Digital Bridge, which owns a broad range of communications infrastructure including Vertical Bridge and ExteNet, has been purchased by Colony Capital, a global real estate investment firm, for $325 million. During the next two years, Marc Ganzi, a founder and CEO of Digital Bridge and a managing partner at Digital Colony (a combo of Digital Bridge and Colony Capital), will transition into the role of CEO of Colony Capital, succeeding Thomas J. Barrack Jr.
“I have known Marc Ganzi for over two decades and have admiringly watched his progression and success as an entrepreneur, visionary, and as the leading operator and investor in the digital world,” Barrick said. “Since Marc founded Global Tower Partners in 2002, he has been at the forefront of trends in the digital world, capitalizing on the overwhelming integration of mobile connectivity into the global economy and delivering remarkable returns for his investors in the process.
“[Ganzi] is an exceptional choice to lead our combined companies, investors, and employees as we accelerate, streamline, and cull other Colony business lines through sale or joint ventures and continue to reduce corporate costs,” he added.
The Digital Bridge acquisition follows the May 2019 closing of a $4.05 billion fund sponsored by Digital Colony and Digital Bridge. Digital Bridge manages nearly $20 billion of digital infrastructure globally, directly and through Digital Colony Partners, and the combined portfolio of the two firms will be $60 billion of assets.
“This acquisition continues Colony’s strategy of building leading investment management platforms, adding a powerful focus on assets and businesses that benefit from the increasingly digital world, including communications infrastructure, quant-driven listed securities products, artificial intelligence, digital credit products, smart logistics industrial, private equity and emerging markets infrastructure and growth equity strategies,” the company said in a press release.
Marc Ganzi’s vision of diversification took another big step yesterday as his global investment firm Digital Colony purchased fiber optic network provider Zayo Group, with the help of EQT Infrastructure IV fund, in a transaction valued at $14.3 billion. Zayo will transition from a public company to a private company but remain headquartered in Boulder, Colorado. The deal is subject to regulatory and shareholder approval.
Jennifer Fritzsche, senior analyst, Wells Fargo Securities, said. “Ultimately, we believe ZAYO will be a valuable asset within the acquirers’ portfolios and create natural synergies with their other investments. Digital Colony, through its partner Digital Bridge, touches many of the converging parts of the communications infrastructure ecosystem.”
Digital Colony is a combination of Digital Bridge Holdings, which is headed by Ganzi, and Colony Capital, a real estate investment management firm. Digital Bridge is a holding company that is quite diversified, owning Vertical Bridge, Mexico Tower Partners, ExteNet Systems, Databank, Vantage Data Centers and Andean Tower Partners.
As a global investment firm, Digital Colony focuses on next generation mobile and internet infrastructure – towers, data centers, small cells, and fiber.
Ganzi said, “Zayo has a world-class digital infrastructure portfolio, including a highly-dense fiber network in some of the world’s most important metro markets. We believe the company has a unique opportunity to meet the growing demand for data associated with the connectivity and backhaul requirements of a range of customers.”
Goldman Sachs and J.P. Morgan are serving as financial advisors to Zayo Group in connection with the transaction and Skadden Arps is serving as legal counsel. Morgan Stanley and Deutsche Bank are acting as financial advisors to Digital Colony and EQT Infrastructure, and Simpson Thacher is serving as legal advisor.
Spencer Kern, analyst, New Street Research, said the transaction was bad news for Crown Castle International. First, the pricing of transaction has negative implications because the implied multiple on Zayo’s fiber is 7x lower than the multiple placed on CCI’s fiber by the market.
“We don’t see any reasons why CCI’s fiber should trade at such a high premium to Zayo’s; at the multiple implied by the Zayo transaction, we see 8 percent downside to CCI’s stock price,” Kern wrote. “Second, the new ownership of Zayo could drive greater competition in small cells, putting pressure on CCI’s small cells win-rate, pricing, or both.”
A Busy Year for Digital Colony
Since its inception, Digital Colony has aggressively moved forward on Ganzi’s vision of diversification, with a particular emphasis on the United Kingdom. Last August, Digital Colony entered the U.K. indoor DAS and small cell market with an investment in Stratto, which offers an Infrastructure-as-a-Service business model.
On April 29 of 2019, the global investment firm announced further growth of its U.K. platform through the acquisition of iWireless Solutions, a small cell provider that serves large, high profile venues in the U.K. (London Olympic Stadium, Twickenham Stadium).
Last November, Digital Colony purchased Opencell, which provides multi-operator indoor coverage and currently has more than 2,000 cells across 100 networks that are used by all four U.K. mobile network operators. Opencell was then merged with Stratto.
“Our goal from day one has been to build the leading digital infrastructure platform that delivers exceptional indoor and outdoor network solutions to the mobile network operators in the U.K.; combining Opencell’s capabilities and active networks with the Stratto platform helps us accelerate those goals,” said Ganzi, in a November 2018 press release. “We look forward to continuing to strengthen our relationships with our customers as well as positioning Digital Colony’s U.K. digital infrastructure platform as the recognized leader in the small cell sector.”
Outside the United Kingdom, Digital Colony Buys Fiber, Towers
Elsewhere in the world, Digital Colony has reached out and planted it flag. Last week, Digital Colony closed on the acquisition of Toronto-based, Cogeco Peer 1, a provider of colocation, network connectivity and managed services company. Cogeco Peer 1’s fiber business, which currently encompass more than 2,050 route miles of owned, dense metro fiber in Canada’s two largest urban markets, plans to become the country’s first neutral-host provider of small cell and 5G infrastructure and enterprise and wholesale fiber connectivity.
At the end of just Digital Colony completed its acquisition of Helsinki, Finland-based Digita Oy, which owns and operates the nationwide digital terrestrial television and radio broadcasting tower infrastructure network in Finland and is the largest independent owner of telecom towers in the country.
5G will be a transformative moment for the wireless industry as operators provide the new, expansive services made possible by multi-gigabit speeds and minimal latency, Marc Ganzi, Digital Bridge CEO, told an audience at last week’s Wireless West Conference, held in Los Angeles. The wireless infrastructure industry will have to transform, too, through technological convergence to provide an estimated 1.2 million small cells, miles of fiber optics and computing pushed to the edge of the networks.
Digital Bridge itself is a prime example of convergence, with ownership of companies across multiple platforms, including macrotowers, small cells, wholesale data center solutions, enterprise-class data centers, neutral-host distributed network systems and fiber optics.
Ganzi challenged the audience members to think bigger and expand beyond towers to serve the operators’ needs. “How do you stay relevant?” he said. “We should be in the business of delivering networks. We are not in silos anymore. Convergence is now. It is not something ethereal or happening in the distant future.”
The 5G buildout will be a complicated build that will take place over the span of seven to eight years, Ganzi forecasted. “It will involve a lot of the pieces of the ecosystem – fiber optics, data centers and small cells — that the wireless industry, the tower industry in particular, hasn’t always been a part. These are complex things that have to all fit within an ecosystem that works harmoniously together,” he said.
Fiber optics will be a critical component of 5G because it is the “connective tissue” of the network, whether it linking a Wi-Fi node, a small cell, an indoor DAS system, an outdoor macrosite or mini-macro. “We are beginning to see companies like Zayo and Crown Castle International where the lines are blurring. They are building both the small cells and the fiber to backhaul them,” Ganzi said.
On the backend, software will define 5G networks and will serve as the catalyst that helps the carriers make money. “SDN allows the operator to deliver the most efficient user experience across the network,” Ganzi said. “That’s really, really hard. It will demand a lot of engineering.”
Also at the backend of the network, and just as important, are the data centers. Ganzi sees a lot of opportunity there. Digital Bridge has been investing a good deal of capital in them, finding the business model to be similar to the tower industry. “The data center industry is where towers were 10 years ago when 80 percent of the towers were owned by the carriers, very fragmented,” Ganzi said. “Currently, 70 percent of data centers are owned by enterprises.”
The wireless infrastructure industry must seek to understand how operators’ needs are changing with the advent of 5G and learn how to meet them. “If you want to be a critical partner, you have to change how you think about MLAs, leases, new sites,” he said. “Speed and accuracy are paramount. Owning and building the different elements of the network is critical if you expect your phone to ring.”
J. Sharpe Smith
J. Sharpe Smith joined AGL in 2007 as contributing editor to the magazine and as editor of eDigest email newsletter. He has 27 years of experience writing about industrial communications, paging, cellular, small cells, DAS and towers. Previously, he worked for the Enterprise Wireless Alliance as editor of the Enterprise Wireless Magazine. Before that, he edited the Wireless Journal for CTIA and he began his wireless journalism career with Phillips Publishing, now Access Intelligence. Sharpe Smith may be contacted at: [email protected]
March 28, 2017 —
Digital Bridge Holdings, along with Public Sector Pension Investment Board and TIAA Investments, has purchased Vantage Data Centers, a hyper-scale data center operator whose customer base includes cloud service providers and large enterprises.
Vantage has four data centers on the flagship Santa Clara, California, campus, two more under construction, and a second large-scale campus under development.
In July 2016, Digital Bridge first entered into the enterprise-class data center business when it acquired DataBank, a North American provider of enterprise-class data center solutions including collocation, managed services, as well as cloud and network services. DataBank, in turn, acquired the network-neutral data center facilities of 365 Data Centers in January 2017, which included interconnection assets.
The data center space, which consists of hundreds of middle market companies, is going through a wave of consolidation that is similar to what happed to the tower industry from 2005 to 2013, according to Ganzi.
“We have found that given our access to capital, and our ability to build platforms and to do roll ups, we are in a good position to execute that same strategy in the data center space,” Marc Ganzi, co-founder and CEO of Digital Bridge, said in an interview with AGL eDigest earlier this year.
The vertical industries within the data center space — interconnect facilities, enterprise data storage, and wholesale, hyperscale cloud computing — are also converging.
“Obviously, we think interconnect is a great business. The ability to create an environment where carriers can cross-connect creates a very fertile ecosystem,” Ganzi said. “The enterprise data storage business feels very tower-like. These are Fortune 500 companies signing five-, 10- to 20-year leases with us.”
The third business segment — wholesale, hyperscale cloud computing — is very specialized, according to Ganzi. Potential customers include the likes of Microsoft, Google, Amazon, and Dell.
“What we like about this space is the long-term, non-cancelable leases, investment grade tenants, and secure, sticky environments, where they are not going to leave,” Ganzi said. “Again, a lot like towers. That is an interesting space and one that we are spending a lot of time on.”
RBC Capital Markets and DH Capital served as financial advisors, and Simpson, Thacher & Bartlett LLP acted as legal advisor to Vantage in connection with the transaction. Jones Day acted as lead M&A counsel, Kleinbard LLC acted as investment structure counsel, and Ernst and Young LLP served as accounting advisor to Digital Bridge. Davies Ward Phillips & Vineberg LLP acted as legal advisor to PSP Investments, and Arnold & Porter Kaye Scholer LLP acted as legal advisor to TIAA Investments. TD Securities together with CIT Bank, N.A., RBC Capital Markets, and SunTrust Robinson Humphrey provided debt financing commitment for the acquisition.
September 27, 2016 —
EDITORS’ NOTE — This is the third of three articles revealing the different approaches to small cells of the major tower companies. Crown Castle International, InSite Wireless Group and Digital Bridge Holdings share an appetite for small cells.
For Crown Castle, small cells represent assets placed on a collocatable asset, which is the fiber-optic network that delivers traffic from a mobile wireless network at a local point. “Whether that’s a distributed antenna system (DAS) node, a small cell, a femtocell or a picocell doesn’t necessarily matter to us, as long as there’s a fiber on which we can collocate,” said Dan Schlager, senior vice president of corporate finance at Crown Castle.
Schlager said Crown Castle wants to make the fiber-optic network profitable. To do so, the company seeks to participate in the densification of the radio-frequency (RF) spectrum the mobile networks deploy and, in doing so, become a partner to its wireless carrier customers. “We firmly believe that fiber is the asset that we’re going to collocate on, and what we really try to push on,” he said.
In a view expressed by Jay A. Brown, Crown Castle’s president and CEO, because small cells are deployed closer to the end user and in a denser array, such as on traffic lights or telephone poles, they represent the natural progression of network densification required to provide continuous consistent high-capacity and low-latency connectivity. With small cells, the company’s initial investment relates primarily to the build out of the fiber-optic cable network. “We believe our fiber footprint of 17,000 miles in top mature markets combined with the capabilities that we have acquired and developed over time give us time to market and economic advantages that should allow us to capture a significant share of this large opportunity,” Brown said.
For 2016, Crown Castle is expecting $170 million in organic revenue growth, with $115 million from towers and $55 million from small cells. Brown said the company sees its investment in small cells as representing an opportunity to grow the dividend it pays shareholders.
“Looking beyond 2016, we believe we are in a multiple-year cycle of network upgrades and enhancements, as carriers focused on meeting significantly increasing demand for wireless connectivity, which we believe will benefit both our tower and small cell businesses,” Brown said.
InSite Wireless started in the DAS business 16 years ago. The company built a system in the Moscone Center in San Francisco that has since undergone nearly six generations of upgrades for densification. InSite Wireless focuses on indoor DAS, always providing fiber access to the sites.
“The leasing on DAS is phenomenal,” said Lance Cawley, CFO of InSite Wireless. He said the company built a DAS that covers the Massachusetts Bay Transportation Authority (MBTA) subway in Boston that serves AT&T Mobility, Verizon Wireless, T-Mobile USA and Sprint. In addition, Comcast provides Wi-Fi service. InSite Wireless has started some underground wireless service for Verizon in the Los Angeles County Metropolitan Transportation Authority (Metro).
“DAS is a wonderful, yet difficult, business,” Cawley said. “Unlike towers, which are just a simple real estate leasing business involving many forms and a documented information flow handled by run of the mill staff, in DAS, it requires somebody at all levels of legal, engineering, RF and finance. These are $20 million, $30 million and $40 million build outs that take many years to complete. It involves a lobbyist and attorneys. It’s complicated, but we have phenomenal results in our DAS business. I think of the small cell business as an extension of the DAS business. A small cell has a base transceiver station (BTS) built in, whereas DAS has a centralized BTS pack.”
Cawley said InSite Wireless is indifferent to which solution it provides. “We provide whatever is cost-effective for the carrier to meet its capacity demands,” he said. “We love the macro tower business. It’s the majority of our business. We believe you should be in all these lines of business to meet the carriers’ growth and capacity requirements.”
At Digital Bridge Holdings, CEO Marc Ganzi said mature small cell networks experience lease amendment activity much like the tower business does. And business is good. “In the small cell business, we’re drinking through a fire hose,” Ganzi said. “We have 2,000 nodes in construction. We’ve got a leasing backlog that’s worth close to $60 million in annual recurring rent. There’s more than we know what to do with. It’s that size of an opportunity. That’s good, because as some of the macro tower business has slowed, we’ve seen the small cell business accelerate dramatically.”
Dan Schlager, Lance Cawley and Marc Ganzi spoke at the Wireless Investors Conference, part of the Wireless Infrastructure Show, in May. The next Wireless Infrastructure Show is scheduled for May 22–25, 2017, in Orlando, Florida. Jay A. Brown spoke during an earnings call in July.