What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2023-11-03 compared with 2023-08-04 · 299 added, 173 removed, 376 unchanged (56% of the section changed)

7 unchanged sentences

Our diverse global investor base includes public and private pensions, sovereign wealth funds, asset managers, insurance companies, and endowments.

At June 30, 2023, we had $72 billion of AUM, composed of assets managed on behalf of our limited partners and our shareholders.

At September 30, 2023, we had $75 billion of assets under management ("AUM"), composed of assets managed on behalf of limited partners/investors of investment vehicles we manage, and separately, our shareholders.

We are headquartered in Boca Raton, Florida, with key offices in New York, Los Angeles, London, Luxembourg and Singapore, and have approximately 300 employees.

1 unchanged sentence

We conduct substantially all of our activities and hold substantially all of our assets and liabilities through our Operating Company.

At June 30, 2023, we owned 93% of the Operating Company as its sole managing member.

At September 30, 2023, we owned 93% of the Operating Company as its sole managing member.

The Company conducts its business through two reportable segments:

5 unchanged sentences

The Company earns management fees based upon the assets or capital managed in investment vehicles, and may earn incentive fees and carried interest based upon the performance of such investment vehicles, subject to achievement of minimum return hurdles.

• Operating— This segment is composed of balance sheet equity interests in digital infrastructure and real estate co-investment 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, an edge colocation data center business (DBRG ownership of 11% at June 30, 2023 and December 31, 2022);

and Vantage SDC, a stabilized hyperscale data center business (DBRG ownership of 13% at June 30, 2023 and December 31, 2022).

DataBank and Vantage SDC are portfolio companies managed by the Company under its Investment Management segment with respect to equity interests owned by third party capital.

The amount of incentive fees and carried interest recognized, a portion of which is allocated to employees and former employees, may be highly variable from period to period.

Through the end of May 2022, earnings from the Investment Management segment were attributed 31.5% to Wafra, a private investment firm, prior to the Company's redemption of Wafra's interest in the investment management business.

• Operating— This segment is composed of balance sheet equity interests in digital infrastructure portfolio companies, which generally earn rental income from providing use of digital asset space and/or capacity through leases, services and other agreements.

The Company owned interests in two portfolio companies:

Vantage SDC, a stabilized hyperscale data center business (DBRG ownership of 13% at September 30, 2023 and December 31, 2022), and DataBank, an edge colocation data center business (DBRG ownership of 11% at December 31, 2022 and through the final close of the recapitalization and deconsolidation in mid-September 2023;

thereafter, the Company's remaining 9.87% interest in DataBank is presented within Corporate and Other) (Note 10 to the consolidated financial statements).

DataBank and Vantage SDC are portfolio companies managed by the Company under its Investment Management segment with respect to equity interests funded through third party capital.

Our Investment Management Platform

10 unchanged sentences

Investment Management

• We have raised approximately $3.4 billion of capital to-date in 2023, primarily for a new digital infrastructure fund (which is not yet fee-earning) and syndications through various co-investment vehicles.

• We have raised approximately $5.4 billion of capital to-date in 2023, primarily $2.2 billion for DigitalBridge Partners III, LP ("DBP III"), the third series in our flagship value-add strategy, and syndications through various co-investment vehicles.

DBP III will begin accruing fee income following its first closing on November 1, 2023.

• In February 2023, we completed our previously announced acquisition of InfraBridge for $314 million cash consideration (net of cash assumed), subject to customary post-closing working capital adjustments, plus potential contingent payments based upon future fundraising for InfraBridge's third and fourth flagship funds under the Global Infrastructure Fund ("GIF") series.

3 unchanged sentences

The acquisition added $5.1 billion in fee earning equity under management ("FEEUM"), comprising primarily GIF II and GIF I investment funds.

• The recapitalization of DataBank, which commenced in August 2022 and completed in September 2023, resulted in the sale of a portion of DataBank's equity interest to new investors totaling $2.2 billion.

The Company's ownership interest in DataBank decreased from 21.8% to 11.0% as of November 2022 and decreased further to 9.87% in September 2023.

The Company received its share of net proceeds from the sale totaling $475 million ($425 million in 2022 and $49 million in 2023), including its share of carried interest, net of allocation to employees and former employees, totaling $48 million ($20 million in 2022 and $28 million in 2023).

The recapitalization implied a pre-transaction net equity value of our ownership in DataBank of $905 million, reflecting a 2.0x multiple of invested capital since our initial investment in DataBank in December 2019.

The incremental third party capital raised through the recapitalization also translated into additional fee income in our Investment Management segment.

The completion of the recapitalization on September 14, 2023 resulted in a deconsolidation of DataBank.

The deconsolidation deleveraged the Company's balance sheet by removing $4.6 billion of assets, $3.0 billion of liabilities and $1.4 billion of noncontrolling interests, representing DataBank's balance sheet as of mid-September 2023.

In connection with the deconsolidation, the Company realized a $3.7 million gain from the sale of its equity interest in the final closing of the recapitalization, and remeasured its remaining 9.87% equity interest in DataBank at a fair value of $434 million which resulted in an unrealized gain of $275 million.

The total gain of $279 million, along with the Company's remaining equity interest in DataBank, are presented within Corporate and Other.

In 2023, DataBank's operating results were included in the Company's Operating segment through the date of completion of the recapitalization on September 14, 2023.

Following deconsolidation on that date, the Company's consolidated financial statements no longer include the operating results and assets and liabilities of DataBank in their entirety and instead reflect only the Company’s interest in DataBank.

The Company's share of future changes in the fair value of DataBank will be reflected in principal investment income within Corporate and Other, consistent with the accounting treatment of the Company's general partner interests in other sponsored funds.

• Our investment in BrightSpire Capital, Inc.

2 unchanged sentences

This resulted from foreclosure of certain assets within the Wellness Infrastructure portfolio by its mezzanine lender.

Operating Metrics

Assets Under Management and Fee Earning Equity Under Management

Below is a summary of our AUM and FEEUM.

Type Products Description June 30, 2023 December 31, 2022

We present below our AUM and FEEUM, which are key operating metrics in the alternative investment management industry.

Our calculation of AUM and FEEUM may differ from other investment managers, and as a result, may not be directly comparable to similar measures presented by other investment managers.

Assets Under Management

AUM represents the total capital for which we provide investment management services.

AUM is generally composed of (a) third party capital managed by the Company and its affiliates, including capital that is not yet fee earning, or not subject to fees and/or carried interest;

and (b) assets invested using the Company's own balance sheet capital and managed on behalf of the Company's shareholders (composed of the Company's fund investments as GP affiliate, warehoused investments, and the Company's interest in portfolio companies consolidated in the Operating segment).

Third party AUM is based upon invested capital as of the reporting date, including capital funded through third party financing, and committed capital for funds in their commitment stage.

Balance sheet AUM is based upon the carrying value of the Company's balance sheet investments as of the reporting date (on an undepreciated basis as it relates to the Company's interest in portfolio companies consolidated in the Operating segment).

Fee Earning Equity Under Management

FEEUM represents the total capital managed by the Company and its affiliates which earns management fees and/or incentive fees or carried interest.

FEEUM is generally based upon committed capital, invested capital, net asset value ("NAV") or gross asset value ("GAV"), pursuant to the terms of each underlying investment management agreement.

Presented below are total AUM and FEEUM by product:

(In billions) September 30, 2023 December 31, 2022

Assets Under Management

$ 74.6 $ 52.8

Fee Earning Equity Under Management

Institutional Funds DBP infrastructure equity Earns management fees and potential for carried interest or incentive fees $ 11.3 $ 11.2

DBP infrastructure equity $ 11.3 $ 11.2

InfraBridge Global Infrastructure 5.1 —

Core Equity, DigitalBridge Credit and Liquid Strategies 2.4 2.0

Other Investment Vehicles DigitalBridge co-invest vehicles Earns management fees, business service fees from portfolio companies, and potential for carried interest 8.0 6.5

Digital infrastructure held by portfolio companies 2.3 2.5

Core Equity, Credit and Liquid Strategies 2.6 2.0

Co-invest vehicles 8.5 6.5

Separately capitalized portfolio companies 2.4 2.5

$ 29.9 $ 22.2

(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.

Third party AUM is based upon the cost basis of managed investments as reported by each underlying vehicle as of the reporting date and may include uncalled capital commitments.

Balance sheet AUM is based upon the undepreciated carrying value of the Company's balance sheet investments as of the reporting date.

The Company's calculation of AUM may differ from other investment managers, and as a result, may not be comparable to similar measures presented by other investment managers.

(2) FEEUM is equity for which the Company and its affiliates provide investment management services and derive management fees and/or incentives.

FEEUM generally represents the basis used to derive fees, which may be based upon invested equity, stockholders’ equity, or fair value, pursuant to the terms of each underlying investment management agreement.

The Company's calculation of FEEUM may differ from other investment managers, and as a result, may not be comparable to similar measures presented by other investment managers.

• FEEUM increased by $6.9 billion or 31% to $29.1 billion at June 30, 2023, driven by the addition of $5.1 billion of InfraBridge FEEUM, new capital raised, primarily for core equity and syndications through co-investment vehicles, that have begun to accrue fee income.

The following table summarizes changes in FEEUM:

Nine Months Ended

September 30, 2023

(In billions)

Fee Earning Equity Under Management

Balance at January 1 $ 22.2

Market activity and other (3)

Balance at September 30 $ 29.9

(1) Inflows include closing on new capital raised where fees are earned on committed capital, deployment of capital where fees are earned on invested capital, new subscriptions where fees are based on NAV, other changes in invested capital such as the effect of recapitalization and syndication, and FEEUM from acquired investment vehicles ($5.1 billion from InfraBridge in 2023).

Excludes capital raised in 2023 for which fees have not been activated totaling $1.5 billion.

(2) Outflows include redemptions and withdrawals in Liquid Strategies, realizations where fees are based on invested capital, other changes in invested capital such as the effect of recapitalization and syndication, change in fee basis from committed to invested capital and expiration of fee paying capital.

(3) Market activity and other include changes in investment value based on NAV or GAV, and the effect of foreign exchange rates.

FEEUM increased by $7.7 billion or 35% to $29.9 billion at September 30, 2023, driven by the addition of $5.1 billion of InfraBridge FEEUM, and new capital raised, primarily through co-investment vehicles.

The subsequent first closing of DBP III in November 2023 further contributed an additional $2.2 billion increase to FEEUM.

Fund Performance Metrics

Certain performance metrics for our key investment funds from inception through September 30, 2023 are presented in the table below.

Excluded are funds with less than one year of performance history as of September 30, 2023, funds and separately managed accounts in the liquid strategy, co-investment vehicles and separately capitalized portfolio companies.

The historical performance of these funds is not indicative of their future performance nor indicative of the performance of our other existing investment vehicles or of any of our future funds.

An investment in DigitalBridge Group, Inc.

is not an investment in any of our funds and these fund performance metrics are not indicative of the performance of DigitalBridge Group, Inc.

($ in millions) Inception date (2)

Commitments Invested Capital (3)

Available Capital (4)

Investment Value MOIC

Total Unfunded Unrealized Realized (5)

DigitalBridge Partners, LP Mar-2018 $4,059 $494 $4,584 $494 $5,991 $1,139 $7,130 1.6x 1.4x

DigitalBridge Partners II, LP Nov-2020 $8,286 $974 $7,681 $979 $8,340 $662 $9,002 1.2x 1.1x

Global Infrastructure Fund I, LP Mar-2015 $1,411 $406 $1,479 $406 $1,125 $1,055 $2,180 1.5x 1.3x

Global Infrastructure Fund II, LP Jan-2018 $3,382 $106 $2,993 $106 $2,773 $64 $2,837 0.9x 0.9x

(1) Listed herein are main fund vehicles.

Performance metrics are presented in aggregate for main fund vehicle, its parallel vehicles and alternative investment vehicles.

(2) First close date of the fund.

InfraBridge funds were acquired in Feb-2023.

(3) Invested capital represents the original cost and subsequent fundings to investments.

Invested capital includes financing costs and investment related expenses which are capitalized.

With respect to Infrabridge funds, such costs are expensed during the period and excluded from their determination of invested capital.

(4) Available capital includes recallable capital.

(5) Realized value represents proceeds from dispositions that have closed and all earnings from both realized and unrealized investments, including interest, dividend and ticking fees.

(6) Total value is the sum of unrealized fair value and realized value of investments.

(7) Total investment gross multiple of invested capital (MOIC) is calculated as unrealized fair value and realized value of investments divided by invested capital, without giving effect to allocation of expenses and general partner carried interest.

Excludes capital attributable to the general partner, general partner affiliate and any other capital that is not subject to fees and/or carried interest.

Gross MOIC is calculated at the fund level and does not reflect gross MOIC at the individual investor level.

(8) Total investment net MOIC is calculated as unrealized fair value and realized value of investments divided by invested capital, after giving effect to allocation of management fee expense, other fund expenses and general partner carried interest (both distributed and unrealized carried interest).

Excludes capital attributable to the general partner, general partner affiliate and any other capital that is not subject to fees and/or carried interest.

Net MOIC is calculated at the fund level and does not reflect net MOIC at the individual investor level.

Results of Operations

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

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

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

(In thousands) 2023 2022 Change 2023 2022 Change

15 unchanged sentences

Total revenues increased $47.2 million or 11% in the quarter-to-date comparison and $72.9 million or 7% in the year-to-date comparison.

• Investment Management— Revenues were 5.6% lower at $149.1 million in the quarter-to-date comparison and 9% lower at $155.9 million in the year-to-date comparison.

The decrease in both periods was due to significant variability in unrealized carried interest.

In 2023, gross unrealized carried interest (before management allocation) was $31.5 million lower at $79.3 million in the quarter-to-date comparison and $55.2 million lower at $24.5 million in the year-to-date comparison, with a larger reversal of unrealized carried interest in the first quarter, attributed to DBP II.

Excluding carried interest, revenues would have increased $22.7 million or 48% in the quarter-to-date comparison and $39.4 million or 43% in the year-to-date comparison.

Fee income was $21.5 million higher at $66.6 million in the quarter-to-date comparison and $38.0 million higher at $126.7 million in the year-to-date comparison, attributable largely to the InfraBridge funds acquired in February 2023 and additional capital raised since July 2022 that have started accruing income.

• Operating— Revenues were higher in 2023, resulting from data center acquisitions and additional lease-up of expanded capacity in Vantage SDC during 2022.

• Corporate and Other— Revenues represent largely our share of earnings from our general partner affiliate investments in the DBP and InfraBridge funds and income from warehoused investments, if any.

Revenues were higher in 2023 due to fair value increases in fund investments, partially offset by warehoused credit investments that were transferred to our new credit fund in the second half of 2022.

• Investment Management— Revenues were $71.0 million or 42.6% higher at $237.7 million in the quarter-to-date comparison, and $55.2 million or 16% higher at $393.6 million in the year-to-date comparison, attributed to fee income and gross carried interest (before management allocation).

(a) Fee income contributed:

• $24.0 million of the increase at $66.1 million in the quarter-to-date comparison;

• $62.0 million of the increase at $192.8 million in the year-to-date comparison.

The increase in fee income is attributed to additional capital raised since October 2022 that has started accruing income for both periods under comparison, and InfraBridge funds acquired in February 2023.

(b) Gross carried interest (before management allocation) was:

• $47.2 million higher in the quarter-to-date comparison at $168.9 million in 2023 from $121.7 million in 2022 (of which distributions were $27.9 million in 2023 and $123.5 million in 2022);

• $8.0 million lower in the year-to-date comparison at $193.4 million in 2023 from $201.4 million in 2022 (of which distributions were $28.4 million in 2023 and $123.5 million in 2022).

Distributed carried interest arose from the first liquidation of investment by DBP I in 2022 and the DataBank recapitalization in 2022 and 2023.

In terms of unrealized carried interest, the higher amounts in 2023 was driven by DBP funds and a DataBank investment that was not subject to recapitalization.

In comparison, 2022 included a reversal of unrealized carried interest for some of these funds.

• Operating— Revenues in the quarter-to-date comparison decreased due to the deconsolidation of DataBank in mid-September 2023.

However, in the year-to-date comparison, the effect of deconsolidation was more than offset by higher revenues contributed by data center acquisitions in the DataBank portfolio and additional lease-up of expanded capacity in Vantage SDC during 2022.

• Corporate and Other— Revenues represent largely our share of earnings from our general partner affiliate investments in the DBP and InfraBridge funds, and additionally, income from warehoused investments in 2022.

Revenues were lower in 2023 due to the sale of warehoused investments to our sponsored funds and to a third party sponsored CLO in the second half of 2022, partially offset by fair value increases in fund investments.

Income (Loss) from continuing operations attributable to DigitalBridge Group, Inc.

Loss from continuing operations attributable to DBRG was $12.7 million or 72% lower in the quarter-to-date comparison but increased $6.2 million or 3.4% in the year-to-date comparison.

• Investment Management— In 2023, net income was close to breakeven in the quarter-to-date period, a $21.0 million decrease, while the year-to-date period was a net loss of $1.9 million compared to a net income of $13.7 million in 2022.

The lower 2023 results can be attributed to lower carried interest, including a reversal of net carried interest in the first quarter, placement fees incurred for a future fund that is not yet fee earning, and higher compensation and administrative expenses attributed to the investment management business.

Income from continuing operations attributable to DBRG was $278.8 million in 2023 and $25.3 million in 2022 in the quarter-to-date period, and $89.7 million in 2023 with a loss of $157.6 million in 2022 in the year-to-date period.

• Investment Management— In 2023, net income increased $28.2 million to $52.4 million in the quarter-to-date comparison and $12.6 million to $50.5 million in the year-to-date comparison.

The higher 2023 results were driven by an increase in carried interest of $31.6 million in the quarter-to-date period and $21.4 million in the year-to-date period, representing the OP's share, partially offset by higher operating costs attributed to the Investment Management segment in 2023 in line with the growth in business.

Additionally, the higher net income in the year-to-date comparison was partially offset by $3.7 million of placement fees and $3.5 million of higher transaction costs, primarily for the InfraBridge acquisition in 2023.

The amounts quoted herein are prior to allocating 7% of income (loss) to OP noncontrolling interest to arrive at amounts attributable to DBRG.

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

• Operating— The Operating segment generally records a net loss, taking into account the effects of real estate depreciation and intangible asset amortization.

Our share of net loss reflects a 13% ownership in Vantage SDC and our interest in DataBank, which decreased from 22% as of June 2022 to 11% as of June 2023.

• Corporate and Other— Net loss generally reflects corporate level costs that have not been attributed to our reportable segments, primarily interest expense on senior notes and compensation and administrative expenses.

Also included are the effects of fair value changes on investments carried at fair value, including our share of earnings from our fund investments.

Net income in the 2023 quarter-to-date period can be attributed to fair value increases in fund investments.

In the year-to-date periods, the significant net loss reflect large non-cash charges:

(i) in 2023, a $133 million fair value write-down on an unsecured promissory note from the 2022 sale of our Wellness Infrastructure business;

and (ii) in 2022, a $133 million debt extinguishment loss in connection with an early exchange of our 5.75% exchangeable notes (Note 8 to the consolidated financial statements).

Our share of net loss reflects a 13% ownership in Vantage SDC and our interest in DataBank, which in 2022, decreased from 22% to 13% as of September 2022, and was at 11% in 2023 prior to deconsolidation in September 2023.

• Corporate and Other— Both periods in 2023 reflected a $278.7 million gain recognized in connection with the recapitalization and deconsolidation of DataBank in September 2023, of which $3.7 million was realized and $275 million unrealized as of September 30, 2023 (Note 10 to the consolidated financial statements).

Additionally, included within the 2023 year-to-date period was a $133 million write-down of an unsecured promissory note related to the sale of our Wellness Infrastructure business in February 2022 (Note 11 to the consolidated financial statements).

In comparison, the 2022 year-to-date period included a $133 million debt extinguishment loss in connection with an early exchange of our 5.75% exchangeable notes (Note 8 to the consolidated financial statements).

The amounts quoted herein are prior to allocating 7% of income (loss) to OP noncontrolling interest to arrive at amounts attributable to DBRG.

A more detailed discussion of key components of revenue and income (loss) from continuing operations follows.

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

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

(In thousands) 2023 2022 Change 2023 2022 Change

1 unchanged sentence

Carried interest allocation 168,891 121,698 47,193 193,389 201,398 (8,009)

Principal investment income (loss) 30,409 16,444 13,965 33,971 22,898 11,073

Principal investment income 17,943 11,531 6,412 51,914 34,429 17,485

Property operating income 214,058 244,336 (30,278) 679,738 681,098 (1,360)

23 unchanged sentences

276,473 (49,088) 325,561 70,013 (317,207) 387,220

Preferred stock repurchases/redemptions (927) — (927) (927) — (927)

Preferred stock repurchases — (1,098) 1,098 (927) (1,098) 171

Preferred stock dividends 14,645 15,283 (638) 43,996 46,801 (2,805)

Net income (loss) attributable to common stockholders $ 261,828 $ (63,273) 325,101 $ 26,944 $ (362,910) 389,854

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

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

(In thousands) 2023 2022 Change 2023 2022 Change

7 unchanged sentences

Fee income increased $24.0 million or 58% in the quarter-to-date comparison and $61.7 million or 48% in the year-to-date comparison.

The increase was driven by management fees from InfraBridge beginning February 2023 and from capital raised since July 2022, including the DataBank recapitalization, our new core equity fund and co-investment vehicles.

Additionally, incentive fees in 2023 are attributed to our liquid securities strategy.

The increase was driven by management fees from InfraBridge beginning February 2023, adding $14.2 million in the quarter-to-date period and $40.8 million in the year-to-date period, as well as from capital raised since October 2022 where fees have been activated, primarily from co-investment vehicles, our new core equity fund, and the DataBank recapitalization.

Additionally, incentive fees in 2023 were attributed to our liquid securities strategy.

Carried Interest Allocation

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

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

(In thousands) 2023 2022 Change 2023 2022 Change

Carried interest allocation

Realized $ — $ — $ — $ 476 $ — $ 476

Distributed $ 27,927 $ 123,498 $ (95,571) $ 28,403 $ 123,498 $ (95,095)

Unrealized 140,964 (1,800) 142,764 164,986 77,900 87,086

1 unchanged sentence

Carried interest allocation represents gross carried interest from our general partner interests in sponsored investment vehicles prior to allocations to management and Wafra.

Unrealized 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.

Gross unrealized carried interest accrual was lower in 2023 in both periods under comparison.

This is because the second quarter of 2022 had included a significant fair value increase on an investment in DBP I that was realized shortly thereafter, while in the first quarter of 2023, there was a higher reversal of carried interest for DBP II.

As DBP II is still in the early stage of its lifecycle, the carried interest reversal is a function of continuing accrual of preferred returns over time at a higher rate than fair value increases on its underlying investments.

Principal Investment Income (Loss)

Principal investment income increased $14.0 million in the quarter-to-date comparison and $11.1 million in the year-to-date comparison.

The increase represents higher earnings from equity interests in our sponsored funds, driven by unrealized fair value increases on the underlying fund investments, primarily the InfraBridge funds.

Distributed carried interest arose from the DataBank recapitalization in the third quarter of 2023 ($27.9 million) and 2022 ($72.3 million), and additionally, the first liquidation of investment by DBP I in the third quarter of 2022 ($51.2 million).

In terms of unrealized carried interest, the higher amounts in 2023 was driven by DBP funds and a DataBank investment that was not subject to recapitalization.

In comparison, 2022 included a reversal of unrealized carried interest for some of these funds.

Principal Investment Income

Principal investment income represents the Company's proportionate share of net income (loss) from investments in its sponsored investment vehicles, which includes unrealized gain (loss) from changes in fair value of the underlying fund investments.

Principal investment income increased $6.4 million in the quarter-to-date comparison to $17.9 million and $17.5 million in the year-to-date comparison to $51.9 million.

The increase was driven by unrealized fair value appreciation on the underlying fund investments, primarily the DBP funds, and additionally, in the year-to-date comparison, the InfraBridge funds.

Property Operating Income and Expense

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

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

(In thousands) 2023 2022 Change 2023 2022 Change

12 unchanged sentences

Operating Segment

Property operating income and expenses were higher in 2023, reflecting operating results from additional acquisitions, including DataBank's acquisition of four data centers in March 2022, and within the Vantage SDC portfolio, additional lease-up of expanded capacity and existing inventory throughout 2022.

This was partially offset by higher lease termination fees in the second quarter of 2022 from the Vantage SDC portfolio.

At June 30, 2023, the Operating segment portfolio is composed of 74 data centers in the U.S., three in Canada, and one in the U.K., with five data centers in France held for disposition effective April 2023.

June 30, 2023 December 31, 2022

Property operating income and expenses were lower in the quarter-to-date comparison, reflecting the effects of deconsolidating DataBank in mid-September 2023.

Absent the deconsolidation and assuming a full month of activity in September 2023 for DataBank, total property operating income and expenses in the Operating segment would have increased approximately 8% and 7%, respectively, in the quarter-to-date comparison.

In the year-to-date comparison, property operating income and expenses were higher as a result of additional acquisitions throughout 2022, including DataBank's acquisition of four data centers in March 2022, and within the Vantage SDC portfolio, additional lease-up of expanded capacity and existing inventory.

This increase was partially offset by higher lease termination fees of $5.8 million quarter-to-date and $5.0 million year-to-date recognized in property operating income, primarily from the Vantage SDC portfolio, and the effects of deconsolidating DataBank in mid-September 2023.

At September 30, 2023, the Operating segment portfolio was composed of 10 data centers in the U.S.

and three in Canada, following the deconsolidation of DataBank.

September 30, 2023 December 31, 2022

Operating segment (1)

6 unchanged sentences

% Utilization Rate (% Leased)

(1) One lease expired and was not renewed in the first quarter of 2023.

A leasehold data center was acquired in May 2023.

On a same store basis, property operating income and expense also increased in 2023, driven by the Vantage SDC portfolio, attributable to increase in leased square footage from lease-up of expanded capacity and existing inventory.

(1) Amounts at September 30, 2023 reflect remaining operations in the Operating segment after deconsolidation of DataBank.

This represents property operating income and expense from a tower portfolio, acquired in June 2022 as a warehoused investment and transferred to our core equity fund in December 2022.

Other income increased $3.9 million in the quarter-to-date comparison and $3.1 million in the year-to-date comparison.

This can be attributed to higher interest income from our subordinated notes in a collateralized loan obligation ("CLO") and money market deposits, and dividend income from our consolidated credit fund.

However, these amounts were partially offset by interest income from credit investments in 2022, in particular warehoused investments that were transferred to our new credit fund during the second half of 2022.

Other income decreased $0.1 million in the quarter-to-date comparison to $10.9 million, but increased $3.0 million in the year-to-date comparison to $37.0 million.

Key drivers are higher interest income from money market deposits and beginning in 2023, from our subordinated notes in a collateralized loan obligation (increase totaling $3.5 million quarter-to-date and $16.6 million year-to-date) and dividend income from our consolidated credit fund (increased $2.0 million quarter-to-date and $5.5 million year-to-date).

However, these amounts were partially offset by interest income in 2022 from warehoused investments that were

transferred to our new credit fund during the second half of 2022 and amounts previously accrued on our Wellness Infrastructure promissory note that was written off in the first quarter of 2023 (totaling $8.3 million quarter-to-date and $20.2 million year-to-date in 2022).

Interest Expense

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

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

(In thousands) 2023 2022 Change 2023 2022 Change

3 unchanged sentences

$ 49,894 $ 53,032 (3,138) $ 173,112 $ 143,450 29,662

Corporate Debt— Interest expense decreased $2.5 million in the quarter-to-date comparison and $3.0 million in the year-to-date comparison as we continue to extinguish higher cost corporate debt.

The decrease is attributed to repayment of our 5.00% convertible notes in April 2023 and additionally, in the year-to-date period, early exchange of our 5.75% exchangeable notes for common stock in March 2022.

Non-Recourse Investment-Level Debt— The increase of $12.1 million in the quarter-to-date comparison and $35.8 million in the year-to-date comparison was driven by:

(i) write-off of unamortized deferred financing costs on DataBank's refinanced debt;

(ii) higher outstanding debt balance in the Operating segment;

and (iii) higher interest rates on Vantage SDC's new securitization and on DataBank's variable rate debt.

These were partially offset by outstanding debt balance in 2022 in connection with the financing of warehoused tower assets and credit investments, all of which were repaid in the second half of 2022.

Corporate Debt— Interest expense decreased $3.2 million in the quarter-to-date comparison and $6.2 million in the year-to-date comparison driven by repayment of our 5.00% convertible notes in April 2023 (decreased $2.7 million quarter-to-date and $5.0 million year-to-date) and to a lesser extent, lower interest expense on our securitized debt with a lower outstanding balance on the VFN in 2023 (decreased $0.5 million for both quarter-to-date and year-to-date).

Additionally, in the year-to-date period, the early exchange of our 5.75% exchangeable notes for common stock in March 2022 contributed a $0.7 million decrease in interest expense.

Non-Recourse Investment-Level Debt— Interest expense was consistent in the quarter-to-date comparison but increased $35.8 million in the year-to-date comparison.

Interest expense on investment-level debt in the Operating segment increased $4.6 million quarter-to-date and $42.5 million year-to-date, reflecting higher outstanding debt balance and higher interest rates on new debt in 2023, partially offset by the deconsolidation of DataBank in mid-September 2023.

Included in the year-to-date increase is also the net effect of writing off unamortized deferred financing costs and debt premium on refinanced debt in the first half of 2023 totaling $13.8 million.

The increase in interest expense in the Operating segment was partially offset by interest expense on outstanding debt balance in 2022 in connection with the financing of warehoused tower assets and credit investments (totaling $4.3 million quarter-to-date and $6.7 million year-to-date), all of which were repaid in the second half of 2022, and additionally in the quarter-to-date period, a decrease in interest expense ($0.3 million) on lower outstanding debt balance of our consolidated credit fund.

Investment Expense

Investment expense decreased $1.9 million in the quarter-to-date comparison and $5.7 million in the year-to-date comparison.

In 2022, there was higher third party costs associated with the day-to-day management of the Vantage SDC portfolio and transition services for DataBank's acquisition of zColo which ended in the second quarter of 2022.

Investment expense decreased $3.8 million in the quarter-to-date comparison to $5.7 million and $9.5 million in the year-to-date comparison to $16.7 million.

2022 had included additional expenses, primarily:

(i) third party costs attributed to our warehoused tower assets that were transferred to our core equity fund in December 2022 ($1.2 million quarter-to-date and $1.7 million year-to-date in 2022);

(ii) transition services that ended in the second quarter of 2022 related to DataBank's acquisition of zColo ($1.0 million year-to-date in 2022);

(iii) higher compensatory expense in 2022 in connection with equity awards granted to the management team of Vantage who perform the day-to-day operations of Vantage SDC ($1.9 million higher year-to-date 2022);

and (iv) higher costs incurred in 2022 that are reimbursable by our managed investment vehicles.

Transaction-Related Costs

Transaction costs in all periods were driven by the InfraBridge acquisition, accrued beginning the second quarter of 2022, with a majority of the costs incurred at closing in February 2023.

In the quarter-to-date comparison, transaction-related costs were $3.0 million lower at $0.9 million, largely due to costs incurred in connection with unconsummated investments in 2022.

In the year-to-date comparison, transaction-related costs were $3.7 million higher at $10.5 million, driven by the InfraBridge acquisition.

Placement Fees

Placement fees was $3.7 million in the second quarter of 2023, incurred in connection with fundraising for our new digital infrastructure fund and co-investment vehicles.

Placement fees of $3.7 million in 2023 were incurred in connection with fundraising for DBP III and co-investment vehicles.

Depreciation and Amortization

Depreciation and amortization expense decreased in the quarter-to-date comparison but increased in the year-to-date comparison.

2023 included additional expense related primarily to InfraBridge and DataBank acquisitions and data center improvements at DataBank.

In contrast, 2022 had included higher accelerated amortization of lease intangibles from lease terminations, and additional expense in connection with short-term leases in the colocation data center business prior to their expiration and warehoused tower assets acquired in June 2022 that were transferred to our core equity fund in December 2022.

The incremental expense in 2023 was lower in the quarter-to-date comparison, but higher in the year-to-date comparison.

This is because the year-to-date period in 2022 included only a partial period of expense related to the DataBank portfolio acquired in March 2022.

Depreciation and amortization expense decreased $17.6 million in the quarter-to-date comparison and $10.4 million in the year-to-date comparison.

Depreciation and amortization expense in the Operating segment decreased $11.9 million quarter-to-date and $7.8 million year-to-date, driven by the combined effects of deconsolidating DataBank in mid-September 2023, and higher amortization of lease intangibles from lease terminations in 2022 and expiration of short term leases at DataBank, partially offset by additional expenses related to data center acquisitions and improvements placed in service.

Additionally, the sale of warehoused tower assets acquired in June 2022 to our core equity fund in December 2022 also contributed to a decrease in depreciation and amortization expenses ($8.4 million quarter-to-date and

$11.3 million year-to-date).

These decreases were partially offset by amortization expense on InfraBridge intangible assets acquired in February 2023 ($4.1 million quarter-to-date and $11.1 million year-to-date).

Compensation Expense

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

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

(In thousands) 2023 2022 Change 2023 2022 Change

9 unchanged sentences

Cash and equity-based compensation— Excluding the Operating segment, compensation expense increased $18.1 million in the quarter-to-date comparison and $44.0 million in the year-to-date comparison.

Equity-based compensation expense was higher in 2023, driven by a performance-based award that met its target in 2023 and shortened vesting periods for previously modified awards.

There was also an increase in cash compensation in 2023, attributed largely to InfraBridge and higher severance and retention costs, partially offset by discontinuance of an incentive program in 2023.

In the Operating segment, compensation expense also increased in both periods, attributed to new stock awards and higher headcount at DataBank.

Incentive and carried interest compensation allocation— Consistent with lower carried interest in 2023, the associated compensation expense was similarly lower in the quarter-to-date comparison.

The 2023 year-to-date period, however, reflected a reversal of compensation expense.

This is because management allocation of carried interest is reflected entirely as compensation expense for DBP II, which recorded a reversal of carried interest in the first quarter, but such allocation is split between compensation expense and net income attributable to noncontrolling interests for DBP I and its associated co-investment vehicles (Note 16 to the consolidated financial statements), which had positive carried interest.

Equity-based compensation expense was higher in 2023, driven by performance-based awards that met their target in 2023 (increased $1.9 million quarter-to-date and $14.7 million year-to-date), awards granted in 2023 with shortened vesting periods (increased $3.1 million in both quarter-to-date and year-to-date), and the effect of award modifications in the fourth quarter of 2022 (increased $3.6 million year-to-date), partially offset by full vesting in 2022 of an LTIP grant and awards in connection with sale of the Wellness Infrastructure business in February 2022 (decrease totaling $3.4 million year-to-date).

There was also an increase in cash compensation in 2023, attributed largely to InfraBridge ($7.2 million quarter-to-date and $19.3 million year-to-date, of which $1.8 million and $4.8 million, respectively, represent deferred bonus amounts funded by the seller in the InfraBridge acquisition) and higher severance and retention costs.

In the Operating segment, the third quarter of 2022 had included $10.1 million of equity-based compensation due to an accelerated vesting of profits interest units issued by DataBank that was triggered by the first closing of the DataBank recapitalization.

Excluding the acceleration, compensation expense increased $1.1 million in the quarter-to-date comparison and $14.6 million in the year-to-date comparison.

The higher compensation expense in 2023 can be attributed to new stock awards and higher headcount at DataBank.

In the quarter-to-date comparison, the increase was partially offset by the effect of deconsolidating DataBank in mid-September 2023.

Incentive and carried interest compensation allocation— The third quarter of 2022 had included $57.3 million of carried interest compensation expense that was fully recognized in connection with the first closing of the DataBank recapitalization.

No further compensation expense was recognized in subsequent closings of the DataBank recapitalization.

Excluding the expense associated with the recapitalization, incentive and carried interest compensation increased $49.5 million in the quarter-to-date comparison and $16.9 million in the year-to-date comparison, driven by carried interest from the DBP funds quarter-to-date and in both periods under comparison, carried interest from the DataBank investment that was not subject to recapitalization.

Administrative Expenses

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

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

(In thousands) 2023 2022 Change 2023 2022 Change

3 unchanged sentences

$ 24,077 $ 29,909 (5,832) $ 76,346 $ 84,147 (7,801)

Total administrative expenses were largely consistent in the quarter-to-date comparison and decreased $2.0 million in the year-to-date comparison, driven by lower legal costs.

Total administrative expenses decreased $5.8 million in the quarter-to-date comparison and $7.8 million in the year-to-date comparison, driven by lower legal costs.

Additionally, in the year-to-date period, the decrease in legal costs ($17.3 million) were partially offset by increases in other administrative costs such as other third-party professional services and travel-related expenses (totaling $5.9 million).

Other Gain (Loss), Net

Other loss was lower in both periods, decreasing $34.7 million to $11.5 million in the quarter-to-date comparison and $41.9 million to $154.3 million in the year-to-date comparison.

The higher net loss in 2022 was driven by decreases in fair value of credit investments and marketable equity securities, net of offsetting fair value changes on short positions.

These were largely credit investments previously warehoused and no longer held on the balance sheet in 2023 and equity securities held by our consolidated liquid funds.

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

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

In comparison, the net loss in 2023 can be attributed mainly to fair value decrease on a warehoused equity investment and increase in the warrant liability fair value, with the year-to-date period including a $133.3 million write-down in value in March 2023 on an unsecured promissory note from the 2022 sale of our Wellness Infrastructure business

In the quarter-to-date comparison, other gain was $254.8 million in 2023 and $25.9 million in 2022.

The year-to-date comparison had other gain of $100.5 million in 2023 and other loss of $170.2 million in 2022.

Both periods under comparison had the following significant items:

• In September 2023, $278.7 million of gain recognized in connection with the deconsolidation of DataBank, of which $3.7 million was realized and $275.0 million unrealized (Note 10 to the consolidated financial statements);

• In March 2023, $133 million fair value write-down on an unsecured promissory note from the 2022 sale of our Wellness Infrastructure business;

• In March 2022, $133 million debt extinguishment loss in connection with an early exchange of our 5.75% exchangeable notes.

Excluding these significant one-off events, quarter-to-date period would have recorded a loss of $23.9 million in 2023 compared to a gain of $26.8 million in 2022, and year-to-date period would have recorded losses of $44.9 million in 2023 and $36.2 million in 2022.

Other loss of $23.9 million in the third quarter of 2023 reflected primarily an increase in the liability fair value of warrants issued to Wafra of $12.4 million and net loss on marketable equity securities of $9.7 million, including those held by our consolidated liquid funds.

In contrast, other gain of $26.8 million in the third quarter of 2022 was driven by a decrease in the warrant liability fair value of $32.4 million and net gain on non-designated derivatives of $9.9 million in connection with our warehoused investments, partially offset by net loss of $8.9 million on marketable equity securities held largely by our consolidated liquid funds, and additionally, unrealized foreign exchange losses.

In the year-to-date period, other loss increased $8.7 million to $44.9 million in 2023, driven by an increase in the warrant liability fair value of $81.1 million and net write-down in value of warehoused investments of $13.2 million, largely offset by net gain of $63.4 million on marketable equity securities, including those held by our consolidated liquid funds, net gains on non-designated derivatives in 2022 of $16.0 million in connection with our warehoused investments, and additionally, decrease in unrealized foreign exchange losses.

Income Tax Benefit (Expense)

Income tax expense was recorded in 2023 of $3.3 million quarter-to-date and $4.3 million year-to-date, while income tax benefit was recorded in 2022 of $2.5 million quarter-to-date and $9.9 million year to-date.

Income tax expense in 2023 primarily reflects the income tax effect of foreign subsidiaries, largely the InfraBridge investment management business.

In 2023, income tax benefit of $0.1 million was recorded quarter-to-date and income tax expense of $4.2 million year-to-date.

In 2022, income tax benefit was recorded in both periods of $7.8 million quarter-to-date and $17.8 million year-to-date.

2023 primarily reflects the income tax effect of foreign subsidiaries, largely the InfraBridge investment management business.

The net income tax benefit in the third quarter of 2023 resulted from deferred tax benefit associated with an InfraBridge subsidiary.

The Company has otherwise established a full valuation allowance on the deferred tax assets of its taxable U.S.

4 unchanged sentences

Income (Loss) from Discontinued Operations

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

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

(In thousands) 2023 2022 Change 2023 2022 Change

5 unchanged sentences

$ (2,369) $ (74,349) 71,980 $ (19,697) $ (159,569) 139,872

Loss from discontinued operations in 2023 reflect largely the $9.7 million impairment of BRSP shares prior to disposition in March 2023.

Loss from discontinued operations in 2022 was driven by disposition of the Wellness Infrastructure business in February 2022, specifically, a $92.1 million write-off of unamortized deferred financing costs on the Wellness Infrastructure debt assumed by the buyer, and impairment loss based upon final carrying value of the Wellness Infrastructure net assets upon disposition.

Loss from discontinued operations in 2023 was immaterial quarter-to-date, and in the year-to-date period, included $9.7 million impairment of BRSP shares prior to disposition in March 2023, as well as unrealized losses on various remaining investments and legal costs associated with discontinued businesses and investments.

Loss from discontinued operations in 2022 included $59.6 million of impairment on BRSP shares and losses incurred in connection with dispositions as well as fair value decreases on various remaining investments in the quarter-to-date period.

Additionally, the year-to-date loss also included the Wellness Infrastructure business that was disposed in February 2022, in particular, a $92.1 million write-off of unamortized deferred financing costs on the Wellness Infrastructure debt assumed by the buyer and $35 million impairment loss based upon final carrying value of the Wellness Infrastructure net assets upon disposition, partially offset by our share of BRSP earnings prior to disposition of $19.4 million.

Non-GAAP Supplemental Financial Measures

We report Distributable Earnings, Adjusted Earnings before Interest, Taxes, Depreciation and Amortization (“Adjusted EBITDA”) and, specific to our Investment Management segment, Fee Related Earnings (“FRE”) as non-GAAP financial measures attributable to the Operating Company.

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

We currently conduct our business through two reportable segments:

(i) Investment Management;

and (ii) Operating, our direct co-investment in digital infrastructure assets held by our portfolio companies.

In order to enhance a full understanding of our business, we present certain non-GAAP measures that allow for comparability with companies that operate in each of these two reportable segments.

We report the following non-GAAP financial measures attributable to the Operating Company:

Distributable Earnings (“DE”) and Adjusted Earnings before Interest, Taxes, Depreciation and Amortization (“Adjusted EBITDA”) on a Company-wide basis, and specific to our Investment Management segment, Fee Related Earnings (“FRE”) and FRE before the effects of new investment strategies, as represented by Investment Management Adjusted EBITDA.

DE and FRE are the most common metrics utilized in the investment management sector, which represents our core business, while presenting Adjusted EBITDA allows for some measure of comparability against companies that hold digital infrastructure assets similar to assets in our Operating segment.

We believe these non-GAAP financial measures supplement and enhance the overall understanding of our underlying financial performance and trends, and facilitate comparison among current, past and future periods and to other companies in similar lines of business.

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

For the same reasons, we believe these non-GAAP measures are useful to the Company’s investors and analysts.

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.

These non-GAAP financial measures should be considered as a supplement to and not an alternative or in lieu of GAAP net income (loss) as measures of operating performance, or to cash flows from operating activities as indicators of liquidity.

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 fully comparable to those calculated by our peers.

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

Three Months Ended June 30,

Three Months Ended September 30,

(In thousands) 2023 2022

4 unchanged sentences

Distributable Earnings

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, where applicable:

DE generally represents the net realized earnings of the Company and is an indicative measure used by the Company to assess ongoing operating performance and in making decisions related to distributions and reinvestments.

Accordingly, we believe DE provides investors and analysts transparency into the measure of performance used by the Company in its decision making.

DE reflects the ongoing operating performance of the Company’s core business by generally excluding non-cash expenses, income (loss) items that are unrealized and items that may not be indicative of core operating results.

This allows the Company, and its investors and analysts to assess its operating results on a more comparable basis period-over-period.

DE is calculated as an after-tax measure that differs from GAAP net income (loss) from continuing operations as a result of the following adjustments to net income (loss):

transaction-related costs;

restructuring charges (primarily severance and retention costs);

realized and unrealized gains or losses, except realized gains or losses related to digital assets, including fund investments, in Corporate and Other;

depreciation, amortization and impairment charges;

interest expense on finance leases;

restructuring charges;

other gain (loss);

unrealized principal investment income (loss);

non-cash depreciation, amortization and impairment charges;

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

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

equity-based compensation costs;

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;

non-cash equity-based compensation costs;

preferred stock redemption gain (loss);

straight-line adjustment to lease income and expense;

interest expense on finance

leases in the Operating segment, amortization of above and below market leases in the Operating segment;

straight-line adjustment to lease income and expense in the Operating segment, non-revenue enhancing capital expenditures necessary to maintain operating real estate in the Operating segment;

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 our operating results to be more comparable period-over-period and relative to other companies in similar lines of business.

Transaction-related costs are incurred in connection with acquisitions and include costs of unconsummated transactions, while restructuring charges are related primarily to severance and retention costs.

These costs, along with other gain (loss) amounts, are excluded from DE as they are related to discrete items, are not considered part of our ongoing operating cost structure, and are not reflective of our core operating performance.

Other items excluded from DE are generally non-cash in nature, including income (loss) items that are unrealized, or otherwise do not represent current or future cash obligations such as amortization of deferred financing costs and straight-line lease adjustment.

These items are excluded from DE as they do not contribute to the measurement of DE as a net realized earnings measure that is used in decision making related to distributions and reinvestments.

Generally, the income tax effect associated with income and expense items excluded from the calculation of DE are similarly excluded from DE.

However, where the resulting income tax liability or benefit arising from these excluded items increase or decrease actual income tax paid or payable by the Company in any one period, the income tax effect of these items are included in DE (for example, equity-based compensation).

In connection with our Operating segment, non-revenue enhancing capital expenditures are excluded as these are not recurring capital expenditures and are not incurred to maintain and extend the useful life of operating digital assets that support the generation of revenues.

The items we have excluded from DE are generally consistent with the exclusions made by our peers, which we believe allows for better comparability to the DE presented by our peers.

Adjusted EBITDA

Adjusted EBITDA represents DE adjusted to exclude the following items attributable to the Operating Company:

interest expense as included in DE, income tax benefit or expense as included in DE, preferred stock dividends, principal investment income or loss as included in DE, placement fee expense, our share of incentive fees and realized carried interest allocation or reversal net of associated compensation expense or reversal, 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 without the effects of certain recurring cash charges, including interest expense, taxes, capital expenditures or other recurring cash requirements, its usefulness as a performance measure may be limited.

Adjusted EBITDA is a supplemental measure derived from DE and generally presents the Company’s core operating performance on a pre-tax basis, based upon recurring revenues and independent of our capital structure and leverage.

We view Adjusted EBITDA as particularly helpful in evaluating the relative contribution of our Operating segment, absent the effects of leverage, as the consolidated portfolio companies in the Operating segment have higher leverage relative to the Company’s own capital structure.

We believe Adjusted EBITDA is useful to investors as an indicative measure of the Company’s profitability that is recurring and sustainable and allows for better comparability of the Company’s performance relative to its peers independent of capital structure and leverage.

However, because Adjusted EBITDA is calculated without the effects of certain recurring cash charges, including interest expense, preferred stock dividends, income taxes, capital expenditures or other recurring cash requirements, its usefulness as a performance measure may be limited.

Adjusted EBITDA is calculated as DE adjusted to generally exclude the following items attributable to the Operating Company that are included in DE:

interest expense as included in DE and income tax benefit (expense) as included in DE consistent with an EBITDA measure, preferred stock dividends, placement fee expense, our share of incentive fees and distributed carried interest net of associated compensation expense, and capital expenditures in the Operating segment as deducted in DE.

Items excluded from Adjusted EBITDA include preferred stock dividends as Adjusted EBITDA removes the effects to earnings associated with the Company's capital structure, and placement fees as they are inconsistent in amount and frequency depending upon timing of fundraising for our funds.

Additionally, Adjusted EBITDA excludes incentive fees and distributed carried interest net of associated compensation expense to be consistent with the FRE measure for our Investment Management segment, as discussed further below.

Distributable Earnings and Adjusted EBITDA Reconciliation

Three Months Ended June 30,

Three Months Ended September 30,

(In thousands) 2023 2022

3 unchanged sentences

Transaction-related and restructuring charges 7,522 23,249

Other (gain) loss, net (excluding realized gain or loss related to digital assets and fund investments in Corporate and Other) (15,990) 15,134

Other (gain) loss, net (254,737) (9,880)

Unrealized principal investment income (17,943) 2,669

Unrealized carried interest allocation, net of associated expense allocation (68,099) (1,228)

Equity-based compensation expense 25,937 9,344

Depreciation and amortization 149,263 153,548

Straight-line rent (revenue) and expense, net (1,860) (2,956)

Equity-based compensation cost 18,621 18,619

Depreciation and amortization expense 128,156 146,810

Straight-line adjustment to lease (income) and expense, net (2,169) (8,895)

Amortization of acquired above-market and (below-market) leases, net (141) 80

Impairment loss — 12,184

Non-revenue enhancing capital expenditures (11,396) (10,992)

Finance lease interest expense, debt prepayment penalties and amortization of deferred financing costs, debt premiums and discounts 3,745 5,627

Preferred stock redemption (gain) loss (927) —

Adjustments attributable to noncontrolling interests in investment entities (1)

1 unchanged sentence

DE of discontinued operations (2)

2,653 (16,940)

Distributable Earnings, after tax—attributable to Operating Company

35,048 32,335

Adjustments attributable to Operating Company :

2 unchanged sentences

Preferred stock dividends 14,645 15,283

Principal investment income included in DE — (9,303)

Placement fees 15 —

Realized incentive fee and carried interest allocation, net of associated expense allocation 883 —

Distributed incentive fee and carried interest, net of associated expense allocation (27,927) (20,258)

Non-revenue enhancing capital expenditures deducted from DE 2,249 2,531

6 unchanged sentences

(2) Equity method earnings (loss) from BRSP, which qualified as discontinued operations in March 2023, is included in DE of discontinued operations for all periods presented.

Investment Management FRE

Investment Management 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, and incentive and carried interest compensation expense or reversal) and administrative expense (excluding placement fees and straight-line rent expense).

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

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

Investment Management FRE is measured as Adjusted EBITDA for the Investment Management segment, adjusted to reflect the Company’s Investment Management 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 Investment Management FRE until such time a new strategy is determined to form part of the Company’s core investment management business.

Investment Management FRE and Investment Management Adjusted EBITDA

Investment Management FRE is presented as Investment Management Adjusted EBITDA, further adjusted to exclude FRE associated with new investment strategies, as discussed below.

Investment Management FRE is used to assess the extent to which direct base compensation and core operating expenses are covered by recurring fee revenues in a stabilized investment management business.

Investment Management FRE is measured as recurring fee income that is not subject to future realization events and other income (inclusive of cost reimbursements associated with administrative expenses), net of the following:

compensation expense (excluding non-cash equity-based compensation, and incentive and carried interest compensation expense), administrative expense (excluding placement fee expense and straight-line adjustment to lease expense) and FRE associated with new investment strategies.

In reconciling Investment Management FRE to GAAP net income (loss), adjustments are made to first arrive at Investment Management Adjusted EBITDA, which generally excludes the following:

our share of incentive fees and carried interest net of associated compensation expense;

unrealized principal investment income (loss);

other gain (loss);

transaction-related and restructuring charges;

non-cash equity-based compensation costs;

straight-line adjustment to lease expense;

placement fee expense;

investment expense;

and in line with an EBITDA measure, non-cash depreciation and amortization expense, interest expense, and income tax benefit (expense).

Consistent with an FRE measure, Investment Management Adjusted EBITDA excludes incentive fees and carried interest net of associated compensation expense, as these are not recurring fee income and are subject to variability given that they are performance-based and/or dependent upon future realization events.

In calculating Investment Management FRE which reflects the Company’s Investment Management segment as a stabilized business, Investment Management Adjusted EBITDA is further adjusted to exclude Start-Up FRE.

Start-Up FRE is 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.

The Company evaluates new investment strategies on a regular basis and excludes Start- Up FRE from Investment Management FRE until such time as a new strategy is determined to form part of the Company’s core investment management business.

We believe that Investment Management FRE and Investment Management Adjusted EBITDA are useful measures to investors as they reflect the Company’s profitability based upon recurring fee streams that are not subject to future realization events, and without the effects of income taxes, leverage, non-cash expenses, income (loss) items that are unrealized and other items that may not be indicative of core operating results.

This allows for better comparability of the profitability of the Company’s investment management business on a recurring and sustainable basis.

Investment Management FRE Reconciliation

Three Months Ended June 30,

Three Months Ended September 30,

(In thousands) 2023 2022

3 unchanged sentences

Investment expense, net of reimbursement 97 230

Depreciation and amortization 11,039 5,375

Equity-based compensation 17,099 3,361

Depreciation and amortization expense 9,003 5,369

Equity-based compensation cost 7,218 2,654

Incentive fee and carried interest allocation, net of associated expense allocation (96,026) (40,867)

2 unchanged sentences

Transaction-related and restructuring charges 3,891 2,317

Principal investment (income) loss (1,604) (1,016)

Unrealized principal investment income (1,451) (1,016)

Other (gain) loss, net 2,662 110

3 unchanged sentences

Start-up FRE 1,155 2,399

Investment Management FRE

34,398 25,459

Attributable to redeemable noncontrolling interests (1)

Investment Management FRE—attributable to Operating Company

$ 29,202 $ 21,498

(1) Wafra's interest in the investment management business was redeemed in May 2022.

Liquidity and Capital Resources

3 unchanged sentences

Our primary liquidity needs are to fund:

• our general partner and co-investment commitments to our investment vehicles;

• our general partner and general partner affiliate commitments to our investment vehicles;

• acquisitions of target investment management businesses;

8 unchanged sentences

• cash on hand;

• fees received from our investment management business, including our share of realized net incentive fees and carried interest;

• fees received from our investment management business, including our share of distributed net incentive fees and carried interest;

• cash flow generated from our investments, both from operations and return of capital;

5 unchanged sentences

• proceeds from public or private equity and debt offerings.

At June 30, 2023, our liquidity position was approximately $505 million, composed of corporate unrestricted cash and including the full $300 million availability under our VFN.

At September 30, 2023, our liquidity position was approximately $530 million, composed of corporate unrestricted cash and including the full $300 million availability under our VFN.

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.

2 unchanged sentences

Sources of Funds

• $49 million net proceeds from the September 2023 recapitalization of DataBank

• $202 million in net proceeds from full disposition of our BRSP shares in March 2023

8 unchanged sentences

Contractual Obligations, Commitments and Contingencies

Debt Obligation

Debt Obligations

As of the date of this filing, our corporate debt is composed of a securitized financing facility and exchangeable senior notes issued by the OP, all of which are recourse to the Company, as described in Note 8 to the consolidated financial statements.

10 unchanged sentences

Fund Commitments —As general partner, we typically have minimum capital commitments to our sponsored funds.

With respect to our flagship value-add funds, DBP I and DBP II, and InfraBridge GIF I and GIF II funds, we have made additional capital commitments as a general partner affiliate alongside our limited partner investors.

With respect to our flagship value-add DBP fund series, and InfraBridge funds, we have made additional capital commitments as a general partner affiliate alongside our limited partner investors.

Our fund capital investments further align our interests to our investors.

As of June 30, 2023, we have unfunded commitments totaling $132 million to our sponsored funds.

As of the date of filing, we have unfunded commitments totaling $245 million to our sponsored funds, including DBP III which had its first closing on November 1, 2023.

Generally, the timing for funding of these commitments is not known and the commitments are callable on demand at any time prior to their respective expirations.

6 unchanged sentences

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.

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

Generally, the timing of future warehousing activities is not known.

Nevertheless, investment warehousing is undertaken only if it is determined that we will have sufficient liquidity through the anticipated warehousing period.

At June 30, 2023, warehoused investments aggregate to $51 million at cost.

At September 30, 2023, warehoused investments aggregate to $50 million at cost.

Carried Interest Clawback

5 unchanged sentences

The Company generally withholds a portion of the distribution of carried interest to employees to satisfy their potential clawback obligation.

At June 30, 2023, the Company has no liability for clawback obligations on distributed carried interest.

At September 30, 2023, the Company has no liability for clawback obligations on distributed carried interest.

Lease Obligations

At June 30, 2023, we had $52.2 million of operating lease obligations on our corporate offices, which are funded through corporate operating cash.

At September 30, 2023, we had $50.0 million of operating lease obligations on our corporate offices, which are funded through corporate operating cash.

The lease obligation amount represents 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.

Separately, finance and operating lease obligations on leasehold data centers in the Operating segment are satisfied through operating cash generated by the respective investment properties.

Sources of Liquidity

19 unchanged sentences

In March 2023, our BRSP shares were fully disposed for net proceeds of $202 million.

We have other marketable equity securities that are available for future monetization, valued at $19.5 million at June 30, 2023.

We have other marketable equity securities that are available for future monetization, with our share valued at $12.8 million at September 30, 2023.

Public Offerings

2 unchanged sentences

The following table summarizes the activities from our consolidated statements of cash flows, including discontinued operations.

Six Months Ended June 30,

Nine Months Ended September 30,

(In thousands) 2023 2022

9 unchanged sentences

Operating Activities

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

Cash inflows from operating activities are generated primarily through fee income, including incentive fees, and distributions of our share of net carried interest from our investment management business, property operating income from our real estate investments, and distributions of earnings received from equity investments.

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

4 unchanged sentences

Our investing activities generated net cash outflows of $768.1 million in 2023 and $1.9 billion in 2022.

Cash outlays in 2023 can be attributed primarily to a business combination, data center acquisition and capital expenditures in the Operating segment and investing activities of our consolidated funds, partially offset by the sale of BRSP shares.

Cash outlays in 2023 can be attributed primarily to the acquisition of InfraBridge and deconsolidation of DataBank, partially offset by the sale of BRSP shares.

2022 cash outlays were driven by the acquisitions of TowerCo and data centers in the Operating segment.

• DataBank recapitalization and deconsolidation —In 2023, we received proceeds of $21.5 million, net of carried interest distribution, from the recapitalization of DataBank.

Following the recapitalization, DataBank was deconsolidated, effective September 14, 2023, resulting in the derecognition of $102.4 million of cash and restricted cash (Note 10).

• Business combination —In 2023, we paid $314.3 million (net of cash assumed) for the acquisition of InfraBridge.

2 unchanged sentences

These cash inflows were partially offset by funding of our fund commitments.

2022 saw 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 of our fund commitments.

2022 saw net cash inflows of $97.4 million, largely representing the trading activities in marketable equity securities by our consolidated liquid funds, and a return of capital from the first sale of investment by DBP I, partially offset by additional contributions to our digital funds.

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

3 unchanged sentences

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

• Debt investments —Our debt investments generated minimal net cash inflows in 2023 and substantial net cash outflows in 2022.

• Debt investments —Our debt investments generated minimal net cash inflows in 2023 and 2022.

Having relinquished all of our warehoused debt investments in 2022, the only cash activity with respect to debt investments in 2023 was the full repayment of a loan held by DataBank of $6.8 million.

In 2022, net cash outflows of $226.5 million were driven by origination and acquisition of loans that were warehoused for future investment vehicles, partially offset by a loan syndication.

These warehoused loans were subsequently transferred to our sponsored credit fund and to a third party sponsored collateralized loan obligation ("CLO") in the second half of 2022.

In 2022, net cash inflows was relatively immaterial at $4.6 million as we had largely transferred our acquired or originated warehoused loans to our sponsored credit fund and to a third party sponsored collateralized loan obligation ("CLO").

Financing Activities

We may draw upon our securitized financing facility to finance our 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 primarily for payments on our corporate debt, and dividends to our preferred stockholders and common stockholders.

Separately, subsidiaries in the Operating segment finance their investing activities largely through investment-level secured debt and incur cash outlays for debt servicing and distributions to their third party investors who represent noncontrolling interests.

Accordingly, we incur cash outlays primarily for payments on our corporate debt, and dividends to our preferred

stockholders and common stockholders.

Separately, subsidiaries in the Operating segment, including DataBank prior to its deconsolidation in September 2023, finance their investing activities largely through investment-level secured debt and incur cash outlays for debt servicing and distributions to their third party investors who represent noncontrolling interests.

Financing activities generated net cash inflows in both years.

• In 2023, the net cash inflows of $24.1 million represents primarily $421.1 million of additional investment-level debt in the Operating segment, largely offset by repayment of our $200 million 5.00% convertible senior notes, $90 million contingent consideration payment to Wafra, $73.5 million distributed for capital redeemed by a noncontrolling interest in a consolidated liquid fund, and income distribution to noncontrolling interests in Vantage SDC.

• In 2023, the net cash inflows of $78.6 million represent primarily $489.9 million of additional investment-level debt in the Operating segment, largely offset by repayment of our $200 million 5.00% convertible senior notes, $90 million contingent consideration payment to Wafra, $78.3 million distributed for capital redeemed by a noncontrolling interest in a consolidated liquid fund, and income distribution to noncontrolling interests in Vantage SDC.

• The financing net cash inflows of $741.8 million in 2022 was driven by financing for the acquisition of TowerCo and the DataBank data center acquisition through term loans and capital contributions from noncontrolling interests totaling $1.1 billion.

Financing cash inflows also included draws on our corporate VFN revolver and on credit facilities to finance bank-syndicated warehoused loans that were intended to be securitized.

In the third quarter of 2022, these loans were transferred into a third party CLO and the corresponding warehouse facilities were repaid.

Additionally, cash inflows included our share of proceeds recorded in equity of $302.8 million from sale a portion of our interest in our DataBank subsidiary in connection with the partial recapitalization in August 2022 that was treated as an equity transaction (Note 10).

The cash inflows were partially offset by $388.5 million of cash paid to redeem Wafra's interest in our investment management business.

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

Financing cash outflows also included repayment of our warehouse credit facility of $172.5 million with proceeds from a transfer of the warehoused loans to a third party CLO, and paydowns on amortizing debt in our Operating segment.

Other notable cash outflows included preferred and common stock repurchases totaling $60.8 million and distributions to various controlling interests.

Guarantees and Off-Balance Sheet Arrangements

11 unchanged sentences

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