DigitalBridge Group, Inc. 10-K

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. The following discussion should be read in conjunction with our consolidated financial statements and accompanying notes thereto, which are included in Item 15. "Exhibits and Financial Statement Schedules" of this Annual Report. Significant Developments The following summarizes significant developments that affected our business and results of operations in 2023 through the date of this filing. Financing • We repaid $200 million of 5.00% senior notes upon maturity in April 2023 using cash on hand, reducing our leverage and outstanding corporate debt to $378 million, with savings of $10 million in annual financing costs. Investment Management • In 2023 and through February 19, 2024, we have raised approximately $7.7 billion ($6.9 billion in 2023) of capital, primarily $3.2 billion ($2.7 billion in 2023) for DigitalBridge Partners III, LP ("DBP III"), the third series in our flagship value-add strategy, and syndications through various co-investment vehicles. • 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 InfraBridge GIF series of funds. The acquisition comprises InfraBridge's investment management platform and fund sponsor investments. 42 Table of Contents The acquisition further scales our investment management business. InfraBridge’s global infrastructure equity platform is a strategic fit alongside our value-add equity franchise, enhancing our capabilities in the mid-market segment. The acquisition added $5.1 billion in fee earning equity under management ("FEEUM"), comprising primarily GIF II and GIF I investment funds. DataBank and Vantage SDC Discontinuance of Operating segment • On December 31, 2023, following the deconsolidation of both DataBank and Vantage SDC (as discussed in Note 9 to the consolidated financial statements), the Operating segment was discontinued and its activities thereof qualified as discontinued operations. The presentation of the operating results of DataBank and Vantage SDC as income (loss) from discontinued operations on the consolidated statement of operations, and on the consolidated balance sheets, as assets and liabilities of discontinued operations, was applied retrospectively to all periods presented. The deconsolidation in 2023 deleveraged the Company's balance sheet by removing $8.55 billion of assets, $5.94 billion of liabilities and $2.06 billion of noncontrolling interests in investment entities. Subsequent to deconsolidation, the Company's consolidated financial statements include only its equity investment in DataBank (9.5% at December 31, 2023) and its consolidated funds' investment in Vantage SDC (aggregated to 38.3% interest in Vantage SDC, of which the Company's share is 12.8% at December 31, 2023), carried at fair value, along with noncontrolling interests representing the limited partners of the consolidated funds, and changes in fair value of these investments. The Company's investments in DataBank and Vantage SDC are presented in Corporate and Other, consistent with the treatment and presentation of the Company's other consolidated funds and of its interest as general partner affiliate in other sponsored investment vehicles. Recapitalization of DataBank • In September 2023, the recapitalization of DataBank, which commenced in August 2022, was completed and resulted in its deconsolidation. A total of $2.2 billion of equity in DataBank was sold to new investors. 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 investment management fee revenue. 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). 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 in September 2023, and remeasured its remaining equity interest in DataBank at a fair value of $434 million which resulted in an unrealized gain of $275 million, presented within Corporate and Other. Other • Our investment in BrightSpire Capital, Inc. (NYSE: BRSP), which was our largest remaining non-digital investment, was fully disposed in March 2023 for approximately $202 million in net proceeds. • A non-cash charge of $133 million in fair value write-down was recorded in March 2023 on an unsecured promissory note from the 2022 sale of our Wellness Infrastructure business. This resulted from foreclosure of certain assets within the Wellness Infrastructure portfolio by its mezzanine lender. 43 Table of Contents Fund Performance Metrics Certain performance metrics for our key investment funds from inception through December 31, 2023 are presented in the table below. Excluded are funds with less than one year of performance history as of December 31, 2023, funds and separately managed accounts in the liquid strategy, co-investment vehicles and separately capitalized portfolio companies. The historical performance of our funds is not indicative of their future performance nor indicative of the performance of our other existing funds or of any of our future funds. An investment in DBRG is not an investment in any of our funds and these fund performance metrics are not indicative of the performance of DBRG. ($ in millions) Inception Date (2) Total Commitments Invested Capital (3) Available Capital (4) Investment Value MOIC (7) (9) IRR (8) (9) Fund (1) Unrealized Realized (5) Total (6) Gross Net Gross Net Value-Add DBP I Mar-2018 $4,059 $4,668 $228 $6,126 $1,140 $7,266 1.6x 1.4x 16.8% 12.3% DBP II Nov-2020 8,286 7,544 974 8,505 686 9,191 1.2x 1.1x 12.1% 9.1% Core SAF Nov-2022 1,110 867 476 878 12 890 1.0x 1.0x 3.7% 0.7% InfraBridge GIF I Mar-2015 1,411 1,488 406 1,279 1,070 2,349 1.6x 1.4x 10.0% 7.4% GIF II Jan-2018 3,382 3,117 26 2,771 95 2,866 0.9x 0.8x <0% <0% Credit Credit I Dec-2022 697 368 426 324 77 401 1.1x 1.1x 16.8% 10.1% __________ (1) Performance metrics are presented in aggregate for main fund vehicle, its parallel vehicles and alternative investment vehicles. (2) Inception date represents first close date of the fund, except for Credit I which is the first capital call date. 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 represents unfunded commitments, including 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 total value of investments, that is realized proceeds and unrealized fair value, divided by invested capital, without giving effect to allocation of management fee expense, other fund expenses and general partner carried interest (both distributed and unrealized). Total investment net MOIC is calculated as total value of investments, that is realized proceeds and unrealized fair value, 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). MOIC calculations exclude capital not subject to fees and/or carried interest, including general partner and general partner affiliate capital. MOICs are calculated at the fund level and do not reflect MOICs at the individual investor level. (8) Internal rate of return (IRR) calculations generally follow the mechanics set forth in the applicable fund limited partnership agreement (LPA). Gross IRR represents annualized time-weighted return on invested capital based upon total value of investments, that is realized proceeds and unrealized fair value, without giving effect to allocation of management fee expense, other fund expenses and general partner carried interest (both distributed and unrealized). Gross IRR is calculated from the date of investment fundings (inclusive of the effect of third-party credit financing) to the date of investment distributions. For unrealized investments, assumes a liquidating distribution equal to the investment fair value, net of third party credit financing. Gross IRR is calculated at the fund level and does not reflect gross IRR at the individual investor level due to timing of investor level inflows and outflows, among other factors. Net IRR is gross IRR after giving effect to allocation of management fee expense, other fund expenses and general partner carried interest (both distributed and unrealized). Net IRR is calculated at the individual investor level based upon timing and amount of fee-paying third party investor level inflows and outflows, and excludes syndicated proceeds and capital not subject to fees and/or carried interest, including general partner and general partner affiliate capital. (9) If an LPA provides that a fund investment that is later syndicated to one or more third-party investors shall be treated as if the syndicated portion of such investment never occurred, the Net IRR and MOICs set forth herein will typically reflect such treatment of the syndicated portion of such investment as this is more consistent with the calculation of the preferred return which determines our ability to earn carried interest. Our funds generally permit us to recycle certain capital distributed to limited partners during certain time periods. The inclusion of recycled capital generally causes invested and realized amounts to be higher and IRRs and MOICs to be lower than had recycled capital not been included. In addition, for funds that utilize third-party credit financing in advance of receiving capital contributions from investors, reported IRRs may be higher or lower than if such financing had not been utilized. 44 Table of Contents Results of Operations Refer to Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our 2022 Annual Report on Form 10-K, which is incorporated by reference herein, for comparative discussion of our consolidated results of operations for the prior year periods of 2022 and 2021. The Company determined that the following qualified as discontinued operations in 2023: its investment in BRSP prior to disposition in March 2023; and its interests in two consolidated digital infrastructure portfolio companies, previously reported in the Company’s former Operating segment, prior to a full deconsolidation and discontinuance of the Operating segment on December 31, 2023. For all prior periods presented: (i) on the December 31, 2022 consolidated balance sheets, the equity method investment in BRSP (2022: $218.0 million previously included in equity and debt investments) and the assets of the portfolio companies previously consolidated in the former Operating segment totaling $8.1 billion have been reclassified to assets of discontinued operations, while the liabilities of the portfolio companies previously consolidated in the former Operating segment totaling $5.3 billion have been reclassified to liabilities of discontinued operations; and (ii) on the 2022 and 2021 consolidated statements of operations, the loss from BRSP of $37.3 million in 2022 and earnings of $41.2 million in 2021, previously included in equity method earnings (losses), and the net loss of the portfolio companies previously consolidated in the former Operating segment totaling $324.2 million and $223.5 million, respectively, have been reclassified to income (loss) from discontinued operations. In 2023, the Company also determined that principal investment income from its equity interest as general partner and general partner affiliate in its sponsored investment vehicles, and its entitlement to carried interest allocation, represent a core component of returns in its investment management business. Accordingly, beginning in 2023, principal investment income and carried interest allocation are now presented within total revenues on the consolidated statements of operations, previously presented as equity method earnings (losses) and equity method earnings—carried interest, respectively, both of which are no longer applicable as separate financial statement line items following the changes discussed herein. Prior periods have been reclassified to conform to current presentation. The discussion of our consolidated results of operations for the prior year periods of 2022 and 2021 in our 2022 Form 10-K should be read in conjunction with Item 15. "Exhibits and Financial Statement Schedules" in this Annual Report, specifically the consolidated statement of operations, Note 2 Summary of Significant Accounting Policies—Discontinued Operations, Note 4 Investments and Note 18 Segment Reporting. A comparative discussion of our consolidated results of operations for 2023 and 2022 is presented below. The following table summarizes the results from continuing operations of our Investment Management segment and the remaining results denoted as "Corporate and Other" which reconciles to our consolidated results from continuing operations. Year Ended December 31, (In thousands) 2023 2022 Change Total revenues Investment Management segment $ 645,884 $ 564,508 $ 81,376 Corporate and Other 175,499 130,263 45,236 $ 821,383 $ 694,771 126,612 Income (Loss) from continuing operations Investment Management segment $ 205,362 $ 186,084 $ 19,278 Corporate and Other 160,261 (245,897) 406,158 $ 365,623 $ (59,813) 425,436 Income (Loss) from continuing operations attributable to DigitalBridge Group, Inc. Investment Management segment $ 110,483 $ 69,884 $ 40,599 Corporate and Other 130,796 (152,454) 283,250 $ 241,279 $ (82,570) 323,849 Revenues Total revenues increased $126.6 million or 18%. • Investment Management— Revenues were $81.4 million or 14% higher at $645.9 million, attributed to fee revenue and gross carried interest (before management allocation). (a) Fee revenue contributed a $91.1 million increase to $267.2 million. The increase in fee revenue is attributed to additional capital raised throughout 2022 and 2023 and InfraBridge funds acquired in February 2023. 45 Table of Contents (b) This was partially offset by gross carried interest (before management allocation) which decreased $15.3 million to $363.1 million in 2023 from $378.3 million in 2022 (of which distributions were $28.4 million in 2023 and $152.5 million in 2022). The higher carried interest in 2022 was driven by distributions, which arose from the first liquidation of investment by DBP I and the DataBank recapitalization. Otherwise, unrealized carried interest was higher in 2023, attributed largely to DataBank, DBP II and co-investment vehicles, partially offset by DBP I. • Corporate and Other— Revenues represent largely our share of earnings, primarily fair value changes, from our general partner affiliate investments, particularly from the DBP funds, and in 2023, InfraBridge funds and DataBank. 2022 also included income from warehoused investments. Revenues were higher in 2023 due to fair value increases in fund investments, driven by DataBank in the fourth quarter of 2023, partially offset by the sale of warehoused investments to our sponsored funds and to a third party sponsored CLO in the second half of 2022. Income (Loss) from continuing operations attributable to DigitalBridge Group, Inc. Income from continuing operations attributable to DBRG was $241.3 million in 2023, compared to a loss of $82.6 million in 2022. • Investment Management— In 2023, income from continuing operations attributable to DBRG increased $40.6 million to $110.5 million. The increase in 2023 was driven by higher net carried interest of $30.5 million, representing the amount attributable to OP. 2023 net income was driven largely by unrealized carried interest from DataBank. In comparison, 2022 net income included higher unrealized carried interest from DBP I, which has a larger allocation to management, resulting in lower OP share. Supplemental performance measures of the Investment Management segment are presented under " —Non-GAAP Measures ." • Corporate and Other— Income from continuing operations attributable to DBRG of $130.8 million 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 (Note 9 to the consolidated financial statements). This was partially offset by a $133 million write-down of an unsecured promissory note related to the sale of our Wellness Infrastructure business in February 2022 (Note 10 to the consolidated financial statements). In comparison, loss from continuing operations attributable to DBRG of $152.5 million in 2022 included a $133 million debt extinguishment loss in connection with an early exchange of our 5.75% exchangeable notes (Note 7 to the consolidated financial statements). The amounts quoted herein are prior to allocating approximately 7% of net income (loss) to OP noncontrolling interest to arrive at amounts attributable to DBRG. 46 Table of Contents A more detailed discussion of key components of revenue and income (loss) from continuing operations follows. Year Ended December 31, (In thousands) 2023 2022 Change Revenues Fee revenue $ 264,117 $ 172,673 $ 91,444 Carried interest allocation 363,075 378,342 (15,267) Principal investment income 145,448 56,731 88,717 Other income 48,743 87,025 (38,282) Total revenues 821,383 694,771 126,612 Expenses Interest expense 24,540 42,926 (18,386) Investment-related expense 3,155 23,219 (20,064) Transaction-related costs 10,823 10,129 694 Depreciation and amortization 36,651 44,271 (7,620) Compensation expense—cash and equity-based 206,892 154,752 52,140 Compensation expense—incentive fee and carried interest allocation 186,030 202,286 (16,256) Administrative expense 83,782 94,122 (10,340) Total expenses 551,873 571,705 (19,832) Other gain (loss), net 96,119 (169,747) 265,866 Income (Loss) before income taxes 365,629 (46,681) 412,310 Income tax benefit (expense) (6) (13,132) 13,126 Income (Loss) from continuing operations 365,623 (59,813) 425,436 Income (Loss) from discontinued operations (320,458) (510,184) 189,726 Net income (loss) 45,165 (569,997) 615,162 Net income (loss) attributable to noncontrolling interests: Redeemable noncontrolling interests 6,503 (26,778) 33,281 Investment entities (155,756) (189,053) 33,297 Operating Company 9,138 (32,369) 41,507 Net income (loss) attributable to DigitalBridge Group, Inc. 185,280 (321,797) 507,077 Preferred stock repurchases (927) (1,098) 171 Preferred stock dividends 58,656 61,567 (2,911) Net income (loss) attributable to common stockholders $ 127,551 $ (382,266) 509,817 47 Table of Contents Fee Revenue Year Ended December 31, (In thousands) 2023 2022 Change Management fees $ 258,288 $ 169,922 $ 88,366 Incentive fees 3,229 — 3,229 Other fee revenue 2,600 2,751 (151) $ 264,117 $ 172,673 91,444 Fee revenue increased $91.4 million or 53%. The increase was driven by management fees from InfraBridge beginning February 2023, adding $54.8 million, as well as capital raised throughout 2022 and 2023, primarily from DBP III which held its first close in November 2023 ($4.5 million), our core equity fund which held its first close in November 2022 ($8.7 million), DataBank recapitalization, and various co-investment vehicles. Incentive fees in 2023 were attributed to our liquid securities strategy. Carried Interest Allocation Year Ended December 31, (In thousands) 2023 2022 Change Carried interest allocation Distributed $ 28,403 $ 152,450 $ (124,047) Unrealized 334,672 225,892 108,780 $ 363,075 $ 378,342 (15,267) 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 as the carried interest is distributed. Distributed carried interest arose from the DataBank recapitalization in September 2023 ($27.9 million) and in the second half of 2022 ($77.4 million), and additionally, the liquidation of investments by DBP I and DBP II in the second half of 2022 ($75.1 million). Unrealized carried interest was higher in 2023, driven by our DataBank investment, DBP II and co-investment vehicles, partially offset by a lower carried interest amount for DBP I. Principal Investment Income Principal investment income represents the Company's proportionate share of net income (loss) from investments in its sponsored investment vehicles, which is predominantly unrealized gain (loss) from changes in fair value of underlying fund investments. Principal investment income increased $88.7 million to $145.4 million in 2023, driven by unrealized fair value increases related to investments in DataBank, DBP funds and related co-investment vehicles. The increase in 2023 was partially offset by distribution income in 2022 from DBP realized investments. Other Income Other income decreased $38.3 million to $48.7 million in 2023. 2022 included (a) property operating income of $43.0 million from a tower portfolio, acquired in June 2022 as a warehoused investment and transferred to our core equity fund in December 2022; and (b) interest income from warehoused investments that were transferred to our 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 $23.3 million in 2022). The decrease was partially offset by: (i) higher interest income from money market deposits and beginning in 2023, from our subordinated notes in a collateralized loan obligation (increase totaling $15.2 million), (ii) incremental costs reimbursable by our managed investment vehicles that are grossed up as other income and expense (increased $5.9 million), and (iii) dividend income from our credit fund beginning the third quarter of 2022 (increased $5.7 million). 48 Table of Contents Interest Expense Year Ended December 31, (In thousands) 2023 2022 Change Interest expense Corporate debt $ 23,606 $ 32,472 $ (8,866) Non-recourse investment-level debt 934 10,454 (9,520) $ 24,540 $ 42,926 (18,386) Corporate Debt— Interest expense decreased $8.9 million driven by repayment of our 5.00% convertible notes in April 2023 (decreased $7.7 million) and to a lesser extent, lower interest expense on our securitized debt with a lower outstanding balance on the VFN in 2023 (decreased $0.6 million). Additionally, the early exchange of our 5.75% exchangeable notes for common stock in March 2022 contributed a $0.6 million decrease in interest expense. Non-Recourse Investment-Level Debt— Interest expense decreased $9.5 million. 2022 included interest expense on outstanding debt balance in connection with the financing of warehoused tower assets and credit investments (totaling $9.5 million), all of which were repaid in the second half of 2022. Investment-Related Expense Investment-related expense decreased $20.1 million to $3.2 million in 2023. 2022 included property operating expense of $13.2 million and third party professional service costs of $2.6 million from a tower portfolio acquired in June 2022 as a warehoused investment and transferred to our core equity fund in December 2022. Additionally, higher costs were incurred in 2022 that are reimbursable by our managed investment vehicles. Transaction-Related Costs Transaction-related costs were $10.8 million in 2023 and $10.1 million in 2022, composed of costs incurred in the acquisition of InfraBridge ($8.9 million and $7.3 million, respectively) and unconsummated deal costs. Depreciation and Amortization Depreciation and amortization expense decreased $7.6 million in 2023. The decrease was driven by the sale of warehoused tower assets acquired in June 2022 to our core equity fund in December 2022 ($18.8 million) and accelerated amortization on an investment management contract intangible in connection with the 2022 Recapitalization ($2.0 million). The decrease was partially offset by amortization expense on InfraBridge intangible assets acquired in February 2023 ($15.2 million). Compensation Expense Year Ended December 31, (In thousands) 2023 2022 Change Cash and equity-based compensation Cash compensation and benefits $ 151,295 $ 123,471 $ 27,824 Equity-based compensation 55,597 31,281 24,316 $ 206,892 $ 154,752 52,140 Incentive and carried interest compensation allocation $ 186,030 $ 202,286 (16,256) Cash and equity-based compensation— Compensation expense increased $52.1 million. The increase in cash compensation of $27.8 million in 2023 is primarily attributed to InfraBridge ($27.9 million in 2023, of which $6.5 million represent deferred bonus amounts funded by the seller in the InfraBridge acquisition). Equity-based compensation expense was $24.3 million higher in 2023, driven by performance-based awards that met their target in 2023 (increased $11.0 million in 2023) and generally higher equity awards granted, partially offset by full vesting in 2022 of equity awards in connection with sale of the Wellness Infrastructure business in February 2022 (decreased $3.4 million in 2023). Incentive and carried interest compensation allocation— 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 in 2022, incentive and carried interest compensation was $41.0 million higher in 2023, largely driven by unrealized carried interest from DataBank. 49 Table of Contents Administrative Expenses Total administrative expenses decreased $10.3 million, driven by lower legal costs (decreased $27.6 million), partially offset by increases in other administrative costs such as other third-party professional services and travel-related expenses (totaling $11.5 million), some of which are reimbursable by our managed investment vehicles. Other Gain (Loss), Net 2023 recorded an other gain of $96.1 million while there was an other loss of $169.7 million in 2022. Both periods under comparison had the following significant items: • In September 2023, $278.7 million gain recognized in connection with the deconsolidation of DataBank, of which $3.7 million was realized and $275.0 million unrealized (Note 9 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 compared with a fair value write-down of $28.7 million in 2022; and • 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, a net loss of $47.8 million and $8.7 million would have been recognized in 2023 and 2022, respectively. The net loss in 2023 can be further attributed to a $21.2 million loss due to an increase in the liability fair value of warrants issued to Wafra and $34.7 million of write-downs in other equity investment fair values, partially offset by $12.1 million net gain on marketable equity securities held by our consolidated liquid funds. In comparison, the smaller net loss in 2022 resulted from a $60.9 million net loss on marketable equity securities held by our consolidated liquid funds and a net loss of $7.6 million from our other equity investments, largely offset by a $63.7 million gain due to a decrease in the liability fair value of warrants issued to Wafra. Income Tax Benefit (Expense) Income tax expense was not material in 2023 and $13.1 million in 2022. 2023 reflects primarily the income tax effect of foreign subsidiaries, largely the InfraBridge investment management business in the United Kingdom. The Company has otherwise established a full valuation allowance on the deferred tax assets of its taxable U.S. entities, resulting in no net U.S. income tax effect for these entities in 2023. Income tax expense in 2022 can be attributed to the establishment of a valuation allowance against the Company's deferred tax asset balance, which offsets the deferred tax benefit from deferred tax assets recognized during 2022. 50 Table of Contents Income (Loss) from Discontinued Operations Year Ended December 31, (In thousands) 2023 2022 Change Property operating income $ 774,226 $ 953,727 $ (179,501) Other income 8,895 21,559 (12,664) Total revenues 783,121 975,286 (192,165) Property operating expense 329,762 412,924 (83,162) Interest expense 174,722 268,519 (93,797) Depreciation and amortization 448,900 534,979 (86,079) Compensation and other expenses 136,097 203,669 (67,572) Impairment loss — 35,985 (35,985) Equity method earnings (losses) (15,188) (45,489) 30,301 Other gain (loss), net 2,671 13,682 (11,011) Income (Loss) from discontinued operations before income taxes (318,877) (512,597) 193,720 Income tax benefit (expense) (1,581) 2,413 (3,994) Income (Loss) from discontinued operations (320,458) (510,184) $ 189,726 Income (Loss) from discontinued operations attributable to noncontrolling interests: Investment entities (260,120) (302,072) 41,952 Operating Company (4,339) (15,893) 11,554 Income (Loss) from discontinued operations attributable to DigitalBridge Group, Inc. $ (55,999) $ (192,219) 136,220 Discontinued operations represent primarily the operations of the Operating segment prior to deconsolidation in 2023 (Note 9) and Wellness Infrastructure prior to its disposition in February 2022. The Operating segment and Wellness Infrastructure business generally record a net loss, taking into account the effects of real estate depreciation and related intangible asset amortization. Within the Operating segment, there was a full year of operations for DataBank and Vantage SDC in 2022 while 2023 included only 8.5 months of operations for DataBank prior to its deconsolidation. Loss from discontinued operations in 2023 also 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 remaining discontinued businesses and investments. In 2022, loss from discontinued operations can also be attributed to 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, as well as $60.4 million of impairment on BRSP shares, partially offset by our share of BRSP earnings prior to disposition of $23.0 million. 51 Table of Contents Operating Metrics Assets Under Management and Fee Earning Equity Under Management 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 stockholders (composed of the Company's fund investments as GP affiliate, warehoused investments, and as of December 31, 2023, the Company's interest in portfolio companies previously 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 (at December 31, 2022 prior to deconsolidation, on an undepreciated basis as it relates to the Company's interest in portfolio companies previously 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, NAV or GAV, pursuant to the terms of each underlying investment management agreement. Presented below are total AUM and FEEUM by product: (In billions) December 31, 2023 December 31, 2022 Assets Under Management $ 80.1 $ 52.8 Fee Earning Equity Under Management DBP infrastructure equity $ 13.0 $ 11.2 InfraBridge Global Infrastructure 5.1 — Core Equity, Credit and Liquid Strategies 2.8 2.0 Co-invest vehicles 9.5 6.5 Separately capitalized portfolio companies 2.4 2.5 $ 32.8 $ 22.2 The following table summarizes changes in FEEUM: Year Ended December 31, 2023 (In billions) Fee Earning Equity Under Management Balance at January 1 $ 22.2 Inflows (1) 12.7 Outflows (2) (2.3) Market activity and other (3) 0.2 Balance at December 31 $ 32.8 ________ (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). (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 $10.6 billion or 48% to $32.8 billion at December 31, 2023, driven by the addition of $5.1 billion of InfraBridge FEEUM, and new capital raised, primarily DBP III of $2.7 billion and various co-investment vehicles. 52 Table of Contents Non-GAAP Supplemental Financial Measures 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. 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. On December 31, 2023, t he Operating segment was discontinued following full deconsolidation of the portfolio companies in the Operating segment , at which time, the activities thereof qualified as discontinued operations. Accordingly, the Company-wide measures of DE and Adjusted EBITDA exclude the Operating segment for both 2023 and the comparative period of 2022. 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: Year Ended December 31, (In thousands) 2023 2022 Attributable to Operating Company: Distributable Earnings $ 48,622 $ (14,000) Adjusted EBITDA 103,560 53,596 Investment Management FRE 137,915 83,474 Distributable Earnings . DE increased approximately $63 million to $48.6 million in 2023, which reflects the growth in our investment management business as noted in "— Investment Management FRE" below. 2022 was also burdened with a higher income tax expense that had included a full valuation allowance established against our U.S. deferred tax assets. Adjusted EBITDA . Adjusted EBITDA was approximately $50 million higher at $103.6 million in 2023, largely consistent with DE. Adjusted EBITDA is derived as DE adjusted to generally exclude the effects of our capital structure and leverage. Refer to the reconciliation from DE to Adjusted EBITDA below. Investment Management FRE . IM FRE increased $54 million or 65% to $137.9 million in 2023, resulting from continued growth in our investment management business as FEEUM grew $10.6 billion, reflecting primarily fee revenue from new capital raised for DBP III and various co-investment vehicles, and FRE contributed from the acquisition of InfraBridge in February 2023. Additionally, our share of 2022 IM FRE was net of $12.3 million attributed to Wafra, whose interest in the IM business was redeemed in May 2022. Distributable Earnings 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; other gain (loss); 53 Table of Contents unrealized principal investment income (loss); non-cash depreciation and amortization expense, non-cash impairment charges (if any); amortization of deferred financing costs, debt premiums and discounts; our share of unrealized carried interest allocation, net of associated compensation expense; non-cash equity-based compensation costs; preferred stock redemption gain (loss); and straight-line adjustment to lease income and expense. 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. Income taxes applied in the determination of DE generally represents GAAP income tax related to continued operations, and includes the benefit of deductions available to the Company on certain expense items excluded from DE (for example, equity-based compensation). As the income tax benefit arising from these excluded expense items do affect actual income tax paid or payable by the Company in any one period, the Company believes their inclusion in DE is appropriate to more accurately reflect amounts available for distribution. 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 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 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, and income taxes, 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, and our share of incentive fees and distributed carried interest net of associated compensation expense. 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. 54 Table of Contents Distributable Earnings and Adjusted EBITDA Reconciliation Year Ended December 31, (In thousands) 2023 2022 Net income (loss) attributable to common stockholders $ 127,551 $ (382,266) Net income (loss) attributable to noncontrolling interests in Operating Company 9,138 (32,369) Net income (loss) attributable to Operating Company 136,689 (414,635) Transaction-related and restructuring charges 45,860 64,334 Other (gain) loss, net (89,700) 161,981 Unrealized principal investment income (145,448) (42,531) Unrealized carried interest allocation, net of associated expense allocation (150,998) (120,423) Equity-based compensation cost 55,596 32,581 Depreciation and amortization expense 36,651 44,271 Straight-line adjustment to lease (income) and expense, net (1,008) (14,025) Amortization of deferred financing costs, debt premiums and discounts 2,784 4,537 Preferred stock redemption (gain) loss (927) — Income tax effect on certain of the foregoing adjustments — (328) Adjustments attributable to noncontrolling interests in investment entities (1) (169,559) (248,033) DE of discontinued operations (2) 328,682 518,271 Distributable Earnings, after tax—attributable to Operating Company 48,622 (14,000) Adjustments attributable to Operating Company : Interest expense included in DE 21,328 35,619 Income tax (benefit) expense included in DE 6 13,180 Preferred stock dividends 58,656 61,566 Principal investment income included in DE (277) (11,221) Placement fees 3,698 — Distributed incentive fee and carried interest, net of associated expense allocation (27,893) (31,463) IM segment other income and investment-related expense, net, included in DE (580) (316) Adjusted EBITDA—attributable to Operating Company $ 103,560 $ 53,596 __________ (1) Noncontrolling interests' share of adjustments pertain largely to discontinued operations, other gain (loss) of consolidated funds, unrealized carried interest allocation and unrealized principal investment income. (2) Equity method earnings (loss) from BRSP and the operating results of the portfolio companies previously consolidated in the Operating segment, which qualified as discontinued operations in March 2023 and December 2023, respectively, are included in DE of discontinued operations for all periods presented. 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 revenue 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 revenue and are subject to variability given that they are performance-based and/or dependent upon future realization events. 55 Table of Contents 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 Year Ended December 31, (In thousands) 2023 2022 Net income (loss)—Investment Management $ 205,362 $ 186,084 Interest expense, net of interest income 8,834 10,377 Investment-related expense, net of reimbursement 116 324 Depreciation and amortization expense 35,260 22,155 Equity-based compensation cost 33,862 15,845 Incentive fee and carried interest allocation, net of associated expense allocation (180,273) (176,016) Straight-line rent expense 1,049 1,844 Placement fees 3,698 — Transaction-related and restructuring charges 26,259 18,402 Unrealized principal investment income (4,223) (4,121) Other (gain) loss, net 2,526 3,341 Income tax (benefit) expense 1,694 7,815 Investment Management Adjusted EBITDA 134,164 86,050 Start-up FRE 3,751 9,739 Investment Management FRE 137,915 95,789 Attributable to redeemable noncontrolling interests (1) — (12,315) Investment Management FRE—attributable to Operating Company $ 137,915 $ 83,474 __________ (1) Wafra's interest in the investment management business was redeemed in May 2022. Liquidity and Capital Resources We regularly evaluate our liquidity position, debt obligations, and anticipated cash needs to fund our business and operations based upon our projected financial performance. Our evaluation of future liquidity requirements is regularly reviewed and updated for changes in internal projections, economic conditions, competitive landscape and other factors as applicable. Liquidity Needs and Sources of Liquidity Our primary liquidity needs are to fund: • our general partner and general partner affiliate commitments to our investment vehicles; • acquisitions of target investment management businesses; • warehouse investments pending the raising of third party capital for future investment vehicles; • principal and interest payments on our debt; • our operations, including compensation, administrative and overhead costs; • dividends to our preferred and common stockholders; • our liability for corporate and other taxes; and • obligation for lease payments on our corporate offices. Our primary sources of liquidity are: • cash on hand; 56 Table of Contents • 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; • availability under our Variable Funding Notes ("VFN"); • issuance of additional term notes under our corporate securitization; • third party co-investors in our consolidated investments and/or businesses; • proceeds from full or partial realization of investments; and • proceeds from public or private equity and debt offerings. Overview At December 31, 2023, our liquidity position was approximately $475 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. While we have sufficient liquidity to meet our operational needs, we continue to evaluate alternatives to manage our capital structure and market opportunities to strengthen our liquidity and to provide further operational and strategic flexibility. Significant Liquidity and Capital Activities in 2023 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 Uses of Funds • Acquisition of InfraBridge in February 2023 for $314 million, net of cash assumed • $200 million repayment of our convertible senior notes upon maturity in April 2023 • $90 million contingent earnout payment to Wafra in March 2023. Liquidity Needs and Capital Activities Dividends Common Stock —The payment of common stock dividends and determination of the amount thereof is at the discretion of our Board of Directors. The Company reinstated quarterly common stock dividends at $0.01 per share beginning the third quarter of 2022, having previously suspended common stock dividends from the second quarter of 2020 through the second quarter of 2022. Preferred Stock— We have outstanding preferred stock totaling $822 million, bearing a weighted average dividend rate of 7.135% per annum, with aggregate dividend payments of $14.7 million per quarter. 57 Table of Contents Contractual Obligations, Commitments and Contingencies Debt Obligations As of the date of this filing, our corporate debt is composed of a securitized financing facility and exchangeable senior notes issued by the OP, all of which are recourse to the Company, as described in Note 7 to the consolidated financial statements. ($ in thousands) Outstanding Principal Interest Rate (Per Annum) Maturity or Anticipated Repayment Date Years Remaining to Maturity Corporate debt: Securitized financing facility—fixed rate $ 300,000 3.93 % September 2026 2.7 Exchangeable senior notes—fixed rate 78,422 5.75 % July 2025 1.5 $ 378,422 Investment Commitments Fund Commitments —As general partner, we typically have minimum capital commitments to our sponsored funds. 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 December 31, 2023, we have unfunded commitments totaling $260 million to our sponsored funds. 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. Contingent Consideration Wafra Redemption —In connection with the May 2022 redemption of Wafra's interest in our investment management business, additional contingent consideration is payable based upon future capital raise thresholds, with up to 50% payable in shares of our class A common stock at our election. The remaining contingent consideration of $35 million will become payable in March 2024. InfraBridge Acquisition —In connection with the InfraBridge acquisition in February 2023, contingent consideration of up to $129 million may become payable based upon achievement of future fundraising targets for the third and fourth flagship InfraBridge funds. The current estimated fair value of the contingent consideration is $11 million. Warehoused Investments We temporarily warehouse investments on behalf of prospective sponsored investment vehicles that are actively fundraising. The warehoused investments are transferred to the investment vehicle 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 December 31, 2023, warehoused investments aggregate to $52 million at cost. Carried Interest Clawback Depending on the final realized value of all investments at the end of the life of a fund (and, with respect to certain funds, periodically during the life of the fund), if it is determined that cumulative carried interest distributions have exceeded the final carried interest amount earned (or amount earned as of the calculation date), we are 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. If the related carried interest distributions received by the Company are subject to clawback, the previously distributed carried interest would be similarly subject to clawback. The Company withholds a portion of the distribution of carried interest to employees to satisfy their potential clawback obligation. Generally, the Company, through the OP, has guaranteed the clawback obligation of its subsidiaries that act as general partner or special limited partner of its respective sponsored funds, for the benefit of these funds and their limited partners. 58 Table of Contents At December 31, 2023, the Company has no liability for clawback obligations on distributed carried interest. Lease Obligations At December 31, 2023, we had $49 million of operating lease obligations on our corporate offices, which will be 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. Sources of Liquidity Debt Funding As of the date of this filing, we have $378 million of outstanding principal on our corporate debt, as discussed above under " —Debt Obligation. " Our securitized financing facility is subject to various covenants, including financial covenants that require the maintenance of minimum thresholds for debt service coverage ratio and maximum loan-to-value ratio, as defined. As of the date of this filing, we are in compliance with all of the financial covenants, and the full $300 million is available to be drawn on our VFN. Our securitized financing facility allows for the issuance of additional term notes in the future to supplement our liquidity. The decision to enter into a particular financing arrangement is made after consideration of various factors including future cash needs, current sources of liquidity, demand for the Company’s debt or equity, and prevailing interest rates. Cash From Operations Fee-Related Earnings— We generate FRE from our Investment Management segment, generally encompassing recurring fee revenue net of associated compensation and administrative expenses. Management fee revenue is generally a predictable and stable revenue stream. Our ability to generate new management fee streams through establishing new investment vehicles and raising investor capital depends on general market conditions and availability of attractive investment opportunities as well as availability of debt capital. Incentive Fees— Incentive fees, net of employee allocations, are earned based upon the financial performance of a vehicle above a specified return threshold, which is largely driven by appreciation in value of underlying investments. Incentive fees are recognized as fee revenue when they are no longer probable of significant reversal. As investment fair values and changes thereof could be affected by various factors, including market and economic conditions, incentive fees are by nature less predictable in amount and timing. Carried Interest Distributions— Carried interest is distributed generally upon profitable disposition of an investment if at the time of distribution, cumulative returns of the fund exceed minimum return hurdles. Carried interest distributions are recognized in earnings net of clawback obligations, if any. The amount and timing of carried interest distributions received may vary substantially from period to period depending upon the occurrence and size of investments realized by our sponsored funds. Investments— Our investments, primarily in our sponsored funds as general partner affiliate, generate cash largely through capital appreciation upon liquidation. Asset Monetization We periodically monetize our investments through opportunistic asset sales or to recycle capital from non-core assets. In March 2023, our BRSP shares were fully disposed for net proceeds of $202 million. As of the date of filing, we have other marketable equity securities that are available for future monetization totaling $32 million, valued as of December 31, 2023. Public Offerings We may offer and sell various types of securities from time to time at our discretion based upon our needs and depending upon market conditions and available pricing. 59 Table of Contents Consolidated Cash Flows The following table summarizes the activities from our consolidated statements of cash flows, including discontinued operations. Year Ended December 31, (In thousands) 2023 2022 Cash, cash equivalents and restricted cash—beginning of period $ 1,036,739 $ 1,766,245 Net cash provided by (used in): Operating activities 233,637 262,582 Investing activities (979,044) (1,913,408) Financing activities 58,152 923,785 Effect of exchange rates on cash, cash equivalents and restricted cash 766 (2,465) Cash, cash equivalents and restricted cash—end of period $ 350,250 $ 1,036,739 Operating Activities Cash inflows from operating activities are generated primarily through fee-related earnings, including incentive fees, distributions of our share of net carried interest, distribution of earnings from our general partner affiliate interests in our sponsored funds, and prior to deconsolidation of the portfolio companies in the Operating segment during 2023, net operating income from investment properties. Our operating activities generated net cash inflows of $233.6 million in 2023 and $262.6 million in 2022. Investing Activities Investing activities relate to business combinations; general partner and general partner affiliate investments in sponsored funds, including subsequent drawdown of commitments and return of investments, primarily from realized fund investments; origination or acquisition of warehoused investments and subsequent repayments, sales and transfers of warehoused investments; and prior to deconsolidation of portfolio companies in the Operating segment in 2023, acquisition of real estate. Our investing activities generated net cash outflows of $979.0 million in 2023 and $1.9 billion in 2022. Cash outlays in 2023 can be attributed primarily to the acquisition of InfraBridge and deconsolidation of DataBank and Vantage SDC, partially offset by proceeds from the sale of BRSP shares and proceeds from DataBank recapitalization. 2022 cash outlays were driven by the acquisitions of TowerCo and data centers in the Operating segment. • Business combination —In 2023, we paid $314.3 million (net of cash assumed) for the acquisition of InfraBridge. • Equity investments —Equity investments generated net cash inflows in both years. In 2023, equity investments recorded net cash inflows of $190.3 million, attributed primarily to $201.6 million from the sale of BRSP shares, return of capital from a non-digital equity investment following a final sale of its underlying assets, and investing activities of our consolidated liquid funds which hold marketable equity securities. These cash inflows were partially offset by funding of our general partner and general partner affiliate commitments, net of return of capital. 2022 saw net cash inflows of $11.6 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 funding of our general partner and general partner affiliate commitments, net of return of capital. • 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, there was a net cash inflow of $44.8 million. Disbursements for additional fundings and acquisitions of warehoused loans during the year were more than offset by proceeds received from the subsequent transfer of the entire portfolio of warehoused loans to our sponsored credit fund and to a third party sponsored collateralized loan obligation. • Real estate investments —Real estate investing activities generated net cash outflows in both years. 60 Table of Contents Net cash outflows in 2023 was $653.5 million, attributed to DataBank's data center acquisition in Dallas and capital expenditures in our data center portfolio, including payments for build-out of expansion capacity and lease-up within the Vantage SDC portfolio, partially offset by $21.5 million of proceeds, net of carried interest distribution, from the recapitalization of DataBank. Also included in cash outflows was cash deconsolidated related to DataBank, Vantage SDC and our credit fund totaling $229.2 million. 2022 saw net cash outflows of $2.0 billion, attributed primarily to the acquisition of TowerCo and, to a lesser extent, to DataBank's acquisition of five data centers, data center capital expenditures, and payments for build-out of expansion capacity and lease-up within the Vantage SDC portfolio. Also contributing to the cash outflows was cash assumed by the buyer, net of proceeds received, in the sale of real estate investment holding entities in our Wellness Infrastructure business and property-level cash transferred related to the transfer of our interest in TowerCo to our sponsored fund in December 2022. 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, prior to their deconsolidation in 2023, portfolio companies in the Operating segment financed their investing activities largely through investment-level secured debt and incured 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 $58.2 million represent primarily $484.5 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, $89.5 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 $923.8 million in 2022 were 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. The TowerCo debt was subsequently assumed by our sponsored fund upon the transfer of our equity interests in TowerCo to the fund. Additionally, cash inflows included our share of proceeds recorded in equity of $302.8 million from sale of 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. 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 $107.8 million and distributions to various controlling interests. Guarantees and Off-Balance Sheet Arrangements We have no guarantees or off-balance sheet arrangements that we believe are reasonable likely to have a material effect on our financial condition. Critical Accounting Policies and Estimates Our consolidated financial statements are prepared in accordance with GAAP, which requires the use of estimates and assumptions that involve the exercise of judgment and that affect the reported amounts of assets, liabilities, and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Our critical accounting policies and estimates are integral to understanding and evaluating our reported financial results, as they require subjective or complex management judgments resulting from the need to make estimates about the effect of matters that are inherently uncertain and unpredictable. Highlighted below are accounting policies and estimates that we believe to be critical based on the nature of our business and/or require significant management judgment and assumptions. With respect to all critical estimates discussed below, we have established policies and control procedures which seek to ensure that estimates and assumptions are appropriately governed and applied consistently from period to period. We believe that all of the decisions and assessments applied were reasonable at the time made, based upon information available to us at that time. 61 Table of Contents Due to the inherently judgmental nature of the various projections and assumptions used and the unpredictability of economic and market conditions, actual results may differ from estimates, and changes in estimates and assumptions could have a material effect on our consolidated financial statements in the future. Fair Value The fair value of investments held by our sponsored investment vehicles represent a primary input in the determination of carried interest allocation together with corresponding compensation expense, and principal investment income (loss) which is our share of income (loss) from equity interests in our sponsored funds. The investments held by our sponsored vehicles are revalued each quarter, with the results subject to the Company's valuation review and approval process. Fair value of the underlying investments is typically estimated using unobservable inputs and assumptions that involves significant judgement including, but not limited to, the financial performance of the portfolio company, economic conditions, foreign exchange rates, comparable transactions in the market, and equity prices for publicly traded securities, and is therefore subject to inherent uncertainties. Equity method investments and loans receivable, if any, for which fair value option is elected, are also revalued each quarter and are similarly subject to the inherent uncertainties and assumptions applied in estimating fair values. Carried Interest Allocation The Company recognizes carried interests from its equity method investments as general partner in investment vehicles that it sponsors. Carried interest represents a disproportionate allocation of returns from the Company's sponsored investment vehicles based upon the extent to which cumulative performance of the vehicles exceeds minimum return hurdles pursuant to terms of their respective governing agreements. Carried interest is subject to reversal until such time it is realized, which generally occurs upon disposition of all underlying investments of an investment vehicle, or in part with each disposition. A portion of carried interest is allocated to certain employees, former employees and to Wafra, and is similarly subject to reversal if there is a decline in the cumulative carried interest amounts previously recognized. The amount of carried interest recognized is based upon the cumulative performance of each investment vehicle if it were liquidated as of the reporting date, which in turn is largely driven by appreciation in the fair value of the underlying investments held by these vehicles. Therefore, carried interest may be subject to significant fluctuations between periods driven by fair value changes of underlying fund investments over time. Income Taxes Deferred tax assets represent amounts available to reduce income taxes payable on taxable income in future years. Such assets arise from temporary differences between the financial reporting and tax bases of assets and liabilities, as well as from NOL, capital loss and tax credit carryforwards. Realization of deferred tax assets is dependent upon the adequacy of future expected taxable income from all sources, including reversal of taxable temporary differences, forecasted taxable earnings and prudent and feasible tax planning strategies. A valuation allowance for deferred tax assets is established if the Company believes it is more likely than not that all or some portion of the deferred tax assets will not be realized based upon the weight of all available positive and negative evidence. The weight given to the evidence is commensurate with the extent to which it can be objectively verified. The more negative evidence that exists, the more positive evidence is necessary and the more difficult it is to support a conclusion that a valuation allowance is not required. In evaluating realizability of deferred tax assets, the Company considers various factors, including: (1) nature of the deferred tax assets and liabilities, whether they are ordinary or capital; (2) in which tax jurisdictions they were generated and timing of their reversal; (3) taxable income in prior carryback years and projected taxable earnings exclusive of reversing temporary differences and carryforwards; (4) length of time that carryovers can be utilized in the various tax jurisdictions; (5) any unique tax rules that would impact the utilization of the deferred tax assets; and (6) any tax planning strategies that could be employed to reasonably assure utilization of the tax benefit prior to expiration. The projection of future taxable earnings to be generated by subsidiaries to which the deferred tax assets apply represent a critical estimate. Key assumptions in this evaluation include the Company's forecast of future capital raises, and actual and planned business and operational changes, which are affected by future macroeconomic and Company-specific conditions and events. These assumptions rely heavily on estimates and changes in estimates could result in an establishment or an increase in valuation allowance. An established valuation allowance may be reversed in a future period if the Company subsequently determines it is more likely than not that all or some portion of the deferred tax assets will become realizable. 62 Table of Contents A discussion of valuation allowances established in 2022 is included in Note 14 to the consolidated financial statements in Item 15 of this Annual Report. Impairment In connection with our review and preparation of the consolidated financial statements, prior to and subsequent to each quarter end, we evaluate if prevailing events or changes in circumstances indicate that carrying values of the following assets may not be recoverable, in which case, an impairment analysis is performed. Goodwill At December 31, 2023, the Company's goodwill is associated with its Investment Management and Operating segments. Goodwill is tested for impairment at the reporting unit to which it is assigned, which can be an operating segment or one level below an operating segment. The assessment of goodwill for impairment may initially be performed based on qualitative factors to determine if it is more likely than not that the fair value of the reporting unit is less than its carrying value, including goodwill. If so, a quantitative assessment is performed, and to the extent the carrying value of the reporting unit exceeds its fair value, impairment is recognized for the excess up to the amount of goodwill assigned to the reporting unit. Alternatively, the Company may bypass a qualitative assessment and proceed directly to a quantitative assessment. A qualitative assessment considers various factors such as macroeconomic, industry and market conditions to the extent they affect the earnings performance of the reporting unit, changes in business strategy and/or management of the reporting unit, changes in composition or mix of revenues and/or cost structure of the reporting unit, financial performance and business prospects of the reporting unit, among other factors. In a quantitative assessment, significant judgment, assumptions and estimates are applied in determining the fair value of reporting units. The Company has generally used the income approach to estimate fair value by discounting the projected net cash flows of the reporting unit, and may corroborate with market-based data where available and appropriate. Projection of future cash flows is based upon various factors, including, but not limited to, our strategic plans in regard to our business and operations, internal forecasts, terminal year residual revenue multiples, operating profit margins, pricing of similar businesses and comparable transactions where applicable, and risk-adjusted discount rates to present value future cash flows. Given the level of sensitivity in the inputs, a change in the value of any one input, in isolation or in combination, could significantly affect the overall estimation of fair value of the reporting unit. The Company determined that there were no indicators of impairment to goodwill in 2023. Acquisitions In a business combination or asset acquisition, all assets acquired and liabilities assumed are measured at fair value as of the acquisition date. Allocation of Purchase Consideration In a business combination, the Company measures the assets acquired, liabilities assumed and any noncontrolling interests of the acquiree at their acquisition date fair values, with the excess of purchase consideration over the fair value of net assets acquired and the fair value of any previously held interest in the acquiree, recognized as goodwill. In an asset acquisition, the Company allocates the purchase consideration to the assets acquired and liabilities assumed based upon their relative fair values, which does not give rise to goodwill. The estimation of fair value of the assets acquired and liabilities assumed involves significant judgment and assumptions. Acquired assets are generally composed of equity interests in managed investment vehicles and investment management related intangibles such as investment management contracts and investor relationships. Equity interests in managed investment vehicles are valued based upon their latest net asset value. Identifiable intangible assets such as management contracts and investor relationships are typically valued using the income approach based upon net cash flows expected to be generated by the assets, discounted to present value. Estimates applied include, but are not limited to: expected future cash flows, reinvestment rates by existing investors in our investment management business, and discount rates. These estimates are based upon assumptions that management believes a market participant would apply in valuing the assets. These estimates and assumptions are forward-looking and are subject to uncertainties in future economic, market and industry conditions. Refer to Note 3 to the consolidated financial statements in Item 15 of this Annual Report for additional discussion of the methodology and inputs applied in estimating fair value of assets acquired and liabilities assumed 63 Table of Contents Consolidation The determination of whether the Company has a controlling financial interest and therefore consolidates an entity can significantly affect presentation in the consolidated financial statements. A consolidation assessment at the onset of the Company's initial investment in or other involvement with an entity as well as reassessments on an ongoing basis, may involve significant judgement, more so if an entity is determined to be a variable interest entity ("VIE"). A VIE is consolidated by its primary beneficiary, which is defined as the party who has a controlling financial interest in the VIE through (a) power to direct the activities of the VIE that most significantly affect the VIE’s economic performance, and (b) obligation to absorb losses or right to receive benefits of the VIE that could be significant to the VIE. This assessment may involve subjectivity in the determination of which activities most significantly affect the VIE’s performance, and estimates about current and future fair value of the assets held by the VIE and financial performance of the VIE. In assessing its interests in the VIE, the Company also considers interests held by its related parties, including de facto agents. Additionally, the Company assesses whether it is a member of a related party group that collectively meets the power and benefits criteria and, if so, whether the Company is most closely associated with the VIE. In performing the related party analysis, the Company considers both qualitative and quantitative factors, including, but not limited to: the characteristics and size of its investment relative to the related party; the Company’s and the related party's ability to control or significantly influence key decisions of the VIE including consideration of involvement by de facto agents; the obligation or likelihood for the Company or the related party to fund operating losses of the VIE; and the similarity and significance of the VIE’s business activities to those of the Company and the related party. The determination of whether an entity is a VIE, and whether the Company is the primary beneficiary, depends upon facts and circumstances specific to an entity at the time of the assessment, and could change over time. Discussion of i) the Company's involvement in various types of entities that are considered to be VIEs and whether the Company is determined to be the primary beneficiary, and ii) entities deconsolidated during 2023 are included in Note 15 and Note 9, respectively, to the consolidated financial statements in Item 15 of this Annual Report. Recent Accounting Updates The effects of accounting standards adopted in 2023 and the potential effects of accounting standards to be adopted in the future are described in Note 2 to our consolidated financial statements in Item 15. "Exhibits, Financial Statement Schedules" of this Annual Report.