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

Hi, good afternoon. This is Michael Funk from Bank of America, the data center analyst with the bank. With me today, we have David Barden, who heads up the telecom and communications infrastructure, research for the bank; and then also Marc Ganzi from DigitalBridge. We are very happy to have Marc here with us today. If you don't know, Marc, he's been doing digital infrastructure for probably approximately 2 decades now, right, starting with the tower industry and sorry -- 3 decades, Marc, he has given me a sign, starting with the tower industry and now with DigitalBridge. But I think DigitalBridge is interesting. I'd like -- you may walk investors through the transformation that has really occurred under your launch since you got there and how you really involved in the company into what it is today. And once again, Marc, thank you for being here with us.

Yes. Thanks, Michael. Appreciate it, David. Good to see you. Thanks for having me in. We're all looking forward to hopefully having this next year in California or wherever you decide to do it, we'll be there to support it. So -- but delighted to spend the afternoon with you guys and talk about digital infrastructure. And thanks for the kind introduction, Michael, 27 years of doing this, I've got the battle scars to prove it. But this is my fifth go around it being a CEO, first time as a public company CEO. And I guess I decided to really go for it and take on a pretty big challenge when I inherited the company over 1.5 years ago. And it was actually at your reconference in New York City, where we declared in September of 2019 that Colony Capital was going to totally transform itself from a $48 billion diversified-asset manager into a digital infrastructure, dedicated digital real estate owner and that we were going to do that in 2 years. I'll never forget that room. We were downtown at the Ritz-Carlton there, and I saw investors' eyes just rolling in the back of their head saying, "There's just no way you guys are going to be able to accomplish that. How do you rotate? How do you sell $48 billion of assets that candidly had some issues with them." But here we are today, 2 years later from that very important conversation that we had with investors at that reconference. And we've actually rotated -- believe it or not, we've rotated close to $86 billion of assets in 24 months. It's never been done. It's incredible, Michael, what we've done in a very short period of time. And it was a balancing act, right? We had to find willing buyers. We had to raise capital. We had to go find good assets. We had to deal with a very large organization with a big cost structure. And I looked to investors in the eye about 14 months ago, and I said, "Look, this is what we're going to do. We're going to sell these assets. We're going to rotate to cash, we're going to delever the company. We're going to greatly simplify the story for investors to understand. We're going to take a real run at the cost structure. And ultimately, where we think we'll be along that road is we're going to be what we believe will be the best diversified global digital REIT in the world and sort of a wild aspirational thing to say at the time." But I think here we are a couple of years later, and we feel really good about our positioning today. Coming out of the heels of selling our wellness infrastructure business last week, candidly a little bit higher than where we told people we would sell it. And on the precipice of divesting of our old private equity business to Fortress, which we expect will close in the next couple of weeks, having sold off our hotel portfolio, our industrial portfolio, our New York City office assets. I mean it's just been an incredible 2 years of running as fast as we can to fill assets and acquire high-quality assets. And then at the same time, a lot of people don't give us a lot of credit for changing the culture, changing the people and inherited 500 full-time employees. Today, we're about 190 employees. We had 27 offices, we're down to 11. And we took G&A from $300 million a year down to $133 million a year run rate G&A. So we've really done a good job of rightsizing the cost structure. And then from a leverage perspective, I inherited a business that was levered at about 12x. I've gotten net leverage now below 7x. And if you look at the securitization that we did last quarter, it was really groundbreaking, similar to the first securitization we did in cell towers in 2004 and the first securitization we did in hyperscale data centers in 2019. Now what we've managed to convince our friends at the rating agencies is when you own a digital infrastructure investment manager where you manage funds for 10, 11, 12 years in duration, those management fees are just as good as a tower lease or a hyperscale data center lease. And the counterparty credit risk there is U.S. pensions, Canadian pensions, sovereign wealth funds, insurance companies. And so we're able to securitize our digital investment management business. And we raised a couple of hundred million dollars in a very, very low cost. We're able to retire some of those very expensive preferreds that were trading close to an 8% coupon. And so our work isn't done yet. We'll finish cleaning up the balance sheet. I got to give a lot of credit to Jacky Wu. He's done an incredible job of being a great copilot and sovereign white in my entire team, but it really is -- it's been a balancing act, right? We've had to delever. We've got to get the cost right, we've get to sell assets, raise capital, buy new assets. And at the end of the day, change the culture and change our board and change our governance, and it's been a lot of fun. It's been quite a journey.

I remember that conference in New York, the investors did walk out the meeting and say, "Who's this Marc Ganzi guy. The strategy he has is so audacious. How does he even possibly do this." So I get to remember that feedback from presentation, but you have totally transformed the company and not just divesting the old nonstructured assets, but the new structure of the OpCo and the investment management piece as well. So maybe help investors think about how the company makes decisions to either kind of build or buy or throw it into the investment management bucket. How do you make that determination?

Well, the key is we've got 1 team. We've got 1 global investment team that handles all of the digital infrastructure investing. So that's 98 professionals globally between London, Singapore, Boca Raton, New York and L.A. And that team wakes up with a singular focus every day, which is how to invest our capital and how to invest our investors' capital. The great thing about our investment management platform is we're one of the largest investors in all of our funds. So we put our money where our mouth is. So if you take a look at our first fund, we put $300 million of our own capital into that fund off the balance sheet. If you look at our most recent fund, we've put $200 million of our own capital into that fund. So we're writing significant checks from the balance sheet to support our investment management platform. Now at the same time, we're also raising billions of dollars of capital. And that billions of dollars of capital generate great long-term fees, which we call FEEUM. And at the beginning of the year, we started the year at about $13 billion of FEEUM per year. We told The Street we guided everyone that we'd raised another $4 billion of fee-bearing capital. Pleased to say we're well ahead of that plan for this year. And the key there is when you have 1 team, and you have a large access to capital, you can really look at opportunities and ultimately triage them where they appropriately sit. And when we say the appropriate place where they sit, Michael, it's about risk. And it's about understanding the returns and it's about understanding the yields, and it's ultimately putting that risk into its right bucket. And so if you look at our investment management business today, whether it's DCP I or DCP II, we've been very clear with our public investors and private investors that we're targeting a high teens return in those types of assets. And there's no current cash yield required to invest in those kinds of assets. Or if you take a look on the balance sheet and you look at what we've done in terms of our investments in DataBank and Vantage, we specifically chose those assets, they had a slightly lower return profile, more in the low teens. But most importantly, they have yield. If you take a look at Vantage YieldCo, it's creating a current cash yield, which is very attractive for our REIT investors. And we do want to have a yield and we do want to have the ability to return cash back to shareholders eventually one day. We can talk about dividend policy a little bit later. But the goal there is just to have good long-term assets, long-duration contracts, investment-grade counterparty risk that we own on our balance sheet "the balance sheet assets," digital operating. And so in digital operating with Vantage and DataBank, it was a great place to start. Those are 2 of our best logos globally, DataBank and Edge Computing, and Vantage and hyperscale data centers. So the great thing is investors don't have to choose between whether we're investing in a private perspective from the IM side or where they're investing off the balance sheet because there's great symmetry and there's great alignment between those 2 buckets of capital.

There's a lot to dig in there as well. On the investment management side, still -- so I heard from investors is the amount of capital allocated to digital infrastructure, right, private equity, infrastructure funds, I don't know what the number is, but it's somewhere in the hundreds of billions of dollars. And we're seeing deals get done in data centers and 4 cap rates and the QTS being taken out of 25x very full valuation. So how do you navigate that world where there is so much capital driving valuations higher? How do you allocate the capital to get the mid- to high teens returns that you're targeting? How do you compete in that environment?

I think the key there is, once again, having capital that can play across a variety of different return profiles. I think that's what makes it pretty unique from my perspective. I think when we take a look, for example, our hyperscale data center business that's on our balance sheet, Vantage YieldCo, we bought those assets for effectively a 5 cap, right? And you look at the weighted average duration contract and that was about 13.7 years with an opening cash yield somewhere in the high 3s and a return profile of 11% to 12%. That didn't fit our traditional Digital Colony 1 DCP II profile, which was a high teens return where we don't need that current cash yield. So having a balance sheet where we can bring permanent capital, Michael, alongside of our capital to own assets like that really creates a competitive advantage for us because we can go play in a core-like return profile and put that on our balance sheet and at the same time, create yield, which is really important for some of our investors. And important for us, we want to have current cash yield to fuel our AFFO growth. And so I think what's very unique about our structure is we have capital for every type of opportunity. And whether it's in our flagship funds or whether it's off our balance sheet or whether it's in digital credit or thinking about other strategies where we can invest out of. We have the ability to raise capital for every type of digital infrastructure opportunity. That's what makes us unique is it's a unique sort of flytrap where nothing escapes. We can look at every opportunity we can triage it, find the right home for it, find the right capital to marry up with it. And if we like the opportunity, we don't have to say no. We don't have to make that choice. Because of the different return profiles of capital today, whether it's an infrastructure fund that's in the high teens or it's a core fund that's willing to accept a 8% to 9% return. We have the ability to pair capital with opportunities. I think the earlier point that you make is probably the more apt point, which is pricing, entry multiple. Where are assets trading today. And I think that's actually more concerning to me than our ability to compete and have capital. You mentioned the QTS transaction. There's been other transactions this year where we've seen multiples really trade up in the levels that do get us a little bit uncomfortable. We highlighted in our last quarterly call, which is -- the good news is when M&A pricing gets really hot, when you're an operator like us, you don't have to go chase M&A multiples, you can go build. And so we have a logical pivot here, which is we can do greenfield anywhere on the planet today. So whether it's in Latin America, whether it's in Asia, Europe or North America, we have the capability to address customer needs across 4 different continents. And oh, by the way, across 4 different verticals, small cells, fiber, towers and data centers. There's not another digital REIT in the world today that has shovels in the ground in 4 continents across 4 asset classes. That is incredibly unique in terms of our capabilities and our scale and our scope to address customer needs. I don't think you'll find another digital REIT that can say that to you with a straight face.

Yes. And I think you referenced it in one of your earlier presentations, you actually laid out the build-versus-buy decision and how you think about it. So amongst those property types, which ones are you a builder, which one are you a buyer. And you also may geographically, how do you think about that decision? Or are you all build right now because valuations are so high or cap rates are so low?

Well, look, I think a great example is kind of what we've done in this quarter, right? I mean if you take a look at some of the opportunities that we've engaged in just in the last 90 to 120 days, I mean, the take, private of Boingo, was a great example of our ability to buy. It was an asset that was, I think, a little bit misunderstood. I think from my perspective, I know David, you covered it, Michael, you've covered it as well. It was just an asset that probably didn't make a lot of sense in the public markets. But in our ecosystem and in our world, it made a ton of sense largely because we are not only building indoor DAS systems and not only deploying WiFi, but the ability to deploy outdoor small cells and mobile infrastructure across military bases was something that we could really lean into because we have the capital to grow the asset base. And most importantly, we have access to a ton of real estate. I mean just look at Zayo alone, we have 38,000 on-net buildings that don't have any WiFi. So when you begin to think of the incremental value that we can bring to an asset like Boingo, it's really obvious. And so within a couple of weeks of getting that deal closed, we signed a massive agreement with Verizon to build out the MTA in New York City, which is the above ground trains covering places like Greenwich and Long Island. And there, we were able to put tens of millions dollars of CapEx probably in a great logo like Verizon, and we're able to spend the next 2 to 3 years building that infrastructure with them where as you guys know in the public markets, that would be a difficult story to explain laying out all that CapEx upfront. So that was a great example where we bought it. Michael, we took it private, and now we're building it. So that's what we call the buy-and-build strategy. I think you look at what we did with PCCW in Asia was a great example, buying 12 data centers in Asia, giving us a presence in multiple markets. For us, that was a great acquisition. We were able to effectively buy that at a effectively a 7 cap, and it's really good value from our perspective because we can grow those assets, we can bring our U.S. logo, webscaler logos to those data centers. There was excess land where we can build incremental facilities. So we bought intelligently, but most importantly, now we're building intelligently through that asset. And then last but not least, you look at the JV we did with Liberty. It's another, I think, logo that you covered, David, the Liberty guys in Europe had a lot of interesting infrastructure that we felt like they weren't fully utilizing. So we got together with Charlie and Mike. And we said, look, you've got a really interesting portfolio of central offices and data centers and switch facilities, which we think we can turn into edge compute locations. So we took our 20-plus edge facilities, their 100 edge facilities. We put it together in a joint venture. We showed we have the necessary technical capability because of our edge experience in the United States at DataBank. And most importantly, we have great relationships with the mobile operators in the -- and obviously, in the European Union. And then in addition to that, having the great relationships with all the webscalers at Vantage Europe. So that combination of being able to take an asset, bring technical expertise, bring customer relationships and really help Liberty unlock the value of those assets is a complete 1 plus 1 equals 5 for us. And so that's a great example of where our unique ability as an operator and Liberty's unique access to those facilities and our facilities, you can really bring something together and create a lot of value. And that's really something that probably most investment managers or infrastructure guys wouldn't be able to do because of the high degree of operational complexity and working with Liberty and making sure those assets are protected, but at the same time, putting in CapEx, growing those facilities, doing M&A, talking to other mobile operators in Europe about expanding our portfolio. It's just a really unique transaction where it wasn't an M&A trade at the end of the day. That was a JV. And so having the ability to create unique structures and unique transactions with customers is also a part of our blueprint going forward. We don't -- we have to chase auctions to 25x to 30x. You can do deals like the Liberty JV, you can do deals like PCCW or Boingo, where they're a little bit off of the beaten path. But because of our ecosystem and our expertise, we can extract tremendous value into those assets. And that really gives us a competitive advantage.

I think it's a complementary question, Marc, at least a related question, I can say. And you touched on it a bit, but putting the complementary assets together, whether it's towers, or the fiber or the data centers, I mean, nobody else is going to do in the same way that you're doing it, right? Your data centers who just stay in their lane, you have tower companies that largely stay in their lane and not too much fiber left anymore. But you've taken a different approach, right, where there's some synergistic value between combined and those different infrastructure assets. And just wondering what you're hearing in terms of the use cases from clients there, right? So you talk about edge, which marries the fiber and the towers together. And I think in hypothetically, it plays out well, but what are the use cases that you're here and seeing for your customers, you've mentioned the Europe deal that you did, what are people using these edge data centers or enclosures, wherever they might be. How are they using those to improve their own service offering?

Sure. And look, I just -- I'd sort of preface all this by saying in the edge compute space, we're really in early innings, right? If we were playing sort of a 9-inning baseball game, Michael, we're kind of in the first inning. And so we got into the edge space. I'll be totally honest, totally by accident. I mean, it's not like I wake up and say, "Hey, let's go chase edge computing." We were busy building a network in Mexico for a customer called Altán. And they had asked us, would we be willing to pick up the base stations at the base of the towers and move them into a more centralized hubbing type networking environment and we met with their OEM vendors. And we said, yes, that's totally interesting. We can fronthaul the fiber out of that Meet-Me room or that hub room and much like we've done in small cells in big urban environments at ExteNet, where we've built hub rooms that have 30, 40, 50, 60 radios, it's the same concept, which is you're bringing a collective amount of gear, Michael, together in one location with a lot of dark and dense fiber where you're fronthauling that fiber out to the tower. And ultimately, a lot of Altán sites in Mexico, you don't see the base transmitting units at the bottom of the tower, why? Because they're back at a baseband hotel, which is basically effectively a small data center. And so 3, 4 years ago, we started building these hubs for Altán, and we would ultimately build it initially for Altán, but what was happening is because that was an open access network that was truly open RAN architecture. We started colocating Telefonica's radios, AT&T's radios, the cable operator, Total Play as well. And then the Mexican government came on to network. The next thing you knew, we had 4 or 5 people colocating in these hub rooms. And they were using our dark fiber to get out to the towers. It was a really cheap and efficient way to open the core of the radio access network to get cheaper network infrastructure. And so it's funny that we had to go south of the border to start learning about how to do shared networking, but literally, that's where it started for us where we kind of had this aha moment and then went on to start building C-RAN hubs for -- obviously, for the U.S. carriers. We've now built over about 900 RAN hubs. We own about 380 of those. The carriers own another 400 to 500 themselves. But our experience in working with ExteNet and working with the 3 big U.S. carriers, same situation. We're building these big RAN hubs where you've got anywhere from as low as 6 radios, Michael, to its upwards is 1 of our hub rooms in downtown San Francisco has over 300 radios in it. And by the way, it's not just the mobile operators there, we have Google, we have the city of San Francisco. We have government agencies on that network. And now we're beginning to see people like Amazon and Microsoft want to populate onto that network as well. So when I say we're in the early innings, it starts with creating a network, right? The ability to deliver a network that you can fronthaul the network versus backhauling the network it allows you to start thinking about different use cases. Not just about mobility, not just about applications, it's further more than content. You begin to think about IoT devices, you begin to think about autonomous vehicles. There are so many use cases we see coming through our Edge facilities now. that we really think we're just scratching the surface because the minute -- the hyperscalers or the cloud guys start partnering up with the mobile guys, they're starting to put their infrastructure adjacent to the radios. Why not, right, zero latency environment. The minute you start putting that rack and that network intelligence from an SDN perspective adjacent to the radios, the whole notion of how you build a network changes. And this is sort of the excitement that we all have around oRAN, which is working for Rakuten. I think it's going to work for Charlie at DISH. I certainly think the European carriers are thinking long hard about this architecture, which is why we're doing this work with Liberty. For me, it's about customers. It's the same thing that I've been doing for 27 years, which is how can I help customers build infrastructure at the lowest cost and create the most value? And if you focus on your customers and you do a good job for them, ultimately, you get more opportunity. You get more up ads. And I think that's what's really unique about what we're doing on the edge side. It started in Mexico. It moved to ExteNet. DataBank has been doing that on the edge side. We have a big investment in EdgePresence, which does these micro data centers at the bottom of towers. We're building this great business in Europe with Liberty called Atlas Edge. So we are deep into the edge. We're doing it in a lot of different ways. And the key for investors so that nobody gets historical, Michael, is the edge is different. You can't just sort of say, with 1 paint brush, you can paint the edge. The edge comes in different shapes, forms and sizes. And we, as investors and operators, got to help our carrier shape that. Does that make sense? I know this edge discussion gets a little weird.

It does. I'm curious if you think the shape of the edge comes from the size that Switch is pursuing where it's not exactly right -- kind of the bottom of a tower or even at the edge of the network. But a data center more in metro area closer to the end user, right, but not the bleeding edge. Is that part of your vision for edge as well? Or is that too much of a step away for what your strategy is?

No. I think, look, we -- once again, you have to think of the edge, Michael, in sort of concentric circles. And sort of the biggest circle is a large hyperscale cloud data center, right? That's sort of like high-powered node macro edge, which could ultimately fuel not only just a major metro area, but even a geographic region, you come inside of that and you get to more of a co-location facility where you "you're doing edge." And what's interesting for DataBank, that edge isn't exactly in a downtown metro -- but most of that edge workloads are actually on the periphery in the suburb. So places like Overland Park; Eden Prairie, Minneapolis; Plano, Texas. I mean, these are places where we have 6 to 10 megawatt facilities where you're seeing those 0.25 megawatt, 0.5 megawatt, 1 megawatt workloads transition from the urban core out to the suburbs. And so that's what DataBank's doing. And I look at that as almost like the second circle. And then you start getting into these tighter circles, which is things like EdgePresence or Vapor IO, I mean, where you actually have containers at the bottom of cell towers. And then obviously, you've got C-RAN hubs. And what's interesting is C-RAN hubs are not at the base of a tower. I want to be like really clear about that. I get a lot of questions from investors who like, "Oh, are you're building these oRAN or C-RAN hubs for DISH. Are they sitting at a bottom tower. We're like, no, it doesn't have to be at a bottom of tower. It can be 1 mile or 2 miles away where it does have to be, it has to be somewhat secure. We've got great power, you've got cooling -- backup cooling and you've got security. And mostly, you've got a lot of fiber. You've got to create a lot of connectivity. And that's where we're building a lot of our RAN hubs and where you're going to see most of that edge network infrastructure structure, where you see the adjacency of mobility and applications. That's where they're going to marry up. So I don't envision it having right in the center like the urban core. I'll have to just disagree with my friends at Switch largely because we've had a couple of thousand up ads at this and they've had maybe a few up ads. So when you have 1,000 -- a couple of up ads, you've got a better batting average.

Yes. I wouldn't really hear your opinion to it, that's why I ask. You have experience in the space. I don't know if Dave wanted to jump in with a question. I want to remind clients as well, they can type questions in to the application, we'll see them run our screen, and we can ask them maybe for thinking about that. We've heard a lot about supply chain, Marc, not just from companies in your space, but all over, right? We're hearing about slowdown in supply chain and back up and getting gear few of the companies I've talked to, the data center space have indicated that it's becoming more difficult to replenish inventory that when you think about labor, obviously, more difficult to find labor. And they believe the larger companies will have an easier time managing through it just based on preferred customer status or relationships but maybe smaller companies might not more difficult time getting bills done. Love to hear what your experience has been in terms of supply chain and then also managing labor shortages or even costs when you're thinking about development.

Yes. Well, look, I'll go through the 4 swimlanes real quick and maybe that's the best way to attack it because I think we're having different challenges in the different industry verticals. I'd say in the data center space, our biggest challenges right now are actually specialized components. So we're not having a problem building a data center. We're not probably getting the generators there or the big HVAC cooling stuff. But it's really the ecosystem that revolves around cooling and power and security and it's obscure stuff that sort of holds you up. So that's -- there's some truth to that what you're hearing in terms of the constraints of the supply chain. I think our customers, as they light up in those workload environments and they dial up capacity, they're also feeling some of that pain, too, just getting their network infrastructure there on time, getting the right installation team in place and then, of course, getting connected, making sure that their fiber connectivity is in place and that someone at the fiber care is going to answer the phone and actually show up for the install, which gets to your point about labor. I'd say on fiber, we've been really good. I mean Zayo and ExteNet and Beanfield are 3 fibercos in this hemisphere have no problems getting the right amount of raw materials and equipment. I would say all of them have said the same thing, which is to your point, the problem in fiber right now is not actually getting the glass. The problem is actually getting someone to come to dig your trench or put it up on a pole. So we have felt some of that pain in the form of labor shortages and just getting crews back to work on the street, putting that fiber in place. I'd say in the tower space, we've really experienced no significant delays. I'd say our customers maybe have had a little bit of delays in terms of getting the base stations there and get installers in place. But that actually, I feel like the tower sector has actually recovered pretty well and is in a good place here going into the third quarter and into the fourth quarter. You'll probably get that feedback from some of my peers. And I'd say in the small cell sector, our big issue continues to be permitting. It's not our inability to get fiber or get a pole or get a node or build the RAN hub, it's really just getting municipalities that are super backed up right now due to COVID to get to our permits and respond to us. That's really the big challenge right now is getting the government to address permitting small cells. Probably Michael has the most difficult permitting process of any asset class, more than a data center, more than fiber, more than towers. Small cells, remember, you're doing 3 things at the same time. Your -- ultimately, you're laying fiber, you're ultimately either installing a pole or touching a pole and then you're actually hanging electrical gear on that pole and lighting that pole from an RF perspective. So the degree of difficulty in small cells is quite high, which even further compounds some of those delays.

Has that changed over time, Marc? I mean, am less familiar with that business I used to be. But I worked on a company called NextG years ago, right, that did small cells actually acquired.

My guess, Basil -- good guy.

Exactly. And I mean -- and they have suggested a time that they could kind of get around some of the permitting issues by kind of using some of the existing right of ways that the cable companies or others had. Has that changed to become more difficult to get the permitting than it used to be? This is some time ago, but...

No. So I think, look, in NextG -- sorry, that was John Georges, but John always had a philosophy that if you were a sea like, you could just go, just put your head down and keep going. And to a certain degree, he was right. To a certain degree, he was wrong. I think what's happened is you had a nascent marketplace where 8 years ago, there were less than 20,000 outdoor small cells. Today, we have almost upwards of over 250,000 outdoor small cells today. So the market's grown 10x in a very short period of time. And along that journey, we've woken the municipalities up. We woke the bear up. And so now the bear understands there's whole fees and there's permits and even though we can throw around our CLEC status at ExteNet like Crown does, it doesn't matter. Municipalities feel like there's a pig in a poke. They feel like there's money there. They feel like there's fees. So now we're having to go through zoning, which we shouldn't have to go through. And there's just a lot of red tape. And there's a lot of this, like what's in it for me. And so -- and I think that's only going to get worse. I don't think it's going to get better. I think as municipalities struggle for income and look at their tax roles and tax records. They're looking at the wireless industry as a great place to go and get money. And so now we're seeing real estate tax bills show up on these poles, which is totally inappropriate because then all of a sudden, the cable guys are going to have to pay real estate taxes for use of poles. And the CLECs will and then the RBOX will. And when does it end? So we're going to have some tension between the state PUCs and the local municipal boards that are looking for that money because their advice and they're saying, "Oh look, that's a small tower. Of course, I got to get my pound of flesh." So more to come there. But I'm still long term, very bullish, Michael, on small cells. Coming out of our new reforecasting on 5G, we thought the small cell opportunity by 2028 was going to be about 1 million small cells. We actually are revising that forecast upwards about 1.1 million and 1.2 million small cells as we build out 5G. And that will really start manifesting itself in 2023 and '24 and '25 when we start densifying.

And maybe not perfectly correlated. We did hear from one of the tower companies that their own small cell build projections are coming back now partly because carriers are just maybe doing less densification than they originally anticipated with more focus on coverage. Presuming that's correct and the carriers will continue and customers will continue to want to focus on coverage versus densification and then the thoughts on the permitting issues and when to get paid, I mean, does it change your enthusiasm in the near term at all for the small cell business and make you want to reallocate that capital somewhere else, like data centers, which maybe has better secular trends? Or does it change your view at all?

Here's the great news. I don't have to choose. That's the great thing about owning DigitalBridge shares. You don't have to choose in terms of the capital allocation strategy because we're doing all of them at the same time. I think what's unique about small cells is I actually like the space more today than I liked it 5 years ago. Why? It's hard. It's difficult. Very few people can sort of hang their shingle out tomorrow, Michael and say, I'm going to be in the small cell space. It takes a lot of time to get validated with customers because remember, you're in the active infrastructure space. You're not in the passive infrastructure space like towers. So the degree of difficulty and complexity is quite high. And so when you look at what ExteNet's doing, when you look at what Crown is doing, which are arguably the 2 leaders in small cells, we're having a good year at ExteNet. Our organic growth is a little bit below where we thought it would be, but we're growing. And we continue to add new nodes, and we'll have our biggest installation year ever in ExteNet's history. We'll be up about 12% to 13% over the amount of installs we did the previous year, year-over-year sequential CAGR growth. And so I am long-term bullish around small cells. I think it's not a surprise to me that demand for small cells will slow down a little bit. Look at what -- go back to 2011 when we were all building 4G together. And remember what happened there. '11, '12, '13 and '14 was all macro overbuilt, right? And so most of what we saw in those 3 to 4 years of tower leasing on the early end of 4G was about overbuilding in a macro infrastructure network. That is where we are today in 5G. So the green shoots that you're seeing from SBA, American Tower, Vertical Bridge, around good leasing, Alex is having -- Alex Gellman, who runs Vertical Bridge Trust, he's having a great quarter in leasing. He's probably going to have the best year in the company in terms of total organic growth, in terms of new lease execution. They're on a pace to do $20 million to $22 million of new leasing, that's the largest private tower company in the U.S. So demand for macros is really strong right now. I don't see that demand abating for the next 2 to 3 years. And then as I said before, in '23 and '24 and '25, we'll start ramping that densification in that small cell infrastructure. So I'm very long-term bullish on small cells. And I like the fact that it's hard. We don't want a lot of people in the space with us.

And you hosted your Analyst Day couple of months ago, Marc, and analysts should actually -- people can check out the presentation. It was a very good presentation in good depth. But one thing I enjoy having appreciated, I guess, was the management team that you pulled together over there. I mean 10 separate guys to be CEOs and have been CEOs of leading companies in the space. And so on the one hand, very impressive having all those people in the same room, but then it targets the question, how do you make decisions, right? Because I mean, a bunch of people have been used to kind of being the decision-maker and now you have to be more collaborative and convince others. So how does that work? How does that work socially within DigitalBridge? We bring all those guys together and then actually reach a conclusion.

Who said benevolent dictatorships can't work. No, we've got a great group of executives, men and women and great diversity. And I am really proud of the team that we've built. What we do have is we have an incredible and efficient decision-making structure. Every new opportunity comes in through our investment management team. It gets initially embedded by the investment team. It eventually works its way 1 to 2 weeks upstream in our investment committee, which is 6 people on a global basis. I sit on both of our investment committees, and we make those decisions quickly and efficiently. And there's just a lot of mutual respect in the room for getting to a quick decision, cutting through sort of what's real and what's not real. And ultimately, being able to look at an asset triage it quickly, put the right returns, the right leverage and the right exit assumptions in place to make a decision. The worst thing you can do in this space is get to a prolonged maybe. That's sort of my famous expression and investment committee. A prolonged maybe kills you. Why? You're spending a lot of money on diligence, you're sucking up the team's time and energy. And so we tend to be pretty efficient. We know what we like to do, and we know what we don't like to do. More than 93% of our opportunities get killed in an investment committee. We're pretty selective, but we're also pretty efficient. And then I think in terms of the assembly of talent, I think that's a testimony that we believe we're building something really unique and big and scalable, and there's a lot of room for a lot of great talent on our team. And then just having 23 portfolio companies, where if somebody really has a hunkering to get down at the operating level, they can move off the investment management team and go to OpCo line for a while, if they want to. So we've had -- what's interesting is I've had a lot of executives, Michael, move from the holding company to an OpCo and then OpCo back to the holding company. And I allow them to do that freely. And I think that creates a lot of loyalty. We all win together, we all share in the profits together. So one of the great things is whether on the investment management team, you're on an operating team, having that incentive compensation structure where we all profit from the success of an investment really gets great alignment between our executive partners and our management partners. And so that's what creates that really unique family is that I've always been willing over 27 years to not take all of those economics and distribute it out to my partners. We're the best in the world.

And so if somebody pitches you a large, primarily U.S. hyperscale operator that is relatively cheap on valuation versus peers and presumably affix their operative slabs and paint on it and put on a new roof in the multiple is 4 turns higher. How do you feel about that side of the business?

Well, we've been involved in some of those businesses. So I think that our job is -- it's interesting. There's some assets you want to own forever. I mean, look at what we just did at Vertical Bridge, another deal we just did in this quarter. That asset is so unique and so scalable. If Alex and I tried to recreate that again today, turning back the clock 8 years ago when we started Vertical Bridge or turning back the clock 18 years ago when we started Global Tower Partners, it takes years to build a scalable tower business. And so what we decided with Vertical Bridge is we built that business. We did a lot of M&A. It was a buy-and-build strategy. The company reached a certain level of scale over 6,900 towers, where we had to make a decision, which is, are we going to ultimately allow this to go out the door to somebody like American Tower? Or are we going to find long-term permanent capital to keep building that business for the next decade. And fortunately for us, we had capital. We had the right source of capital, and we're able to keep Vertical Bridge in the family and go run it for the next 10 years, which I think was the right decision, finding long-term lower IRR quarterly capital enabled us to keep Vertical Bridge in the family.

Okay. So that wasn't a -- there was -- that wasn't -- I hate those type of assets.

No, I think we like all assets. We'll look at them all. I think entry price is a key determination. I mean for example, we've looked at a lot of these RBAC deals that are getting done. I won't name names, but there's a lot of interesting RBACs that have been recapitalized with new, either it going private or through a bankruptcy process. And the question is, can you take a largely copper-based assets that's converting to fiber? And can you put that CapEx in? And like you said, can you change the roof? Can you put new paint on? And can you make it work? And these legacy assets, when you buy them and you buy them at the right price, you can do that. Now where people get in trouble. You get in trouble when you overpay for assets like that. And so if you pay 10, 11, 12 or 13x for a legacy asset where you've got to go put in $600 billion to $800 billion -- $800 million of CapEx to get to the right place, you've effectively taken your entry multiple from what you thought was a value at 9, 10, 11x, and you've effectively just added 4 or 5 turns in your entry multiple, just made your job a lot harder. So you got to be really careful in these when you get into these situations and you buy something and you fix it up. You got to make sure that the fix it up or CapEx doesn't place your entry multiple into a place where you can't make returns.

It's a great point. Can you remind more, I think this is...

Marc, thanks so much. I appreciate it. I think we've run out of time. But it's really great to see you. I kind of have to jump on to the next presentation. But it's been a real pleasure hearing the story again from you guys. I know you guys are doing super well, and the transformation has been amazing. And the team is really great. Say hi to Matty Yohannan for us. We miss him. And we appreciate everything you've done for us. Thank you so much.

I will. I will. I'll tell you one thing, Dave, before we go, this is from Ric Prentiss. He decided to do this. He calls us the InfraVengers. We have bobbleheads of all of us. We now apparently all have superheroes. You see the red hair, that's me, I am Iron Man.

So what you're saying is he sent you a bobblehead now. Okay. Got it.

Yes. It's definitely a bobble head.

Well, Ric is raising the bar every time.

He really is. I mean this is good. I think this is $1.99 on eBay. Thanks, guys. Really good to see you. Thanks, Michael. See you soon, guys. Bye-bye.

Of course, Marc.

Bye, Marc. Take care.

You too.