Marc Ganzi, president and chief executive officer of DigitalBridge Group, and Alex Gellman, chief executive officer and co-founder of Vertical Bridge, delivered the keynote address at today’s AGL Virtual Summit. Moderated by Rick Heilbrunn, president and CEO of AGL Media Group, the keynote marked the first time Gellman and Ganzi have spoken together on the same panel, Gellman said.
“Ours is really a simple story,” Ganzi said. “It’s a story that started back in 1994, building a business with Alex, constructing digital PCS sites and building infrastructure. We’re in a really unique space today. We’re the only global-scale digital infrastructure firm that invests across all the key five verticals, and on a global basis: cell towers, networks, small cells and edge infrastructure. Today, we have about $40 billion in assets under management and 23 companies on a global basis. And we have over 100 investment professionals who wake up every day and only think about investing in this very specific ecosystem.”
Ganzi talked about the traditional way of investing in digital infrastructure, which he called picking a swim lane and a silo approach, where firms would specialize in cell towers, small cells or data centers.
“That’s the way networks were built in the 1990s and early 2000s — 2G, 3G and even 4G,” Ganzi said. “What we’re going through today is really an unprecedented window of opportunity — which is more than just mobility. Certainly, 5G is feeling the cap of expansion, but I would offer that cloud, particularly as it impacts access network cores, C-RAN and O-RAN, artificial intelligence, internet of things — all of these things are starting to converge.
“Secular tailwinds are driving us toward what I would call next-generation networks and, most importantly, toward next-generation network architecture — which is really about reliability, low maintenance and bringing technology and applications closer and closer to the end users,” Ganzi said. “This is the transition that this sector is going to go though over the next decade.”
Gellman said that he agreed.
“Marc has been talking about convergence for a number of years,” Gellman said. “It really has each year become clearer that convergence is coming into fruition. We look to our customers. We’re not looking at our competitors, we’re looking at our customers and seeing what kind of conversations they want to have, and what they’re thinking. And one thing that’s happening — certainly in the United States, but really worldwide — is wireless carriers are rethinking their networks top to bottom. Four years ago, we were talking about virtualizing the core, but now they’re really talking about is where the core should be, which drives the edge conversation.”
Gellman said that Vertical Bridge customers were looking at open RAN, shared RAN and their networks top to bottom in a new way.
“What’s exciting for us is we’re a tower company — so that’s pretty straightforward — but we have the opportunity, in the DigitalBridge family, as our customers demand a converged solution, to tailor the converged solution with the other partners in the family to that customer’s needs. Right now, what we’re seeing is that each customer in the United States has a different angle on it and is seeking different levels to coordinate convergence between our companies.”
During his presentation, Ganzi emphasized the need for connectivity in digital infrastructure. Presenting a PowerPoint slide that read, “DigitalBridge is levered to the powerful thematics driving significant investments in mobile and internet connectivity on global basis,” Ganzi said, “It’s simple: We need more connectivity, we need it better and faster.”
Ganzi said that there’s a persistent amount of investment, which sets up well for DigitalBridge’s sector — and he said that everyone who participates in the wireless infrastructure sector will be really busy for the next decade.
“So, what fuels that?” he asked. “Obviously, mobile data traffic — five times growth over the next five years. “That will come in traditional 2G, 3G and 4G, but 5G is the biggest growth vertical. And then, fixed wireless. Enterprise 5G networks and indoor networks. Behind that is more than just wireless connectivity. It’s computers — and the pipes that ultimately fuel that.”
When AGL’s Heilbrunn asked him about the difficulties posed by the pandemic, such as supply chain issues and skilled-worker shortages, Ganzi said he would classify the challenges into three categories.
“The first is supply chain,” he said. “It’s the strangest stuff that will hold you up today. It won’t be fiber from Corning. It won’t be a monopole form Sabre, but it will be something as silly as a grounding system. It will be something as silly an AC vent — a special type of venting system for a hyperscale datacenter. And it’s sometimes the smallest components that are stuck in a shipping container. Supply chain congestion is specialized components. It’s hurting our ability to execute.”
Ganzi said the second category is just getting people back to work.
“That’s been one of the biggest challenges we’ve had,” he said. “Getting folks motivated to return to work, return to the mission.”
Ganzi said the third category is permitting, which he said is DigitalBridge’s biggest challenge.
“Municipalities have been slow to get back to full steam,” he said. “Certainly, online permitting is great, but when you’re doing specialized things, like building a 100-megawatt datacenter, trying to lay down 100 nodes in Austin, Texas — it’s challenging. I think permitting has always been the challenge — but certainly the pandemic has made it more pronounced and more difficult.”
Gellman said that he agreed.
“We’re insulated as a macro tower builder in that we can get what we need to deploy towers, but our customers can’t get what they need to install them,” Gellman said. “At some point. that’s going to back up. We haven’t seen it yet, but I am concerned and acutely aware of the potential. Interestingly, it’s not Nokia and Ericsson that are having the trouble, it’s all the other builders of materials that go into the site, where you start to run into these shortages”
Gellman raised an alarm on a regulatory issue: the FAA’s new rules, which regulate C-Band installation because of potential navigation interference.
“We’re getting notices from the FAA on any site where our customers are installing C-Band, asking a list of detailed questions about power output and antennas.”
Other AGL Summit sessions included “A Different View from the Top, in which a panel of wireless infrastructure women executives discussed the news, industry predictions and technologies.
In another session, “Venturing Out: Post-pandemic Investment,” panelists examined the types of wireless infrastructure opportunities that attract investors, including new business, mergers and acquisitions, and expanding industry subgroups.
A fourth AGL Virtual Summit session was “Out of Stock: Mitigating Global Supply Chain Issues.” The pandemic set off a chain of events that has industries scrambling to meet demand for their customers. In the supply chain session, panelists examined the areas of concern for the digital infrastructure industry and discussed how to navigate this unprecedented time of shortage.
Within several days, a video recording of the AGL Virtual Summit will become available for viewing on the AGL Media Group website at https://aglmediagroup.com/localsummits/.
Mike Harrington is a contributing editor.
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.
Marc Ganzi, president and CEO of DigitalBridge Group, has been appointed to the Nareit 2022 Advisory Board of Governors. Nareit, the National Association of Real Estate Investment Trusts, is the worldwide representative voice for REITs and real estate companies with an interest in U.S. real estate.
“I am honored to have been elected to Nareit’s Advisory Board of Governors and look forward to working with other members to highlight the important role REITs play, now and into the future, in creating jobs, driving economic activity, revitalizing communities and building much needed digital infrastructure,” Ganzi said. “As a unique digital REIT with the operating DNA and access to institutional capital that positions us to execute globally on converging the digital infrastructure ecosystem, DigitalBridge is laying the foundation today for tomorrow’s data-driven economy.”
Nareit President and CEO Steven A. Wechsler said that Nareit brings together diverse groups of professionals who share a common interest in real estate investment.
“We are pleased to welcome Marc Ganzi, a leader in the digital real estate sector with more than two decades of experience, to our Advisory Board of Governors,” he said.
DigitalBridge Group said today that funding from DigitalBridge Investment Management, the company’s investment management platform, has been used to complete the acquisition of a controlling stake in Vertical Bridge Holdings. According to DigitalBridge Group, Vertical Bridge Holdings is the largest private owner and operator of wireless communication infrastructure in the United States.
Since its founding in 2014, Vertical Bridge has rapidly expanded its portfolio to include more than 308,000 owned or master-leased sites, including over 8,000 towers in the United States. DigitalBridge said it will continue this trend as it addresses the growing need for 5G services created by the continued popularity of next-generation digital devices in the U.S. telecom infrastructure market.
J.P. Morgan Securities served as financial advisor to DigitalBridge Investment Management in connection with the transaction, and Vinson & Elkins served as legal counsel. Goldman Sachs & Co. acted as financial advisor to Vertical Bridge, and Greenberg Traurig served as legal advisor.
“We are pleased to extend our longstanding relationship with Vertical Bridge, the industry’s leading independent tower platform led by the preeminent tower management team,” said Steven Sonnenstein, senior managing director of DigitalBridge Investment Management. “The rapidly increasing demand for telecommunications infrastructure in the United States has created exciting and meaningful opportunities for long-term growth. Our ownership position in Vertical Bridge is representative of our conviction in its future.”
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.
In July 2019, Colony Capital purchased for $325 million a company Marc Ganzi, DigitalBridge president and CEO, founded and led as CEO, a company called Digital Bridge, with a space between the two words in the company name. Digital Bridge owned a broad range of communications infrastructure including Vertical Bridge and ExteNet Systems, and Colony Capital was primarily a global real-estate investment firm. At the time, Colony Capital reported that during the next two years, Ganzi would transition into the role of CEO of Colony Capital, succeeding Thomas J. Barrack Jr. Ganzi also was a managing partner at Digital Colony, which Colony Capital acquired in 2019.
Prior to being purchased by Colony Capital, Digital Bridge was a holding company that invested in telecommunications infrastructure. 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.