DigitalBridge Group, Inc. (DBRG) Earnings Call Transcript & Summary

Good morning. My name is Colby Synesael, and I'm the Communications Infrastructure and Telco Services analyst here at Cowen. Welcome to day 2 of Cowen's Communications Infrastructure Summit, being brought to you live from Colorado and from Brooklyn, New York. So for this fireside chat, we have Colony Capital. And from Colony Capital, we have the company's CEO, Marc Ganzi. This is structured as a fireside chat. It's going to go 40 minutes. I present -- I've put together a bunch of questions, which I'm going to go through, but if you have questions of your own, you're welcome to submit those, and I'll try to get to as many of those as I can. So with that, Marc, thanks so much for being here.

Thanks, Colby. Good to see you.

You as well. So why don't you start out talking about just the business outlook and investment allocation priorities. So first off, congratulations on being named the CEO of Colony Capital, effective July 1, along with your first earnings call last week. I guess just to start, any big changes for you with the move? Or are you already executing with full autonomy?

Well, I would say we've been executing on the plan since September of last year. And the goal was pretty simple, which is to try to, first and foremost, simplify what was a fairly complex business and begin to rotate our asset base. And so we set out at the beginning of this year in our December call, and I mapped a couple of key priorities for the business to take us through the midpoint of this year, which was, first, as I think you've heard me say as a broken record before, you can't have a lot of leverage in a business. We got a REIT that was candidly, a diversified REIT [indiscernible] 12x corporate leverage. So we began last December and we continued that trend in the second quarter, taking net leverage from 12x to 8x, and that will continue to be a priority as we move through the back half of this year, but making sure that we can be growing our core leverage in line with our peer group. And when we talk about our peer group, it's really Equinix, DLR, American Tower, [indiscernible], that's the kind of net leverage we want to have at Colony for the long run. So that was the first priority of business. The second was continue to sell assets. And we had a great year last year in selling assets. We sold billions of dollars of traditional Colony core real estate assets. And then this year, we've sold another $380 million of excess real estate, and we'll continue to divest our real estate assets between now and the end of the year. We've guided the street to another $100 million to $300 million of core asset sales. We have about 4 assets that are currently, what I would say, in trade discussions right now. The third thing we said we would do is cut G&A, rightsize the organization, simplify the business. We delivered about $35 million in G&A cuts last year, going back to July when I came on, and we merged Digital Bridge with Colony. And then I committed to another $40 million in G&A cuts there. And so far through this year, we're at about $40 million in run rate G&A cuts. We'll probably hit about $45 million by the end of the year, maybe even higher. And so we want to continue to over-execute against the Street. And candidly, for 2021, there's more room to [ categorize ] the organization and bring it more in line with how I've traditionally operated some of the companies that I've built through the years. We want to be -- don't want to waste a lot of time, effort or more importantly, investor money. And so if we can continue to rightsize the organization, that will be, long term, very good for our shareholders. And then the other thing we said we would do is we change the people. I think you've seen a significant change in the corporate leadership study, and that's been great. And then last but not least is growth. We've [ agreed ] at the beginning of the year to about 15% core organic revenue growth. We did 22% organic growth through the first half of the year, and I'm guiding the street towards 30% organic growth for the full year guidance now. So we're really beginning to hit our stride in terms of growing our core digital earnings, Colby. We've added another fantastic asset to the balance sheet. We've over-delivered on raising third-party capital in our investment management business, and we've telegraphed to folks that we're going to continue to raise capital between now and the end of the year. And we've telegraphed folks that we're going to add more [indiscernible] to the balance sheet. And all the while, we now have got $900 million of cash. So we were able to find a way to delever the balance sheet and would take it in and put more cash on the balance sheet. So we're in a great position. I think this is a complete -- completely transformed company from where it was July last year, and there's still more and more transformation ahead. So I'm pretty excited.

So obviously, very busy, and you talk about how you already quickly moved to transform the company. I mean, how would you describe Colony's value proposition from an investor perspective on a go-forward basis?

Yes. Look, I think it's pretty simple. Now there's sort of 3 things that we point investors to today. One, [indiscernible] there's not a better place to be than in digital infrastructure. I think that's been proven out in the pandemic. Look at the performance of the public tower cos, look at the performance of the public data center REITs. And most importantly, just look at the guidance in terms of the CapEx spend and how much infrastructure needs to be spent. We've highlighted in some of our investor presentations recently that there's a $370 billion CapEx opportunity just in 2020 in digital infrastructure. We think there's close to literally about 80 million miles of fiber that need to be built, 80,000 plus cell towers over 130,000 small cells, Colby, and about 1,400 megawatts of leasing absorption just in this year alone. And as we think about what that means for CapEx spending for mobile, mobile is going to lead the way. About $94 billion of CapEx is put to work globally by the carriers. We think another $98 billion of CapEx will be spent next year. And so when we think about the total quantum of capital we manage and we think about the total quantum of capital that we're raising right now for new ideas and initiatives, we're barely 1% of the TAM, if you really think about it from an equity perspective. And so the market is so massive for digital infrastructure today, and it continues to grow. And so there's a lot of opportunity for our peer group. There's a lot of opportunity for ourselves. It is a massive thematic. And it's not just 5G that's leading the way. There's other really exciting things that we're working on as a firm that give us a lot of [ promise ] in terms of what we're doing in the future for our ability to deploy capital and to grow [indiscernible]. The second thing we would say is we have an alternative approach. [indiscernible] to investors last Friday was, look, the historical way of investing in public equities and digital infrastructure has been fantastic. Everyone that is attending this conference and investment companies has performed has been, probably pretty happy. If you've invested in American Tower Crown and SBA, Equinix and Digital Realty, you've done incredibly well. And those businesses are well run. They're great companies. And they've invested in silos historically. They've stayed inside of macro sites. They've stayed inside of data centers, some have migrated and now into fiber into small cells like Crown has. And what we're offering to investors is a different approach, a different approach to investing in digital infrastructure, which is this notion of convergence. What you've been talking about, people ask, probably, I think, [indiscernible] and I have been talking about convergence. And we do believe that the behavior of our customers is changing. And we think the ecology is changing. We think that networks today are a lot different than the networks I built in 1994 and the networks I built in the early 2000s. Our customers are looking for a more sophisticated approach and a more converged approach because the networks of the future, particularly 5G, they're heavily reliant on dark fiber, they're heavily reliant on small cell densification. You still need the macro sites as part of the core of the network. But in terms of ultimately where the RAN sits and [indiscernible], that's changing. And how RAN is ultimately with applications and how it ultimately interfaces with other parts of the ecosystem is also changing. And the biggest opportunities today really sit with that ability to transport that information in the most efficient manner in the most cost-effective manner and also to be able to bring compute and bring [indiscernible] to the edge of the network. And so what that requires you to begin to think about is the notion of where is the RAN, where is the core of the network? Do you believe that the network is now decentralized? And if so, where do you start aggregating base stations? Where do you start aggregating your interface point to some of the cloud providers. Cloud partnerships for the mobile carriers have never been more important. If you look at what Verizon announced, as we've been clearly telegraphing where they're going on edge, if you listen carefully to what Jeff McElfresh has told you about where AT&T is going with Microsoft, that is also a heavily edge-laden strategy. And none of this works without [indiscernible], none of this works without small cell infrastructure, and none works without edge compute. And so what we're trying to bring out and dry out into the open for investors to see is that converged networks are absolutely the future. If you're going to continue to invest in one swim lane and just be a one-trick pony as a digital REIT, fine, you'll deliver 3% to 4%, 5% core growth. That might be interesting, [indiscernible]. But I would offer to folks that if you want to continue to grow and you want to be a part of the future of the ecosystem, you want to be with someone that's going to grow at double-digit organic growth and is able to deliver for customers across the entire network ecosystem. That's where we're going. And we've been very clear with folks that our portfolio of companies has the ability to sit with customers and really deliver the networks of the future. And our conversations aren't just with mobile operators. They're really with cloud providers, with IoT providers, AI providers. And we have a larger ecosystem of customers. We have a bigger opportunity to sell through to customers. And in turn, what that's doing is it's creating more growth. And if you look at our digital hardware and you look at what we're telling The Street where we're going over 2 to 3 years, there's not enough there digital REIT in the world that will post like Colony will. And so that value proposition.

So you just laid out the value proposition from an investor perspective, which I think is pretty clear and very helpful. But -- you also, from a strategic perspective, you talked about the comps being an American Tower, a Digital Realty, an Equinix. But do you believe offering that wide breadth of services is a competitive advantage versus those siloed peers? And if so, because having everything under different brands, which is how you have it, different actual operating companies, does that take away from that strategy?

Not at all because the connective tissue to all that is our brand, is the Digital Colony brands. So when we do have big opportunities or big [indiscernible] Customers, we're part of that conversation. We're showing up in the [indiscernible] meetings where we bring to bear the leading U.S. edge data center provider, the leading largest private fiber operator in the U.S., the largest private sector...

So the real advantage is having a meeting with some large cloud company. Do you sometimes say, we should bring Jim, the CEO of ExteNet, into this meeting. I think that there might be some reason for him to be here, too.

Yes, we've done that on numerous occasions. And look, there's no confusion to be connected. Once again, the connectivity of that is us. And so sometimes, I'm attending those meetings, some of my partners like [indiscernible] who are attending those meetings. And so we do have the ability to show up and present ourselves as a global solutions provider. And then if there's a very surgical need in a surgical market, we'll have those brands go very specifically to go for that demand. So if it's a hyperscale, [indiscernible] from Virginia, Sureel is going alone. If it's a broader discussion around edge with a cloud provider based in Seattle, we may bring 2 or 3 brands to that meeting because it may not just be grow all on edge, it may not be, for example, Jim Hyde with ExteNet and Sureel with Vantage. But sometimes, you have to bring more to bear for the customer. And what inevitably happens in those meetings is those dialogues open up doors. And really, that's -- candidly as a facilitator between our brands, that's what we want to do. We want to open those doors. And if there's a chance to price or to deliver a holistic solution for a customer, we're open to that. We look at, for example, what DISH is doing, as a huge opportunity for Colony, right? When you think about the massive amount of infrastructure that Dave Mayo has to put on air over the next 2 years, there really isn't a provider out there that can do the entire thing. And that's a network that will be 5G day 1, probably a decentralized brand of architecture, which will evolve around edge. And if you think about what that means, it means dense fiber, it means edge data centers. Yes, it means macro sites. But really to make that network work, the macro is probably the third most important ingredient and where DISH is going with their network. The most important part of their network is the network intelligence. And where do they put the core of the network and how [ present ] to optimize what they're trying to do, which is a 5G [indiscernible] OTT network. So that's a great example where we can show up to that party and we can bring a lot of resources to bear, more resources than candidly our peer group can.

When you look at the opportunities to build your portfolio, how are you prioritizing each of the subsegment investments between towers, small cells, edge and enterprise data centers, hyperscale data centers, fiber, et cetera? Where are you looking you're seeing the most opportunity?

Well, look, it's interesting what a difference a year makes. I mean today we're operating in 4 theaters. We're in Asia, we're in Latin America, and we're in Europe, we're in North America. And candidly, all of those 4 verticals, Colby, represent great opportunity for us. There is a bit of geographic, what I would call, sort of differentiation in terms of where our focus might be. So for example, in a place like Asia right now, we're spending a lot of time around [ hyperscale ]. Our customers are very interested in having us in that part of the world. So we've spent the last year buying land, looking at locations and beginning to implement our strategy for Asia, similar to what we did with Vantage almost 18 months [indiscernible] where we identified Europe. When you and I talked 2 years ago at this conference, I told you Europe would be the next big theater for hyperscale, and we were pretty much spot on around that. So I see Asia Pac is a big opportunity for that. I see the edge computing business in Asia, really in a nascent phase right now. I think there's a lot of opportunity for edge in that part of the world. So we've seen some interesting ideas and opportunities for management teams in part of Asia. In Latin America today, we're spending some time looking at fiber assets. A lot of conjunction and speculation that we're buying mobile network in Brazil. We spent some time looking at mobile assets in Brazil, not from an operator perspective. We've got an operating partner on that deal and we continue to have an operating partner in that deal. But looking at interesting and differentiated ways to provide infrastructure in Brazil, that ultimately could be more cost effective, candidly, to Oi and most importantly, to Vivo, TIM and Claro. So different ways to look at different models these days around the globe. So we're spending more time around preparing for 5G in Latin America, and most importantly, how to make it a value proposition for the carriers that's going to be so expensive to build these networks. And in Latin America, the economies are having some challenges, you have come to the table with those big brands like Telefónica and Telecom Italia and Claro. You have to come to the table with unique solutions, new solutions, new ideas, and how to defray the cost and how to share networks. And so we've been thinking a lot about that. And so we're spending time on 5G infrastructure. [indiscernible] not just in Brazil, but looking at...

Interesting how you answered that question. I put it in terms of subsegments of services, and you actually answered it more from a geographical perspective where you kind of highlighted Asia, then you've highlighted LatAm. And I think, and correct me if I'm wrong, you're open to deploying any of those types of services, whether it's small cells, fiber, data centers, et cetera. In Asia, in LatAm, so it's not about products, but it's about geography. And then as it relates to the U.S., what was I think implied is that you're probably going to be more organic in the U.S. as opposed to acquisition, I'm guessing, based on how you answered that question.

Yes. So everything we're doing in North America today is around organic. We don't see value proposition in buying assets in the high 20s or low 30s, that just doesn't make a lot of sense, particularly when replacement cost or new construction cost is kind of 1/4 or 1/3 of where M&A pricing is today. So continue having some really great CEOs and great portfolio companies is we can throw all of our free cash flow and all of our equity and all of our debt resources into a greenfield strategy. So that's where we're focused today. I think if you look at all of the companies that we can operate in the U.S. today, everything is oriented towards growth and greenfield in the U.S. and in Canada, and we're getting the best returns. So the question is, do you have the right platforms? Can you scale and can you continue to deliver? That's -- at the end of the day, customers will continue to take meetings with me, Colby, if I deliver. If I don't [indiscernible], there's not a meeting to be had. So the big topic of discussion during the pandemic with our customers has been, okay, how are you going to deliver to us? How are you going to get the permit? How are you going to get the site built? Are we going to turn it on? How do we get the company to actually take an interest and show power for us. So this is really becoming a game right now in COVID execution. And that's the most important thing. I mean it's nothing new, but obviously, you have to keep executing for your customers. But this now more than ever is an execution game. So over the next -- yesterday and today, you'll hear from one of our portfolio company CEOs. And their highest priority right now in COVID is making sure that supply chain stay intact and making sure that we're getting out in front of permitting and making sure that we're delivering for a couple of customers. Because in an environment like this where things are tough, customers remember the people that show up for them and customers remember the people that are delivering for them. And I would say, we've never worked hard over the last 6 months. This has been one of the toughest 6 months in my career in terms of just the sheer hours of work that we're doing, not only in Colony, but down on the portfolio of companies. We've been just incredibly busy.

Just to fill up the circle here. Europe, is that more of an organic strategy at this point or is that more of M&A at this point?

Well, once again, it depends on [ the year ]. So for this year in North America, we're very focused on greenfield and organic. And then [indiscernible] and Europe, we're doing a bit of both. We're buying and building. Historically, our platforms are a buy-and-build strategy. That's been a strategy that's worked well for me for 26 years, where we have a great platform and a great management team. We buy a platform. And then from there, what we'll do is we'll bolt-on M&A. We'll build development, obviously, organically [ same ] and then opportunistically finance the asset and just continue to push and operate that asset at a higher level than our peer group. That's been a great formula for us that's worked well throughout the last 3 decades. So M&A is still there. Look, we did -- we've done 7 M&A deals in the last 7 months. $22 billion of capital has been put out in terms of us buying new assets in [indiscernible]. So it's not like we've turned off the M&A space and been very selective. And we've taken our shots where we think we have a clean shot on goal and where we have a proprietary deal.

Okay. Colony Capital's unique structure, when compared against the publicly traded digital infrastructure operating companies, is that investing rather than building the infrastructure yourself creates an opportunity for a lower cost business model. Where is this most evident in your financials versus, say, Digital Realty or American Tower or even a CenturyLink, if I pick a data center, a tower and a fiber company as examples? Is it purely the growth that you referenced earlier, that 30%, or is there other areas where it's very clear that people should be saying, well, look at this financial metric, and that's why you're getting that better value?

Well, in our business today, Colby, there's really kinds of digital revenues that we're guiding investors to today. And if you think about where we are from a revenue growth perspective and where we're going over the next 2 to 3 years, we point folks to really 2 core focuses of where our growth is. First and foremost, we've got our balance sheet investments. And so we've made 2 significant balance sheet investments which are digital assets that don't require, as you said, a lot of G&A for us to manage them because they're investments in existing platforms that are performing quite well. The first is DataBank in our edge compute strategy. So at the end of the day, we own 21% of DataBank. We're the control shareholder there alongside of our partners, [indiscernible], and that's a great business. It's a business that sequential growth around this year grew at 9.5% organic. And DataBank continues to deliver fantastic operating metrics and organic growth, candidly, is faster than Digital Realty and Equinix. So it's a good business. It has a young set of assets, that's really important. It's not saddled with legacy assets that are 15, 20 years old. These are younger data centers, Tier 3 quality, and they're sitting on the edge of the network. And so we want to be in a business where we own assets on the balance sheet that are growth assets and that provide our investors the opportunity to grow core FFO organically. And certainly, if there's opportunities at DataBank we'll continue to support the company. That's [indiscernible]. The most recent example is Vantage. We put the Vantage core 12 data centers in the U.S. onto our balance sheet. We're really, really happy with what transpired there. If you think about those 12 assets, we don't have any G&A [ associated ] with the ownership of those assets. We literally just have the core FFO that comes directly to the balance sheet. So that's a great way for investors to get a pure exposure to hyperscale. And when you look at some of the other data center REITS, they've got a combination of assets, colocation, interconnection and hyperscale. And with our Vantage asset, it's a pure play. It's 12 data centers, close to 89 contracts in place, weighted average duration customer leases greater than 11 years. Over 90% investment-grade concentration, fixed escalators. We all [indiscernible] those facilities. It's literally the most blue-chip set of data centers that's [ acquired ]. And so we have the ability to create that yield care in conjunction with Vantage, put our balance sheet up. We put up $200 million of our balance sheet. We were able to generate stabilized earnings of about $14 million of AFFO for us for the balance sheet and complement that with the billion dollars of third-party capital that we manage for others. We take management fees on that capital. So we generally close another $5 million of reoccurring earnings on that platform through the management fee. So at the end of the day, through the stabilized leasing efforts over the next 12 to 18 months, plus the management fees, we get close to $19 million of AFFO on an asset where we posted $200 million around balance sheet. That's the first multiplier of the balance sheet, and that is that differentiated approach. And so when talked to investors, we said, look, you can acquire these blue-chip assets, we couple that with third-party capital, long stabilized cash flow. So one of the great things about this is, I said, as you know, Colby, they have strong, predictable earnings. And this is something -- this is where we're taking Colony over the next 12 to 24 months is really building a set of core assets to deliver predictable digital earnings. So we've got 2 other deals that we want to do on the balance sheet between now and the [indiscernible]. We hope they come to fruition. If they do, it will continue to strengthen that core digital asset on the balance sheet where we can deliver strong predictable earnings. The second piece of our business is our investment management business. You've known about that for many years. That's the old business, as you would know, is Digital Bridge, which is really an alternative asset management model, similar to an EQT, a Blackstone or a KKR. We've got about $83 million in management fees that we generate off of third-party capital. We continue to grow that. We highlighted the [indiscernible] advantage in Zayo. We've got other fund management products that are in-flight right now. Due to SEC rules, we're not allowed to talk about them. But what I can tell investors is we are going to continue to do what we've been doing for the last 2 years. We will continue to raise third-party capital. And we'll raise third-party capital that pay us for our ideas, and we're managing that capital on behalf of others, and it's a great business model. And most of our fund structures are typically 10-year fund life, with 3 one-year extensions. So there's once again this notion of long-term predictable digital earnings. So we give it to investors on both sides. There's balance sheet investments, there's investment management. And at the end of the day, where we're going is an earnings-driven model that delivers stable, predictable, high-growth digital earnings for investors.

So we prepared way more questions than I'm going to have time to ask you. And we have 135 people who are live listening to this stream right now, and I'm getting blasted with questions. I'm just going to start going through some of them because I think some of them are kind of more to the point than my cute way of trying to ask you something. So let me -- so the first question is, do you expect to see a further consolidation of the retail colocation operators? And then for instance, do they have Flexential, Cyxtera and others?

Well, I think it's inevitable, yes. We talked about this last year that this was sort of the golden era of the data center. And you could say that from 2003 to 2013 was sort of the golden era of the tower company or the tower model, where we saw massive consolidation of towers following 2003 to '13. I think data centers has entered that phase. I think it started about 4 to 5 years ago in terms of the consolidation. You've seen some major range [indiscernible] trades this year, obviously, the interaction. DLR trade was probably the biggest. But there are going to be more trades. There's going to be more consolidation. I always remind investors all the time, not all data center assets are the same. In fact, this is where the data center sector is very different from the tower business. In the tower business, steel is steel, a monopole is a monopole, a wireless tower is a wireless tower. And you can value towers very easily based on their age, contract duration, quality of the ground ease, quality of expenses, real estate taxes, [ quarterly ] cash flows, investment-grade, [indiscernible]. I could value a tower in 60 seconds. Valuing in data center takes days. Why? It takes days because you have to understand what's the quality of the fee, what's the quality of the interconnection, what's the quality of the cooling? What type of tier data center is it? What type of maintenance CapEx do we have? Where is the location? Is it interesting from an edge perspective? And ultimately, what's the quality of the rental duration of [indiscernible] escalators. Do you have an aggregate customer because you bought these data centers from a telco. Are they going to migrate out of that as they move into cloud. So [ assets ] are very, very differentiated. It's not like towers. So we are going to see continued consolidation, but you're going to see a wide gap in value, right? The crescendo in the market this year was, for example, the air trunk transaction. We look at Apollo's IPO with Rackspace, and that couldn't crack 10x. But we had a data center asset in Australia that traded north of 30x. So you're seeing 20 turns of value differentiation and data center space. Because really, in the data center sector, you've got to remember, it's not one business model, it's 5. There are 5 different ways to make money in data centers: hyperscale, edge compute, core colocation, interconnection and managed services. So literally, because there's 5 differentiated services, and there's 5 differentiated types of products, you're getting a wide band of valuation. And so these legacy colo assets have challenges. A lot of the legacy assets that came to market, which were sale leasebacks, whether it was CenturyLink, whether it was AT&T, whether it's Windstream, a lot of those assets, as you know, Colby, were built 15 years ago. So they're not exactly what our customers -- the customers that are growing where you want to be. It's not exactly the type of product that those customers want. And candidly, it might be in a location that's candidly focused at the edge or focused in the right market where they need [indiscernible] megawatt, 1 megawatt edge workload, whereas [indiscernible] where the growth is right now in edge. So I would just say, I do see consolidation coming. I think value will be largely based on the quality of the assets, and you're going to see a wide canyon of valuations in the sector because some of these assets require a lot of remaking, [ revisiting ] OpEx. And some of them can't really have rent rolls that are just melting away. So it's a very interesting and highly differentiated space right now.

I would say that fiber is similar to data centers in that there's many different business models. And as a result, you'll see many -- a wide variation of valuation. I guess to that point, another question, any update on the Zayo assets and acquisition? What's the way forward for Zayo?

Look, the way forward for Zayo is getting Zayo to focus on what it's really great at and getting it back to its core roots, which is, really, from our perspective, the leader in dark metro fiber and long-haul solutions. And, really, Zayo's strength is its network. It has probably the best dark fiber network throughout the United States from a long-haul and from a metro transport perspective. And so focusing on that wholesale business, we're just on network infrastructure, as Dan likes to call it, that's where the business is going. It is a network infrastructure business. And Dan really created the vertical. And so what we're trying to do is, really, sort of respect that heritage and put the resources behind that and continue to focus on greenfield expansion and simplify the business. So we've long talked about different businesses that Zayo has, different business units that perhaps distract or take away from where the business needs to go long term. And so Dan set out a key series of priorities that they'll have the chance to talk about in about an hour. I'll let him do the talking for the company, but I couldn't be more pleased with the performance, and Zayo had a spectacular first quarter. COVID was candidly an opportunity for Zayo to shine, and it did. A big surge in lit services, big surge in new route activity in terms of what Dan is designing and building with Jack and the team. So I think we're very happy. And in terms of transformation, it's not really a transformation, it's more of a simplification. And I think that's good news for the employees at Zayo and for the customers in Zayo, because there's a lot of free cash flow, there's a lot of capital now to put in there. We had an amazing [ app ] on the closing with the financing. We had a debt transaction, a series of 4 different debt transactions that led to decreasing our total cost of capital. We've delivered about close to 900 million in savings for Zayo over the next 5 years. So think about where all that free cash flow could go. It can go back to the customers, and that's really where Dan's most comfortable and where Zayo will excel, is putting more capital in the ground for customers long term. And now because he doesn't have to manage the business quarter-to-quarter, he can do the things that he likes to do, which is really investing in long-term infrastructure, which is where Zayo's strength is. So we're playing to Zayo's strengths. We're committing [indiscernible] we're committing more time and energy to our customers and greatly simplifying the business, going forward. So I'm very excited about where Zayo is headed. It will probably be, candidly, our most exciting company over the next 2 to 3 years.

Not now, but 2, 3 years, is that a function of them kind of just internally focusing and executing better? Is it more a function of where you think the market is going as it relates to things like small cells or some other dynamic that I'm not thinking of?

Well, I think, look, the go-to-market strategy for Zayo is -- really remains unchanged. I think that they provide a variety of solutions for customers. And having a more simplified business, not having a focus on managing quarter-to-quarter, it really allows that [ management ] to pivot and be more customer focused. And so I think that customer focus and that ability to just zero-in on the thing Zayo does best is going to really provide competitive advantage for Zayo. The Other thing that I would say is, once again, coming back to that $378 billion TAM that I mentioned at the beginning of our speech, 200 billion of that, so of that $378 billion, $200 billion is going towards fiber. It's a massive opportunity to deploy more fiber. If there's one thing that all of our customers say, they need time and time again as they need more fiber connectivity. And to enable this next digital economy, enable everything that's happening, Zayo sits at state and main. They're literally in the corner of everything that's happening. So I do think it's -- the market opportunity is growing for Zayo. I'm having a private model for Dan and his team to operate as a huge advantage for them, and then having unlimited asset, I think, makes a formidable competitor going forward. So I'm looking forward to all the things that Zayo can accomplish over the next couple of years.

Okay. Another question that we have here is DISH. We talked about this a little bit. But what are the implication of DISH's different network architecture oRAN for tower operators such as yourselves? And how do you differentiate and succeed against the big 3 tower operators in terms of new tower builds?

Well, look, I think on new tower builds, I'll let Alex Gellman speak for himself. But no one's been more active in the United States on the [indiscernible] in terms of building new towers. I've heard some funny metrics and funny [indiscernible] by some other private tower companies, but we know the truth and the truth is that Vertical Bridge has built more towers than any other company in the U.S. And so -- and that's really based on the fact that 26 years of experience, Alex is a great developer of assets, and he's got a team that's very, very strong and capable of deploying for customers. And I think their track record will speak for itself. In terms of DISH's open RAN architecture, I'm a big proponent of this, and I'm also a big fan of the gentlemen they've hired to build that network, Dave Mayo. So we think there's a huge opportunity there. And once again, understanding how to build oRAN and how to put aggregated base stations in the hubs on the edge is a skill set that, once again, we have resident in our portfolio. We've done it for other customers. At ExteNet, we've built close to 600 C-RAN hubs with our customers. So this is not something that's new to us. So that gives us an advantage inherently. We get to walk in the door and say, here are our references from 4 carriers, well, now 3 carriers. [indiscernible] we've built a centralized and open RAN architecture for. Once again, it's just a conversation we can have and, perhaps, others can't based on our qualifications and our ability to deliver. So we're having those discussions. We're confident we'll get a piece of DISH's architecture. We hope to be a massive teaming partner for them across all of the infrastructure they need, whether it's dark fiber from Zayo, edge computing with DataBank or macro sites with Alex or small cells for Jim. We have the ability to deliver. And I think we'll do a great job for DISH.

I'm just seeing you keep on mentioning edge with DataBank. Is Raul, I feel like I've been one of the more skeptic people as it relates to this notion of edge. Yet you keep on using them as like your prime example of like your edge portfolio company.

Well, he's a skeptic as he hates the street talking about it because everyone wants to find edge, and I think he's just sort of stick of the topic. But Raul is a guy that's very humble, and he's [indiscernible]. And so his really simple as, he calls it. He says, look, I'm focused on one thing, which is the edge isn't defined by Wall Street. It's not defined by analysts, it's not defined by investors. It's defined by customers. Okay. So we're -- no offense to you, but where our customers go is where the edge is. And so what Raul's been doing very [ quietly ] the last couple of years is he's been executing. And he's been building and developing assets on the periphery of the network in places where customers have workloads that they need satisfied. And so I think he's just sort of sick of the overused term of edge, and he's more about the execution. So I appreciate that. That's the kind of executive we want, is somebody who goes out and is more about the action than the reports.

I have one more question for you. It's going to come from the audience, and then we'll conclude. But before I do that, I just want to preface it by saying, I think one of the things that interesting that's kind of come up in my head through this conversation is -- and as sell-side analyst, I sometimes get disgruntled when the operating companies I cover have to jack their CapEx and go back to the market for equity. Or I get to disgruntled when they have a bad leasing quarter, but the reality is the next 3 are great and the year-end aggregate was great, and you end up having more volatility probably in the stock than otherwise needed to be in, in retrospect. I think it's interesting with your model where you're kind of disaggregating the operating company from, what I'll call, the portfolio company which is Colony Capital. And to some degree, it feels like it's a way to kind of smooth out the gyrations, if you will, on a company-to-company, quarter-to-quarter basis that sometimes creates more volatility than, again, in retrospect, may have been needed. With that said, I mean, the question is this, which is, what needs to be done to get Colony's stock to work? How about the real estate portfolio? What is the overall strategy to realize value? And it's kind of circling back to how we started this conversation. But in all fairness, you look at the stock year-to-date, it really has worked. I mean what's the inflection where you think the stock does start to work?

Yes, look, I think the foundational change with our shareholder base has already taken place. I think the work that's happened since we did the refinancing of the 2021 convert was a big rotation of our shareholder base. We had over 60 new investors in our stock, which was important. And we've been out very carefully architecting the strategy, Colby, now for the better part of 3 quarters. And to imagine to sort of rotate a $50 billion global asset manager from a highly diversified, highly levered traditional real estate model into a -- 2 years later into a fully digital focused total wings digital FFO and remake the entire culture, remake the entire team. Rotating $50 billion of assets isn't something you can do overnight. I'll start there. And so where we had to say is, look, we're going to go through these different verticals that have been to stir our core FFO earners. And we're going to go surgically and begin to remove them, and then add high-quality assets over the top. And it's a highly underappreciated amount of work that's been done in the last year, and I don't care. We're not looking for credit. But what I would say is, where our Q4 earnings call is, the foundational work that was required for us to build a base and a step-back and go from here to here. If you just take a careful look at our core FFO and where we're going to be in 24 months, and you look at our [ rating ] multiples and where we trade them today, there's a massive re-rating of Colony that's going to happen. The only way it happens is if I continue to deliver. And delivery is really simple. Can we continue to sell core assets, core real estate assets on our net asset trading values, or NAT. So what we did is we took a significant impairment where we said, look, we believe, Jacky Wu and I believe this is the floor. This is the floor for wellness, for infrastructure, this is the floor for our mortgage REIT, and then this is the floor for our original equity and debt flow formally known as the original Colony Capital, the original private equity and debt business. And we said this is simple. We have a clear path to exit the lodging sector. We're going to exit the lodging sector. We've told everybody that we took the impairment. We're restructuring all of our loans across all 7 portfolios that will put us in a position at the end of the third quarter to begin to monetize those assets in fourth quarter and first quarter next year. So exiting lodging is an important part of our story. Wellness infrastructure has actually performed incredibly well during the pandemic. So it's contributed to core FFO. It's doing well. And we have that sort of state for sale next year. And we're in no rush because it's in assets that have performed. The OE&D portfolio is where we sold $380 million of assets at the beginning of the year. So we're selling another $100 million and $300 million of assets. So we'll take that from about $1.2 billion to do about anywhere from 1.1 billion to $900 million in net asset value. We've got really good assets embedded in that portfolio. It's our old private equity portfolio, where we have strong real estate assets. And we're going to continue to monetize those assets. And we'll get that to 18 months. And then the last thing is our mortgage REIT, which I've asked Mike Mazzei, to come in at the beginning of the year to run that for us, to run Ladder Capital. He's a veteran with Andy Witt, David Palame and the entire team there. They've done a great job. They've rotated almost 500 of the liquidity. Their reserves are in place. They continue to sell assets on the CLNC side. They did a great trade with Goldman Sachs earlier this week. And now they're getting ready to play offense. But at the end of the day, that's a business that trades publicly and separately. We've marketed it at a little over $300 million. The book value of those is almost double, and we have a management contract that's very valuable. And so we continue to feel the increase from other mortgage REITs that want to own that asset. And ultimately, we'll find the right home for our mortgage REIT, and we think will it through to, most importantly, cash back on our balance sheet. And so now we've got a highly complicated story from a year ago where we had assets in Europe, we had industrial. We had office buildings in New York City. We had assets all over the place. And I've continued to prune those assets. And if you're watching carefully, which I think some people are, they'll see that we've gone through a very calibrated measured approach that we sell assets. And people that know me like you know that we're going to do that. We're going to continue to do that. We're going to do it in a very careful and measured way because now we have not only enough cash on our balance sheet, we've dealt with our long-term liability management, we've extended those maturities, we've delevered the company, and now we have the ability to be patient in how we [ manage ] the assets. So I think the re-rating of the stock is simple, right? If we get to a place where we have $200 million to $300 million of core digital earnings and you look at where our peer group multiple is trading and you take that multiple and you even take half that multiple, right, if you sort of re-rate Colony to 14, 16 to 18x the FFO, a massive re-rating the equity. And I think smart investors [indiscernible]. And most importantly, I'm asked is, they get a chance to work with the best management team in the world in digital infrastructure. I think our team is great. I wake up every day and believe that we are the best team. Certainly, we're the most experienced. As a CEO in the sector -- I've been a CEO in the sector for 26 years. That puts me pretty high in the seniority depth chart and [indiscernible] of delivering for investors. That's well documented. So I think people look at that. They look at leadership. And when I tell people I'm going to do something, I look you in the eye and I tell you I'm going to do it, and I do it. And so we're just going to keep executing. And if we keep doing the things that we're doing, if we keep taking costs out of the business, we keep growing core digital earnings on the balance sheet, we grow our digital IM business, we keep selling assets, this stock will re-rate, and I'm not allowed to guide you to math, but I would just say people can do the math themselves and figure out $2, and whatever we are today, I don't suspect we'll be at $2 and change much longer, given our growth rate and given our ability to continue to deliver for investors. So I'm pretty optimistic about the future.

With that, we'll leave it there. Thank you so much, Marc. Always a pleasure. And would I get to see you sometime in person soon. But we'll see how that goes. All right. Good. Take care.

I look forward to that, Colby. Thanks, buddy. Take care. Good to see you.

You too.