DigitalBridge Group, Inc. 10-K

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. The following discussion should be read in conjunction with our consolidated financial statements and accompanying notes thereto, which are included in Item 15. "Exhibits and Financial Statement Schedules" of this Annual Report. Significant Developments The following summarizes significant developments in 2021 and through the date of this filing that affected our business and results of operations. Financing • Securitized Financing Facility— In July 2021, our corporate credit facility was terminated and replaced with $500 million aggregate principal amount of Series 2021-1 Secured Fund Fee Revenue Notes issued by subsidiaries of the OP (the "Co-Issuers"), composed of: (i) $300 million aggregate principal amount of 3.933% Secured Fund Fee Revenue Notes, Series 2021-1, Class A-2 (the “Class A-2 Notes”); and (ii) up to $200 million Secured Fund Fee Revenue Variable Funding Notes, Series 2021-1, Class A-1 (the “VFN Notes” and, together with the Class A-2 Notes, the “Series 2021-1 Notes”). The VFN Notes allow the Co-Issuers to borrow on a revolving basis. Proceeds from issuance of the Class A-2 Notes of $285 million, net of offering costs and $5.4 million of interest reserve deposit, are being applied for acquisitions of digital infrastructure investments, funding of commitments to sponsored funds, redemption or repayment of other higher cost corporate securities, and/or general corporate purposes. The issuance of the Series 2021-1 Notes represents a key milestone for the Company on a number of fronts: ▪ Longer-duration financing — We effectively refinanced our corporate credit facility and extended the maturity of our revolving credit from 2022 to 2026. ▪ First-of-its-kind securitization backed by investment management fees. ▪ Lower cost of capital — Successful rotation from “diversified to digital” has positioned us to issue securitized notes with a high-quality digital collateral base, which lowers our effective cost of capital. ▪ Greater flexibility — This new financing structure, which we intend to continue to utilize as it grows, creates greater flexibility around capital allocation and corporate liability management, including our ability to retire higher cost debt or securities and pay regular dividends on our common stock in the future. • In 2021, we reduced higher cost corporate indebtedness by $343 million. This reduction encompasses: (i) $193 million of corporate debt extinguished through $32 million repayment upon maturity and early exchange of $161 million of senior notes into shares of our class A common stock; and (ii) $150 million of preferred stock redeemed. Digital Business Digital IM • DBP II, our second flagship digital infrastructure fund, had its final closing in December 2021 with commitments totaling $8.3 billion (inclusive of $120 million of our commitments as limited partner and general partner). The successful fundraising for DBP II significantly exceeded our initial target and stands at twice the size of DBP I. Digital Operating • Our DataBank subsidiary completed its restructuring in the second quarter of 2021 and expects to elect REIT status for the 2021 taxable year, resulting in a write-off of $67 million of net deferred tax liabilities. • In February 2021, DataBank completed the acquisition of zColo's remaining five data centers in France for $33 million. • We acquired an additional data center and build-out of expansion capacity within the Vantage SDC portfolio, including lease-up of the expanded capacity and existing inventory, for aggregate payments of $505 million, funded primarily through borrowings by Vantage SDC. • In January 2022, DataBank entered into a definitive agreement to acquire four colocation data centers in Houston, Texas for $670 million. Based upon total equity investment by DataBank, our share of the investment is $91 million. 48 Table of Contents The new facilities will collectively add approximately 308,000 built square feet and 42.5 MW of installed critical IT load, as well as a roster of blue-chip customers. Additionally, one of the facilities being acquired is the region’s primary interconnection point that is strategically positioned with access to significant and redundant utility power feeds and access to fast and reliable telecommunications networks. The transaction is expected to close in March 2022, subject to customary closing conditions and regulatory approval. • In March 2021 and October 2021, DataBank raised $658 million and $332 million of 5-year securitized notes at blended fixed rates of 2.32% and 2.43% per annum, respectively. Proceeds from the March securitization were applied principally to refinance $514 million of outstanding debt, which meaningfully reduced DataBank's overall cost of debt and extended its debt maturities, while the October proceeds were used to repay borrowings on its credit facility and to finance the future Houston acquisition. • In November 2021, Vantage SDC issued $530 million of 5-year securitized notes at a blended per annum fixed rate of 2.17%. Proceeds were applied to replace its current bridge financing and fund capital expenditures on the September 2021 add-on acquisition, as well as to fund payments for future build-out and lease-up of expansion capacity. • In January 2022, we acquired additional interest in DataBank from a selling investor for $32.0 million, which increased our ownership in DataBank to 21.9%. Other • DBP II, together with other third party co-invest capital, acquired a digital communications infrastructure business in October 2021. No capital was drawn from DBRG's balance sheet to bridge the financing for this acquisition and DBRG's previous commitment to a preferred equity investment has been cancelled. Non-Digital Assets • In the first half of 2021, we determined we would accelerate the monetization of our remaining non-digital assets in Wellness Infrastructure, OED and Other IM. • In December 2021, pursuant to a definitive agreement entered into in June 2021, we sold our interests in a substantial majority of our OED investments and Other IM business for cash consideration of $443 million, net of closing adjustments of $31 million, representing net cash already received, largely for asset monetizations realized prior to closing. Approximately $510 million of consolidated investment-level debt was assumed by the acquirer. • In February 2022, pursuant to a definitive agreement entered into in September 2021 (as amended in February 2022), we sold our Wellness Infrastructure business in a transaction valued at $3.1 billion, including the acquirer's assumption of $2.86 billion of consolidated investment-level debt. The sales price was $281 million, composed of $126 million in cash and a $155 million 5-year seller note. In addition, we received a $35 million cash distribution from NRF Holdco prior to closing. • Based upon the sales price for the Wellness Infrastructure assets, OED investments and Other IM business, the carrying values of these assets were written down by $625 million in aggregate, of which $265 million was attributable to the OP, included in discontinued operations. • On April 30, 2021, we terminated the BRSP management contract, which resided in the Other IM business, for a one-time termination payment of $102.3 million at closing. Consequently, the Other IM goodwill balance of $81.6 million was fully written off as the remaining value of the Other IM reporting unit represented principally the BRSP management contract. This resulted in a net gain of $20.7 million, recognized within other gain (loss) in discontinued operations. • 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 consolidated investment-level debt. The remaining one hotel portfolio that was in receivership was sold by the lender in September 2021 for no proceeds to us. • In August 2021, we sold 9.5 million BRSP shares for net proceeds of approximately $82 million. 49 Table of Contents • In October 2021, our equity interest in a private healthcare real estate investor/manager (the "Investee") was diluted following an acquisition of the Investee in conjunction with a merger of the Investee's co-sponsored non-traded REITs. In connection with this transaction, we received distributions of $7.8 million cash and units in the operating company of the new combined non-traded healthcare REIT, valued at approximately $45 million, based upon the net asset value of the non-traded healthcare REIT. As a result, we recorded a $7.4 million realized gain and approximately $37 million of unrealized gain. • In April 2021, we received proceeds from the sale of the two largest assets securing our Irish loan portfolio, which were applied to repay $305 million of our outstanding 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. • For all current and prior periods presented, all non-digital assets that have been disposed or subject to planned disposition, and associated liabilities (excluding our interest in BRSP, except for BRSP shares and units held by NRF Holdco) are presented as held for disposition, and the related operating results are presented as discontinued operations (Notes 11 and 12 to the consolidated financial statements). Assets Under Management and Fee Earning Equity Under Management ("FEEUM") Below is a summary of our AUM and FEEUM. AUM (1)(3) (In billions) FEEUM (2)(3) (In billions) Type Products Description December 31, 2021 December 31, 2020 December 31, 2021 December 31, 2020 Third Party Managed Capital Institutional Funds Digital Bridge Partners opportunistic strategy Earns management fees and potential for carried interest or incentive fees $ 16.6 $ 9.3 $ 11.2 $ 7.0 Liquid securities strategy 0.8 0.5 0.8 0.4 Other Investment Vehicles Digital co-invest vehicles Earns management fees, business service fees from portfolio companies, and potential for carried interest 19.3 9.9 4.2 2.6 Digital real estate and infrastructure held by portfolio companies 6.9 8.9 2.1 2.8 43.6 28.6 18.3 12.8 Balance Sheet Capital (4) Digital Operating 1.2 1.1 NA NA Other 0.5 0.3 NA NA 45.3 30.0 18.3 12.8 __________ (1) AUM is composed of (a) third party managed capital, which are 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; and (b) assets invested using the Company's own balance sheet capital and managed on behalf of the Company's shareholders. Third party AUM is based upon the cost basis of managed investments as reported by each underlying vehicle as of the reporting date and may include uncalled capital commitments. Balance sheet AUM is based upon the undepreciated carrying value of the Company's balance sheet investments as of the reporting date. The Company's calculation of 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) Our non-digital investment management business was disposed in the fourth quarter of 2021. AUM and FEEUM associated with our non-digital investment management business are no longer presented for the prior year period. (4) 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 balance sheet assets, 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. • In 2021, we have made significant progress in the digital rotation of our investment management business. At December 31, 2021, our third party AUM stood at $43.6 billion. 50 Table of Contents • FEEUM grew 43% or $5.5 billion to $18.3 billion at December 31, 2021, attributed to the successful fundraising for DBP II and additional capital from co-investment vehicles. These increases were partially offset by a change in the fee base for DBP I from committed to contributed capital following the closing of DBP II. DBP II had its final closing in December 2021 with total commitments of $8.3 billion, having raised $4.2 billion in 2021. The successful fundraising for DBP II significantly exceeded our initial target and stands at twice the size of DBP I. Results of Operations A comparative discussion of our consolidated results of operations for 2021 and 2020 is presented below. Refer to Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our 2020 Annual Report on Form 10-K for comparative discussion of our consolidated results of operations for 2020 and 2019. In 2021, our Wellness Infrastructure segment and substantially all of our Other segment qualified as discontinued operations. The operating results of those segments for all periods presented have been recast as income from discontinued operations on the consolidated statements of operations. Additionally, beginning with the third quarter of 2021, only Digital Investment Management and Digital Operating represent reportable segments, while our remaining investment activities and corporate level activities are combined and presented as Corporate and Other. The operating results by segment have been recast for all prior periods presented. The discussion of our consolidated results of operations for 2020 and 2019 in our 2020 Form 10-K should be read in conjunction with Item 15. "Exhibits and Financial Statement Schedules" in this Annual Report, specifically the consolidated statement of operations, Note 12. Discontinued Operations and Note 20. Segment Reporting. The following table summarizes our consolidated results from continuing operations by reportable segments. Year Ended December 31, (In thousands) 2021 2020 Change Continuing Operations Total revenues Digital Investment Management $ 191,682 $ 85,782 $ 105,900 Digital Operating 763,199 313,283 449,916 Corporate and Other (1) 10,918 17,365 (6,447) $ 965,799 $ 416,430 549,369 Income (loss) from continuing operations Digital Investment Management $ 90,915 $ 11,155 $ 79,760 Digital Operating (230,841) (132,063) (98,778) Corporate and Other (76,897) (470,180) 393,283 $ (216,823) $ (591,088) 374,265 Net income (loss) from continuing operations attributable to DigitalBridge Group, Inc. Digital Investment Management $ 51,531 $ 10,423 $ 41,108 Digital Operating (36,664) (20,903) (15,761) Corporate and Other (87,506) (425,268) 337,762 $ (72,639) $ (435,748) 363,109 __________ (1) Includes elimination of fee income earned by Digital Investment Management from managed investment vehicles consolidated within Digital Operating and Corporate and Other. Revenues Total revenues increased $549.4 million or 132%. • Digital Investment Management— Revenues from our investment management business grew 123% to $191.7 million as a result of significant growth in our FEEUM from $12.8 billion at December 31, 2020 to $18.3 billion at December 31, 2021 following the successful fundraising for DBP II and co-invest vehicles. DBP II had its final closing in December 2021 at $8.3 billion of total commitments, with $4.2 billion raised in 2021. • Digital Operating— 2021 includes a full fiscal year of revenues from zColo's 39 colocation data centers (held through our subsidiary, DataBank, 20% DBRG ownership during 2021) and Vantage SDC's 12 hyperscale data centers (13% DBRG ownership), acquired in December 2020 and July 2020, respectively. 2021 also included 51 Table of Contents additional acquisitions with another five zColo colocation data centers, and in the Vantage SDC portfolio, an add-on acquisition plus additional lease-up of expanded capacity and existing inventory. Income (loss) from continuing operations • Digital Investment Management— In addition to higher fee income, 2021 also included significant unrealized carried interest income, which accrues to the Company net of allocations to certain employees. • Digital Operating— Our Digital Operating segment generally records a net loss, reflecting the effects of real estate depreciation and amortization of lease intangibles. In 2021, net loss in Digital Operating was reduced by a $66.8 million net deferred tax benefit at our DataBank subsidiary, driven by the write-off of deferred tax liabilities as DataBank completed its restructuring to qualify as a REIT in the second quarter and expects to elect REIT status for the 2021 taxable year. We present our supplemental operating results measure of earnings before interest, tax, depreciation and amortization for real estate ("EBITDA re ") for Digital Operating under " —Non-GAAP Measures." • Corporate and Other— Net losses generally reflect corporate level costs that have not been allocated to our reportable segments. The significantly larger net loss in 2020 was driven by $298.2 million of losses in connection with our equity investment in BRSP, including a $254.5 million impairment. BRSP represents our largest remaining non-digital investment. 52 Table of Contents Key components of revenue and income (loss) from continuing operations are discussed in more detail below. Comparison of Year Ended December 31, 2021 to Year Ended December 31, 2020 Year Ended December 31, (In thousands) 2021 2020 Change Revenues Property operating income $ 762,750 $ 312,928 $ 449,822 Interest income 8,791 7,206 1,585 Fee income 180,826 83,355 97,471 Other income 13,432 12,941 491 Total revenues 965,799 416,430 549,369 Expenses Property operating expense 316,178 119,834 196,344 Interest expense 186,949 120,829 66,120 Investment expense 28,257 13,551 14,706 Transaction-related costs 5,781 5,282 499 Depreciation and amortization 539,695 241,020 298,675 Impairment loss — 25,079 (25,079) Compensation expense, including carried interest 301,875 178,058 123,817 Administrative expenses 109,490 78,766 30,724 Settlement loss — 5,090 (5,090) Total expenses 1,488,225 787,509 700,716 Other income (loss) Other loss, net (21,412) (6,493) (14,919) Equity method earnings (losses), including carried interest 226,477 (260,579) 487,056 Loss before income taxes (317,361) (638,151) 320,790 Income tax benefit 100,538 47,063 53,475 Loss from continuing operations (216,823) (591,088) 374,265 Loss from discontinued operations (600,088) (3,199,322) 2,599,234 Net loss (816,911) (3,790,410) 2,973,499 Net income (loss) attributable to noncontrolling interests: Redeemable noncontrolling interests 34,677 616 34,061 Investment entities (500,980) (812,547) 311,567 Operating Company (40,511) (302,720) 262,209 Net loss attributable to DigitalBridge Group, Inc. (310,097) (2,675,759) 2,365,662 Preferred stock redemption 4,992 — 4,992 Preferred stock dividends 70,627 75,023 (4,396) Net loss attributable to common stockholders $ (385,716) $ (2,750,782) 2,365,066 53 Table of Contents Property Operating Income and Expense Year Ended December 31, (In thousands) 2021 2020 Change Property operating income Lease income $ 701,706 $ 265,391 $ 436,315 Data center service revenue 61,044 47,537 13,507 $ 762,750 $ 312,928 449,822 Property operating expense $ 316,178 $ 119,834 196,344 Property operating income and expense amounts were higher in 2021, reflecting the operating results for a full fiscal year in 2021 for zColo's 39 colocation data centers and Vantage SDC's 12 hyperscale data centers, acquired in December 2020 and July 2020, respectively. 2021 also included additional acquisitions with another five zColo colocation data centers, and in the Vantage SDC portfolio, an add-on acquisition plus additional lease-up of expanded capacity and existing inventory. Total real estate carrying value in our Digital Operating segment stood at $4.97 billion at December 31, 2021 compared to $4.45 billion at December 31, 2020. Our portfolio includes 69 data centers in the U.S., three in Canada, one in the U.K., and five in France. December 31, 2021 December 31, 2020 Number of data centers Owned 28 26 Leasehold 50 45 78 71 (In thousands, except %) Max Critical I.T. Square Feet or Total Rentable Square Feet 1,949 1,720 Leased Square Feet 1,553 1,386 % Utilization Rate (% Leased) 80% 81% On a same store basis, property operating income and expense also increased in 2021, reflecting an increase in leased square footage. Additionally, higher power costs were incurred in connection with inclement weather conditions in 2021, with the incremental cost largely billed to our colocation tenants. Interest Income Interest income was $1.6 million higher. In 2021, there was additional interest income from new loans originated or acquired that are being warehoused for future investment vehicles. However, this increase was largely offset by lower interest income on available cash in 2021 as proceeds from the sale of our light industrial business in December 2019 have since been redeployed. Fee Income Year Ended December 31, (In thousands) 2021 2020 Change Digital Investment Management Management fees $ 168,618 $ 78,421 $ 90,197 Incentive fees 7,174 35 7,139 Other fee income 5,034 4,899 135 $ 180,826 $ 83,355 97,471 Fee income was higher by $97.5 million. The increase was driven by: (i) the successful fundraising for DBP II beginning November 2020 with a final close in December 2021 at $8.3 billion of total commitments, having raised $4.2 billion in 2021; and (ii) incentive fees earned based upon the performance of managed third party accounts in our digital liquid strategy. The increase in fees from DBP II and new co-invest vehicles were partially offset by lower fees from DBP I in 2021 with a change in its fee base from committed capital to contributed capital following the first closing of DBP II. 54 Table of Contents Other Income Other income increased $0.5 million, which can be attributed primarily to higher professional service fees incurred on behalf of and reimbursable by our managed investment vehicles. Interest Expense Year Ended December 31, (In thousands) 2021 2020 Change Digital Investment Management $ 4,766 $ — $ 4,766 Digital Operating 125,387 77,976 47,411 Other investment-level debt 660 — 660 Corporate-level debt 56,136 42,853 13,283 $ 186,949 $ 120,829 66,120 Digital Investment Management— This represents interest expense from our securitized financing facility beginning in July 2021 as the $300 million term loan is attributed largely to the Digital IM segment. Digital Operating— The increase of $47.4 million is attributed to: (i) a full year of interest expense in 2021 incurred on debt financing the Vantage SDC and zColo portfolios, acquired in July 2020 and December 2020, respectively; (ii) interest expense on additional debt raised through securitization transactions by DataBank and Vantage SDC during 2021; and (iii) interest expense on our securitized financing facility which is partially allocated to the Digital Operating segment. This increase was partially offset by lower interest expense on the DataBank portfolio following its March 2021 and October 2021 securitization transactions which meaningfully reduced its cost of debt. The weighted average interest rate on DataBank's outstanding debt was 6.08% per annum in 2020 and 2.35% per annum in 2021. Overall, at December 31, 2021, our data center portfolio was financed by an aggregate $4.22 billion of outstanding debt principal ($3.23 billion at December 31, 2020), bearing a combined weighted average interest rate of 2.88% per annum (3.69% per annum at December 31, 2020). Other Investment-level Debt— This represents interest expense from our securitized financing facility that is partially allocated to our digital credit and digital liquid investments on the balance sheet. Corporate-level Debt— Interest expense was $13.3 million higher. This increase can be attributed to: (i) a net increase in interest expense on our senior notes, with a higher interest rate on the exchangeable notes issued in July 2020 (5.75% per annum) relative to the convertible notes that were substantially repurchased in the third quarter of 2020 and fully repaid in January 2021 (3.875% per annum); and (ii) debt conversion expense of $25.1 million recognized in connection with an early exchange of $161.3 million of our 5.75% exchangeable notes into shares of our class A common stock in the fourth quarter of 2021 (refer to Note 8 to the consolidated financial statements). This increase was partially offset by lower interest expense on our corporate credit facility that was terminated in July 2021, which included a proportional write-off of deferred financing costs in June 2020 following a reduction in the facility amount. Investment Expense Investment expense was $14.7 million higher. The increase was related primarily to a full year of management fees paid to Vantage for the day-to-day operations of Vantage SDC beginning the end of July 2020, fees paid in 2021 for transitional services in connection with the zColo portfolio, and reimbursable due diligence costs incurred in our investment management business. Transaction-Related Costs Transaction-related costs were generally in connection with unconsummated investments and corporate restructuring transactions. Depreciation and Amortization Increase in depreciation and amortization reflects a full year of expense in 2021 on real estate and intangible assets acquired from Vantage SDC in July 2020 and zColo in December 2021, and in connection with an add-on acquisition and additional lease-up of expanded capacity and existing inventory in the Vantage SDC portfolio in 2021. Impairment Loss There was no impairment loss in 2021. Impairment loss of $25.1 million in 2020 pertains to: (i) a management contract intangible due to reduced cash flows from the original Vantage contract, which was replaced by a new fee stream 55 Table of Contents from third party capital raised in our acquisition of Vantage SDC; (ii) right-of-use lease asset on certain corporate office leases due to reduced need for office space based upon the Company’s operations; and (iii) corporate aircraft that was written down to recoverable value prior to its sale in January 2021. Compensation Expense Year Ended December 31, (In thousands) 2021 2020 Change Cash compensation and benefits $ 197,717 $ 153,260 $ 44,457 Equity-based compensation 38,268 22,892 15,376 Incentive and carried interest compensation 65,890 1,906 63,984 $ 301,875 $ 178,058 123,817 Total compensation expense was $123.8 million higher, driven primarily by: • compensation cost associated with data center employees of zColo who became employees of the Company following the zColo acquisition in December 2020; • higher severance payments, including acceleration of equity-based compensation in 2021; and • incentive and carried interest compensation accrued in 2021, representing a portion of incentive fees earned and unrealized carried interest from our managed accounts and sponsored investment vehicles that are shared with management and certain employees. Unlike incentive fees and related compensation which have been earned, unrealized carried interest and corresponding compensation amounts are subject to adjustments each period, including reversals, until such time they are realized, based upon the cumulative performance of the underlying investments of the respective vehicles that are carried at fair value. Administrative Expenses Administrative expense increased $30.7 million, attributable largely to administrative costs associated with our new zColo portfolio, growth in our Digital Operating business, placement fees incurred in fundraising for DBP II, and higher professional fees. Settlement Loss Settlement loss recognized in 2020 represents the initial fair value of the settlement arrangement with Blackwells and the reimbursement of legal costs incurred by Blackwells. Refer to additional discussion in Note 13 to the consolidated financial statements. Other Loss Other loss was $21.4 million in 2021 and $6.5 million in 2020. The larger loss in 2021 was driven by a write-off of an equity investment that was determined to be unrecoverable. Additionally, both 2021 and 2020 included losses from an increase in value of the Blackwells settlement liability prior to its settlement in June 2021 based upon an increase in the DBRG stock price, which was more pronounced in 2021 (refer to Note 13 to the consolidated financial statements). However, these losses were partially offset in both years, more so in 2021, by fair value increases in marketable equity securities held by our consolidated digital liquid securities funds. Equity Method Earnings (Losses) Year Ended December 31, (In thousands) 2021 2020 Change Digital Investment Management $ 101,811 $ 13,039 $ 88,772 Other 124,666 (273,618) 398,284 $ 226,477 $ (260,579) 487,056 Digital Investment Management— These amounts represent earnings, predominantly unrealized carried interest income, from our general partner interests in sponsored investment vehicles. Carried interest income is subject to adjustments each period, including reversals, based upon the cumulative performance of the underlying investments of these vehicles that are measured at fair value, until such time the carried interest is realized. The unrealized carried interest recognized to-date are in connection with investment vehicles that are in the early stage of their lifecycle. Other— These amounts were driven primarily by our investment in BRSP for which we recorded earnings of $41.2 million in 2021 and losses of $298.2 million in 2020. The large loss in 2020 can be attributed to a $254.5 million 56 Table of Contents impairment charge on our equity investment in BRSP (excluding amounts associated with BRSP shares and units held by NRF Holdco that is presented as discontinued operations). Furthermore, our share of BRSP's net losses was higher overall in 2020 as a result of the economic effects of COVID-19. We also recorded net losses from BRSP in 2021, attributable largely to investment write-downs and BRSP's restructuring costs, including the BRSP management contract termination fee that was paid to us. However, our basis difference adjustment (as discussed in Note 5 to consolidated financial statements) more than offset our share of loss from BRSP in 2021 while partially reducing our loss from BRSP in 2020. Additionally, we recorded a $44.3 million gain in 2021 from our equity investment in a healthcare real estate investor/manager following an acquisition of the investee in conjunction with a merger of the investee's co-sponsored non-traded REITs. In connection with this transaction, we received distributions of $7.8 million cash and units in the operating company of the new combined non-traded healthcare REIT, valued at its net asset value. 2021 also included higher unrealized gains from an equity investment following a merger of the investee into a special purpose acquisition company in 2021, and our limited partnership interests in DBP I and DBP II, specifically our share of fair value increases on the underlying investments of these funds. Income Tax Benefit Income tax benefit increased $53.5 million, which can be attributed primarily to the following: • a $66.8 million net deferred tax benefit at our DataBank subsidiary, driven by the write-off of deferred tax liabilities as DataBank completed its restructuring to qualify as a REIT in the second quarter and expects to elect REIT status for the 2021 taxable year; and • increase in compensation expense, primarily significant severance costs in 2021; partially offset by • higher income tax expense on our investment management business resulting from significant growth in fee income in 2021; and • deferred tax expense recognized in 2021 on an unrealized gain from our equity investment in a non-traded healthcare REIT (as discussed under "—Equity Method Earnings (Losses)" ). Loss from Discontinued Operations Year Ended December 31, (In thousands) 2021 2020 Change Revenues $ 843,659 $ 1,414,430 $ (570,771) Expenses (1,282,168) (4,217,744) 2,935,576 Other loss (111,679) (356,337) 244,658 Income tax expense (49,900) (39,671) (10,229) Loss from discontinued operations (600,088) (3,199,322) 2,599,234 Loss from discontinued operations attributable to noncontrolling interests: Investment entities (337,685) (712,771) 375,086 Operating Company (24,945) (246,540) 221,595 Loss from discontinued operations attributable to DigitalBridge Group, Inc. $ (237,458) $ (2,240,011) 2,002,553 Discontinued operations represent primarily the operations of the following businesses: (1) Wellness Infrastructure; (2) opportunistic investments in our OED portfolio and credit investment management business in Other IM prior to disposition of our equity interest and deconsolidation in December 2021; and (3) the Company's hotel business prior to its disposition in March 2021, with the remaining hotel portfolio that was in receivership sold by the lender in September 2021. Losses in both years are driven by significant impairment expense and decreases in asset fair values, particularly in the second quarter of 2020. Our determination to accelerate our digital transformation in the second quarter of 2020 necessitated an assumption of accelerated monetization of all of our non-digital businesses in estimating recoverable values and in combination with the negative economic effects of COVID-19, resulted in significant write-down in asset values. In 2021, asset values were further written-down, but to a much lesser extent than in 2020, based upon the respective sales price for our Wellness Infrastructure, and OED and Other IM business. Impairment of our investment assets in 2021 was partially offset by significantly less depreciation and amortization expense and various gains recognized during the year, including a gain on extinguishment of debt on the hotel portfolio that was sold in September 2021. 57 Table of Contents A detailed income statement on discontinued operations is included in Note 12 to the consolidated financial statements and the monetization of our discontinued businesses is discussed further under " —Business. " Preferred Stock Redemption In connection with a full redemption of Series G preferred stock in August 2021 and partial redemption of Series H preferred stock in November 2021, net income attributable to common stockholders was reduced by $5.0 million in aggregate, representing the excess of the $25.00 per share redemption price over the carrying value of the preferred stock that is net of issuance cost. Non-GAAP Supplemental Financial Measures We report funds from operations ("FFO") as an overall non-GAAP supplemental financial measure. For the Digital Operating segment, we also report earnings before interest, tax, depreciation and amortization for real estate ("EBITDA re "), which is a non-GAAP supplemental financial measure widely used by the equity REIT industry. These non-GAAP measures should not be considered alternatives to GAAP net income (loss) 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 and EBITDA re 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) real estate-related depreciation and amortization; (ii) impairment of depreciable real estate and impairment of investments in unconsolidated ventures directly attributable to decrease in value of depreciable real estate held by the venture; (iii) gain from sale of depreciable real estate; (iv) gain or loss from a change in control in connection with interests in depreciable real estate or in-substance real estate; and (v) adjustments to reflect the Company's share of FFO from investments in unconsolidated ventures. Included in FFO are gains and losses from sales of assets which are not depreciable real estate such as loans receivable, equity investments, 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 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 (loss) attributable to common stockholders to FFO attributable to common interests in OP and common stockholders, both of which include results from discontinued operations. Amounts in the table include our share of the relevant activities from equity method investments, where applicable. Year Ended December 31, (In thousands) 2021 2020 2019 Net loss attributable to common stockholders $ (385,716) $ (2,750,782) $ (1,152,207) Adjustments for FFO attributable to common interests in OP and common stockholders: Net loss attributable to noncontrolling common interests in Operating Company (40,511) (302,720) (93,027) Real estate depreciation and amortization ($110,314, $340,360 and $512,508 related to discontinued operations) 595,527 561,195 548,766 Impairment of real estate ($300,038, $1,956,662 and $347,158 related to discontinued operations) 300,038 1,956,662 351,395 Gain on sale of real estate — discontinued operations (41,782) (41,912) (1,524,290) Adjustments attributable to noncontrolling interests in investment entities (1) (535,756) (638,709) 719,225 FFO attributable to common interests in OP and common stockholders ($(34,842), $(704,165) and $(534,574) related to discontinued operations) $ (108,200) $ (1,216,266) $ (1,150,138) __________ 58 Table of Contents (1) The components of adjustments attributable to noncontrolling interests in investment entities for FFO are as follows: Year Ended December 31, (In thousands) 2021 2020 2019 FFO adjustments attributable to noncontrolling interests in investment entities: Real estate depreciation and amortization ($31,696, $83,622 and $168,787 related to discontinued operations) $ 426,443 $ 259,543 $ 170,024 Impairment of real estate — discontinued operations 110,051 403,770 111,231 Gain on sale of real estate — discontinued operations (738) (24,604) (1,000,480) $ 535,756 $ 638,709 $ (719,225) 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 or expense; (iii) depreciation and amortization; (iv) impairment of depreciable real estate and impairment of investments in unconsolidated ventures directly attributable to decrease in value of depreciable real estate held by the venture; (v) gain on disposition of depreciated real estate; (vi) gain or loss from a change in control in connection with interests in depreciable real estate or in-substance real estate; and (vii) adjustments to reflect the Company's share of EBITDA re from investments in unconsolidated ventures. 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. EBITDA re generated by our Digital Operating segment is as follows. EBITDA re was immaterial in 2019 as the Company acquired its first real estate portfolio in the Digital Operating segment in late December 2019. Year Ended December 31, (In thousands) 2021 2020 Change Digital Operating Total revenues $ 763,199 $ 313,283 $ 449,916 Property operating expenses (316,178) (119,729) (196,449) Transaction-related costs and investment expense (21,835) (6,704) (15,131) Compensation and administrative expense (113,080) (51,965) (61,115) Other loss, net (1,293) (245) (1,048) EBITDA re $ 310,813 $ 134,640 176,173 The following table presents a reconciliation of net loss to EBITDA re for the Digital Operating segment. Year Ended December 31, (In thousands) 2021 2020 Digital Operating Net loss $ (230,841) $ (132,063) Adjustments: Interest expense 125,387 77,976 Depreciation and amortization 495,342 210,188 Income tax benefit (79,075) (21,461) EBITDA re $ 310,813 $ 134,640 The higher 2021 EBITDA re reflects the acquisition of Vantage SDC in July 2020, zColo in December 2020 and February 2021, and an add-on acquisition in the Vantage SDC portfolio in October 2021. 59 Table of Contents On a same store basis, EBITDA re was largely consistent. While there was an increase in revenues attributed to an increase in rentable square footage, this was mostly offset by higher compensation and administrative costs as we ramped up resources to support the growth in business, additional costs incurred in the restructuring of DataBank's operations for REIT qualification, and unfavorable margins in our power component due to inclement weather conditions in 2021. Liquidity and Capital Resources Overview We believe we have sufficient cash on hand, and anticipated cash generated from operating activities and external financing sources, to meet our short term and long term capital requirements. Our liquidity position is $1.1 billion, composed of corporate cash on hand at December 31, 2021 and the full $200 million availability under our VFN Notes. 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. 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. Significant Liquidity and Capital Activities • In July 2021, we replaced our corporate credit facility with the issuance of $500 million aggregate principal amount of Series 2021-1 Notes, composed of: (i) $300 million 3.933% BBB rated Class A-2 Notes; and (ii) VFN Notes with up to $200 million availability. These Series 2021-1 Notes provide a lower cost of capital and extend our revolving credit maturity to 2026. • In 2021, we reduced higher cost corporate indebtedness by $343 million, encompassing $193 million of corporate debt and $150 million of preferred stock. • We completed the internalization of BRSP in April 2021 and received a one-time payment of $102 million for termination of the BRSP management contract. • We sold 9.5 million BRSP shares in a secondary offering by BRSP in August 2021 for net proceeds of approximately $82 million. • We monetized (i) our Wellness Infrastructure business in February 2022 for $151 million in cash, including cash distributions received from NRF Holdco prior to closing of the sale, and $155 million in note receivable; and (ii) substantially all of our OED investments in December 2021 for $443 million in cash. Liquidity Needs and Sources of Liquidity Our primary liquidity needs are to fund: • acquisitions of target digital assets for our balance sheet and related ongoing commitments; • our general partner and co-investment commitments to our investment vehicles; • warehouse investments pending the raising of third party capital for future investment vehicles; • 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; • development, construction and capital expenditures on our operating real estate; • 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 primary sources of liquidity are: • cash on hand; • fees received from our investment management business, including the Company's share of realized net incentive or carried interest, if any; 60 Table of Contents • cash flow generated from our investments, both from operations and return of capital; • availability under our VFN Notes; • issuance of additional term notes under our corporate securitization; • third party co-investors in our consolidated investments and/or businesses; • proceeds from full or partial realization of investments; • investment-level financing; and • proceeds from public or private equity and debt offerings.. Investment Commitments As of December 31, 2021, we have unfunded commitments of $89 million to our DBP funds. Lease Obligations At December 31, 2021, we have $142.8 million and $299.7 million of finance and operating lease obligations, respectively, that were assumed through acquisitions, principally leasehold data centers, and $42.8 million of operating lease obligations on our corporate offices. These amounts represent fixed lease payments, 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. These lease obligations will be funded through operating cash generated by the investment properties and corporate operating cash, respectively. 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. Payment of common dividends was previously subject to certain restrictions under the terms of the corporate credit facility, which was terminated in July 2021. The Company continues to monitor its financial performance and liquidity position, and will reevaluate its dividend policy as conditions improve. Preferred Stock— At December 31, 2021, we have outstanding preferred stock totaling $884 million, bearing a weighted average dividend rate of 7.135% per annum, with aggregate dividend payments of $15.8 million per quarter. 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 digital infrastructure business, which is partially offset by interest expense associated with non-recourse borrowings on our digital portfolio. We also receive periodic distributions from our equity investments, including our GP co-investments. Additionally, we generate fee related earnings from our digital investment management business, of which 31.5% is attributable to our noncontrolling investor, Wafra. Management fee income is generally a predictable and stable revenue stream, while carried interest and 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. As noted above, in completing our digital transformation, we monetized (i) our Wellness Infrastructure assets in February 2022 for $151 million in cash, including cash distributions received from NRF Holdco prior to closing of the sale, and $155 million in note receivable; and (ii) the bulk of our OED portfolio in December 2021 for $443 million in cash. 61 Table of Contents Debt Description of our debt is included in Note 8 to the consolidated financial statements (and Note 11 for debt related to assets held for disposition). Our indebtedness at December 31, 2021 is summarized as follows: ($ in thousands) Outstanding Principal Weighted Average Interest Rate (1) (Per Annum) Weighted Average Years Remaining to Maturity (2) Secured fund fee revenue notes $ 300,000 3.93 % 4.7 Convertible and exchangeable senior notes 338,739 5.31 % 2.2 Non-recourse investment level secured debt Fixed rate 3,646,466 2.44 % Variable rate 637,517 5.15 % 4,283,983 2.84 % 4.0 Total debt (excluding amounts related to assets held for disposition) $ 4,922,722 Debt related to assets held for disposition (to be assumed by acquirer) $ 2,962,051 __________ (1) Calculated based upon outstanding debt principal at balance sheet date. For variable rate debt, weighted average interest rate is calculated based upon the applicable index plus spread at balance sheet date. (2) Calculated based upon anticipated repayment dates for notes issued under securitization financing; otherwise based upon initial maturity dates, or extended maturity dates if extension criteria are met for extensions that are at the Company's option. Scheduled principal payments on our debt obligations at December 31, 2021, excluding debt classified as held for disposition, were as follows. Year Ending December 31, (In thousands) 2022 2023 2024 2025 2026 2027 and thereafter Total Secured fund fee revenue notes $ — $ — $ — $ — $ 300,000 $ — $ 300,000 Convertible and exchangeable senior notes — 200,000 — 138,739 — — 338,739 Investment-level secured debt Digital Operating 6,230 228,793 616,503 1,146,267 1,619,690 600,000 4,217,483 Other — 66,500 — — — — 66,500 Total $ 6,230 $ 495,293 $ 616,503 $ 1,285,006 $ 1,919,690 $ 600,000 $ 4,922,722 Debt maturities and future debt principal payments are presented based upon anticipated repayment dates for notes issued under securitization financing, otherwise based upon initial maturity dates or extended maturity dates if extension criteria are met at December 31, 2021 for extensions that are at the Company's option. Securitized Financing Facility As discussed above and further in Note 8 to the consolidated financial statements, we replaced our corporate credit facility with a securitized financing facility in July 2021 through the issuance of $300 million 3.933% Class A-2 Notes, and $200 million of VFN Notes, which is available to be drawn in full as of the date of this filing. Non-Recourse Investment-Level Secured Debt Investment level financing is non-recourse to us and secured by the respective underlying real estate. Significant Developments • Digital Operating— In March 2021 and October 2021, DataBank raised $658 million and $332 million of 5-year securitized notes at blended fixed rates of 2.32% and 2.43% per annum, respectively. Proceeds from the March securitization were applied principally to refinance $514 million of outstanding debt, which meaningfully reduced DataBank's overall cost of debt and extended its debt maturities, while the October proceeds were used to repay borrowings on its credit facility and to finance future acquisitions. 62 Table of Contents In November 2021, Vantage SDC issued $530 million of 5-year securitized notes at a blended fixed rate of 2.17% per annum. Proceeds were applied to replace its current bridge financing and fund capital expenditures on the September 2021 add-on acquisition as well as to fund payments for future build-out and lease-up of expansion capacity. • Other— In the third quarter of 2021, the Company entered into a credit facility to fund the acquisition of loans that are warehoused for a future securitization vehicle. At December 31, 2021, $83.5 million was available to be drawn from the facility. • Dispositions— Consolidated investment-level debt of $4 billion financing our hotel and OED portfolios, and $2.86 billion held by NRF Holdco (previously classified as held for disposition) have been assumed by the respective acquirers upon sale of our hotel and OED assets in 2021 and NRF Holdco in 2022, resulting in 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. Year Ended December 31, (In thousands) 2021 2020 Net cash provided by (used in): Operating activities $ 248,237 $ 89,893 Investing activities 146,565 (1,931,980) Financing activities 411,260 1,373,027 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, 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 generated net cash inflows of $248.2 million in 2021 and $89.9 million in 2020. Notable items affecting operating cash flows included the following: • In 2021, the higher operating cash flows included receipt of a $102.3 million one-time payment in connection with termination of the BRSP management agreement and growth in fee income following successful fund raising in our Digital Investment Management business. Additionally, there was higher net operating cash flows from our Digital Operating segment, with a full year of operations in 2021 from portfolios acquired during 2020. • In 2020, operating cash flows were negatively affected by the fallout from COVID-19 on our hospitality business that was sold in 2021, and also included $39.9 million of carried interest compensation payment 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. 63 Table of Contents Our investing activities resulted in net cash inflows of $146.6 million in 2021 compared to net cash outflows of $1.9 billion in 2020. • Real estate investments —Real estate investing activities generated net cash outflows in both years. Outflows were significantly higher in 2020 totaling $2.1 billion, driven by the acquisition of Vantage SDC in July 2020 and zColo in December 2020. In 2021, net cash outflows from real estate investing activities were $384.9 million. This was driven by payments for add-on acquisition and expanded capacity in Vantage SDC and capital expenditures within the overall digital operating portfolio. These outflows were partially offset by proceeds from sales of various properties in Europe and in our Wellness Infrastructure business in the first half of 2021, as well as sales of real estate investment holding entities in our hotel business in March and the OED portfolio in December, both of which were net of cash deconsolidated. • Debt investments —Investing cash inflows in 2021 included $452.1 million from our debt investments, attributed to loan repayments, in particular a $305.0 million repayment received on two loans in our Irish loan portfolio, and $146.0 million in proceeds from sale of our loan investment holding entities in the OED portfolio in December, net of cash deconsolidated. These cash inflows were partially offset by payments for loans acquired and warehoused for future digital credit vehicles, including a potential CLO, other loan disbursements and acquisition of additional N-Star CDOs at a discount by our Wellness Infrastructure segment. In 2020, our debt investments generated a much smaller net cash inflow of $59.8 million as receipts from loan repayments were largely offset primarily by drawdowns on development loans. • Equity investments —In 2021, our equity investments recorded net cash inflows of $104.6 million. Significant sales of equity investments included 9.5 million BRSP shares for $81.8 million of cash, and sale of investment holding entities in the OED portfolio in December which generated proceeds of $177.8 million, net of cash deconsolidated. Sales proceeds, along with return of capital distributions received from our investments, were partially offset primarily by funding of our digital fund commitments and draws on acquisition, development and construction ("ADC") loans that were accounted for as equity method investments prior to their sale in December. 2020 also recorded net cash inflows of $152.3 million from equity investments, attributed primarily to $179.1 million of net proceeds received from sale of our investment in RXR Realty and $87.4 million from recapitalization of our joint venture investment in Albertsons, both of which were partially offset by funding of our commitments to DBP I and additional draws on ADC loans. Purchases and sales of equity investments include trading activities in marketable equity securities by our consolidated funds in the digital liquid strategy in both years, more so in 2021. Financing Activities We finance our investing activities largely through investment-level secured debt and capital from co-investors. We also draw upon our securitized financing 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 private placement notes. Accordingly, we incur cash outlays for payments on our investment-level and corporate debt, dividends to our preferred stockholders and common stockholders (common dividends are temporarily suspended), as well as distributions to noncontrolling interests in our various investments. Financing activities generated net cash inflows of $411.3 million in 2021 and $1.4 billion in 2020. • In 2021, borrowings exceeded debt repayments at both the corporate and investment level, resulting in aggregate net cash inflows of $671.2 million. At the corporate level, we replaced our credit facility with a securitized financing facility, from which we issued $300 million of Class A-2 Notes in July. Investment-level financing activities included issuances of securitized notes and draws on variable funding notes by Vantage SDC to finance an add-on acquisition, future expansion capacity and capital expenditures, as well as by DataBank to refinance existing debt and fund future acquisition. There was also repayment of debt financing various real estate in Europe that were sold during the year. In terms of cash outflows, we redeemed $150.3 million of preferred stock, applying some of the proceeds from our Class A-2 Notes. Dividend payments were $73.4 million, which is lower in 2021 following additional preferred stock redemptions and continued suspension of common stock dividends. 64 Table of Contents Additionally, distributions outpaced contributions from noncontrolling interests, resulting in net cash outflow of $16.9 million, with gross activities during the year associated with third party co-investors primarily in the OED portfolio prior to deconsolidation upon sale of our interests in December. • The significant financing net cash inflows in 2020 were driven by $1.8 billion of net contributions from noncontrolling interests, of which $1.5 billion represented third party investors in Vantage SDC and zColo, primarily fee bearing capital that we raised, and a $253.6 million investment by Wafra in our digital investment management business. Additionally, borrowings on our investment level debt exceeded repayments for a net cash inflow of $278.1 million, which included $550.0 million of debt drawn to finance our acquisition of zColo. However, these financing cash inflows were partially offset by: (i) $402.9 million settlement in January 2020 of the December 2019 redemption of our Series B and E preferred stock using proceeds from our industrial sale in December 2019; (ii) higher dividend payments of $185.8 million which included common stock dividends in the first quarter of 2020 in addition to preferred stock; and (iv) partial repurchase of our 3.875% convertible senior notes for $81.3 million through a tender offer in September 2020. An additional repurchase of our 3.875% convertible senior notes for $289.7 million was made through a concurrent application of all of the net proceeds from our issuance of $300.0 million of new 5.75% exchangeable senior notes in July 2020. 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. 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 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. Highlighted below are accounting policies and estimates that we believe to be critical based on the nature of our business and/or require significant management judgment and assumptions. With respect to all critical estimates discussed below, 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, and unpredictability of economic and market conditions, actual results may differ from estimates, and changes in estimates and assumptions could have a material effect on our financial statements in the future. Impairment In connection with our review and preparation of the financial statements, prior to and subsequent to each quarter end, we evaluate if prevailing events or changes in circumstances indicate that carrying values of the following assets may not be recoverable, in which case, an impairment analysis is performed. Assets Held for Disposition For assets that meet the criteria to be classified as held for disposition, impairment loss may be recognized in order to reduce the asset carrying amount to its estimated fair value less disposal costs. Depending on specific circumstances at the time the asset is classified as held for disposition, fair value is generally estimated based upon either a letter of intent setting out preliminary terms for a potential acquisition by a buyer, a contracted sales price, or derived using market comparables or other indicative pricing in the market. Until such time a disposition is consummated, the asset fair values may be subject to change, including the determination of disposal costs and various closing adjustments that may involve the application of estimates and assumptions. If fair value is determined to have increased subsequent to classifying an asset as held for disposition, impairment loss may be reversed up to the amount of cumulative loss previously recognized. For disposition of a portfolio of assets in bulk, the unit of account is the disposal group, which may require an allocation of the aggregate impairment loss to individual assets within the disposal group and such allocation could involve subjectivity and judgement. 65 Table of Contents In 2021, the Company classified its portfolio of OED investments, Other IM business and Wellness Infrastructure business as held for disposition and wrote down the carrying value of these assets, as discussed in Notes 1 and 11 of the consolidated financial statements. Real Estate Held for Investment Triggering events that may indicate potential impairment of our real estate held for investment include, but are not limited to, the Company's shortened hold period assumptions; deterioration in current and/or projected net operating income; significant near-term lease expirations; decline in occupancy; or other customer or market conditions that would negatively affect property operating cash flows. The carrying amount of real estate held for investment is not recoverable if it exceeds the undiscounted future net cash flows expected to be generated by the property, including any estimated proceeds from eventual disposition of the property. If multiple outcomes are under consideration, the Company may apply either a probability-weighted cash flows approach or the single-most-likely estimate of cash flows approach, whichever is more appropriate under the circumstances. Impairment is recognized to reduce the carrying value of the property to its estimated fair value, generally based upon a discounted net cash flow analysis which applies a terminal capitalization rate at the end of the projection period to derive an exit value, or a direct capitalization approach which applies an overall capitalization rate to expected net operating income to estimate current property value. Estimation of future net cash flows involves significant judgment and assumptions, including, but not limited to, the Company's anticipated hold period; probability-weighting to different cash flow scenarios or the determination of the single-most-likely cash flow scenario, where applicable; available market information such as competition levels, leasing trends, occupancy trends, lease rates, and market prices of similar properties recently sold or currently being offered for sale; and capitalization rates. Refer to Note 11 of the consolidated financial statements for a discussion of impairment recorded on real estate prior to their classification as held for disposition. Equity Method Investments Significant equity method investments that are subject to periodic impairment assessment include the Company's investment in BRSP. Indicators of impairment on equity method investments generally include the Company's shortened hold period assumptions; significant deterioration in earnings performance, asset quality, or business prospects of the investee; or significant adverse change in the industry, economic, or market environment of the investee. If indicators of impairment exist, the Company estimates the fair value of its equity method investment, which considers factors such as the estimated enterprise value of the investee, fair value of the investee's underlying net assets, or net cash flows to be generated by the investee, and for equity method investees with publicly-traded equity, the traded price of the equity securities in an active market. Further consideration is made if a decrease in the fair value of equity method investments is other-than-temporary to determine if impairment loss should be recognized. Assessment of other-than-temporary impairment may involve significant management judgment, including, but not limited to, consideration of the investee’s current and projected financial condition and earnings, business prospects and creditworthiness; significant and prolonged decline in traded price of the investee’s equity security; or the Company's ability and intent to hold the investment until recovery of its carrying value. If management is unable to reasonably assert that an impairment is temporary or believes that the Company may not fully recover the carrying value of its investment, then the impairment is considered to be other-than-temporary. Refer to Note 11 of the consolidated financial statements for a discussion of impairment recorded on equity method investments prior to their classification as held for disposition and to Note 5 for assessment of other-than-temporary impairment of our investment in BRSP in prior years, . Goodwill At December 31, 2021, the Company's goodwill is associated with its digital investment management and digital operating businesses. Goodwill is tested for impairment at the reporting unit to which it is assigned, which can be an operating segment or one level below an operating segment. The assessment of goodwill for impairment may initially be performed based on qualitative factors to determine if it is more likely than not that the fair value of the reporting unit is less than its carrying value, including goodwill. If so, a quantitative assessment is performed, and to the extent the carrying value of the 66 Table of Contents reporting unit exceeds its fair value, impairment is recognized for the excess up to the amount of goodwill assigned to the reporting unit. Alternatively, the Company may bypass a qualitative assessment and proceed directly to a quantitative assessment. A qualitative assessment considers various factors such as macroeconomic, industry and market conditions to the extent they affect the earnings performance of the reporting unit, changes in business strategy and/or management of the reporting unit, changes in composition or mix of revenues and/or cost structure of the reporting unit, financial performance and business prospects of the reporting unit, among other factors. In a quantitative assessment, significant judgment, assumptions and estimates are applied in determining the fair value of reporting units. The Company has generally used the income approach to estimate fair value by discounting the projected net cash flows of the reporting unit, and may corroborate with market-based data where available and appropriate. Projection of future cash flows is based upon various factors, including, but not limited to, our strategic plans in regard to our business and operations, internal forecasts, terminal year residual revenue multiples, operating profit margins, pricing of similar businesses and comparable transactions where applicable, and risk-adjusted discount rates to present value future cash flows. Given the level of sensitivity in the inputs, a change in the value of any one input, in isolation or in combination, could significantly affect the overall estimation of fair value of the reporting unit. The Company determined that there were no indicators of impairment to goodwill in 2021. Refer to Note 11 of the consolidated financial statements for a discussion of impairment recorded on the Other IM goodwill in prior years, including triggering events, and methodology and inputs applied in estimating fair value of the Other IM reporting unit. Fair Value The Company carries certain assets at fair value on a recurring basis or at the time of initial acquisition. The Company has elected the fair value option for all loans receivable effective January 1, 2020. In a business combination or asset acquisition, all assets acquired and liabilities assumed are initially measured at fair value upon acquisition. Loans Receivable Certain loans receivable are classified under Level 3 of the fair value hierarchy, with the measurement of fair value using at least one unobservable input that is significant and requiring management judgment. Level 3 fair value for loans receivable are generally estimated based upon the income approach, applying a discounted cash flow model. This involves a projection of principal and interest that are expected to be collected, and includes consideration of factors such as the financial standing and credit risk of the borrower or sponsor, operating results and/or value of the underlying collateral, and market yields for loans with similar credit risk and other characteristics. In times of adverse economic conditions, the judgment applied in estimating unobservable inputs is subject to a greater degree of uncertainty. Refer to Notes 13 and 11 of the consolidated financial statements for additional information on the inputs applied in estimating fair value of loans receivable. Allocation of Purchase Consideration In a business combination, the Company measures the assets acquired, liabilities assumed and any noncontrolling interests of the acquiree at their acquisition date fair values, with the excess of purchase consideration over the fair value of net assets acquired and the fair value of any previously held interest in the acquiree, recognized as goodwill. In an asset acquisition, the Company allocates the purchase consideration to the assets acquired and liabilities assumed based upon their relative fair values, which does not give rise to goodwill. The estimation of fair value of the assets acquired and liabilities assumed involves significant judgment and assumptions. Acquired assets are generally composed of real estate, lease right-of-use ("ROU") asset, lease-related intangibles, investment management related intangibles, and other identifiable intangibles such as customer contracts, customer relationships and trade names. The Company generally values real estate based upon their replacement cost for buildings (in an as-vacant state), improvements and data center infrastructure, and based upon comparable sales or current listings for land. Lease ROU assets are measured based upon future lease payments over the lease term, adjusted for any lease incentives and capitalized direct leasing costs, and discounted at the incremental borrowing rate. Identifiable intangible assets are typically valued using the income approach based upon net cash flows expected to be generated by the assets, discounted to present value. Estimates applied include, but are not limited to: (i) construction costs for buildings and improvements; (ii) cost per kilowatt and costs of design, engineering, construction and installation for data center infrastructure; and (iii) for intangible assets, expected future cash flows, reinvestment rates by existing investors in our investment management business, lease renewal rates, customer attrition rates, discount rates, and useful lives. These estimates are based upon assumptions that management believes a market participant would apply in 67 Table of Contents valuing the assets. These estimates and assumptions are forward-looking and are subject to uncertainties in future economic, market and industry conditions. Refer to Note 3 of the consolidated financial statements for additional discussion of the methodology and inputs applied in estimating fair value of assets acquired and liabilities assumed. Equity Method Earnings — Carried Interest The Company recognizes carried interests from its equity method investments as general partner in investment vehicles that it sponsors. Carried interest represents a disproportionate allocation of returns from the Company's sponsored investment vehicles based upon the extent to which cumulative performance of the vehicles exceeds minimum return hurdles pursuant to terms of their respective governing agreements. The amount of carried interest recognized is based upon the cumulative performance of each investment vehicle if it were liquidated as of the reporting date, which in turn is largely driven by appreciation in value of the underlying investments held by these vehicles. Fair value of the underlying investments is typically estimated using unobservable inputs and assumptions that involves significant judgement and is therefore subject to inherent uncertainties. The investments held by sponsored vehicles are revalued each quarter, with the results subject to the Company's valuation review and approval process. Carried interest is subject to reversal until such time it is realized, which generally occurs upon disposition of all underlying investments of an investment vehicle, or in part with each disposition. A portion of carried interest is allocated to certain employees, and is similarly subject to reversal if there is a decline in the cumulative carried interest amounts previously recognized. Consolidation The determination of whether the Company has a controlling financial interest and therefore consolidates an entity can significantly affect presentation in the consolidated financial statements. A consolidation assessment at the onset of the Company's initial investment in or other involvement with an entity as well as reassessments on an ongoing basis, may involve significant judgement, more so if an entity is determined to be a variable interest entity ("VIE"). A VIE is consolidated by its primary beneficiary, which is defined as the party who has a controlling financial interest in the VIE through (a) power to direct the activities of the VIE that most significantly affect the VIE’s economic performance, and (b) obligation to absorb losses or right to receive benefits of the VIE that could be significant to the VIE. This assessment may involve subjectivity in the determination of which activities most significantly affect the VIE’s performance, and estimates about current and future fair value of the assets held by the VIE and financial performance of the VIE. In assessing its interests in the VIE, the Company also considers interests held by its related parties, including de facto agents. Additionally, the Company assesses whether it is a member of a related party group that collectively meets the power and benefits criteria and, if so, whether the Company is most closely associated with the VIE. In performing the related party analysis, the Company considers both qualitative and quantitative factors, including, but not limited to: the characteristics and size of its investment relative to the related party; the Company’s and the related party's ability to control or significantly influence key decisions of the VIE including consideration of involvement by de facto agents; the obligation or likelihood for the Company or the related party to fund operating losses of the VIE; and the similarity and significance of the VIE’s business activities to those of the Company and the related party. The determination of whether an entity is a VIE, and whether the Company is the primary beneficiary, depends upon facts and circumstances specific to an entity at the time of the assessment, and could change over time. Note 14 to the consolidated financial statements discusses the Company's involvement in various types of entities that are considered to be VIEs and whether the Company is determined to be the primary beneficiary. 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 15. "Exhibits, Financial Statement Schedules" of this Annual Report. 68 Table of Contents