What changed in this filing

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Item 1. Financial Statements

2022-11-07 compared with 2022-08-08 · 370 added, 233 removed, 1389 unchanged (30% of the section changed)

3 unchanged sentences

(In thousands, except per share data)

June 30, 2022

September 30, 2022

December 31, 2021

6 unchanged sentences

Loans receivable (at fair value) 174,389 173,921

Equity investments ($ 202,514 and $ 201,912 at fair value)

Equity and debt investments ($ 206,758 and $ 201,912 at fair value)

1,050,356 935,153

8 unchanged sentences

$ 11,740,829 $ 14,197,816

$ 5,539,732 $ 4,860,402

Debt, net $ 5,325,615 $ 4,860,402

Accrued and other liabilities ($ 196,561 and $ 37,970 at fair value)

12 unchanged sentences

Preferred stock, $ 0.01 par value per share;

$ 883,500 liquidation preference;

$ 827,779 and $ 883,500 liquidation preference;

250,000 shares authorized;

35,340 shares issued and outstanding

33,111 and 35,340 shares issued and outstanding

800,355 854,232

9 unchanged sentences

Accumulated other comprehensive income

( 4,056 ) 42,383

Total stockholders’ equity 1,654,659 2,146,934

10 unchanged sentences

(In thousands, except per share data)

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

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

16 unchanged sentences

Other income (loss)

Other loss, net ( 46,256 ) ( 27,041 ) ( 196,137 ) ( 36,391 )

Equity method earnings 27,427 51,481 46,634 35,064

Other gain (loss), net 25,908 4,657 ( 170,229 ) ( 31,734 )

Equity method earnings (losses) ( 52,382 ) 6,987 ( 5,748 ) 42,051

Equity method earnings—carried interest 121,698 58,382 201,398 69,329

2 unchanged sentences

Income tax benefit 7,841 10,973 17,772 109,408

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

Loss from continuing operations ( 94,598 ) ( 40,935 ) ( 384,194 ) ( 183,451 )

Loss from discontinued operations ( 26,389 ) ( 10,429 ) ( 148,558 ) ( 590,595 )

4 unchanged sentences

Operating Company ( 4,834 ) 4,311 ( 30,786 ) ( 38,565 )

Net loss attributable to DigitalBridge Group, Inc.

Net income (loss) attributable to DigitalBridge Group, Inc.

( 49,088 ) 61,357 ( 317,207 ) ( 307,677 )

Preferred stock repurchases/redemptions (Note 9)

( 1,098 ) 2,865 ( 1,098 ) 2,865

Preferred stock dividends 15,283 17,456 46,801 54,488

Net loss attributable to common stockholders $ ( 37,321 ) $ ( 141,260 ) $ ( 299,637 ) $ ( 406,066 )

Loss per share—basic

Net income (loss) attributable to common stockholders $ ( 63,273 ) $ 41,036 $ ( 362,910 ) $ ( 365,030 )

Income (loss) per share—basic

Loss from continuing operations per common share—basic $ ( 0.30 ) $ ( 0.23 ) $ ( 1.57 ) $ ( 1.20 )

Net loss attributable to common stockholders per common share—basic $ ( 0.06 ) $ ( 0.29 ) $ ( 0.51 ) $ ( 0.85 )

Loss per share—diluted

Net income (loss) attributable to common stockholders per common share—basic $ ( 0.39 ) $ 0.33 $ ( 2.37 ) $ ( 3.04 )

Income (loss) per share—diluted

Loss from continuing operations per common share—diluted $ ( 0.30 ) $ ( 0.23 ) $ ( 1.57 ) $ ( 1.20 )

Net loss attributable to common stockholders per common share—diluted $ ( 0.06 ) $ ( 0.29 ) $ ( 0.51 ) $ ( 0.85 )

Net income (loss) attributable to common stockholders per common share—diluted $ ( 0.39 ) $ 0.33 $ ( 2.37 ) $ ( 3.04 )

Weighted average number of shares

1 unchanged sentence

Diluted 162,398 121,458 153,028 120,041

Dividends declared per common share

$ 0.01 $ — $ 0.01 $ —

The accompanying notes are an integral part of the consolidated financial statements.

2 unchanged sentences

(In thousands)

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

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

12 unchanged sentences

Operating Company ( 5,259 ) 2,539 ( 34,733 ) ( 44,395 )

Comprehensive loss attributable to stockholders $ ( 32,908 ) $ ( 140,044 ) $ ( 309,170 ) $ ( 407,477 )

Comprehensive income (loss) attributable to stockholders $ ( 54,600 ) $ 44,535 $ ( 363,770 ) $ ( 362,942 )

The accompanying notes are an integral part of the consolidated financial statements.

43 unchanged sentences

(In thousands, except per share data)

Preferred Stock Common Stock Additional Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Income Total Stockholders’ Equity Noncontrolling Interests in Investment Entities Noncontrolling Interests in Operating Company Total Equity

Balance at June 30, 2021 $ 999,490 $ 4,927 $ 7,622,382 $ ( 6,601,522 ) $ 83,675 $ 2,108,952 $ 3,836,609 $ 113,469 $ 6,059,030

Net income (loss) — — — 61,357 — 61,357 ( 124,301 ) 4,311 ( 58,633 )

Other comprehensive loss — — — — ( 16,822 ) ( 16,822 ) ( 19,921 ) ( 1,772 ) ( 38,515 )

Redemption of preferred stock (Note 9)

( 83,385 ) — ( 2,865 ) — — ( 86,250 ) — — ( 86,250 )

Deconsolidation of investment entities (Note 21)

— — — — — — ( 149,515 ) — ( 149,515 )

Redemption of OP Units for class A common stock — 5 1,085 — — 1,090 — ( 1,090 ) —

Equity awards issued, net of forfeitures — 12 7,351 — — 7,363 308 903 8,574

Shares canceled for tax withholdings on vested stock awards — ( 3 ) ( 1,670 ) — — ( 1,673 ) — — ( 1,673 )

Contributions from noncontrolling interests — — — — — — 24,292 — 24,292

Distributions to noncontrolling interests — — — — — — ( 51,584 ) — ( 51,584 )

Preferred stock dividends — — — ( 17,456 ) — ( 17,456 ) — — ( 17,456 )

Reallocation of equity (Notes 2 and 10)

— — ( 731 ) — 27 ( 704 ) — 704 —

Balance at September 30, 2021 $ 916,105 $ 4,941 $ 7,625,552 $ ( 6,557,621 ) $ 66,880 $ 2,055,857 $ 3,515,888 $ 116,525 $ 5,688,270

The accompanying notes are an integral part of the consolidated financial statements.

DigitalBridge Group, Inc.

Consolidated Statements of Equity (Continued)

(In thousands, except per share data)

Preferred Stock Common Stock Additional Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Income (Loss) Total Stockholders’ Equity Noncontrolling Interests in Investment Entities Noncontrolling Interests in Operating Company Total Equity

26 unchanged sentences

Transaction costs incurred in connection with redemption of redeemable noncontrolling interest — — ( 7,137 ) — — ( 7,137 ) — — ( 7,137 )

Reclassification of carried interest allocated to redeemable noncontrolling interest to noncontrolling interest in investment entities (Note 10)

Reclassification of carried interest allocated to redeemable noncontrolling interest to noncontrolling interests in investment entities (Note 10)

— — — — — — 4,087 — 4,087

13 unchanged sentences

DigitalBridge Group, Inc.

Consolidated Statements of Equity (Continued)

(In thousands, except per share data)

Balance at June 30, 2022 $ 854,232 $ 6,564 $ 7,646,852 $ ( 6,875,817 ) $ 1,455 $ 1,633,286 $ 2,870,528 $ 57,705 $ 4,561,519

Net loss — — — ( 49,088 ) — ( 49,088 ) ( 60,623 ) ( 4,834 ) ( 114,545 )

Other comprehensive loss — — — — ( 5,512 ) ( 5,512 ) ( 19,587 ) ( 425 ) ( 25,524 )

Stock repurchases ( 53,877 ) ( 38 ) ( 12,476 ) — — ( 66,391 ) — — ( 66,391 )

DataBank recapitalization (Note 10)

— — 170,770 — — 170,770 ( 170,770 ) — —

Equity-based compensation — 2 9,867 — — 9,869 8,861 311 19,041

Shares canceled for tax withholdings on vested stock awards — ( 2 ) ( 1,533 ) — — ( 1,535 ) — — ( 1,535 )

Cost of DataBank recapitalization — — ( 8,749 ) — — ( 8,749 ) ( 21,247 ) — ( 29,996 )

Contributions from noncontrolling interests — — — — — — 1,502,454 — 1,502,454

Distributions to noncontrolling interests — — — — — — ( 1,219,454 ) ( 127 ) ( 1,219,581 )

Preferred stock dividends — — — ( 15,117 ) — ( 15,117 ) — — ( 15,117 )

Common stock dividend declared ($ 0.01 per share)

— — — ( 1,636 ) — ( 1,636 ) — — ( 1,636 )

Reallocation of equity (Notes 2 and 10)

— — ( 11,239 ) — 1 ( 11,238 ) — 11,238 —

Balance at September 30, 2022 $ 800,355 $ 6,526 $ 7,793,492 $ ( 6,941,658 ) $ ( 4,056 ) $ 1,654,659 $ 2,890,162 $ 63,868 $ 4,608,689

The accompanying notes are an integral part of the consolidated financial statements.

DigitalBridge Group, Inc.

Consolidated Statements of Cash Flows

(In thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

Cash Flows from Operating Activities

5 unchanged sentences

Amortization of deferred financing costs and debt discount and premium, net 102,943 56,494

Equity method (gains) losses ( 153,019 ) 18,248

Equity method (earnings) losses ( 198,325 ) 78,444

Distributions of income from equity method investments 97,003 3,072

17 unchanged sentences

Repayments of loans receivable 23,956 492,022

Proceeds from sales of loans receivable and debt securities 126,644 —

Proceeds from sales of loans receivable and debt securities, including transfers of warehoused loans 360,773 —

Acquisition of and additions to real estate, related intangibles and leasing commissions ( 1,901,931 ) ( 608,155 )

5 unchanged sentences

Proceeds from sale of corporate fixed assets — 14,946

Net (payments) receipts on settlement of derivatives ( 11,893 ) 17,123

Net receipts on settlement of derivatives 13,952 17,123

Other investing activities, net ( 769 ) ( 833 )

3 unchanged sentences

(In thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

Cash Flows from Financing Activities

Dividends paid to preferred stockholders $ ( 47,629 ) $ ( 56,105 )

Repurchases of common stock ( 8,008 ) —

Repayment or repurchase of senior notes ( 14,237 ) ( 31,502 )

Borrowings from corporate credit facility and securitized financing facility — 345,000

Repayment of borrowings from corporate credit facility securitized financing facility ( 200,000 ) —

Repayment of borrowings from corporate credit facility and securitized financing facility — ( 45,000 )

Borrowings from secured debt 1,014,582 1,150,909

3 unchanged sentences

Distributions to and redemptions of noncontrolling interests ( 1,684,752 ) ( 129,790 )

Redemptions/repurchases of preferred stock ( 52,779 ) ( 86,250 )

Shares canceled for tax withholdings on vested equity awards ( 18,012 ) ( 18,570 )

Acquisition of noncontrolling interest ( 32,076 ) —

Net cash provided by (used in) financing activities 760,345 ( 308,682 )

Net cash provided by financing activities 741,772 198,221

Effect of exchange rates on cash, cash equivalents and restricted cash ( 3,039 ) 590

3 unchanged sentences

Reconciliation of cash, cash equivalents and restricted cash to consolidated balance sheets

Six Months Ended June 30,

Nine Months Ended September 30,

Beginning of the period

11 unchanged sentences

Notes to Consolidated Financial Statements

June 30, 2022

September 30, 2022

Business and Organization

3 unchanged sentences

The Company conducts all of its activities and holds substantially all of its assets and liabilities through its operating subsidiary, DigitalBridge Operating Company, LLC (the "Operating Company" or the "OP") .

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

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

The remaining 7 % is owned primarily by certain current and former employees of the Company as noncontrolling interests.

19 unchanged sentences

For all current and prior periods presented, the related assets and liabilities, to the extent they have not been disposed at the respective balance sheet dates, are presented as assets and liabilities held for disposition on the consolidated balance sheets (Note 11) and the related operating results are presented as discontinued operations on the consolidated statements of operations (Note 12).

Reverse Stock Split

In August 2022, the Company effectuated a one-for-four reverse stock split of its outstanding shares of class A and class B common stock.

The number of authorized shares of common stock was not adjusted in connection with the reverse stock split, however, the Company intends to seek stockholder approval to make a proportional change to the number of authorized shares of class A and class B common stock at its next annual meeting of stockholders.

Par value of common stock was proportionately increased from $ 0.01 to $ 0.04 per share.

Throughout this Quarterly Report on Form 10-Q, common stock share and per share information, including OP units and stock award units, as well as the Company's senior note conversion or exchange ratio in common stock shares have been revised for all periods presented to give effect to the reverse stock split.

Summary of Significant Accounting Policies

25 unchanged sentences

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 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;

6 unchanged sentences

Changes in consolidation status are applied prospectively.

An entity may be consolidated as a result of this reassessment, in which case, the assets, liabilities and noncontrolling interest in the entity are recorded at fair value upon initial consolidation.

An entity may be consolidated as a result of this reassessment, in which case, the assets, liabilities and noncontrolling interests in the entity are recorded at fair value upon initial consolidation.

Any existing equity interest held by the Company in the entity prior to the Company obtaining control will be remeasured at fair value, which may result in a gain or loss recognized upon initial consolidation.

18 unchanged sentences

If not, for an acquisition to be considered a business, it would have to include an input and a substantive process that together significantly contribute to the ability to create outputs (i.e., there is a continuation of revenue before and after the transaction).

A substantive process is not ancillary or minor, cannot be replaced without significant costs, effort or delay or is otherwise considered unique or scarce.

A substantive process is not ancillary or minor, cannot be replaced without significant costs,

effort or delay or is otherwise considered unique or scarce.

To qualify as a business without outputs, the acquired assets would require an organized workforce with the necessary skills, knowledge and experience to perform a substantive process.

4 unchanged sentences

Transaction costs related to acquisition of a business are expensed as incurred and excluded from the fair value of consideration transferred.

The identifiable assets acquired, liabilities assumed and noncontrolling interests

in an acquired entity are recognized and measured at their estimated fair values.

The identifiable assets acquired, liabilities assumed and noncontrolling interests in an acquired entity are recognized and measured at their estimated fair values.

The excess of the fair value of consideration transferred over the fair values of identifiable assets acquired, liabilities assumed and noncontrolling interests in an acquired entity, net of fair value of any previously held interest in the acquired entity, is recorded as goodwill.

25 unchanged sentences

Under the new guidance, an acquirer records a contract asset or contract liability as if it had originated the acquired revenue contract, which requires the acquirer to evaluate performance obligations, transaction price and relative stand-alone selling price at the original contract inception date or subsequent modification dates.

will generally result in the recognition and measurement of a contract asset and contract liability that will likely be more comparable to the books of the acquiree at acquisition date.

This will generally result in the recognition and measurement of a contract asset and contract liability that will likely be more comparable to the books of the acquiree at acquisition date.

In circumstances where an acquirer is unable to assess or rely on the acquiree's accounting under ASC 606, the ASU provides a practical expedient that allows an acquirer to determine the stand-alone selling price of each performance obligation in the contract as of acquisition date, instead of contract inception date, for purposes of allocating the transaction price.

21 unchanged sentences

The Company and its co-investors also committed to acquire the future build-out of expansion capacity, along with lease-up of the expanded capacity and existing inventory, the costs of which are borne by the previous owners of Vantage SDC.

As of June 30, 2022, the remaining consideration for the incremental lease-up acquisitions is estimated to be approximately $ 245 million.

As of September 30, 2022, the remaining consideration for the incremental lease-up acquisitions is estimated to be approximately $ 204 million.

Most, if not all, of the cost of the expansion capacity has been or will be funded by Vantage SDC from borrowings under its credit facilities and/or cash from operations.

Pursuant to this arrangement, Vantage SDC

had 8 new tenant leases that commenced in the six months ended June 30, 2022, and 11 new tenant leases that commenced in 2021 related to a portion of the expansion capacity, for aggregate consideration of $ 67.8 million and $ 100.8 million, respectively.

Pursuant to this arrangement, Vantage SDC had 11 new tenant leases that commenced in the nine months ended September 30, 2022, and 11 new tenant leases that commenced in 2021 related to a portion of the expansion capacity, for aggregate consideration of $ 123.7 million and $ 100.8 million, respectively.

All of these payments were made to the previous owners of Vantage SDC and are treated as asset acquisitions.

Acquisitions by DataBank

• In May 2022, the Company's subsidiary, DataBank, acquired a data center in Atlanta, Georgia for $ 10.9 million.

• In May 2022, the Company's edge colocation data center subsidiary, DataBank, acquired a data center in Atlanta, Georgia for $ 10.9 million.

• In March 2022, DataBank acquired four colocation data centers in Houston, Texas for $ 670 million.

27 unchanged sentences

(iii) current replacement cost for towers in consideration of their remaining economic life;

and (iv) recent comparable sales or

current listings for land.

and (iv) recent comparable sales or current listings for land.

Useful lives of real estate acquired range from 35 to 50 years for buildings and improvements, 15 to 20 years for site improvements, 11 to 71 years for towers and related equipment, and 11 to 20 years for data center infrastructure.

• Lease-related intangibles for real estate acquisitions were composed of the following:

• In-place leases reflect the value of rental income forgone if the properties had been acquired vacant, and the leasing commissions, legal and marketing costs that would have been incurred to lease up the properties, discounted at 6.8 %, with remaining lease terms ranging between 1 and 15 years.

• In-place leases reflect the value of rental income forgone if the properties had been acquired vacant, and the leasing commissions, legal and marketing costs that would have been incurred to lease up the properties, discounted at rates between 4.75 % and 6.8 %, with remaining lease terms ranging between 1 and 15 years.

• Above- and below-market leases represent the rent differential for the remaining lease term between contractual rents of acquired leases and market rents at the time of acquisition, discounted at rates between 6.0 % and 11.25 % with remaining lease terms ranging between 1 and 4 years.

10 unchanged sentences

Consideration for the acquisition consists of:

(i) an upfront amount of A$ 458 million (approximately $ 327 million), subject to certain customary adjustments;

and (ii) a contingent amount of up to A$ 180 million (approximately $ 128 million), primarily based upon future fundraising for AMP Capital's global infrastructure funds.

(i) an upfront amount of A$ 458 million ($ 314 million at September 30, 2022 spot rate), subject to certain customary adjustments;

and (ii) a contingent amount of up to A$ 180 million ($ 125 million at September 30, 2022 spot rate), primarily based upon future fundraising for AMP Capital's global infrastructure funds.

The transaction is expected to close in the fourth quarter of 2022, subject to customary closing conditions, including regulatory approvals.

1 unchanged sentence

The following table summarizes the Company's real estate held for investment.

(In thousands) June 30, 2022 December 31, 2021

(In thousands) September 30, 2022 December 31, 2021

Land $ 257,499 $ 206,588

7 unchanged sentences

Real Estate Depreciation

Depreciation of real estate held for investment was $ 87.3 million and $ 67.6 million for the three months ended June 30, 2022 and 2021, respectively, and $ 166.4 million and $ 135.7 million for the six months ended June 30, 2022 and 2021, respectively.

Depreciation of real estate held for investment was $ 91.3 million and $ 69.7 million for the three months ended September 30, 2022 and 2021, respectively, and $ 257.7 million and $ 211.3 million for the nine months ended September 30, 2022 and 2021, respectively.

Property Operating Income

Components of property operating income are as follows.

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

Three Months Ended September 30, Nine Months Ended September 30,

(In thousands) 2022 2021 2022 2021

7 unchanged sentences

$ 244,336 $ 194,854 $ 681,098 $ 572,841

For the six months ended June 30, 2022 and 2021, property operating income from a single customer accounted for approximately 18 % and 17 %, respectively, of the Company's total revenues from continuing operations, or approximately 8 % and 9 %, respectively, of the Company's share of total revenues from continuing operations, net of amounts attributable to noncontrolling interests in investment entities.

For the nine months ended September 30, 2022 and 2021, property operating income from a single customer accounted for approximately 18 % and 16 %, respectively, of the Company's total revenues from continuing operations, or approximately 8 % for both periods, of the Company's share of total revenues from continuing operations, net of amounts attributable to noncontrolling interests in investment entities.

Equity and Debt Investments

The Company's equity and debt investments, excluding investments held for disposition (Note 11), are represented by the following:

(In thousands) September 30, 2022 December 31, 2021

Equity investments

The Company's equity investments, excluding investments held for disposition (Note 11), are represented by the following:

(In thousands) June 30, 2022 December 31, 2021

Equity method investments

1 unchanged sentence

$ 220,793 $ 284,985

Company-sponsored private funds (2)

Company-sponsored private funds—equity investment in funds

305,833 270,737

Company-sponsored private funds—carried interest

193,758 111,957

Other 4,458 5,417

5 unchanged sentences

Other 77,270 10,570

$ 1,080,261 $ 935,153

Total equity investments 999,429 935,153

Debt securities

CLO subordinated notes 50,927 —

Equity and debt investments $ 1,050,356 $ 935,153

(1) At December 31, 2021, excluded approximately 461,000 shares and 3.1 million units in BRSP held by NRF Holdco that were included in assets held for disposition (Note 11).

NRF Holdco was sold in February 2022.

(2) Includes unrealized carried interest of $ 195.5 million at June 30, 2022 and $ 112.0 million at December 31, 2021 in connection with sponsored investment vehicles that are in the early stage of their lifecycle, of which a substantial portion is shared with certain employees.

Equity Investments

The Company's equity investments represent noncontrolling equity interests in various entities, primarily BRSP, interests in the Company's sponsored digital investment vehicles, and marketable securities held largely by private open-end liquid funds sponsored and consolidated by the Company.

2 unchanged sentences

The Company evaluates its equity method investments for other-than-temporary impairment ("OTTI") at each reporting period.

OTTI was recorded only on equity method investments held for disposition, as discussed in Note 11.

In 2021, OTTI was recorded only on equity method investments held for disposition, as discussed in Note 11.

BrightSpire Capital, Inc.

At June 30, 2022, the Company owned approximately 35.0 million shares in BRSP for a 27.1 % interest in BRSP ( 29.0 % at December 31, 2021, including BRSP shares and units held by NRF Holdco that were disposed in February

2022), accounted for under the equity method as it exercises significant influence over BRSP's operating and financial policies through its substantial ownership interest.

At September 30, 2022, the Company owned approximately 35.0 million shares in BRSP for a 27.1 % interest in BRSP ( 29.0 % at December 31, 2021, including BRSP shares and units held by NRF Holdco that were disposed in February 2022), accounted for under the equity method as it exercises significant influence over BRSP's operating and financial policies through its substantial ownership interest.

In connection with the internalization of BRSP in April 2021, the Company had entered into a stockholders agreement with BRSP, pursuant to which the Company agreed, for so long as the Company owns at least 10 % of BRSP's outstanding common shares, to vote in BRSP director elections as recommended by BRSP’s board of directors at any stockholders' meeting that occurs prior to BRSP's 2023 annual stockholders' meeting.

3 unchanged sentences

A net gain was recognized in equity method earnings within continuing operations of $ 7.6 million (including a proportion of basis difference associated with the BRSP shares disposed, as discussed below).

OTTI —In the second quarter of 2022, the Company determined that the deficit between fair value of the Company's investment in BRSP, based upon BRSP's closing stock price at June 30, 2022, and its carrying value did not represent OTTI of its investment in BRSP as the Company has the intent and ability to hold its investment in BRSP to recovery.

OTTI —In the third quarter of 2022, the Company determined that its investment in BRSP was other-than-temporarily

impaired and recorded an impairment charge, included in equity method losses, of $ 59.6 million.

The Company determined that given the continued market volatility in 2022, its anticipated hold period for its investment in BRSP may not be sufficient to allow for a recovery of BRSP's stock price relative to the Company's carrying value of its investment in BRSP.

The OTTI charge was measured as the excess of carrying value over market value of the Company's investment in BRSP based upon BRSP's closing stock price on September 30, 2022, the last trading day of the quarter, of $ 6.31 per share.

Throughout 2021, the fair value of the Company's investment in BRSP was in excess of its carrying value.

Basis Difference —The impairment charges recorded by the Company on its investment in BRSP in 2020 and 2019 resulted in a basis difference between the Company's carrying value of its investment in BRSP (based upon BRSP's share price at the time of impairment) and the Company's proportionate share of BRSP's book value of equity at the time of impairment.

As a result of the impairment charge, the carrying value of the Company's investment in BRSP as of September 30, 2022 represents a non-recurring fair value that was measured under the Level 1 fair value hierarchy.

Basis Difference —The Company recorded impairment charges on its investment in BRSP in 2022, 2020 and 2019.

This resulted in a basis difference between the Company's carrying value of its investment in BRSP (based upon BRSP's share price at the time of impairment) and the Company's proportionate share of BRSP's book value of equity at the time of impairment.

The impairment charges were applied to the Company's investment in BRSP as a whole and were not determined based upon an impairment assessment of individual assets held by BRSP.

2 unchanged sentences

Upon resolution of these investments by BRSP or upon the Company's disposition of its shares in BRSP, the basis difference related to resolved investments or the proportion of basis difference associated with the BRSP shares disposed is applied to calculate the Company's share of net gain or loss resulting from such resolution or disposition.

The Company increased its share of net earnings from BRSP by $ 1.7 million and $ 34.5 million for the three months ended June 30, 2022 and 2021, respectively, and $ 15.8 million and $ 59.2 million for the six months ended June 30, 2022 and 2021 , respectively, representing the basis difference allocated to investments that were resolved or impaired by BRSP during these periods.

The remaining basis difference at June 30, 2022 was $ 151.5 million.

The Company increased its share of net earnings from BRSP by $ 1.2 million and $ 41.4 million for the three months ended September 30, 2022 and 2021, respectively, and $ 17.0 million and $ 100.5 million for the nine months ended September 30, 2022 and 2021 , respectively, representing the basis difference allocated to investments that were resolved or impaired by BRSP during these periods.

The basis difference balance at September 30, 2022 was $ 209.8 million.

Carried Interest

Carried interest represents a disproportionate allocation of returns to the Company, as general partner, based upon the extent to which cumulative performance of a sponsored fund exceeds minimum return hurdles.

Carried interest generally arises when appreciation in value of the underlying investments of the fund exceeds the minimum return hurdles, after factoring in a return of invested capital and a return of certain costs of the fund pursuant to terms of the governing documents of the fund.

The amount of carried interest recognized is based upon the cumulative performance of the fund if it were liquidated as of the reporting date.

Unrealized carried interest is driven by changes in fair value of the underlying investments of the fund and may be subject to reversal until such time it is realized.

Realization of carried interest occurs upon disposition of all underlying investments of the fund, or in part with each disposition.

Generally, carried interest is distributed upon profitable disposition of an investment if at the time of distribution, cumulative returns of the fund exceed minimum return hurdles.

Depending on the final realized value of all investments at the end of the life of a fund, if it is determined that cumulative carried interest distributions have exceeded the final carried interest amount earned, the Company is obligated to return the excess carried interest received.

Therefore, carried interest distributions may be subject to clawback if decline in investment values results in cumulative performance of the fund falling below minimum return hurdles in the interim period.

If it is determined that the Company has a clawback obligation, a liability would be established based upon a hypothetical liquidation of the net assets of the fund at reporting date.

The actual determination and required payment of any clawback obligation would generally occur after final disposition of the investments of the fund or otherwise as set forth in the governing documents of the fund.

At September 30, 2022, the Company does not have a liability for clawback obligations on distributed carried interest.

With respect to funds that have distributed carried interest, in the event all of their investments are deemed to have no value, the likelihood of which is remote, carried interest distributions subject to clawback as of September 30, 2022 would amount to $ 51.2 million, of which $ 45.9 million would be the responsibility of the employee and former employee recipients.

For this purpose, a portion of the carried interest allocated is generally held back from these recipients at the time of distribution (Note 7).

The carried interest balances at September 30, 2022 and December 31, 2021 represent unrealized carried interest in connection with sponsored funds that are currently in the early stage of their lifecycle.

Carried interest allocation is presented gross of accrued carried interest compensation (Note 7).

Carried Interest Distributed

In the third quarter of 2022, $ 123.5 million of carried interest was distributed, including $ 51.2 million that had been previously accrued, recognized in equity method earnings.

$ 103.2 million of the distributed carried interest was allocated to current and former employees and to Wafra (Note 10), of which $ 45.9 million had been previously accrued, recorded as carried interest compensation and amounts attributable to noncontrolling interests (Note 18).

Investment and Lending Commitments

What changed 10-Q

Item 1. Financial Statements