8-K
DigitalBridge Group, Inc. (DBRG)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): August 5, 2021
| DIGITALBRIDGE GROUP, INC. | ||||
|---|---|---|---|---|
| (Exact Name of Registrant as Specified in Its Charter) | Maryland | 001-37980 | 46-4591526 | |
| --- | --- | --- | ||
| (State or Other Jurisdiction of<br>Incorporation or Organization) | (Commission<br>File Number) | (I.R.S. Employer<br>Identification No.) |
750 Park of Commerce Drive, Suite 210
Boca Raton, Florida 33487
(Address of Principal Executive Offices, Including Zip Code)
(561) 570-4644
Registrant’s telephone number, including area code:
N/A
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |||||
|---|---|---|---|---|---|---|
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |||||
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |||||
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) | Securities registered pursuant to Section 12(b) of the Act: | ||||
| --- | --- | --- | ||||
| Title of Class | Trading Symbol(s) | Name of Each Exchange on Which Registered | ||||
| Class A Common Stock, $0.01 par value | DBRG | New York Stock Exchange | ||||
| Preferred Stock, 7.50% Series G Cumulative Redeemable, $0.01 par value | DBRG.PRG | New York Stock Exchange | ||||
| Preferred Stock, 7.125% Series H Cumulative Redeemable, $0.01 par value | DBRG.PRH | New York Stock Exchange | ||||
| Preferred Stock, 7.15% Series I Cumulative Redeemable, $0.01 par value | DBRG.PRI | New York Stock Exchange | ||||
| Preferred Stock, 7.125% Series J Cumulative Redeemable, $0.01 par value | DBRG.PRJ | New York Stock Exchange | Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). | |||
| --- | --- | --- | ||||
| Emerging growth company | ☐ | |||||
| If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. | ☐ |
Item 2.02 Results of Operations and Financial Condition.
On August 5, 2021, DigitalBridge Group, Inc. (the “Company”) issued a press release announcing its financial position as of June 30, 2021 and its financial results for the quarter ended June 30, 2021. A copy of the press release is attached as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference.
On August 5, 2021, the Company made available a Supplemental Financial Disclosure Presentation for the quarter ended June 30, 2021 on the Company’s website at www.digitalbrige.com. A copy of the Supplemental Financial Disclosure Presentation is attached as Exhibit 99.2 to this Current Report on Form 8-K and is incorporated herein by reference.
Item 7.01 Regulation FD Disclosure.
In connection with the earnings call to be held on August 5, 2021 as referenced in the press release, the Company has prepared a presentation, dated August 5, 2021 (the "Earnings Presentation"), a copy of which is attached as Exhibit 99.3 to this Current Report on Form 8-K and incorporated herein by reference.
The information included in this Current Report on Form 8-K (including Exhibits 99.1, 99.2 and 99.3 hereto) shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference into any filing made by the Company under the Exchange Act or the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such a filing.
Use of Website to Distribute Material Company Information
The Company’s website address is www.digitalbridge.com. The Company uses its website as a channel of distribution for important company information. Important information, including press releases, analyst presentations and financial information regarding the Company, is routinely posted on and accessible on the Shareholders subpage of its website, which is accessible by clicking on the tab labeled “Shareholders” on the website home page. The Company also uses its website to expedite public access to time-critical information regarding the Company in advance of or in lieu of distributing a press release or a filing with the U.S. Securities and Exchange Commission disclosing the same information. Therefore, investors should look to the Shareholders subpage of the Company’s website for important and time-critical information. Visitors to the Company’s website can also register to receive automatic e-mail and other notifications alerting them when new information is made available on the Shareholders subpage of the website.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits. The following exhibits are being furnished herewith to this Current Report on Form 8-K.
| Exhibit No. | Description |
|---|---|
| 99.1 | Press Release dated August 5, 2021 |
| 99.2 | Supplemental Financial Disclosure Presentation for the quarter ended June 30, 2021 |
| 99.3 | Earnings Presentation dated August 5, 2021 |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Date: | August 5, 2021 | DIGITALBRIDGE GROUP, INC. | |
|---|---|---|---|
| By: | /s/ Jacky Wu | ||
| Jacky Wu | |||
| Executive Vice President and Chief Financial Officer |
Document
Exhibit 99.1
DIGITALBRIDGE ANNOUNCES SECOND QUARTER 2021 FINANCIAL RESULTS
Boca Raton, August 5, 2021 - DigitalBridge Group, Inc. (NYSE: DBRG) and subsidiaries (collectively, “DigitalBridge,” or the “Company”) today announced financial results for the second quarter ended June 30, 2021. The Company reported second quarter 2021 total revenues of $237 million, GAAP net loss attributable to common stockholders of $(141) million, or $(0.29) per share and Core FFO of $(4.8) million, or $(0.01) per share.
“This past quarter marked an exciting milestone for the Company, with our business transformation from ‘diversified to digital’ nearly complete we unveiled a new name and logo, DigitalBridge, highlighting our team’s deep heritage investing in digital infrastructure and introducing investors to what we believe is the fastest-growing digital infrastructure REIT globally,” said Marc Ganzi, President and CEO of DigitalBridge. "Our new flagship equity fund, DCP II, now has commitments of over $6.6 billion, exceeding its $6.0 billion target and we have already made seven platform investments out of this new fund, positioning DigitalBridge for its next stage of growth."
Q2 2021 HIGHLIGHTS
Executing on the Next Chapter as DigitalBridge
•Completed rebranding to DigitalBridge, reflecting the Company’s singular focus on owning, building and operating digital infrastructure businesses on a global basis.
•Unveiled our strategic priorities and introduced investors to the broadest, deepest team in digital infrastructure during our inaugural Investor Day in June.
•Updated and increased 2021 and 2023 financial guidance for our two primary Digital businesses and introduced longer-term 2025 financial targets.
•Increased Digital AUM to $36 billion as of August 5, 2021, representing an increase of 11% from the prior quarter and 65% year-over-year (YoY), driven by strong capital formation at our second flagship fund, which now stands at $6.6 billion inclusive of the Company’s commitment.
•In July, issued $500 million of notes securitized by investment management fee earnings with a BBB investment grade rating in a first-of-its-kind transaction.
Focus on Digital Earnings
•The majority of legacy assets are now classified as discontinued operations and are no longer contributing to Core FFO, including Wellness Infrastructure which was transitioned to discontinued operations this quarter.
•The streamlined organization and reporting highlight a digital business with a strong growth trajectory and attractive returns on capital.
•Core FFO is now substantially comprised of Digital earnings, for which we have updated and increased guidance, and corporate overhead, which will continue to be rationalized.
•Existing liquidity and anticipated legacy monetizations represent over $2 billion of untapped earnings power.
•Core Digital Adjusted EBITDA increased by 146% to $31 million from $13 million in the prior year due to significant FEEUM growth and substantial investments in high-quality Digital Operating assets, namely Vantage SDC and DataBank's acquisition of zColo.
| Financial Summary | |
|---|---|
| ( in millions, except per share data and where noted) | |
| Q2 2020 | |
| Corporate: | |
| Property operating income | $42 |
| Fee income | $20 |
| Total revenues | $68 |
| Net loss to common stockholders | $(2,043) |
| Net loss to common stockholders per share | $(4.33) |
| Adjusted EBITDA | $(5) |
| Core FFO | $(37) |
| Core FFO per share | $(0.07) |
| Liquidity (cash & undrawn VFN/RCF)(1) | $904 |
| Core Digital (Investment Management & Operating): | |
| Net income to common stockholders | $(2) |
| Adjusted EBITDA | $13 |
| Core FFO | $11 |
| Digital AUM(2) (in billions) | $21.5 |
All values are in US Dollars.
________________________________________________
Note: Revenues and Net Income are consolidated while Adjusted EBITDA, Core FFO, Liquidity and AUM are DBRG OP share.
(1) Amounts as of June 30, 2021 and June 30, 2020, respectively. Corporate revolving credit facility (RCF) maximum availability was $500 million as of June 30, 2020. In July 2021, the Company terminated and replaced the RCF with $200 million revolving Variable Funding Notes, which are currently undrawn and included in June 30, 2021 liquidity. In addition, June 30, 2021 is proforma for $280 million of net proceeds from Class A-2 term note issued in July 2021 and the pending redemption of $86 million of our preferred equity stock in August 2021.
(2) Includes Digital Investment Management, Digital Operating and Digital Other.
Accelerating Monetization of Legacy Businesses and Reduction of High-Cost Securities
•On April 30, 2021, the Company and BrightSpire Capital, Inc. (NYSE: BRSP) (formerly Colony Credit Real Estate, Inc.) terminated the BRSP management agreement for a one-time payment of $102.3 million in cash, which resulted in the internalization of BRSP's management and operating functions, with 44 employees previously dedicated wholly or substantially to BRSP becoming employees of BRSP.
•In June 2021, we entered into a definitive agreement to sell a substantial majority of our OED investments and Other IM business, including our general partner interests and management rights with respect to these OED assets, to an affiliate of Fortress Investment Group. The aggregate sales price is approximately $535 million, subject to customary adjustments. Digital AUM will represent 85% of total AUM upon the closing of this transaction, which is expected during the fourth quarter of 2021.
•During the second quarter of 2021, the Company initiated a process to dispose of its Wellness Infrastructure business along with assets and liabilities of NRF Holdco, LLC, a wholly-owned subsidiary of the Company, and includes: (i) the Company's equity interest in and management of its sponsored non-traded REIT, NorthStar Healthcare Income, Inc., debt securities collateralized largely by certain debt and preferred equity within the capital structure of the Wellness Infrastructure portfolio, limited partner interests in private equity real estate funds; and (ii) the 5.375% exchangeable senior notes, trust preferred securities and corresponding junior subordinated debt, all of which were issued by NRF Holdco, LLC, who acts as guarantor. This process resulted in the re-classification of the Wellness Infrastructure business into discontinued operations.
•On August 16, 2021, the Company will redeem all of its $86.3 million 7.5% Series G preferred stock, lowering its cost of corporate securities by 350 basis points when compared with the recently issued securitization notes and VFN. Dividends on the Series G preferred shares will cease to accrue on this redemption date.
Corporate Rebranding
•On June 22, 2021 the Company effectuated a corporate rebrand, changing its name to DigitalBridge Group, Inc., and began trading under a new NYSE ticker symbol, DBRG, and held its inaugural Virtual Investor Day, during which we highlighted key steps in our transformation into a leading global digital infrastructure REIT.
•In July 2021, the Company published its 2020 Environmental, Social and Governance (ESG) Report, “Accelerating Our Impact,” which details DigitalBridge’s approach to responsible investment, and includes its expectations for and actions to help portfolio companies advance their ESG initiatives. The report also highlights the Company’s 2020 achievements and commitments for 2021 and beyond.
Common Stock and Operating Company Units
As of August 2, 2021, the Company had 493.1 million shares of Class A and B common stock outstanding and the Company’s operating partnership had 52.0 million operating company units outstanding and held by members other than the Company.
Preferred Dividends
On May 4, 2021, the Company’s Board declared cash dividends with respect to each series of the Company’s cumulative redeemable perpetual preferred stock in accordance with the terms of such series, as follows: with respect to each of the Series G preferred stock: $0.46875 per share; Series H preferred stock: $0.4453125 per share; Series I preferred stock: $0.446875 per share; and Series J preferred stock: $0.4453125 per share, such dividends were paid on July 15, 2021 to the respective stockholders of record on July 9, 2021.
On August 4, 2021, the Company’s Board declared cash dividends with respect to each series of the Company’s cumulative redeemable perpetual preferred stock in accordance with the terms of such series, as follows: Series H preferred stock: $0.4453125 per share; Series I preferred stock: $0.446875 per share; and Series J preferred stock: $0.4453125 per share, such dividends will be paid on October 15, 2021 to the respective stockholders of record on October 11, 2021.
In July 2021, the Company announced it will be redeeming all of its outstanding shares of 7.5% Series G Cumulative Redeemable Perpetual Preferred Stock (NYSE: DBRG.PrG) (the “Series G Preferred Shares”) with a total liquidation preference of $86.3 million. The cash redemption price for each Series G Preferred Share is $25, plus any accrued and unpaid dividends (whether or not declared) to, but not including, the redemption date of August 16, 2021 (the “Redemption Date”). Dividends on the Series G Preferred Shares will cease to accrue on the Redemption Date.
Second Quarter 2021 Conference Call
The Company will conduct an earnings presentation and conference call to discuss the financial results on Thursday, August 5, 2021 at 10:00 a.m. ET. The earnings presentation will be broadcast live over the Internet and can be accessed on the Shareholders section of the Company’s website at ir.digitalbridge.com/events. A webcast of the presentation and conference call will be available on the Company’s website. To participate in the event by telephone, please dial (855) 327-6837 ten minutes prior to the start time (to allow time for registration). International callers should dial (631) 891-4304.
For those unable to participate during the live call, a replay will be available starting August 5, 2021, at 1:00 p.m. ET. To access the replay, dial (844) 512-2921 (U.S.), and use passcode 10015663. International callers should dial (412) 317-6671 and enter the same conference ID number.
Earnings Presentation and Supplemental Financial Report
A Second Quarter 2021 Earnings Presentation and Supplemental Financial Report is available in the Events & Presentations and Financial Information sections, respectively, of the Shareholders tab on the Company’s website at www.digitalbridge.com. This information has also been furnished to the U.S. Securities and Exchange Commission in a Current Report on Form 8-K.
About DigitalBridge Group, Inc.
DigitalBridge (NYSE: DBRG) is a leading global digital infrastructure REIT. With a heritage of over 25 years investing in and operating businesses across the digital ecosystem including towers, data centers, fiber, small cells, and edge infrastructure, the DigitalBridge team manages a $35 billion portfolio of digital infrastructure assets on behalf of its limited partners and shareholders. DigitalBridge, structured as a REIT, is headquartered in Boca Raton with key offices in Los Angeles, New York, London and Singapore. For more information on DigitalBridge, visit www.digitalbridge.com.
Cautionary Statement Regarding Forward-Looking Statements
This press release may contain forward-looking statements within the meaning of the federal securities laws, including statements related to our digital transformation. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. In some cases, you can identify forward-looking statements by the use of forward-looking terminology such as “may,” “will,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” or “potential” or the negative of these words and phrases or similar words or phrases which are predictions of or indicate future events or trends and which do not relate solely to historical matters. You can also identify forward-looking statements by discussions of strategy, plans or intentions.
Forward-looking statements involve known and unknown risks, uncertainties, assumptions and contingencies, many of which are beyond the Company’s control, and may cause the Company’s actual results to differ significantly from those expressed in any forward-looking statement. Factors that might cause such a difference include, without limitation, the duration and severity of the current novel coronavirus (COVID-19) pandemic, and its impact on the global market, economic and environmental conditions generally and in the digital and communications technology, wellness infrastructure and hospitality real estate, other commercial real estate equity and debt, and investment management sectors; the effect of COVID-19 on the Company's operating cash flows, debt service obligations and covenants, liquidity position and valuations of its real estate investments; whether we will successfully execute our strategic transformation to become a digital infrastructure and real estate focused company within the timeframe contemplated or at all, and the impact of such transformation on the Company's legacy portfolios and assets, including whether such transformation will be consistent with the Company’s REIT status; our ability to obtain and maintain financing arrangements, including securitizations, on favorable or comparable terms or at all; the Company's ability to complete anticipated monetizations of
non-core assets within the timeframe and on the terms contemplated, if at all; the impact of the completion of the sale of the Company's hospitality portfolios and whether we will realize the anticipated benefits of our exit from our hospitality business; the impact of completed or anticipated initiatives related to our digital transformation, including the strategic investment by Wafra and the formation of certain other investment management platforms, on our company's growth and earnings profile; whether we will realize any of the anticipated benefits of our strategic partnership with Wafra, including whether Wafra will make additional investments in our Digital Other and Digital Operating segments; our ability to integrate and maintain consistent standards and controls, including our ability to manage our acquisitions in the digital industry effectively; the ability to realize anticipated strategic and financial benefits from terminating the management agreement with Brightspire Capital, Inc. (NYSE:BRSP; formerly, Colony Credit Real Estate, Inc. or CLNC); the impact to our business operations and financial condition of realized or anticipated compensation and administrative savings through cost reduction programs; our ability to redeploy any proceeds received from the sale of our non-digital or other legacy assets within the timeframe and manner contemplated or at all; our business and investment strategy, including the ability of the businesses in which we have a significant investment (such as BRSP) to execute their business strategies; BRSP's trading price and its impact on the carrying value of the Company's investment in BRSP; performance of our investments relative to our expectations and the impact on our actual return on invested equity; our ability to grow our business by raising capital for the companies that we manage; our ability to deploy capital into new investments consistent with our digital business strategies, including the earnings profile of such new investments; the impact of adverse conditions affecting a specific asset class in which we have investments; the availability of, and competition for, attractive investment opportunities; our ability to achieve any of the anticipated benefits of certain joint ventures, including any ability for such ventures to create and/or distribute new investment products; our ability to satisfy and manage our capital requirements; our expected hold period for our assets and the impact of any changes in our expectations on the carrying value of such assets; the general volatility of the securities markets in which we participate; stability of the capital structure of our wellness infrastructure portfolio and remaining hospitality portfolio; changes in interest rates and the market value of our assets; interest rate mismatches between our assets and any borrowings used to fund such assets; effects of hedging instruments on our assets; the impact of economic conditions on third parties on which we rely; any litigation and contractual claims against us and our affiliates, including potential settlement and litigation of such claims; our levels of leverage; adverse domestic or international economic conditions, including those resulting from the COVID-19 pandemic, and the impact on the commercial real estate or real-estate related sectors; the impact of legislative, regulatory and competitive changes; actions, initiatives and policies of the U.S. and non-U.S. governments and changes to U.S. or non-U.S. government policies and the execution and impact of these actions, initiatives and policies; whether we will maintain our qualification as a real estate investment trust for U.S. federal income tax purposes and our ability to do so; our ability to maintain our exemption from registration as an investment company under the Investment Company Act of 1940, as amended; changes in our board of directors or management team, and availability of qualified personnel; our ability to make or maintain distributions to our stockholders; our understanding of our competition, and other risks and uncertainties, including those detailed in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020 and Quarterly Report on Form 10-Q for the quarter ended March 31, 2021, each under the heading “Risk Factors,” as such factors may be updated from time to time in the Company’s subsequent periodic filings with the U.S. Securities and Exchange Commission (“SEC”). All forward-looking statements reflect the Company’s good faith beliefs, assumptions and expectations, but they are not guarantees of future performance. Additional information about these and other factors can be found in the Company’s reports filed from time to time with the SEC.
The Company cautions investors not to unduly rely on any forward-looking statements. The forward-looking statements speak only as of the date of this press release. The Company is under no duty to update any of these forward-looking statements after the date of this press release, nor to conform prior statements to actual results or revised expectations, and the Company does not intend to do so.
Source: DigitalBridge Group, Inc.
Investor Contacts:
Severin White
Managing Director, Head of Public Investor Relations
severin.white@digitalbridge.com
212-547-2777
Non-GAAP Financial Measures and Definitions
Adjusted Earnings before Interest, Taxes, Depreciation and Amortization
The Company calculates Adjusted EBITDA by adjusting Core FFO to exclude cash interest expense, preferred dividends, tax expense or benefit, earnings from equity method investments, placement fees, realized carried interest and incentive fees, and revenues and corresponding costs related to installation services. The Company uses Adjusted EBITDA as a supplemental measure of our performance because they eliminate depreciation, amortization, and the impact of the capital structure from its operating results. However, because Adjusted EBITDA is calculated before recurring cash charges including interest expense and taxes and are not adjusted for capital expenditures or other recurring cash requirements, their utilization as a cash flow measurement is limited.
Assets Under Management (AUM)
Assets owned by the Company’s balance sheet and assets for which the Company and its affiliates provide investment management services, including assets for which the Company may or may not charge management fees and/or performance allocations. Balance sheet AUM is based on the undepreciated carrying value of digital investments and the impaired carrying value of non digital investments as of the reporting date. Investment management AUM is based on the cost basis of managed investments as reported by each underlying vehicle as of the reporting date. AUM further includes uncalled capital commitments, but excludes DBRG OP’s share of non wholly-owned real estate investment management platform’s AUM. The Company's calculations of AUM may differ from the calculations of other asset managers, and as a result, this measure may not be comparable to similar measures presented by other asset managers.
DigitalBridge Operating Company, LLC (DBRG OP)
DBRG OP is the operating partnership through which the Company conducts all of its activities and holds substantially all of its assets and liabilities. The Company is the sole managing member of, and directly owns approximately 90% of the common units in, DBRG OP. The remaining common units in DBRG OP are held primarily by current and former employees of the Company. Each common unit is redeemable at the election of the holder for cash equal to the then fair value of one share of the Company’s Class A common stock or, at the Company’s option, one share of the Company’s Class A common stock. DBRG OP share excludes noncontrolling interests in investment entities. Throughout this presentation, consolidated figures represent the interest of both the Company (and its subsidiary, the “DBRG OP”) and noncontrolling interests. Figures labeled as DBRG OP share represent the Company’s pro-rata share.
Digital Operating Earnings before Interest, Taxes, Depreciation and Amortization for Real Estate (EBITDAre) and Adjusted EBITDA
The Company calculates EBITDAre in accordance with the standards established by the National Association of Real Estate Investment Trusts, which defines EBITDAre as net income or loss calculated in accordance with GAAP, excluding interest, taxes, depreciation and amortization, gains or losses from the sale of depreciated property, and impairment of depreciated property. The Company calculates Adjusted EBITDA by adjusting EBITDAre for the effects of straight-line rental income/expense adjustments and amortization of acquired above- and below-market lease adjustments to rental income, revenues and corresponding costs related to the delivery of installation services, equity-based compensation expense, restructuring and transaction related costs, the impact of other impairment charges, gains or losses from sales of undepreciated land, gains or losses from foreign currency remeasurements, and gains or losses on early extinguishment of debt and hedging instruments. The Company uses EBITDAre and Adjusted EBITDA as supplemental measures of our performance because they eliminate depreciation, amortization, and the impact of the capital structure from its operating results. EBITDAre represents a widely known supplemental measure of performance, EBITDA, but for real estate entities, which we believe is particularly helpful for generalist investors in REITs. EBITDAre depicts the operating performance of a real estate business independent of its capital structure, leverage and noncash items, which allows for comparability across real estate entities with different capital structure, tax rates and depreciation or amortization policies. Additionally, exclusion of gains on disposition and impairment of depreciated real estate, similar to FFO, also provides a reflection of ongoing operating performance and allows for period-over-period comparability. However, because EBITDAre and Adjusted EBITDA are calculated before recurring cash charges including interest expense and taxes and are not adjusted for capital expenditures or other recurring cash requirements, their utilization as a cash flow measurement is limited.
Fee-Earning Equity Under Management (FEEUM)
Equity for which the Company and its affiliates provides investment management services and derives management fees and/or performance allocations. FEEUM generally represents the basis used to derive fees, which may be based on invested equity, stockholders’ equity, or fair value pursuant to the terms of each underlying investment management agreement. The Company's calculations of FEEUM may differ materially from the calculations of other asset managers, and as a result, this measure may not be comparable to similar measures presented by other asset managers.
Fee Related Earnings (FRE)
The Company calculates FRE for its investment management business within the digital segment as base management fees, other service fee income, and other income inclusive of cost reimbursements, less compensation expense (excluding equity-based compensation), administrative expenses (excluding fund raising placement agent fee expenses), and other operating expenses
related to the investment management business. The Company uses FRE as a supplemental performance measure as it may provide additional insight into the profitability of the overall digital investment management business. FRE is presented prior to the deduction for Wafra's 31.5% interest.
Funds From Operations (FFO) and Core Funds From Operations (Core FFO)
The Company calculates funds from operations (FFO) in accordance with standards established by the National Association of Real Estate Investment Trusts, which defines FFO as net income or loss calculated in accordance with GAAP, excluding (i) extraordinary items, as defined by GAAP; (ii) gains and losses from sales of depreciable real estate; (iii) impairment write-downs associated with depreciable real estate; (iv) gains and losses from a change in control in connection with interests in depreciable real estate or in-substance real estate, plus (v) real estate-related depreciation and amortization; and (vi) including similar adjustments for equity method investments. Included in FFO are gains and losses from sales of assets which are not depreciable real estate such as loans receivable, equity method investments, as well as equity and debt securities, as applicable.
The Company computes core funds from operations (Core FFO) by adjusting FFO for the following items, including the Company’s share of these items recognized by its unconsolidated partnerships and joint ventures: (i) equity-based compensation expense; (ii) effects of straight-line rent revenue and expense; (iii) amortization of acquired above- and below-market lease values; (iv) debt prepayment penalties and amortization of deferred financing costs and debt premiums and discounts; (v) non-real estate depreciation, amortization and impairment; (vi) restructuring and transaction-related charges; (vii) non-real estate loss (gain), fair value loss (gain) on interest rate and foreign currency hedges, and foreign currency remeasurements except realized gain and loss from the Digital Other segment; (viii) net unrealized carried interest; and (ix) tax effect on certain of the foregoing adjustments. The Company’s Core FFO from its interest in BrightSpire Capital (NYSE: BRSP) represented the cash dividends declared in the reported period. The Company excluded results from discontinued operations in its calculation of Core FFO and applied this exclusion to prior periods. Beginning with the first quarter 2021, the Company revised the computation of Core FFO and applied this revised computation methodology to prior periods presented.
FFO and Core FFO should not be considered alternatives to GAAP net income as indications of operating performance, or to cash flows from operating activities as measures of liquidity, nor as indications of the availability of funds for our cash needs, including funds available to make distributions. FFO and Core FFO should not be used as supplements to or substitutes for cash flow from operating activities computed in accordance with GAAP.
The Company uses FFO and Core FFO as supplemental performance measures because, in excluding real estate depreciation and amortization and gains and losses, it provides a performance measure that captures trends in occupancy rates, rental rates, and operating costs, and such a measure is useful to investors as it excludes periodic gains and losses from sales of investments that are not representative of its ongoing operations. The Company also believes that, as widely recognized measures of the performance of REITs, FFO and Core FFO will be used by investors as a basis to compare its operating performance with that of other REITs. However, because FFO and Core FFO exclude depreciation and amortization and capture neither the changes in the value of the Company’s properties that resulted from use or market conditions nor the level of capital expenditures and leasing commissions necessary to maintain the operating performance of its properties, all of which have real economic effect and could materially impact the Company’s results from operations, the utility of FFO and Core FFO as measures of the Company’s performance is limited. FFO and Core FFO should be considered only as supplements to GAAP net income as a measure of the Company’s performance. Additionally, Core FFO excludes the impact of certain fair value fluctuations, which, if they were to be realized, could have a material impact on the Company’s operating performance.
(FINANCIAL TABLES FOLLOW)
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
| December 31, 2020 | |||
|---|---|---|---|
| Assets | |||
| Cash and cash equivalents | 1,006,195 | $ | 703,544 |
| Restricted cash | 67,772 | ||
| Real estate, net | 4,451,864 | ||
| Loans receivable | 36,798 | ||
| Equity and debt investments | 792,996 | ||
| Goodwill | 761,368 | ||
| Deferred leasing costs and intangible assets, net | 1,340,760 | ||
| Assets held for disposition | 11,237,319 | ||
| Other assets | 784,912 | ||
| Due from affiliates | 23,227 | ||
| Total assets | 15,921,346 | $ | 20,200,560 |
| Liabilities | |||
| Debt, net | 3,877,664 | $ | 3,930,989 |
| Accrued and other liabilities | 1,034,282 | ||
| Intangible liabilities, net | 39,788 | ||
| Liabilities related to assets held for disposition | 7,886,516 | ||
| Due to affiliates | 601 | ||
| Dividends and distributions payable | 18,516 | ||
| Total liabilities | 12,910,692 | ||
| Commitments and contingencies | |||
| Redeemable noncontrolling interests | 305,278 | ||
| Equity | |||
| Stockholders’ equity: | |||
| Preferred stock, 0.01 par value per share; 1,033,750 liquidation preference; 250,000 shares authorized; 41,350 shares issued and outstanding | 999,490 | ||
| Common stock, 0.01 par value per share | |||
| Class A, 949,000 shares authorized; 491,922 and 483,406 shares issued and outstanding, respectively | 4,834 | ||
| Class B, 1,000 shares authorized; 734 shares issued and outstanding | 7 | ||
| Additional paid-in capital | 7,570,473 | ||
| Accumulated deficit | (6,195,456) | ||
| Accumulated other comprehensive income | 122,123 | ||
| Total stockholders’ equity | 2,501,471 | ||
| Noncontrolling interests in investment entities | 4,327,372 | ||
| Noncontrolling interests in Operating Company | 155,747 | ||
| Total equity | 6,984,590 | ||
| Total liabilities, redeemable noncontrolling interests and equity | 15,921,346 | $ | 20,200,560 |
All values are in US Dollars.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
| Three Months Ended June 30, | ||||
|---|---|---|---|---|
| 2021 | 2020 | |||
| (unaudited) | (unaudited) | |||
| Revenues | ||||
| Property operating income | $ | 188,985 | $ | 42,017 |
| Interest income | 1,319 | 2,102 | ||
| Fee income | 45,157 | 20,173 | ||
| Other income | 1,726 | 3,581 | ||
| Total revenues | 237,187 | 67,873 | ||
| Expenses | ||||
| Property operating expense | 77,140 | 18,055 | ||
| Interest expense | 37,938 | 20,852 | ||
| Investment and servicing expense | 5,871 | 2,010 | ||
| Transaction costs | 64 | 89 | ||
| Depreciation and amortization | 138,229 | 36,680 | ||
| Impairment loss | — | 12,297 | ||
| Compensation expense | ||||
| Cash and equity-based compensation | 48,199 | 44,628 | ||
| Carried interest and incentive fee compensation | 8,266 | — | ||
| Administrative expenses | 28,505 | 12,847 | ||
| Total expenses | 344,212 | 147,458 | ||
| Other income (loss) | ||||
| Other gain (loss), net | (27,041) | 1,254 | ||
| Equity method earnings (losses) | 51,481 | (316,516) | ||
| Equity method earnings (losses) - carried interest | 11,169 | — | ||
| Income (loss) before income taxes | (71,416) | (394,847) | ||
| Income tax benefit (expense) | 75,239 | 1,650 | ||
| Income (loss) from continuing operations | 3,823 | (393,197) | ||
| Income (loss) from discontinued operations | (98,906) | (2,325,796) | ||
| Net income (loss) | (95,083) | (2,718,993) | ||
| Net income (loss) attributable to noncontrolling interests: | ||||
| Redeemable noncontrolling interests | 6,025 | 390 | ||
| Investment entities | 36,616 | (470,052) | ||
| Operating Company | (14,980) | (225,057) | ||
| Net income (loss) attributable to DigitalBridge Group, Inc. | (122,744) | (2,024,274) | ||
| Preferred stock dividends | 18,516 | 18,516 | ||
| Net income (loss) attributable to common stockholders | $ | (141,260) | $ | (2,042,790) |
| Loss per share—basic | ||||
| Loss from continuing operations per share—basic | $ | (0.02) | $ | (0.75) |
| Net loss attributable to common stockholders per share—basic | $ | (0.29) | $ | (4.33) |
| Loss per share—diluted | ||||
| Loss from continuing operations per share—diluted | $ | (0.02) | $ | (0.75) |
| Net loss attributable to common stockholders per share—diluted | $ | (0.29) | $ | (4.33) |
| Weighted average number of shares | ||||
| Basic | 479,643 | 471,253 | ||
| Diluted | 479,643 | 471,253 |
FUNDS FROM OPERATIONS AND CORE FUNDS FROM OPERATIONS
(In thousands, except per share data, unaudited)
| Three Months Ended | ||||
|---|---|---|---|---|
| June 30, 2021 | June 30, 2020 | |||
| Net loss attributable to common stockholders | $ | (141,260) | $ | (2,042,790) |
| Adjustments for FFO attributable to common interests in Operating Company and common stockholders: | ||||
| Net loss attributable to noncontrolling common interests in Operating Company | (14,980) | (225,057) | ||
| Real estate depreciation and amortization | 150,458 | 131,722 | ||
| Impairment of real estate | 242,903 | 1,474,262 | ||
| Loss (gain) from sales of real estate | (2,969) | 4,919 | ||
| Less: Adjustments attributable to noncontrolling interests in investment entities | (162,021) | (329,601) | ||
| FFO attributable to common interests in Operating Company and common stockholders | 72,131 | (986,545) | ||
| Additional adjustments for Core FFO attributable to common interests in Operating Company and common stockholders: | ||||
| Adjustment to BRSP cash dividend | (40,165) | 328,222 | ||
| Equity-based compensation expense | 11,642 | 10,152 | ||
| Straight-line rent revenue and expense | (2,309) | (5,240) | ||
| Amortization of acquired above- and below-market lease values, net | (1,498) | (531) | ||
| Debt prepayment penalties and amortization of deferred financing costs and debt premiums and discounts | 10,196 | 10,080 | ||
| Non-real estate fixed asset depreciation, amortization and impairment | 19,996 | 13,390 | ||
| Restructuring and transaction-related charges(1) | 5,174 | 8,864 | ||
| Non-real estate (gains) losses, excluding realized gains or losses within the Digital Other segment | (151,773) | 740,038 | ||
| Net unrealized carried interest | (6,485) | 801 | ||
| Deferred taxes and tax effect on certain of the foregoing adjustments | (42,536) | (3,092) | ||
| Less: Adjustments attributable to noncontrolling interests in investment entities | 146,687 | (182,607) | ||
| Less: Core FFO from discontinued operations | (25,874) | 29,242 | ||
| Core FFO attributable to common interests in Operating Company and common stockholders | $ | (4,814) | $ | (37,226) |
| Core FFO per common share / common OP unit(2) | $ | (0.01) | $ | (0.07) |
| Core FFO per common share / common OP unit—diluted(2)(3)(4) | $ | (0.01) | $ | (0.07) |
| Weighted average number of common OP units outstanding used for Core FFO per common share and OP unit(2) | 539,287 | 535,938 | ||
| Weighted average number of common OP units outstanding used for Core FFO per common share and OP unit—diluted (2)(3) | 539,287 | 535,938 |
__________
(1) Transaction-related costs primarily represent costs and charges incurred as a result of corporate restructuring and reorganization to implement the digital evolution. These costs and charges include severance, retention, relocation, transition, shareholder settlement and other related restructuring costs, which are not reflective of the Company’s core operating performance.
(2) Calculated based on weighted average shares outstanding including participating securities and assuming the exchange of all common OP units outstanding for common shares.
(3) For the three months ended June 30, 2021 and June 30, 2020, excluded from the calculations of diluted Core FFO per share are Class A common stock or OP units issuable in connection with performance stock units, performance based restricted stock units and Wafra’s warrants, of which the issuance and/or vesting are subject to the performance of the Company's stock price or the achievement of certain Company specific metrics, and the effect of adding back interest expense associated with convertible senior notes and weighted average dilutive common share equivalents for the assumed conversion of the convertible senior notes as the effect of including such interest expense and common share equivalents would be antidilutive.
ADJUSTED EBITDA
(In thousands, unaudited)
| Three Months Ended June 30, 2021 | ||
|---|---|---|
| Core FFO attributable to common interests in Operating Company and common stockholders | $ | (4,814) |
| Adjustments: | ||
| Less: Earnings of equity method investments | (6,216) | |
| Plus: Preferred dividends | 18,516 | |
| Plus: Core interest expense | 11,834 | |
| Plus: Core tax expense | (8,224) | |
| Plus: Non pro-rata allocation of income (loss) to NCI | 223 | |
| Plus: Placement fees | 4,767 | |
| Less: Realized carried interest/incentive fees | (1,565) | |
| Plus: Installation services | 692 | |
| Adjusted EBITDA (DBRG OP Share) | $ | 15,213 |
NET INCOME (LOSS) FROM CONTINUING OPERATIONS BY SEGMENT
| (In thousands) | Three Months Ended June 30, 2021 | |
|---|---|---|
| Digital Investment Management | $ | 15,786 |
| Digital Operating | (10,850) | |
| Digital Other | 13,280 | |
| Other | 45,983 | |
| Amounts Not Allocated to Segments | (60,376) | |
| Total Consolidated | $ | 3,823 |
RECONCILIATION OF DIGITAL OPERATING NET INCOME (LOSS) TO ADJUSTED EBITDA
| (In thousands) | Three Months Ended June 30, 2021 | ||
|---|---|---|---|
| Digital Operating Net income (loss) from continuing operations | $ | (10,850) | |
| Adjustments: | |||
| Interest expense | 29,272 | ||
| Income tax (benefit) expense | (66,788) | ||
| Depreciation and amortization | 126,227 | ||
| Digital Operating EBITDAre | 77,861 | ||
| Straight-line rent expenses and amortization of above- and below-market lease intangibles | (98) | ||
| Compensation expense—equity-based | 308 | ||
| Installation services | 576 | ||
| Transaction, restructuring & integration costs | 2,999 | ||
| Other gain/loss, net | 349 | ||
| Digital Operating Adjusted EBITDA | $ | 81,995 | |
| DBRG OP Share of Digital Operating Adjusted EBITDA | $ | 13,612 | (1) |
__________
(1) Represents the Company 20% interest in DataBank, including zColo, and 13% interest in Vantage SDC..
RECONCILIATION OF DIGITAL INVESTMENT MANAGEMENT NET INCOME (LOSS) TO FRE / ADJUSTED EBITDA
| (In thousands) | Three Months Ended June 30, 2021 | |
|---|---|---|
| Digital Investment Management net income (loss) | 15,786 | |
| Adjustments: | ||
| Depreciation and amortization | 6,298 | |
| Compensation expense—equity-based | 1,837 | |
| Compensation expense—carried interest and incentive | 8,266 | |
| Administrative expenses—straight-line rent | 50 | |
| Administrative expenses—placement agent fee | 6,959 | |
| Incentive/performance fee income | (4,489) | |
| Equity method (earnings) losses | (11,203) | |
| Other (gain) loss, net | (119) | |
| Income tax (benefit) expense | 2,236 | |
| Digital Investment Management FRE / Adjusted EBITDA | $ | 25,621 |
11
Document
| Cautionary Statement Regarding Forward-Looking Statements |
|---|
This presentation may contain forward-looking statements within the meaning of the federal securities laws, including statements related to our digital transformation. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. In some cases, you can identify forward-looking statements by the use of forward-looking terminology such as “may,” “will,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” or “potential” or the negative of these words and phrases or similar words or phrases which are predictions of or indicate future events or trends and which do not relate solely to historical matters. You can also identify forward-looking statements by discussions of strategy, plans or intentions.
Forward-looking statements involve known and unknown risks, uncertainties, assumptions and contingencies, many of which are beyond the Company’s control, and may cause the Company’s actual results to differ significantly from those expressed in any forward-looking statement. Factors that might cause such a difference include, without limitation, the duration and severity of the current novel coronavirus (COVID-19) pandemic, and its impact on the global market, economic and environmental conditions generally and in the digital and communications technology, wellness infrastructure and hospitality real estate, other commercial real estate equity and debt, and investment management sectors; the effect of COVID-19 on the Company's operating cash flows, debt service obligations and covenants, liquidity position and valuations of its real estate investments; whether we will successfully execute our strategic transformation to become a digital infrastructure and real estate focused company within the timeframe contemplated or at all, and the impact of such transformation on the Company's legacy portfolios and assets, including whether such transformation will be consistent with the Company’s REIT status; our ability to obtain and maintain financing arrangements, including securitizations, on favorable or comparable terms or at all; the Company's ability to complete anticipated monetizations of non-core assets within the timeframe and on the terms contemplated, if at all; the impact of the completion of the sale of the Company's hospitality portfolios and whether we will realize the anticipated benefits of our exit from our hospitality business; the impact of completed or anticipated initiatives related to our digital transformation, including the strategic investment by Wafra and the formation of certain other investment management platforms, on our company's growth and earnings profile; whether we will realize any of the anticipated benefits of our strategic partnership with Wafra, including whether Wafra will make additional investments in our Digital Other and Digital Operating segments; our ability to integrate and maintain consistent standards and controls, including our ability to manage our acquisitions in the digital industry effectively; the ability to realize anticipated strategic and financial benefits from terminating the management agreement with Brightspire Capital, Inc. (NYSE: BRSP; formerly, Colony Credit Real Estate, Inc. or CLNC); the impact to our business operations and financial condition of realized or anticipated compensation and administrative savings through cost reduction programs; our ability to redeploy any proceeds received from the sale of our non-digital or other legacy assets within the timeframe and manner contemplated or at all; our business and investment strategy, including the ability of the businesses in which we have a significant investment (such as BRSP) to execute their business strategies; BRSP's trading price and its impact on the carrying value of the Company's investment in BRSP; performance of our investments relative to our expectations and the impact on our actual return on invested equity; our ability to grow our business by raising capital for the companies that we manage; our ability to deploy capital into new investments consistent with our digital business strategies, including the earnings profile of such new investments; the impact of adverse conditions affecting a specific asset class in which we have investments; the availability of, and competition for, attractive investment opportunities; our ability to achieve any of the anticipated benefits of certain joint ventures, including any ability for such ventures to create and/or distribute new investment products; our ability to satisfy and manage our capital requirements; our expected hold period for our assets and the impact of any changes in our expectations on the carrying value of such assets; the general volatility of the securities markets in which we participate; stability of the capital structure of our wellness infrastructure portfolio and remaining hospitality portfolio; changes in interest rates and the market value of our assets; interest rate mismatches between our assets and any borrowings used to fund such assets; effects of hedging instruments on our assets; the impact of economic conditions on third parties on which we rely; any litigation and contractual claims against us and our affiliates, including potential settlement and litigation of such claims; our levels of leverage; adverse domestic or international economic conditions, including those resulting from the COVID-19 pandemic, and the impact on the commercial real estate or real-estate related sectors; the impact of legislative, regulatory and competitive changes; actions, initiatives and policies of the U.S. and non-U.S. governments and changes to U.S. or non-U.S. government policies and the execution and impact of these actions, initiatives and policies; whether we will maintain our qualification as a real estate investment trust for U.S. federal income tax purposes and our ability to do so; our ability to maintain our exemption from registration as an investment company under the Investment Company Act of 1940, as amended; changes in our board of directors or management team, and availability of qualified personnel; our ability to make or maintain distributions to our stockholders; our understanding of our competition, and other risks and uncertainties, including those detailed in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020 and Quarterly Report on Form 10-Q for the quarter ended March 31, 2021, each under the heading “Risk Factors,” as such factors may be updated from time to time in the Company’s subsequent periodic filings with the U.S. Securities and Exchange Commission (“SEC”). All forward-looking statements reflect the Company’s good faith beliefs, assumptions and expectations, but they are not guarantees of future performance. Additional information about these and other factors can be found in the Company’s reports filed from time to time with the SEC.
All forward-looking statements reflect the Company’s good faith beliefs, assumptions and expectations, but they are not guarantees of future performance. Additional information about these and other factors can be found in the Company’s reports filed from time to time with the SEC. The Company cautions investors not to unduly rely on any forward-looking statements. The forward-looking statements speak only as of the date of this presentation. The Company is under no duty to update any of these forward-looking statements after the date of this presentation, nor to conform prior statements to actual results or revised expectations, and the Company does not intend to do so.
This presentation is for informational purposes only and does not constitute an offer to sell or a solicitation of an offer to buy any securities of the Company. This information is not intended to be indicative of future results. Actual performance of the Company may vary materially.
The appendices herein contain important information that is material to an understanding of this presentation and you should read this presentation only with and in context of the appendices.
| DigitalBridge | Supplemental Financial Report |
|---|---|
| Important Note Regarding Non-GAAP Financial Measures | |
| --- |
This supplemental package includes certain “non-GAAP” supplemental measures that are not defined by generally accepted accounting principles, or GAAP, including the financial metrics defined below, of which the calculations may from methodologies utilized by other REITs for similar performance measurements, and accordingly, may not be comparable to those of other REITs.
Adjusted Earnings before Interest, Taxes, Depreciation and Amortization (Adjusted EBITDA): The Company calculates Adjusted EBITDA by adjusting Core FFO to exclude cash interest expense, preferred dividends, tax expense or benefit, earnings from equity method investments, placement fees, realized carried interest and incentive fees and revenues and corresponding costs related to installation services. The Company uses Adjusted EBITDA as a supplemental measure of our performance because they eliminate depreciation, amortization, and the impact of the capital structure from its operating results. However, because Adjusted EBITDA is calculated before recurring cash charges including interest expense and taxes and are not adjusted for capital expenditures or other recurring cash requirements, their utilization as a cash flow measurement is limited.
FFO: The Company calculates funds from operations (FFO) in accordance with standards established by the Board of Governors of the National Association of Real Estate Investment Trusts, which defines FFO as net income or loss calculated in accordance with GAAP, excluding (i) extraordinary items, as defined by GAAP; (ii) gains and losses from sales of depreciable real estate; (iii) impairment write-downs associated with depreciable real estate; (iv) gains and losses from a change in control in connection with interests in depreciable real estate or in-substance real estate, plus (v) real estate-related depreciation and amortization; and (vi) including similar adjustments for equity method investments. Included in FFO are gains and losses from sales of assets which are not depreciable real estate such as loans receivable, equity method investments, as well as equity and debt securities, as applicable.
Core FFO: The Company computes core funds from operations (Core FFO) by adjusting FFO for the following items, including the Company’s share of these items recognized by its unconsolidated partnerships and joint ventures: (i) equity-based compensation expense; (ii) effects of straight-line rent revenue and expense; (iii) amortization of acquired above- and below-market lease values; (iv) debt prepayment penalties and amortization of deferred financing costs and debt premiums and discounts; (v) non-real estate depreciation, amortization and impairment; (vi) restructuring and transaction-related charges; (vii) non-real estate loss (gain), fair value loss (gain) on interest rate and foreign currency hedges, and foreign currency remeasurements except realized gain and loss from the Digital Other segment; (viii) net unrealized carried interest; and (ix) tax effect on certain of the foregoing adjustments. The Company’s Core FFO from its interest in BrightSpire Capital, Inc. (NYSE: BRSP) represented the cash dividends declared in the reported period. The Company excluded results from discontinued operations in its calculation of Core FFO and applied this exclusion to prior periods. Beginning with the first quarter 2021, the Company revised the computation of Core FFO and applied this revised computation methodology to prior periods presented.
FFO and Core FFO should not be considered alternatives to GAAP net income as indications of operating performance, or to cash flows from operating activities as measures of liquidity, nor as indications of the availability of funds for our cash needs, including funds available to make distributions. FFO and Core FFO should not be used as supplements to or substitutes for cash flow from operating activities computed in accordance with GAAP.
The Company uses FFO and Core FFO as supplemental performance measures because, in excluding real estate depreciation and amortization and gains and losses, it provides a performance measure that captures trends in occupancy rates, rental rates, and operating costs, and such a measure is useful to investors as it excludes periodic gains and losses from sales of investments that are not representative of its ongoing operations. The Company also believes that, as widely recognized measures of the performance of REITs, FFO and Core FFO will be used by investors as a basis to compare its operating performance with that of other REITs. However, because FFO and Core FFO exclude depreciation and amortization and capture neither the changes in the value of the Company’s properties that resulted from use or market conditions nor the level of capital expenditures and leasing commissions necessary to maintain the operating performance of its properties, all of which have real economic effect and could materially impact the Company’s results from operations, the utility of FFO and Core FFO as measures of the Company’s performance is limited. FFO and Core FFO should be considered only as supplements to GAAP net income as a measure of the Company’s performance. Additionally, Core FFO excludes the impact of certain fair value fluctuations, which, if they were to be realized, could have a material impact on the Company’s operating performance.
| DigitalBridge | Supplemental Financial Report |
|---|---|
| Important Note Regarding Non-GAAP Financial Measures | |
| --- |
Digital Operating Earnings before Interest, Taxes, Depreciation and Amortization for Real Estate (EBITDAre) and Adjusted EBITDA: The Company calculates EBITDAre in accordance with the standards established by the National Association of Real Estate Investment Trusts, which defines EBITDAre as net income or loss calculated in accordance with GAAP, excluding interest, taxes, depreciation and amortization, gains or losses from the sale of depreciated property, and impairment of depreciated property. The Company calculates Adjusted EBITDA by adjusting EBITDAre for the effects of straight-line rental income/expense adjustments and amortization of acquired above- and below-market lease adjustments to rental income, revenues and corresponding costs related to the delivery of installation services, equity-based compensation expense, restructuring and transaction related costs, the impact of other impairment charges, gains or losses from sales of undepreciated land, gains or losses from foreign currency remeasurements, and gains or losses on early extinguishment of debt and hedging instruments. The Company uses EBITDAre and Adjusted EBITDA as supplemental measures of our performance because they eliminate depreciation, amortization, and the impact of the capital structure from its operating results. EBITDAre represents a widely known supplemental measure of performance, EBITDA, but for real estate entities, which we believe is particularly helpful for generalist investors in REITs. EBITDAre depicts the operating performance of a real estate business independent of its capital structure, leverage and noncash items, which allows for comparability across real estate entities with different capital structure, tax rates and depreciation or amortization policies. Additionally, exclusion of gains on disposition and impairment of depreciated real estate, similar to FFO, also provides a reflection of ongoing operating performance and allows for period-over-period comparability. However, because EBITDAre and Adjusted EBITDA are calculated before recurring cash charges including interest expense and taxes and are not adjusted for capital expenditures or other recurring cash requirements, their utilization as a cash flow measurement is limited.
Digital Investment Management Fee Related Earnings (FRE): The Company calculates FRE for its investment management business within the digital segment as base management fees, other service fee income, and other income inclusive of cost reimbursements, less compensation expense (excluding equity-based compensation), administrative expenses (excluding fund raising placement agent fee expenses), and other operating expenses related to the investment management business. The Company uses FRE as a supplemental performance measure as it may provide additional insight into the profitability of the overall digital investment management business. FRE is presented prior to the deduction for Wafra's 31.5% interest.
| DigitalBridge | Supplemental Financial Report |
|---|---|
| Note Regarding DBRG Reportable Segments / Consolidated and OP Share of Consolidated Amounts | |
| --- |
This presentation includes supplemental financial information for the following segments: Digital Investment Management, Digital Operating, Digital Other and Other.
Digital Investment Management (Digital IM)
This business encompasses the investment and stewardship of third party capital in digital infrastructure and real estate. The Company's flagship opportunistic strategy is conducted through DCP I, DCP II and separately capitalized vehicles while other strategies, including digital credit and public equities, will be or are conducted through other investment vehicles. The Company earns management fees, generally based on the amount of assets or capital managed in investment vehicles, and have the potential to earn carried interest based on the performance of such investment vehicles subject to achievement of minimum return hurdles.
Digital Operating
This business is composed of balance sheet equity interests in digital infrastructure and real estate operating companies, which generally earns rental income from providing use of space and/or capacity in or on digital assets through leases, services and other agreements. The Company currently owns interests in two companies, DataBank's enterprise data centers, including zColo, and Vantage stabilized hyperscale data centers, which are also portfolio companies under Digital IM for the equity interests owned by third party capital.
Digital Other
This segment is composed of equity interests in digital investment vehicles, the largest of which is the Company’s investments and commitments to DCP I and DCP II. This segment also includes the Company’s investment and commitment to the digital liquid strategies and seed investments for future digital investment vehicles.
Other
This segment is composed of the remaining non-digital equity investments, primarily the Company’s interest in BrightSpire Capital, Inc. (BRSP), that are not substantially available for immediate sale and are expected to be monetized over an extended period.
Discontinued Operations
Following the successful exit of its hotel business, the Company seeks to monetize the remainder of its non-digital businesses to complete its digital transformation. This includes the Company's Wellness Infrastructure business, and a substantial majority of the Company's other equity and debt investments and its non-digital investment management business, both of which resided in the Other segment. The completed and pending dispositions of the Company’s hotel business, other equity and debt investments and Other IM business, and Wellness Infrastructure represent strategic shifts in the Company's business that are expected to have a significant effect on the Company’s operations and financial results, and accordingly, have met the criteria as discontinued operations. For all current and prior periods presented, the related assets and liabilities, to the extent they have not been disposed at the respective balance sheet dates, are presented as assets and liabilities held for disposition on the consolidated balance sheets and the related operating results are presented as income (loss) from discontinued operations on the consolidated statements of operations.
Throughout this presentation, consolidated figures represent the interest of both the Company (and its subsidiary DigitalBridge Operating Company, LLC or the “DBRG OP”) and noncontrolling interests. Figures labeled as DBRG OP share represent the Company’s pro-rata share.
| DigitalBridge | Supplemental Financial Report | ||||
|---|---|---|---|---|---|
| Table of Contents | |||||
| --- | Page | ||||
| --- | --- | --- | --- | ||
| I. | Financial Overview | ||||
| a. | Summary Metrics | 6 | |||
| b. | Summary of Segments | 7-8 | |||
| II. | Financial Results | ||||
| a. | Balance Sheet Consolidated& Noncontrolling Interests’ Share | 9 | |||
| b. | Consolidated Segment Operating Results | 10 | |||
| c. | Noncontrolling Interests’ Share Segment Operating Results | 11 | |||
| d. | Segment Reconciliation of Net Income to FFO & Core FFO & Adjusted EBITDA | 12 | |||
| III. | Capitalization | ||||
| a. | Debt Summary | 13 | |||
| b. | Secured Fund Fee Revenue Notes and Variable Funding Notes | 14 | |||
| c. | Convertible/Exchangeable Notes & Perpetual Preferred Stock | 15 | |||
| d. | Organization Structure | 16 | |||
| IV. | Digital Investment Management | 17 | |||
| V. | Digital Operating | 18-19 | |||
| VI. | Digital Other | 20 | |||
| VII. | Total Company Assets Under Management | 21 | |||
| Definitions | 22 | ||||
| DigitalBridge | Supplemental Financial Report | 5 | |||
| --- | --- | ||||
| Ia. Financial Overview - Summary Metrics | |||||
| --- | |||||
| ( and shares in thousands, except per share data and as noted; as of or for the three months ended June 30, 2021, unless otherwise noted) (Unaudited) | |||||
| --- | |||||
| Financial Data | |||||
| Net income (loss) attributable to common stockholders | |||||
| Net income (loss) attributable to common stockholders per basic share | |||||
| Core FFO | |||||
| Core FFO per basic share | |||||
| Adjusted EBITDA | |||||
| Balance Sheet, Capitalization and Trading Statistics | |||||
| Total consolidated assets | |||||
| DBRG OP share of consolidated assets | |||||
| Total consolidated debt(1) | |||||
| DBRG OP share of consolidated debt(1) | |||||
| Basic shares and OP units outstanding as of June 30, 2021(2) | |||||
| Basic shares and OP units outstanding as of August 2, 2021(2) | |||||
| Liquidation preference of perpetual preferred equity(3) | |||||
| Insider ownership of shares and OP units as of August 2, 2021 | |||||
| Digital Assets Under Management ("AUM") | |||||
| % of total company AUM | |||||
| Digital Fee Earning Equity Under Management ("FEEUM") | |||||
| % of total company FEEUM |
All values are in US Dollars.
In evaluating the information presented throughout this presentation see the appendices to this presentation for definitions and reconciliations of non-GAAP financial measures to GAAP measures.
(1) Represents principal balance and excludes debt issuance costs, discounts and premiums. Excluded from above presentation is debt of assets which are presented under discontinued operations for the second quarter 2021, including, one hospitality portfolio under receivership, with related $780 million consolidated, or $702 million DBRG OP share, of debt; Wellness Infrastructure business along with other non-core assets, all of which are held by the Company's subsidiary, NRF Holdco, LLC, including 5.375% exchangeable senior notes, trust preferred securities and corresponding junior subordinated debt, all of which were issued by NRF Holdco, LLC who acts as guarantor, with related $2,899 million consolidated, or $2,140 million DBRG OP share, of debt; and all of Other Equity and Debt assets with related $720 million consolidated, or $265 million DBRG OP share, of debt.
(2) Represents common shares and OP units outstanding including all vested and unvested restricted stock and vested director share units. Excluded are Class A common stock or OP units issuable in connection with Wafra’s warrants, 31.0 million unvested shares related to LTIP units, performance stock units, and performance based restricted stock units, which the issuance and/or vesting are subject to the performance of the Company's stock price or the achievement of certain Company-specific metrics.
(3) On August 16, 2021, the Company will redeem all of its $86.3 million 7.5% series G preferred stock.
| DigitalBridge | Supplemental Financial Report | 6 |
|---|---|---|
| Ib. Financial Overview - Summary of Segments | ||
| --- | ||
| ( in thousands; as of or for the three months ended June 30, 2021, unless otherwise noted) | DBRG OP share of<br>consolidated amount | |
| --- | --- | --- |
| Digital Investment Management(1) | ||
| Third-party AUM ( in millions) | $ | 33,551 |
| FEEUM ( in millions) | 14,505 | |
| Q2 2021 fee related earnings (FRE) / Adjusted EBITDA(2)(3) | 17,449 | |
| Digital Operating | ||
| Q2 2021 Adjusted EBITDA(4) | 13,612 | |
| Investment-level non-recourse financing(5)(6) | 528,609 | |
| Digital Other | ||
| Net carrying value | 269,488 |
All values are in US Dollars.
Notes:
(1) In July 2020, the Company closed on a strategic investment from Wafra for a 31.5% ownership stake in the Digital Investment Management business.
(2) For a reconciliation of net income/(loss) to FRE / Adjusted EBITDA, please refer to the Digital Investment Management section of this presentation.
(3) DBRG OP share amount presented is after excluding Wafra 31.5% ownership.
(4) For a reconciliation of net income/(loss) to Adjusted EBITDA, please refer to the Digital Operating section of this presentation.
(5) Represents unpaid principal balance.
(6) In addition to debt presented, the Digital operating segment has $143 million consolidated, or $29 million DBRG OP share, of finance lease obligations, which represents the present value of payments on leases classified as finance leases, in the Other Liabilities line item on the Company’s Balance Sheet.
| DigitalBridge | Supplemental Financial Report | 7 | ||||
|---|---|---|---|---|---|---|
| Ib. Financial Overview - Summary of Segments (cont’d) | ||||||
| --- | ($ in thousands except as noted; as of or for the three months ended June 30, 2021, unless otherwise noted) | Consolidated amount | DBRG OP share of consolidated amount | |||
| --- | --- | --- | --- | --- | ||
| Legacy Businesses | ||||||
| Held for Investment - Remaining Other net equity carrying value (primarily BRSP shares) | $ | 408,604 | $ | 408,604 | ||
| Discontinued operations net carrying value(1) | 5,828,471 | 3,295,648 | ||||
| Investment-level non-recourse financing(2) | 3,325,126 | 2,110,738 | ||||
| 5.375% Exchangeable senior notes and TruPS | 293,722 | 293,722 | ||||
| Discontinued Operations - Legacy Businesses net equity carrying value | $ | 2,209,623 | $ | 891,188 | ||
| Unallocated Segment & Corporate Net Assets | ||||||
| Cash and cash equivalents, restricted cash and other assets | $ | 503,632 | $ | 503,632 | ||
| Accrued and other liabilities and dividends payable | 132,766 | 132,766 | ||||
| Net assets | $ | 370,866 | $ | 370,866 |
Notes:
(1) Includes all components related to real estate assets, including tangible real estate and lease-related intangibles and cash of the investments presented under discontinued operations.
(2) Represents unpaid principal balance.
| DigitalBridge | Supplemental Financial Report | 8 | |
|---|---|---|---|
| IIa. Financial Results - Balance Sheet | |||
| --- | |||
| ( in thousands, except per share data) (unaudited) | |||
| --- | --- | --- | --- |
| Non Controlling Interests' Share | |||
| Assets | |||
| Cash and cash equivalents | 1,006,195 | $ | 248,763 |
| Restricted cash | 77,992 | ||
| Real estate, net | 3,773,691 | ||
| Loans receivable | 108,707 | ||
| Equity and debt investments | 449,264 | ||
| Goodwill | 456,477 | ||
| Deferred leasing costs and intangible assets, net | 1,052,242 | ||
| Assets held for disposition | 2,267,240 | ||
| Other assets | 545,069 | ||
| Due from affiliates | 12,511 | ||
| Total assets | 15,921,346 | $ | 8,991,956 |
| Liabilities | |||
| Debt, net | 3,877,664 | $ | 2,820,254 |
| Accrued and other liabilities | 540,035 | ||
| Intangible liabilities, net | 30,776 | ||
| Liabilities related to assets held for disposition | 1,417,771 | ||
| Due to affiliates | — | ||
| Dividends and distributions payable | — | ||
| Total liabilities | 4,808,836 | ||
| Commitments and contingencies | |||
| Redeemable noncontrolling interests | 346,511 | ||
| Equity | |||
| Stockholders’ equity: | |||
| Preferred stock, 0.01 par value per share; 1,033,750 liquidation preference; 250,000 shares authorized; 41,350 shares issued and outstanding | — | ||
| Common stock, 0.01 par value per share | |||
| Class A, 949,000 shares authorized; 491,922 shares issued and outstanding | — | ||
| Class B, 1,000 shares authorized; 734 shares issued and outstanding | — | ||
| Additional paid-in capital | — | ||
| Accumulated deficit | — | ||
| Accumulated other comprehensive income | — | ||
| Total stockholders’ equity | — | ||
| Noncontrolling interests in investment entities | 3,836,609 | ||
| Noncontrolling interests in Operating Company | — | ||
| Total equity | 3,836,609 | ||
| Total liabilities, redeemable noncontrolling interests and equity | 15,921,346 | $ | 8,991,956 |
All values are in US Dollars.
| DigitalBridge | Supplemental Financial Report | 9 | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| IIb. Financial Results - Consolidated Segment Operating Results | ||||||||||||||||
| --- | Three Months Ended June 30, 2021 | |||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | ||
| ($ in thousands) (unaudited) | Digital Investment Management | Digital Operating | Digital Other | Other | Discontinued Operations | Amounts not<br>allocated to<br>segments | Total | |||||||||
| Revenues | ||||||||||||||||
| Property operating income | $ | — | $ | 188,985 | $ | — | $ | — | $ | — | $ | — | $ | 188,985 | ||
| Interest income | — | 91 | 988 | — | — | 240 | 1,319 | |||||||||
| Fee income(1) | 46,789 | — | — | — | — | (1,632) | 45,157 | |||||||||
| Other income | 84 | 17 | 732 | — | — | 893 | 1,726 | |||||||||
| Total revenues | 46,873 | 189,093 | 1,720 | — | — | (499) | 237,187 | |||||||||
| Expenses | ||||||||||||||||
| Property operating expense | — | 77,140 | — | — | — | — | 77,140 | |||||||||
| Interest expense | — | 29,272 | — | — | — | 8,666 | 37,938 | |||||||||
| Investment and servicing expense(2) | — | 5,200 | 117 | 9 | — | 545 | 5,871 | |||||||||
| Transaction costs | — | 55 | — | — | — | 9 | 64 | |||||||||
| Depreciation and amortization | 6,299 | 126,227 | — | 5,167 | — | 536 | 138,229 | |||||||||
| Compensation expense | ||||||||||||||||
| Cash and equity-based compensation | 16,262 | 18,876 | — | — | — | 13,061 | 48,199 | |||||||||
| Carried interest and incentive compensation | 8,266 | — | — | — | — | — | 8,266 | |||||||||
| Administrative expenses | 9,345 | 9,612 | 418 | — | — | 9,130 | 28,505 | |||||||||
| Total expenses | 40,172 | 266,382 | 535 | 5,176 | — | 31,947 | 344,212 | |||||||||
| Other income (loss) | ||||||||||||||||
| Other gain (loss), net | 119 | (349) | 6,746 | 2,459 | — | (36,016) | (27,041) | |||||||||
| Equity method earnings (loss) | 33 | — | 6,396 | 45,052 | — | — | 51,481 | |||||||||
| Equity method earnings (loss) - carried interest | 11,169 | — | — | — | — | — | 11,169 | |||||||||
| Income (loss) before income taxes | 18,022 | (77,638) | 14,327 | 42,335 | — | (68,462) | (71,416) | |||||||||
| Income tax benefit (expense) | (2,236) | 66,788 | (1,047) | 3,648 | — | 8,086 | 75,239 | |||||||||
| Income (loss) from continuing operations | 15,786 | (10,850) | 13,280 | 45,983 | — | (60,376) | 3,823 | |||||||||
| Income (loss) from discontinued operations | — | — | — | — | (98,906) | — | (98,906) | |||||||||
| Net income (loss) | 15,786 | (10,850) | 13,280 | 45,983 | (98,906) | (60,376) | (95,083) | |||||||||
| Net income (loss) attributable to noncontrolling interests: | ||||||||||||||||
| Redeemable noncontrolling interests | 501 | — | 5,524 | — | — | — | 6,025 | |||||||||
| Investment entities | 1,905 | (10,434) | 1,758 | — | 43,387 | — | 36,616 | |||||||||
| Operating Company | 1,280 | (40) | 574 | 4,377 | (13,623) | (7,548) | (14,980) | |||||||||
| Net income (loss) attributable to DigitalBridge Group, Inc. | 12,100 | (376) | 5,424 | 41,606 | (128,670) | (52,828) | (122,744) | |||||||||
| Preferred stock dividends | — | — | — | — | — | 18,516 | 18,516 | |||||||||
| Net income (loss) attributable to common stockholders | $ | 12,100 | $ | (376) | $ | 5,424 | $ | 41,606 | $ | (128,670) | $ | (71,344) | $ | (141,260) |
Notes:
(1) Fee income is earned by the Digital Investment Management segment from third party capital in investment vehicles managed by the Company which are consolidated within the Digital Operating and Digital Other segments. Prior to the second quarter of 2021, the fee income in Digital Investment Management and fee expense in Digital Operating and Digital Other were eliminated within the respective segments. Effective the second quarter of 2021, the eliminated adjustments are no longer included in the respective segments but included in amounts not allocated to segments.
| DigitalBridge | Supplemental Financial Report | 10 | ||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| IIc. Financial Results - Noncontrolling Interests’ Share Segment Operating Results | ||||||||||||||||||
| --- | Three Months Ended June 30, 2021 | |||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | ||||
| ($ in thousands) (unaudited) | Digital Investment Management | Digital Operating | Digital Other | Other | Discontinued Operations | Amounts not<br>allocated to<br>segments | Total | |||||||||||
| Revenues | ||||||||||||||||||
| Property operating income | $ | — | $ | 156,382 | $ | — | $ | — | $ | — | $ | — | $ | 156,382 | ||||
| Interest income | — | 73 | 12 | — | — | — | 85 | |||||||||||
| Fee income | 13,441 | — | — | — | — | — | 13,441 | |||||||||||
| Other income | 25 | 14 | 567 | — | — | — | 606 | |||||||||||
| Total revenues | 13,466 | 156,469 | 579 | — | — | — | 170,514 | |||||||||||
| Expenses | ||||||||||||||||||
| Property operating expense | — | 63,449 | — | — | — | — | 63,449 | |||||||||||
| Interest expense | — | 24,324 | — | — | — | — | 24,324 | |||||||||||
| Investment and servicing expense | — | 4,393 | 50 | — | — | — | 4,443 | |||||||||||
| Transaction costs | — | 2 | — | — | — | — | 2 | |||||||||||
| Depreciation and amortization | 1,981 | 104,896 | — | — | — | — | 106,877 | |||||||||||
| Impairment loss | — | — | — | — | — | — | — | |||||||||||
| Compensation expense | ||||||||||||||||||
| Cash and equity-based compensation | 4,706 | 15,100 | — | — | — | — | 19,806 | |||||||||||
| Carried interest and incentive compensation | 994 | — | — | — | — | — | 994 | |||||||||||
| Administrative expenses | 722 | 7,564 | 255 | — | — | — | 8,541 | |||||||||||
| Total expenses | 8,403 | 219,728 | 305 | — | — | — | 228,436 | |||||||||||
| Other income (loss) | ||||||||||||||||||
| Other gain (loss), net | 13 | (280) | 5,249 | — | — | — | 4,982 | |||||||||||
| Equity method earnings (loss) | 9 | — | 1,759 | — | — | — | 1,768 | |||||||||||
| Equity method earnings (loss) - carried interest | 3,597 | — | — | — | — | — | 3,597 | |||||||||||
| Income (loss) before income taxes | 8,682 | (63,539) | 7,282 | — | — | — | (47,575) | |||||||||||
| Income tax benefit (expense) | (31) | 53,415 | — | — | — | — | 53,384 | |||||||||||
| Net income (loss) | 8,651 | (10,124) | 7,282 | — | — | — | 5,809 | |||||||||||
| Income (loss) from discontinued operations | — | — | — | — | 43,387 | — | 43,387 | |||||||||||
| Non-pro rata allocation of income (loss) to NCI | (6,245) | (310) | — | — | — | — | (6,555) | |||||||||||
| Net income (loss) attributable to noncontrolling interests | $ | 2,406 | $ | (10,434) | $ | 7,282 | $ | — | $ | 43,387 | $ | — | $ | 42,641 | ||||
| DigitalBridge | Supplemental Financial Report | 11 | ||||||||||||||||
| --- | --- | |||||||||||||||||
| IId. Financial Results - Segment Reconciliation of Net Income to FFO & Core FFO & Adjusted EBITDA | ||||||||||||||||||
| --- | ||||||||||||||||||
| OP pro rata share by segment | Amounts<br>attributable to<br>noncontrolling interests | DBRG consolidated as reported | ||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| ($ in thousands; for the three months ended June 30, 2021; and unaudited) | Digital IM | Digital Operating | Digital Other | Other | Discontinued Operations | Amounts not<br>allocated to<br>segments | Total OP pro rata share | |||||||||||
| Net income (loss) attributable to common stockholders | $ | 12,100 | $ | (376) | $ | 5,424 | $ | 41,606 | $ | (128,670) | $ | (71,344) | $ | (141,260) | $ | — | $ | (141,260) |
| Net income (loss) attributable to noncontrolling common interests in Operating Company | 1,280 | (40) | 574 | 4,377 | (13,623) | (7,548) | (14,980) | — | (14,980) | |||||||||
| Net income (loss) attributable to common interests in Operating Company and common stockholders | 13,380 | (416) | 5,998 | 45,983 | (142,293) | (78,892) | (156,240) | — | (156,240) | |||||||||
| Adjustments for FFO: | ||||||||||||||||||
| Real estate depreciation and amortization | — | 19,155 | — | 3,340 | 23,602 | — | 46,097 | 104,361 | 150,458 | |||||||||
| Impairment of real estate | — | — | — | — | 184,465 | — | 184,465 | 58,438 | 242,903 | |||||||||
| Gain from sales of real estate | — | — | — | — | (2,191) | — | (2,191) | (778) | (2,969) | |||||||||
| Less: Adjustments attributable to noncontrolling interests in investment entities | — | — | — | — | — | — | — | (162,021) | (162,021) | |||||||||
| FFO | $ | 13,380 | $ | 18,739 | $ | 5,998 | $ | 49,323 | $ | 63,583 | $ | (78,892) | $ | 72,131 | $ | — | $ | 72,131 |
| Additional adjustments for Core FFO: | ||||||||||||||||||
| Adjustment to BRSP cash dividend | — | — | — | (39,369) | (796) | — | (40,165) | — | (40,165) | |||||||||
| Equity-based compensation expense | 1,544 | 62 | — | — | 3,828 | 5,721 | 11,155 | 487 | 11,642 | |||||||||
| Straight-line rent revenue and expense | 33 | 157 | — | — | (794) | (375) | (979) | (1,330) | (2,309) | |||||||||
| Amortization of acquired above- and below-market lease values, net | — | 89 | — | — | (1,579) | — | (1,490) | (8) | (1,498) | |||||||||
| Debt prepayment penalties and amortization of deferred financing costs and debt premiums and discounts | — | 547 | — | — | 5,023 | 1,232 | 6,802 | 3,394 | 10,196 | |||||||||
| Non-real estate fixed asset depreciation, amortization and impairment | 48 | 2,177 | — | 5,167 | 1,419 | 535 | 9,346 | 10,650 | 19,996 | |||||||||
| Restructuring and transaction-related charges(1) | 35 | 53 | — | — | 3,660 | 1,408 | 5,156 | 18 | 5,174 | |||||||||
| Non-real estate (gains) losses, excluding realized gains or losses within the Digital Other segment | (136) | 69 | (6,258) | (5,259) | (72,184) | 35,875 | (47,893) | (103,880) | (151,773) | |||||||||
| Net unrealized carried interest | (3,085) | — | — | — | (797) | — | (3,882) | (2,603) | (6,485) | |||||||||
| Deferred taxes and tax effect on certain of the foregoing adjustments | (259) | (13,373) | — | — | 24,511 | — | 10,879 | (53,415) | (42,536) | |||||||||
| Less: Adjustments attributable to noncontrolling interests in investment entities | — | — | — | — | — | — | — | 146,687 | 146,687 | |||||||||
| Less: Core FFO from discontinued operations | — | — | — | — | (25,874) | — | (25,874) | — | (25,874) | |||||||||
| Core FFO | $ | 11,560 | $ | 8,520 | $ | (260) | $ | 9,862 | $ | — | $ | (34,496) | $ | (4,814) | $ | — | $ | (4,814) |
| Less: Earnings of equity method investments | — | — | — | (6,216) | — | — | (6,216) | |||||||||||
| Plus: Preferred dividends | — | — | — | — | — | 18,516 | 18,516 | |||||||||||
| Plus: Core interest expense | — | 4,400 | — | — | — | 7,434 | 11,834 | |||||||||||
| Plus: Core tax expense | 2,465 | — | 1,047 | (3,648) | — | (8,088) | (8,224) | |||||||||||
| Plus: Non pro-rata allocation of income (loss) to NCI | 223 | — | — | — | — | — | 223 | |||||||||||
| Plus: Placement fees | 4,767 | — | — | — | — | — | 4,767 | |||||||||||
| Less: Realized carried interest/incentive fees | (1,565) | — | — | — | — | — | (1,565) | |||||||||||
| Plus: Digital Operating installation services, transaction, investment and servicing costs | — | 692 | — | — | — | — | 692 | |||||||||||
| Adjusted EBITDA (DBRG OP Share) | $ | 17,450 | $ | 13,612 | $ | 787 | $ | (2) | $ | — | $ | (16,634) | $ | 15,213 |
Notes:
(1) Restructuring and non-recurring items primarily represent costs and charges incurred as a result of corporate restructuring and reorganization to implement the digital evolution. These costs and charges include severance, retention, relocation, transition, shareholder settlement and other related restructuring costs, which are not reflective of the Company’s core operating performance.
| DigitalBridge | Supplemental Financial Report | 12 | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| IIIa. Capitalization - Debt Summary | ||||||||||||||
| --- | ||||||||||||||
| ( in thousands; as of June 30, 2021) | ||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Consolidated debt | ||||||||||||||
| 2022 | 2023 | 2024 | 2025 and after | Total | ||||||||||
| Investment-level debt: | ||||||||||||||
| Digital Operating - Fixed | 3,115 | $ | 6,230 | $ | 219,793 | $ | 600,753 | $ | 1,957,890 | $ | 2,787,781 | |||
| Digital Operating - Variable | 600 | 38,350 | 15,750 | 531,724 | $ | 586,474 | ||||||||
| Total Digital Operating | 6,830 | 258,143 | 616,503 | 2,489,614 | 3,374,255 | |||||||||
| Corporate debt: | ||||||||||||||
| Revolving credit facility(2)(3) | — | — | — | — | 45,000 | |||||||||
| Convertible/exchangeable senior notes | — | 200,000 | — | 300,000 | 500,000 | |||||||||
| Total consolidated debt(4) | 48,165 | $ | 6,830 | $ | 458,143 | $ | 616,503 | $ | 2,789,614 | $ | 3,919,255 | |||
| DBRG OP share of debt | Fixed/Variable | WA Interest Rate | WA Remaining Term | |||||||||||
| 2022 | 2023 | 2024 | 2025 and after | Total | ||||||||||
| Investment-level debt: | ||||||||||||||
| Digital Operating - Fixed | 409 | $ | 818 | $ | 28,859 | $ | 78,879 | $ | 302,399 | $ | 411,364 | Fixed | 2.5% | 4.4 |
| Digital Operating - Variable | 120 | 7,675 | 3,148 | 106,292 | $ | 117,245 | Variable | 5.7% | 4.4 | |||||
| Total Digital Operating | 938 | 36,534 | 82,027 | 408,691 | 528,609 | 3.1% | 4.4 | |||||||
| Corporate debt: | ||||||||||||||
| Revolving credit facility(2)(3) | — | — | — | — | 45,000 | Variable | 4.8% | — | ||||||
| Convertible/exchangeable senior notes | — | 200,000 | — | 300,000 | 500,000 | Fixed | 5.5% | 3.1 | ||||||
| Total DBRG share of debt(4) | 45,419 | $ | 938 | $ | 236,534 | $ | 82,027 | $ | 708,691 | $ | 1,073,609 |
All values are in US Dollars.
Notes:
(1) Maturity dates are based on initial maturity dates or extended maturity dates, where applicable, the extension option is at the Company’s discretion and if the criteria to extend have been met as of the reporting date.
(2) The Company's revolving credit facility had $45 million outstanding on June 30, 2021 and was meeting all of its required covenant threshold levels. The Company fully repaid and terminated its revolving credit facility in July 2021.
(3) In July 2021, the Company completed a first of its kind secured fund fee revenue term note and variable funding note (VFN) issuance totaling $500 million, DBRG Series 2021-1. The VFN has maximum availability of $200 million and had a zero balance outstanding as of August 5, 2021.
(4) Excluded from above presentation is debt of assets which are presented under discontinued operations for the second quarter 2021, including, one hospitality portfolio under receivership, with related $780 million consolidated, or $702 million DBRG OP share, of debt; Wellness Infrastructure business along with other non-core assets, all of which are held by the Company's subsidiary, NRF Holdco, LLC, including 5.375% exchangeable senior notes, trust preferred securities and corresponding junior subordinated debt, all of which were issued by NRF Holdco, LLC who acts as guarantor, with related $2,899 million consolidated, or $2,140 million DBRG OP share, of debt; and all of Other Equity and Debt assets with related $720 million consolidated, or $265 million DBRG OP share, of debt.
| DigitalBridge | Supplemental Financial Report | 13 |
|---|---|---|
| IIIb. Capitalization - DBRG Series 2021-1 (July 2021 Issuance)(1) | ||
| --- | ||
| ( in thousands, as of July 9, 2021) | ||
| --- | --- | --- |
| Class A-2 Term Notes | ||
| Amount outstanding | 300,000 | |
| Interest rate | % | |
| Anticipated Repayment Date (ARD) | ||
| Kroll Rating | ||
| Class A-1 Variable Funding Notes | ||
| Maximum Available | 200,000 | |
| Amount outstanding | — | |
| Interest Rate | ||
| Fully extended Anticipated Repayment Date (ARD)(2) | ||
| Financial covenants: | ||
| Debt Service Coverage Ratio(3) | ||
| Loan to Value Ratio(4) | ||
| Investment Management Expense Ratio(5) | ||
| Company status: As of August 2, 2021, DBRG is meeting all required covenant threshold levels. |
All values are in US Dollars.
Notes:
(1) In July 2021, the Company completed a first of its kind secured fund fee revenue term note and variable funding note (VFN) issuance totaling $500 million, DBRG Series 2021-1. The VFN has maximum availability of $200 million and had a zero balance outstanding as of August 5, 2021. The Company's revolving credit facility had $45 million outstanding on June 30, 2021 and was meeting all of its required covenant threshold levels. The Company fully repaid and terminated its revolving credit facility in July 2021.
(2) Anticipated Repayment Date is September 25, 2026 with two 1-year extension options subject to 1) either rating agency confirmation and consent of VFN noteholders are obtained or DSCR exceeding 1.75x, 2) term notes rating not less than BBB- 3) the payment of a 0.05% extension fee and 4) other customary conditions.
(3) Debt service coverage ratio covenant thresholds: minimum of 1.75x for ability to borrow from the VFN; below 1.75x to 1.50x = 50% cash trap; below 1.50x to 1.20x = 100% cash trap; and below 1.20x = cash sweep.
(4) 100% cash sweep until LTV is less than 35%.
(5) 50% cash sweep until ratio is less than 60%.
| DigitalBridge | Supplemental Financial Report | 14 | |||||
|---|---|---|---|---|---|---|---|
| IIIc. Capitalization - Convertible/Exchangeable Notes & Perpetual Preferred Stock | |||||||
| --- | |||||||
| ( in thousands; except per share data; as of June 30, 2021, unless otherwise noted) | |||||||
| --- | --- | --- | --- | --- | --- | --- | --- |
| Convertible/exchangeable debt | |||||||
| Description | Final due date(1) | Interest rate | Conversion price (per share of common stock) | Conversion ratio | Conversion shares | ||
| 5.75% Exchangeable senior notes | 300,000 | July 15, 2025 | 5.75% fixed | $ | 2.30 | 434.7826 | 130,435 |
| 5.0% Convertible senior notes | April 15, 2023 | 5.00% fixed | 15.76 | 63.4700 | 12,694 | ||
| Total convertible debt | 500,000 |
All values are in US Dollars.
| Perpetual preferred stock | ||||
|---|---|---|---|---|
| Description | Liquidation <br>preference | Shares outstanding (In thousands) | Callable period | |
| Series G 7.5% cumulative redeemable perpetual preferred stock(2) | $ | 86,250 | 3,450 | Callable |
| Series H 7.125% cumulative redeemable perpetual preferred stock | 287,500 | 11,500 | Callable | |
| Series I 7.15% cumulative redeemable perpetual preferred stock | 345,000 | 13,800 | On or after June 5, 2022 | |
| Series J 7.125% cumulative redeemable perpetual preferred stock | 315,000 | 12,600 | On or after September 22, 2022 | |
| Total preferred stock | $ | 1,033,750 | 41,350 |
Notes:
(1) Callable at principal amount only if DBRG common stock has traded at least 130% of the conversion price for 20 of 30 consecutive trading days: on or after July 21, 2023, for the 5.75% exchangeable senior notes and on or after April 22, 2020, for the 5.0% convertible senior notes.
(2) On August 16, 2021, the Company will redeem all of its $86.3 million 7.5% series G preferred stock.
| DigitalBridge | Supplemental Financial Report | 15 |
|---|---|---|
| IIId. Capitalization - Organization Structure | ||
| --- |
DBRG Capitalization Organization Structure following July 2021 DBRG Series 2021-1 issuance and August 2021 Series G Preferred Stock redemption:
| DigitalBridge | Supplemental Financial Report | 16 | ||||||
|---|---|---|---|---|---|---|---|---|
| IV. Digital Investment Management | ||||||||
| --- | ||||||||
| Digital Third-party AUM & FEEUM | ||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| ( in millions, as of June 30, 2021, unless otherwise noted) | FEEUM DBRG OP Share | Fee Rate | ||||||
| Digital Colony Partners I | 6,003 | $ | 3,081 | (1) | 1.1 | % | ||
| Digital Colony Partners II | 5,519 | 1.1 | % | |||||
| Separately Capitalized Portfolio Companies | 2,576 | 0.9 | % | |||||
| Co-Investment (Sidecar) Capital | 2,817 | 0.5 | % | |||||
| Liquid Strategies | 512 | 0.5 | % | |||||
| Digital Investment Management Total | 33,551 | $ | 14,505 | 0.9 | % | |||
| Digital Investment Management FRE / Adjusted EBITDA - Q2 2021 | ||||||||
| ( in thousands, unless otherwise noted) | Consolidated | |||||||
| Fee income(2) | $ | 42,300 | ||||||
| Other income | 84 | |||||||
| Compensation expense—cash | (14,426) | |||||||
| Administrative expenses | (2,337) | |||||||
| Digital Investment Management FRE / Adjusted EBITDA Total | $ | 25,621 | (2) |
All values are in US Dollars.
| Consolidated | |||
|---|---|---|---|
| Digital Investment Management Net income (loss) | $ | 15,786 | |
| Adjustments: | |||
| Depreciation and amortization | 6,298 | ||
| Compensation expense—equity-based | 1,837 | ||
| Compensation expense—carried interest and incentive | 8,266 | ||
| Administrative expenses—straight-line rent | 50 | ||
| Administrative expenses—placement agent fee | 6,959 | ||
| Incentive/performance fee income | (4,489) | ||
| Equity method (earnings) losses | (11,203) | ||
| Other (gain) loss, net | (119) | ||
| Income tax (benefit) expense | 2,236 | ||
| Digital Investment Management FRE / Adjusted EBITDA | $ | 25,621 | (2) |
Notes:
(1) Due to the first closing of Digital Colony Partners II, Digital Colony Partners I FEEUM changed from committed capital to invested equity. Committed capital which has not been invested will generate fees once this capital is invested.
(2) Excludes $4.5 million of incentive fee income and includes $8.2 million of catch-up fees earned during 2Q21, which are customary fees paid on newly raised 3rd party capital as if it were raised on the first closing date.
| DigitalBridge | Supplemental Financial Report | 17 | |
|---|---|---|---|
| V. Digital Operating | |||
| --- | |||
| Portfolio Overview | DBRG OP share of consolidated amount | ||
| --- | --- | --- | --- |
| ( in thousand, as of June 30, 2021, unless otherwise noted) | |||
| Asset(1) | 6,735,683 | $ | 1,092,632 |
| Debt(2)(3) | 528,609 | ||
| Net Carrying Value | 3,361,428 | $ | 564,023 |
| Digital Operating Adjusted EBITDA - Q2 2021 | DBRG OP share of consolidated amount | ||
| Total revenues | 189,093 | $ | 32,624 |
| Property operating expenses | (13,690) | ||
| Compensation and administrative expenses | (5,514) | ||
| Investment, servicing and commission expenses | (819) | ||
| Other gain/loss, net | (69) | ||
| EBITDAre: | 77,861 | $ | 12,532 |
| Straight-line rent expenses and amortization of above- and below-market lease intangibles | 247 | ||
| Compensation expense—equity-based | 62 | ||
| Installation services | 115 | ||
| Transaction, restructuring & integration costs | 587 | ||
| Other gain/loss, net | 69 | ||
| Digital Operating Adjusted EBITDA: | 81,995 | $ | 13,612 |
| Net income (loss) from continuing operations | (375) | ||
| Adjustments: | |||
| Interest expense | 4,948 | ||
| Income tax (benefit) expense | (13,373) | ||
| Depreciation and amortization | 21,332 | ||
| EBITDAre: | 77,861 | $ | 12,532 |
| Straight-line rent expenses and amortization of above- and below-market lease intangibles | 247 | ||
| Compensation expense—equity-based | 62 | ||
| Installation services | 115 | ||
| Transaction, restructuring & integration costs | 587 | ||
| Other gain/loss, net | 69 | ||
| Digital Operating Adjusted EBITDA: | 81,995 | $ | 13,612 |
All values are in US Dollars.
Notes:
(1) Includes all components related to real estate assets, including tangible real estate and lease-related intangibles and cash.
(2) Represents unpaid principal balance.
(3) In addition to debt presented, the Digital operating segment has $143 million consolidated, or $29 million DBRG OP share, of finance lease obligations, which represents the present value of payments on leases classified as finance leases, in the Other Liabilities line item on the Company’s Balance Sheet.
| DigitalBridge | Supplemental Financial Report | 18 | |||
|---|---|---|---|---|---|
| V. Digital Operating | |||||
| --- | |||||
| Operating Metrics | |||||
| --- | --- | --- | --- | --- | --- |
| ($ in millions, unless otherwise noted) | 6/30/21 | 6/30/20(1) | |||
| Number of Data Centers | 76 | 76 | |||
| Max Critical I.T. Square Feet | 1,809,943 | 1,768,615 | |||
| Leased Square Feet | 1,439,291 | 1,409,082 | |||
| % Utilization Rate | 79.5% | 79.7 | % | ||
| MRR (Annualized) | $ | 750.2 | $ | 718.9 | |
| Bookings (Annualized) | $ | 16.4 | $ | 17.4 | |
| Quarterly Churn (% of Prior Quarter MRR) | 1.3% | 1.9 | % |
Notes:
(1) The Company did not have interest in Vantage SDC or zColo in the second quarter 2020, however, presented Operating Metrics include data for Vantage SDC and zColo for the prior year period for comparative purposes.
| DigitalBridge | Supplemental Financial Report | 19 | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| VI. Digital Other | |||||||||||
| --- | |||||||||||
| Portfolio Overview | |||||||||||
| --- | --- | --- | --- | --- | |||||||
| ($ in thousand, as of June 30, 2021, unless otherwise noted) | Consolidated amount | DBRG OP share of consolidated amount | |||||||||
| DBRG's GP Co-investment in DCP I and II Investments | $ | 225,411 | $ | 171,012 | |||||||
| Equity interests in digital investment vehicles | 198,934 | 98,476 | |||||||||
| Net carrying value | $ | 424,345 | $ | 269,488 | |||||||
| DigitalBridge | Supplemental Financial Report | 20 | |||||||||
| --- | --- | ||||||||||
| VII. Total Company Assets Under Management | |||||||||||
| --- | ($ in millions) | DBRG OP Share | |||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | ||
| Segment | 6/30/21 | % of DBRG Total | 6/30/20 | % of DBRG Total | |||||||
| Digital Investment Management | $ | 33,551 | 69.3 | % | $ | 20,930 | 45.8 | % | |||
| Digital Balance Sheet: | |||||||||||
| Digital operating | 1,093 | 300 | |||||||||
| Digital other | 269 | 236 | |||||||||
| Digital Balance Sheet | 1,362 | 2.8 | % | 536 | 1.2 | % | |||||
| Digital Total AUM | 34,913 | 72.1 | % | 21,466 | 47.0 | % | |||||
| Legacy Investment Management | 9,817 | 20.3 | % | 14,948 | 32.7 | % | |||||
| Legacy Balance Sheet: | |||||||||||
| Wellness Infrastructure | 2,398 | 2,751 | |||||||||
| Hospitality | — | 2,468 | |||||||||
| Other - OED | 1,306 | 4,075 | |||||||||
| Legacy Balance Sheet | 3,704 | 7.6 | % | 9,294 | 20.3 | % | |||||
| Legacy Total AUM | 13,521 | 27.9 | % | 24,242 | 53.0 | % | |||||
| DBRG Total AUM | $ | 48,434 | 100.0 | % | $ | 45,708 | 100.0 | % | |||
| Less: Other Equity and Debt portfolio sale | $ | (7,493) | |||||||||
| Proforma DBRG Total AUM | $ | 40,941 | |||||||||
| Digital % of Proforma DBRG Total AUM | 85.3 | % | |||||||||
| DigitalBridge | Supplemental Financial Report | 21 | |||||||||
| --- | --- | ||||||||||
| Definitions | |||||||||||
| --- |
Assets Under Management (“AUM”)
Assets owned by the Company’s balance sheet and assets for which the Company and its affiliates provide investment management services, including assets for which the Company may or may not charge management fees and/or performance allocations. Balance sheet AUM is based on the undepreciated carrying value of digital investments and the impaired carrying value of non digital investments as of the report date. Investment management AUM is based on the cost basis of managed investments as reported by each underlying vehicle as of the report date. AUM further includes uncalled capital commitments, but excludes DBRG OP’s share of non wholly-owned real estate investment management platform’s AUM. The Company's calculations of AUM may differ from the calculations of other asset managers, and as a result, this measure may not be comparable to similar measures presented by other asset managers.
Contracted Revenue Growth (“Bookings”)
The Company defines Bookings as either (1) a new data center customer contract for new or additional services over and above any services already being provided as well as (2) an increase in contracted rates on the same services when a contract renews. In both instances a booking is considered to be generated when a new contract is signed with the recognition of new revenue to occur when the new contract begins billing.
Churn
The Company calculates Churn as the percentage of MRR lost during the period divided by the prior period’s MRR. Churn is intended to represent data center customer contracts which are terminated during the period and not renewed.
DigitalBridge Operating Company, LLC (“DBRG OP”)
The operating partnership through which the Company conducts all of its activities and holds substantially all of its assets and liabilities. DBRG OP share excludes noncontrolling interests in investment entities.
Fee-Earning Equity Under Management (“FEEUM”)
Equity for which the Company and its affiliates provides investment management services and derives management fees and/or performance allocations. FEEUM generally represents the basis used to derive fees, which may be based on invested equity, stockholders’ equity, or fair value pursuant to the terms of each underlying investment management agreement. The Company's calculations of FEEUM may differ materially from the calculations of other asset managers, and as a result, this measure may not be comparable to similar measures presented by other asset managers.
Max Critical I.T. Square Feet
Amount of total rentable square footage.
Monthly Recurring Revenue (“MRR”)
The Company defines MRR as revenue from ongoing services that is generally fixed in price and contracted for longer than 30 days.
UPB: Unpaid Principal Balance
% Utilization Rate: Amount of leased square feet divided by max critical I.T. square feet.
| DigitalBridge | Supplemental Financial Report | 22 |
|---|
digitalbridge_2q21earnin
1 EARNINGS PRESENTATION 2Q 2021 A u g u s t 5 , 2 0 2 1
2 DISCLAIMER This presentation may contain forward-looking statements within the meaning of the federal securities laws, including statements related to our digital transformation. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. In some cases, you can identify forward-looking statements by the use of forward-looking terminology such as “may,” “will,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” or “potential” or the negative of these words and phrases or similar words or phrases which are predictions of or indicate future events or trends and which do not relate solely to historical matters. You can also identify forward-looking statements by discussions of strategy, plans or intentions. Forward-looking statements involve known and unknown risks, uncertainties, assumptions and contingencies, many of which are beyond the Company’s control, and may cause the Company’s actual results to differ significantly from those expressed in any forward-looking statement. Factors that might cause such a difference include, without limitation, the duration and severity of the current novel coronavirus (COVID-19) pandemic, and its impact on the global market, economic and environmental conditions generally and in the digital and communications technology, wellness infrastructure and hospitality real estate, other commercial real estate equity and debt, and investment management sectors; the effect of COVID-19 on the Company's operating cash flows, debt service obligations and covenants, liquidity position and valuations of its real estate investments; whether we will successfully execute our strategic transformation to become a digital infrastructure and real estate focused company within the timeframe contemplated or at all, and the impact of such transformation on the Company's legacy portfolios and assets, including whether such transformation will be consistent with the Company’s REIT status; our ability to obtain and maintain financing arrangements, including securitizations, on favorable or comparable terms or at all; the Company's ability to complete anticipated monetizations of non-core assets within the timeframe and on the terms contemplated, if at all; the impact of the completion of the sale of the Company's hospitality portfolios and whether we will realize the anticipated benefits of our exit from our hospitality business; the impact of completed or anticipated initiatives related to our digital transformation, including the strategic investment by Wafra and the formation of certain other investment management platforms, on our company's growth and earnings profile; whether we will realize any of the anticipated benefits of our strategic partnership with Wafra, including whether Wafra will make additional investments in our Digital Other and Digital Operating segments; our ability to integrate and maintain consistent standards and controls, including our ability to manage our acquisitions in the digital industry effectively; the ability to realize anticipated strategic and financial benefits from terminating the management agreement with Brightspire Capital, Inc. (NYSE:BRSP; formerly, Colony Credit Real Estate, Inc. or CLNC); the impact to our business operations and financial condition of realized or anticipated compensation and administrative savings through cost reduction programs; our ability to redeploy any proceeds received from the sale of our non-digital or other legacy assets within the timeframe and manner contemplated or at all; our business and investment strategy, including the ability of the businesses in which we have a significant investment (such as BRSP) to execute their business strategies; BRSP's trading price and its impact on the carrying value of the Company's investment in BRSP; performance of our investments relative to our expectations and the impact on our actual return on invested equity; our ability to grow our business by raising capital for the companies that we manage; our ability to deploy capital into new investments consistent with our digital business strategies, including the earnings profile of such new investments; the impact of adverse conditions affecting a specific asset class in which we have investments; the availability of, and competition for, attractive investment opportunities; our ability to achieve any of the anticipated benefits of certain joint ventures, including any ability for such ventures to create and/or distribute new investment products; our ability to satisfy and manage our capital requirements; our expected hold period for our assets and the impact of any changes in our expectations on the carrying value of such assets; the general volatility of the securities markets in which we participate; stability of the capital structure of our wellness infrastructure portfolio and remaining hospitality portfolio; changes in interest rates and the market value of our assets; interest rate mismatches between our assets and any borrowings used to fund such assets; effects of hedging instruments on our assets; the impact of economic conditions on third parties on which we rely; any litigation and contractual claims against us and our affiliates, including potential settlement and litigation of such claims; our levels of leverage; adverse domestic or international economic conditions, including those resulting from the COVID-19 pandemic, and the impact on the commercial real estate or real-estate related sectors; the impact of legislative, regulatory and competitive changes; actions, initiatives and policies of the U.S. and non-U.S. governments and changes to U.S. or non-U.S. government policies and the execution and impact of these actions, initiatives and policies; whether we will maintain our qualification as a real estate investment trust for U.S. federal income tax purposes and our ability to do so; our ability to maintain our exemption from registration as an investment company under the Investment Company Act of 1940, as amended; changes in our board of directors or management team, and availability of qualified personnel; our ability to make or maintain distributions to our stockholders; our understanding of our competition, and other risks and uncertainties, including those detailed in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020 and Quarterly Report on Form 10-Q for the quarter ended June 30, 2021, each under the heading “Risk Factors,” as such factors may be updated from time to time in the Company’s subsequent periodic filings with the U.S. Securities and Exchange Commission (“SEC”). All forward-looking statements reflect the Company’s good faith beliefs, assumptions and expectations, but they are not guarantees of future performance. Additional information about these and other factors can be found in the Company’s reports filed from time to time with the SEC. The Company cautions investors not to unduly rely on any forward-looking statements. The forward-looking statements speak only as of the date of this press release. The Company is under no duty to update any of these forward-looking statements after the date of this press release, nor to conform prior statements to actual results or revised expectations, and the Company does not intend to do so. This presentation may contain statistics and other data that has been obtained or compiled from information made available by third-party service providers. The Company has not independently verified such statistics or data. This presentation is for informational purposes only and does not constitute an offer to sell or a solicitation of an offer to buy any securities of the Company. This information is not intended to be indicative of future results. Actual performance of the Company may vary materially.
3 AGENDA 1. Corporate Overview 2. 2Q Highlights 3. Financial Results 4. Executing the Digital Playbook 5. Q&A
4 1 CORPORATE OVERVIEW
5 A LEADING GLOBAL DIGITAL INFRASTRUCTURE REIT DigitalBridge is the only dedicated, global-scale digital infrastructure firm investing across five key verticals: data centers, cell towers, fiber networks, small cells, and edge infrastructure. This unique investment strategy gives investors exposure across an evolving digital ecosystem. Digital Infrastructure Investment Team With Over 25 Years of Experience Converged, next-gen networks built for speed and performance Proprietary ideas and investments rooted in deep industry relationships $35B Assets Under Management1 22 Digital Portfolio Companies (1) As of 6/30/21
6 THE DIGITALBRIDGE DIFFERENCE: INVESTOR–OPERATOR–BUILDER With a heritage of investing capital efficiently, operating digital assets, and building businesses, we take an innovative approach to growth and value creation on behalf of our customers and investors DIGITAL REITs DIGITAL INFRASTRUCTURE ASSET MANAGERS/ INVESTORS DigitalBridge actively invests and operates 22 portfolio and affiliated companies across the digital infrastructure ecosystem DigitalBridge Digital Infrastructure Assets DigitalBridge Portfolio Companies ~30,000 Tower Assets Active Sites > 80,000 Small Cells Assets Nodes > 130,000 Fiber Assets Route Miles Edge InfrastructureData Centers Enterprise & Hyperscale>100 Edge Facilities > 400 DATA CENTERS
7 MACRO: INCREASED DEMAND FOR DIGITAL INFRA Infrastructure supply remains insufficient today to meet the ever-growing requirements of a connected global economy shifting to all things digital GSMA – Global Mobile Capex Capex, 2020–2025 (billion) $1.1T Worldwide in Mobile Capex Over $1.3T on Global Data Center Capex 5x Global Network Traffic THE NEXT 5 YEARS Source: Ericsson Mobility 2021 Report Source: GSMA The Global Mobile Economy 2020 Sources: Credit Suisse, Dell’Oro
8 GLOBAL MIGRATION TO DIGITAL Pandemic accelerated investment at least 10 yrs MICRO: DEMAND FOR CONNECTIVITY CONTINUES TO SOAR As the global economy emerges from the pandemic, the digital boom sparked by lockdowns looks set to continue with companies who rely on digital infrastructure growing faster than ever $81B Revenue Records Best Second Quarter Ever1 $62B Revenue GOOGL beats earnings and revenue expectations1 $43B Revenue Microsoft bests earnings estimates1 $29B Revenue Facebook surpassed estimates1 Google advertising revenue rose 68.9% compared to the year-ago quarter YouTube revenue came in over $7 billion, up 83% from last year, drawing close to Netflix’s quarterly revenue, which was $7.34 billion. Dawn of a second wave of digital transformation sweeping every company and every industry Azure revenue grew 51% driven by strong demand for cloud services Facebook’s revenue grew by 56% year over year in the second quarter. It’s the fastest growth since 2016. Operating profit grew over 100% to $12.4B.Ke y Ta ke aw ay s Sources: Company filings iPhone sales soared 53% in the quarter to ~ $40B, while revenue from Apple services, jumped 33% to $17.5B Digital adoption has taken a quantum leap at both the organizational and industry levels
9 Since 1Q20, DigitalBridge has increased its digital asset base by ~70%, acquiring over $14B of Digital AUM FASTEST GROWING DIGITAL REIT 2021 YTD European Edge data center business $20.6B AUM & $7.7B FEEUM in 1Q20 grows to $35B AUM & $14.5B FEEUM in 2Q21 2020 Acquired telecom infrastructure firm Phoenix Tower do Brasil, adding +2,500 active sites to Highline Cornerstone investor in the IPO of Vodafone’s tower business spin-off Leading US indoor/venue wireless solutions provider Vantage Europe embarks upon USD $2 billion European expansion; enters five new European markets 5th largest media & communications LBO A Latin American hyperscale data center platform Premium outdoor media assets 12 world class North American hyperscale data centers DataBank acquires zColo, adding 44 data centers Leading US indoor/venue wireless solutions provider Asia Pacific hyperscale platform Leading Hong Kong-based data center business with significant expansion capacity to serve strong regional demand WE ARE NOT DONE FOR 2021 DATA CENTERS
10 Asia DIGITALBRIDGE – INVESTING ON A GLOBAL SCALE 22 portfolio companies….already investing actively out of DCP II with commitments of over $4 billion, leveraging DigitalBridge’s deep operating expertise and global presence Note: This map is not inclusive of other secondary DigitalBridge offices. 2 Colombia, Peru & Chile Mexico FinlandCanada, U.S. and U.K. U.K. Europe U.K.CanadaUnited States United StatesUnited States North America, Europe Brazil Brazil Asia Asia United States, Canada United States, Canada Boca Raton DigitalBridge HQ New York Los Angeles London Singapore 2 3 4 5 1 EuropeUnited States 3 Europe 13 4 North America 2 5 DATA CENTERS
11 2 2Q HIGHLIGHTS
12 NEW PLATFORM INVESTMENTS ADVANCE STRATEGIC VISION Investments announced or closed in 2Q21 highlight DigitalBridge’s expanding global scope and leadership investing in next generation networks that support the proliferation of 5G and IOT enabled devices Asia Cell Towers § Asian tower platform - leveraged to strong regional growth dynamics § Partnering with established mgmt team to build Asean tower platform § Already assembled 9,000+ tower portfolio via 5 acquisitions § Ability to apply DigitalBridge playbook from other markets and prior investment cycles Asia Hyperscale Data Centers § Asia Pacific hyperscale platform § Backing experienced mgmt team to capitalize on persistent, strong growth in cloud infrastructure demand across AsiaPac region AsiaNext-Generation Networks United States Small Cells / DAS § Leading US indoor/venue wireless solutions provider § DCP II take-private investment at $14/share, $840M TEV § Leveraged to emerging demand for converged indoor wireless solutions (5G, Wifi6, CBRS) Europe Edge Data Centers § European ‘edge infrastructure’ joint venture with Liberty Global § Emerging digital infra vertical blends various elements of traditional digital infra § Designed to bring connectivity closer to consumers and enterprises, driving down latency and improving customer experience § Significant opportunities to extend reach across Europe and partner with other tech/telcos to unlock and grow value Asia Hyperscale/Colo Data Centers Towers Small Cells Data Centers Fiber Edge Infrastructure Launched North America South America Europe Launched § Acquiring leading Hong Kong-based data center business to anchor regional strategy § Strong development pipeline with significant expansion capacity to serve strong regional demand from hyperscalers and large enterprises. Expanding key logos. DATA CENTERS
13 DCP II UPDATE DCP II current commitments reach $6.6 billion, exceeding $6.0 billion target, on strong fundraising environment Highlights Quality Relationships and Fees § 4 of 5 largest global infrastructure investors are now LPs § Strong participation from existing DCP I investors and industry-leading new logos § Currently over 50% larger than DCP I, generating long- duration, high-margin management fee revenues § Fund remains open and is set for early final close prior to YE2021 Active Investment Pipeline § Strong pipeline of digital investments globally § Fund has closed 7 platform acquisitions to-date § Over $4.0 billion committed to new acquisitions DCP I DCP II Fund Total Commitments $4.1B Current Total Commitments $6.6B Target $6.0B +$2.4B since Feb 2021 20212019 LARGEST DEDICATED DIGITAL INFRASTRUCTURE INVESTMENT PLATFORM +50%
14 Long-term contracted fee streams drive stable, predictable earnings that compound over time, similar to our digital operating revenues CONTINUING TO GROW OUR DIGITAL IM FRANCHISE + + Credit•Former the original base for growth 2019 2020 2021 $17B Digital Bridge DCP I DCP II •6 separately capitalized companies •Actively deploying Credit Liquid Note: Individual components of graph are not to scale $15.3B NEW STRATEGIES Q2 •Flagship equity fund •Now almost fully committed +30% $13B 2Q Update +$2B New Capital Formation DCPII success places on track to meet/exceed 2021 fundraising target Co Invest •An important commitment to our investors •Boosts our firepower (1) Includes ~$800M raised subsequent to 6/30/21 1
15 Wellness CLNC (BRSP) Internalization 5/21 Hotels 3/21 OED Portfolio Sale 6/21 Digital CORPORATE UPDATE – FINISH(ING) THE MISSION DBRG is ahead of plan to finish rotation ‘from diversified to digital’ at over 85% digital following 2Q announcement of OED (Other Equity & Debt) portfolio sale and BRSP (CLNC) internalization …only Wellness Infrastructure left…stay tuned Pro Forma - August 2021 85% Digital 2021 YTD Rotation Other Equity & Debt (OED) Portfolio Sale § In June, the Company agreed to sell the bulk of the remaining OED portfolio to Fortress Investment Group § Gross proceeds of $535M, in the line with carrying value § Important 'simplify' moment with >50 individual investments sold (accounting, asset mgmt, etc. savings) § In April, DBRG sold investment management contract back to BrightSpire (BRSP, publicly-traded mortgage REIT) for $102M, transferred 44 employees, another step in DBRG simplification § Transaction allowed BrightSpire to chart independent strategic direction unlocking value for BRSP shareholders, +12% since deal announced. BrightSpire Internalization - BRSP (former CLNC)
16 JUNE 2021 REBRANDING TO DIGITALBRIDGE - INAUGURAL INVESTOR DAY § DigitalBridge…a new name with a rich heritage. Introduce the fastest-growing global digital infra REIT, a business with unique characteristics § Operating DNA § Access to institutional capital § Levered to strong, secular industry tailwinds § New logo § New NYSE ticker: DBRG § Present our executive management’s team unique digital expertise, developed over the last 25+ years § Meet the broadest, deepest team singularly focused on the massive opportunity in digital infrastructure THE DIGITALBRIDGE DIFFERENCE Established Category Leader Trusted Financial Partner Compound Value for Investors Growing Markets Challenging the Status Quo Strong Entrepreneurial Drive Make a difference Resilient Markets INVESTOR DAY MICROSITE - details investment strategy across verticals and introduction to key mgmt. team and operating partners
17 2020 ESG REPORT RELEASED ESG Focused on ESG issues where we can have the greatest impact AND which are most important to our stakeholders – our DB “Top Five” 1. Climate change: Energy efficiency, GHG emissions & physical climate risks 2. Diversity, Equity & Inclusion on our management teams and Boards 3. Workplace health and safety 4. FCPA, anti-bribery/anti-corruption 5. Privacy and data security Highlights DigitalBridge commitment to a shared future and achieving measurable results § Published 2020 Annual Report, “Accelerating Our Impact” which details DBRG’s approach to responsible investment, highlights our 2020 achievements and outlines our goals for 2021 and beyond § Announced science-based Net Zero 2030 Commitment, which has been broadly embraced by all of our portfolio companies, and also joined the Net Zero Asset Managers Initiative § Tangible early progress on ESG programs at the portfolio companies § Three portfolio companies have been certified as Carbon Neutral § Bi-monthly “all hands” calls with ESG leadership at each portfolio company driving results and progress
18Strictly Private and Confidential 3 2Q FINANCIAL RESULTS
19 2Q21 SUMMARY RESULTS (1) Includes Digital Operating and Digital Investment Management segments. Excludes Digital Other segment. ($ millions except per share & AUM) 2Q20 1Q21 2Q21 Y/Y% Total Company Consolidated Revenues $67.9 $220.6 $237.2 +249% Adjusted EBITDA (DBRG OP Share) ($5.2) $12.5 $15.2 N/M Core FFO ($37.2) ($10.0) ($4.8) per share ($0.07) ($0.02) ($0.01) Net Income (DBRG Shareholder) ($2,042.8) ($264.8) ($141.3) per share ($4.33) ($0.56) ($0.29) AUM ($B) $45.7 $46.1 $48.4 +6% % Digital 47% 69% 72% +25% Legacy Monetizations $93 $96 $231 N/M Core Digital Segments(1) Consolidated Revenues $62.9 $220.3 $236.0 +275% DBRG share of Revenues $29.3 $54.2 $66.0 +126% Consolidated FRE / Adjusted EBITDA $25.9 $100.5 $107.6 +316% DBRG Share of FRE / Adjusted EBITDA $12.6 $25.6 $31.1 +146% Core FFO $10.9 $16.2 $20.1 +85% AUM ($B) $21.6 $32.0 $34.9 +62% N/M N/M Note: Historical comparative figures have been recast to exclude the results of discontinued operations except for AUM and legacy monetizations.
20 $16.6 $82.3 $82.0 $9.3 $18.2 $25.6 $25.9 $100.5 $107.6 41% 46% 46% 2Q20 1Q21 2Q21 Digital Operating Digital FRE Combined Margin $42.0 $189.2 $189.1 $20.9 $31.1 $46.9 $62.9 $220.3 $236.0 2Q20 1Q21 2Q21 Digital Operating Digital IM DIGITAL EARNINGS SUMMARY Consolidated Digital FRE / Adjusted EBITDA(1)Core Digital Revenues(1) (1) Includes Digital Operating and Digital Investment Management segments. Excludes Digital Other segment. (2) Excludes $4.5M of incentive fee income and includes $8.2M of catch-up fees earned during 2Q21, which are customary fees paid on newly raised 3rd party capital as if it were raised on the first closing date. Consolidated Digital Revenues increased to $236M in 2Q21, driven by new fees raised by DCP II and realized incentive fees on Listed Securities products Consolidated Digital FRE and Adjusted EBITDA increased to $108M during 2Q21, also led by new DCP II fees ($ in millions) ($ in millions) 100% 69% 69% 20% 17% 17% DBRG % Digital IM Digital Operating 100% 69% 69% 20% 17% 17% Y/Y Y/Y 2
21 16 11 8 2020 EOY 1Q-2021 (ex.DiscOps) 2Q-2021 (ex.DiscOps) # of Offices 300 201 132 2020 EOY 1Q-2021 (ex.DiscOps) 2Q-2021 (ex.DiscOps) N SIMPLIFICATION OF COST STRUCTURE AND G&A As part of the Digital Transformation, the Company has completed strategic divestitures and undergone cost rationalization efforts that have significantly decreased G&A to operate more efficiently Total G&A(1) (1) Digital G&A is presented on a consolidated basis inclusive of Wafra’s share, but excludes Digital Operating G&A given it is not a direct cost incurred by the Company. 2Q21 annualized G&A excludes G&A related to divested segments (Hospitality, BRSP (CLNC) investment management, and Wellness) and discontinued operations (the majority of the Other segment). Rationalizing Global Footprint Headcount Rotation ($s in millions) Non-Digital & Corporate Non-Digital, $169 Non-Digital, $88 Non-Digital, $70 Digital, $49 Digital, $63 Digital, $65 $219 $151 $135 2020 G&A 1Q21 Annualized G&A 1H21 Annualized G&A
22 STABLE TO SIGNIFICANT GROWTH… $40M $38M $40M $41M $62M $70M 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 $76M $79M $85M $100M $124M $137M 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 $36M $34M $62M $84M $131M $131M 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 $13M $13M $28M $39M $56M $55M 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 Digital investment management continued growth driven by the investment in professionals to support future capital raising and product growth Managed to generate consistent revenues and earnings with growth now beginning to manifest Steady and strong growth in revenues and earnings due to continued rotation of DBRG’s balance sheet into high quality digital assets Notably Vantage SDC in July 2020 and zColo in December 2020 Annualized Digital Fee Revenues Annualized Digital IM FRE Annualized Digital Operating Revenues Annualized Digital Operating EBITDA Investment Management Digital Operating (DBRG OP) (1) Annualization excludes $4.5M of incentive fee income and run-rate fees from $827M of FEEUM raised after 6/30/21 but includes $8.2M of catch-up fees earned during 2Q21, which are customary fees paid on newly raised 3rd party capital as if it were raised on the first closing date. (2) 4Q20 FRE adjusted to add back a $5.7M one-time outperformance incentive for DCP II capital raising; 1Q21 adjusted to remove a $2.7M benefit from reversing unused portions of the one-time incentive. (3) Represents annualized 1H21 results 221 1 3 3
23 TWO POWERFUL HIGH-GROWTH REVENUE AND EARNINGS STREAMS $44M $90M $110M $140M $95M $140M $200M 1H21 Actual FY2021 Guidance FY2023 Target FY2025 Framework $73M $145M $180M $240M $155M $230M $300M 1H21 Actual FY2021 Guidance FY2023 Target FY2025 Framework $28M $55M $175M $225M $60M $225M $275M 1H21 Actual FY2021 Guidance FY2023 Target FY2025 Framework $65M $130M $400M $500M $140M $500M $600M 1H21 Actual FY2021 Guidance FY2023 Target FY2025 Framework Digital IM revenue and FRE is anticipated to grow rapidly as DigitalBridge continues to expand the magnitude and scope of its investment products Based on our longer-term view of product offerings and fundraising expectations, we target 2023 FRE of $110M to $140M and see a path to $140M to $200M in 2025 Significant growth to 2023 targets will be achieved primarily through new acquisitions with $1.5B to 1.75B anticipated deployment from recycling capital from legacy business units Incremental growth through 2025 through organic growth, bolt-on acquisitions and new investments Digital Fee Revenues Digital IM FRE RA N G E RA N G E RA N G E RA N G E High Teens Projected Annual Growth (1) Digital Operating Revenues Digital Operating EBITDA 2 Organic growth and acquisitions to drive significant growth Mid Teens Projected Annual Growth (1) (1) Based on approximate growth rates from annualized 2Q21 to 2025 framework (2) Represents solely full year contributions of existing investments without consideration of new deployment. Organic growth and acquisitions to drive significant growth 2 Investment Management Digital Operating (DBRG OP)
24 $500M CORPORATE SECURITIZATION LOWERS DBRG COST OF CAPITAL • LOWER COST OF CAPITAL: Successful rotation into high quality digital earnings positions capital structure to be competitive; early use - taking out $86M of 7.5% preferreds • LONGER-DURATION FINANCING: Revolving variable funding notes (VFN) replace revolver, extending maturity from early 2022 to late 2026 • FIRST DIGITALBRIDGE INVESTMENT GRADE RATING: Class A-2 Notes received a BBB rating from Kroll Bond Rating Agency • VEHICLE FOR GROWTH: Ability to issue additional notes as Digital business grows, subject to rating agency confirmation Class Balance ($M) Format Kroll Rating Exp. Maturity Coupon A1-VFN 200 Not Offered N/A 5.2 yrs 3mL + 3.0% A2-Term Note 300 144A BBB 5.2 yrs 3.933% Class A Total 500 Pioneering Digital Infrastructure Financings DigitalBridge has executed securitizations totaling16 ~$7B to-date First of its kind… Fund Fee Securitization (DBRG) Hyperscale and Enterprise Data Center Securitizations (Vantage and DataBank) Small Cell Securitization (ExteNet) Investor Familiarity with DBRG Mgmt Successful Transition to Digital LAUNCHED AND SUCCESSFULLY PLACED A FIRST-OF-ITS- KIND FUND FEE SECURITIZATION DigitalBridge’s journey in the institutional debt market started in 2004 The DigitalBridge difference is embedded in this financing, and our drive to innovate GTP’s first wireless tower securitization in 2007 3.933% 7.5%
25 4 Executing The Digital Playbook
26 TWO-WAY ATHLETE: DIGITALBRIDGE CAN BUY AND BUILD 25yr + Track Record successfully executing both buy and build-driven strategies is a key differentiator…especially relative to financial sponsors new to the sector DigitalBridge expertise as both investor and operator of digital infrastructure gives us unique capability to buy, build, or both as we launch and support the growth of our portfolio companies. Buy vs. Build § Replacement cost / feasibility § Evolution of market cycles § Uniqueness / Ability to scale rapidly Flexible approach allows DigitalBridge to optimize capital allocation decisions in each situation. Many investments benefit from buy AND build over lifecycle Generates Alpha as portfolio companies benefit from DBRG strategic M&A capabilities AND/OR access to capex funding for best projects, ultimately driving higher returns for investors vsBUY BUILD 3x 2x 1x Market Price Replacement Cost Multiple BUILD BUY FOCUSED Superior build economics OPPORTUNISTIC At near or below replacement cost TIME 0
27 BUY – STRATEGIC M&A IS A CORE CAPABILITY AT DIGITALBRIDGE Accelerating value creation, from large-scale investments that establish new platform…to accretive M&A supporting continued portfolio company growth Buy When:- Ability to execute ‘carve outs’ vsBUY BUILD Proprietary Deal flow DigitalBridge global network of relationships drives unique market insight and access to deals Capital Markets Expertise Track record arranging/refi financing adds tangible value to portfolio companies (lower rates, more capital) Access to Capital Institutional capital formation capability in the Digital Infrastructure sector is second-to-none Bolt-Ons – Accretive M&A § Efficient expansion into new geos § Improve customer experience at new and existing logos § Scale rapidly § Leverage platform – overhead savings § Key Value add for portfolio companies Platform Investing – A Base To Build On § Acquire leading, high-quality businesses – Focus on scalability § Attracts best, most-qualified management teams § Infrastructure that can support growth, market leading systems
28 SLC5 Data Center BUILD – THE EXPERTISE TO MAKE OUR VISION A REALITY DigitalBridge companies are always building – delivering for customers cements strong relationships and generates superior returns for investors, especially when markets are elevated Superior Economics Returns from building are generally superior, particularly when markets are elevated We Are Builders DigitalBridge management teams have multi-decade track records managing construction, adding value from the ground up Follow The Logos Great customer relationships drive DBRG build decisions. Where, when, and what to build are all informed by steady feedback vsBUY BUILD 2021 on track to build +360 sites Beanfield builds its own infrastructure V6 Data Center DigitalBridge Builds Across all Subsectors of Digital Infra GloballyNew Site Construction Site Selection Site Acquisition Zoning / Permitting Construction Site Installation (by carrier/Operator) Site Acceptance (by Carrier/Operator) Maintenance Market Analysis
29 1Q20 1Q21 WHY IS BUILDING SO CRITICAL TODAY? Public and private market multiples are elevated today, improving the relative ‘value prop’ of building while at the same time there is a growing need for new investment to support customer growth BUILD: Investing to support customer growthBUY: Elevated Market Multiples RECENT M&A TRANSACTIONS US Data Centers Nordic Data Centers European Towers 18.4x 18.3x 18.7x 22.0x 25.9x 26.6x 2016 2017 2018 2019 2020 2021 +35% +20% +81% +78% _____________ Source: Capital IQ, February 2021 composite average: AMT, CCI, EQIX, SBAC, DLR, COR ~26x EBITDA ~33x NOI ~28x EBITDA DIGITAL INFRASTRUCTURE FORWARD MULTIPLES(1) TOTAL HYPERSCALE CAPEX $32B1Q 2020 $38B1Q 2021 vsBUY BUILD
30 WHERE ARE WE BUILDING EUROPE ASIA NORTH AMERICA LATAM
31 INVESTMENT BACKGROUND SLC 5 Campus § DataBank entered the Salt Lake City market in 2017 with the acquisition of C7 Data Centers (SLC 1 – 3) § Salt Lake City’s “Silicon Slopes” technology sector employment has grown at 2x the national average over the past 10 years § Alternative to expensive data centers in Los Angeles, Santa Clara, San Jose, and San Francisco § Success Based Capex - strong demand drove the need to expand § Built and developing DigitalBridge portfolio company DataBank is building actively across the US, adding to its 64 data centers serving edge colocation customers nationwide. Salt Lake City (SLC) is an emerging cloud-centric market where we are building… CASE STUDY – DATABANK SLC (SALT LAKE CITY) BUILD MULTIPLE ON STABILIZED EBITDA BELOW 10x Campus with modular design drives cost synergies SLC 4 Complete 2019 SLC 5 Complete 2020 SLC 6/7 Design Phase vs. Industry precedent transaction multiples of 21.7x and recent take private at 26x SLC 4 CampusSALT LAKE CITY BUILD RATIONALE vsBUY BUILD
32 WHY DBRG? CEO 2Q Checklist Secular Tailwinds Around Connectivity 25+ years Investing and Operating Digital Assets Converged Vision with Exposure to Entire Digital Ecosystem Continue to Build Digital IM Franchise DCPII exceeded target hitting $6.6B…and we are not done yet Invest In High Quality Digital DCP II with 7 platform investments already, building actively on a global basis Finish The Mission (Rotation To Digital) 85% rotated, new name/brand to reflect a business transformed ESG 2020 ESG report outlines significant program designed to generate tangible results Fast-growing Digital REIT. New management building the next great digital infra platform
33 5 Q&A SESSION
34 NON-GAAP RECONCILIATIONS Total DBRG for the Three Months Ended Core Digital Segments(3) for the Three Months Ended Core Funds from Operations (in thousands, except per share) June 30, 2021 March 31, 2021 June 30, 2020 June 30, 2021 March 31, 2021 June 30, 2020 Net income (loss) attributable to common stockholders $ (141,260) $ (264,806) $ (2,042,790) $ 11,724 $ (3,195) $ (2,204) Net income (loss) attributable to noncontrolling common interests in Operating Company (14,980) (27,896) (225,057) 1,240 (336) (241) Net income (loss) attributable to common interests in Operating Company and common stockholders (156,240) (292,702) (2,267,847) 12,964 (3,531) (2,445) Adjustments for FFO: Real estate depreciation and amortization 150,458 184,762 131,722 115,311 120,414 25,774 Impairment of real estate 242,903 106,077 1,474,262 – – – Loss (gain) from sales of real estate (2,969) (38,102) 4,919 – – – Less: Adjustments attributable to noncontrolling interests in investment entities (162,021) (188,496) (329,601) (96,156) (100,245) (20,595) FFO 72,131 (228,461) (986,545) 32,119 16,638 2,734 Additional adjustments for Core FFO: Adjustment to BRSP cash dividend (40,165) 55,648 328,222 – – – Equity-based compensation expense 11,642 19,299 10,152 2,093 1,841 978 Straight-line rent revenue and expense (2,309) 17,225 (5,240) (797) (1,018) 1,410 Amortization of acquired above- and below-market lease values, net (1,498) 6,005 (531) 749 695 1,723 Debt prepayment penalties and amortization of deferred financing costs and debt premiums and discounts 10,196 45,627 10,080 2,450 1,703 – Non-real estate fixed asset depreciation, amortization and impairment 19,996 20,563 13,390 12,938 3,813 9,327 Restructuring and transaction-related charges(1) 5,174 34,482 8,864 106 – 596 Non-real estate (gains) losses, excluding realized gains or losses within the Digital Other segment (151,773) 267,812 740,038 196 (255) 46 Net unrealized carried interest (6,485) 189 801 (5,688) 189 – Tax effect on certain of the foregoing adjustments (42,536) (17,657) (3,092) (67,047) (12,527) (3,092) Less: Adjustments attributable to noncontrolling interests in investment entities 146,687 (218,328) (182,607) 42,961 5,084 (2,864) Less: CFFO from discontinued operations (25,874) (12,391) 29,242 – – – Core FFO $ (4,814) $ (9,987) $ (37,226) $ 20,080 $ 16,163 $ 10,858 Core FFO per common share / common OP unit $ (0.01) $ (0.02) $ (0.07) W.A. number of common OP units outstanding used for Core FFO per common share and OP unit (2) 539,287 537,033 535,938 (1) Restructuring and non-recurring items primarily represent costs and charges incurred as a result of corporate restructuring and reorganization to implement the digital evolution. These costs and charges include severance, retention, relocation, transition, shareholder settlement and other related restructuring costs, which are not reflective of the Company’s core operating performance. (2) Calculated based on weighted average shares outstanding including participating securities and assuming the exchange of all common OP units outstanding for common shares. (3) Includes Digital Operating and Digital Investment Management segments; excludes Digital Other.
35 NON-GAAP RECONCILIATIONS Three Months Ended (In thousands) June 30, 2021 March 31, 2021 June 30, 2020 DBRG Share of Core Digital Revenues Total Revenues $235,966 $220,322 $62,870 Less: Non-controlling interest (169,935) (166,133) (33,608) DBRG pro-rata share of Revenues $66,031 $54,189 $29,262 Digital Investment Management FRE Determined as Follows Digital Investment Management Net Income (loss) $15,786 $7,663 $2,424 Adjustments: Depreciation and amortization 6,298 8,911 6,605 Compensation expense—equity-based 1,837 1,533 682 Compensation expense—carried interest and incentive 8,266 (33) – Administrative expenses—straight-line rent 50 (2) 16 Administrative expenses—placement agent fee 6,959 59 – Incentive/performance fee income (4,489) – – Equity method earnings (losses) (11,203) 195 (277) Other gain (loss), net (119) (165) 8 Income tax (benefit) expense 2,236 7 (151) Investment and services expense – 32 – Digital Investment Management FRE / Adjusted EBITDA $25,621 $18,200 $9,307 Fee income $42,300 $31,065 $20,293 Other income 84 54 552 Compensation expense—cash (14,426) (10,852) (9,208) Administrative expenses (2,337) (2,067) (2,330) Fee related earnings $25,621 $18,200 $9,307 DBRG pro-rata share of FRE $17,449 $11,645 $9,307 Three Months Ended (In thousands) June 30, 2021 March 31, 2021 June 30, 2020 Digital Operating Adjusted EBITDA Determined as Follows Net income (loss) from continuing operations ($10,850) ($64,260) ($21,262) Adjustments: Interest expense 29,272 31,133 8,170 Income tax (benefit) expense (66,788) (12,268) (2,673) Depreciation and amortization 126,227 122,220 28,571 EBITDAre: 77,861 76,825 12,806 Straight-line rent expenses and amortization of above- and below-market lease intangibles (98) (399) 1,837 Compensation expense - equity-based 308 308 296 Installation Services 576 880 493 Transaction, restructuring & integration costs 2,999 4,670 1,141 Other gain/loss, net 349 – – Adjusted EBITDA $81,995 $82,284 $16,573 DBRG pro-rata share of Adjusted EBITDA $13,612 $13,918 $3,318 Three Months Ended Three Months Ende (In thousands) June 30, 2021 March 31, 2021 June 30, 2020 Firm-Wide Adjusted EBITDA Core FFO ($4,814) ($9,987) ($37,226) Less: Earnings of equity method investments (6,216) (4,440) – Plus: Preferred dividends 18,516 18,516 18,516 Plus: Core interest expense 11,834 12,387 12,625 Plus: Core tax expense (8,224) (5,613) 891 Plus: Non pro-rata allocation of income (loss) to NCI 223 201 – Plus: Placement fees 4,767 40 – Less: Realized carried interest/incentive fees (1,565) 11 – Plus: Installation services 692 1,393 (18) Adjusted EBITDA: $15,213 $12,508 ($5,212) Note: Prior to the second quarter of 2021, the fee income in Digital Investment Management and fee expense in Digital Operating and Digital Other were eliminated within the respective segments. Effective the second quarter of 2021, the eliminated adjustments are not included in the respective segments.
36 IMPORTANT NOTE REGARDING NON-GAAP FINANCIAL MEASURES This presentation includes certain “non-GAAP” supplemental measures that are not defined by generally accepted accounting principles, or GAAP, including the financial metrics defined below, of which the calculations may from methodologies utilized by other REITs for similar performance measurements, and accordingly, may not be comparable to those of other REITs. FFO: The Company calculates funds from operations (FFO) in accordance with standards established by the Board of Governors of the National Association of Real Estate Investment Trusts, which defines FFO as net income or loss calculated in accordance with GAAP, excluding (i) extraordinary items, as defined by GAAP; (ii) gains and losses from sales of depreciable real estate; (iii) impairment write-downs associated with depreciable real estate; (iv) gains and losses from a change in control in connection with interests in depreciable real estate or in-substance real estate, plus (v) real estate-related depreciation and amortization; and (vi) including similar adjustments for equity method investments. Included in FFO are gains and losses from sales of assets which are not depreciable real estate such as loans receivable, equity method investments, as well as equity and debt securities, as applicable. Core FFO: The Company computes core funds from operations (Core FFO) by adjusting FFO for the following items, including the Company’s share of these items recognized by its unconsolidated partnerships and joint ventures: (i) equity-based compensation expense; (ii) effects of straight-line rent revenue and expense; (iii) amortization of acquired above- and below-market lease values; (iv) debt prepayment penalties and amortization of deferred financing costs and debt premiums and discounts; (v) non-real estate depreciation, amortization and impairment; (vi) restructuring and transaction-related charges; (vii) non-real estate loss (gain), fair value loss (gain) on interest rate and foreign currency hedges, and foreign currency remeasurements except realized gain and loss from the Digital Other segment; (viii) net unrealized carried interest; and (ix) the tax effect on certain of the foregoing adjustments. The Company’s Core FFO from its interest in BrightSpire Capital, Inc. (NYSE: BRSP) represented the cash dividends declared in the reported period. The Company excluded results from discontinued operations in its calculation of Core FFO and applied this exclusion to prior periods. Beginning with the first quarter 2021, the Company revised the computation of Core FFO and applied this revised computation methodology to prior periods presented. FFO and Core FFO should not be considered alternatives to GAAP net income as indications of operating performance, or to cash flows from operating activities as measures of liquidity, nor as indications of the availability of funds for our cash needs, including funds available to make distributions. FFO and Core FFO should not be used as supplements to or substitutes for cash flow from operating activities computed in accordance with GAAP. The Company uses FFO and Core FFO as supplemental performance measures because, in excluding real estate depreciation and amortization and gains and losses, it provides a performance measure that captures trends in occupancy rates, rental rates, and operating costs, and such a measure is useful to investors as it excludes periodic gains and losses from sales of investments that are not representative of its ongoing operations. The Company also believes that, as widely recognized measures of the performance of REITs, FFO and Core FFO will be used by investors as a basis to compare its operating performance with that of other REITs. However, because FFO and Core FFO exclude depreciation and amortization and capture neither the changes in the value of the Company’s properties that resulted from use or market conditions nor the level of capital expenditures and leasing commissions necessary to maintain the operating performance of its properties, all of which have real economic effect and could materially impact the Company’s results from operations, the utility of FFO and Core FFO as measures of the Company’s performance is limited. FFO and Core FFO should be considered only as supplements to GAAP net income as a measure of the Company’s performance. Additionally, Core FFO excludes the impact of certain fair value fluctuations, which, if they were to be realized, could have a material impact on the Company’s operating performance DigitalBridge Operating Company, LLC (DBRG OP): DBRG OP is the operating partnership through which the Company conducts all of its activities and holds substantially all of its assets and liabilities. The Company is the sole managing member of, and directly owns approximately 90% of the common units in, DBRG OP. The remaining common units in DBRG OP are held primarily by current and former employees of the Company. Each common unit is redeemable at the election of the holder for cash equal to the then fair value of one share of the Company’s Class A common stock or, at the Company’s option, one share of the Company’s Class A common stock. DBRG OP share excludes noncontrolling interests in investment entities. Throughout this presentation, consolidated figures represent the interest of both the Company (and its subsidiary, the “DBRG OP”) and noncontrolling interests. Figures labeled as DBRG OP share represent the Company’s pro-rata share. Adjusted Earnings before Interest, Taxes, Depreciation and Amortization (Adjusted EBITDA): The Company calculates Adjusted EBITDA by adjusting Core FFO to exclude cash interest expense, preferred dividends, tax expense or benefit, earnings from equity method investments, placement fees, realized carried interest and incentive fees and revenues and corresponding costs related to installation services. The Company uses Adjusted EBITDA as a supplemental measure of our performance because they eliminate depreciation, amortization, and the impact of the capital structure from its operating results. However, because Adjusted EBITDA is calculated before recurring cash charges including interest expense and taxes and are not adjusted for capital expenditures or other recurring cash requirements, their utilization as a cash flow measurement is limited. Digital Operating Earnings before Interest, Taxes, Depreciation and Amortization for Real Estate (EBITDAre) and Adjusted EBITDA: The Company calculates EBITDAre in accordance with the standards established by the National Association of Real Estate Investment Trusts, which defines EBITDAre as net income or loss calculated in accordance with GAAP, excluding interest, taxes, depreciation and amortization, gains or losses from the sale of depreciated property, and impairment of depreciated property. The Company calculates Adjusted EBITDA by adjusting EBITDAre for the effects of straight-line rental income/expense adjustments and amortization of acquired above- and below-market lease adjustments to rental income, revenues and corresponding costs related to the delivery of installation services, equity-based compensation expense, restructuring and transaction related costs, the impact of other impairment charges, gains or losses from sales of undepreciated land, gains or losses from foreign currency remeasurements, and gains or losses on early extinguishment of debt and hedging instruments. The Company uses EBITDAre and Adjusted EBITDA as supplemental measures of our performance because they eliminate depreciation, amortization, and the impact of the capital structure from its operating results. EBITDAre represents a widely known supplemental measure of performance, EBITDA, but for real estate entities, which we believe is particularly helpful for generalist investors in REITs. EBITDAre depicts the operating performance of a real estate business independent of its capital structure, leverage and noncash items, which allows for comparability across real estate entities with different capital structure, tax rates and depreciation or amortization policies. Additionally, exclusion of gains on disposition and impairment of depreciated real estate, similar to FFO, also provides a reflection of ongoing operating performance and allows for period-over-period comparability. However, because EBITDAre and Adjusted EBITDA are calculated before recurring cash charges including interest expense and taxes and are not adjusted for capital expenditures or other recurring cash requirements, their utilization as a cash flow measurement is limited. Digital Investment Management Fee Related Earnings (“FRE”) / Adjusted EBITDA: The Company calculates FRE / Adjusted EBITDA for its investment management business within the digital segment as base management fees, other service fee income, and other income inclusive of cost reimbursements, less compensation expense (excluding equity-based compensation), administrative expenses (excluding fund raising placement agent fee expenses), and other operating expenses related to the investment management business. The Company uses FRE as a supplemental performance measure as it may provide additional insight into the profitability of the overall digital investment management business. FRE / Adjusted FRE is presented prior to the deduction for Wafra's 31.5% interest. Assets Under Management (AUM): Assets owned by the Company’s balance sheet and assets for which the Company and its affiliates provide investment management services, including assets for which the Company may or may not charge management fees and/or performance allocations. Balance sheet AUM is based on the undepreciated carrying value of digital investments and the impaired carrying value of non digital investments as of the reporting date. Investment management AUM is based on the cost basis of managed investments as reported by each underlying vehicle as of the reporting date. AUM further includes uncalled capital commitments, but excludes DBRG OP’s share of non wholly-owned real estate investment management platform’s AUM. The Company's calculations of AUM may differ from the calculations of other asset managers, and as a result, this measure may not be comparable to similar measures presented by other asset managers. Fee-Earning Equity Under Management (FEEUM): Equity for which the Company provides investment management services and derives management fees and/or performance allocations. FEEUM generally represents the basis used to derive fees, which may be based on invested equity, stockholders’ equity, or fair value pursuant to the terms of each underlying investment management agreement. The Company's calculations of FEEUM may differ materially from the calculations of other asset managers, and as a result, this measure may not be comparable to similar measures presented by other asset managers.
37