect as of September 30, 2017, at spreads to market rates pursuant to the financing agreements, and range from 0.6% to 9.4%. The majority of the borrowings are due on demand and for purposes of this schedule are assumed to mature within one year. Interest on the majority of these borrowings rolls over into the principal balance at each reset date.

(f) These obligations represent commitments of the consolidated Blackstone Funds to make capital contributions to investee funds and portfolio companies. These amounts are generally due on demand and are therefore presented in the less than one year category.

(g) Represents obligations by the Partnership’s corporate subsidiary to make payments under the Tax Receivable Agreements to certain non-controlling interest holders for the tax savings realized from the taxable purchases of their interests in connection with the reorganization at the time of Blackstone’s IPO in 2007 and subsequent purchases. The obligation represents the amount of the payments currently expected to be made, which are dependent on the tax savings actually realized as determined annually without discounting for the timing of the payments. As required by GAAP, the amount of the obligation included in the Condensed Consolidated Financial Statements and shown in Note 16. “Related Party Transactions” (see “Part I. Item 1. Financial Statements”) differs to reflect the net present value of the payments due to certain non-controlling interest holders.

(h) The total represents gross unrecognized tax benefits of $3.3 million and interest and penalties of $3.2 million. In addition, Blackstone is not able to make a reasonably reliable estimate of the timing of payments in individual years in connection with gross unrecognized benefits of $0.3 million and interest of $0.4 million; therefore, such amounts are not included in the above contractual obligations table.

(i) These obligations represent commitments by us to provide general partner capital funding to the Blackstone Funds, limited partner capital funding to other funds and Blackstone principal investment commitments. These amounts are generally due on demand and are therefore presented in the less than one year category; however, a substantial amount of the capital commitments are expected to be called over the next three years. We expect to continue to make these general partner capital commitments as we raise additional amounts for our investment funds over time.

Guarantees

Blackstone and certain of its consolidated funds provide financial guarantees. The amounts and nature of these guarantees are described in Note 17. “Commitments and Contingencies – Contingencies – Guarantees” in the “Notes to Condensed Consolidated Financial Statements” in “Part I. Item 1. Financial Statements” of this filing.

Indemnifications

In many of its service contracts, Blackstone agrees to indemnify the third party service provider under certain circumstances. The terms of the indemnities vary from contract to contract and the amount of indemnification liability, if any, cannot be determined and has not been included in the table above or recorded in our Condensed Consolidated Financial Statements as of September 30, 2017.

Clawback Obligations

Carried Interest is subject to clawback to the extent that the Carried Interest received to date with respect to a fund exceeds the amount due to Blackstone based on cumulative results of that fund. The actual clawback liability, however, generally does not become realized until the end of a fund’s life except for certain Blackstone real estate funds, multi-asset class investment funds and credit-focused funds, which may have an interim clawback liability. The lives of the carry funds, including available contemplated extensions, for which a liability for potential clawback obligations has been recorded for financial reporting purposes, are currently anticipated to expire at various points through 2028. Further extensions of such terms may be implemented under given circumstances.

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For financial reporting purposes, when applicable, the general partners record a liability for potential clawback obligations to the limited partners of some of the carry funds due to changes in the unrealized value of a fund’s remaining investments and where the fund’s general partner has previously received Carried Interest distributions with respect to such fund’s realized investments.

As of September 30, 2017, the total clawback obligations were $2.2 million, of which $1.1 million related to Blackstone Holdings and $1.1 million related to current and former Blackstone personnel. If, at September 30, 2017, all of the investments held by our carry funds were deemed worthless, a possibility that management views as remote, the amount of Carried Interest subject to potential clawback would be $5.4 billion, on an after-tax basis where applicable, of which Blackstone Holdings is potentially liable for $5.0 billion if current and former Blackstone personnel default on their share of the liability, a possibility that management also views as remote. (See Note 16. “Related Party Transactions” and Note 17. “Commitments and Contingencies” in the “Notes to Condensed Consolidated Financial Statements” in “Part I. Item 1. Financial Statements” of this filing.)

Critical Accounting Policies

We prepare our Condensed Consolidated Financial Statements in accordance with GAAP. In applying many of these accounting principles, we need to make assumptions, estimates and/or judgments that affect the reported amounts of assets, liabilities, revenues and expenses in our condensed consolidated financial statements. We base our estimates and judgments on historical experience and other assumptions that we believe are reasonable under the circumstances. These assumptions, estimates and/or judgments, however, are often subjective. Actual results may be affected negatively based on changing circumstances. If actual amounts are ultimately different from our estimates, the revisions are included in our results of operations for the period in which the actual amounts become known. We believe the following critical accounting policies could potentially produce materially different results if we were to change underlying assumptions, estimates and/or judgments. (See Note 2. “Summary of Significant Accounting Policies” in the “Notes to Condensed Consolidated Financial Statements” in “Part I. Item 1. Financial Statements” of this filing.)

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

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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.

Revenue Recognition

Revenues primarily consist of management and advisory fees, performance fees, investment income, interest and dividend revenue and other. Please refer to “Part I. Item 1. Business – Incentive Arrangements / Fee Structure” in our Annual Report on Form 10-K for the year ended December 31, 2016 for additional information regarding the manner in which Base Management Fees and Performance Fees are generated.

Management and Advisory Fees, Net — Management and Advisory Fees, Net are comprised of management fees, including base management fees, transaction and other fees and advisory fees net of management fee reductions and offsets.

The Partnership earns base management fees from limited partners of funds in each of its managed funds, at a fixed percentage of assets under management, net asset value, total assets, committed capital or invested capital, or in some cases, a fixed fee. Base management fees are recognized based on contractual terms specified in the underlying investment advisory agreements. The range of management fee rates and the calculation base from which they are earned, generally, are as follows:

On private equity, real estate, and certain of our hedge fund solutions and credit-focused funds:

• 0.28% to 1.75% of committed capital or invested capital during the investment period,

• 0.25% to 1.75% of invested capital or investment fair value subsequent to the investment period for private equity and real estate funds, and

• 0.75% to 1.50% of invested capital or net asset value subsequent to the investment period for certain of our hedge fund solutions and credit-focused funds.

On real estate and credit-focused funds structured like hedge funds:

• 0.50% to 1.50% of net asset value.

On credit-focused separately managed accounts:

• 0.35% to 1.50% of net asset value.

On real estate separately managed accounts:

• 0.50% to 2.00% of invested capital, net operating income or net asset value.

On funds of hedge funds, certain hedge funds and separately managed accounts invested in hedge funds:

• 0.50% to 1.25% of net asset value.

On CLO vehicles:

• 0.40% to 0.65% of the aggregate par amount of collateral assets, including principal cash.

On credit-focused registered and non-registered investment companies:

• 0.35% to 1.50% of total assets or net asset value.

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The investment adviser of BXMT receives annual management fees based upon 1.50% of BXMT’s net proceeds received from equity offerings and accumulated “core earnings” (which is generally equal to its GAAP net income excluding certain non-cash and other items), subject to certain adjustments. The investment adviser of our non-exchange traded REIT receives a management fee of 1.25% per annum of net asset value, payable monthly.

Transaction and other fees (including monitoring fees) are fees charged directly to managed funds and portfolio companies. The investment advisory agreements generally require that the investment adviser reduce the amount of management fees payable by the limited partners to the Partnership (“management fee reductions”) by an amount equal to a portion of the transaction and other fees directly paid to the Partnership by the portfolio companies. The amount of the reduction varies by fund, the type of fee paid by the portfolio company and the previously incurred expenses of the fund.

Management fee offsets are reductions to management fees payable by the limited partners of the Blackstone Funds, which are granted based on the amount such limited partners reimburse the Blackstone Funds for placement fees.

Advisory fees consist of transaction-based fee arrangements. Transaction-based fees are recognized when (a) there is evidence of an arrangement with a client, (b) agreed upon services have been provided, (c) fees are fixed or determinable, and (d) collection is reasonably assured.

Accrued but unpaid Management and Advisory Fees, net of management fee reductions and management fee offsets, as of the reporting date are included in Accounts Receivable or Due from Affiliates in the Condensed Consolidated Statements of Financial Condition. Management fees paid by limited partners to the Blackstone Funds and passed on to Blackstone are not considered affiliate revenues.

Performance Fees — Performance Fees earned on the performance of Blackstone’s hedge fund structures (“Incentive Fees”) are recognized based on fund performance during the period, subject to the achievement of minimum return levels, or high water marks, in accordance with the respective terms set out in each hedge fund’s governing agreements. Accrued but unpaid Incentive Fees charged directly to investors in Blackstone’s offshore hedge funds as of the reporting date are recorded within Due from Affiliates in the Condensed Consolidated Statements of Financial Condition. Accrued but unpaid Incentive Fees on onshore funds as of the reporting date are reflected in Investments in the Condensed Consolidated Statements of Financial Condition. Incentive Fees are realized at the end of a measurement period, typically annually. Once realized, such fees are not subject to clawback or reversal.

In certain fund structures, specifically in private equity, real estate and certain hedge fund solutions and credit-focused funds (“carry funds”), performance fees (“Carried Interest”) are allocated to the general partner based on cumulative fund performance to date, subject to a preferred return to limited partners. At the end of each reporting period, the Partnership calculates the Carried Interest that would be due to the Partnership for each fund, pursuant to the fund agreements, as if the fair value of the underlying investments were realized as of such date, irrespective of whether such amounts have been realized. As the fair value of underlying investments varies between reporting periods, it is necessary to make adjustments to amounts recorded as Carried Interest to reflect either (a) positive performance resulting in an increase in the Carried Interest allocated to the general partner or (b) negative performance that would cause the amount due to the Partnership to be less than the amount previously recognized as revenue, resulting in a negative adjustment to Carried Interest allocated to the general partner. In each scenario, it is necessary to calculate the Carried Interest on cumulative results compared to the Carried Interest recorded to date and make the required positive or negative adjustments. The Partnership ceases to record negative Carried Interest allocations once previously recognized Carried Interest allocations for such fund have been fully reversed. The Partnership is not obligated to pay guaranteed returns or hurdles, and therefore, cannot have negative Carried Interest over the life of a fund. Accrued but unpaid Carried Interest as of the reporting date is reflected in Investments in the Condensed Consolidated Statements of Financial Condition.

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Carried Interest is realized when an underlying investment is profitably disposed of and the fund’s cumulative returns are in excess of the preferred return or, in limited instances, after certain thresholds for return of capital are met. Carried Interest is subject to clawback to the extent that the Carried Interest received to date exceeds the amount due to Blackstone based on cumulative results. As such, the accrual for potential repayment of previously received Carried Interest, which is a component of Due to Affiliates, represents all amounts previously distributed to Blackstone Holdings and non-controlling interest holders that would need to be repaid to the Blackstone carry funds if the Blackstone carry funds were to be liquidated based on the current fair value of the underlying funds’ investments as of the reporting date. The actual clawback liability, however, generally does not become realized until the end of a fund’s life except for certain funds, including certain Blackstone real estate funds, multi-asset class investment funds and credit-focused funds, which may have an interim clawback liability.

Investment Income (Loss) — Investment Income (Loss) represents the unrealized and realized gains and losses on the Partnership’s principal investments, including its investments in Blackstone Funds that are not consolidated, its equity method investments and other principal investments. Investment Income (Loss) is realized when the Partnership redeems all or a portion of its investment or when the Partnership receives cash income, such as dividends or distributions. Unrealized Investment Income (Loss) results from changes in the fair value of the underlying investment as well as the reversal of unrealized gain (loss) at the time an investment is realized.

Interest and Dividend Revenue — Interest and Dividend Revenue comprises primarily interest and dividend income earned on principal investments held by Blackstone.

Other Revenue — Other Revenue consists of miscellaneous income and foreign exchange gains and losses arising on transactions denominated in currencies other than U.S. dollars.

Expenses

Our expenses include compensation and benefits expense and general and administrative expenses. Our accounting policies related thereto are as follows:

Compensation and Benefits — Compensation — Compensation and Benefits consists of (a) employee compensation, comprising salary and bonus, and benefits paid and payable to employees and senior managing directors and (b) equity-based compensation associated with the grants of equity-based awards to employees and senior managing directors. Compensation cost relating to the issuance of equity-based awards to senior managing directors and employees is measured at fair value at the grant date, taking into consideration expected forfeitures, and expensed over the vesting period on a straight-line basis, except in the case of (a) equity-based awards that do not require future service, which are expensed immediately and (b) certain awards to recipients that meet specified criteria making them eligible for retirement treatment (allowing such recipient to keep a percentage of those awards upon departure from Blackstone after becoming eligible for retirement), for which the expense for the portion of the award that would be retained in the event of retirement is either expensed immediately or amortized to the retirement date. Cash settled equity-based awards are classified as liabilities and are remeasured at the end of each reporting period.

Compensation and Benefits — Performance Fee — Performance Fee Compensation consists of Carried Interest (which may be distributed in cash or in-kind) and Incentive Fee allocations, and may in future periods also include allocations of investment income from Blackstone’s firm investments, to employees and senior managing directors participating in certain profit sharing initiatives. Such compensation expense is subject to both positive and negative adjustments. Unlike Carried Interest and Incentive Fees, compensation expense is based on the performance of individual investments held by a fund rather than on a fund by fund basis. Compensation received from advisory clients in the form of securities of such clients may also be allocated to employees and senior managing directors.

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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 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 and debt securities sold, not yet purchased. 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

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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. For credit-focused investments that are not publicly traded or whose market prices are not readily available, Blackstone may utilize other valuation techniques, including the discounted cash flow method or a market approach. The discounted cash flow method projects the expected cash flows of the debt instrument based on contractual terms, and discounts such cash flows back to the valuation date using a market-based yield. The market-based yield is estimated using yields of publicly traded debt instruments issued by companies operating in similar industries as the subject investment, with similar leverage statistics and time to maturity.

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The market approach is generally used to determine the enterprise value of the issuer of a credit investment, and considers valuation multiples of comparable companies or transactions. The resulting enterprise value will dictate whether or not such credit investment has adequate enterprise value coverage. In cases of distressed credit instruments, the market approach may be used to estimate a recovery value in the event of a restructuring.

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

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presented as a transition and acquisition adjustment to Appropriated Partners’ Capital. Assets of the consolidated 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” in the “Notes to Condensed Consolidated Financial Statements” in “Part I. Item 1. Financial Statements” of this filing.

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” in the “Notes to Condensed Consolidated Financial Statements” in “Part I. Item 1. Financial Statements” of this filing.

Intangibles and Goodwill

Blackstone’s intangible assets consist of contractual rights to earn future fee income, including management and advisory fees, Incentive Fees and Carried Interest. Identifiable finite-lived intangible assets are amortized on a straight-line basis over their estimated useful lives, ranging from 3 to 20 years, reflecting the contractual lives of such assets. Amortization expense is included within General, Administrative and Other in the Condensed Consolidated Statements of Operations. The Partnership does not hold any indefinite-lived intangible assets. Intangible assets are reviewed for impairment when events or changes in circumstances indicate that the carrying amount may not be recoverable.

Goodwill comprises goodwill arising from the contribution and reorganization of the Partnership’s predecessor entities in 2007 immediately prior to its IPO, the acquisition of GSO in 2008 and the acquisition of Strategic Partners in 2013. Goodwill is reviewed for impairment at least annually utilizing a qualitative or quantitative

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approach, and more frequently if circumstances indicate impairment may have occurred. The impairment testing for goodwill under the qualitative approach is based first on a qualitative assessment to determine if it is more likely than not that the fair value of Blackstone’s operating segments is less than their respective carrying values. The operating segment is the reporting level for testing the impairment of goodwill. If it is determined that it is more likely than not that an operating segment’s fair value is less than its carrying value or when the quantitative approach is used, a two-step quantitative assessment is performed to (a) calculate the fair value of the operating segment and compare it to its carrying value, and (b) if the carrying value exceeds its fair value, to measure an impairment loss.

Senior management has organized the firm into four operating segments. All of the components in each segment have similar economic characteristics and senior management makes key operating decisions based on the performance of each segment. Therefore, we believe that operating segment is the appropriate reporting level for testing the impairment of goodwill.

The carrying value of goodwill was $1.7 billion as of September 30, 2017 and December 31, 2016. At September 30, 2017 and December 31, 2016, we determined that there was no evidence of goodwill impairment.

Off-Balance Sheet Arrangements

In the normal course of business, we enter into various off-balance sheet arrangements including sponsoring and owning limited or general partner interests in consolidated and non-consolidated funds, entering into derivative transactions, entering into operating leases and entering into guarantee arrangements. We also have ongoing capital commitment arrangements with certain of our consolidated and non-consolidated drawdown funds. We do not have any off-balance sheet arrangements that would require us to fund losses or guarantee target returns to investors in our funds.

Further disclosure on our off-balance sheet arrangements is presented in the “Notes to Condensed Consolidated Financial Statements” in “Part I. Item 1. Financial Statements” of this filing as follows:

• Note 6. “Derivative Financial Instruments”,

• Note 9. “Variable Interest Entities”, and

• Note 17. “Commitments and Contingencies — Commitments — Investment Commitments” and “— Contingencies — Guarantees”.

Recent Accounting Developments

Information regarding recent accounting developments and their impact on Blackstone can be found in Note 2. “Summary of Significant Accounting Policies” in the “Notes to Condensed Consolidated Financial Statements” in “Part I. Item 1. Financial Statements” of this filing.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our predominant exposure to market risk is related to our role as general partner or investment adviser to the Blackstone Funds and the sensitivities to movements in the fair value of their investments, including the effect on management fees, performance fees and investment income.

Although the Blackstone Funds share many common themes, each of our alternative asset management operations runs its own investment and risk management processes, subject to our overall risk tolerance and philosophy:

• The investment process of our carry funds involves a detailed analysis of potential investments, and asset management teams are assigned to oversee the operations, strategic development, financing and capital

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deployment decisions of each portfolio investment. Key investment decisions are subject to approval by the applicable investment committee, which is comprised of Blackstone senior managing directors and senior management.

• In our capacity as adviser to certain funds in our Hedge Fund Solutions and Credit segments, we continuously monitor a variety of markets for attractive trading opportunities, applying a number of traditional and customized risk management metrics to analyze risk related to specific assets or portfolios. In addition, we perform extensive credit and cash flow analyses of borrowers, credit-based assets and underlying hedge fund managers, and have extensive asset management teams that monitor covenant compliance by, and relevant financial data of, borrowers and other obligors, asset pool performance statistics, tracking of cash payments relating to investments and ongoing analysis of the credit status of investments.

Effect on Fund Management Fees

Our management fees are based on (a) third parties’ capital commitments to a Blackstone Fund, (b) third parties’ capital invested in a Blackstone Fund or (c) the net asset value, or NAV, of a Blackstone Fund, as described in our Condensed Consolidated Financial Statements. Management fees will only be directly affected by short-term changes in market conditions to the extent they are based on NAV or represent permanent impairments of value. These management fees will be increased (or reduced) in direct proportion to the effect of changes in the fair value of our investments in the related funds. The proportion of our management fees that are based on NAV is dependent on the number and types of Blackstone Funds in existence and the current stage of each fund’s life cycle. For the nine months ended September 30, 2017 and September 30, 2016, the percentages of our fund management fees based on the NAV of the applicable funds or separately managed accounts, were as follows:

	Nine Months Ended September 30,
	2017			2016
Fund Management Fees Based on the NAV of the Applicable Funds or Separately Managed Accounts		32	%		35	%

Market Risk

The Blackstone Funds hold investments which are reported at fair value. Based on the fair value as of September 30, 2017 and September 30, 2016, we estimate that a 10% decline in fair value of the investments would result in the following declines in Management Fees, Performance Fees, Net of Related Compensation Expense and Investment Income:

	September 30,
	2017						2016
	Management Fees (a)		Performance Fees, Net of Related Compensation Expense (b)		Investment Income (b)		Management Fees (a)		Performance Fees, Net of Related Compensation Expense (b)		Investment Income (b)
	(Dollars in Thousands)
10% Decline in Fair Value of the Investments	$	88,953	$	1,341,724	$	184,092	$	91,459	$	1,282,928	$	250,895

(a) Represents the annualized effect of the 10% decline.

(b) Represents the reporting date effect of the 10% decline.

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Total Assets Under Management, excluding undrawn capital commitments and the amount of capital raised for our CLOs, by segment, and the percentage amount classified as Level III investments as defined within the fair value standards of GAAP, are as follows:

	September 30, 2017
	Total Assets Under Management, Excluding Undrawn Capital Commitments and the Amount of Capital Raised for CLOs		Percentage Amount Classified as Level III Investments
	(Dollars in Thousands)
Private Equity	$	51,433,331		73	%
Real Estate	$	75,715,915		85	%
Credit	$	56,543,361		55	%

The fair value of our investments and securities can vary significantly based on a number of factors that take into consideration the diversity of the Blackstone Funds’ investment portfolio and on a number of factors and inputs such as similar transactions, financial metrics, and industry comparatives, among others. (See “Part I. Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2016. Also see “Part I. Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies — Investments, at Fair Value.”) We believe these fair value amounts should be utilized with caution as our intent and strategy is to hold investments and securities until prevailing market conditions are beneficial for investment sales.

Investors in all of our carry funds (and certain of our credit-focused funds and funds of hedge funds) make capital commitments to those funds that we are entitled to call from those investors at any time during prescribed periods. We depend on investors fulfilling their commitments when we call capital from them in order for those funds to consummate investments and otherwise pay their related obligations when due, including management fees. We have not had investors fail to honor capital calls to any meaningful extent and any investor that did not fund a capital call would be subject to having a significant amount of its existing investment forfeited in that fund; however, if investors were to fail to satisfy a significant amount of capital calls for any particular fund or funds, those funds could be materially and adversely affected.

Exchange Rate Risk

The Blackstone Funds hold investments that are denominated in non-U.S. dollar currencies that may be affected by movements in the rate of exchange between the U.S. dollar and non-U.S. dollar currencies. Additionally, a portion of our management fees are denominated in non-U.S. dollar currencies. We estimate that as of September 30, 2017 and September 30, 2016, a 10% decline in the rate of exchange of all foreign currencies against the U.S. dollar would result in the following declines in Management Fees, Performance Fees, Net of Related Compensation Expense and Investment Income:

	September 30,
	2017						2016
	Management Fees (a)		Performance Fees, Net of Related Compensation Expense (b)		Investment Income (b)		Management Fees (a)		Performance Fees, Net of Related Compensation Expense (b)		Investment Income (b)
	(Dollars in Thousands)
10% Decline in the Rate of Exchange of All Foreign Currencies Against the U.S. Dollar	$	13,979	$	434,471	$	31,749	$	13,044	$	195,523	$	29,521

(a) Represents the annualized effect of the 10% decline.

(b) Represents the reporting date effect of the 10% decline.

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Interest Rate Risk

Blackstone has debt obligations payable that accrue interest at variable rates. Interest rate changes may therefore affect the amount of our interest payments, future earnings and cash flows. Based on our debt obligations payable as of September 30, 2017 and September 30, 2016, we estimate that interest expense relating to variable rates would increase on an annual basis, in the event interest rates were to increase by one percentage point, as follows:

	September 30,
	2017		2016
	(Dollars in Thousands)
Annualized Increase in Interest Expense Due to a One Percentage Point Increase in Interest Rates	$	28	$	29

Blackstone has a diversified portfolio of liquid assets to meet the liquidity needs of various businesses. This portfolio includes cash, open ended money market mutual funds, open ended bond mutual funds, marketable investment securities, freestanding derivative contracts, repurchase and reverse repurchase agreements and other investments. If interest rates were to increase by one percentage point, we estimate that our annualized investment income would decrease, offset by an estimated increase in interest income on an annual basis from interest on floating rate assets, as follows:

	September 30,
	2017					2016
	Annualized Decrease in Investment Income			Annualized Increase in Interest Income from Floating Rate Assets		Annualized Decrease in Investment Income			Annualized Increase in Interest Income from Floating Rate Assets
	(Dollars in Thousands)
One Percentage Point Increase in Interest Rates	$	31,548	(a)	$	20,614	$	20,762	(a)	$	17,272

(a) As of September 30, 2017 and 2016, this represents 0.6% and 0.5% of our portfolio of liquid assets, respectively.

Credit Risk

Certain Blackstone Funds and the Investee Funds are subject to certain inherent risks through their investments.

Our portfolio of liquid assets contain certain credit risks including, but not limited to, exposure to uninsured deposits with financial institutions, unsecured corporate bonds and mortgage-backed securities. These exposures are actively monitored on a continuous basis and positions are reallocated based on changes in risk profile, market or economic conditions.

We estimate that our annualized investment income would decrease, if credit spreads were to increase by one percentage point, as follows:

	September 30,
	2017		2016
	(Dollars in Thousands)
Decrease in Annualized Investment Income Due to a One Percentage Point Increase in Credit Spreads (a)	$	45,305	$	26,902

(a) As of September 30, 2017 and 2016, this represents 0.9% and 0.7% of our portfolio of liquid assets, respectively.

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Certain of our entities hold derivative instruments that contain an element of risk in the event that the counterparties may be unable to meet the terms of such agreements. We minimize our risk exposure by limiting the counterparties with which we enter into contracts to banks and investment banks who meet established credit and capital guidelines. We do not expect any counterparty to default on its obligations and therefore do not expect to incur any loss due to counterparty default.

ITEM 4. CONTROLS AND PROCEDURES

We maintain “disclosure controls and procedures,” as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”), that are designed to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired objectives.

Our management, including our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15 under the Exchange Act as of the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the period covered by this report, our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) are effective at the reasonable assurance level to accomplish their objectives of ensuring that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

No changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act) occurred during our most recent quarter, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We may from time to time be involved in litigation and claims incidental to the conduct of our business. Our businesses are also subject to extensive regulation, which may result in regulatory proceedings against us. See “Part I. Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2016. We are not currently subject to any pending judicial, administrative or arbitration proceedings that we expect to have a material impact on our consolidated financial statements. However, given the inherent unpredictability of these types of proceedings and the potentially large and/or indeterminate amounts that could be sought, it is possible that an adverse outcome in certain matters could have a material effect on Blackstone’s financial results in any particular period.

ITEM 1A. RISK FACTORS

For a discussion of our potential risks and uncertainties, see the information under the heading “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2016 and in our subsequently filed Quarterly Reports on Form 10-Q, all of which are accessible on the Securities and Exchange Commission’s website at www.sec.gov.

See “Part I. Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Business Environment” in this report for a discussion of the conditions in the financial markets and economic conditions affecting our businesses. This discussion updates, and should be read together with, the risk factor entitled “Difficult market conditions can adversely affect our business in many ways, including by reducing the value or performance of the investments made by our investment funds and reducing the ability of our investment funds to raise or deploy capital, each of which could materially reduce our revenue, earnings and cash flow and adversely affect our financial prospects and condition.” in our Annual Report on Form 10-K for the year ended December 31, 2016.

The risks described in our Annual Report on Form 10-K and in our subsequently filed Quarterly Reports on Form 10-Q are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

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

In January 2008, the Board of Directors of our general partner, Blackstone Group Management L.L.C., authorized the repurchase of up to $500 million of Blackstone common units and Blackstone Holdings Partnership Units. Under this unit repurchase program, units may be repurchased from time to time in open market transactions, in privately negotiated transactions or otherwise. The timing and the actual number of Blackstone common units and Blackstone Holdings Partnership Units repurchased will depend on a variety of factors, including legal requirements, price and economic and market conditions. The unit repurchase program may be suspended or discontinued at any time and does not have a specified expiration date. During the three months ended September 30, 2017, no units were repurchased. As of September 30, 2017, the amount remaining available for repurchases was $335.8 million under this program. See “Part I. Item 1. Financial Statements — Notes to Condensed Consolidated Financial Statements — Note 14. Net Income Per Common Unit” and “Part I. Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Sources and Used of Liquidity” for further information regarding this unit repurchase program.

As permitted by our policies and procedures governing transactions in our securities by our directors, executive officers and other employees, from time to time some of these persons may establish plans or arrangements complying with Rule 10b5-1 under the Exchange Act, and similar plans and arrangements relating to our common units and Blackstone Holdings Partnership Units.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

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ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

Exhibit Number	Exhibit Description
4.1	Tenth Supplemental Indenture dated as of October 2, 2017 among Blackstone Holdings Finance Co. L.L.C., The Blackstone Group L.P., Blackstone Holdings I L.P., Blackstone Holdings AI L.P., Blackstone Holdings II L.P., Blackstone Holdings III L.P., Blackstone Holdings IV L.P. and The Bank of New York Mellon, as trustee (incorporated by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K (File No. 001-33551) filed with the SEC on October 2, 2017).
4.2	Form of 3.150% Senior Note due 2027 (included in Exhibit 4.1 hereto).
4.3	Eleventh Supplemental Indenture dated as of October 2, 2017 among Blackstone Holdings Finance Co. L.L.C., The Blackstone Group L.P., Blackstone Holdings I L.P., Blackstone Holdings AI L.P., Blackstone Holdings II L.P., Blackstone Holdings III L.P., Blackstone Holdings IV L.P. and The Bank of New York Mellon, as trustee (incorporated by reference to Exhibit 4.4 to the Registrant’s Current Report on Form 8-K (File No. 001-33551) filed with the SEC October 2, 2017).
4.4	Form of 4.000% Senior Note due 2047 (included in Exhibit 4.3 hereto).
10.1*	Aircraft Dry Lease Agreement between GH4 Partners LLC and Blackstone Administrative Services Partnership L.P. dated as of August 7, 2017.
10.2*	Aircraft Dry Lease Agreement between XB Partners LLC and Blackstone Administrative Services Partnership L.P. dated as of August 7, 2017.
10.3*	Aircraft Dry Lease Agreement between GBBX Associates LLC, WLBX LLC and Blackstone Administrative Services Partnership L.P. dated as of August 7, 2017.
31.1*	Certification of the Chief Executive Officer pursuant to Rule 13a-14(a).
31.2*	Certification of the Chief Financial Officer pursuant to Rule 13a-14(a).
32.1*	Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).
32.2*	Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).
101.INS*	XBRL Instance Document.
101.SCH*	XBRL Taxonomy Extension Schema Document.
101.CAL*	XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF*	XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB*	XBRL Taxonomy Extension Label Linkbase Document.
101.PRE*	XBRL Taxonomy Extension Presentation Linkbase Document.

* Filed herewith.

+ Management contract or compensatory plan or arrangement in which directors or executive officers are eligible to participate.

The agreements and other documents filed as exhibits to this report are not intended to provide factual information or other disclosure other than with respect to the terms of the agreements or other documents themselves, and you should not rely on them for that purpose. In particular, any representations and warranties made by us in these agreements or other documents were made solely within the specific context of the relevant agreement or document and may not describe the actual state of affairs as of the date they were made or at any other time.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: November 7, 2017

The Blackstone Group L.P.
By:	Blackstone Group Management L.L.C., its General Partner
	/s/ Michael S. Chae
Name:	Michael S. Chae
Title:	Chief Financial Officer
	(Principal Financial Officer and Authorized Signatory)

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