On Nov. 4, DigitalBridge Group and its subsidiaries disclosed its financial results for the third quarter ended Sept. 30. The company reported third-quarter revenue of $252 million, GAAP (generally accepted accounting principles) net income attributable to common stockholders of $41 million, or 8 cents per share, core FFO (funds from operations) of $2 million and AFFO (adjusted funds from operations) of $700,000.
“Having successfully rotated more than $70 billion of AUM in less than three years, we’ve transformed DigitalBridge into a leading global digital infrastructure firm,” said Marc Ganzi, president and CEO of DigitalBridge, in a public forum on Nov. 4. “Nearly 100 percent digital, we’re fully aligned with the powerful secular tailwinds driving opportunities in global connectivity and playing offense by generating growth through new offerings while accelerating operating earnings. We are pleased that our second flagship fund, DCP II, reached commitments of $8.1 billion, validating DigitalBridge as the partner of choice to institutional capital looking to build exposure to this resilient, growing asset class.”
Some of DigitalBridge’s third-quarter highlights — aligned with its strategic goals, encapsulated in the catchphrase “Digital Transformation — Finish the Mission” — include:
Capital formation momentum —Digital Colony Partners II (DCP II) commitments reached $8.1 billion in October, an increase of over $1.5 billion since DigitalBridge’s last quarter report and 35 percent higher than the original $6 billion target. Total digital FEEUM increased to $17.2 billion as of Nov. 4, exceeding the company’s year-end 2021 guidance a quarter ahead of schedule.
Rotation to digital — 99 percent digital AUM, a rotation of $73 billion in AUM in less than three years, proforma for the closing of previously announced sales of legacy businesses, including the Wellness Infrastructure sale announced in September 2021.
Reduced corporate debt and lowered cost of capital — Since the second quarter, DBRG has redeemed $150 million in preferred stock, conducted an early exchange of $44 million in convertible notes and issued a $500 million digital investment management fee revenue securitization, effectively lowering its cost of corporate capital and increasing current cash flow.
In September, DigitalBridge Group reached an agreement to sell its Wellness Infrastructure business, including a portfolio of more than 300 facilities across senior housing, skilled nursing, medical office buildings and hospitals, to an investment group composed of two real estate investment firms, Highgate Capital Investments and Aurora Health Network, in a transaction valued at $3.2 billion.
At the third-quarter 2021 presentation, Ganzi said that the Wellness sale was the last step of DigitalBridge’s Finish the Mission agenda. “We announced the sale of our Wellness Business earlier this quarter, taking us effectively to 100 percent rotated on digital infrastructure on a pro forma basis,” Ganzi said. “I want to put that into some perspective because the team will have really achieved something special this year when that deal closes in the first quarter of 2022.”
Ganzi also said that the finish-the-mission transition is not just about asset rotation. “I’m here to tell you it’s been a complete transformation of the company,” he said. “Our corporate capitalization has gone from being over-levered with over $7 billion in debt to just over $1 billion in the last year alone. Just as important to this, our corporate governance has also been completely overhauled. With new senior leadership in place, and a more digital, more focused and more diverse board, helping us navigate the DigitalBridge roadmap and ecosystem.”
Ganzi then said that DigitalBridge is “finally able to play offense and off of our front foot and invest in the best asset classes that we see globally. This is really an exciting inflection point for us. We’re set to enter the second stage of our business transformation, the acceleration, where our two high-growth business lines really achieved scale. Just there’s a number of exciting thematics begin to play out in our sector: 5G, IoT, AI, edge computing. These are the emerging demand drivers we are aligned with in our investment thesis. The place we believe investors want to be today.”
Ganzi summarized DigitalBridge’s successful third quarter by recounting the progress of the global REIT investment group’s various businesses.
“First, our Digital IM business is raising record amounts of capital. We’re set to broaden and deepen our investment offerings next year and beyond. That’ll drive new opportunity, and of course in turn FEEUM, which in turn drives our revenues and earnings,” he said.
“Next, our digital operating division is set to lift off fueled by the deployment of our balance sheet capital into high-quality stabilized digital infrastructure assets. That means supporting our existing platforms, DataBank advantage, or building exposure to new mature developed market assets. This is going to be a significant growth driver for us, as you can see here, and it underpins earnings growth for the next two years. The bottom line in the acceleration stage that we’re entering is where this opportunity becomes very compelling. I couldn’t be more excited.
“Next, I want to talk about our capital formation efforts at DigitalBridge and specifically fundraising a DCP II, our second flagship fund. This is the most powerful part of our results this quarter. We didn’t slow down in the third quarter. We maintained and built on our strong pace of capital formation, and we hit our $8.1 billion hard cap in early October.”
Ganzi concluded his public address by stating, “DigitalBridge has established itself as the partner of choice to institutional capital, looking to build exposure to this resilient and growing digital infrastructure asset class. I want to thank my entire team for their tireless work this past year, and for this fantastic achievement that serves our shareholders.”
With a heritage of more than 25 years investing in and operating businesses across the digital ecosystem including towers, data centers, fiber, small cells and edge infrastructure, DigitalBridge Group, formerly named Colony Capital, has had a complicated — albeit lucrative — financial history. Founded in 2013 by Ganzi and Ben Jenkins, the holding company initially focused on cellular infrastructure, but later expanded to data centers, fiber networks, and other areas. In 2017, it bought data center company Vantage Data Centers Management for more than $1 billion.
Last month, DigitalBridge Group announced that funds affiliated with DigitalBridge Investment Management, DigitalBridge’s investment management platform, completed the acquisition of a controlling stake in Vertical Bridge Holdings, which claims to be the largest private owner and operator of wireless communication infrastructure in the United States.
Mike Harrington is a contributing editor.