What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2022-08-08 compared with 2022-05-09 · 308 added, 206 removed, 314 unchanged (62% of the section changed)

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We are a leading global-scale digital infrastructure firm that invests, directly and through our portfolio companies, across the digital ecosystem, including data centers, cell towers, fiber networks, small cells, and edge infrastructure.

At March 31, 2022, we have $47 billion of assets under management, comprising digital infrastructure assets managed on behalf of our limited partners and our shareholders.

At June 30, 2022, we have $48 billion of assets under management, comprising digital infrastructure assets managed on behalf of our limited partners and our shareholders.

We are headquartered in Boca Raton, Florida, with key offices in New York, Los Angeles, London and Singapore, and have approximately 230 employees.

We conduct substantially all of our activities and hold substantially all of our assets and liabilities through the OP, our operating subsidiary.

At March 31, 2022, we owned 92% of the OP, as its sole managing member.

At June 30, 2022, we owned 93% of the OP, as its sole managing member.

We operate our business in a manner that will permit us to maintain our exemption from registration as an investment company under the 1940 Act.

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federal and state income tax.

In the first quarter of 2022, the Company completed the disposition of its non-digital assets, as described below, and in connection with its digital transformation, has recorded significant growth in its Digital Investment Management ("Digital IM") business.

In the first quarter of 2022, the Company completed the disposition of substantially all of its non-digital assets, as described below, and in connection with its digital transformation, has recorded significant growth in its Digital Investment Management ("Digital IM") business.

Due to the pace of growth of the Company's Digital IM business and other strategic transactions that the Company may pursue, the Company’s Board of Directors and management agreed to discontinue actions necessary to maintain qualification as a REIT for 2022.

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This includes the intended deployment of capital to redeem third party interest in the Company’s Digital IM business, retaining and reinvesting earnings in other new initiatives in the Digital IM business, and warehousing digital infrastructure investments in the future that may be non-REIT qualified assets.

The Company’s transition to a C-Corporation is not expected to result in significant incremental current income tax expense in the near term due to the availability of significant capital loss and net operating loss (“NOL”) carry forwards.

As of March 31, 2022, there was no material net tax effect on the Company’s consolidated statement of operations as a result of the Company's transition to a C-Corporation.

At March 31, 2022, the Company has $46.6 billion of assets under management ("AUM"), including both third party capital and the Company's balance sheet.

At June 30, 2022, the Company has $48 billion of assets under management ("AUM"), including both third party capital and the Company's balance sheet.

The Company conducts its business through two reportable segments, as follows:

• Digital Investment Management ("Digital IM")— This business represents a leading global digital infrastructure investment platform, managing capital on behalf of a diverse base of global investors.

The Company's flagship opportunistic strategy is conducted through its Digital Bridge Partners platform ("DBP") and separately capitalized vehicles, while other strategies, including digital credit, ventures and public equities, are conducted through other investment vehicles.

The Company's flagship opportunistic strategy is conducted through its DigitalBridge Partners platform ("DBP") and separately capitalized vehicles, while other strategies, including digital credit, ventures 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 incentive fees and carried interest based upon the performance of such investment vehicles, subject to achievement of minimum return hurdles.

Earnings from our Digital IM segment are attributed 31.5% to Wafra, a significant investor in our Digital IM business, until such time Wafra's interest is redeemed by the Company (as discussed further in Note 10 to the consolidated financial statements).

Earnings from our Digital IM segment were attributed 31.5% to Wafra through the end of May 2022 when Wafra's investment in the Digital IM business was redeemed by the Company (as discussed further in Note 10 to the consolidated financial statements).

• 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 (DBRG ownership at 21.8% as of March 31, 2022, 20% as of December 31, 2021);

The Company currently owns interests in two

DataBank, including zColo, an edge colocation data center business (DBRG ownership at 21.8% as of June 30, 2022, 20% as of December 31, 2021);

and Vantage SDC, a stabilized hyperscale data center business (DBRG ownership at 13%).

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• We have discontinued actions necessary to maintain qualification as a REIT for 2022, and will be taxed as a C-Corporation.

Absent REIT constraints, we will have more flexibility to execute various strategic initiatives, including the proposed Wafra transaction, as discussed below.

Incremental tax burden is not expected to be significant in the near term given the availability of significant capital loss and NOL carry forwards and that our Digital IM business was previously taxable under a TRS.

• We continue to reduce higher cost corporate indebtedness through early exchange of an additional $60 million of senior notes in March 2022 for shares of our class A common stock and cash, resulting in 74% of the original issuance exchanged to-date, which will generate future interest savings.

Without the constraints of maintaining REIT status, we have more flexibility to execute various strategic initiatives, including the Wafra transaction, as discussed below.

Incremental tax burden is not expected to be significant in the near term given the availability of significant capital loss and NOL carryforwards and that our Digital IM business, prior to the transition, was already taxable under a TRS.

Capitalization and Financing

• In July 2022, our board of directors authorized a stock repurchase program which provides for repurchases up to $200 million of our class A common stock and/or preferred stock.

The repurchases are targeted towards preferred stock, which will further reduce our leverage.

• We expect to effectuate a reverse stock split in the third quarter of 2022 in which one share of class A common and class B common stock will be issued in exchange for every four shares of existing class A and class B common stock.

• Effective April 2022, the availability under our VFN was increased by $100 million to $300 million.

Digital Business

• In April 2022, we agreed to redeem Wafra's 31.5% interest in our Digital IM business.

With limited exceptions, Wafra will also sell or forgo its carried interest entitlement from future, but not from existing, investment management products.

Consideration for the redemption consists of:

(i) upfront amount of $390 million in cash (subject to certain net cash and closing adjustments) to be paid using cash on hand and issuance of 57,741,599 shares of our Class A common stock;

and (ii) contingent amount between $90 million and up to $125 million based upon achievement of new capital formation targets that may become payable in March 2023 and March 2024, with up to 50% payable in shares of our Class A common stock at our election.

The transaction will be accretive to our shareholders through full ownership of our high growth and high margin Digital IM platform.

All net cash flows from our fee business will immediately accrue to us at 100% and similarly, with net carried interest from new investment products in the future.

The transaction is expected to close in May 2022.

Refer to further descriptions of the transaction in Note 10 to the consolidated financial statements.

• In May 2022, we redeemed Wafra's 31.5% interest in our Digital IM business and Wafra sold or gave up its carried interest entitlement from future (not existing) investment management products.

Consideration for the redemption was valued at $862.3 million at closing, consisting of:

(i) net cash paid of $388.5 million;

(ii) 57.7 million shares of our class A common stock valued at $348.8 million at closing;

and (iii) the ability to earn a contingent amount up to $125 million payable in March 2023 and/or March 2024, with up to 50% payable in common stock at our election.

Following the redemption, all net cash flows from our fee business accrue to us at 100%, and we are entitled to 100% of carried interest net of management allocations from future investment products.

The transaction is described further in Note 10 to the consolidated financial statements.

• In April 2022, we agreed to acquire AMP Capital's global infrastructure equity investment management business, composed of its management platform, fund sponsor investments, and retained performance fees.

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and (ii) a contingent amount of up to A$180 million (approximately $128 million), primarily based upon future fundraising for the third and fourth flagship funds under the Global Infrastructure Fund ("GIF") series.

The transaction is expected to close in the second half of 2022.

Closing is expected in the fourth quarter of 2022.

The acquisition of AMP Capital will further scale our Digital IM business.

AMP Capital’s global infrastructure equity platform will be a strategic fit alongside our value-add equity franchise, enhancing our capabilities in the mid-market segment.

The acquisition will add $5.5 billion in fee earning assets under management, comprising $3.4 billion GIF II and $1.4 billion GIF I investment funds, and co-investment vehicles, and is expected to be immediately accretive to our fee related earnings.

The acquisition will add $5.5 billion in fee earning assets under management, comprising $3.4 billion GIF II and $1.4 billion GIF I investment funds, as well as co-investment vehicles, and is expected to be immediately accretive to our fee related earnings.

Digital Operating

DataBank Investments

• In March 2022, DataBank acquired four colocation data centers in Houston, Texas for $670 million, funded by a combination of $262.5 million of debt and $407.5 million of equity, of which the Company's share was $87.0 million.

The new facilities added 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 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 new facilities added approximately 308,000 built square feet and 42.5 MW of installed critical IT load, and a roster of blue-chip customers.

One of the facilities 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.

• In January 2022, we acquired additional interest in DataBank from a selling investor for $32.0 million

• The above transactions increased our ownership in DataBank from 20% to 21.8%.

• In March 2022, we agreed to acquire the mobile telecommunications tower business (“TowerCo”) of Telenet Group Holding NV (Euronext Brussels:

TNET, "Telenet") for approximately €745 million (or approximately $820 million ) , to be funded through a combination of debt and equity, including our €458 million (approximately $504 million) equity commitment.

The TowerCo investment is intended to thereafter be transferred to a new sponsored investment vehicle as we continue to develop new investment strategies in our Digital IM business.

Telenet’s tower business is a high-quality digital infrastructure asset with stable, predictable cashflows, high cash conversion, and long-term contracts.

We will acquire full ownership of Telenet’s passive infrastructure and tower assets, including TowerCo’s nationwide footprint of 3,322 sites in Belgium.

Telenet will enter into a long-term Master Lease Agreement (“MLA”) with TowerCo, which includes an initial period of 15 years and two renewals of 10 years each.

• The above transactions had increased our ownership in DataBank from 20% to 21.8%.

DataBank Recapitalization

• In June 2022, an affiliate of Swiss Life Asset Management AG agreed to acquire 27% of the fully diluted equity interest in DataBank from existing investors for approximately $1.2 billion in cash.

Our share of proceeds from the sale will be approximately $230 million and our ownership interest in DataBank will decrease from 21.8% to 15.5%.

The valuation reflects a 1.9x multiple of the average cost basis of our four investments in DataBank since December 2019.

Closing is expected in the third quarter of 2022.

• Recapitalization efforts will continue throughout the remainder of 2022 and are expected to result in incremental sales of equity interests in DataBank by existing investors to new investors, and further dilute our interest in DataBank.

• In June 2022, we acquired the mobile telecommunications tower business (“TowerCo”) of Telenet Group Holding NV (Euronext Brussels:

TNET, "Telenet") for €740 million or $791 million (including transaction costs) .

The acquisition was funded through $326 million of debt, $278 million of equity from the Company, and $214 million of third party equity, including funding for transaction costs, debt issuance costs and working capital.

The TowerCo investment is intended to be transferred to a new sponsored investment vehicle as we continue to develop new investment strategies in our Digital IM business.

Telenet’s tower business is a high-quality digital infrastructure asset with stable, predictable cash flows, high cash conversion, and long-term contracts.

We acquired full ownership of Telenet’s passive infrastructure and tower assets, including TowerCo’s nationwide footprint of approximately 3,300 sites in Belgium, of which approximately 2,200 sites are owned and the remaining sites are leased from third parties.

Telenet entered into a long-term Master Lease Agreement (“MLA”) with TowerCo, which includes an initial period of 15 years and two renewal periods of 10 years each.

The MLA also includes a build-to-suit commitment to deploy a minimum of 475 additional new sites, with Telenet acting as subcontractor to TowerCo, and provides for payment for such services to Telenet over time.

The transaction is expected to close in the second quarter of 2022.

Assets Under Management and Fee Earning Equity Under Management ("FEEUM")

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FEEUM (2)(3) (In billions)

Type Products Description March 31, 2022 December 31, 2021 March 31, 2022 December 31, 2021

Type Products Description June 30, 2022 December 31, 2021 June 30, 2022 December 31, 2021

Third Party Managed Capital

Institutional Funds Digital Bridge Partners opportunistic strategy Earns management fees and potential for carried interest or incentive fees $ 16.5 $ 16.6 $ 11.0 $ 11.2

Institutional Funds DigitalBridge Partners opportunistic strategy Earns management fees and potential for carried interest or incentive fees $ 16.7 $ 16.6 $ 11.0 $ 11.2

Liquid securities strategy 1.0 0.8 0.9 0.8

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$ 47.9 $ 45.3 $ 19.0 $ 18.3

(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;

(1) AUM is composed of (a) third party managed capital 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.

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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 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.

• FEEUM grew 3% or $0.5 billion to $18.8 billion at March 31, 2022.

• Our acquisition of AMP Capital's global infrastructure equity platform will add another $5.5 billion of FEEUM when the transaction closes in the second half of 2022.

(3) Balance sheet capital 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 generally reflects 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.

• FEEUM increased by $0.7 billion or 4% to $19 billion from December 31, 2021 to June 30, 2022.

• Our acquisition of AMP Capital's global infrastructure equity platform is expected to add $5.5 billion of FEEUM when the transaction closes in the fourth quarter of 2022.

Results of Operations

The following table summarizes our consolidated results from continuing operations by reportable segments.

Three Months Ended March 31,

(In thousands) 2022 2021 Change

Three Months Ended June 30, Six Months Ended June 30,

(In thousands) 2022 2021 Change 2022 2021 Change

Continuing Operations

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(1) Includes elimination of fee income earned by Digital Investment Management from managed investment vehicles consolidated within Digital Operating and Corporate and Other.

Total revenues increased $36.9 million or 17%.

• Digital Investment Management— Revenues from our investment management business grew 44% to $44.9 million as a result of significant growth in our FEEUM from $12.9 billion at March 31, 2021 to $18.8 billion at March 31, 2022 following the successful fundraising for DigitalBridge Partners II, LP ("DBP II") and co-invest vehicles.

DBP II had its final closing in December 2021 at $8.3 billion of total commitments, having raised $4.1 billion subsequent to the first quarter of 2021.

• Digital Operating— 2022 includes revenue from additional acquisitions, driven by the Vantage SDC portfolio, with an add-on acquisition in October 2021 and additional lease-up of expanded capacity and existing inventory throughout 2021.

• Corporate and Other— Revenues in 2022 also reflect interest income from our growing credit investments which we started actively warehousing in 2021 for future credit products.

Total revenues increased $52.2 million, or 22%, in the quarter-to-date comparison and $89.1 million, or 19%, in the year-to-date comparison.

• Digital Investment Management— Revenues were largely consistent in the quarter-to-date comparison and increased 17% in the year-to-date comparison.

2021 had benefited from an incentive fee from our digital liquid strategy, while additional fee income in 2022 was sourced largely from new co-invest vehicles and sub-advisory accounts.

Additionally, year-to-date revenues reflect higher fee income from third party capital committed to DigitalBridge Partners II, LP ("DBP II") in the second half of 2021.

Supplemental performance measures of the Digital IM segment are presented under "—Non-GAAP Measures."

• Digital Operating— 2022 includes revenue from additional acquisitions, namely DataBank's four new data centers in March 2022 and within the Vantage SDC portfolio, an add-on acquisition in October 2021 and additional lease-up of expanded capacity and existing inventory throughout 2021 and 2022.

The second quarter of 2022 also included a one-time fee from a lease termination at Vantage SDC.

• Corporate and Other— Revenues in 2022 reflect largely income from warehoused investments, specifically interest income from credit investments which were actively acquired or originated over time and lease income from the tower business acquired in June 2022.

Income (loss) from continuing operations

• Digital Investment Management— Net loss in the first quarter of 2022 is attributed to a reversal of some of the carried interest that accrued in the fourth quarter of 2021 when fair value increases on most of the underlying fund investments was initially recognized, net of reversal of associated compensation expense (prior to attribution to noncontrolling interest).

In this case, the reversal of carried interest is a function of continuing accrual of preferred returns over time while fair value of underlying investments remain largely consistent.

Additionally, there was an unrealized loss on our interest in a managed sub-account as net asset value decreased due to mark-to-market of underlying equity securities invested in the account.

We have also continued to ramp up resources and invest in our growing Digital IM business.

• Digital Operating— Our Digital Operating segment generally records a net loss, reflecting the effects of real estate depreciation and amortization of lease intangibles.

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 2022 was driven by a $133.2 million non-cash loss

recognized in connection with an early exchange of $60.3 million of our 5.75% exchangeable notes (refer to discussion in Note 8 to the consolidated financial statements).

• Digital Investment Management— Net income reflects the effect of carried interest, net of management allocations.

2022 included significant carried interest accrued in the second quarter, driven by an increase in the valuation of a portfolio company that is currently under contract for sale.

On a year-to-date basis in 2022, the additional carried interest accrual was partially offset by a reversal in the first quarter.

We have also continued to ramp up resources and invest in our growing Digital IM business over time.

• Digital Operating— Our Digital Operating segment generally records a net loss, reflecting the effects of real estate depreciation and intangible asset amortization.

Net loss was lower in 2021 as there was a large deferred

tax benefit resulting from a write-off of deferred tax liabilities at DataBank as it was then determined that DataBank would elect REIT status beginning with the 2021 taxable year.

• Corporate and Other— The net loss generally reflects corporate level costs that have not been allocated to our reportable segments, primarily interest expense on corporate debt and compensation and administrative expenses.

Also included are the effects of fair value changes on marketable equity securities held by our consolidated liquid strategy funds, warehoused loan investments and underlying portfolio companies of our digital funds which affect our share of earnings from these funds.

The larger net loss in 2022 was driven by a $133.2 million non-cash loss recognized in connection with an early exchange of our 5.75% exchangeable notes in March 2022 (refer to Note 8 to the consolidated financial statements), and decreases in investment fair values.

Key components of revenue and income (loss) from continuing operations are discussed in more detail below.

Comparison of Three Months Ended March 31, 2022 to Three Months Ended March 31, 2021

Three Months Ended March 31,

(In thousands) 2022 2021 Change

Comparison of Three and Six Months Ended June 30, 2022 to Three and Six Months Ended June 30, 2021

Three Months Ended June 30, Six Months Ended June 30,

(In thousands) 2022 2021 Change 2022 2021 Change

Property operating income $ 234,251 $ 188,985 $ 45,266 $ 436,762 $ 377,987 $ 58,775

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Depreciation and amortization 155,352 138,229 17,123 283,919 277,654 6,265

Compensation expense, including carried interest 45,190 78,753 (33,563)

Compensation expense, including incentive fee and carried interest allocation 101,861 56,465 45,396 147,051 135,218 11,833

Administrative expenses 26,353 28,505 (2,152) 54,238 46,301 7,937

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Other loss, net (46,256) (27,041) (19,215) (196,137) (36,391) (159,746)

Equity method losses, including carried interest (11,872) (16,639) 4,767

Equity method earnings, including carried interest 138,206 62,650 75,556 126,334 46,011 80,323

Loss before income taxes (55,828) (71,416) 15,588 (299,527) (240,951) (58,576)

Income tax benefit 2,518 75,239 (72,721) 9,931 98,435 (88,504)

Loss from continuing operations (236,286) (146,339) (89,947)

Income (loss) from continuing operations (53,310) 3,823 (57,133) (289,596) (142,516) (147,080)

Loss from discontinued operations (14,771) (98,906) 84,135 (122,169) (580,166) 457,997

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Property Operating Income and Expense

Three Months Ended March 31,

(In thousands) 2022 2021 Change

Three Months Ended June 30, Six Months Ended June 30,

(In thousands) 2022 2021 Change 2022 2021 Change

Property operating income

Digital Operating

Lease income $ 207,951 $ 173,859 $ 34,092 $ 392,122 $ 347,474 $ 44,648

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227,646 188,985 38,661 430,157 377,987 52,170

Lease income 6,605 — 6,605 6,605 — 6,605

$ 234,251 $ 188,985 45,266 $ 436,762 $ 377,987 58,775

Property operating expense

Property operating income and expense amounts are higher in 2022, which includes operating results from additional acquisitions, primarily within the Vantage SDC portfolio, with an add-on acquisition in October 2021 and additional lease-up of expanded capacity and existing inventory throughout 2021, as well as DataBank's acquisition of four new data centers in March 2022.

Total real estate carrying value in our Digital Operating segment stood at $5.63 billion at March 31, 2022 compared to $4.45 billion at December 31, 2021.

At March 31, 2022, our portfolio includes 73 data centers in the U.S., three in Canada, one in the U.K., and five in France.

March 31, 2022 December 31, 2021

Digital Operating $ 94,744 $ 77,140 $ 17,604 $ 178,747 $ 157,002 $ 21,745

Other 2,546 — 2,546 2,546 — 2,546

$ 97,290 $ 77,140 20,150 $ 181,293 $ 157,002 24,291

Digital Operating

Property operating income and expense are higher in 2022, which includes operating results from additional acquisitions.

These include DataBank's acquisition of four data centers in March 2022, and within the Vantage SDC portfolio, an add-on acquisition in October 2021 and additional lease-up of expanded capacity and existing inventory throughout 2021.

Additionally, the second quarter of 2022 also included a $5.8 million fee received from a lease termination in the Vantage SDC portfolio.

Total real estate carrying value in our Digital Operating segment increased to $6.05 billion at June 30, 2022 compared to $4.97 billion at December 31, 2021 following the DataBank March 2022 acquisition.

At June 30, 2022, our portfolio includes 73 data centers in the U.S., three in Canada, one in the U.K., and five in France.

June 30, 2022 December 31, 2021

Digital Operating

Number of data centers (1)

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in this case, four data centers that were acquired in March 2022.

On a same store basis, property operating income and expense also increased in 2022, reflecting an increase in leased square footage, driven by the lease-up of expanded capacity and existing inventory in the Vantage SDC portfolio.

On a same store basis, property operating income and expense also increased in 2022, driven by the Vantage SDC portfolio, attributable to a lease termination fee and increase in leased square footage from lease-up of expanded capacity and existing inventory.

This represents one month of property operating income and expense from the tower business, acquired in June 2022.

Interest Income

Interest income was $4.3 million higher.

Interest income was $7.2 million higher in the quarter-to-date comparison and $11.5 million higher in the year-to-date comparison.

In 2022, there was additional interest income from new loans originated or acquired beginning the third quarter of 2021 that are being warehoused for future investment vehicles, as well as an unsecured promissory note in connection with the sale of our Wellness Infrastructure business.

Three Months Ended March 31,

(In thousands) 2022 2021 Change

Three Months Ended June 30, Six Months Ended June 30,

(In thousands) 2022 2021 Change 2022 2021 Change

Digital Investment Management

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Incentive fees

— 4,489 (4,489) 2 5,083 (5,081)

Other fee income

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$ 44,318 $ 45,157 (839) $ 87,155 $ 74,600 12,555

Fee income was higher by $13.4 million.

The increase was driven by the successful fundraising for DBP II which had a final close in December 2021 at $8.3 billion of total commitments, having raised $4.1 billion subsequent to the first quarter of 2021.

Other income increased $5.7 million, which can be attributed primarily to higher professional service fees incurred on behalf of and reimbursable by our managed investment vehicles, and dividend income received from our equity interest in a third party non-traded REIT.

Fee income decreased $0.8 million in the quarter-to-date comparison and increased $12.6 million in the year-to-date comparison.

Management fees were higher in both periods under comparison, attributed to capital calls by portfolio companies as well as new co-invest vehicles and sub-advisory accounts.

Additionally, the increase in the year-to-date period was driven by DBP II commitments that were closed subsequent to the second quarter of 2021.

However, there were no incentive fees earned from our digital liquid strategy in 2022 in comparison to 2021, which contributed to an overall decrease in fee income in the quarter-to-date period and partially offset the higher management fees in the year-to-date period.

Other income increased $0.6 million in the quarter-to-date comparison and $6.3 million in the year-to-date comparison.

The increase is attributed primarily to higher professional service fees incurred on behalf of and reimbursable by our managed investment vehicles, dividend income received from our equity interest in a third party non-traded REIT and loan origination fee earned in in the first quarter of 2022 in connection with a loan syndication.

Interest Expense

Three Months Ended March 31,

(In thousands) 2022 2021 Change

Three Months Ended June 30, Six Months Ended June 30,

(In thousands) 2022 2021 Change 2022 2021 Change

Digital Investment Management $ 2,785 $ — $ 2,785 $ 5,287 $ — $ 5,287

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$ 46,388 $ 37,938 8,450 $ 90,418 $ 77,718 12,700

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 $5.1 million is attributed to:

Digital Investment Management— This represents interest expense from our securitized financing facility beginning in July 2021, which is attributed largely to the Digital IM segment.

Digital Operating— The increase of $8.0 million in the quarter-to-date comparison and $13.0 million in the year-to-date comparison is attributed to:

(i) interest expense on additional debt raised through securitization transactions by DataBank and Vantage SDC during 2021;

and (ii) interest expense on our securitized financing facility which is partially allocated to the Digital Operating segment.

Overall, at March 31, 2022, our data center portfolio was financed by an aggregate $4.48 billion of outstanding debt principal ($4.22 billion at December 31, 2021), primarily fixed rate securitized debt, bearing a combined weighted average interest rate of 2.92% per annum (2.88% per annum at December 31, 2021).

(ii) interest expense on new financing for DataBank's acquisition of four data centers in March 2022;

and (iii) interest expense on our securitized financing facility beginning July 2021 which is partially allocated to the Digital Operating segment.

At June 30, 2022, our data center portfolio was financed by an aggregate $4.48 billion of outstanding debt principal ($4.22 billion at December 31, 2021), primarily fixed rate securitized debt, bearing a combined weighted average interest rate of 3.11% per annum (2.88% per annum at December 31, 2021).

Other Investment-level Debt— This represents interest expense from:

(i) our securitized financing facility beginning in July 2021 that is partially allocated to our digital credit and digital liquid investments on the balance sheet;

and (ii) interest expense on our credit facilities financing loans that are being warehoused for future securitization vehicles.

Corporate-level Debt— Interest expense was $4.0 million lower in 2022 as we have extinguished $221 million of higher cost corporate debt since March 2021 through early exchanges of our 5.75% exchangeable notes totaling $161 million in the fourth quarter of 2021 and an additional $60 million in the first quarter of 2022.

Additionally, the first quarter of 2021 also included interest expense on our corporate credit facility that was terminated in July 2021.

(i) debt to partially fund the acquisition of the tower assets in June 2022;

(ii) credit facilities financing loans warehoused for future securitization vehicles;

and (iii) our securitized financing facility beginning in July 2021 that is partially allocated to our digital credit and digital liquid investments on the balance sheet.

Corporate-level Debt— Interest expense decreased $4.7 million in the quarter-to-date comparison and $8.7 million in the year-to-date comparison as we have extinguished $221 million of higher cost corporate debt through early exchanges of our 5.75% exchangeable notes totaling $161 million in the fourth quarter of 2021 and an additional $60 million in March 2022 (refer to Note 8 to the consolidated financial statements).

2021 also included interest expense on our corporate credit facility that was terminated in July 2021.

Investment Expense

Investment expense increased $2.7 million, attributable largely to compensatory expense recognized in connection with equity awards granted to the management team of Vantage who performs the day-to-day operations of Vantage SDC.

Investment expense increased $1.3 million in the quarter-to-date comparison and $4.0 million in the year-to-date comparison, attributable largely to compensatory expense recognized in connection with equity awards granted to the management team of Vantage who performs the day-to-day operations of Vantage SDC, higher management fees paid to Vantage as a result of the add-on acquisition in October 2021, and higher professional service fees incurred on behalf of and reimbursable by our managed investment vehicles.

Transaction-Related Costs

Transaction-related costs are generally in connection with unconsummated investments.

Transaction-related costs in the second quarter of 2022 are related to the pending acquisition of AMP Capital and in connection with unconsummated investments in other periods.

Depreciation and Amortization

Decrease in depreciation and amortization was primarily due to accelerated amortization recognized in the first quarter of 2021 on a trade name intangible in anticipation of the Company's name change in June 2021.

In the Digital Operating segment, overall depreciation and amortization was largely consistent between the two periods as increases attributable to assets acquired throughout 2021 were mostly offset by a decrease in amortization expense on lease intangibles following the term expiration on short term leases in our co-location business in the first quarter of 2022.

Increase in depreciation and amortization can be attributed to real estate and intangible assets acquired through the Vantage SDC add-on acquisition in October 2021, DataBank's four new data centers in March 2022, and tower assets in June 2022.

The second quarter of 2022 also included accelerated amortization of lease intangibles in connection with an early lease termination in the Vantage SDC portfolio.

The increase was partially offset by (i) accelerated amortization recognized in the first quarter of 2021 on a trade name intangible in anticipation of the Company's name change in June 2021;

and (ii) a decrease in amortization expense on lease intangibles following the term expiration on short term leases in our colocation data center business in 2022.

Compensation Expense

Three Months Ended March 31,

(In thousands) 2022 2021 Change

Three Months Ended June 30, Six Months Ended June 30,

(In thousands) 2022 2021 Change 2022 2021 Change

Cash compensation and benefits $ 43,873 $ 40,426 $ 3,447 $ 99,684 $ 103,306 $ (3,622)

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$ 101,861 $ 56,465 45,396 $ 147,051 $ 135,218 11,833

Total compensation expense was $33.6 million lower, driven primarily by a reversal of carried interest compensation in the first quarter of 2022.

Total compensation expense was $45.4 million higher in the quarter-to-date comparison and $11.8 million higher in the year-to-date comparison.

The increase in both periods under comparison is driven primarily by carried interest compensation accrued in the second quarter of 2022, representing a portion of unrealized carried interest from our sponsored investment vehicles that are shared with management and certain employees.

In the year-to-date comparison, the increase was partially offset by a reversal of carried interest compensation in the first quarter of 2022 and also a decrease in cash and equity-based compensation as there was higher severance payments, including acceleration of equity-based compensation, in the first quarter of 2021.

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.

Additionally, the first quarter of 2021 included higher severance payments, including acceleration of equity-based compensation.

Administrative Expenses

Administrative expense increased $10.1 million, attributable largely to higher professional fees.

Other loss was $149.9 million in 2022 and $9.4 million in 2021.

The significant loss in 2022 was driven by a non-cash debt extinguishment loss of $133.2 million, recognized in connection with an early exchange of our 5.75% exchangeable notes in March 2022, as discussed further in Note 8 to the consolidated financial statements.

Other losses include decreases in fair value of marketable equity securities, held primarily by our consolidated digital liquid funds.

In 2021, the loss was driven by 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 (refer to discussion in Note 13 to the consolidated financial statements).

In contrast, there were fair value increases on the marketable equity securities in 2021 that partially offset the Blackwells loss.

Equity Method Earnings (Losses)

Three Months Ended March 31,

(In thousands) 2022 2021 Change

Digital Investment Management (carried interest reversal of $31,079 and $222)

Administrative expense decreased $2.2 million in the quarter-to-date comparison and increased $7.9 million in the year-to-date comparison.

The second quarter of 2021 had included placement fees incurred in fundraising for DBP II which resulted in a decrease in administrative expense in the quarter-to-date comparison.

However, this was more than offset by higher professional fees incurred in 2022 which resulted in an increase in administrative expense in the year-to-date comparison.

Other loss increased $19.2 million from $27.0 million to $46.3 million in the quarter-to-date comparison, and increased $159.7 million from $36.4 million to $196.1 million in the year-to-date comparison.

The losses in 2022 were driven by fair value decreases in relation to:

(i) marketable equity securities held largely by our consolidated liquid securities funds, net of offsetting fair value changes on short positions;

and (ii) loans receivable in the second quarter of 2022 given the rising interest rate environment.

Additionally, the first quarter of 2022 included a non-cash debt extinguishment loss of $133.2 million, recognized in connection with an early exchange of our 5.75% exchangeable notes (refer to Note 8 to the consolidated financial statements).

Losses in the second quarter of

2022 were partially offset by a decrease in the liability fair value of the warrants issued to Wafra (refer to Note 13 to the consolidated financial statements).

In 2021, the losses were driven by a write-off of an equity investment that was determined to be unrecoverable in June 2021 and an increase in value of the Blackwells settlement liability prior to its settlement in June 2021 (refer to Note 13 to the consolidated financial statements).

In contrast, there were fair value increases on marketable equity securities in 2021 that partially offset these losses.

Equity Method Earnings

Three Months Ended June 30, Six Months Ended June 30,

(In thousands) 2022 2021 Change 2022 2021 Change

Digital Investment Management (carried interest earnings of $110,779, $11,169, $79,700 and $10,947)

$ 111,795 $ 11,202 $ 100,593 $ 80,733 $ 11,007 $ 69,726

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Digital Investment Management— These amounts represent predominantly unrealized carried interest from our general partner interests in sponsored investment vehicles.

In 2022, there was significant carried interest accrued in the second quarter, driven by an increase in the valuation of a portfolio company that is currently under contract for sale.

On a year-to-date basis in 2022, this increase was partially offset by a reversal of carried interest in the first quarter.

Carried interest 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.

In the first quarter of 2022, there was a reversal of some of the carried interest that accrued in the fourth quarter of 2021 when fair value increases on most of the underlying fund investments was initially recognized.

In this case, the carried interest reversal is a function of continuing accrual of preferred returns over time while fair value of underlying investments remain largely consistent.

Other— These amounts were driven primarily by our investment in BRSP for which we recorded earnings of $12.8 million in 2022 and losses of $27.5 million in 2021.

These amounts included basis difference adjustment (as discussed in Note 5 to consolidated financial statements) that increased earnings in 2022 and notably offset some of the losses in 2021.

Our share of net losses in 2021 were attributed largely to investment write-downs and BRSP's restructuring costs, including the BRSP management contract termination fee that was paid to us.

2022 also included higher earnings from our limited partnership interests in DBP I and DBP II, representing unrealized fair value increases on the underlying investments of these funds.

In 2021, the BRSP losses were partially offset by fair value increases on an equity method investment that had been accounted for under the fair value option.

Other— These amounts were driven primarily by our investment in BRSP for which we recorded earnings of $11.0 million and $23.8 million for the three and six months ended June 30, 2022, respectively, and $42.2 million and $14.8 million for the three and six months ended June 30, 2021, respectively.

These amounts included basis difference adjustment (as discussed in Note 5 to consolidated financial statements) that increased earnings in 2022 and quarter-to-date 2021, while offsetting year-to-date net loss in 2021.

Our share of year-to-date net loss in 2021 was attributed largely to investment write-downs and BRSP's restructuring costs in the first quarter of 2021, including the BRSP management contract termination fee that was paid to us.

Also included in all periods are earnings from our limited partnership interests in funds in the DigitalBridge Partners opportunistic strategy, representing unrealized fair value increases on the underlying investments of these funds.

Additionally, 2021 included earnings related to fair value increases on an equity method investment that had been accounted for under the fair value option.

Beginning May 2021, the equity investment is accounted for as a marketable equity security following a merger of the investee into a special purpose acquisition company.

Income Tax Benefit

Income tax benefit decreased $15.8 million.

The first quarter of 2021 had included deferred tax benefit recognized on NOL from our DataBank subsidiary and in connection with significant severance costs.

In the second quarter of 2021, it was determined that DataBank would elect REIT status beginning with the 2021 taxable year and thereafter, only NOL on DataBank TRS is subject to a deferred tax benefit, for which a full valuation allowance was recorded in the first quarter of 2022.

The net income tax benefit recorded in the first quarter of 2022 otherwise reflects the tax effect of activities in the Company's TRS in the normal course of business, which continues to be driven primarily by deferred tax benefit on equity-based compensation.

Income tax benefit was $2.5 million compared to $75.2 million in the three months ended June 30, 2022 and 2021, respectively, and $9.9 million compared to $98.4 million in the six months ended June 30, 2022 and 2021, respectively.

The large deferred tax benefit in 2021 resulted primarily from a write-off of deferred tax liabilities at DataBank when it was determined in the second quarter of 2021 that DataBank would elect REIT status beginning with the 2021 taxable year.

2021 also included higher deferred tax benefit recognized in connection with significant severance costs.

The net income tax benefit recorded in 2022 reflects the tax effect of activities in the Company's previously designated TRS in the normal course of business, which continues to be driven primarily by deferred tax benefit on equity-based compensation.

Loss from Discontinued Operations

Three Months Ended March 31,

(In thousands) 2022 2021 Change

Three Months Ended June 30, Six Months Ended June 30,

(In thousands) 2022 2021 Change 2022 2021 Change

Revenues $ 2,002 $ 209,953 $ (207,951) $ 82,283 $ 476,730 $ (394,447)

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Other gain (loss) 15,711 175,614 (159,903) 27,075 (73,565) 100,640

Income tax benefit 2,112 3,718 (1,606)

Income tax benefit (expense) 3,996 (23,905) 27,901 6,108 (20,187) 26,295

Loss from discontinued operations (14,771) (98,906) 84,135 (122,169) (580,166) 457,997

Loss from discontinued operations attributable to noncontrolling interests:

Income (Loss) from discontinued operations attributable to noncontrolling interests:

Investment entities 386 43,387 (43,001) (5,789) (260,464) 254,675

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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 2022 can be attributed primarily to write-off of unamortized deferred financing costs related to the Wellness Infrastructure debt, which was assumed by the buyer in February 2022.

Losses in 2021 were driven by significant impairment expense and decreases in asset fair values based upon the selling price of our OED and Other IM portfolio.

The net loss in 2022 is attributed largely to the disposition of NRF Holdco in February 2022, specifically, a write-off of unamortized deferred financing costs on the Wellness Infrastructure debt assumed by the buyer and impairment loss recognized based upon the final carrying value of net assets of the Wellness Infrastructure business upon disposition.

The net loss in 2021 was driven by significant impairment expense and decreases in asset fair values based upon the selling price of our Wellness Infrastructure and OED portfolios.

A detailed income statement on discontinued operations is included in Note 12 to the consolidated financial statements.

Non-GAAP Supplemental Financial Measures

Following our decision not to maintain qualification as a REIT for 2022, we no longer present Funds From Operations, which is a non-GAAP supplemental financial measure that is widely used by the equity REIT industry.

For the Digital Operating segment in which our DataBank and Vantage SDC subsidiaries operate as REITs, we 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.

This non-GAAP measure should not be considered an alternative to GAAP net income (loss) as an indication of operating performance, or to cash flows from operating activities as a measure of liquidity, nor as an indication of the availability of funds for our cash needs, including funds available to make distributions, in our Digital Operating segment.

Our calculation of 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.

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 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.

Three Months Ended March 31,

(In thousands) 2022 2021 Change

Digital Operating

Total revenues $ 202,522 $ 189,202 $ 13,320

Property operating expenses (84,003) (79,862) (4,141)

Transaction-related costs and investment expense (8,016) (6,565) (1,451)

Compensation and administrative expense (26,855) (25,947) (908)

Other gain (loss), net 956 (3) 959

$ 84,604 $ 76,825 7,779

The following table presents a reconciliation of net loss to EBITDA re for the Digital Operating segment.

Three Months Ended March 31,

(In thousands)

Digital Operating

Net loss $ (74,141) $ (64,260)

Interest expense 36,184 31,132

Following our decision not to maintain qualification as a REIT for 2022, we no longer present Funds From Operations, a supplemental non-GAAP measure commonly used by equity REITs.

Resulting from the significant growth in our digital investment management business, effective the second quarter of 2022, we report Distributable Earnings, Adjusted Earnings before Interest, Taxes, Depreciation and Amortization (“Adjusted EBITDA”) and, specific to our Digital IM segment, Fee Related Earnings (“FRE”) as non-GAAP financial measures attributable to the Operating Company, which more closely align the key performance metrics of our core business to the alternative investment management industry.

We use these non-GAAP financial measures in evaluating the Company’s business performance and in making operating decisions.

As we evaluate profitability based upon continuing operations, these non-GAAP measures exclude results from discontinued operations.

These non-GAAP financial measures should not be considered alternatives to GAAP net income or loss as indicators of operating performance, or to cash flows from operating activities as measures of liquidity, nor as indicators of the availability of funds for our cash needs, including funds available to make distributions.

Our calculation of these non-GAAP measures may differ from methodologies utilized by other companies for similarly titled performance measures and, as a result, may not be directly comparable to those calculated by other companies in similar lines of business.

Results of our non-GAAP measures attributable to Operating Company were as follows:

(In thousands) Three Months Ended June 30, 2022

Attributable to Operating Company:

Distributable Earnings $ 7,585

Adjusted EBITDA 30,928

Digital IM FRE 20,759

Distributable Earnings ("DE")

Distributable Earnings is an after-tax measure that differs from GAAP net income or loss from continuing operations as a result of the following adjustments, including adjustment for our share of similar items recognized by our equity method investments:

transaction-related costs;

restructuring charges (primarily severance and retention costs);

realized and unrealized gains and losses, except realized gains and losses related to digital assets in Corporate and Other;

depreciation, amortization and impairment charges;

debt prepayment penalties and amortization of deferred financing costs, debt premiums and debt discounts;

our share of unrealized carried interest, net of associated compensation expense;

equity-based compensation expense;

equity method earnings to reflect only cash dividends declared by BRSP;

effect of straight-line lease income and expense;

impairment of equity investments directly attributable to decrease in value of depreciable real estate held by the investee;

non-revenue enhancing capital expenditures necessary to maintain operating real estate;

and income tax effect on certain of the foregoing adjustments.

Income taxes included in DE reflect the benefit of deductions arising from certain expenses that are excluded from the calculation of DE, such as equity-based compensation, as these deductions do decrease actual income tax paid or payable by the Company in any one period.

We believe that DE is a meaningful supplemental measure as it reflects the ongoing operating performance of our core business by generally excluding items that are non-core in nature, and allows for better comparability of operating results period-over-period and to other companies in similar lines of business.

Adjusted EBITDA

Adjusted EBITDA represents DE adjusted to exclude:

interest expense as included in DE, income tax expense or benefit as included in DE, preferred stock dividends, equity method earnings as included in DE, placement fee expense, our share of realized carried interest and incentive fees net of associated compensation expense, certain investment costs for capital raising that are not reimbursable by our sponsored funds, and capital expenditures as deducted in DE.

We believe that Adjusted EBITDA is a meaningful supplemental measure of performance because it presents the Company’s operating performance independent of its capital structure, leverage and non-cash items, which allows for better comparability against entities with different capital structures and income tax rates.

However, because Adjusted EBITDA is calculated before recurring cash charges including interest expense and taxes and does not deduct capital expenditures or other recurring cash requirements, its usefulness as a performance measure may be limited.

Distributable Earnings and Adjusted EBITDA reconciliation

(In thousands) Three Months Ended June 30, 2022

Net loss attributable to common stockholders $ (37,321)

Net loss attributable to noncontrolling interests in Operating Company (3,090)

Net loss attributable to Operating Company (40,411)

Transaction-related and restructuring charges 29,300

Other (gains) losses, excluding realized gains or losses related to digital assets in Corporate and Other 13,433

Unrealized carried interest, net of associated compensation expense (58,775)

Equity-based compensation expense 9,344

Depreciation and amortization 155,909

Income tax benefit (330) (12,268)

$ 84,604 $ 76,825

The higher 2022 EBITDA re reflects an increase in rentable square footage, driven by the Vantage SDC portfolio, with an add-on acquisition in October 2021 and additional lease-up of expanded capacity and existing inventory throughout 2021, as well as DataBank's acquisition of four new data centers in March 2022.

Straight-line rent (revenue) and expense, net (2,956)

Amortization of acquired above- and below-market lease values, net (10)

Impairment loss 12,184

Non-revenue enhancing capital expenditures (13,377)

Debt prepayment penalties and amortization of deferred financing costs, debt premiums and debt discounts 5,238

Adjustment to equity method earnings to reflect BRSP cash dividend declared (4,660)

Adjustments attributable to noncontrolling interests in investment entities (1)

DE of discontinued operations (5,958)

Distributable Earnings (after tax)—attributable to Operating Company

Adjustments attributable to Operating Company :

Interest expense included in DE 14,142

Income tax benefit included in DE (2,662)

Preferred stock dividends 15,759

Equity method earnings included in DE (6,982)

Non-revenue enhancing capital expenditures deducted from DE and investment costs 3,086

Adjusted EBITDA—attributable to Operating Company

(1) Noncontrolling interests' share of adjustments pertain largely to depreciation and amortization and unrealized carried interest, net of associated compensation expense.

Digital IM FRE

Digital IM FRE is calculated as recurring fee income and other income inclusive of cost reimbursements associated with administrative expenses, and net of compensation expense (excluding equity-based compensation, carried interest and incentive compensation) and administrative expense (excluding placement fees and straight-line rent expense).

Digital IM FRE is used to assess the extent to which direct base compensation and operating expenses are covered by recurring fee revenues in the digital investment management business.

We believe that Digital IM FRE is a useful supplemental performance measure because it may provide additional insight into the profitability of the overall digital investment management business.

Digital IM FRE is measured as Adjusted EBITDA for the Digital IM segment, adjusted to reflect the Company’s Digital IM segment as a stabilized business by excluding FRE associated with new investment strategies that have 1) not yet held a first close raising FEEUM;

or 2) not yet achieved break-even Adjusted EBITDA only for investment products that may be terminated solely at the Company’s discretion, collectively referred to as “Start-up FRE.” The Company evaluates new investment strategies on a regular basis and excludes Start-Up FRE from Digital IM FRE until such time a new strategy is determined to form part of the Company’s core investment management business.

Digital IM FRE reconciliation

(In thousands) Three Months Ended June 30, 2022

Digital Investment Management

Net income $ 67,995

Interest expense, net of interest income 2,771

Investment expense and reimbursement (income), net (200)

Depreciation and amortization 5,375

Equity-based compensation 3,361

Incentive fee and carried interest compensation expense 49,069

Straight-line rent expense 76

Transaction-related and restructuring charges 4,042

Incentive fee and carried interest (110,779)

Equity method earnings (1,016)

Other loss, net 424

Income tax expense 2,006

Digital IM Adjusted EBITDA 23,124

Start-up FRE 2,335

Digital IM FRE 25,459

Attributable to redeemable noncontrolling interests (4,700)

Digital IM FRE—attributable to Operating Company

Liquidity and Capital Resources

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.

In addition to our cash balance at March 31, 2022, our expected liquidity position is $1.0 billion, including the full $300 million availability under our VFN.

At June 30, 2022, our liquidity position was $260 million, including corporate-level cash and $230 million availability under our VFN.

In the normal course of business, we continue to seek and capitalize on opportunities to syndicate our investments to third party co-investors.

In the third quarter of 2022, we anticipate cash inflows from partial monetization of our interest in DataBank of approximately $230 million and additionally, a return of funds from our warehoused loans that will be transferred to our new credit fund, as discussed below.

We also have access to the capital markets to raise additional funds, namely through issuance of additional series of notes under our securitized financing facility.

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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

At this time, while we 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 2022

• We continue to reduce higher cost corporate indebtedness through early exchange of an additional $60 million of senior notes in March 2022, which will generate future interest savings.

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Investment Commitments

Fund Commitments —As of March 31, 2022, we have unfunded commitments of $91 million, predominantly to our DBP funds.

Wafra Redemption —We agreed to redeem Wafra's 31.5% interest in our Digital IM business for $390 million in cash and 57.7 million in shares of our Class A common stock.

The transaction is expected to close in May 2022.

Additional contingent consideration between $90 million and up to $125 million based upon achievement of new capital formation targets may become payable in March 2023 and March 2024, with up to 50% payable in shares of our Class A common stock at our election.

Acquisition of Tower Assets —We have committed to acquire a mobile telecommunications tower business for approximately €745 million (or approximately $820 million ) , to be funded through a combination of debt and equity, including a €458 million (approximately $504 million) equity commitment.

The acquisition is expected to close in the second quarter of 2022.

We expect to temporarily warehouse the investment, which is intended to be transferred thereafter to a new sponsored investment vehicle.

Acquisition of Infrastructure Investment Management Platform —We have committed to acquire AMP Capital's global infrastructure equity investment management platform for A$458 million (approximately $327 million) in cash.

The transaction is expected to close in the fourth quarter of 2022.

Additional contingent consideration of up to A$180 million (approximately $129 million) may become payable based upon achievement of future fundraising targets.

Fund Commitments —As of June 30, 2022, we have unfunded commitments of $65 million, predominantly to our DBP funds.

Wafra Redemption —In connection with the May 2022 redemption of Wafra's interest in our Digital IM business, additional contingent consideration of up to $125 million may be payable in March 2023 and/or March 2024, with up to 50% payable in shares of our class A common stock at our election.

Acquisition of Infrastructure Investment Management Platform —We have committed to acquire AMP Capital's global infrastructure equity investment management platform for $327 million in cash.

The acquisition is expected to close in the fourth quarter of 2022.

Additional contingent consideration of up to $128 million may become payable based upon achievement of future fundraising targets.

Lease Obligations

At March 31, 2022, we have $141.0 million and $293.8 million of finance and operating lease obligations, respectively, that were assumed through acquisitions, principally leasehold data centers, and $41.1 million of operating lease obligations on our corporate offices.

At June 30, 2022, we have $139.3 million and $488.1 million of finance and operating lease obligations, respectively, that were assumed through acquisitions, principally in connection with leasehold data centers and ground space hosting tower communication sites, and $39.1 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.

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The Company expects to reinstate quarterly common stock dividends beginning the third quarter of 2022, subject to approval of its Board of Directors.

Preferred Stock— At March 31, 2022, 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.

Preferred Stock— At June 30, 2022, 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.

Stock Repurchase

We currently have a $200 million stock repurchase program, with repurchases targeted towards preferred stock to further reduce our leverage.

Cash From Operations

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Additionally, we generate fee related earnings from our digital investment management business.

Following the expected conversion of Wafra's 31.5% interest in our Digital IM business into DBRG corporate level ownership, 100% of fee related earnings will be attributable to us.

Following the redemption of Wafra's 31.5% interest in our Digital IM business in May 2022, 100% of fee related earnings are attributable to us.

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.

Warehoused Investments

We temporarily warehouse investments on behalf of prospective sponsored investment vehicles that are actively fundraising.

The warehoused investments are transferred to the investment vehicle when sufficient third party capital, including debt, is raised.

At June 30, 2022, our warehoused investments include $57 million of equity investments and $381 million of outstanding loan principal, of which $151 million is expected to be transferred to a new credit vehicle in the third quarter of 2022.

The remaining loan balance is partially funded by $168 million of debt.

The largest warehoused investment is currently TowerCo that was acquired in June 2022, for which we funded $278 million at acquisition.

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 our Wellness Infrastructure assets in February 2022 for $161 million in cash, including cash distributions received from NRF Holdco prior to closing of the sale, and $155 million in note receivable.

Wellness Infrastructure— As noted above, in completing our digital transformation, we monetized our Wellness Infrastructure assets in February 2022 for $161 million in cash, including cash distributions received from NRF Holdco prior to closing of the sale, and $155 million in note receivable.

DataBank— We expect to partially monetize our interest in DataBank in the third quarter of 2022 for approximately $230 million in proceeds.

Efforts to recapitalize DataBank will continue throughout the remainder of 2022, with incremental sales of equity interests in DataBank by existing investors to new investors, which will result in further monetization of our interest in DataBank.

Description of our debt is included in Note 8 to the consolidated financial statements.

Our indebtedness at March 31, 2022 is summarized as follows:

Our indebtedness at June 30, 2022 is summarized as follows:

($ in thousands) Outstanding Principal Weighted Average Interest Rate (1)

Weighted Average Years Remaining to Maturity (2)

Corporate-level debt:

Secured fund fee revenue notes $ 370,000 4.10 % 4.2

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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 March 31, 2022 were as follows.

Scheduled principal payments on our debt obligations at June 30, 2022 were as follows.

(In thousands) Remaining 2022 2023 2024 2025 2026 2027 and thereafter Total

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Total $ 3,116 $ 565,292 $ 910,503 $ 1,224,939 $ 1,989,690 $ 918,734 $ 5,612,274

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 March 31, 2022 for extensions that are at the Company's option.

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 June 30, 2022 for extensions that are at the Company's option.

Securitized Financing Facility

As noted above, our VFN availability was increased $100 million to $300 million, all of which is available to be drawn in full as of the date of this filing.

As of the date of this filing, we are in compliance with all of the financial covenants under the securitized financing facility.

As noted above, our VFN availability was increased $100 million to $300 million in April 2022, of which $230 million is available to be drawn as of June 30, 2022.

Non-Recourse Investment-Level Secured Debt

Investment level financing is non-recourse to us and secured by the respective underlying real estate.

Significant Developments

Investment level financing is non-recourse to us and secured by the respective underlying real estate or loans receivable.

Significant Developments in 2022

• Dispositions— Consolidated investment-level debt of $2.86 billion held by NRF Holdco (previously classified as held for disposition) have been assumed by the acquirer upon sale of NRF Holdco in February 2022, which resulted in further deleveraging of our balance sheet.

• Acquisition— Additional $319 million of debt was undertaken to partially fund the acquisition of TowerCo in June 2022.

The debt is expected to be assumed by our new sponsored investment vehicle, along with the TowerCo assets, when sufficient third party capital has been raised.

Public Offerings

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The following table summarizes the activities from our statements of cash flows.

Three Months Ended March 31,

Six Months Ended June 30,

(In thousands) 2022 2021

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Operating Activities

Cash inflows from operating activities are generated primarily through fee income from our investment management business, property operating income from our real estate investments, interest received from our loan portfolio, and distributions of earnings received from equity investments.

This is partially offset by payment of operating expenses, including property management and operations, loan servicing, investment transaction costs, as well as compensation and general administrative costs.

Our operating activities generated net cash inflows of $1.3 million in 2022 and net cash outflows of $23.9 million in 2021.

Cash inflows from operating activities are generated primarily through fee income from our investment management business, property operating income from our real estate investments, interest received from our warehoused loans, and distributions of earnings received from equity investments.

This is partially offset by payment of operating expenses, including property management and operations, loan servicing, investment transaction-related costs, as well as compensation and general administrative costs.

Our operating activities generated net cash inflows of $67.3 million in 2022 and $104.9 million in 2021.

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 generated net cash outflows of $1.1 billion in 2022 and $7.9 million in 2021.

Investing activities include primarily cash outlays for acquisition of real estate, origination or acquisition of warehoused loans and disbursement on subsequent drawdowns, and new equity investments and subsequent contributions, which are partially offset by repayments and sales of loans receivable, distributions of capital received from equity investments, and proceeds from sale of real estate and equity investments.

Our investing activities generated net cash outflows of $2.1 billion in 2022 and net cash inflows of $408.6 million in 2021.

• Real estate investments —Real estate investing activities generated net cash outflows in both years.

Outflows were significantly higher in 2022 totaling $0.9 billion, attributed to DataBank's acquisition of five data centers, capital expenditures in our data center portfolio and payments for build-out of expansion capacity and lease-up within the Vantage SDC portfolio.

Outflows were significantly higher in 2022 totaling $1.6 billion, attributed primarily to the acquisition of TowerCo, and to a lesser extent, DataBank's acquisition of five data centers, capital expenditures in our data center portfolio and payments for build-out of expansion capacity and lease-up within the Vantage SDC portfolio.

Also contributing to the cash outflows was cash assumed by the buyer in the sale of real estate investment holding entities in our Wellness Infrastructure business.

All of these outflows were partially offset by proceeds received from our Wellness Infrastructure sale.

2021 saw net cash outflows of $9.2 million, as proceeds from sales of various European properties and sales of real estate investment holding entities in our hotel business, net of cash assumed by the buyer, were more than offset by capital expenditures.

• Debt investments —Our debt investments generated net cash outflows of $164.1 million in 2022 and $4.5 million in 2021.

Cash outflows in 2022 were driven by origination and acquisition of loans that are warehoused for future investment vehicles, including securitization vehicles;

and were partially offset by a loan syndication.

In 2021, there was a $9.7 million acquisition of additional N-Star CDOs by our Wellness Infrastructure segment at a discount (subsequently sold as part of the disposition of NRF Holdco in February 2022), which was partially offset by repayments exceeding disbursements on our loan portfolio.

• Equity investments —In 2022, our equity investments recorded net cash inflows of $8.7 million, largely representing the net activity from the marketable equity securities portfolio of our consolidated liquid funds.

In 2021, we recorded net cash outflows of $25.0 million from equity investments, largely from draws on acquisition, development and construction ("ADC") loans that were accounted for as equity method investments.

2021 saw net cash inflows of $176.8 million, as proceeds from sales of various European properties and sales of real estate investment holding entities in our hotel business, net of cash assumed by the buyer, more than offset capital expenditures.

• Debt investments —Our debt investments generated net cash outflows in 2022 and net cash inflows in 2021.

Cash outflows of $226.5 million in 2022 were driven by origination and acquisition of loans that are warehoused for future investment vehicles, partially offset by repayment and a loan syndication.

In 2021, net cash inflows of $320.9 million can be attributed to loan repayments, in particular a $305.0 million repayment on two loans in our Irish loan portfolio, partially offset by a loan acquired and warehoused for a future digital credit vehicle, other loan disbursements and acquisition of additional N-Star CDOs at a discount by our Wellness Infrastructure segment.

The N-Star CDOs were subsequently sold as part of the disposition of NRF Holdco in February 2022.

• Equity investments —Our equity investments generated net cash outflows in both years.

In 2022, our equity investments recorded net cash outflows of $33.3 million, largely representing the trading activities in marketable equity securities by our consolidated liquid funds, in addition to funding our digital fund commitments.

In 2021, net cash outflows of $120.7 million can be attributed to funding our digital fund commitments and draws on acquisition, development and construction ("ADC") loans that were accounted for as equity method investments.

These ADC loans have since been disposed in conjunction with the sale of investment holding entities in our OED portfolio in December 2021.

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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 $559.3 million in 2022 and $99.2 million in 2021.

• In 2022, the large cash inflows reflect the financing for DataBank's data center acquisition in March 2022 through a term loan and capital contribution from noncontrolling interests.

Other investment-level financing included additional amounts drawn on credit facilities to finance loans acquired for future securitization vehicles.

• The 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 by Wafra of a portion of our commitments to DBP I.

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.

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 of the second quarter of 2022), as well as distributions to noncontrolling interests in our various investments.

Financing activities generated net cash inflows of $760.3 million in 2022 and net cash outflows of $308.7 million in 2021.

• In 2022, the large net cash inflow of $760.3 million was driven by financing for the acquisitions of TowerCo and the DataBank data center acquisition through term loans and capital contributions from noncontrolling interests totaling $1.1 billion.

This was partially offset by $388.5 million of cash paid to redeem Wafra's interest in our digital investment management business.

Financing cash inflows also included draws on our corporate VFN revolver and

on credit facilities to finance bank-syndicated warehoused loans.

Other notable cash outflows included acquisition of noncontrolling interest in DataBank and distributions to various noncontrolling interests.

• The financing net cash outflows of $308.7 million in 2021 were driven by $360.9 million of debt repayments exceeding borrowings, primarily repayment of debt financing real estate and loans that were sold or resolved during the year.

The net cash outflow from debt financing was partially offset by $106.2 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, assumption by Wafra of a portion of our commitments to DCP I, and additional consideration paid by Wafra for its investment in our digital investment management business.

• Dividend payments were $31.5 million in 2022 compared to $37.0 million in 2021 following additional preferred stock redemptions during 2021.

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

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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.

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 DBP 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.

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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;

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.

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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.

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.

Recent Accounting Updates

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis