What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-11-01 compared with 2024-08-08 · 92 added, 84 removed, 404 unchanged (30% of the section changed)

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

At June 30, 2024, we had $32.7 billion of fee earning equity under management ("FEEUM").

At September 30, 2024, we had $34.1 billion of fee earning equity under management ("FEEUM").

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

We operate as a taxable C Corporation and conduct substantially all of our activities and hold substantially all of our assets and liabilities through our Operating Company.

At June 30, 2024, we owned 93% of the Operating Company as its sole managing member.

At September 30, 2024, we owned 93% of the Operating Company as its sole managing member.

Our Investment Management Platform

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Capital Raise

• In the year to-date period through July 2024, we have raised $3.4 billion of capital, primarily for the third series in our flagship value-add strategy and syndications through various co-investment vehicles.

• In the year to-date period through October 2024, we have raised $6.1 billion of capital, primarily for the third series in our flagship value-add strategy and syndications through various co-investment vehicles.

• In 2024, we further reduced our leverage with the full exchange/redemption of our remaining $78.4 million of 5.75% senior notes, which results in annual interest savings of approximately $4.5 million.

$73.4 million of note principal was exchanged for 8.2 million shares of the Company's class A common stock and $5.0 million of note principal was redeemed for cash.

Return of Capital

• We monetized a substantial portion of marketable equity securities that form DBRG's non-core investments for total net proceeds of $35.0 million.

• In October 2024, as the subordinated note holder of a third party managed CLO, we received $10.4 million of excess net proceeds from a refinancing of the CLO.

Fund Performance Metrics

Certain performance metrics for our key investment funds from inception through June 30, 2024 are presented in the table below.

Excluded are funds with less than one year of performance history as of June 30, 2024, funds and separately managed accounts in the liquid strategy, co-investment vehicles and separately capitalized portfolio companies.

Certain performance metrics for our key investment funds from inception through September 30, 2024 are presented in the table below.

Excluded are funds with less than one year of performance history as of September 30, 2024, 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.

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GIF I Mar-2015 1,411 1,504 388 1,336 1,093 2,429 1.6x 1.4x 9.8% 7.3%

GIF II Jan-2018 3,382 3,094 26 2,304 237 2,541 0.8x 0.7x <0% <0%

GIF II Jun-2018 3,382 3,118 26 2,294 245 2,539 0.8x 0.7x <0% <0%

Credit I Dec-2022 697 428 391 346 140 486 1.1x 1.1x 13.8% 9.1%

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Results of Operations

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

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

(In thousands) 2024 2023 Change 2024 2023 Change

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Net income (loss) attributable to common stockholders $ (883) $ 261,828 (262,711) $ 31,592 $ 26,944 4,648

Total revenues were $390.3 million and $189.9 million for the three months ended June 30, 2024 and 2023, respectively, and $464.7 million and $208.4 million for the six months ended June 30, 2024 and 2023, respectively, driven by significant variability in unrealized carried interest, with higher fee revenues largely offset by a decrease in principal investment income.

Total revenues were $76.1 million and $262.7 million for the three months ended September 30, 2024 and 2023, respectively, and $540.9 million and $471.1 million for the nine months ended September 30, 2024 and 2023, respectively.

The decrease of $186.6 million in the quarter-to-date comparison and increase of $69.8 million in the year-to-date comparison was driven largely by significant variability in carried interest.

Excluding carried interest, revenues were higher in both periods under comparison, driven by an increase in fee income of $11.3 million quarter-to-date and $38.0 million year to-date.

Principal investment income and other income were lower in 2024, and these decreases largely offset the higher fee revenue in the quarter-to-date and year-to-date comparison.

The key components of revenue are discussed in more detail below.

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

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

(In thousands) 2024 2023 Change 2024 2023 Change

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$ 76,582 $ 65,240 11,342 $ 228,142 $ 190,108 38,034

Fee revenue increased $12.9 million, or 20%, in the quarter-to-date comparison and $26.7 million, or 21%, in the year-to-date comparison, as FEEUM increased $3.6 billion or 12% from $29.1 billion at June 30, 2023 to $32.7 billion at June 30, 2024.

Management fees were higher in the three and six months ended June 30, 2024, driven by (i) our third flagship fund, which held its first close in November 2023, contributing $13.6 million and $22.9 million of fees, respectively (including catch-up fees), and (ii) additional deployments in DBP I and our credit fund ($1.9 million and $3.6 million, respectively), partially offset by lower fees in DBP II due to a change in fee basis to invested capital and syndication of an investment in 2024, as well as recapitalization of a portfolio company in a co-invest vehicle (aggregate decrease of $6.1 million and $8.9 million, respectively).

Additionally, in the year-to-date comparison, 2024 also had higher fees from InfraBridge funds that were acquired in February 2023 ($2.6 million).

Fee revenue increased $11.3 million or 17% in the quarter-to-date comparison and $38.0 million or 20% in the year-to-date comparison, consistent with increase in FEEUM of $4.2 billion or 14% in the 12-month period to $34.1 billion at September 30, 2024.

Management fees were $10.8 million and $36.4 million higher in the three and nine months ended September 30, 2024, respectively, driven by our third flagship fund that held its first close in November 2023, contributing $16.7 million and $39.6 million of fees, respectively (including catch-up fees), as well as additional deployments and commitments in other funds.

These increases were partially offset by lower fees in DBP II following a change in fee basis to invested capital and syndication of an investment in 2024, as well as recapitalization of a portfolio company in a co-invest vehicle (aggregate decrease of $6.9 million and $15.9 million, respectively).

Higher incentive fees earned in 2024 are attributed to our liquid securities strategy.

Carried Interest Allocation (Reversal)

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

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

(In thousands) 2024 2023 Change 2024 2023 Change

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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.

Unrealized carried interest was higher in 2024 in both periods under comparison, primarily driven by DBP II.

The distributed carried interest in 2023 arose from the recapitalization of DataBank.

In the quarter-to-date comparison, 2024 included a reversal of unrealized carried interest, while a large unrealized carried interest was recognized in 2023, attributed primarily to DBP funds and a DataBank investment that was not subject to recapitalization.

In the year-to-date comparison, unrealized carried interest was higher in 2024, driven by DBP funds and partially offset by a reversal of carried interest in DataBank funds.

Principal Investment Income

Principal investment income decreased $14.4 million in the quarter-to-date comparison and $15.1 million in the year-to-date comparison.

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

(In thousands) 2024 2023 Change 2024 2023 Change

Principal investment income

Realized $ 2,647 $ — $ 2,647 $ 13,193 $ — $ 13,193

Unrealized 7,308 17,943 (10,635) 15,589 51,914 (36,325)

$ 9,955 $ 17,943 (7,988) $ 28,782 $ 51,914 (23,132)

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.

There was realized principal investment income of $8.2 million in the second quarter of 2024 and $10.5 million year-to-date 2024, including gains from syndication of an investment in DBP II and in the second quarter of 2024, $4.2 million of previously escrowed proceeds received from the partial sale of our interest in DataBank in prior years.

However, in both the quarter-to-date and year-to-date periods, these increases were more than offset by lower unrealized income in 2024 from fair value decreases or lower fair value increases in other funds.

Realized principal investment income in 2024 arose largely from gains related to syndication of investments in DBP funds and distribution of interest income.

Additionally, the year-to-date period included $4.2 million of previously escrowed proceeds received from the partial sale of our interest i n DataBank in prior years.

However, in both the quarter-to-date and year-to-date periods, the realized income in 2024 was more than offset by lower unrealized income from fair value decreases or lower fair value increases in underlying investments of other funds.

Other income decreased $5.2 million in the quarter-to-date comparison and $15.7 million in the year-to-date comparison.

In 2023, there was higher interest income from our subordinated notes in a collateralized loan obligation ("CLO") and money market deposits, and dividend income from our credit fund which was deconsolidated in the fourth quarter of 2023 (aggregate effect of $4.8 million and $18.2 million, respectively).

This was partially offset by incremental costs reimbursable by InfraBridge funds in 2024 that are grossed up as other income and expense ($1.7 million and $2.6 million, respectively).

Total expenses were $268.5 million and $132.3 million for the three months ended June 30, 2024 and 2023, respectively, and $352.4 million and $186.9 million for the six months ended June 30, 2024 and 2023, respectively, with the increase attributed primarily to unrealized carried interest compensation.

This was partially offset by incremental costs reimbursable by InfraBridge funds in 2024 that are grossed up as other income and administrative expense ($0.9 million and $3.5 million, respectively).

Total expenses were $76.3 million and $159.5 million for the three months ended September 30, 2024 and 2023, respectively, and $428.7 million and $346.3 million for the nine months ended September 30, 2024 and 2023, respectively, with the changes attributed primarily to significant variability in unrealized carried interest compensation.

Excluding incentive fee and carried interest compensation, expenses were lower in both periods under comparison, attributed largely to lower compensation expense, partially offset by higher administrative costs.

The year-to-date period also benefited from lower interest expense and transaction costs.

Changes in the various expense items are discussed below.

Compensation Expense

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

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

(In thousands) 2024 2023 Change 2024 2023 Change

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Incentive fee and carried interest compensation allocation (reversal) $ (8,474) $ 72,865 (81,339) $ 163,242 $ 72,110 91,132

Cash and equity-based compensation— Cash compensation was $1.8 million lower in the quarter-to-date comparison as 2023 included higher expenses from severance and an InfraBridge deferred bonus plan that was fully paid out in the first quarter of 2024, totaling $3.8 million, partially offset by higher headcount in 2024.

In comparison, cash compensation increased $3.4 million in the year-to-date comparison, which can be attributed to higher headcount to support our growing investment management business, partially offset by lower severance costs of $3.3 million.

Equity-based compensation was lower in both periods under comparison, as 2023 had higher expenses associated with performance-based awards as a result of target metrics for such awards being achieved.

Incentive fee and carried interest compensation allocation— The increase in compensation expense is consistent with the movement in carried interest, as discussed above.

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 15 to the consolidated financial statements), which had positive carried interest.

Cash and equity-based compensation— Cash compensation was $4.2 million lower in the quarter-to-date comparison and $0.8 million lower in the year-to-date comparison, as a result of lower estimated bonus, severance and retention costs (decreased $6.5 million and $5.8 million, respectively), partially offset by the effects of a higher headcount in 2024 to support our growing investment management business.

Equity-based compensation was lower in both periods under comparison as 2023 had higher expenses associated with performance-based awards that had achieved their targets.

Incentive fee and carried interest compensation allocation— The change in compensation expense for both periods is consistent with the change in carried interest, as discussed above.

Administrative and Other Expenses

Administrative and other expenses increased $9.5 million in the quarter-to-date comparison and $18.3 million in the year-to-date comparison.

In both periods under comparison, the increases can be attributed largely to an increase in third party professional service costs, reimbursable costs from our funds, office lease expense and information technology costs ($5.4 million and $7.7 million, respectively).

In the quarter-to-date comparison, the increase was partially offset by $3.7 million of placement fees in the second quarter of 2023 in connection with fundraising for our third flagship fund and co-investment vehicles.

In both periods under comparison, the increase can be attributed largely to higher third party professional service costs and also, reimbursable costs from our funds ($5.9 million and $11.3 million, respectively) that are grossed up in other income and administrative expense.

Interest Expense

Interest expense decreased $2.5 million in the quarter-to-date comparison and $5.5 million in the year-to-date comparison as a result of the Company's full exchange or redemption of its remaining 5.75% exchangeable senior notes in 2024 ($2.1 million decrease in both periods under comparison).

Interest expense decreased $1.4 million in the quarter-to-date comparison and $6.9 million in the year-to-date comparison as a result of the Company's full exchange or redemption of its remaining 5.75% exchangeable senior notes in 2024 (decreased $1.3 million and $3.4 million, respectively).

Additionally, interest expense decreased in the year-to-date comparison due to the full repayment of the $200 million 5.00% convertible notes upon maturity in April 2023 ($3.1 million).

Transaction-Related Costs

Transaction-related costs decreased $0.4 million in the quarter-to-date comparison and $8.2 million in the year-to-date comparison.

Both periods under comparison in 2023 included higher costs associated with the InfraBridge acquisition ($0.4 million and $7.5 million, respectively) and higher expense related to unconsummated deals.

Transaction-related costs increased $0.9 million in the quarter-to-date comparison due to higher unconsummated deal costs, and decreased $7.3 million in the year-to-date comparison as 2023 included higher costs related to the InfraBridge acquisition.

Depreciation and Amortization

Depreciation and amortization expense decreased $1.1 million in the quarter-to-date comparison and $2.1 million in the year-to-date comparison, primarily due to management contract intangible assets which have a declining amortization rate over time based upon projected cash flows to be generated from these contracts.

The decrease was partially offset in the year-to-date comparison with an additional month of amortization in 2024 on InfraBridge intangible assets acquired in February 2023.

Other Gain (Loss), Net

Other gain of $8.8 million and $2.9 million was recognized in the three and six months ended June 30, 2024, respectively, and other loss of $11.9 million and $156.4 million was recognized in the three and six months ended June 30, 2023, respectively.

The net gain in 2024 was primarily driven by the fair value decrease of warrant liability ($8.4 million and $3.0 million in the three and six months ended June 30, 2024, respectively).

The net loss in 2023 can be attributed mainly to a $133.3 million write-off of an unsecured promissory note from the 2022 sale of our Wellness Infrastructure business in the year-to-date period, and additionally, in both the three and six months ended June 30, 2023, the write-down in the value of a warehoused investment ($2.9 million and $16.5 million, respectively) and fair value increase of warrant liability ($6.8 million and $11.3 million, respectively).

Other gain of $47.9 million and $50.8 million was recognized in the three and nine months ended September 30, 2024, respectively, and $256.4 million and $100.0 million was recognized in the three and nine months ended September 30, 2023, respectively.

The net gain in the three and nine months ended September 30, 2024 was primarily driven by (i) net fair value increase in investments held by consolidated funds ($44.4 million and $46.0 million, respectively), (ii) net gain from partial sale and price changes on our non-core marketable equity securities ($6.5 million and $9.3 million, respectively), and (iii) fair value decrease of warrant liability ($1.2 million and $4.2 million, respectively), all of which were partially offset by impairment of warehoused investments ($8.9 million and $12.5 million, respectively).

The net gain in the three and nine months ended September 30, 2023 is mainly attributed to a $278.7 million gain recognized in connection with the deconsolidation of DataBank in September 2023 (of which $3.7 million was realized and $275.0 million unrealized), which was largely offset in the year-to-date period by a $133.3 million write-off of an unsecured promissory note from the 2022 sale of our Wellness Infrastructure business.

Both periods in 2023 also included losses related to fair value increase of warrant liability ($12.4 million and $23.7 million, respectively), and net decreases in investment values, including those held by our consolidated funds ($8.0 million and $16.1 million, respectively).

Income Tax Benefit (Expense)

Income tax benefit was immaterial and income tax expense was $2.8 million in the three months ended June 30, 2024 and 2023, respectively.

In the year-to-date comparison, income tax expense was $1.2 million and $3.9 million, respectively.

This reflects the income tax expense of foreign subsidiaries, partially offset by an income tax benefit recorded as a result of various U.S.

state tax refunds, particularly in 2024.

Income tax expense was $0.9 million and $0.1 million in the three months ended September 30, 2024 and 2023, respectively, and $2.1 million and $3.9 million in the nine months ended September 30, 2024 and 2023.

This reflects the income tax expense of foreign subsidiaries, partially offset in year-to-date 2024 by various U.S.

state tax refunds.

The Company otherwise has operating losses and capital loss carryforwards that can be applied against current income tax expense for its domestic entities, and has established a full valuation allowance on the deferred tax assets of these entities, resulting in no net federal income tax effect for its domestic entities.

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) 2024 2023 Change 2024 2023 Change

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$ 1,345 $ (11,204) 12,549 $ (12,459) $ (46,988) 34,529

Loss from discontinued operations for the six months ended June 30, 2024 included primarily a loss on a guarantee related to the previous bulk sale of the Company's real estate investments.

Loss from discontinued operations for the nine months ended September 30, 2024 included primarily a loss on a guarantee related to the previous bulk sale of the Company's real estate investments.

The loss in 2023 represents primarily the operations of the former Operating segment and $9.7 million impairment of BRSP shares prior to disposition in March 2023, as discussed in Note 2 to the consolidated financial statements.

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Presented below are total AUM and FEEUM by product:

(In billions) June 30, 2024 December 31, 2023

(In billions) September 30, 2024 December 31, 2023

Assets Under Management

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The following table summarizes changes in FEEUM:

Six Months Ended June 30, 2024

Nine Months Ended September 30, 2024

(In billions)

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Market activity and other (3)

Balance at June 30

Balance at September 30

(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.

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

Amount was less than $100 million in the first half of 2024.

There was a marginal decrease in FEEUM to $32.7 billion at June 30, 2024 compared to $32.8 billion at December 31, 2023.

In the first half of 2024, FEEUM contributed by capital raise for our third flagship fund and additional invested capital from other DBP funds were offset by the effects of various recapitalization and syndication of fund investments, resulting in a marginal net decrease in our fee base.

Amount was less than $100 million in 2024.

FEEUM increased $1.3 billion in 2024 to $34.1 billion at September 30, 2024, driven by capital raise for our third flagship fund and deployments in other DBP funds, partially offset by the effects of various recapitalization and syndication of investments.

Non-GAAP Supplemental Financial Measures

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

Three Months Ended June 30,

Three Months Ended September 30,

(In thousands) 2024 2023 Change

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Fee-Related Earnings .

FRE increased $4.4 million, or 20%, to $26.0 million, resulting from continued growth in our investment management business as FEEUM increased 12% from $29.1 billion at June 30, 2023 to $32.7 billion at June 30, 2024.

FRE increased $7.8 million, or 42%, to $26.2 million, resulting from continued growth in our investment management business as FEEUM increased 14% from $29.9 billion at September 30, 2023 to $34.1 billion at September 30, 2024.

This reflects primarily fee revenue from new capital raised for our third flagship fund, partially offset by decreases in fees in other funds due to change in fee basis, syndications and recapitalizations.

Additionally, higher compensation and administrative costs were incurred in 2024 in supporting our growing investment management business.

Additionally, higher administrative costs were incurred in 2024 in supporting our growing investment management business.

Distributable Earnings .

DE increased $14.1 million to $19.6 million.

In addition to the improvement in FRE, DE also benefited from the receipt of final proceeds from the 2023 sale of our interest in DataBank which represented a gain in 2024, lower interest expense following the exchange into equity or redemption of our exchangeable notes, and the absence of placement fee expense in 2024.

However, DE was partially reduced by lower interest income in 2024.

DE in the third quarter of 2023 of $32.6 million had benefited from $27.9 million of realized carried interest from the recapitalization of DataBank.

As a result, notwithstanding a $7.8 million increase in FRE, DE decreased $21.9 million to $10.7 million in the third quarter of 2024.

Distributable Earnings and Fee-Related Earnings Reconciliation

Three Months Ended June 30,

Three Months Ended September 30,

(In thousands) 2024 2023

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Net income (loss) attributable to Operating Company (933) 281,746

Transaction-related and non-core items (1)

Transaction-related costs and non-core items (1)

Other (gain) loss, net (2)

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OP share of (income) loss from discontinued operations (5) (6)

(1,439) 14,051

Distributable Earnings, after tax—attributable to Operating Company

10,732 32,618

Realized principal investment income (6)

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(4) Adjustments attributable to noncontrolling interests in investment entities pertain to other gain/loss attributed to limited partners of consolidated funds, and a third party investor's share of principal investment income attributed to our general partner interest in certain sponsored funds.

Allocation of unrealized carried interest to management and a third party investor is netted against "unrealized carried interest, net of expense (allocation) reversal" for all periods presented (recasted for periods prior to the second quarter of 2024 when it was presented gross in "adjustments attributable to noncontrolling interests in investment entities").

Allocation of unrealized carried interest to management and a third party investor is netted against "unrealized carried interest, net of expense (allocation) reversal" for all periods presented (recasted for periods prior to the second quarter of 2024 when it was previously presented gross in "adjustments attributable to noncontrolling interests in investment entities").

(5) OP share of discontinued operations represents primarily operating results of portfolio companies consolidated in the former Operating segment prior to 2024, net of associated noncontrolling interests in investment entities.

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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.

We regularly evaluate our liquidity position, 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, 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;

Our primary liquidity needs, both short term and long term, are to fund:

• our operations, including compensation, administrative and overhead costs;

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

• principal and interest payments on our debt;

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• 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;

• cash flow generated from our investments, both from operations and return of capital, including proceeds from full or partial realization of investments;

• availability under our Variable Funding Notes ("VFN");

• issuance of additional term notes under our corporate securitization;

• proceeds from full or partial realization of investments;

• proceeds from public or private equity and debt offerings.

At June 30, 2024, our liquidity position was approximately $427 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.

At September 30, 2024, our liquidity position was approximately $427 million, composed of available corporate cash and including the full $300 million under our VFN.

Available corporate cash generally represents cash at our OP entity after allocating cash for certain compensatory liabilities, and excludes cash held at subsidiaries of the OP, including cash maintained to satisfy regulatory capital requirements in applicable foreign jurisdictions.

We believe we have sufficient cash on hand, and anticipated cash generated from operating activities and availability of external financing sources, to meet our short term and long term liquidity and capital requirements.

While we have sufficient liquidity to meet our operational needs, we continuously 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 2024

• We continued to reduce higher cost corporate indebtedness through the full exchange or redemption of the remaining $78.4 million of 5.75% senior notes, which will result in annual interest savings of approximately $4.5 million.

• We continued to reduce higher cost corporate indebtedness through the full exchange or redemption of the remaining $78.4 million of 5.75% senior notes, which results in annual interest savings of approximately $4.5 million.

• We settled the remaining $35 million contingent consideration payable to Wafra i n connection with the 2022 redemption of their investment in the Company's investment management business, 50% each in shares of the Company's Class A common stock and in cash.

• We monetized marketable equity securities that form non-core investments for total net proceeds of $35.0 million.

• As the subordinated note holder of a third party managed CLO, we received $10.4 million of excess net proceeds from a refinancing of the CLO in October 2024, which we applied as a return of capital.

Liquidity Needs and Capital Activities

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

As of June 30, 2024, we have unfunded commitments totaling $281.1 million to our sponsored funds.

As of September 30, 2024, we have unfunded equity commitments to our unconsolidated funds as general partner and general partner affiliate of $262.5 million (including commitments attributed to the ownership by employees and former employees in the general partner entities).

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.

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

At June 30, 2024, warehoused investments aggregated to $51 million at cost.

At September 30, 2024, warehoused investments have an aggregate carrying value of $22 million.

Carried Interest Clawback

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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.

At June 30, 2024, the Company had no liability for clawback obligations on distributed carried interest.

At September 30, 2024, the Company had no liability for clawback obligations on distributed carried interest.

Lease Obligations

At June 30, 2024, we had $44 million of operating lease obligations on our corporate offices, which will be funded through corporate operating cash.

At September 30, 2024, we had $45 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.

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We intend to monetize and recycle capital from our non-core investments through opportunistic asset sales.

In July 2024, we monetized marketable equity securities that form non-core investments for total net proceeds of $9.8 million.

Following this sale, remaining marketable equity securities available for future monetization totaled $25.1 million based upon their June 30, 2024 market price.

Following monetization of a substantial portion of our holdings in the third quarter of 2024, remaining marketable equity securities available for future monetization totaled $6.4 million at September 30, 2024.

Public Offerings

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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) 2024 2023

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Cash inflows from operating activities are generated primarily through fee-related earnings, 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 former Operating segment during 2023, net operating income from investment properties.

Our operating activities generated net cash outflows of $4.5 million in 2024 and inflows of $91.9 million in 2023.

Our operating activities generated net cash inflows of $31.4 million and $192.1 million in 2024 and 2023, respectively.

2023 cash inflows were driven largely by the operating activities of portfolio companies in the former Operating segment.

Investing Activities

Investing activities relate to general partner and general partner affiliate investments in sponsored funds, including drawdown of commitments and return of investments from realized fund investments;

origination or acquisition of warehoused investments and subsequent repayments, sales and transfers of warehoused investments;

Investing activities relate to general partner and general partner affiliate investments in sponsored funds, including drawdown of commitments and return of capital from realized fund investments;

business combinations;

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Our investing activities generated net cash outflows of $6.8 million in 2024 and $768.1 million in 2023.

• In 2024, equity investments recorded net cash outflows of $14.2 million, attributed primarily to fundings of our general partner and general partner affiliate commitments in our sponsored funds, net of return of capital.

This was partially offset by net proceeds from investing activities of our consolidated liquid funds which hold marketable equity securities.

• Net cash outflows in 2024 were driven by $76.8 million of fundings for our general partner and general partner affiliate commitments in our sponsored funds, net of return of capital, largely offset by $35.0 million of net proceeds from sale of our non-core investments and $38.0 million of net inflows from the investing activities of our consolidated liquid funds which hold marketable equity securities.

• The large net cash outflows in 2023 can be attributed to (i) real estate investing activities which generated net cash outflows of $613.1 million, attributable to capital expenditures in the data center portfolio of our former Operating segment;

and (ii) $314.3 million paid, net of cash assumed, for the acquisition of InfraBridge.

(ii) derecognition of $102.4 million of cash and restricted cash following the deconsolidation of a portfolio company in our former Operating segment, and (iii) $314.3 million paid, net of cash assumed, for the acquisition of InfraBridge.

These outflows were partially offset by net cash inflows of $232.3 million from equity investments, largely representing $201.6 million proceeds 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, partially offset by funding of our general partner and general partner affiliate commitments, net of return of capital.

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 deconsolidation in 2023, portfolio companies in the former Operating segment financed their investing activities largely through investment-level secured debt and incurred cash outlays for debt servicing and distributions to their third party investors who represented noncontrolling interests.

We may draw upon our securitized financing facility to finance our operating activities, and have the ability to raise capital in the public markets through issuances of preferred stock, common stock and private placement notes.

We incur cash outlays primarily for payments on our corporate debt, and dividends to our preferred stockholders and common stockholders.

Prior to deconsolidation in 2023, portfolio companies in the former Operating segment financed their activities largely through investment-level secured debt and incurred cash outlays for debt servicing and distributions to their third party investors who represented noncontrolling interests.

Financing activities generated net cash outflows in 2024 and inflows in 2023.

• In 2024, net cash outflows of $61.9 million represent cash settlement of the Wafra contingent consideration of $17.5 million, $5.0 million cash redemption of our 5.75% senior notes, $14.6 million of investor capital redeemed by our consolidated liquid funds, net of contribution, and $32.6 million payment of our preferred and common stock dividends.

This was partially offset by a $6.1 million syndication of our interest in a consolidated fund and separately, Wafra's share of our general partner funding of commitments in DBP I.

• Net cash inflows of $24.1 million in 2023 represent primarily $421.1 million of additional investment-level debt in the former Operating segment, largely offset by the full 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 our former Operating segment.

• In 2024, net cash outflows of $77.8 million were driven by preferred dividend payments of $44.0 million, cash settlement of contingent consideration to Wafra of $17.5 million, and limited partner redemptions in our consolidated liquid funds, partially offset by syndication of our interest in a consolidated fund and funding by Wafra for its share of our general partner commitment in DBP I.

• Net cash inflows of $78.6 million in 2023 represent primarily $489.9 million of additional investment-level debt in the former Operating segment, largely offset by the full repayment of our $200 million 5.00% convertible senior notes, $90 million contingent consideration payment to Wafra, $73.5 million redemption by a limited partner in a consolidated liquid fund, and income distribution to noncontrolling interests in our former Operating segment.

Guarantees and Off-Balance Sheet Arrangements

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What changed 10-Q

Item 2. Management’s Discussion and Analysis