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

Good morning, everyone, and welcome to day 3 of the Deutsche Bank Media, Internet and Telecom conference. For our first session today, we are very pleased to be joined by Colony Capital's CEO, Marc Ganzi. Marc, welcome back to the conference. Great to have you.

Thank you. Good to be here.

Thanks. Before I start, just for the purpose of everybody on the webcast, if you do have any questions, feel free to type them into the web portal. I'll see them on my end, and I'll make sure any questions are woven into the discussion with Marc.

So without further ado, Marc, maybe just having recently reported fourth quarter results, it sounds like Colony has got a very busy 2021 in front of it. So maybe just to start, can you talk about the key milestones achieved in 2020? And your top priorities for the business in '21?

Well, look, turning back to clock in 2020, I think we put forth a simple mantra that we were going to really bring stability and transparency to the Colony story. And I think on that basis, we achieved a lot. So the hierarchy of objectives were, first and foremost, to make sure that we dealt with our long-term liabilities, we refinanced our revolver, we did a convert transaction that brought stability to our debt stack, we extended maturities, and most importantly, we delevered the company by 5 turns, taking that leverage from 12x to just below 7x. And in the course of doing that, what was really great is we've also been able to rotate to liquidity at that same time. We made a tough decision, which was to turn off the dividend, but we also made strong decisions to sell assets and rotate those asset sales into cash. And so today, we sit in a privileged position with a little over $735 million of cash on our balance sheet. We have not drawn down on our revolver at all and have really brought, what I would say, to be some calm to the -- injected some calm into the story. The second thing we said is we're going to fix the cost structure of the company. Jacky and I have been really busy. We took about $110 million of cost out of the business, which only builds credibility with the investor community. The third thing that we did is asset sales. So we gave some guidance last year around where we would ultimately be in terms of disposal of legacy Colony assets, and we hit the highest point of that guidance. And so I think, once again, just making promises that we felt we could keep and keeping in line with our mantra, promises made promises kept. And then the fourth thing we said we would do is we would change the senior leadership. And so we made a series of changes across the organization, changed out the entire Section 16 management team, brought in new business leaders to run this business and build it for the future. And I'd be remiss if I didn't thank all of our team members that have helped pilot this thing to where it is. But good leadership, strong execution and most importantly, just an unwavering commitment to the mission has gotten us to where we are. I'm a big believer of managing of people. People has been a big part of my success and my organization for the last 3 decades. And then the last thing that I would say is we grew. Growth is great. Investors love growth. And so we promised that we would grow our investment management business by 15%. And we went out and delivered 90% growth. So we massively outkicked our coverage. We took FEEUM from $8 billion up to $13 billion. And at the same time put 2 really high-quality assets onto our digital operating business, DataBank and Vantage onto our balance sheet. And we did $22 billion in digital deals last year. We were really busy and growing. And the way you grow is you raise capital, you form unique and proprietary ideas and you execute. And so last year was a great step in building, what I would call, foundational support for 2021, which we're now affectionately calling finish the mission. And so the mission for us in '21 is pretty simple. We want to, first and foremost, continue to raise capital and grow our POM. The guidance that we've given folks is that we believe in our digital line business. We can grow fee-bearing capital under management from $13 billion to $17 billion. And we're well underway with that with a very successful closing in DCP II. The second thing we said we would do is we'd continue to deploy capital. And so our trajectory is deploying about $1.5 billion of capital every quarter. So we think we can grow digital AUM by $6 billion this year, and we're off to a great start. We've had a tremendous start to the year, announcing a bunch of deals and obviously, making a significant amount of moves in the sector. Very active last week. Very active this week. It's been an active week for our investment management team as we continue to find unique ideas and place capital on behalf of the folks that trust us with that capital. We think we can continue to make progress on cost. We weren't done with $110 million of G&A. Jacky and I believe we can deliver more G&A cuts. So we think there's another circa $25 million to $40 million in G&A we can take out of the business this year. And so as we continue to sell assets, it's sort of a self-fulfilling prophecy. You begin to prune the number of people you have at the firm and you'd be able to prune cost. And so Jacky is doing a great job there. He's looking at office space. He's looking at how we reconfigure our organization go forward. And so that's obviously a big part of the story. We continue to hire and find the best people. Last quarter, bringing in Steve Smith to run Zayo, and Liam Stewart to be our COO of Digital. We really have a great reputation in the sector. I think executives want to be with us at Digital Colony because we have a leading franchise, and we have a unique ecosystem of CEOs. And I have some of the best partners in the world. And just 27 years of relationships, you build these relationships and bringing Steve in was so critical to where we want to take Zayo in the future. And so people is a big part of our business and an organization. And then lastly, we've laid out a really aggressive agenda for ESG. We started with ESG back in 2010, when we were building Global Tower Partners. I took that same framework in 2013 when we started Digital Bridge and incorporating ESG into our due diligence in how we ultimately -- our asset management framework. And now as the CEO of Colony, we've launched a series of initiatives that we think are really important to how we want to do business, ultimately how we act as a family with our employees and our colleagues, and then most importantly, social impact are the things that we're doing, are we making an impact in our community. So I prefer a series of things that I think are important to me on a personal level, which is one, Colony Net Zero 2030 is something that we're now implementing. 2 of our portfolio companies went carbon neutral this past year, Scala and Vertical Bridge; our 2 biggest data center investments, DataBank and Vantage, now consume and operate about at least no more than -- no less than 58% of their energy from green sources and renewables. And so those companies are making a big progress. Beanfield's going carbon neutral this year. And all of our CEOs are keen into this initiative now. And they understand that we're calling the play from the top and that it's important, and we believe it takes bold leadership. And so that's the direction we're going in. We're not going to wait to 2035. We're not waiting until 2040. We think it's too late if we wait another 10 to 15 or 20 years. So that's the work that we're doing on our DEI committee. We've announced a series of initiatives that I outlined on our call just around our approach to mentoring high school students, our approach to internships and fellowships, our approach to how we're changing, how we're recruiting and hiring people, and most importantly, our transparency around wage equality, removing any gender bias, removing the glass ceilings and making sure that everyone at Colony, regardless of their gender or their race knows that there's a path to the top and that compensation and most importantly, praising people for being promoted is a level playing field for everybody. So this is what we're doing. These are the things that matter to us. And I think we'll have a great year. I think we're very well positioned to continue selling assets. We've obviously got the sale of a hotel portfolio readying for close. We've announced a series of dispositions. We have assets that are being sold in our OE&D portfolio. We've guided folks to a $400 million to $600 million of guidance of incremental OE&D sales. We've often talked about ultimately finding the right eventual home for our credit REIT, CLNC, which has done such an amazing job in the last 6 months. And then last but not least, our 400 medical properties, making sure that we find the right place for them this year as well. So it's really about, once again, just like last year math for us, it's ruthless execution and making sure that the things that we put out there to you and to our investors that we continue to make sure that we make good on those covenants and that we -- and most importantly, that we outperform those covenants. That's kind of the real key from this -- from my chair.

Got it. And if I can follow up. So obviously, business activity, you've been focused on transitioning towards digital infrastructure. So can you update us in terms of where we sit today, Any targets you have? You mentioned the $400 million to $600 million. But in terms of percentage of assets, where you'd like to be by the end of the year? And ultimately, when you anticipate reaching that 90% digital AUM milestone?

So I think the way we do it is, obviously, we continue on this path. And I think we've made a tremendous amount of progress getting to just a little about 60% rotated by the end of last year. We'll continue with the OE&D details, which gets us to about 65% rotated. If we buy another $8 billion of digital assets, we're $30 billion today, we go to $38 billion. That's a lot of progress, right, on the offensive side of the football. And then last but not least, with respect to CLNC and our wellness infrastructure business, as we pointed out on the call, that's 20% of our AUM today. So finding homes for those 2 assets, going from 60% to 65% and then the possibility of those 2 assets ultimately being harvested, that takes us to 85% and then if you add another $6 billion of digital assets, a buying program of $1.5 billion per quarter, you find a path to 90%. That's kind of the road -- that's sort of the road through in terms of AUM. And all of that, of course, is contingent upon us being able to access capital, equity capital, debt capital. And I would say we're almost through the first quarter, and we've been able to raise significant debt capital in our portfolio of companies. I mean, last week, our edge data center business, DataBank, with the help of our friends at Deutsche Bank, we did a $678 million securitization. What was crazy about that? The book was 10x oversubscribed. The market had never seen an edge data center securitization. It was the first of its kind. And we got that deal done with flawless execution, 30-year tenure, 2.3% fixed interest rate, $113 million of cash came back to DataBank's balance sheet. Interest savings of over $100 million in terms over the next 5 years. No cash traps. And now DataBank has clear liquidity to recycle back into new facilities and expansion of existing facilities. And most importantly, no covenants and no amortization. So really clean execution and most importantly positioning DataBank as it continues to grow and proliferates on the edge, really positioning that company for success. Good long-term success.

So it's a good segue. Edge is obviously going to be one of the answers to the next question. But in terms of key themes, what do you see as the top themes within digital infrastructure that guide your team's investment process from a capital allocation perspective?

So we think about investing today on a global basis, Matt. And so I always say to investors today, when I'm traveling, that's a game of 3 dimensional chess. And so the dimensions -- the 3 dimensions are really a, geography, where are we investing. And for us today, we're investing in Asia, we're investing in Europe, we're investing in Latin America and North America. So we play in, I believe, 4 of the most important hemispheres in the global digital economy today. The second dimension is risk and returns. So we look at digital infrastructure as having sort of 3 bands of risk. There's what I would call low-risk assets that typically have weighted average contract duration, Matt, greater than 10 years. So that's hyperscale data centers and that's towers. Those are really the 2 safest assets. But also they unfortunately, yield the lowest returns today. They're very compressed. It's a competitive world. It's a competitive marketplace. So our asset allocation strategy is if we're going to go focus on risk off, we want to be in towers, we want to be in hyperscale data centers, but we have to accept lower returns. In the mid-range of risk, we look at edge data centers, we look at dark fiber and we look at digital media infrastructure as being assets where we're getting our weighted average contract ratio between 6 to 10 years. We're seeing those returns in the mid-teens. And we call that a mid-band of risk. And then I would say in the higher band of risk where, you can chase a little more alpha, where your weighted average contract duration is between 1 and 5 years, you've got WiFi offload, you've got CBRS, indoor wireless networks, you've got Enterprise fiber. You've got small cells and managed services or hybrid cloud. And so these types of businesses, obviously, as you know, have higher churn. They have higher operational complexity. But you can see returns in the band of 18% to 22%. So you're taking shorter contract duration, you're taking more churn, you're taking more risk, and most importantly, you're dealing with a lot more operational complexity. So we actually see digital infrastructure today as having 9 key verticals, not 4. The ecosystem just continues to keep growing in terms of the opportunity set. And at the same time, Matt, CapEx keeps growing. We had a total addressable market of about $350 billion 2 years ago. Last year, it was $387 billion of CapEx going into digital infrastructure. This year, we think that number is $400 billion of CapEx. And we think next year is about $412 million to $415 million. So every year, the CapEx spend in digital infrastructure continues to go up, which is great news for everyone attending this conference that invest or owns a digital infrastructure company. And so that's as an asset allocator, and ultimately is the steward of Colony's balance sheet and deciding where assets go and how we grow our business. We're always thinking about risk. We're always thinking about reward. And of course, we're always thinking about yield, and how to put investor capital to work because that's really our primary objective of Colony Capital is investing in digital infrastructure and achieving the best results for our investors.

Got it. And so now when we think about digital relative to some of your peers, I think one of the bigger differentiators is obviously this convergence of infrastructure. So I'm wondering if you could talk a little bit about why Colony's converged your digital infrastructure to be optimal strategy for networks of the future? And how this may serve as a competitive advantage relative to some other more dedicated power-specific, fiber-specific or data center specific companies?

Well, I think my history of being a CEO that is really based in 27 years of working for customers. And the most important thing I tell my team at Colony Capital today is like first thing is the customer is always right. I learned that from my family that was in the restaurant business for 100 years in New York City. And it's a really simple rule, right? It can apply to any business. And so you got to listen to your customers. And so we've been doing a lot of careful listening over the last 3 to 4 years, and we've been listening most carefully to the CTOs of our mobile customers and trying to really understand and unpack the topology of where networks are going, and what does that look like in a virtualized world. And so the answer to that is when you begin to virtualize the core of the network to the cloud. And you begin to think about where that radio access network sits, Matt, that's really the guidance of converged networks. Because ultimately, to make a cloud radio access network work, it's not a simple linear relationship with 1 macro site that ultimately gets backhauled back to a switch. It's a lot more complicated. And then you put MyMill on top of that, and it creates even a further complication because you've got multiple input, multiple output technology down at the radio level. And so we think about cloud radio access networks and/or oRAN or cRAN, whatever you want to call it, as arguably the most important development in network architecture since I've been in this business since the '90s. And so this notion of putting your core where carriers used to sort of hug the core, that was sort of dear to them. Now that, that core is being virtualized and it's being up in the cloud, it allows them to rethink their network architecture, which is a series of RAN hubs that have a series -- a significant amount of dense fiber. A lot of dark fiber is required. You need vertical real estate, which is the locations on the towers. You need the vertical real estate in terms of small cells, but then you need to bring that back to an intelligent location, which is an Edge data center. Something that's secure, has power, backup power, cooling, backup cooling. Some of these need raised floors, some of it needs security. But ultimately, you need to create an ecosystem map where, ultimately, that radio access network or a series of radios when they're congregated together with their interface to the cloud through an SDN solution can sit side-by-side with applications. And that marriage of mobility with applications is really where the magic of 5G can be realized for our customers because, look, it's a very expensive proposition 5G. The only way our customers are going to be able to win is if they can find multiple use cases that ultimately surface through these networks, these networks of the future, which is why they spend a lot of money on the C-band. So we're looking -- as I said, we're always looking around the corner. We're trying to figure out what's next and where are we going. And we look at 2 things that are happening. One, we look at what Charlie is doing in Denver with DISH, and we look at what our friends in Japan are doing at Rakuten and those are 2 very interesting case studies for network convergence and networks of the future. Those are de novo 5G networks. Guess what, both are being built with C-RAN architecture, which is what we're talking about right now, this virtualization of the core. And it was interesting in listening to my friends at Crown Castle yesterday talk about where they think the business is going? And ultimately, their first real sort of test case of a real 5G network is DISH, and they're feeling pretty good about winning their fair share of that business. We feel pretty good, too, right? We were in the door just as early as they were. But instead of coming in as Crown Castle, we walk in the door with Zayo, with DataBank, with Vertical Bridge, with Extenet. And what it sums down to? I try to make this analogy easy as, can you walk in the door armed with the max amount of arrows in your quiver, right, because ultimately, to really sit down with customers say they just want to know that you understand their network. They want to understand that you have solutions. And at the end of the day, they don't care how it gets done. They just want it to get done. They want the network to perform, and they want you to step up and understand what they need in terms of fiber. What they need in small cells, what they need at macro sites and ultimately what they need either in terms of building new RAN hubs, repurposing existing RAN hubs or offering de novo or existing Edge data centers. We understand all 4 those swim lanes better than anyone. And it's not to suggest that Dan and my good friend, Jay Brown, are better or worse than we are, and it's not to suggest that American Tower and SBA and Digitals and Equinix are not great companies. They're all great companies. The good news for investors that you get to choose. You get to listen to these stories and you get to hear the results, and you ultimately got to pick what you feel is the best way to play the future of networks. What we're offering today at Colony, we say to investors, look, there's been some amazing digital infrastructure REITs to invest in, and they've done really well for investors for decades. What we invite people to do at Colony is by investing with us is to think about owning the networks of the future and really investing in where the future is going. And so we invest in all of these different spaces and verticals so that our investors don't really have to choose. By having access to our investment management platform and by having access to what we call digital operating, which is our Edge data center business and our hyperscale data center businesses, we really think we're giving investors the perfect mousetrap. And that, for me, is so important, is making sure that we're delivering sustainable long-term value. And look, the proof is in the results. We had fantastic organic growth last year. We posted greater than 20% organic growth last year. We'll post greater than 20% organic growth this year. Our digital operating business is really stable and consistent. We'll put up 5% organic growth on the digital operating business. And so we're in a good place, and we're growing. And ultimately, the reason we're growing is because we're investing in these new ideas. We're investing in converged networks. And ultimately, that's something that not every digital REIT can say. And once again, it's not to suggest that those digital REITs are worse than us or better than us. It's just -- this is a fundamentally different choice in how we're investing. And we're pointing -- and we're trying to make the case to investors that the world has changed. And look -- and maybe the right idea for some people is just to invest in macro sites. But I think our bet is that you have to have a few more arrows in your quiver, and I think that's the case that Crown Castle is taking to investors as well. And as a consequence, you see the organic growth that Crown is a little higher than the peer group, and our organic growth is a lot higher than the peer group. So you sort of bet with your wallet, I guess, so to speak, and you look at the numbers and you look at the growth.

Got it. Let's -- I want to dig into some of these different asset classes. And we always appreciate your insight at this conference. So maybe we'll start with U.S. Towers. Obviously, we've got new 5G builds from the nationals. We talked about DISH, just serving as a multiyear tailwind. But the industry also faces one of the biggest churn events in years through the Sprint site decommissioning. And so I'm wondering what's the latest you're seeing across your U.S. Tower assets in terms of carrier activity and organic growth? And then how do you see that growth trending over the next several years given those puts and takes out lined?

Well, each of these businesses operate independently and differently. So they have different trajectories and they have -- inevitably, they all have a relationship with T-Mobile. So T-Mobile has been one of our great and most treasured relationships for going back to the days when we built for George Schmitt at Omnipoint. So there's a lot of history with us and the brand, and we've been -- it's been a privilege to work with them. I think the churn event you referenced is something that's been telegraphed, by the way, for almost 2 years now. We've all know that it was coming. It was just a question of when. There was sort of this can down the road attitude. And now it's coming home to roost a little bit. So I think in our U.S. Cell Tower business and Vertical Bridge, we have one of the youngest of the big 4 tower portfolios in the U.S., We have the youngest tower portfolio. So we really didn't have a lot of Sprint, T-Mobile overlap. In fact, less than 5% of our rent roll was an overlap. So we haven't been terribly damaged by that from a macro perspective. I think from a small cell perspective, we obviously had a lot of Sprint and T-Mobile small cells. But thankfully, they're in a lot of different locations. So most of -- a good chunk of that legacy Sprint small cell stuff T-Mobile needs because they're in -- let's be honest, they're in places where coverage is already strained, like places like Downtown San Francisco, Downtown New York City and the 4 boroughs, looking at coverage in L.A. We've got some of the best metro networks out there. And as you heard from Crown yesterday, a lot of these small cells that were Sprint occupied are being used. They need to be used. I think some of the relay stuff has -- UA relay stuff has been turned off, Matt, as you know. So for those companies that UA relay fiber, backhaul or those folks that had you UA relay on their towers or small cells, a lot of that is just going away. T-Mobile doesn't need it. So that's sort of one of the fallouts. And obviously, that impacts a little bit of what we're doing at Zayo. It's impacted a little bit of what we're doing at ExteNet. But those churn events have been communicated. We've understood them. Most importantly, we've worked with them for the last year around this integration. We were one of the partners of this in the DB and integration, and we just made it really transparent with T-Mobile like how can we help you get this deal done? How can we help you accelerate where you need to go? And so the key here is, yes, we understand there is a churn event. And we understand that there's an opportunity for growth. And so a lot of what you heard, once again, I hate to keep picking on Dan and Crown yesterday. But they were communicating that very well too, which is -- yes, they lost some business, but they also won a bunch of new business. And I think that's kind of been our attitude, which is particularly in small cells and fiber, we've been able to endure a lot of that churn and really focus on the future of the relationship.

Got it. And what is -- if you can just comment on organic growth. I mean we've seen a slide from Crown. I think some of the others in the industry have talked about low single-digit type growth as they go through this churn cycle. What are you seeing at Vertical Bridge on an organic basis? And then how would you sort of expect that to trend on a multiyear time frame?

Well, I think, look, we've had some of the highest growth in the industry. We've typically been in a band between 8% to 12% organic growth. I think this year, we're telegraphing sort of 5% to 6% organic growth. Maybe there's a beat to that. A lot of that will depend on new tower construction and how we progress there. But I think the upper end of the guide feels pretty good. I think we're definitely going to be north of 5%, for sure. The question is, can we touch 6% or 7% organic growth? And I think the start of the year was okay. I mean Q1 is always soft. So it's never a great barometer to use Q1 as the proxy for what's coming in the future. So I think the leasing backlog is held steady. That's always the sort of predictor of the future. And we've got a very strong backlog heading into Q2 and Q3. So I think from an organic growth perspective, we feel good that there's enough macro activity, there's enough amendment activity and there's enough EPS, new leasing activity that we should be able to hit the high end of our guide. I think on small cells, there we're projecting a really strong year at ExteNet. We think that's a business that will deliver somewhere between 10% to 12% top line growth this year. It had a very strong fourth quarter, our best fourth quarter, actually, in the history of the company in terms of new bookings. So we're seeing a surge in small cell activity, similar to what Crown said yesterday. So all 3 carriers very active, even T-Mobile is coming back and turning up some new business with us. And so I think it's going to be a really good year in small cell thing. It's probably going to be a little back-end loaded, as it always is. It seems like I say this every year to you. But we're -- what we're projecting next year is we think we should be able to light up between somewhere in the low end of the guide of 3,600 nodes to 4,500 nodes in terms of new construction. And then in terms of new bookings, somewhere between, call it, circa 13.5 million to 16 million in new bookings. So strong new bookings, a lot of strong new installs, and ExteNet should be really, really busy this year.

Got it. I want to get your take on DISH. We talked about this briefly. But I'm wondering, just to get your insight on whether you see an opportunity for new greenfield 5G network to succeed in the U.S. given that we have 3 healthy incumbents already? And I guess, more broadly, how you would envision this new greenfield network from DISH being monetized differently relative to peers?

Well, I think you have an advantage in the respect that there is not a legacy network that you have to overbuild. And so with legacy networks come legacy issues and legacy technologies. And I think one of the great opportunities for Charlie and DISH is that they can go out and they can reimagine the network and they can take chances in network architecture that perhaps their predecessors weren't able to take advantage of. So the ability to go sort of C-RAN first will obviously need a lot of money. The ability to aggregate a bunch of radios and to be able to proliferate that infrastructure through dark fiber out to a series of access points is really sort of the magic of how a multiple input, multiple output network can work. If you're efficiently managing your spectrum and you're managing your radios, and you can today, you can do that from the cloud, you can do that with an SDN solution. So that for me is really exciting. And I think their plan is a sensible one. They're focused on machine to machine connections, IoT connections, OTT, video services. There's not an ambitious plan of saying, "Oh, God, in 1 year, we're going to have cell phones in everybody's hands across the United States." They've got a calibrated plan. It's a credible plan. And they're committed. I mean DISH is fully committed to building this is what we can see. So I think it's exciting. I think they spent a lot of time looking at what was done in Japan. And I think in terms of what Rakuten has done is really interesting because there, they've had to go toe to toe with 2 powerhouses and when you're going up against NTT and you're going up against SoftBank, those are formidable competitors, just like AT&T and Verizon are. So imagine what they've done. And they had to build the de novo 5G network, and they've done it in the same band that Charlie is doing it. And I think the lessons learned coming out of Japan was by doing it in this way, they were able to save a significant amount of cost in infrastructure. They were able to build a nationwide network for fractions of what the incumbents had to do. So there's a playbook here and it works. And I think it will be interesting to see how this plays out globally if we see more de novo 5G networks based on this O-RAN or C-RAN architecture.

Let's pivot to fiber. And we talked about ExteNet briefly, but I also want to ask you about Zayo and get an update in terms of how bookings and net growth have been trending in recent quarters. And then whether there's any changes we should expect under the new leadership with Steve Smith running the show there?

Well, look, I think the -- 2 questions there. One is about leadership, and I'd be remiss if I didn't thank Dan Caruso for his service and his leadership. I mean, Dan was the -- let's give Dan his praise. He was the godfather of the fiber space, and he did such an amazing job putting Zayo together and really leading the industry into prominence and relevance because people had historically, 10 years ago, nobody talked about fiber, and Zayo really brought that dialogue to the forefront. So it was a pleasure to work with Dan. He's really entrusted myself and Steve Smith to take this company forward. And I think we're doing that. And we're doing that by revisiting our product set. We've made the business a lot less complicated in terms of selling noncore assets. We spun out Allstream in our Canadian CLEC. We obviously sold zColo. And we're -- we obviously put a new head of product in place. And Steve is now bringing in augmenting the management team with people he knows and trusts that helped him build Equinix into the powerhouse that it was. So I think the change of leadership was good. It was time. Dan built an incredible company. Steve has been a great builder of businesses in the past. And so we're turning this now into Steve's hands and his leadership. And so far, the early returns are, it's good. We got the sale of the noncore assets done. We took advantage of some good capital markets. And in addition to that, I would say the results were interesting in COVID. I think Q1 and Q2 really were surprising, well above our guidance. And Q3 and Q4 saw some softness that was, I think, the foray of COVID sort of wore off, and we began to see some COVID churn. And obviously, we had some of that churn, was impacted by the Sprint and T-Mobile merger. So we had a pretty not terribly exciting third and fourth quarter, I would say, marginal positive net growth, where the first and second quarter were really quite strong and outstanding. Where do we set up for '21? I think we set up pretty good. I think we're targeting sort of net growth in that band between 6% and 8% is where we want to be at Zayo. We've got some work to do to get there. But ultimately, that's aspirationally where we want to be, in terms of enterprise and wholesale, which are the 2 main products that we're involved in. So I like the change in leadership. Obviously, I'm excited to work with Steve, who is somebody I've known in the sector for 13 years. And I'm excited about what Zayo can do in a perhaps a little less complicated format; A, not being public; and B, not being involved in business lines that are not core to what Zayo does. So I think from -- at the end of the day, it's sort of back to the future, which is bring Zayo back to what it was, focus on the fiber, focus on fiber solutions and reduce the noise and bring new leadership in to carry Dan's legacy forward and really focus on working with customers, getting back on the road, seeing customers, understanding where their networks are going, how can we serve them with our network presence and our reach and most importantly, our access to capital. This is where I think Zayo can be a powerful force for change.

A couple of questions on the data center front. Maybe I'll start with hyperscale. If you can just update us on the demand backdrop you're seeing across the hyperscale business? And how that may vary across regions? So maybe we'll start there, and I'm going to dig in eventually the competition in pricing. But if you want to weave those -- that color and feel free.

Well, look, we operate in 4 different theaters today. We're in North America. We're in -- obviously, in Latin America with Scala. We're in Europe with Vantage Europe. And then we're in Asia with Agile. So we've got 4 hyperscale platforms and they're all incredibly busy, is what I would say. I would say, last year, start down South with Scala in Brazil. Really good year for us. We had about 16 megawatts of bookings down there, and it's a relatively small company. So when you get 16 megawatts, it obviously feels pretty good. We turned up 18 new megawatts of capacity last year. And we feel good. I mean we've got a great competitor in Digital Realty in Ascenty down there. So we have a competitor that's been there a long time and is respected and does great work with the same customers as we do. So I think we're happy to be the challenger brand in that market, and we're getting more than our fair share of the marketplace. So I like where we are in terms of -- we'd beat budget by about 38% in terms of new leasing last year, in terms of top line revenue and megawatts leased. So I'm pretty happy. It's early days. It's a marketplace that probably, in total, today, has about 250 megawatts between Mexico, Colombia, Chile and Brazil. Ascenty has got a big chunk of that. We've got a pretty sizable chunk of that. And it's a marketplace that we think is just Brazil alone is going to 550 megawatts over the next 5 years. So we're excited about that, and we've got our eye on Latin America. I say Europe has been probably our biggest bright spot, Matt. We've really crushed it in Europe last year. We did close to 78 megawatts of leasing. We're sitting on a backlog of over 250 megawatts of new leasing this year. We've already executed a few new logos at the beginning of the year. And we're bullish. We're in places, we're in good places. We're in Cardiff. We're in Dublin. We're in Frankfurt. We're in Berlin, Warsaw, Milan, Zurich, and these are markets that are all, from a cloud perspective, they're all growing, and we've got customers going in all those locations. So I'm optimistic about Europe. We don't bump into a lot of competition in Europe. I mean we know that DLR is there, we know that Cyrus is there. We know Equinix is there, but we feel like we're winning the logos we want to win. But most importantly, we're winning those logos on price terms that we want per megawatt. So I'm really happy with the development of Europe. And I think we're one of the most credible operators in the continent. So moving into the U.S. is -- I'm probably less enthusiastic about the U.S. I think we operate there in 5 different markets in the U.S. I would say, Montreal and Québec has been a bright surprise. We like our market position there. We like the fill-in leasing we're getting, and we like the web scale leasing we're getting. So that's probably one of our best markets. Santa Clara continues to perform. We're the largest owner-operator of data centers in Santa Clara from a total power capacity. We operate in 8 data centers across Silicon Valley. And there -- every time we turn up new product, it gets leased. So we feel pretty lucky that, that's a market where we've got a comparative advantage because of the amount of power we've been able to secure and the fact that we've been able to entitle land and assemble land and get stuff built a little quicker than our peers. So we're really happy with that. Quincy, Washington has been a great satellite market for Seattle. In San Francisco. We've done reasonably well there. We had some bookings there last year. We're looking to get more bookings there. That's an alternative sort of to Hillsboro and an alternative to Santa Clara. And so that's been a good market. And then I would say Goodyear, Arizona is an emerging market for us. I think that's going to be one of those markets that sets up really well for cloud players, and we think that will be a growth market in the future. Ashburn has been okay for us. I think it's very competitive, Ashburn. I think you hear that from all of our peer group CEOs. The influx of private capital into Ashburn where people are buying land for crazy prices and they're building empty buildings and pricing that below where it should be priced. That's a dangerous trend. And when private infra capital gets into the hyperscale leasing and the pricing gets undercut, that really -- that damages sort of the structural integrity of the market. So I'm not that bullish on Ashburn. I know Ashburn is the -- by far and away, the biggest market in the U.S. but it is a race to the bottom in terms of pricing. And so we've been able to perform in the other 4 markets really well and get the rents we want. And Ashburn has been tough. We're winning business in Ashburn, but it's a knife fight. Every RFP that comes out in Ashburn is really hard, Matt. We just got started in Asia. We've got 2 projects under construction. We're going into 5 markets. Probably a bit early innings. We'll probably come back to you later in the year on our progress in Asia. But we're net-net. We're very excited about that. We think that's probably the best growth market in the world, is from a web scale perspective is Asia.

I have 1 question that I want to weave in. It actually relates -- it goes back to the power discussion, but it's more related to Europe. If you can comment on the Vantage Towers IPO investment. And I believe it was in the headlines earlier this week. Just trying to figure out what's different about this? And I think it sort of goes back to some of the commentary made in the past around Europe, maybe not being as favorable of a market for the third-party tower -- neutral host tower model relative to the U.S. So just curious in terms of how you sort of frame the Vantage investment relative to that broader view?

Sure. I think, look, it's a really simple answer actually. We've been doing a lot of work with Vodafone in the U.K. We've got great relationship with them through our -- one of our portfolio companies, FreshWave, which builds small cell infrastructure. We've got about 9,000 small cells in the U.K. now. And so we've had a lot of success with Vodafone in that market. We've gotten to know Vodafone senior leadership really well over the last 5 years. And my mission at the highest level, Matt, is to help my customers. And so when you look at the Vodafone IPO as being kind of a twofer for us. One, we can help with customer achieve their ultimate objectives. And then two, we could make an investment in European towers at what we think will be an attractive entry point against a credible quality that's strong with a long-term lease. So I'm always a big believer that towers is about credit. And I think we look around the European landscape and look to be honest, some of these MLAs are not as good as the others. And in fact, some of the MLAs aren't even MLAs they are MSAs, which is not a lease. It's a services contract. And so when I see tower operators taking outsized risks and paying north of 28 or 30x for noninvestment grade MSAs, it's sort of -- it's something that, for me, is a bit of a red light. So in this situation, we really want to focus on helping our customer. We like the structure of the long-term leases in place. We like Vodafone as a credit. We think it's one of the great credit stories in Europe. And so we felt like this was a unique way to play the sector with a customer we know and trust. And also that knows and trust us. So that trust is a 2-way street, and we're really excited to help them, and we believe it will go well. And we think it's an attractive entry point. I mean, obviously, as you know, towers have sold off pretty significantly at the beginning of this year. And so valuations from a public perspective really rained into a zone where we find it to be pretty attractive.

It's actually interesting segue for my next question. I always appreciate your color in terms of the M&A landscape, valuations and what you're seeing. So maybe you can update us in terms of opportunities and then valuations that you're seeing across the digital infrastructure landscape? And I think in the past, you've talked about the build versus buy decision, the pendulum swinging more in favor of build, putting picks and shovels in the ground. Where are you at now in terms of what you see across the landscape?

Well, I think I'm still at kind of a 50,000 foot level. I'm still a big fan of greenfield right now. I still think whatever -- this market has caught us more cold and we're sort of dealing with it, we still haven't seen it in private M&A pricing. Private M&A pricing hasn't caught up to the sort of public comps yet. And that takes a couple of quarters for it to sort of circulate through the M&A community. But the reality is there's still just a ton of capital sitting on the sidelines in infrastructure funds and alternative asset managers. The planet is just awash with liquidity. So even if the public guys take a breather and their multiples come in 2 or 3 turns, I don't see M&A slowing down. And I don't see prices going down either. I think people look at these assets and they say, digital infrastructure is really valuable, and it's an asset class we want to be in, then they're going to pay the price whatever it takes to get into that asset class. So financial buyers will continue to drive pricing up because they've got liquidity. I don't see the public players being the big disruptors in price over the next 2 to 3 quarters. I think we see the big disruption point here is private transactions getting done at record multiples. And so we'll keep an eye on that as the year goes on. But I still like building towers. I mean we can build in the U.S. for $235,000 a tower. We can build in Latin America between $68,000 and $90,000 per tower. We can build in Europe for EUR 115,000 per tower. So I look at some of these M&A trades, and we sort of struggle, right? We look at some of the most recent U.S. M&A deals, and we're getting -- we're seeing values greater than $1 million per tower. From my perspective, that's pretty heady stuff, right? I mean we look at the -- and I don't like naming names, but I think investors can do the math. They can extrapolate the last 2 or 3 big U.S. deals. They can sort of take that headline price, divide it by the number of towers and you get to an intrinsic value. And I'm going to tell you, it's still 4 to 5x above replacement costs. So naturally, we're building. We're building in the U.S. We're building in Latin America. We're building in the U.K. We're building in the Nordics. We're building in Southeast Asia now. And so we've got active shovels in the ground in 5 or 6 different geographies globally right now. And we'll continue to do that. And I would say, look, the same thing holds true in data centers. I think we can build data centers a lot cheaper than where people could buy them today. But I think good data centers are a scarce commodity. You don't see 90% investment-grade with greater than 12-year contract. Hyperscale data centers just coming on the market. That doesn't exist. It's a bit of a unicorn. So the only way you can play hyperscale today, Matt, is you got to go out and you got to build it, right? You got to understand how to get the entitlements, the power, and most importantly, you have to have the trust of the customer. So we're seeing this ripple through every sector we're in, whether it's small cells, whether it's fiber, whether it's data centers, towers, there's a scarcity of really good M&A trades. There's a massive glut of liquidity. But at the same time, there's not a lot of people that know-how. Most financial sponsors can't go out and do greenfield on their own. You have to have decades of credibility, and you've got to understand how to work for customers. And that's where we have a big advantage.

And so last question, just want to tie this all together. How would you frame the investment case for Colony shares today to potential or new shareholders? And what do you see as sort of the steps or milestones necessary on your end to unlock greater value over the next year?

So for us, first and foremost, it starts with raising capital and our ability to form capital. So we've given you guidance that suggests that we can go out and raise $4 billion of fee-bearing capital, that $4 billion when paired with, call it, $4.5 billion to $4.8 billion of debt gives us another $8 billion to $9 billion of purchasing power. So we're busy outraising and forming capital. That's the first thing investors have to believe. The second thing you have to believe if you're going to invest in Colony is can we keep doing deals? Can we keep doing good deals, good proprietary deals that are unique and have an angle and that ultimately are going to endure and most importantly, create the right returns? And so form capital, deploy capital. The third thing you have to believe is can we continue to sell assets? We had a great year last year, hitting the upper end of our guide in terms of selling assets. Can we finish the mission? And get out there and sell these assets? And I think, look, there's going to continue to be more news about assets that we sell. We don't comment about that at public conferences. We don't comment on it in the press. We just go about our business, we put our heads down and we sell assets. And then when they're sold and it's done, we'll share that with the market, and we'll put out the proper notification via our SEC rules and we'll work obviously with folks like yourself. And -- but ultimately, that part of the business is just head down, do your job and get it done, and that's what we're focused on. So as we sell assets, it really accomplishes 2 goals for me. One, it brings cash on the balance sheet; and second, it reduces G&A, which are a few sort of core things that we got to finish up and we got to get done. So I think those are kind of the key seminal things. Can we raise capital? Can we deploy capital? Can we sell assets? Can we continue to reduce G&A? And then ultimately, can our ecosystem of companies in our business model, Matt, of having a digital investment management business and having digital operating, can we deliver better than peer organic growth? And the answer to that, we believe, will be yes. And so if we execute all of the things that I just said, we will have the fastest organic growth in the sector. And on that basis, we're transforming this company. It's being re-rated. And it's a really good opportunity to jump in today and take part of this transformation, but most importantly, take part in investing in converged network solutions, which we think is the right place where investors need be. So we got a lot on our plate, but it's been a great first quarter. We've done everything so far that we said we were going to do in the first quarter. We're having a great setup, is setting up for the second quarter in terms of those key initiatives that I laid out for you. And we're very excited about what we're doing and got a deep pipeline of opportunities. We've got a deep pipeline of capital. And so it's just -- at Colony Capital, it's just about sticking to what worked for us last year, which is execution.

That sounds great. And so I think we are just about out of time. So we're going to end it there. So on behalf of myself, everyone at DB, Marc, thank you for your time, and hope we can do this in person together at Palm Beach next year.

That would be great, and we look forward to hosting you.

Sounds great. Looking forward to it. Take care, Marc.

Thanks, Matt. Take it easy. Good to see you.