DigitalBridge Group, Inc. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. The following discussion should be read in conjunction with our unaudited consolidated financial statements and accompanying notes thereto, which are included in Item 1 of this Quarterly Report, as well as information contained in our Annual Report on Form 10-K for the year ended December 31, 2020, which is accessible on the SEC's website at www.sec.gov . Our Organization We are a leading global investment firm with a focus on identifying and capitalizing on key secular trends in digital real estate. We are headquartered in Boca Raton, Florida, with key offices in Los Angeles, New York, London and Singapore, and have approximately 300 employees. We have elected to be taxed as a real estate investment trust (" REIT") for U.S. federal income tax purposes . We conduct our operations as a REIT, and generally are not subject to U.S. federal income taxes on our taxable income to the extent that we annually distribute all of our taxable income to stockholders and maintain qualification as a REIT, although we are subject to U.S. federal income tax on income earned through our taxable subsidiaries. In light of our ongoing digital transformation, we will continue to evaluate whether we will maintain REIT status for 2021 or future years. We also operate our business in a manner that will permit us to maintain our exemption from registration as an investment company under the 1940 Act. We conduct substantially all of our activities and hold substantially all of our assets and liabilities through our Operating Company. At March 31, 2021, we owned 90% of the Operating Company, as its sole managing member. Effective April 1, 2021, Thomas J. Barrack Jr., our former Executive Chairman, having completed the transformational plan for the Company set in motion two years ago, has transitioned to a Non-Executive member of the Company's Board of Directors, and the position of Executive Chairman has been eliminated. Ms. Nancy Curtin, a long-time member of the Board and most recently the Lead Independent Director, transitioned to independent, non-executive Chairperson of the Board effective April 1, 2021. Our Business Our vision is to establish the Company as a leading owner, operator and investment manager of digital infrastructure and real estate. We are currently the only global REIT that owns, manages, and/or operates across all major infrastructure components of the digital ecosystem including data centers, cell towers, fiber networks and small cells . At March 31, 2021, the Company has $46 billion of assets under management ("AUM"), including both third party capital and the Company's balance sheet, of which $32 billion is dedicated to digital real estate and infrastructure. With the Company's ongoing digital transformation, the Company currently conducts business through five reportable segments, as follows: • Digital Investment Management ("Digital IM")— This business encompasses the investment and stewardship of third party capital in digital infrastructure and real estate. The Company's flagship opportunistic strategy is conducted through Digital Colony Partners ("DCP") and separately capitalized vehicles, while other strategies, including digital credit and public equities, are conducted through other investment vehicles. The Company earns management fees, generally based on the amount of assets or capital managed in investment vehicles, and has the potential to earn carried interest based upon the performance of such investment vehicles subject to achievement of minimum return hurdles. • Digital Operating— This business is composed of balance sheet equity interests in digital infrastructure and real estate operating companies, which generally earn rental income from providing use of digital asset space and/or capacity through leases, services and other agreements. The Company currently owns interests in two companies: DataBank, including zColo, an edge colocation data center business; and Vantage SDC, a stabilized hyperscale data center business. Both DataBank and Vantage are also portfolio companies managed under Digital IM for the equity interests owned by third party capital. • Digital Other— This segment is composed of equity interests in digital investment vehicles, the largest of which is the Company’s investment and commitment to the DCP flagship funds. This segment also includes the Company’s investment and commitment to the digital liquid strategies and seed investments for future digital investment vehicles. • Wellness Infrastructure— This segment is composed of a diverse portfolio of senior housing, skilled nursing facilities, medical office buildings, and hospitals. The Company earns rental income from senior housing, skilled 57 Table of Contents nursing facilities and hospital assets that are under net leases to single tenants/operators and from medical office buildings which are both single tenant and multi-tenant. In addition, certain of the Company's senior housing properties are managed by operators under a RIDEA (REIT Investment Diversification and Empowerment Act) structure, which allows the Company to gain financial exposure to underlying operations of the facility in a tax efficient manner versus receiving contractual rent under a net lease arrangement. This segment also holds other wellness infrastructure-related assets, principally equity interests in and the management contract of NorthStar Healthcare, Inc. ("NorthStar Healthcare"), a non-traded REIT sponsored by the Company. • Other— This segment is primarily composed of the Company's interest in CLNC. The Company expects to monetize the remaining assets in its Other segment as it completes its digital evolution. Digital Transformation During the first quarter of 2021, the Company successfully exited its hotel business, and continues its process of actively monetizing a substantial majority of its OED investments and its Other IM business, both of which reside in its Other segment, as discussed further below. The disposition of the Company’s hotel business and the continued efforts to monetize the Company’s OED investments and Other IM business represent strategic shifts in the Company's business that are expected to have a significant effect on the Company’s operations and financial results, and accordingly, have met the criteria as discontinued operations. For all current and prior periods presented, the related assets and liabilities, to the extent they have not been disposed at the respective balance sheet dates, are presented as assets and liabilities held for disposition on the consolidated balance sheets and the related operating results are presented as loss from discontinued operations on the consolidated statements of operations (refer to Item 1. "Financial Statements" of this Quarterly Report). Accelerating the Monetization of OED and Other IM Having successfully exited its hotel business in the first quarter of 2021, the Company is continuing its efforts to accelerate the monetization of a substantial majority of its OED investments and Other IM business. These assets consist of non-digital real estate, real estate-related equity and debt investments, and management of the Company's private real estate credit funds and CLNC. In consideration of a potential monetization, the Company reassessed the carrying value of these assets based upon estimated recoverable values. As a result, the Company recognized an aggregate write-down in asset values of $420.3 million, of which $121.2 million was attributable to the OP, recorded within impairment loss, equity method loss and other loss in discontinued operations (Note 7 to the consolidated financial statements). In April 2021, the Company and CLNC agreed to terminate the management agreement for a one-time termination fee of $102.3 million in cash. The transaction closed on April 30, 2021, resulting in the internalization of CLNC's management and operating functions (the "CLNC Internalization"), with certain employees previously dedicated wholly or substantially to CLNC becoming employees of CLNC. In connection with the CLNC Internalization, CLNC's board of directors ceased to include Company-affiliated directors on CLNC's board of directors upon expiration of their terms in May 2021. The Company also entered into a new stockholders agreement, pursuant to which the Company agreed, for so long as the Company owns at least 10% of CLNC's outstanding common shares, to vote in CLNC director elections as recommended by CLNC’s board of directors at any stockholders' meeting that occurs prior to CLNC's 2023 annual stockholders' meeting. In addition, the Company is subject to customary standstill restrictions, including an obligation not to initiate or make stockholder proposals, nominate directors or participate in proxy solicitations, until the beginning of the advance notice window for CLNC's 2023 annual meeting. The Company currently holds a 36.1% equity ownership in CLNC and is prohibited from acquiring additional CLNC shares. Exit of the Hotel Business In March 2021, the Company completed the previously announced exit of its hotel business, which represents a key milestone in the Company’s digital transformation. Pursuant to an agreement entered into with a third party in September 2020 (as amended in October 2020, February 2021 and March 2021), the Company sold five of the six hotel portfolios in its Hospitality segment and its 55.6% interest in a portfolio of limited service hotels that was acquired through a consensual foreclosure in July 2017 (the "THL Hotel Portfolio") in its Other segment, composed of 197 hotel properties in aggregate. The remaining portfolio in the Hospitality segment is in receivership and the remaining interests in the THL Hotel Portfolio will continue to be held by investment vehicles currently managed by the Company. Two of the hotel portfolios that were sold in the Hospitality segment were held through joint ventures in which the Company held a 90% and a 97.5% interest, respectively. The aggregate selling price of $67.5 million, represented a transaction value of approximately $2.8 billion, with the acquirer's assumption of $2.7 billion of investment-level debt. 58 Table of Contents Significant Developments In the first quarter of 2021 and through the date of this filing, significant developments affecting our business and results of operations included the following. Digital Business • We completed the add-on acquisition of zColo's remaining five data centers in France for $33 million in February 2021. • In February 2021, we held a first closing of DCP II, our second digital opportunistic fund, with total callable commitments of $4.2 billion, inclusive of $120 million of our commitments as general partner and limited partner. Non-Digital Assets • In the first quarter of 2021, we are accelerating the monetization of our OED investments and Other IM business. This included termination of the CLNC management contract on April 30, 2021, for which we received a one-time termination fee of $102.3 million at closing. • In consideration of potential monetization of the OED investments and Other IM business, these assets were written down by $420 million in aggregate across our loan portfolio, equity investments and real estate assets, of which $121 million was attributable to the OP. For all current and prior periods presented, these assets and corresponding liabilities are presented as held for disposition, and the related operating results are presented as discontinued operations (Notes 7 and 14 to the consolidated financial statements). • In March 2021, we sold five of the six hotel portfolios in our Hospitality segment and our 55.6% interest in the THL Hotel Portfolio in the Other segment, generating net proceeds of $45.6 million. The transaction was valued at $2.8 billion, including aggregate selling price of $67.5 million and the buyer's assumption of $2.7 billion of investment-level debt. • In April 2021, we received proceeds from a sale of the two largest assets securing our Irish loan portfolio, which were applied to repay $265 million of outstanding principal on our loan receivable and extinguish the full $155 million of debt financing the portfolio. This removed all encumbrances on the remaining assets in the portfolio. Our share of excess net proceeds was $103.5 million. The Irish loan portfolio is composed of distressed loans that were previously acquired at a discount. Results of Operations The following table summarizes our results from continuing operations by reportable segment. Excluded are discontinued operations (Note 14 to the consolidated financial statements) which generated loss from discontinued operations attributable to Colony Capital, Inc. of $125.2 million and $228.5 million in the three months ended March 31, 2021 and 2020, respectively. (In thousands) Total Revenues Income (Loss) from Continuing Operations Income (Loss) Attributable to Colony Capital, Inc. from Continuing Operations Three Months Ended March 31, 2021 2020 2021 2020 2021 2020 Digital Operating $ 189,202 $ 45,167 $ (62,844) $ (18,295) $ (8,793) $ (3,418) Digital Investment Management 29,498 19,179 6,041 2,110 5,412 1,902 Digital Other 1,140 160 7,869 (3,035) 3,949 (2,242) Wellness Infrastructure 93,543 144,679 (41,210) (66,288) (32,906) (49,938) Other 1,580 3,198 (32,218) (11,295) (29,145) (10,179) Amounts not allocated to segments 741 4,830 (67,815) (57,396) (59,593) (49,817) $ 315,704 $ 217,213 $ (190,177) $ (154,199) $ (121,076) $ (113,692) 59 Table of Contents Selected Balance Sheet Data The following table summarizes key balance sheet data by reportable segment, excluding balances held for disposition (Note 7 to the consolidated financial statements). Real Estate, net Loans Receivable Equity and Debt Investments Debt, net (In thousands) March 31, 2021 December 31, 2020 March 31, 2021 December 31, 2020 March 31, 2021 December 31, 2020 March 31, 2021 December 31, 2020 Digital Operating $ 4,459,123 $ 4,451,865 $ 5,160 $ 5,070 $ — $ — $ 3,337,342 $ 3,213,240 Digital Investment Management — — — — 24,151 19,167 — — Digital Other — — 31,663 31,727 290,165 377,048 — — Wellness Infrastructure 3,223,574 3,338,085 48,449 47,233 69,359 61,790 2,873,579 2,920,030 Other 20,014 20,014 — — 394,144 418,698 176,727 185,743 Amounts not allocated to segments — — — — — — 489,643 553,337 Total $ 7,702,711 $ 7,809,964 $ 85,272 $ 84,030 $ 777,819 $ 876,703 $ 6,877,291 $ 6,872,350 60 Table of Contents Consolidated Results of Operations Comparison of Three Months Ended March 31, 2021 to Three Months Ended March 31, 2020 Three Months Ended March 31, (In thousands) 2021 2020 Change Revenues Property operating income $ 275,216 $ 183,953 $ 91,263 Interest income 2,676 2,607 69 Fee income 33,679 25,128 8,551 Other income 4,133 5,525 (1,392) Total revenues 315,704 217,213 98,491 Expenses Property operating expense 132,264 83,477 48,787 Interest expense 72,485 63,441 9,044 Investment and servicing expense 8,108 5,732 2,376 Transaction-related costs 2,685 596 2,089 Depreciation and amortization 170,967 76,236 94,731 Impairment loss 15,232 48,532 (33,300) Compensation expense 83,386 42,737 40,649 Administrative expenses 18,957 29,558 (10,601) Settlement loss — 5,090 (5,090) Total expenses 504,084 355,399 148,685 Other income (loss) Other loss, net (8,714) (9,703) 989 Equity method losses (18,908) (11,879) (7,029) Loss before income taxes (216,002) (159,768) (56,234) Income tax benefit 25,825 5,569 20,256 Loss from continuing operations (190,177) (154,199) (35,978) Loss from discontinued operations (437,422) (249,858) (187,564) Net loss (627,599) (404,057) (223,542) Net income (loss) attributable to noncontrolling interests: Redeemable noncontrolling interests 2,449 (548) 2,997 Investment entities (355,862) (21,749) (334,113) Operating Company (27,896) (39,601) 11,705 Net loss attributable to Colony Capital, Inc. (246,290) (342,159) 95,869 Preferred stock dividends 18,516 19,474 (958) Net loss attributable to common stockholders $ (264,806) $ (361,633) 96,827 61 Table of Contents Property Operating Income and Property Operating Expenses Three Months Ended March 31, (In thousands) 2021 2020 Change Property operating income: Digital Operating $ 189,002 $ 45,149 $ 143,853 Wellness Infrastructure 86,214 138,249 (52,035) Other — 555 (555) $ 275,216 $ 183,953 91,263 Property operating expenses: Digital Operating $ 79,862 $ 16,906 $ 62,956 Wellness Infrastructure 52,400 66,567 (14,167) Other 2 4 (2) $ 132,264 $ 83,477 48,787 Digital Operating— Amounts in the first quarter of 2021 include Vantage SDC, acquired in July 2020 and zColo, acquired in December 2020. Wellness Infrastructure— Property operating income decreased $52.0 million, of which $21.7 million is attributed to the conveyance of a 36 property senior housing operating portfolio to the lender in August 2020, and sales of six net lease properties during 2020. Other factors contributing to the decrease include: (i) $22.4 million write-off of straight-line rent receivable on our UK net lease senior housing portfolio based upon current assessment of collectability, while we engage in ongoing negotiations with the tenant to restructure the lease; (ii) a decline in occupancy across our senior housing operating portfolio due to restrictions on new admissions in an effort to contain COVID-19; and (iii) acceleration of above-market lease intangible following a lease restructuring. These decreases were partially offset by a gross-up of resident fee income following the conversion of six properties from a net lease portfolio to a senior housing operating portfolio in April 2020. Property operating expenses decreased $14.2 million. The conveyance of the senior housing operating portfolio to the lender and the disposition of properties as noted above reduced expenses by $16.3 million, absent which property operating expenses would have increased $2.1 million. The increase was driven by a gross up of expenses following the net lease to senior housing operating conversion of six properties and incremental costs incurred in our senior housing operating facilities in response to COVID-19. The incremental COVID-19 related costs were partially abated by government stimulus funding under the CARES Act Provider Relief Fund, reflected in other income. Other— Amounts represent a net lease property that is in receivership. Interest Income Interest income was largely consistent between the periods. While there was additional interest income in the first quarter of 2021 from new loans originated in the digital segment in the fourth quarter of 2020 and drawdown of the credit facility provided to NorthStar Healthcare in April 2020, this increase was largely offset by lower interest income on available cash as proceeds from the sale of our light industrial business in December 2019 have since been redeployed. Fee Income Fee income is earned from the following sources: Three Months Ended March 31, (In thousands) 2021 2020 Change Digital Investment Management segment Institutional funds and other investment vehicles $ 29,443 $ 18,944 $ 10,499 Other segment Institutional funds and other investment vehicles 757 1,618 (861) Non-traded REIT—NorthStar Healthcare 2,769 4,431 (1,662) Other 710 135 575 Subtotal — Other segment 4,236 6,184 (1,948) $ 33,679 $ 25,128 8,551 62 Table of Contents Digital Investment Management— Fee income was $10.5 million, driven by the first closing of DCP II in February 2021, and to a lesser extent, fees from co-investment capital raised for the acquisitions of Zayo by DCP I in March 2020 and Vantage SDC in July 2020. Other— Fee income from the non-digital investment management business was $1.9 million lower, attributed to a decrease in fees from NorthStar Healthcare based upon a lower net asset value ("NAV") fee base beginning December 2020. Other Income Other income decreased $1.4 million, attributed primarily to lower due diligence cost reimbursements from our sponsored private funds, partially offset by government stimulus funding under the CARES Act Provider Relief Fund. Interest Expense Three Months Ended March 31, (In thousands) 2021 2020 Change Investment-level financing: Digital Operating $ 31,132 $ 9,402 $ 21,730 Wellness Infrastructure 32,705 43,952 (11,247) Other — 405 (405) Corporate-level debt 8,648 9,682 (1,034) $ 72,485 $ 63,441 9,044 Net decrease in interest expense of $9.0 million is attributed to the following: Digital Operating— The $21.7 million increase is attributed to interest expense on debt financing on Vantage SDC and zColo portfolios, acquired in July 2020 and December 2020, respectively. This was partially offset by lower interest expense on the DataBank portfolio as a result of: (i) a decline in LIBOR as all of DataBank's debt was variable rate prior to refinancing through its March 2021 securitization transaction; and (ii) meaningful reduction in its weighted average interest rate post-securitization from 6.1% per annum as of December 31, 2020 to 2.4% per annum as of March 31, 2021. Wellness Infrastructure— Interest expense was lower by $11.2 million as a result of: (i) decrease in LIBOR on predominantly variable rate debt; (ii) debt repayment upon certain sales of net lease properties in 2020; and (iii) conveyance of underlying collateral to lender in satisfaction of $157.5 million of outstanding debt principal in August 2020. Other— This represents interest expense on a net lease property that is in receivership. Corporate-level Debt— Interest expense decreased by $1.0 million as there was no outstanding balance on our corporate credit facility during the first quarter of 2021. This was partially offset by a net increase in interest expense on our senior notes, with a higher rate on the new exchangeable notes issued in July 2020 relative to the convertible notes that were substantially repurchased in the third quarter of 2020 and fully repaid in January 2021. Investment and Servicing Expense Investment and servicing costs were $2.4 million higher, primarily related to management fees paid to Vantage for the day-to-day operations of Vantage SDC, and fees paid for transitional services in connection with the zColo portfolio, both of which were partially offset by costs incurred in the prior year in connection with the conversion of a net lease portfolio to a senior housing operating portfolio in our Wellness Infrastructure segment. Transaction-Related Costs Transaction-related costs were $2.7 million compared to $0.6 million for the three months ended March 31, 2021 and 2020, respectively. The higher costs in the current period are primarily related to an unconsummated deal and ongoing corporate restructuring transactions. Depreciation and Amortization Increase in depreciation and amortization expense is primarily related to real estate and intangible assets from acquisitions of Vantage SDC in July 2020 and zColo in December 2020 and February 2021. The increase was partially offset by decreases due to the effects of lower real estate basis after impairment charges and sales of properties in our Wellness Infrastructure segment. 63 Table of Contents Impairment Loss These are impairment charges on real estate in our Wellness Infrastructure segment. Impairment of $15.2 million in the first quarter of 2021 reflects primarily a write-down to net sales proceeds on a medical office building and two portfolios of net lease skilled nursing facilities, all of which were sold in April 2021. In the first quarter of 2020, the aggregate impairment of $48.5 million was related to a portfolio of senior housing operating facilities and net lease skilled nursing facilities resulting from shortened hold period assumptions in contemplation of underlying debt that was at risk of default. The senior housing portfolio was subsequently conveyed to the lender in August 2020 in settlement of the debt. Compensation Expense The following table provides the components of compensation expense: Three Months Ended March 31, (In thousands) 2021 2020 Change Cash compensation and benefits $ 66,813 $ 37,552 $ 29,261 Equity-based compensation 16,606 5,185 11,421 Carried interest compensation (33) — (33) $ 83,386 $ 42,737 40,649 Total compensation expense was $40.6 million higher, driven by significant severance payments, including acceleration of equity-based compensation in the first quarter of 2021, and compensation costs associated with data center employees of the new zColo portfolio. Administrative Expenses Administrative expense decreased $10.6 million, largely attributable to lower costs related to legal and professional services in the current period. Settlement Loss Settlement loss recognized in the three months ended March 31, 2020 represents the initial fair value of the settlement arrangement with Blackwells, plus the reimbursement of legal costs incurred by Blackwells. Refer to additional discussion in Note 10 to the consolidated financial statements. Equity Method Losses The increase in equity method losses can be attributed primarily to a higher loss from our investment in CLNC due to its recognition of restructuring costs in the first quarter of 2021, primarily composed of the $102.3 million termination fee payable to us and other associated costs. This loss was partially offset by an unrealized gain based upon a higher valuation on an equity method investment that is accounted for under the fair value option. Other Loss We recorded other net loss of $8.7 million and $9.7 million for the three months ended March 31, 2021 and 2020, respectively. While the settlement liability to Blackwells increased $12.7 million in the first quarter of 2021, driven by the increase in CLNY stock price, this was offset by fair value gains on marketable equity securities held by our consolidated digital liquid securities funds. In contrast, in the first quarter of 2020, fair value losses were recorded on marketable equity securities of consolidated funds and there was a remeasurement loss on a GBP denominated loan receivable in our Wellness Infrastructure segment as a result of the financial market distress and appreciation of the USD in March 2020. Income Tax Benefit We recognized income tax benefit of $25.8 million and $5.6 million in the three months ended March 31, 2021 and 2020, respectively, driven by deferred tax benefit recognized on net losses from our DataBank subsidiary, which was higher in 2021, including the zColo business that was acquired in December 2020. Additional deferred tax benefit was also recorded in 2021, arising from significant severance costs. 64 Table of Contents Income (Loss) from Discontinued Operations Three Months Ended March 31, 2021 Three Months Ended March 31, 2020 Change (In thousands) Other Hotel Total Other Hotel & Industrial Total Other Hotel & Industrial Revenues Property operating income $ 21,169 $ 122,106 $ 143,275 $ 28,352 $ 218,490 $ 246,842 $ (7,183) $ (96,384) Interest income 4,132 — 4,132 30,262 17 30,279 (26,130) (17) Fee income 15,962 — 15,962 18,377 — 18,377 (2,415) — Other income 8,260 22 8,282 136 62 198 8,124 (40) Revenues from discontinued operations 49,523 122,128 171,651 77,127 218,569 295,696 (27,604) (96,441) Expenses Property operating expense 13,253 112,829 126,082 12,612 169,016 181,628 641 (56,187) Interest expense 15,700 62,318 78,018 10,002 52,377 62,379 5,698 9,941 Transaction-related, investment and servicing costs 5,894 1,794 7,688 4,711 1,560 6,271 1,183 234 Depreciation and amortization 11,670 7,668 19,338 13,062 48,194 61,256 (1,392) (40,526) Impairment loss 108,528 — 108,528 86,373 252,363 338,736 22,155 (252,363) Compensation and administrative expense (1) 20,557 2,410 22,967 2,282 2,447 4,729 18,275 (37) Expenses from discontinued operations 175,602 187,019 362,621 129,042 525,957 654,999 46,560 (338,938) Other income (loss) Gain on sale of real estate 391 45,359 45,750 7,932 — 7,932 (7,541) 45,359 Other gain (loss), net (200,683) 3 (200,680) 3,375 2,861 6,236 (204,058) (2,858) Equity method earnings (losses) (92,611) — (92,611) 109,170 — 109,170 (201,781) — Income (loss) from discontinued operations before income taxes (418,982) (19,529) (438,511) 68,562 (304,527) (235,965) (487,544) 284,998 Income tax benefit (expense) 2,613 (1,524) 1,089 (16,482) 2,589 (13,893) 19,095 (4,113) Income (loss) from discontinued operations (416,369) (21,053) (437,422) 52,080 (301,938) (249,858) (468,449) 280,885 Income (loss) from discontinued operations attributable to: Noncontrolling interests in investment entities (302,387) 3,370 (299,017) 35,116 (31,485) 3,631 (337,503) 34,855 Noncontrolling interests in Operating Company (10,863) (2,328) (13,191) 1,674 (26,696) (25,022) (12,537) 24,368 Income (loss) from discontinued operations attributable to Colony Capital, Inc. $ (103,119) $ (22,095) $ (125,214) $ 15,290 $ (243,757) $ (228,467) (118,409) 221,662 Other The results in this column represent the operations of substantially all of the OED investments and Other IM business in the Other segment, composed of non-digital real estate, real estate-related equity and debt investments, fee income from CLNC and the Company's private real estate credit funds and co-investment vehicles, and underlying compensation and administrative costs for managing these non-digital investments and investment vehicles. The Other segment generated loss from discontinued operations of $416.4 million compared to income from discontinued operations of $52.1 million in the three months ended March 31, 2021 and 2020, respectively, attributed primarily to the following: • Asset values were written down by $420.3 million in the aggregate in the first quarter of 2021 (of which $121.2 million was attributable to the OP) based upon estimated recoverable values considering a potential monetization of the OED investments and Other IM business. This amount is composed of $108.5 million of impairment loss on real estate and investor relationship intangible asset, $108.0 million of impairment and unrealized fair value loss on equity investments (recorded in equity method earnings), and $203.8 million of unrealized fair value loss on loans receivable and investment in a third party fund (recorded in other loss). In contrast, impairment loss was $86.4 million in the first quarter of 2020, with $79.0 million attributed to the Other IM goodwill and remainder to OED real estate assets. 65 Table of Contents • Total revenues were $27.6 million lower, driven by the following: • Interest income decreased $26.1 million as a number of loans were placed on nonaccrual beginning the second and third quarters of 2020 due to increased uncertainty over collectability resulting from the COVID-19 crisis, and additionally, loans were sold or repaid during 2020; and • Fee income decreased $2.4 million due to a decrease in CLNC stockholders' equity fee base following the onset of COVID-19 and continued liquidation of credit and opportunistic funds over time; partially offset by • Higher other income, representing a higher gross up of income and compensation expense on CLNC equity awards (Note 17 to consolidated financial statements), as discussed below. • Higher operating expenses further compounded the decrease in revenues, notably the following: • Interest expense was $5.7 million higher, attributed primarily to profit allocation to a participating mortgage debt that is recorded as interest expense, based upon the returns from a sale of two loans receivable that closed in April 2021; and • Compensation cost was higher as 2021 included an acceleration of equity based compensation on CLNC equity awards that fully vested upon termination of the CLNC management contract in April 2021, while compensation expense in 2020 had been reduced by a reversal of equity based compensation on CLNC awards and a reversal of unrealized carried interest compensation. • In contrast, 2020 included a $106.1 million gain from the sale of an equity investment, partially offset by a reversal of unrealized carried interest allocation from our sponsored credit funds. The gain on sale is subject to tax, resulting in additional income tax expense in 2020. Hotel and Industrial The bulk industrial portfolio recorded net income of $0.5 million in the first quarter of 2020 and was sold in December 2020. The hotel business generated net loss of $21.1 million and $302.4 million in the three months ended March 31, 2021 and 2020, respectively, a $281.4 million decrease in losses. Results in 2021 reflect the hotel operations through mid-March for the THL Hotel Portfolio and five of the six portfolios in our Hospitality segment prior to their sale in March 2021. The one remaining hotel portfolio is currently in receivership. The significant net loss in 2020 was driven by $252.4 million of impairment charges resulting from shortened hold period assumptions. In 2021, a gain of $45.4 million was recorded from sale of the hotel business based upon final proceeds and carrying values at the time of sale, attributed largely to debt extinguishment. 66 Table of Contents Assets Under Management and Fee Earning Equity Under Management ("FEEUM") Below is a summary of our AUM and FEEUM. AUM (1) (In billions) FEEUM (2) (In billions) Type Products Description March 31, 2021 December 31, 2020 March 31, 2021 December 31, 2020 Digital Third Party Managed Capital Institutional Funds Digital Colony Partners opportunistic strategy Earns management fees and potential for carried interest $ 10.7 $ 9.3 $ 7.1 $ 7.0 Liquid securities strategy 0.5 0.5 0.4 0.4 Other Investment Vehicles Digital real estate and infrastructure held by portfolio companies and co-invest vehicles Earns management fees, business service fees and potential for carried interest 19.5 18.8 5.4 5.4 Subtotal — Third Party Managed Capital 30.7 28.6 12.9 12.8 Balance sheet capital (3) Digital Operating 1.1 0.3 NA NA Digital Other 0.2 1.1 NA NA Total — Digital IM 32.0 30.0 12.9 12.8 Other (4) Third Party Managed Capital Institutional Funds Credit funds, opportunistic funds, value-add funds and other co-investment vehicles Earns management fees from all managed funds 6.6 7.4 4.4 4.6 Retail Companies NorthStar Healthcare Earns management fees 3.3 3.4 0.7 0.7 Public Companies Colony Credit Real Estate, Inc. (5) NYSE-listed credit REIT — 2.6 — 1.9 Earned management fees (prior to April 30, 2021) Subtotal — Third Party Managed Capital 9.9 13.4 5.1 7.2 Balance sheet capital (3) Wellness Infrastructure 2.7 2.7 NA NA Hospitality — 2.5 NA NA Other—OED 1.6 3.3 NA NA Total — Other IM 14.2 21.9 5.1 7.2 Total Company—Third Party and Balance Sheet Capital $ 46.2 $ 51.9 18.0 $ 20.0 __________ (1) Third party AUM is composed of assets for which the Company and its affiliates provide investment management services, including assets for which the Company may or may not charge management fees and/or performance allocations. Third party AUM is based on the cost basis of managed investments as reported by each underlying vehicle as of the end of the reporting period and may include uncalled capital commitments. The Company's calculations of third party AUM may differ from other asset managers, and as a result, may not be comparable to similar measures presented by other asset managers. (2) FEEUM is equity for which the Company and its affiliates provide investment management services and derive management fees and/or incentives. FEEUM generally represents the basis used to derive fees, which may be based upon invested equity, stockholders’ equity, or fair value, pursuant to the terms of each underlying investment management agreement. The Company's calculation of FEEUM may differ from other asset managers, and as a result, may not be comparable to similar measures presented by other asset managers. (3) Represents the Company's investment interests on its balance sheet, excluding the portion held by noncontrolling interests in investment entities, that is managed by the Company on behalf of its stockholders, therefore is not fee-bearing. Balance sheet AUM reflects generally the OP's share of net book value of the respective segments, determined based upon undepreciated carrying value of assets, and where applicable, after impairment charges that create a new basis for the affected assets, in all instances, net of liabilities. (4) Except for Wellness Infrastructure, which includes NorthStar Healthcare, a substantial majority of the remaining non-digital AUM represents assets held for sale and discontinued operations. (5) Reflects termination of our management agreement with CLNC on April 30, 2021. Total FEEUM decreased $2.0 billion to $18.0 billion at March 31, 2021. While Digital FEEUM increased $0.1 billion, the overall decrease reflects the termination of our management agreement with CLNC on April 30, 2021, for which we received a one-time termination fee of $102.3 million, and lower asset values within our institutional funds. 67 Table of Contents Segments The following discussion summarizes key information on our Digital and Wellness Infrastructure reportable segments. Digital Investment Management ("Digital IM") This business encompasses the investment and stewardship of third party capital in digital infrastructure and real estate. The Company's flagship opportunistic strategy is conducted through Digital Colony Partners ("DCP") and separately capitalized vehicles, while other strategies, including digital credit and public equities, are conducted through other investment vehicles. The Company earns management fees, generally based on the amount of assets or capital managed in investment vehicles, and has the potential to earn carried interest based upon the performance of such investment vehicles subject to achievement of minimum return hurdles. DCP II In February 2021, we held a first closing of DCP II, our second digital opportunistic fund, with total callable commitments of $4.2 billion, inclusive of $120 million of our commitments as general partner and limited partner. Fee Earning Equity Under Management We have $12.9 billion of Digital IM FEEUM at March 31, 2021. Refer to further details in " —Assets Under Management and Fee Earning Equity Under Management. " Operating Performance Results of operations of our Digital IM segment were as follows: Three Months Ended March 31, (In thousands) 2021 2020 Total revenues $ 29,498 $ 19,179 Net income 6,041 2,110 Net income attributable to Colony Capital, Inc. 5,412 1,902 • Fee income from our Digital IM business is trending positively in 2021, with fees from the first close of DCP II in February 2021 and new co-invest capital raised for various acquisitions during 2020, and reflects the significant growth in our Digital IM FEEUM from $7.7 billion at March 31, 2020 to $12.9 billion at March 31, 2021. Net income from our Digital IM segment is generally attributed 31.5% to Wafra, a significant investor in our Digital IM business effective July 2020. Digital Operating This business is composed of balance sheet equity interests in digital infrastructure and real estate operating companies, which generally earn rental income from providing use of digital asset space and/or capacity through leases, services and other agreements. The Company currently owns interests in two companies: DataBank, including zColo, an edge colocation data center business; and Vantage SDC, a stabilized hyperscale data center business. Both DataBank and Vantage are also portfolio companies managed under Digital IM for the equity interests owned by third party capital. Our ownership interest is at 20% for DataBank, including zColo, and 13% for Vantage SDC. Significant Developments • DataBank Strategic Investment— Following DataBank's acquisition of zColo's 39 U.S and U.K. colocation assets in December 2020 for approximately $1.2 billion, an add-on acquisition of zColo's remaining five data centers in France for $33 million closed in February 2021. • DataBank REIT Conversion— Our DataBank subsidiary is currently in the process of restructuring its operations in order to qualify as a REIT. If DataBank satisfies the REIT qualification requirements, DataBank anticipates electing REIT status for U.S. federal income tax purposes for the 2021 taxable year. Provided REIT status is elected, DataBank would generally not be subject to U.S. federal income taxes on its taxable income to the extent that it annually distributes such taxable income to stockholders and maintains certain asset and income requirements. However, DataBank would continue to be subject to U.S. federal income taxes on income earned by any of its taxable subsidiaries. 68 Table of Contents Portfolio Overview Our data center portfolio currently spans across 21 states in the U.S, with three in Canada, one in U.K. and five in France. March 31, 2021 December 31, 2020 Number of data centers Owned 25 25 Leasehold 51 46 76 71 (In thousands, except %) Max Critical I.T. Square Feet 1,792 1,720 Leased Square Feet 1,423 1,386 % Utilization Rate 79.4% 80.6% Balance Sheet Information The following table presents key balance sheet data of our Digital Operating segment: (In thousands) March 31, 2021 December 31, 2020 Real estate $ 4,459,123 $ 4,451,865 Loan receivable 5,160 5,070 Debt 3,337,342 3,213,240 • Higher debt balance at March 31, 2021 reflects additional debt obtained through DataBank's securitization transaction, as described below. Financing At March 31, 2021, our data center business was financed by an aggregate $3.4 billion of outstanding debt principal, of which $2.8 billion is fixed rate debt and $0.6 billion is variable rate debt, bearing a combined weighted average interest rate of 3.04% per annum. In March 2021, DataBank raised $658 million of securitized notes at a blended fixed rate of 2.3%, with 5 years maturity. The proceeds were applied principally to refinance $514 million of outstanding debt, which meaningfully reduced the overall cost of debt from 6.1% per annum as of December 31, 2020 to 2.4% per annum as of March 31, 2021 and extended debt maturities at DataBank. Operating Performance Results of operations of our Digital Operating segment are as follows. Three Months Ended March 31, (In thousands) 2021 2020 Total revenues $ 189,202 $ 45,167 Net loss (62,844) (18,295) Net loss attributable to Colony Capital, Inc. (8,793) (3,418) • Operating results in 2021 include results from the acquisitions of Vantage SDC in July 2020 and zColo in December 2020. • Net loss is driven by the effects of depreciation and amortization expense, and also includes interest expense. Operating results excluding these items are presented below as earnings before interest, tax, depreciation and amortization for real estate ("EBITDA re "). 69 Table of Contents EBITDA re EBITDA re generated by our Digital Operating segment is as follows. A reconciliation of the most directly comparable GAAP measure to EBITDA re is presented in " —Non-GAAP Supplemental Financial Measures. " Three Months Ended March 31, (In thousands) 2021 2020 Total revenues $ 189,202 $ 45,167 Property operating expenses (79,862) (16,906) Transaction-related and investment costs (6,445) (197) Compensation and administrative expense (24,651) (12,656) EBITDA re —Digital Operating $ 78,244 $ 15,408 The higher EBITDA re in the first quarter of 2021 reflects the addition of Vantage SDC and zColo, acquired in July and December 2020, respectively. Digital Other This segment is composed of equity interests in digital investment vehicles, the largest of which is the Company’s investment and commitment to the DCP flagship funds. This segment also includes the Company’s investment and commitment to the digital liquid strategies and seed investments for future digital investment vehicles. Balance Sheet Information The following table presents key balance sheet data of our Digital Other segment: (In thousands) March 31, 2021 December 31, 2020 Loan receivable $ 31,663 $ 31,727 Equity investments DCP funds 156,359 153,872 Digital liquid securities strategy 133,806 223,176 • Loan receivable was originated in November 2020 and warehoused on our balance sheet for a future digital credit investment vehicle. • Equity investments represent primarily: ▪ our equity method interest in DCP I; and ▪ equity investments in our digital liquid securities strategy, of which $103 million in a third party mutual fund was liquidated in January 2021. Remaining balance is composed principally of marketable equity securities held by two consolidated Company-sponsored open-end funds (our interests in the funds range between 24% and 55%). • We have funded $140 million of our $190 million commitment to DCP I (including our $1.8 million investment as general partner that is reflected as an equity method investment in the Digital IM segment). Wafra will be responsible for $17 million of our remaining commitment to DCP I. No capital has been called by DCP II to-date. Operating Performance Results of operations of our Digital Other segment are as follows: Three Months Ended March 31, (In thousands) 2021 2020 Change Interest income $ 690 $ 7 $ 683 Equity method earnings (losses) 2,776 465 2,311 Other gain (loss), net 3,188 (3,572) 6,760 Net income (loss) 7,869 (3,035) 10,904 Net income (loss) attributable to Colony Capital, Inc. 3,949 (2,242) 6,191 • Operating results include unrealized fair value changes in i) investments held by DCP I (reflected in equity method earnings); and ii) marketable equity securities held by consolidated funds in the digital liquid securities strategy (reflected in other gain (loss), net). 70 Table of Contents Wellness Infrastructure This segment is composed of a diverse portfolio of senior housing, skilled nursing facilities, medical office buildings, and hospitals. The Company earns rental income from senior housing, skilled nursing facilities and hospital assets that are under net leases to single tenants/operators and from medical office buildings which are both single tenant and multi-tenant. In addition, certain of the Company's senior housing properties are managed by operators under a RIDEA (REIT Investment Diversification and Empowerment Act) structure, which allows the Company to gain financial exposure to underlying operations of the facility in a tax efficient manner versus receiving contractual rent under a net lease arrangement. This segment also holds other wellness infrastructure-related assets, principally equity interests in and the management contract of NorthStar Healthcare. The Company owns between 69.6% and 81.3% of the various real estate portfolios in the Wellness Infrastructure segment. In the first quarter of 2021, the Company reorganized its Wellness Infrastructure segment to retrospectively include other healthcare related assets and obligations. These assets and obligations encompass: (i) the Company's equity interests in and the management contract of NorthStar Healthcare, equity investment in a healthcare asset manager, and N-Star CDOs collateralized largely by certain debt and preferred equity within the capital structure of Wellness Infrastructure, all of which previously resided in the Other segment; as well as (ii) the 5.375% exchangeable senior notes, trust preferred securities and corresponding junior subordinated debt that were not previously allocated to reportable segments, all of which were issued by NRF Holdco, LLC, a subsidiary of the Company which holds the Wellness Infrastructure assets and acts as guarantor. Overview Our wellness infrastructure properties are located across 30 states domestically and in the U.K. (representing 19% of our portfolio based upon NOI for the first quarter of 2021). The following table presents key balance sheet data of our Wellness Infrastructure segment: (In thousands) March 31, 2021 December 31, 2020 Real estate Held for investment $ 3,223,574 $ 3,338,085 Held for disposition 248,278 162,952 Loans receivable 48,449 47,233 Equity and debt investment 69,359 61,790 Debt (at carrying value) 2,873,579 2,920,030 The following table presents selected metrics on our Wellness Infrastructure operating properties: Number of Properties Capacity Average Occupancy (1) Average Remaining Lease Term (Years) March 31, 2021 Senior housing — operating 53 4,756 units 69.4 % N/A Medical office buildings 106 3.8 million sq. ft. 82.6 % 4.5 Net lease—senior housing 65 3,534 units 70.8 % 11.2 Net lease—skilled nursing facilities 83 9,723 beds 68.2 % 5.0 Net lease—hospitals 9 456 beds 62.8 % 9.1 Total 316 December 31, 2020 Senior housing — operating 53 4,756 units 72.8 % N/A Medical office buildings 106 3.8 million sq. ft. 82.4 % 4.7 Net lease—senior housing 65 3,534 units 76.1 % 11.5 Net lease—skilled nursing facilities 83 9,713 beds 70.5 % 4.0 Net lease—hospitals 9 456 beds 64.9 % 9.8 Total 316 71 Table of Contents __________ (1) Occupancy represents the property operator's patient occupancy for all types except medical office buildings. Average occupancy is based upon the number of units, beds or square footage by type of facility. Occupancy percentages are presented as follows: (i) as of the last day of the quarter for medical office buildings; (ii) average for the quarter for senior housing — operating; and (iii) average of the prior quarter for net lease properties as our operators report on a quarter lag. Dispositions In April 2021, we sold (i) a medical office building and repaid $22.3 million of underlying debt; and (ii) two portfolios of net lease skilled nursing facilities, totaling eight properties with 1,025 beds, which included assumption by the respective buyers of $46.1 million of associated debt, of which $44.1 million was in default in March 2021. In addition to the properties sold, a medical office building and various net lease skilled nursing facilities totaling 12 properties and 1,515 beds were held for disposition at March 31, 2021, with an aggregate carrying value of $156.0 million and encumbered with $74.2 million of outstanding debt. Financing Indebtedness of our Wellness Infrastructure segment at March 31, 2021 is summarized as follows: ($ in thousands) Outstanding Principal Weighted Average Interest Rate (Per Annum) Weighted Average Years Remaining to Maturity (1) NRF Holdco 5.375% exchangeable note $ 13,605 5.375 % 12.2 Junior subordinated debt 280,117 3.06 % 15.2 Non-recourse secured investment level debt Fixed rate 400,075 4.55 % 3.9 Variable rate 2,283,458 3.89 % 3.1 2,683,533 Total debt principal (excluding amounts related to assets held for disposition) $ 2,977,255 Operating Performance Results of operations of our Wellness Infrastructure segment are as follows: Three Months Ended March 31, (In thousands) 2021 2020 Change Property operating income $ 86,214 $ 138,249 $ (52,035) Interest income 1,815 792 1,023 Fee income 2,769 4,431 (1,662) Other income 2,745 1,207 1,538 Total revenues 93,543 144,679 (51,136) Net loss (41,210) (66,288) 25,078 Net loss attributable to Colony Capital, Inc. (32,906) (49,938) 17,032 Operating results at the property level are discussed under NOI below. Results summarized above include (i) the effects of interest expense on mortgage financing, impairment charges and depreciation and amortization expense on our wellness infrastructure real estate portfolio; as well as (ii) results from our debt securities portfolio, equity investments and management of NorthStar Healthcare, which are discussed in " —Results of Operations. " Earnings in both years were affected by the fallout from COVID-19 on the operations of our healthcare properties, as discussed in more detail below. In comparison, net loss was higher in the first quarter of 2020, attributed to $33.3 million of higher real estate impairment loss. Results in the first quarter of 2021 were negatively affected by a $22.4 million reversal of straight-line rent receivable on our UK net lease senior housing portfolio while we engage in ongoing negotiations with the tenant to restructure the lease, partially offset by lower interest expense due to a decline in LIBOR and extinguishment of $157.5 million of debt in August 2020 through conveyance of underlying collateral to the lender. 72 Table of Contents Net Operating Income NOI of our wellness infrastructure operating properties is derived as follows and is reconciled to the most directly comparable GAAP measure in " —Non-GAAP Supplemental Financial Measures. " Three Months Ended March 31, (In thousands) 2021 2020 Total revenues $ 88,666 $ 139,182 Straight-line rent and amortization of above- and below-market lease intangibles and ground lease ROU assets 24,571 (3,968) Interest income (53) (25) Property operating expenses (52,400) (66,567) NOI—Wellness Infrastructure $ 60,784 $ 68,622 NOI by type of wellness infrastructure properties is as follows: Three Months Ended March 31, Change ($ in thousands) 2021 2020 $ % Senior housing—operating $ 8,654 16,853 $ (8,199) (48.7) % Medical office buildings 13,574 12,991 583 4.5 % Net lease Senior housing 14,066 14,304 (238) (1.7) % Skilled nursing facilities 22,037 22,523 (486) (2.2) % Hospitals 2,453 1,951 502 25.7 % NOI—Wellness Infrastructure $ 60,784 $ 68,622 (7,838) (11.4) % NOI decreased $7.8 million, of which $4.6 million was attributed to the conveyance of 36 properties in a senior housing operating portfolio to the lender in August 2020, and sales of six net lease properties in 2020. The remaining decrease in NOI is attributed primarily to the effects of COVID-19 on our senior housing operating portfolio as resident fee income decreased due to a decline in occupancy while incremental operating costs were incurred, partially offset by government stimulus funding, as discussed further below. Effects of COVID-19 on our Wellness Infrastructure Segment Although there are some indications that widespread vaccine deployment has eased some of the effects of COVID-19, our first priority continues to be the health and safety of the residents and staff at our communities. We remain focused on supporting our operating partners during this challenging time. Concurrently, we are actively managing capital needs and liquidity to mitigate the financial impact of COVID-19 on our wellness infrastructure business. At this time, we understand from our operators and managers that significant vaccine deployment has begun to mitigate the number of confirmed COVID-19 cases. Nevertheless, the incidence of confirmed cases in our portfolio correlates with vaccination rates, local prevalence, and the emergence of variants . The COVID-19 vaccine rollout began in early January 2021. Our operators and tenants coordinated with the respective states and administering agents to set up on-site clinics at our communities to provide the vaccine to both residents and staff. Currently, their focus is on the coordination of vaccines for new residents and employees. To date, the resident acceptance rate has been high. Staff acceptance, however, has been lower than many of our operators and tenants would have liked and they have implemented programs to support improving those efforts. The effect of COVID-19 varies by asset class in the Company's wellness infrastructure portfolio. Specifically, efforts to address COVID-19 have in some cases forced temporary closures of medical offices, restricted the admission of new residents to senior housing facilities, especially in communities that have experienced infections, and caused incurrence of unanticipated costs and other business disruptions. The Company is directly impacted by these factors in its RIDEA assets, and indirectly impacted in its net leased assets as these factors influence tenants’ ability to pay rent. • In our medical office portfolio, beginning in April 2020, a number of tenants failed to make rent payments or make timely payments, and some sought more flexible payment terms or rent concessions as a result of the COVID-19 crisis. Local governments in certain jurisdictions have implemented programs that permit or require forbearance of rent payments by tenants affected by COVID-19. The Company agreed to provide the affected tenants with deferral of rent, generally for two to three months, with deferred rent to be repaid in monthly installments over periods of three to 18 months. As of March 31, 2021, the increase in lease income receivable as a result of the 73 Table of Contents deferral was $0.1 million. All lease income receivable, including straight-line rents, are subject to the Company's policy for evaluation of collectability based upon creditworthiness of the lessee. • In our senior housing operating portfolio, statutory or self-imposed restrictions began to limit admission of new residents into our communities starting in March 2020 in an effort to contain COVID-19. Although some restrictions have loosened, we continue to face challenges from consumer apprehension regarding congregate living, staffing challenges, and regulatory scrutiny. There remains a period of time where restrictions on admissions continue to be imposed in communities that have experienced infections until such time that infections are no longer detected. As a result, we still anticipate occupancy challenges until such time the rate of resident move-outs is outpaced by new resident admissions. Although improving, there continues to be other factors impacting our operators’ ability to move in new residents, including: health and safety concerns of prospective new residents and their loved ones; restricted access to community dining, amenities and other lifestyle benefits; inability to tour communities in person; quarantine requirements upon initial move-in to a community; and limitations on families’ ability to visit their loved ones. • Operating costs in our senior housing operating portfolio have risen as our healthcare operators take action to protect their residents and staff, specifically higher labor costs, as well as higher usage and cost of personal protective equipment, and medical and sanitation supplies. Since the onset of the pandemic, we have incurred $13.2 million of such incremental costs, of which $7.0 million was abated through income received from government stimulus funding under the CARES Act Provider Relief Fund. The increased operating costs are expected to continue until there is a shift in the employment market dynamics and consumer confidence. • Our senior housing and skilled nursing net leased portfolios have experienced similar challenges. In addition, for our skilled nursing portfolio, the deferral of elective surgeries has also impacted occupancy. However, we generally have continued to collect rent from our operators, in part due to the benefits of various federal relief programs. The challenges faced by our healthcare operators and our tenants as a result of COVID-19 will continue to put pressure on future revenues and operating margins in our Wellness Infrastructure segment. As necessary, we will engage in discussions with our lenders on the deferral of payment obligations, and/or waiver of defaults for any potential failure in the future to satisfy certain financial or other covenants. Given the ongoing nature of the pandemic, the extent of the financial effects and how prolonged the effects will be to our wellness infrastructure business remains uncertain at this time, and largely dependent on the duration and severity of the COVID-19 crisis, vaccination rates, and the employment market.. Non-GAAP Supplemental Financial Measures The Company reports funds from operations ("FFO") as an overall non-GAAP supplemental financial measure. The Company also reports EBITDA re for the Digital Operating segment and NOI for the Wellness Infrastructure segment, which are supplemental non-GAAP financial measures widely used in the equity REIT industry. These non-GAAP measures should not be considered alternatives to GAAP net income as indications of operating performance, or to cash flows from operating activities as measures of liquidity, nor as indications of the availability of funds for our cash needs, including funds available to make distributions. Our calculation of FFO, EBITDA re and NOI may differ from methodologies utilized by other REITs for similar performance measurements, and, accordingly, may not be comparable to those of other REITs. Funds from Operations We calculate FFO in accordance with standards established by the National Association of Real Estate Investment Trusts ("NAREIT"), which defines FFO as net income or loss calculated in accordance with GAAP, excluding (i) extraordinary items, as defined by GAAP; (ii) gains and losses from sales of depreciable real estate; (iii) impairment write-downs associated with depreciable real estate; and (iv) gains and losses from a change in control in connection with interests in depreciable real estate or in-substance real estate; plus (v) real estate-related depreciation and amortization; and (vi) including similar adjustments for equity method investments. Included in FFO are gains and losses from sales of assets which are not depreciable real estate such as loans receivable, equity method investments, and equity and debt securities, as applicable. We believe that FFO is a meaningful supplemental measure of the operating performance of our business because historical cost accounting for real estate assets in accordance with GAAP assumes that the value of real estate assets diminishes predictably over time, as reflected through depreciation. Because real estate values fluctuate with market conditions, management considers FFO an appropriate supplemental performance measure by excluding historical cost 74 Table of Contents depreciation, gains related to sales of previously depreciated real estate, and impairment of previously depreciated real estate which is an early recognition of loss on sale. The following table presents a reconciliation of net income attributable to common stockholders to FFO attributable to common interests in Operating Company and common stockholders. Amounts in the table include our share of activity in unconsolidated ventures. Three Months Ended March 31, (In thousands) 2021 2020 Net loss attributable to common stockholders $ (264,806) $ (361,633) Adjustments for FFO attributable to common interests in Operating Company and common stockholders: Net loss attributable to noncontrolling common interests in Operating Company (27,896) (39,601) Real estate depreciation and amortization 184,762 130,523 Impairment of real estate 106,077 308,268 Gain on sales of real estate (38,102) (7,933) Less: Adjustments attributable to noncontrolling interests in investment entities (1) (188,496) (82,329) FFO attributable to common interests in Operating Company and common stockholders $ (228,461) $ (52,705) __________ (1) The components of adjustments attributable to noncontrolling interests in investment entities for FFO are as follows: Three Months Ended March 31, (In thousands) 2021 2020 FFO adjustments attributable to noncontrolling interests in investment entities: Real estate depreciation and amortization $ 117,281 $ 47,715 Impairment of real estate 71,151 40,134 Gain on sales of real estate 64 (5,520) $ 188,496 $ 82,329 EBITDAre We calculate EBITDA re for our Digital Operating segment in accordance with standards established by NAREIT, which defines EBITDA re as net income or loss calculated in accordance with GAAP, excluding (i) interest expense; (ii) income tax benefit (expense); (iii) depreciation and amortization; (iv) gains on disposition of depreciated real estate, including gains or losses on change of control; (v) impairment of depreciated real estate and of investments in unconsolidated affiliates, if any, caused by a decrease in value of depreciated real estate in the affiliate; and (vi) including similar adjustments for equity method investments, if any, to reflect the Company's share of EBITDAre of unconsolidated affiliates EBITDA re represents a widely known supplemental measure of performance, EBITDA, but for real estate entities, which we believe is particularly helpful for generalist investors in REITs. EBITDA re depicts the operating performance of a real estate business independent of its capital structure, leverage and noncash items, which allows for comparability across real estate entities with different capital structure, tax rates and depreciation or amortization policies. Additionally, exclusion of gains on disposition and impairment of depreciated real estate, similar to FFO, also provides a reflection of ongoing operating performance and allows for period-over-period comparability. As with other non-GAAP measures, the usefulness of EBITDA re may be limited. For example, EBITDA re focuses on profitability from operations, and does not take into account financing costs, and capital expenditures needed to maintain operating real estate. NOI NOI for our Wellness Infrastructure segment represents total property and related income less property operating expenses, adjusted primarily for the effects of (i) straight-line rental income adjustments; and (ii) amortization of acquired above- and below-market lease adjustments to rental income, where applicable. We believe that NOI is a useful measure of operating performance of our wellness infrastructure portfolio as it is more closely linked to the direct results of operations at the property level. NOI also reflects actual rents received during the period after adjusting for the effects of straight-line rents and amortization of above- and below-market leases; therefore, a comparison of NOI across periods better reflects the trend in occupancy rates and rental rates at our properties. 75 Table of Contents NOI excludes historical cost depreciation and amortization, which are based upon different useful life estimates depending on the age of the properties, as well as adjust for the effects of real estate impairment and gains on sales of depreciated properties, which eliminate differences arising from investment and disposition decisions. This allows for comparability of operating performance of our properties period over period and also against the results of other equity REITs in the same sector. Additionally, by excluding corporate level expenses or benefits such as interest expense, any gain or loss on early extinguishment of debt, and income taxes, which are incurred by the parent entity and are not directly linked to the operating performance of our properties, NOI provides a measure of operating performance independent of our capital structure and indebtedness. However, the exclusion of these items as well as others, such as capital expenditures and leasing costs, which are necessary to maintain the operating performance of our properties, and transaction costs and administrative costs, may limit the usefulness of NOI. Reconciliation of Non-GAAP Financial Measures The following tables present reconciliations of net loss of the Digital Operating segment to EBITDA re , and net loss of the Wellness Infrastructure segment to NOI of the operating properties in Wellness Infrastructure. Digital Operating Wellness Infrastructure Three Months Ended March 31, Three Months Ended March 31, (In thousands) 2021 2020 2021 2020 Net loss $ (62,844) $ (18,295) $ (41,210) $ (66,288) Adjustments: Straight-line rent and amortization of above- and below-market lease intangibles and ground lease ROU assets — — 24,571 (3,968) Interest income — — (999) 100 Fee income — — (2,769) (4,431) Other income — — (1,162) (1,191) Interest expense 31,132 9,402 32,705 43,952 Transaction-related, investment and servicing costs — — 2,163 2,913 Depreciation and amortization 122,221 30,031 31,418 37,460 Impairment loss — — 15,232 48,532 Compensation and administrative expense — — 3,913 5,205 Other (gain) loss, net 3 — (657) 6,467 Income tax (benefit) expense (12,268) (5,730) (2,421) (129) EBITDA re / NOI $ 78,244 $ 15,408 $ 60,784 $ 68,622 Liquidity and Capital Resources Overview We believe that our capital resources are sufficient to meet our short-term and long-term capital requirements. As of March 31, 2021, our liquidity position was $667 million, composed of corporate cash on hand and availability under our corporate credit facility. We regularly evaluate our liquidity position, debt obligations, and anticipated cash needs to fund our operating and investing activities, based upon our projected financial and operating performance, and investment opportunities as we divest non-digital assets and complete our digital transformation. Our evaluation of future liquidity requirements is regularly reviewed and updated for changes in internal projections, economic conditions, competitive landscape and other factors. At this time, while we are in compliance with all of our corporate debt covenants and have sufficient liquidity to meet our operational needs, we continue to evaluate alternatives to manage our capital structure and market opportunities to strengthen our liquidity and provide further operational and strategic flexibility. Stabilizing our capital structure and liquidity in 2020 has put us in a stronger position to execute our digital transformation. Liquidity Needs and Sources of Liquidity Our current primary liquidity needs are to fund: • our general partner and co-investment commitments to our investment vehicles; 76 Table of Contents • acquisitions of target digital assets for our balance sheet and related ongoing commitments; • principal and interest payments on our debt; • our operations, including compensation, administrative and overhead costs; • obligation for lease payments, principally leasehold data centers and corporate offices; • capital expenditures for our real estate investments; • distributions to our common and preferred stockholders (to the extent distributions have not been suspended); and • income tax liabilities of taxable REIT subsidiaries and of the Company subject to limitations as a REIT. Our current primary sources of liquidity are: • cash on hand; • our corporate revolving credit facility; • cash flow generated from our investments, both from operations and return of capital; • fees received from our investment management business, including incentive or carried interest payments, if any; • proceeds from full or partial realization of investments and/or businesses, particularly from investments in the Other segment; • investment-level financing; • proceeds from public or private equity and debt offerings; and • third party co-investors in our consolidated investments and/or businesses. Liquidity Needs Investment Commitments As of March 31, 2021, we have $170 million of unfunded capital commitments to our DCP I and DCP II funds, after assumption by Wafra of $60 million of our DCP I commitments. Separately, Wafra has also acquired a participation interest and is responsible for $17 million of our approximately $50 million remaining unfunded commitments to DCP I. We expect to fund our remaining investment commitments through cash on hand and/or proceeds from future asset monetization. Lease Obligations At March 31, 2021, we have $146.8 million and $321.4 million of finance and operating lease obligations, respectively, that were assumed through acquisitions, primarily leasehold data centers and to a lesser extent, ground leases on certain investment properties, and $42.2 million of operating lease obligations on corporate offices. These amounts represent fixed lease payments on an undiscounted basis, excluding any contingent or other variable lease payments, and factor in lease renewal or termination options only if it is reasonably certain that such options would be exercised. Certain lease payments under ground leases are recoverable from our tenants. These lease obligations will be funded through operating cash generated by the investment properties and corporate operating cash, respectively. Our lease obligations, including future fixed lease payments. Dividends U.S. federal income tax law generally requires that a REIT distribute annually at least 90% of its REIT taxable income, without regard to the deduction for dividends paid and excluding net capital gains, and that it pay tax at regular corporate rates to the extent that it annually distributes less than 100% of its net taxable income. These distribution requirements may constrain our ability to accumulate operating cash flows. We intend to pay regular quarterly dividends to our stockholders in an amount equal to our net taxable income, if and to the extent authorized by our board of directors. Before we pay any dividend, whether for U.S. federal income tax purposes or otherwise, we must first meet both our operating requirements and debt service, including complying with any restrictions imposed by our lenders. If our cash available for distribution is less than our net taxable income, we may be required to sell assets or borrow funds to make cash distributions or we may make a portion of the required distribution in the form of a taxable stock distribution or distribution of debt securities. Common Stock —The Company suspended dividends on its class A common stock beginning with the second quarter of 2020. Under the terms of the Company's amended credit facility, the Company is restricted from paying common dividends other than to maintain the Company’s status as a REIT or to reduce income tax payments. The Company will continue to monitor its financial performance and liquidity position, and as economic conditions improve, the Company will reevaluate its dividend policy in consultation with its revolver lending group. 77 Table of Contents Preferred Stock— At March 31, 2021, the Company's outstanding preferred stock, totaling $1.03 billion in liquidation preference, bears a weighted average dividend rate of 7.165% per annum, with aggregate cash distributions of $18.5 million per quarter. Sources of Liquidity Cash From Operations Our investments generate cash, either from operations or as a return of our invested capital. We primarily generate revenue from net operating income of our real estate properties, and expect such earnings to be increasingly sourced from our Digital Operating segment as we complete our digital transformation. We also generate interest income from commercial real estate related loans and securities as well as receive periodic distributions from our equity investments, including our GP co-investments. Such income is offset by interest expense associated with non-recourse borrowings on our investments. Additionally, we generate fee revenue from our investment management business, with increasing contribution of fees from our digital investment management business following the significant growth in digital FEEUM in 2020. Of our fee revenue from digital investment management business, 31.5% is attributable to Wafra. Management fee income is generally a predictable and stable revenue stream, while carried interest and contractual incentive fees are by nature less predictable in amount and timing. Our ability to establish new investment vehicles and raise investor capital depends on general market conditions and availability of attractive investment opportunities as well as availability of debt capital. Asset Monetization We periodically monetize our investments through opportunistic asset sales or to recycle capital from non-core assets. In 2021, we anticipate monetizing a substantial majority of the assets in our Other segment as we complete our digital transformation. Debt Description of our debt is included in Note 9 to the consolidated financial statements (and Note 7 for debt related to assets held for disposition). Summary of Indebtedness Our indebtedness at March 31, 2021 is summarized as follows: ($ in thousands) Outstanding Principal Weighted Average Interest Rate (Per Annum) Weighted Average Years Remaining to Maturity (1) Corporate credit facility $ — — % 0.8 Convertible and exchangeable senior notes 513,605 5.31 % 3.3 Junior subordinated debt 280,117 3.06 % 15.2 Non-recourse investment level financing Fixed rate 3,210,729 2.77 % 4.5 Variable rate 3,018,775 4.29 % 3.3 6,229,504 Total debt (excluding amounts related to assets held for disposition) $ 7,023,226 Debt related to assets held for disposition (to be assumed by counterparty) Wellness Infrastructure $ 44,149 Hotels (2) 780,000 Other 884,053 __________ (1) Calculated based upon initial maturity dates, or extended maturity dates if extension criteria are met and extension is available at the Company's option. (2) Represents debt on a hotel portfolio that is under receivership. Recent Developments Corporate Credit Facility We expect to either exercise the second extension option on our credit facility prior to maturity in July 2021, with a reduction to the current maximum principal amount of $400 million, or otherwise replace the existing credit facility. As of the date of filing, the full $400 million was available to be drawn. 78 Table of Contents Non-Recourse Investment-Level Financing Investment level financing is non-recourse to us, and secured by the respective underlying commercial real estate or mortgage loans receivable. • Digital Operating— In March 2021, DataBank raised $658 million of securitized notes at a blended fixed rate of 2.3%, with 5 years maturity. The proceeds were applied principally to refinance $514 million of outstanding debt, which meaningfully reduced the overall cost of debt from 6.1% per annum as of December 31, 2020 to 2.4% per annum as of March 31, 2021 and extended debt maturities at DataBank. • Hotels— Upon closing of the sale of our hotel assets in March 2021, $2.7 billion of the underlying debt was assumed by the acquirer, which resulted in a significant deleveraging of our balance sheet. Public Offerings We may offer and sell various types of securities under our shelf registration statement. These securities may be issued from time to time at our discretion based on our needs and depending upon market conditions and available pricing. Cash Flows The following table summarizes the activities from our statements of cash flows. Three Months Ended March 31, (In thousands) 2021 2020 Net cash provided by (used in): Operating activities $ (23,937) $ (59,669) Investing activities (7,901) 166,921 Financing activities 99,171 4,882 Operating Activities Cash inflows from operating activities are generated primarily through property operating income from our real estate investments, interest received from our loans and securities portfolio, distributions of earnings received from equity investments, and fee income from our investment management business. This is partially offset by payment of operating expenses supporting our various lines of business, including property management and operations, loan servicing and workout of loans in default, investment transaction costs, as well as compensation and general administrative costs. Our operating activities resulted in net cash outflows of $23.9 million in 2021 and $59.7 million in 2020. Notable items affecting operating cash flows included the following: • in 2021, contribution of operating cash flows from our Digital Operating segment, specifically Vantage SDC acquired in July 2020 and zColo acquired in December 2020, partially offset by significant severance payments; and • in 2020, payment of $39.9 million of accrued carried interest compensation in connection with carried interest realized from the sale of our light industrial portfolio in December 2019 . Investing Activities Investing activities include primarily cash outlays for acquisition of real estate, disbursements on new and/or existing loans, and contributions to unconsolidated ventures, which are partially offset by repayments and sales of loans receivable, distributions of capital received from unconsolidated ventures, and proceeds from sale of real estate and equity investments. Our investing activities resulted in net cash outflows of $7.9 million in 2021 compared to net cash inflows of $166.9 million in 2020. • Equity investments —In 2021, we recorded net cash outflows of $25.0 million from equity investments, largely from draws on ADC loans that are accounted for as equity method investments. In contrast, investing cash inflows in 2020 was driven by $133.6 million generated from equity investments, which was attributed primarily to $179.1 million of net proceeds received from sale of our investment in RXR Realty, partially offset by additional draws on ADC loans. 79 Table of Contents • Real estate investments —2021 saw net cash outflows of $9.2 million, with proceeds from sales of various European properties and our hotel business more than offset by capital expenditures. In 2020, real estate activities generated net cash inflows of $48.5 million with relatively higher proceeds from sale and no new acquisitions, coupled with lower capital expenditures on a smaller digital real estate portfolio. • Debt investments —Our loan and securities portfolio generated net cash outflows of $4.5 million in 2021, largely from a $9.7 million acquisition of additional N-Star CDOs by our Wellness Infrastructure segment at a discount, and partially offset by repayments exceeding disbursements on our loan portfolio. In 2020, the $13.1 million net cash outflow reflects activities in our loan portfolio, which partially offset the net cash inflows from equity investments and real estate. Financing Activities We finance our investing activities largely through investment-level secured debt along with capital from third party or affiliated co-investors. We also draw upon our corporate credit facility to finance our investing and operating activities, as well as have the ability to raise capital in the public markets through issuances of preferred stock, common stock and senior notes. Accordingly, we incur cash outlays for payments on our investment-level and corporate debt, dividends to our preferred stockholders and common stockholders (temporarily suspended), as well as distributions to our noncontrolling interests. Financing activities generated net cash inflows of $99.2 million in 2021 and $4.9 million in 2020. • The higher financing net cash inflows in 2021 were driven by $91.0 million of net contributions from noncontrolling interests. This was composed largely of a syndication of our interest to a new third party investor in our zColo investment vehicle and assumption of a portion of our commitments to DCP I by Wafra. While there were net borrowings from our secured mortgage debt during the period, the cash inflow was offset by a $31.5 million repayment of our remaining convertible senior notes at maturity. We also had lower dividend payments of $18.5 million to preferred stockholders in 2021, as common dividends were suspended beginning with the second quarter of 2020. • In 2020, while borrowings exceeded debt repayments by $496.2 million, primarily due to a $600 million draw on our corporate credit facility, we also settled the redemption of our Series B and E preferred stock for $402.9 million in January 2020 using proceeds from the sale of our light industrial portfolio in December 2019. Additionally, dividend payments were higher, totaling $77.4 million as it included both preferred and common stock. Guarantees and Off-Balance Sheet Arrangements In connection with financing arrangements for certain unconsolidated ventures, we provided customary non-recourse carve-out guarantees. We believe that the likelihood of making any payments under the guarantees is remote. Risk Management Risk management is a significant component of our strategy to deliver consistent risk-adjusted returns to our stockholders. The audit committee of our board of directors, in consultation with our chief risk officer, internal auditor and management, maintains oversight of risk management matters, and periodically reviews our policies with respect to risk assessment and risk management, including key risks to which we are subject, including credit risk, liquidity risk, financing risk, foreign currency risk and market risk, and the steps that management has taken to monitor and control such risks. Underwriting and Investment Process In connection with executing any new investment in digital assets for our balance sheet or a managed investment vehicle, our underwriting team undertakes a comprehensive due diligence process to ensure that we understand all of the material risks involved with making such investment, in addition to related accounting, legal, financial and business issues. If the risks can be sufficiently mitigated in relation to the potential return, we will pursue the investment on behalf of our balance sheet and/or investment vehicles, subject to approval from the applicable investment committee, composed of senior executives of the Company. Specifically, as part of our underwriting process, we evaluate and review the following data, including, but not limited to: financial data including historical and budgeted financial statements, tenant or customer quality, lease terms and structure, renewal probability, capital expenditure plans, sales pipeline , technical/energy requirements and supply, local and macroeconomic market conditions, ESG, leverage and comparable transactions, as applicable. For debt investments, we also analyze metrics such as loan-to-collateral value ratios, debt service coverage ratios, debt yields, sponsor credit ratings and performance history. 80 Table of Contents In addition to evaluating the merits of any particular proposed investment, we evaluate the diversification of our or a particular managed investment vehicle’s portfolio of assets, as the case may be. Prior to making a final investment decision, we determine whether a target asset will cause the portfolio of assets to be too heavily concentrated with, or cause too much risk exposure to, any one digital real estate sector, geographic region, source of cash flow such as tenants or borrowers, or other geopolitical issues. If we determine that a proposed investment presents excessive concentration risk, we may decide not to pursue an otherwise attractive investment. Allocation Procedures We currently manage, and may in the future manage, private funds, REITs and other entities that have investment and/or rate of return objectives similar to our own or to other investment vehicles that we manage. In order to address the risk of potential conflicts of interest among us and our managed investment vehicles, we have implemented an investment allocation policy consistent with our duty as a registered investment adviser to treat our managed investment vehicles fairly and equitably over time. Pursuant to this policy, and subject to certain priority rights in our DCP funds, investment allocation decisions are based on a suitability assessment involving a review of numerous factors, including the particular source of capital’s investment objectives, available cash, diversification/concentration, leverage policy, the size of the investment, tax, anticipated pipeline of suitable investments and fund life. Portfolio Management The comprehensive portfolio management process generally includes day-to-day oversight by the Company's portfolio management team, regular management meetings and quarterly asset review process. These processes are designed to enable management to evaluate and proactively identify investment-specific issues and trends on a portfolio-wide basis for both assets on our balance sheet and assets of the companies within our investment management business. Nevertheless, we cannot be certain that such review will identify all issues within our portfolio due to, among other things, adverse economic conditions or events adversely affecting specific assets; therefore, potential future losses may also stem from investments that are not identified during these reviews. We use many methods to actively manage our risk to preserve our income and capital, including, but not limited to, maintaining dialogue with tenants, operators, partners and/or borrowers and performing regular inspections of our collateral and owned properties. With respect to our wellness infrastructure properties, we consider the impact of regulatory changes on operator performance and property values. During a quarterly review, or more frequently as necessary, investments are monitored and identified for possible asset impairment or loan loss reserves, as applicable, based upon several factors, including missed or late contractual payments, significant declines in property operating performance and other data which may indicate a potential issue in our ability to recover our invested capital from an investment. In addition, we may utilize services of certain strategic partnerships and joint ventures with third parties with relevant expertise to assist our portfolio management. In order to maintain our qualification as a REIT for U.S. federal income tax purposes and our exemption from registration under the 1940 Act, and maximize returns and manage portfolio risk, we may dispose of an asset earlier than anticipated or hold an asset longer than anticipated if we determine it to be appropriate depending upon prevailing market conditions or factors regarding a particular asset. We can provide no assurances, however, that we will be successful in identifying or managing all of the risks associated with acquiring, holding or disposing of a particular asset or that we will not realize losses on certain assets. Interest Rate and Foreign Currency Hedging Subject to maintaining our qualification as a REIT for U.S. federal income tax purposes and our exemption from registration under the 1940 Act, we may mitigate the risk of interest rate volatility through the use of hedging instruments, such as interest rate swap agreements and interest rate cap agreements. The goal of our interest rate management strategy is to minimize or eliminate the effects of interest rate changes on the value of our assets, to improve risk-adjusted returns and, where possible, to lock in, on a long-term basis, a favorable spread between the yield on our assets and the cost of financing such assets. In addition, because we are exposed to foreign currency exchange rate fluctuations, we employ foreign currency risk management strategies, including the use of, among others, currency hedges, and matched currency financing. We can provide no assurances, however, that our efforts to manage interest rate and foreign currency exchange rate volatility will successfully mitigate the risks of such volatility on our portfolio. Critical Accounting Policies and Estimates Our financial statements are prepared in accordance with GAAP, which requires the use of estimates and assumptions that involve the exercise of judgment and that affect the reported amounts of assets, liabilities, and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues 81 Table of Contents and expenses during the reporting period. Our critical accounting policies and estimates are integral to understanding and evaluating our reported financial results as they require subjective or complex management judgments, resulting from the need to make estimates about the effect of matters that are inherently uncertain and unpredictable. There have been no changes to our critical accounting policies or those of our unconsolidated joint ventures since the filing of our Annual Report on Form 10-K for the year ended December 31, 2020. With respect to critical estimates, we have established policies and control procedures which seek to ensure that estimates and assumptions are appropriately governed and applied consistently from period to period. We believe that all of the decisions and assessments applied were reasonable at the time made, based upon information available to us at that time. Due to the inherently judgmental nature of the various projections and assumptions used, unpredictability of economic and market conditions, uncertainty as to the timing and the manner by which the assets in our Other segment would be monetized and the recoverable values upon monetization, and uncertainties over the duration and severity of the resulting economic effects of COVID-19, actual results may differ from estimates, and changes in estimates and assumptions could have a material effect on our financial statements in the future. Recent Accounting Updates The effects of accounting standards adopted in 2021 and the potential effects of accounting standards to be adopted in the future are described in Note 2 to our consolidated financial statements in Item 1 of this Quarterly Report.