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Ganzi, Gellman Share the Stage at AGL Virtual Summit

By Mike Harrington

Marc Ganzi, president and CEO of DigitalBridge Group

Alex Gellman, Vertical Bridge CEO and co-founder

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.

DigitalBridge Reveals Third-quarter 2021 Results

By Mike Harrington

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.

Marc Ganzi, president and CEO of DigitalBridge Group,

“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.

DigitalBridge CEO Ganzi Appointed to Nareit Advisory Board

Marc Ganzi, president and CEO of DigitalBridge Group

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.

5G Nudges Edge Computing Toward Telecom’s Center Stage

By Mike Harrington

The global edge computing market will reach $17.8 billion by 2026, according to a new report released by Reportlinker. Released Oct. 27, the report asserts that edge computing is rapidly emerging as a technology innovation that can be widely adopted across industries.

ReportLinker estimates the U.S. edge computing market to be $2 Billion in 2021, while it predicts China’s market will reach $2.4 Billion by 2026.  Reportlinker believes that 5G cellular technologies — delivering massive bandwidths along with supporting a wide array of devices including smartphones, autonomous vehicles as well as large scale IoT — represents another prominent growth- promoting factor for the edge-computing market.

As the telecommunications industry evolves, 5G wireless communications and edge computing are redefining how business and consumers connect. According to a 2019 IBM report called “Edge computing changes everything,” by 2022, there will be an estimated 55 billion edge devices on the market. By 2025, the number of edge devices is expected to grow to 150 billion; even more when the impact of remote working practices in the COVID era are taken into account.

Growing emphasis on process automation and cost reduction combined with intensifying business competition, along with increased adoption of edge computing for datacenter application, is leading to market growth, the ReportLinker report says.

Edge datacenters are smaller datacenters that exist to support a geographic region. This edge segment saw strong growth since the pandemic started, the report says, with employees working from areas that needed a closer datacenter to support their remote activities.

According to a new white paper, “5G Edge Automation and Intelligence,” edge computing is a fundamental part of the 5G ecosystem that provides network data processing and storage close to the end users, typically within or at the boundary of operator enabled networks. Produced by 5G Americas, the white paper details the convergence of 5G, edge computing, and artificial intelligence (AI), allowing 5G networks to deliver new services and capabilities more efficiently.

Chris Pearson, president of 5G Americas

Chris Pearson, president of 5G Americas, said “Edge computing and AI are a dynamic duo of integral technologies for 5G that will enable a plethora of use cases, which enable 5G networks to reach their full potential. 5G reduces the radio network latency significantly, while edge computing places compute and storage within the telco infrastructure resulting in end-to-end latency reduction. This will positively impact the experience of enterprises and consumers alike.”

“5G Edge Automation and Intelligence” identifies optimization and automation strategies for both 5G network and edge computing, as well as the leveraging of Artificial Intelligence/Machine Learning capabilities, according to a prepared release from 5G Americas. Additionally, the white paper covers how 5G network and edge computing enable low latency, high reliable intelligence in edge applications.

Meryem Simsek, lead scientist, VMwar, and technical working group co-leader for the 5G Americas white paper said, “The ultimate goal of the unique symbiosis between 5G and edge involves increased performance guarantees, enhanced workload balancing, improved processing capabilities and performance via 5G edge automation and optimization, with greatly reduced human intervention.”

Clark Chen, senior staff engineer and research manager at Intel and co-leader for the white paper, agrees: “Carriers are embracing AI/ML technology to deliver the promise of 5G and increased levels of automation in the network. The convergence of communication and computing is creating innovative opportunities to deploy and integrate 5G, edge artificial intelligence and cloud capabilities. This can help address a diverse set of use cases that ultimately deliver better business outcomes across a range of industries.”

Although “edge computing” is a relatively new technology term, edge computing is already well established in U.S. businesses, which quickly realized the benefits of locating their computer services close to where the applications are running. Software works faster and more reliably when it does not have to reach back to a data center located hundreds, or thousands, of miles away.

As eDigest reported last week, innovations from IBM highlight the company’s role in helping the telecommunications industry evolve as 5G wireless communications and edge computing redefine how business and consumers connect.

“A recent study from the IBM Institute for Business Value on ‘‘The End of Communications Services as We Know Them” revealed that 59 percent of high-performing communications service providers surveyed agree they must become secure clouds infused with artificial intelligence and automation,” said Andrew Coward, general manager of software-defined networking at IBM.”

“The study also says that communications service providers are thinking more strategically about 5G-enabled edge computing more for its ability to building more revenue as 5G and edge computing usher in a new reality for businesses,” Coward said. “We are continuing to help communications service providers embrace secured technologies like automation, artificial intelligence and hybrid cloud, and we believe IBM is uniquely positioned to provide the software and consulting needed to evolve their digital architecture.”

Meanwhile, within the DigitalBridge portfolio, companies that provide data centers, optical fiber connectivity, macro cell towers and edge infrastructure have increasing roles to play in edge computing.  VerticalBridge says it believes the best location for the “physical” edge of the network is as close to the data as possible. That’s why VerticalBridge is developing a strategy called “edge to suit,” which means it works closely with customers to figure out the best location for their edge data centers, regardless of whether there is a tower nearby or not.

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.

Marc Ganzi, president and CEO of DigitalBridge Group,

Edge computing has two aspects and three sizes, according to Marc Ganzi, president and CEO of DigitalBridge Group, which has 23 portfolio companies, including several that are involved with edge computing.

Of the two aspects of edge computing, Ganzi said, one is the physical aspect of where infrastructure sits. The second part, he said, is the experience, how the customer ultimately participates in a low-latency environment and how its applications work. He said the two functions are consumer and geography.

“Let’s start with geography,” Ganzi said, in speaking about edge computing with Matt Niknam, director of equity research and communications infrastructure analyst at Deutsche Bank, during the bank’s 29th annual Leveraged Finance Conference on Oct. 4. “Geography is pretty easy to understand, because there are three layers to edge infrastructure: main edge workloads, mid-range and micro edge,” he said.

“Main edge workloads are secondary and tertiary markets, where you’re not in a primary hyperscale market, as in Ashburn, Virginia; or Goodyear, Arizona; or some of the other big areas such as Atlanta, where you have massive, hundreds of megawatts of power and compute,” Ganzi said. “And then you go to you go outside of that for what’s happening in markets like Salt Lake City; Austin, Texas; Cleveland; and Minneapolis. These are good edge markets.”

According to American web infrastructure and security company Cloudfare, edge computing optimizes internet devices and web applications by bringing computing closer to the source of the data. Edge computing minimizes the need for long-distance communications between client and server, which reduces latency and bandwidth use, as stated by Cloudfare.

Meanwhile, digital infrastructure giant American Tower — as it readies for C-band deployments and the start of Dish Network’s 5G buildout — is looking further ahead to mobile edge compute opportunities. “Scale deployment of a true mobile edge remains several years away, but in our view the TAM [total addressable market] could be quite significant, running well into the billions of dollars annually,” said American Tower CEO Tom Bartlett during the company first quarter earnings call in April 2021.

One caveat: As edge computing grows and evolves to provide solutions along with the booming 5G market, some businesses worry about the risks of edge computing — and how to balance those risks against edge computing irrefutable benefits. Many believe the solution simply involves “baking” security into the computer architecture from the start, and making the edge an extension of that architecture.

Mike Harrington is a contributing editor.

DigitalBridge Completes Acquisition of Controlling Stake in Vertical Bridge

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.

Steven Sonnenstein, senior managing director of DigitalBridge Investment Management.

“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.