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RELATED PARTY TRANSACTIONS | 6 Months Ended
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Jun. 30, 2012
RELATED PARTY TRANSACTIONS |
15. | RELATED PARTY TRANSACTIONS
Affiliate Receivables and Payables As of June 30, 2012 and December 31, 2011, Due from Affiliates and Due to Affiliates comprised the following:
|  | June 30, |  |  | December 31, |
|  | 2012 |  |  | 2011 |
Due from Affiliates |  |  |  |  |  |  |  |
Accrual for Potential Clawback of Previously Distributed Carried Interest |  | $ | 160,755 |  |  | $ | 167,415 |
Primarily Interest Bearing Advances Made on Behalf of Certain Non-Controlling Interest Holders and Blackstone Employees for Investments in Blackstone Funds |  |  | 150,482 |  |  |  | 223,281 |
Amounts Due from Portfolio Companies and Funds |  |  | 278,602 |  |  |  | 234,254 |
Investments Redeemed in Non-Consolidated Funds of Funds |  |  | 1,522 |  |  |  | 67,608 |
Management and Performance Fees Due from Non-Consolidated Funds of Funds |  |  | 79,647 |  |  |  | 71,162 |
Payments Made on Behalf of Non-Consolidated Entities |  |  | 120,510 |  |  |  | 87,711 |
Advances Made to Certain Non-Controlling Interest Holders and Blackstone Employees |  |  | 8,545 |  |  |  | 9,083 |
|  | $ | 800,063 |  |  | $ | 860,514 |
|  | June 30, 2012 |  |  | December 31, 2011 |
Due to Affiliates |  |  |  |  |  |  |  |
Due to Certain Non-Controlling Interest Holders in Connection with the Tax Receivable Agreements |  | $ | 1,167,547 |  |  | $ | 1,112,330 |
Accrual for Potential Repayment of Previously Received Performance Fees |  |  | 261,007 |  |  |  | 266,300 |
Due to Note-Holders of Consolidated CLO Vehicles |  |  | 206,842 |  |  |  | 292,372 |
Distributions Received on Behalf of Certain Non-Controlling Interest Holders and Blackstone Employees |  |  | 32,055 |  |  |  | 20,526 |
Payable to Affiliates for Consolidated Funds in Liquidation |  |  | 51,760 |  |  |  | 58,793 |
Distributions Received on Behalf of Blackstone Entities |  |  | 35,286 |  |  |  | 42,620 |
Payments Made by Non-Consolidated Entities |  |  | 9,245 |  |  |  | 18,527 |
|  | $ | 1,763,742 |  |  | $ | 1,811,468 |
Interests of the Founder, Senior Managing Directors and Employees The founder, senior managing directors and employees invest on a discretionary basis in the Blackstone Funds both directly and through consolidated entities. Their investments may be subject to preferential management fee and performance fee arrangements. As of June 30, 2012 and December 31, 2011, the founder’s, other senior managing directors’ and employees’ investments aggregated $782.3 million and $715.5 million, respectively, and the founder’s, other senior managing directors’ and employees’ share of the Net Income Attributable to Redeemable Non-Controlling and Non-Controlling Interests in Consolidated Entities aggregated $9.9 million and $61.1 million for the three months ended June 30, 2012 and 2011, respectively, and $43.3 million and $131.9 million for the six months ended June 30, 2012 and 2011, respectively. Revenues Earned from Affiliates Management and Advisory Fees earned from affiliates totaled $56.1 million and $118.9 million for the three months ended June 30, 2012 and 2011, respectively. Management and Advisory Fees earned from affiliates totaled $104.1 million and $189.0 million for the six months ended June 30, 2012 and 2011, respectively. Fees relate primarily to transaction and monitoring fees which are made in the ordinary course of business and under terms that would have been obtained from unaffiliated third parties. 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 $1.0 million and $0.6 million for the three months ended June 30, 2012 and 2011, respectively, and $2.3 million and $1.3 million for the six months ended June 30, 2012 and 2011, respectively. No such loans to any director or executive officer of Blackstone have been made or were outstanding since March 22, 2007, the date of Blackstone’s initial filing with the Securities and Exchange Commission of a registration statement relating to its initial public offering. 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 Possible 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 June 30, 2012. See Note 16. “Commitments and Contingencies — Contingencies — Contingent Obligations (Clawback)”. Aircraft and Other Services In the normal course of business, Blackstone personnel have made use of aircraft owned as personal assets by Stephen A. Schwarzman (“Personal Aircraft”). In addition, on occasion, Mr. Schwarzman and his family have made use of an aircraft in which Blackstone owns a fractional interest, as well as other assets of Blackstone. Mr. Schwarzman paid for his purchases of the aircraft himself and bears all operating, personnel and maintenance costs associated with their operation. In addition, Mr. Schwarzman is charged for his and his family’s personal use of Blackstone assets based on market rates and usage. Payment by Blackstone for the use of the Personal Aircraft by other Blackstone employees are made at market rates. Personal use of Blackstone resources are also reimbursed to Blackstone at 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 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 $357.9 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. Other Blackstone does business with and on behalf of some of its Portfolio Companies; all such arrangements are on a negotiated basis.

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- Definition The entire disclosure for related party transactions. Examples of related party transactions include transactions between (a) a parent company and its subsidiary; (b) subsidiaries of a common parent; (c) and entity and its principal owners; and (d) affiliates. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 850 -SubTopic 10 -Section 50 -Paragraph 6 -URI http://asc.fasb.org/extlink&oid=6457730&loc=d3e39691-107864 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 850 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=6457730&loc=d3e39622-107864 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 850 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6457730&loc=d3e39549-107864 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 57 -Paragraph 1-4 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 850 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6457730&loc=d3e39603-107864 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 850 -SubTopic 10 -Section 50 -Paragraph 5 -URI http://asc.fasb.org/extlink&oid=6457730&loc=d3e39678-107864 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(k)) -URI http://asc.fasb.org/extlink&oid=6881521&loc=d3e23780-122690 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 04 -Paragraph b -Article 3A Reference 9: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 08 -Paragraph k -Article 4 + Details
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