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

Welcome to Citi's 2021 Virtual Global Property CEO Conference. I'm Mike Rollins of Citi Research. And we're pleased to have with us Colony Capital and CEO, Marc Ganzi. Just a few housekeeping items, Marc -- I'll get to those in a second, but Marc, great to see you. Thanks for joining us.

Thanks, Michael. Appreciate it. Nice to see you as well.

So the session is for Citi clients only. If media or other individuals are on the line, please disconnect now. Disclosures are available on the webcast. For those joining us here today to ask management any questions, simply type them into the question box on the screen. They'll come to us, and we'll do our best to ask them during this session. Marc, I'm going to turn it over to you to introduce the company as well as to answer the following question. Coming out of the pandemic, if an investor were to choose only 1 real estate stock to own, what are the 3 reasons why they should invest in Colony Capital?

Well, thanks, Michael. I think the 3 reasons are pretty simple. First and foremost, we're the fastest organic growing digital REIT that there is today that investors can take advantage of. Last year, we posted over 20% organic growth in our digital business unit, and we don't know of another digital REIT that, on a pure organic basis, not with M&A, is growing faster than us. We think, secondly, our ability to provide converged network services to our customers is a very differentiated approach to how you play digital infrastructure. And as you know, Michael, as you've talked to other folks that are in the sector and you've talked to customers, this notion of cloud radio access networks and where we see the virtualization of networks is an important step function in how our customers are ultimately going to purchase infrastructure in the future. And so no longer providing these silent approaches is going to work. You have to understand how ultimately the edge compute interacts with their radio access network, interacts with fiber and ultimately interacts with what I call the vertical real estate piece, towers and small cells. So having a holistic approach to this, we think, is super important. And last but not least, the people matter. We have the deepest management team in the sector. I'm the CEO of the longest-running tenure in the industry, dating all the way back to 1994 as the CEO in the digital infrastructure space. We have 93 people that wake up on our investment team every day, focused only on digital infrastructure between Singapore, L.A., New York, London, Boca Raton. We have the biggest team, the biggest footprint, the best experience. And the talent does matter, and our team offers us a decided comparative advantage against our peer group.

And just taking a look at the coming -- or the current year 2021, can you outline the operating and strategic priorities for Colony Capital?

Yes. So first and foremost, we want to continue to finish the mission of what we started last year. We've been very clear about that, that 2021 will be a completion of a journey that started. When I first got to Colony Capital in the fourth quarter of September 2019, when investors got to meet me for the first time along with our then current CEO. And said, look, we're going to try to make this a simple story for folks. We're going to exit the traditional real estate business. We're going to rotate to digital. We want to be 90% digital by the end of 2021. We said we're going to make the business a lot simpler from a cost structure perspective. We've taken a lot of cost out of the business. And then we said we were going to revamp the entire management. So we've had a complete overhaul in the management team. Now that's complete. And then the last thing we said we'd do is we'd go back to growing again. And that started last year. We grew our digital PUM business, we grew our digital balance sheet. Both of those business units are sort of the hallmarks of where we're going, and both of them will have significant growth in '21, '22 and '23. And we've given investors for the first time in a long time, a clear set of guardrails on where we're going. Where we're going in terms of our total liquidity position, where we're going in terms of how we plan to grow, give them operating and how we plan to grow digital IM and there's literally no confusion about what we're doing anymore. And as we spend the rest of this year monetizing and harvesting those legacy assets, it will continue to be a story about simplification where it just gets easier and easier. And at the same time, we're growing while we do more digital deals, while we raise more capital and while we add more predictable, high-quality assets to the balance sheet.

You referenced a 20% organic digital growth. Can you unpack that a bit in terms of how you achieved it? Was there a significant capital component to get there? And maybe just help our audience and investors understand what's underneath that? And is that a sustainable growth rate for Colony Capital?

Well, look, we think the growth rates will certainly, as we continue to get bigger, as you know in this business, it starts to look a little smaller as we continue to grow and need scale. And we're going to scale this year. It will be a good year for us. And last year, our growth, we promised investors we would achieve 15% organic growth rate in our FEEUM. Now that's really our total capital raise that generates fees. And the management fees that Colony Capital generates, Michael, on its investment management side are typically from funds that are 10, 11, 12 years in duration. So we get management fees for a very, very long duration. Those management fees are coming from sovereign wealth funds, investment-grade insurance companies and pension systems that are every bit as good as the investment-grade quality of the 10-year data center REIT. So the quality of our cash flows -- this is really important, the quality of our cash flows in our investment management side of the business are just as every bit as good as the quality of cash flows out of a typical data center REIT or a tower REIT that would offer actually maybe a little bit better, just given the investment-grade blue chip nature of our investors. So last year, we took that base from about $8 billion to $13 billion. This year, we've given a guide from $13 billion to about $17 billion. So we'll grow that by about $4 billion. So $13 million up from $4 million. So we're tracking more or less at a growth rate that will be probably in the 15% to 17% range. And look, our hope is to beat that like we did last year. Then the other side of our business, Michael, as you know, is our digital operating business. We have 3 different ways that we create opportunity there. One is we own Vantage YieldCo. These are 12 of the best data centers, hyperscale data centers, long-term contracts, fixed escalators of about 3%. And that portfolio is about 90% occupied, and we're starting to see ways that we can lease some of that vacant space to get ourselves into that 92%, 93%, 94% occupancy. So without any future leasing, that portfolio will grow a steady state at about 3%. Our second investment is in our edge data center business databank. 60-plus data centers throughout the United States, totally focused on edge computing. Last year, delivering 8% top line growth. And so on a blended basis, our core digital operating business of DataBank and Vantage will grow at about 5% organic. And that's, of course, net of churn. That's a true organic growth rate. In addition to that, we have cash on our balance sheet, which we can deploy. We've deployed it into DCP I. We've employed it into other investment management ideas, and we'll continue to use the balance sheet where we think it makes sense to -- we have either raised third-party of capital or put other assets on the balance sheet. In addition to that, digital operating can grow 3 other ways. One, Vantage and DataBank can continue to do M&A. If they choose to do M&A, we'll support them and we'll continue to put capital to work in M&A. Two, greenfield. We've already highlighted that Vantage is one of the best hyperscale developers of properties in the U.S. We have a forward contract to acquire additional facilities from them at a set cap rate. We will exercise those options throughout the year as Vantage continues to stabilize some of these data centers, we'll purchase them and bring them in. So we have an intention about adding more hyperscale data centers this year. And we just said, DataBank has been building. They've been very active in building new data centers. Salt Lake City 5, Salt Lake City 6. We're looking at Pittsburgh 2, Pittsburgh 3, looking at Minneapolis 3, looking for a new site in Atlanta. So we have a lot of stimulated opportunity at DataBank. We're now integrating zColo, some of the zColo -- [ refurbishment ] and some of those campuses will be expanded where we have additional land. So of course, last but not least, the best way to grow in the balance sheet is to look at other great digital businesses that we can add, digital assets that we can add to, obviously, to the balance sheet. We've telegraphed that we've looked at U.S. towers. We've looked at dark fiber. Businesses, Michael, that are predictable, that have long-term leases and that are greater than... [Technical Difficulty]

We'll just ask our audience to stand by for a moment while we just try to get the connection back on with Marc. Apologize for the delay.

Can you hear me, Michael?

Yes. Can hear you now. We lost you when you're talking about the predictable long-term leases.

Sorry. So I was just...

That's okay.

I [indiscernible] by saying that where we are for the end of the year is we'll do about 5% organic growth on the digital operating business. We'll do a 15% organic growth on digital IM. So it will be a good year for the company. We'll post positive organic growth in both of our business units and that does not include M&A. Obviously, if there's M&A, those organic growth rates can go higher. But that's pure organic growth in the true sense of the word. And I marvel at listening to some of our peers talk about growth and growth is -- doesn't, of course, include churn. Well, of course, it includes churn. So the numbers I've just given you are net of churn, but they don't include us using incremental CapEx to buy more things, which we certainly could do.

So as you survey the landscape of digital infrastructure, what's going well? What are you excited about? And where, product region-wise, would you have some concerns or things not progressing the way they should?

Sure. Well, look, as I said, we operate in 4 different hemispheres, obviously, Asia, Latin America, North America and Europe. What I would say -- let's start out with where I see potential opportunity and what we're excited about. So today, we've announced 2 transactions in late fourth quarter and early first quarter focusing on towers in Southeast Asia. We think that's a really good opportunity. We see double-digit growth rates. We see attractive entry multiples, attractive build-to-suit economics. And it reminds honestly of Latin America like a decade ago. So with a better risk profile. So we're pretty excited about that, Michael. I think we're continuing to look at hyperscale data centers in Asia. We like that opportunity. And then we like dark fiber in certain parts of Asia as well. So Asia is really a dynamic new theater for us, and we're very active. We've got a great team on the ground, 5 people working out of our Singapore office, waking up every day focused on putting capital to work and the best ideas behind our best logos. So we're generally enthusiastic. Latin America has been tough the last couple of years, but we've managed during what was a pretty protracted recession, not suggesting the recession is over in a lot of those countries. There's still going to be some speed bumps this year as they sort of emerge from COVID. But that being said, we like really how we ended last year in Brazil on towers. We made a savvy acquisition out of the [ OE ] bankruptcy. We had a very successful 1,500 tower build-to-suit agreement. And so we're getting our fair share of [ FX ] in Brazil, and we're winning. We're taking market share, and we're doing it on attractive rates. I think as it relates to the Andean region in Mexico, for towers, we're probably -- we'll continue to put capital to work in our existing platform. In terms of anything earth-shattering or large deals, we'll probably stay away from towers. We see multiples there being pretty hot and heavy. I think another area of thematic that we're looking at is, obviously, we're already building hyperscale data center campuses in Brazil. We're looking at going out to those secondary workload environments in places like Santiago and Bogotá in Mexico City, those are sort of interesting new web scale opportunities. And then last but not least, looking at a roll out strategy in the edge compute space and whether or not there's a sufficient amount of edge computing in Latin America. We think edge computing is still probably 3 to 5 years off, but why not get there early and start preparing on that. I think in the U.S., we really like indoor CBRS and Enterprise 5G, a lot of chatter about WiFi 6 and just kind of how are indoor networks are -- indoor wireless networks, Michael, or how are they going to change over the next decade. We think the carriers spend a lot on that spectrum. We think it's topically very interesting. And we think for carriers to make the returns, we've got to start evolving from this notion of being sort of B2B or B2C or C2C and really start thinking about networks in an environment where it's device-to-device. And I think that's sort of the promise of CBRS and how do you weaponize that spectrum. I think we continue to be buoyant about long-term U.S. mobile towers. I think there's been a bit of a run on them recently, but towers have held up traditionally pretty well. We're going into a tailwind with 5G. Yes, there's Sprint churn. Yes, there's some complications with the business model. Yes, some MLAs have given away a lot of economics. But it's still a pretty good business. And so we're still very interested in that. We're looking at it, and it's thematically pretty interesting. I'd say in Europe, hyperscale data centers continues to be a real bright spot for us. We do think that really dark fiber is a theme that continues to be interesting in Europe. A lot of -- obviously, fiber to the home and a lot of wholesale fiber to the home networks, but not a lot of discussion about really dark fiber to web scalers, dark fiber to mobile infrastructure, dark fiber to the edge. We think that's a big theme coming up in the next decade in Europe. Then last but not least, edge computing. We think edge computing in Europe is very thematically topical. It's a great way for carriers to reduce their cost of infrastructure in an open RAN or cRAN environment. So we're very interested in how we can take edge computing and work with our customers, Michael, to reduce their costs. Where do we see trouble spots? I think for us, European towers continues to be a market that confound us a little bit. We hear folks say it's just like U.S. towers. Well, it's just not. I mean, we thought M&A trades touch 30x or close to 30x. And historically, Europe's organic growth rate ex escalators is about 1% to 2% per annum. And so you then put on top of that a 2% or 3% escalator, and you're talking about 4% to 5% or 6% growth, which is well below historically where the U.S. has been. Now a lot of big carrier deals have been done. There's not a lot of churn, but we do see some of these markets that have 4 going to 3. So there will be consolidation, I think, in Europe over time. But I think the biggest problem is that a lot of these carriers have done, Michael, their own captive tower companies. And if everyone has their own captive tower company, why would you colocate to somebody else when there's an incentive for you to just build it, do your own BTS to not colocate. So there's a set of perverse incentives that are built up when the carriers do their own captive tower companies where the true independent tower companies aren't going to get the lease-up. And so comparing it to U.S. towers is just not a fair, nor is it intellectually honest. The historical data suggests that European towers grow a lot slower than the U.S. I would say other areas, I think we got to keep growing fiber in the U.S. A lot of migration trends, a lot of pattern changes where enterprises are buying fiber. I think you're going to see more elevated churn in enterprise fiber. That's a big storm cloud for the next 3 to 5 years. I think retail colocation, a lot of these data centers that -- data center businesses, some of them one of them, for example, going [ in respect ] that's been not growing very fast because retail colo is shrinking. Retail colo is going to continue to shrink. That's just a fact. And so digital REITs or data center REITs that are overexposed to retail colo, we think that's something to keep an eye on. I think enterprise fiber in Latin America is brutally competitive as the telcos ramp up the heat, cable companies getting involved in ramping up. Obviously, 4G and 5G as a potential deterrent for people for setting up for home broadband. So we do think that 5 are topically particularly enterprise fiber in Latin America is going to come under some heat over the next couple of years. So we're sort of negative on that. And then I think, look, in Asia, once again, similar to some of the problems in the U.S., we do think that retail colocation or enterprise colo as a business will be in retreat as greater and greater web scale campuses get developed and more enterprises go to the cloud. So that's kind of our global view. And there's obviously a lot to do right now.

Yes, it's such a helpful description of everything that you're seeing around the globe and in different products. Just one of the things that you mentioned was your concern on U.S. retail colo, was that a similar concern to what you described in Asia, just things moving to the cloud? Or is there a little more perspective that you want to unpack just in terms of how you're viewing that retail colo market in the U.S.

Well, I think, first of all, some facilities are just 20-plus years old, and they just don't meet the network architecture needs of our customers. And so I think we just need to be intellectually honest about that, right? I mean some of these [ facilities ] are old, and they don't have the right power and they don't have the right backup power. They don't have the right cooling, and they're sort of Tier 1 or Tier 2 data centers trying to be a Tier 3, and it's hard. There's a reason why there's a certification process for data centers. I think the other thing is with some of these edge workloads, the [ tropic ] is shifting to one, some is going to the cloud, some is migrating to the edge. Some of those work environments are just being downsized. It doesn't mean that the customers are going away. It just means there's a rationalization and there's a repricing risk. And when stuff gets repriced and a new deal comes in the market, it's no longer just like 2 or 3 public guys chasing the same logo. It's 3 or 4 public guys chasing the same logo. And then 3 or 4 private guys that are funding themselves and building empty data center. So there's a lot of pressure on rents. There's pressure on churn, in retail and enterprise colo, and that's why you're seeing some of these choppy prints that you're getting where you get a surprise where a CEO says, "Oh, yes, we lost these 2 enterprise customers this quarter." And like the analyst communities, well, you never told us that was coming. That's the challenge in sort of retail colo. You don't see it coming sometimes. The customer is pretty clandestine about what their workloads are anyway, so why are they going to share with you they're leaving? They probably wait until the last second to tell you they're leaving. So I think we just got to keep our eye on some of these business models that are over rotated to retail colo. And just be mindful that some of that's going away, some of it's staying and some is being repurposed as edge. So look, if you can repurpose those, what I call edge workloads from 0.25 megawatt to 1 megawatt, and you lose a 40 [ RAC ] customer, but you replace it with a half [indiscernible] at least, you're going to probably average up actually in rent. So this is something we got to be mindful of and keep looking ahead. Everything is about looking ahead.

And when investors are thinking about Colony Capital, and you think about over a 5-year view, how should they think about the quantum of assets that you're going to own on an operating [ sys ] versus the assets that you're going to be managing and getting fee income? And maybe also investing in those funds as well or co-investing?

I think our third-party AUM guidance for getting out to 2023 is, my goal is to be at about $50 billion of AUM in digital. Maybe there'll be some residual traditional real estate left that we just did in divestment. We're about $48 billion of AUM today. We're talking about going to $50 billion in basically effectively 2 years. And so we're at $30 billion now. We'd have to grow to do another $10 billion of deals this year, another $10 billion next year. But some of that could be off the balance sheet, remember because balance sheet capital is [indiscernible] AUM calculations. So talk about the balance sheet. I mean, we're about $750 million in liquidity today. We see liquidity getting to about $1.3 billion for all the asset sales we're going to do this year. Ultimately for the divestiture of the hotels and wellness in CLNC, there is a path forward that we could see that cash balance get to $2 billion. And with that $2 billion, Michael, it gives us a lot of purchasing power. If we have a 60-40 loan-to-value ratio, you're talking about the potential to buy order of magnitude of $4.4 billion to $4.8 billion of assets. Which we think, based on our ability to access proprietary deal flow at kind of a 17 to 18 multiple, you can begin to extrapolate that. We can add a significant amount of EBITDA, Michael, just by weaponizing our balance sheet correctly. And remember, some of that balance sheet will go for new funds, that will go for new co-investments. So it will all just go straight to digital operating. But I think our ability to hit the digital IM plan, we feel pretty good about that. Just based on the capital we're raising already to date, the capital we're going to raise this year and then the capital we have lined up to raise next year, marrying that once again with sort of either 50-50 loan-to-value or 60-40 or 40-60, whatever the case may be. If we raised $4 billion of AUM this year and we raised $4 billion of AUM next year, that's $8 billion, and you marry that up with, call it, circa 55% or 60% loan-to-value, you start to see that it's pretty easy to kind of get to that another $16 billion to $18 billion third-party AUM capital out of the IM business. So we can add another $16 billion of AUM on the IM side. And then we can take that $2 billion of cash and get up to a $4.4 billion of assets. So that's how you get to $50 billion of AUM for $30 billion today. So assets under management, we think we can get there in a 2-year period. Obviously, we've given our guidance on revenue and EBITDA over the next 2 years. We know we've told everyone where we're going to be by 2023. We've walked everyone through the building blocks. Once again, the big theme here is there's no mystery. It's all laid out there for investors. And every day, we're executing. That's the key. The key is this management team, at this point, has begun to not only earn investors' trust that they expect us to execute. So that's a transitional opportunity for us is to continue to do the things we say we're going to do and do them effectively.

One of the questions we're asking all the participating companies is, what are your top 3 priorities to improve your ESG score next year?

Well, look, this is something that I take a lot of personal pride in, and it's something we've been doing since 2010. So this is an 11-year journey for us on ESG. It started at Global Tower Partners when we took in a Dutch pension fund in 2010, they mandated in their investment documents with us that we be ESG compliant within a year. At that point in time, we didn't know the acronym meant. But we got educated, we got smart about it. We got serious about it, and we learned a lot from the Dutch, and they were really helpful. When we sold GTP and ultimately started digital bridge, we really think the way that you improve your ESG score is a sort of the 360 approach to ESG. So what do we do? First and foremost, it starts with how you buy assets and how you manage them, having an investment management framework where you do ESG diligence where you have the ESG asset management and then you ESG scores. That's already stuff that we do today at Colony Capital. So we're way, way out ahead of our peer group there. The second thing we're doing is, on the E side, is we're creating a lot of impact by having all of our companies go net zero by 2030. And I know some other companies have gotten in some hot water in the last couple of days about committing to this stuff. And we're saying that they are already and then people going to do the research and they're not. Look, we're not saying we're net zero today. We're saying we have 2 portfolio companies that are net zero. We're really proud of Scala, which is our hyperscale data center business in Latin America that buys 100% green energy. Both DataBank and Vantage are well into their 60 percentile range on green energy, Beanfield is going carbon neutral next year and every one of our 20 CEOs globally is focused on this initiative. They believe in what we're doing, and it's part of their culture because it's part of our culture. And so getting to the environmental piece is super important. And I think you're going to see we as a firm at Colony Capital, we're going to score incredibly high on that metric. The last thing that we're doing is around our [ DEI ] program, which we call our 4 pillars of [ DEI ]. And so there once again, we were early in the adaptation phase of mentorship. We were early in providing fellowships and providing quality to getting jobs. And then ultimately, at Colony Capital, your path to moving up and making sure that wages are equal and that the path is there. Everything we're doing in these [indiscernible] Michael, is about creating a level playing field. And all we can do as business leaders is say, look, "Look people now and say, this is a level playing field." And the way you do that is you got to back it up. And so it starts early with our mentorship program in L.A. and New York and Florida. We're working with high school students where they're going home at night to communities as they stay with their parent's home, they can't go to college. Like that's a real problem. People are never going to believe. The only way you get to a change in this country is that we change the core. We changed the fundamental belief system. And human beings, the only way to do that is you catch them early in high school. Because by the time they get to college, by the time they come out to college, their belief system is filled. You can't alter that narrative by waiting until somebody gets out of college as they've been educated. And at that point, they may have been told that the world is not a fair place. We don't know that, right? The only way we get there is through education by bringing people that have less opportunities, by opening doors in our offices a couple of days and months seeing how a corporate environment works. And then having someone, an executive like myself or you tell them, look, you can go to college. We're going to work on your applications. We're going to write a recommendation for you. We're going to build a realistic set of plans for you to get to college. When you get to college, we're going to recruit and we're going to go out and get our entrance from those diverse universities. That we're going to hire from those diversity universities. And then we're going to make sure that our diversity metrics in terms of raises and in terms of the gender gap is closed. And that we provide those numbers, and we provide that path and we provide transparency. That's our framework. Our framework is about transparency. It's about creating a level of playing field. And then it's making sure that we're identifying these 4 quadrants, capturing people as they mature, helping their curve. As they move along in their life, certainly, from our perspective, showing them that there is a path that the world can be a fair place because this is what it's about, it's about opportunity. And if we provide that opportunity, we make the planet a better place. And then ultimately, we govern ourselves with good diligence and we govern ourselves with great asset management and metrics. We think that's the right approach and that we'll be on top on our ESG scores.

Another question for you is just with all the capital that you described that you're looking to infuse in the business. How do rising rates and inflation impact the net returns to shareholders as well as just the dynamics of the different digital businesses that you're owning and managing?

Well, look, I think digital infrastructure is the best place to be in a rising rate environment and an inflationary creepy environment. Creepy being creeping up. And so what we've been able to do through the years is negotiate master lease agreements that give us some protection related to OpEx coverage in place -- in case in some of our businesses' operating expenses go up due to inflation. So we capture some of that in our leases, mostly in our data center leases. We capture that in our small cell leases. And to a lesser extent, towers and fiber. I would say on rising interest rates, we've been locking down debt stacks for the better part of the last 180 days. We've been doing a series of securitizations across a lot of our businesses to give ourselves 30-year final legal maturities, fixed interest rates, no covenants, no cash reps. When you -- a lot of people are like, oh, the most important thing you can do and go into a rising rate environment is just make sure you lock in that interest rate and extend tenor. Yes, those are important things, but going to a no-covenant model or a covenant-light is actually even more important. Having no amortization and having no cash reps when the cash gets stuck, we need cash. When the going gets tough, my experience is, you don't want to have a conversation with your bank. You want to have access to all the cash you can get your hands on. And if you could do that, you can weather the storm. So we've beaten into all 20 of our CEOs at our operating businesses down below the holding company that prepare for an impending storm. And you do it. We did it in late '90s. We did it in '01. We did it at GTP in '08, and we certainly weathered the pandemic last year at Colony Capital working through COVID. So as a CEO, 4 store liquidity crunches, and I've always had my companies prepared. And the best way that you fight a rising rate environment is you're just prepared. And there's a way to get prepared. And so we're preparing ourselves for that rising rate environment because we don't think it happens today, Michael. We don't think it happens next quarter. We think it's an easing policy, and we think it happens over probably a 24-month ramp. And it will be subtle, it will creep up on us. And we'll all look backwards and go, oh, my god, where were those -- where was that 1% cost of capital, it's now 2.5% or 3%, which by the way 2.5%, 3% is not bad, but I'm just saying that we do think that rates will rise in due course, has no inflation.

Are you ready for annual rapid fire questions?

Yes. I love the rapid fire questions. Let's go.

All right. Question number one. When we're sitting physically together in Florida a year from today, what will be the one thing that will have surprised people the most about your business over the prior 12 months?

So I think what will surprise people is our ability to finish the mission and our ability to monetize all of the legacy real estate. I think folks will be surprised that I think people are still -- the people that are hesitant on our story are still saying, can they get it done. And I think this year, we'll prove it out, and I think we'll all be sitting in Florida next year, have this chat and you'll say, Marc, you did what you said you're going to do. And that's what this management team is about, it's making those promises, committing the things and then making sure that our word is impeccable. And that's what we're going to do this year.

What do you think your corporate travel budget will be next year in 2022 as a rough percentage of what you spend in 2019?

So we think, obviously, it will be a lot less in 2019 because we took $110 million of cost out of the business. Then we sold our corporate plane, and we've done a really good job pairing back the T&E accounting. No, seriously, we've been very focused on cost. It's something that when I got here in 2019, I said I wanted to fix. I really owe a debt of gratitude to my CFO. Jacky Wu has done an amazing job there. We pulled a $110 million of run rate cost out of the business. We think there's more cost we can pull out of the business. And look, as we sell assets, it gets easy. So with a smaller employee base, with a smaller asset base, with a more digitally-focused business which requires less people, we fully anticipate spending a lot less in T&E in 2019 than we'll spend in 2022. 2020 was super muted. We didn't have a lot of travels, particularly for the 3 quarters following the pandemic. This year, we're starting to travel a little bit again. We're starting to get back out there. We're seeing customers, we're out seeing investors. There's parts of the world that are open. We're getting there, and we think it's important to see people face-to-face. So I don't envision -- I probably would expect that our T&E will be probably somewhere in the order of magnitude of 65% of what it was in '19, just to give you a sense, because a lot of what we do is fundraise and a lot of what we do is greenfield. And the only way you do greenfield is got to go out and you've got to touch customers.

That's helpful. This next one is a little tougher just because you cover so many regions and so many parts of digital infrastructure. But if you had to summarize, what is same-store NOI growth for digital infrastructure overall in 2022? What's the right frame of reference investors should keep in mind for the category as they think about comparing the different companies within that?

[indiscernible] CapEx numbers, just to get your mind wrapped around. It was about a $380 billion TAM last year. We're forecasting $396 billion this year. And then we're forecasting $412 billion of CapEx spend next year. So as you start pushing up, we think, logically, the sector sort of clips along between 4.5% and 4.7% growth. Organic, again, Michael. Not talking about M&A, not talking about greenfield, just talking about pure organic growth. We think the sector, which is broadly speaking, small cells, towers, fiber, data centers, we think the sector can push along at about sub-5%.

Last question. What will the 10-year U.S. treasury yield be 1 year from today? Last week, it was around 1.5%.

Yes. I would think that if things continue on the trajectory that they're on, we're probably in for 2 rate increases. And the question is whether or not those are both 25 basis point moderation steps or not. So could the 10-year go from 1.5% to 2%? I don't think so. Could the 10-year go to 1.75%? Maybe. I think that feels intellectually on us, somewhere between 1.75% and 1.85%. I'm being way too scientific, aren't I?

You just give us a rough number, final answer. Would you want to go with the final answer, 1.75%, 1.85%?

We're going with 1.85%.

1.85%. Marc, it's great to see you. Thank you for spending time with us and our clients today, and thanks for our clients for joining in. Appreciate the time.

Thanks, Michael. Take care.

Thanks. Take care.