COMMITMENTS AND CONTINGENCIES

9 Months Ended

Sep. 30, 2020

Commitments and Contingencies Disclosure [Abstract]

8. COMMITMENTS AND CONTINGENCIES

Indemnification Arrangements

Consistent with standard business practices in the normal course of business, the Company enters into contracts that contain indemnities for affiliates of the Company, persons acting on behalf of the Company or such affiliates and third parties. The terms of the indemnities vary from contract to contract and the Company’s maximum exposure under these arrangements cannot be determined and has not been recorded in the Condensed Consolidated Statements of Financial Condition. As of September 30, 2020, the Company has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote.

Commitments

As of September 30, 2020 and December 31, 2019, the Company had aggregate unfunded commitments to invest in funds it manages or to support certain strategic initiatives of $706.4 million and $387.4 million, respectively.

Performance Income

Performance income is affected by changes in the fair values of the underlying investments in the funds that we advise. Valuations, on an unrealized basis, can be significantly affected by a variety of external factors including, but not limited to, public equity market volatility, industry trading multiples and interest rates. Generally, if at the termination of a fund (and increasingly at interim points in the life of a fund), the fund has not achieved investment returns that (in most cases) exceed the preferred return threshold or (in all cases) the general partner receives net profits over the life of the fund in excess of its allocable share under the applicable partnership agreement, the Company will be obligated to repay carried interest that was received by the Company in excess of the amounts to which the Company is entitled. This contingent obligation is normally reduced by income taxes paid by the Company related to its carried interest.

Senior professionals of the Company who have received carried interest distributions are responsible for funding their proportionate share of any contingent repayment obligations. However, the governing agreements of certain of the Company's funds provide that if a current or former professional does not fund his or her respective share for such fund, then the Company may have to fund additional amounts beyond what was received in carried interest, although the Company will generally retain the right to pursue any remedies under such governing agreements against those carried interest recipients who fail to fund their obligations.

At September 30, 2020 and December 31, 2019, if the Company assumed all existing investments were worthless, the amount of performance income subject to potential repayment, net of tax distributions, which may differ from the recognition of revenue, would have been approximately $294.0 million and $233.4 million, respectively, of which approximately $226.8 million and $175.1 million, respectively, is reimbursable to the Company by certain professionals who are the recipients of such performance income. Management believes the possibility of all of the investments becoming worthless is remote. As of September 30, 2020 and December 31, 2019, if the funds were liquidated at their fair values, there would be no contingent repayment obligation or liability.

Litigation

From time to time, the Company is named as a defendant in legal actions relating to transactions conducted in the ordinary course of business. Although there can be no assurance of the outcome of such legal actions, in the opinion of management, the Company does not have a potential liability related to any current legal proceeding or claim that would individually or in the aggregate materially affect its results of operations, financial condition or cash flows.

Leases

The Company leases office space and certain office equipment. The Company's leases have remaining lease terms of one to 10 years. The tables below present certain supplemental quantitative disclosures regarding the Company's leases:


		As of September 30,		As of December 31,
	Classification	2020		2019
Operating lease assets	Right-of-use operating lease assets	$	136,392	$	143,406
Finance lease assets	Other assets(1)	1,508		1,787
Total lease assets		$	137,900	$	145,193

Operating lease liabilities	Operating lease liabilities	$	161,737	$	168,817
Finance lease obligations	Accounts payable, accrued expenses and other liabilities	1,306		1,651
Total lease liabilities		$	163,043	$	170,468

(1) Finance lease assets are recorded net of accumulated amortization of $0.9 million and $0.6 million as of September 30, 2020 and December 31, 2019, respectively.


		Three months ended September 30,				Nine months ended September 30,
	Classification	2020		2019		2020		2019
Operating lease expense	General, administrative and other expenses	$	7,701	$	7,314	$	23,138	$	21,463
Finance lease expense:
Amortization of finance lease assets	General, administrative and other expenses	127		89		346		194
Interest on finance lease liabilities	Interest expense	11		9		33		30
Total lease expense		$	7,839	$	7,412	$	23,517	$	21,687


Other information	Nine months ended September 30, 2020		Nine months ended September 30, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases	$	23,098	$	23,273
Operating cash flows for finance leases	48		54
Financing cash flows for finance leases	412		283
Leased assets obtained in exchange for new finance lease liabilities	—		128
Leased assets obtained in exchange for new operating lease liabilities	12,477		49,833


	As of September 30,		As of December 31,
Lease term and discount rate	2020		2019
Weighted-average remaining lease terms (in years):
Operating leases	5.9		6.5
Finance leases	2.9		3.3
Weighted-average discount rate:
Operating leases	3.97	%	4.00	%
Finance leases	3.26	%	3.39	%


Maturity of lease liabilities	Operating Leases		Finance Leases
2020	$	8,647	$	45
2021	31,044		518
2022	31,925		485
2023	28,549		158
2024	25,593		156
After 2024	55,850		8
Total future payments	181,608		1,370
Less: interest	19,871		64
Total lease liabilities	$	161,737	$	1,306