EQUITY-BASED COMPENSATION

3 Months Ended

Mar. 31, 2014

EQUITY-BASED COMPENSATION

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, 2014, the Partnership had the ability to grant 164,224,426 units under the Equity Plan.

For the three months ended March 31, 2014 and March 31, 2013, the Partnership recorded compensation expense of $194.6 million and $195.3 million, respectively, in relation to its equity-based awards with corresponding tax benefits of $7.2 million and $5.5 million, respectively. As of March 31, 2014, there was $1.1 billion of estimated unrecognized compensation expense related to unvested awards. This cost is expected to be recognized over a weighted-average period of 1.7 years.

Total vested and unvested outstanding units, including Blackstone common units, Blackstone Holdings Partnership Units and deferred restricted common units, were 1,154,116,384 as of March 31, 2014. Total outstanding unvested phantom units were 146,294 as of March 31, 2014.

A summary of the status of the Partnership’s unvested equity-based awards as of March 31, 2014 and of changes during the period January 1, 2014 through March 31, 2014 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, 2013		48,057,816		$	26.64		20,004,139		$	15.57		147,169		$	12.00
Granted		555,917			31.48		760,880			26.72		461			28.05
Vested		(1,644,757	)		19.23		(1,539,627	)		14.50		(766	)		33.46
Forfeited		(65,425	)		23.63		(198,821	)		13.18		(570	)		33.41
Balance, March 31, 2014		46,903,551		$	26.96		19,026,571		$	16.13		146,294		$	11.95

Units Expected to Vest

The following unvested units, after expected forfeitures, as of March 31, 2014, are expected to vest:

	Units		Weighted-Average Service Period in Years
Blackstone Holdings Partnership Units		43,437,445		1.7
Deferred Restricted Blackstone Common Units		16,159,235		2.3
Total Equity-Based Awards		59,596,680		1.8
Phantom Units		147,319		0.03

Equity-Based Awards with Performance Conditions

The Partnership has also granted certain equity-based awards with performance requirements. These awards are based on the performance of certain businesses over a three to five year period beginning January 2012, relative to a predetermined threshold. Blackstone has determined that it is probable that the relevant performance thresholds will be exceeded in future periods and, therefore, has recorded compensation expense since the beginning of the performance period of $68.4 million.