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

Okay. Good afternoon, everyone. Welcome to the next session at our Leveraged Finance Conference. I'm Matt Niknam, communications infrastructure analyst here at Deutsche Bank. And for our next session, we are very pleased to be joined by DigitalBridge's President and CEO, Marc Ganzi. Marc, welcome to the conference.

Thanks, Matt. Good to be here.

[Operator Instructions] So without further ado, let's jump right into it. So Marc, maybe just to start, you guys have been pretty busy. It's been a really busy, I'd say, last 12 to 18 months for the company. But as we sort of close out the year, can you maybe just to start, talk a little bit about some of the key milestones the company has achieved in 2021 and then your top priorities as we close out the year.

Yes. Well, it has been. Thank you. And it's been an incredible -- for me being now in the CEO chair coming up on 15 months. It feels a little bit like it's been a track and field meet. We've rotated, as I think most people know, we've rotated close to just a little under $88 billion of assets. We're now 98% rotated to digital, which is absolutely incredible from where we stood almost 2 years ago. We had close to $50 billion of assets in diversified real estate to now today about $40 billion of digital real estate and digital infrastructure. It's been an incredible rotation and really testimony to our team and our focus and our resolve to getting this company, Matt, to the right place so that investors can really focus on investing in what we think is the best secular trend in the world, which is digital infrastructure. So that was really our primary focus was to: a, rotate the assets; b, deleverage the company; c, restructure the cost in the business. We had 500 employees, and we had over $300 million of G&A. So getting the business simple and getting it into a format that investors could really understand and appreciate, which is where we are today, which is one single purpose-built digital REIT that's focused in investing and owning assets across the entire converge ecosystem, which is incredibly unique when you look and you sort of benchmark us against our peer group. And now today, we've got a much simpler story, right? We've got our digital operating business. We've got our digital investment management business. Jacky Wu has done a phenomenal job bringing net leverage under 7x and getting our cost structure to about $133 million on a run rate basis. So we've pulled about $170 million of costs out of the business. And we continue to do great deals in digital. We announced a fantastic trade last week, adding CA22 to our balance sheet, which was true to our word. And that's really the key is when Jacky and I got in the chair with the help of Severin, is just being true to our word, telling investors exactly what we're going to do and executing against that, and that's the kind of management team we are. So part of that journey has also been, Matt, rebuilding investor credibility and trust. Trust is the most important thing. And we've had -- my team has been around for 27 years. We already had the trust of our customers. That wasn't the hard part. But when we made that merger and took over this rather complicated business, we had to rebuild trust with the investor community. And I think we've done a really good job of doing that by setting out simple markers for investors to understand and then to hit those markers. And most importantly, you have to exceed those markers along that journey, and that's something we've done a very good job of. So as I look to the end of this year, it got a lot simpler, right? We don't have to worry about hotels, we don't have to worry about senior living facilities. We don't have to worry about industrial properties. We wake up every day, and we just think about how to be the best owner operator of digital infrastructure in the world. So part of that is investing in great digital companies. And another big piece of that, Matt, is just continuing to raise capital. Our ability to form capital around good ideas is second to none in digital infrastructure. We're proving that out this year. We set a target that we'd be -- from a fundraising perspective, our target was about $17 billion of FEEUM. And we continue to enjoy incredible success in the fundraising environment. And that's an important part of our business, right, fueling that investment management platform and creating long-term predictable fee streams as something that sounds very familiar to you in the digital infrastructure space is, predictability of cash flows and having access to high investment-grade cash flows, which is what we're doing in investment management as well. So really proud of what we've done. I want to thank my team. We don't get it done without having the best team in the world. We wake up every day. We've got an investment team of 98 professionals globally. All they do is focus on this sector. And that brutal focus provides differentiation for us.

Got it. Well, let's dig in a little bit into the digital infrastructure story. And I know we always appreciate your insights in terms of the different pools within digital infrastructure. So maybe just to start from a high level, what do you see as the top themes today within digital infrastructure that guide your team's investment process from a capital allocation perspective?

Yes. Look, there's 4 thematics that we're hunting today. And I think those 4 thematics are resident in the investments that you see us making. First and foremost is around 5G and 5G mobile infrastructure. Looking at the Vertical Bridge transaction, looking at other things that we've done in the last year. For example, Boingo, which is investing in CBRS networks and private 5G enterprise. Vertical Bridge, obviously, investing in core macro infrastructure in the 5G ecosystem. That's good knitting for us. It's what we're good at. It's really been our heritage for the last 3 decades. So we'll continue to invest in mobile infrastructure. Two areas that we see as being growing and somewhat new. You've heard a lot of discussion around edge computing. So we've put a lot of capital to work behind our edge computing platforms in Europe and the U.S. Here in the United States, DataBank sits on our balance sheet. It's an incredibly important asset to us. We continue to allocate capital and resources to that business because we see organic growth there that's candidly about as good as any of the swim lanes that we're in today. And we're just at the beginning of edge computing. We can talk more about that today, but we're really excited about what DataBank is doing, and we're very excited about what we're doing at AtlasEdge. I'll be in London next week for AtlasEdge's first Board meeting. It's a great joint venture between us and the team at Liberty Global. Mike Fries, Charlie Bracken, great, great, great, experienced and savvy operators themselves, but really extending the fabric of the network to the edge and being able to pull those resources into places where, historically, the high-powered computer has not been asked to be is really an exciting development. So AtlasEdge and DataBank are 2 really big themes that we've been pursuing and investing in and very successfully investing in. I'd say the third area is just the continued migration of cloud. Last year, 18% of workloads were in the cloud, That should be well north of 21%, almost 22% by the end of this year. We continue to see fantastic partnership with our cloud customers. As web scalers continue to build incremental capacity, not only just in the primary big markets, but moving out towards secondary markets, that's really been an area where we've excelled. We've got a leasing pipeline advantage, which is the largest private owner of hyperscale data centers, well over 200 megawatts. We've leased through about 80 megawatts already this year. So we're in a really good place. We're having a lot of success in hyperscale data centers, and that's where you see us paying a lot of attention. I would say the last theme that we've been spending a lot of time around is really around IoT networks. This ultimate industrialization of data and how you use data and how you can effectuate data in the enterprise is going to be a big theme and it's going to be something that I think you'll see the mobile carriers talk about. You saw it last week at some of the conferences in the last 30 days. As Verizon and AT&T, T-Mobile and even DISH, begin to talk about how they're ultimately going to weaponize data, how they're going to use mobile infrastructure to attack the enterprise market and the way you do that is through IoT. The ability to extend the network beyond just personal communications and extending the network into everything from manufacturing lines to productivity in terms of how those production lines work, the efficiency in office buildings, the efficiency in airports. I mean, these are all of the use cases that we're seeing come to bear. And what's really cool about IoT networks is we're not only using our tower infrastructure and our small cell infrastructure, but you need a lot of fiber and you need a lot of data center and you need a lot of high-power compute. So that's really one of those great ideas that's bringing it all together for us. So when we talk to those kinds of customers, we're really implementing on a much broader scale. And these are the things that get us excited. And most importantly, it's where our customers are spending CapEx. And that's really what investors want to see today is chasing those thematics that have consistent CapEx deployments. And those are really the customer relationships that we backed up the truck in our most recent fund and on our balance sheet.

That's -- it's a good segue into my next question. I really want to dig into why DigitalBridge's converged view of digital infrastructure is the optimal strategy for networks of the future. Because I do think it may be a lot of -- you've talked a lot about how it's a little bit of a competitive advantage or differentiator relative to some of the more dedicated tower or fiber-specific or data center-specific companies. So maybe we can expound a little bit about that and talk to us about how the DigitalBridge vision may be a little bit more of where maybe skating towards the puck is heading in terms of this broader space.

Well, I think you've got to -- to really help customers say, you have to have access to capital. We talked about it earlier. And so whether we deploy off the balance sheet or we deploy off our investment management platform, we have the capability to deploy capital in many different ways, shapes, forms and sizes. And I think that nimbleness does give us a strong competitive advantage against our peer set. So first and foremost, let's talk about the balance sheet. Deploying capital on our balance sheet is really an essential part of our story as a REIT. We've got 2 very large assets that are on our balance sheet today that require incremental capital and require incremental attention. So on the DataBank side, as I said, one of our most exciting thematics is edge computing. So we put our best edge computing platform on our balance sheet so investors can get direct operating exposure to that vertical. And then in terms of hyperscale deployments, Vantage stabilized data center, SDC, that is really the vehicle which when our Vantage portfolio becomes stabilized, we migrate those assets onto the balance sheet. Why? Because their weighted average duration in terms of those leases is over 10 years in duration, 3% escalators. Most of those campuses when they come to us are 88% to 92% leased. We have the ability to continue to lease those campuses. So we get growth, we get escalators, we get yield. Those are all really important features on a REIT balance sheet. And most importantly, those are all brand-new data centers. Those are not legacy data centers that have been around for 25 years. These are campuses that have been built in the last 2 years. So it's always best to own the most current infrastructure. And so when we build these cloud campuses for the hyperscalers, what investors are getting exposure to, Matt, is the newest data centers that we own. These are brand-new purpose-built data centers where we acquired the land. We got the permits. We got the Will Serve letters. We have the customers. And we didn't go out and buy them per se, from somebody who wouldn't know. We bought them from somebody that we know quite well, which is Vantage, which is one of our great platforms in our Investment Management business. And then on the investment management side, we have 23 companies globally, close to $40 billion of assets. We operate in Asia, Europe, North America, Latin America. It really gives us an incredible expanse in terms of how we serve customers. There's not a geography that we say we can't serve a customer, maybe other than perhaps today, we don't operate in places like Russia or China or in Africa, but most of the economies where investors do want to be exposed to from an investment-grade perspective is those are the geographies that DigitalBridge serves. And so we're unconstrained by good geography. We're unconstrained by the verticals we serve, whether it's fiber, small cells, towers, data centers, edge. Those are all the verticals that we're actively building and buying in today. And I think that pivot is the key nuance, is understanding also how to build assets, not only be able to buy assets, but also understanding how to develop assets and then lease them up. It's something we've been doing for over 20 years. The ability to build an asset, get the right customer in place, get a long-term lease and then continue to lease that infrastructure to incremental customers, that's why everybody loves digital infrastructure. And that's what we're doing at DigitalBridge. And so the unique thing -- the only thing that's really changed in the last 27 years, Matt, is our customers have changed. And the reason why we've chosen this format is we know that we have to be agile in terms of serving customers. The old way of just building macro towers or building dark fiber or just building a data center, that doesn't work. Networks have completely changed, as you know. And you're watching it. It's literally happening every quarter. All we hear from Hans and what we hear from the guys at T-Mobile, and Jeff McElfresh, and Dave Mayo at DISH is the most important thing they're doing today is the virtualization of their network. And ultimately taking that core, that radio access network and putting it into the cloud requires many, many moving parts and pieces. It requires a lot of fiber, requires a lot of access to data centers, edge facilities, small cells, macro towers. But really now, the emphasis is how do you deliver a holistic solution where the radio access network is decentralized? And so that whole notion of decentralized RAN is what's driving our business today. It's what drives our dark fiber sales, it's what drives our edge computing. And so to be able to serve customers on a holistic basis, and I'm talking everything from web scalers to the mobile carriers, you have to understand how to service all of these different niches in a comprehensive way. And if you can do that, you get outsized market share. I mean I look at the amount of market share that we took in the DISH lease-up in terms of towers, fiber and edge compute, we were one of DISH's biggest vendors. Now we're not the largest digital REIT in the world, right? We're candidly probably one of the smaller ones when you compare us from a market cap perspective to Crown, American and SBA, but we're punching above our weight class. And our ability to do that is when we show up at Dave Mayo's door at DISH, we don't show up just as digital-rich, we show up with Zayo with Vertical Bridge with ExteNet and with DataBank and we can fulfill all of their needs in one shot. And that's really unique and that's really differentiated. But don't take our word for it, ask our customers. They'll tell you that what we're doing is differentiated, and it allows us to get higher organic growth. And at the end of the day, we're going to be valued on how fast we grow cash flows. This is a cash flow business at the end of the day. Everything that we've learned in the last 27 years is how do you grow AFFO? How do you grow net income? How do you get to cash flow positive? Everything that Jacky and our team are focused on today is growing those digital earnings. And that's how we're going to create what we believe will be the best digital REIT in the world today.

Let's dig into those. You mentioned 4 different sort of swim lanes or key thematics. So maybe we'll start with 5G and we'll head into edge, cloud and IoT. But on the 5G topic, maybe just to start and level set expectations. We've seen network builds, obviously, ramping across the national carriers. We saw a wave of Analyst Days earlier in the year. Everybody sort of doubling down on the network. And so I'm wondering how -- what you're seeing in terms of pacing of U.S. carrier activity? And then maybe you can talk to some of the benefits that 5G is driving across the Vertical Bridge, ExteNet and maybe even some of the Zayo assets or some of the broader fiber assets under your portfolio.

Yes. Well, look, I think what will happen in the 5G build is it will probably take somewhere between 6 to 8 years to build that network infrastructure. I don't think it's a quick build. Our expectation is, Matt, over the next 2 to 3 years, it will be primarily driven at macro infrastructure. And so that first layer of the network from a physical infrastructure perspective, will be the macro side of the business. Macros are still incredibly poor to a network engineers design. And so that's where we'll spend the next few years and then direct beneficiaries of that, of course, will be Vertical Bridge and Zayo because the amount of towers that we connect to and the number of towers we have in the U.S. The second phase of that will be densification. And densification will take probably from 2023 through 2028. And that will be a lot of small cells, we think, somewhere around 800,000 to 900,000, maybe even 1 million small cells depending on how deep carriers go into indoor infrastructure. But clearly, that's advantage, ExteNet, advantage, Zayo. And certainly, if Jay Brown were sitting over my shoulder, he'd say advantage, Crown. So we're excited about that. ExteNet is having a very good year and had a very good year the year previously. It continues to take more than its market share. So we think that's in a very, very good place. And then the last part of the equation will just be this edge out infrastructure piece, which really has just started. I mean if we were playing a 9-inning baseball game, we'd kind of be maybe top of the first, but we see that physical part of C-RAN and O-RAN sitting in edge locations where you've got anywhere from aggregating anywhere from a dozen radios to 40 radios, but adjacent to that is really cloud architecture and cloud ecosystem. So we see that as an opportunity where you're going to see content players, IoT players, mobile solutions providers, application writers. That entire ecosystem being adjacent to the radio access network. And so that edge infrastructure will take time. It's not going to happen overnight. It's probably going to happen over a 6- to 8-year period. So that's how we see 5G unfolding. And as you said, it impacts all of our businesses. It will impact Vertical Bridge in Zayo first. It will impact DataBank and ExteNet second. But what you'll see is it's impacting all of the businesses that we own and operate, and all of them are going to require more capital. And one of the great things about our model is whether an asset is on the balance sheet, whether it's in the investment management side of the business, as we deploy more capital, it increases our digital earnings. And that's what gives us the conviction and the belief about where we're going next year and in 2023 in terms of our forecast and hopefully, to push through that forecast, obviously.

Any color -- you mentioned Vertical Bridge, while we're on the topic. I'm just curious if there's any color you can share in terms of the organic growth you're seeing within the U.S. assets. I'm just curious to get your thoughts there.

Well, we're -- I'm sitting here at the tower show in Orlando. So I've got pretty good visibility on that. But we're forecasting this year high single-digit organic growth. We're having a great year at Vertical Bridge. So we're telegraphing somewhere between 6.5% and 8.25% organic growth, depending how the fourth quarter comes in. But they've had their best year in leasing. They've got their deepest backlog in terms of leasing activity. So it's been a really terrific year. So in the 7 years that Vertical Bridge has been around, this has been their biggest leasing year in history. We don't see any signs of that abating. We actually see that accelerating next year and the sort of pipeline and the growth of where it sits today would suggest a very big organic growth here next year for Vertical Bridge. So more than just green shoots. You and I have been -- we've known each other a long time, the leasing pipeline doesn't lie. It tells you exactly where you are. So those guys are sitting on a monster backlog of new revenue that's effectively probably about a 20% step-up in their current revenue, but that leasing backlog takes 1.5 years, 2 years to fulfill. And same thing at ExteNet. They've got a leasing backlog that's somewhere in the $30 million range, and they did $200 million of sales. So you're talking about a 15% increase in sales over the next 18 months because it takes about 18 months for a small cell backlog to fully play out. But as you're signing leases, Matt, remember, new leases come into the pipeline. So it's like a cup, you sort of fill it up, it's a Starbucks cup, right. And you fill it up and leases as they get signed, they fall out and new leases come in. And so this is really the whole notion of a pipeline. It's the same thing in DataBank, same thing in Vantage. You can really learn a lot about great digital infrastructure businesses. by monitoring their leasing pipeline. It tells you a lot about where the business is going. So our pipeline has never been stronger. And in fact, even at Zayo and at DataBank and Vantage, all of those businesses, leasing activity has picked up here in the second half of the year. We're seeing green shoots across all of our portfolio companies.

On the topic -- just while we're on the topic of 5G. One other question I had before we pivot, is on DISH. Obviously, we've heard so much about the greenfield 5G network build. I'm curious to get your thoughts on the potential for this brand new network to succeed in the U.S. We've already got 3 healthy incumbents. And so I'm wondering where you see or how you see this brand-new network being monetized differently relative to peers?

Yes. Well, I do see it differently. We have this conversation with them all the time. I think they have an advantage on a couple of different levels. One, this is really -- Day 1 can be a fantastic OTT delivery mechanism, Day 1 from a video perspective. So their ability to provide over-the-top content on a direct basis using 5G. Given the cleanliness of their network, it really provides an advantage for them. And obviously, DISH has a lot of access to content. So there's an immediate sort of video delivery mechanism that is, I don't want to say, superior to the other 3 carriers, but it's in their pedigree and it's in their heritage. So they know how to deliver video. I'd say second, is they are spending a lot of time thinking about enterprise. And once again, just given that this is a clean sheet 5G network Day 1, they can go into industrial use cases right away. That's a big advantage for them. So being able to play in that 5G enterprise sandbox immediately, Matt, is a big advantage. Then obviously, the voice product is getting there. Dave Mayo is a long veteran. He built the T-Mobile network, as you know. He's one of the -- by the way, he literally just walked by 2 minutes ago. He just swung by me. So his ears must be burning. But I'm actually going to leave this and go watch them speak at a private session. But I've known Dave forever. He's a great builder of a network. He knows how to build a voice and data network. Obviously, the core of their network will be voice and data. A lot of their architecture was based on Rakuten's architecture in Japan, which is a highly disruptive Open RAN network, and that's where they're going. So their total cost of infrastructure, a lot lower than the 3 legacy carriers, right? So when you have a lower cost of infrastructure, and your infrastructure is very nimble, Day 1, where they're using a lot of the strategies that you and I have been talking about, whether it's edge infrastructure or it's putting that infrastructure in a distributed network and you're putting it adjacent to the cloud guys where you get quicker access to applications, you deliver low latency solutions Day 1, and then you can bring that into an enterprise environment. Those are really cool topics that I think the major 3 carriers, as you've heard over the last 90 days, they're all making the case for how they're going to be differentiated and how they're going to play in the enterprise space. DISH is going there Day 1. So that provides them, I think, with some advantage. Now their network is not going to be perfect Day 1. They openly admit it. They've got a lot of work to do on the network spend, but they're getting after it. And they've got a great team and I have a lot of respect for Charlie Ergen and a ton of respect for Dave Mayo and the entire team there. So we've been one of their big infrastructure providers of choice. I think we were the second person they signed a master lease with was with us. And so even though, once again, we're small in terms of market cap size, we were sort of a high priority for DISH because of what we can do for them and our ability to deliver in a virtualized environment.

Let's pivot to the second big theme you mentioned around edge. I'm curious if you could talk a little bit about the opportunity you see within edge solutions, why this matters, when it becomes relevant? And then I guess more broadly, how DigitalBridge can capitalize on the growth potential of this peak?

Well, I've tried to distill this so it's easy for investors to understand because I think there's a lot of mystery to what the edge is, right? I think we all try to -- we struggle with defining what edge computing is. And I said, look, there's 2 aspects to edge. One is the physical aspects of where infrastructure sits. And then the second part is ultimately, the experience and how the customer ultimately participates in a low latency environment and how their applications work. So the 2 sort of functions are consumer and geographies. So let's start with geography. Geography is pretty easy to understand because there's 3 layers to edge infrastructure. There's sort of what I would call sort of midrange edge workloads. There's -- sorry, sorry, there's main edge workloads, midrange and then there's micro edge. So main edge workloads are really the secondary and tertiary markets where you're not in a primary hyperscale market like an Ashburn or you're not in a Goodyear, Arizona or some of the other big areas or Atlanta, where you've got massive, hundreds of megawatts of power and compute. And then you go outside of that and you say, okay, well, what's happening in markets like Salt Lake City? What's happening in Austin, Texas? What's happening in Cleveland? What's happening in Minneapolis? I mean these are good edge markets. So these edge workloads are kind of these 0.5-megawatt to 4-megawatt workloads that are happening in the secondary and tertiary markets. So that's pretty exciting. And those are sort of -- that's happening now. DataBank is doing that every day. And so we're delivering and fulfilling that need for the hyperscalers as they continue to deploy and densify their infrastructure in secondary and tertiary markets. Now midrange edge compute is really the sort of smaller edge data centers that are going to end up being between 5,000 square feet and 20,000 square feet, and these are going to be special purpose-built data centers that are going to be more in the suburbs. So if you wanted to sort of think about this in a way that's easy, where are you right now, Matt? Are you in New York today?

I'm in 60 Wall right now, but I'm out in Long Island...

You're in 60 Wall?

Yes, yes.

I missed 60 Wall. Those were the good old days.

We've got a few...

So if you think about that, so go to a place like Somerset, New Jersey. That's not a secondary market. That's not a tertiary market. That's a suburb of New York. But there, you'll have either a repurposed central office, you'll have a small data center. And in there, you'll have an aggregation points of radios, you'll have a small presence from the cloud players, maybe 2 to 3 racks, and then you'll have adjacent content players there, and that's really what I would call a true edge out workload, where you're out in the suburbs and you're trying to really execute the main thesis of their business plan, which is to increase the throughput out to the suburbs, but reduce latency. And then ultimately, on micro edge. And we're doing micro edge today, actually. We've got a business called EdgePresence. We made an investment in them through DataBank. Great entrepreneurs. They really understand the business. We've built 12 locations now. Principally, most of them at Vertical Bridge towers. We've built at a couple of other TowerCo sites. But those are literally containers, Matt. And we've got anywhere from 10 to 20 racks in those containers. And we're getting lease rates that are effectively a half of a BBE for rack, and we're leasing compute space at the base of cell towers. Now to be clear, I want to be clear with investors. That's not going to happen at every cell tower. That's going to happen at like one out of every 20 cell towers, right? You don't need an edge data center at the bottom of very cell tower. You probably need one at like so far, what we've seen is like one out of 100 get it. And we started trial testing this in Atlanta. Atlanta was a test market for this. So what's great is we're doing all 3. So AtlasEdge in Europe is using a lot of those old COs that Liberty had, we're renovating them, putting in edge infrastructure. DataBank is doing massive edge workloads in places like Bluffdale, Overland Park, Eden Prairie, Minneapolis. And then in Atlanta with EdgePresence, we're building micro data centers. So the 3 layers, right? You got way out here 0.5 megawatt to 4 megawatts, then you come in here and you get into a zone where you've got 10 to 20 racks, and then you get to micro edge, which is literally a couple of racks at a base of a tower. So the network begins to move out, but you can take the network down to a very surgical level and deliver edge computing. But at the end of the day, it's all about what does the customer want. So our customers in this instance are Amazon, they're Microsoft. It's Google. It's the 3 -- it's the 4 major mobile carriers here in the U.S. It's IoT players. It's trying to make sure that we're delivering the high-powered compute experience on the periphery of the network. Ultimately, to serve consumers. This is totally consumer-facing because most of the edge compute stuff in an enterprise environment is going to happen in the bottom of office buildings, where we build out small edge data centers in the basement of office buildings as we light up enterprise CBRS. That's a whole another topic of discussion.

Let's -- I hope we have enough time. We only have 14 minutes, but I want to jump...

Oh, no. That's a tragedy. And I got to go see Dave Mayo speak.

On hyperscale, just because we hear so much about the success Vantage has had. I know you guys have talked a lot about the success in the first 6 months of the year within Vantage. Can you maybe shed some light on the demand backdrop you're seeing in hyperscale, how maybe that's varied across different continents? And then maybe what you would point to as driving some of the outsized success Vantage has had specifically in the first half of the year?

Yes. Look, I think the Vantage story is a story that, candidly, the reason we made the investment was in the CEO. I mean he has so many great characteristics and he's a lot like my partner, Alex Gellman of 27 years. He's just a very low key, no nonsense operator, stays -- keeps his head down, stays out of the press and just spends his entire every waking moment thinking about how to deliver for customers. And I think if you do that and you put your customers first, and you understand how to underwrite calculated development risk, customers keep coming back to you, especially if you deliver on time, like delivery is number one. Like you have to deliver. If you can't deliver, you don't get a second at bat with these guys. These web scalers, the hyperscalers, they don't have a lot of patience for folks that come back and say, "Oh, we didn't get the building permit. Oh, we didn't get the Will Serve letter, right?" I think one of the great things that Vantage has been able to do that's differentiated itself against Equinix and DLR and CyrusOne is that because it's in a private format, and where we develop our data centers is on the private investment management side of our business, it's a huge advantage for us because you look at what's dogged CyrusOne or you looked at what sometimes got Equinix or DLR in trouble is land banking. You get no credit for land banking in Wall Street, right? Owning hundreds of acres of land that may eventually be a hyperscale campus, you can't value that in the earnings. Now what I can do is I have the advantage. I get to put all of our development activities in our Private Funds Group. And then our really great stabilized assets that are now 90% leased, we moved them over to Vantage SDC where public investors get to enjoy the benefit of that direct earnings power. So this is where our architecture, we think, wins, and it differentiates ourselves. And so having an operator like Sureel, who's very good at site selection, he's very good at permitting, he's really good at working with local municipalities in terms of getting the power and the Will Serve letters. And then once you have those ingredients, you're through design, you've got your Will Serve letter, you ultimately have acquired your land. We own all of our land advantage. We don't lease land. So we control our destiny. That ability to control power, space, cooling and land and permits really is a big competitive advantage. So if I think about the places where we've been successful in the last 24 months, it really, Matt, was about being prepared. And Sureel and his team always understanding where customers are going next and making sure that we have the right land and the right entitlements and the right power density, that's how you win. You win by being prepared. You win by being what we call shovel-ready. You've got to be shovel-ready in this business. And so the victories that we've been able to get this year was really a byproduct of the hard work that we did in 2020 and the hard work that we saw on the drawing board in 2019. So now in 2021, I look at our next projects, I know where we're going over the next 2 years. We've already identified the next campus in Asia. We've already identified the next campuses in Europe and the next campuses in North America that will ultimately be lift capacity in 2023. That's how far ahead you have to think in the hyperscale business. So -- and make no mistake, Digital and Equinix great businesses, good friends of mine, they're awesome, awesome companies. But that ability to take calculated speculated risk over a 12-, 18- and 24-month period is incredibly difficult and requires long-term patient private infrastructure capital, which is what we're really good at doing in terms of raising in our IM business. So this is really where we're able to marry up the IM business with the public balance sheet, and it really provides a strategic weapon for us. This is why Sureel is winning is because he's ready. And customers really like them, too. And being private, he doesn't have to disclose everything. So most of the hyperscalers really like being private. They don't like having their competitors know where they're going. So Sureel gets to keep that quiet because he develops in the private side of our business. And then once they're fully stabilized, we move them over to the balance sheet, it's worked out really well. It was good to add another asset last quarter onto that entity, and we'll keep doing that. It's been a great formula for us and it's working for public investors as well.

One more on the topic of data centers, and this is maybe a little bit of a broader market question. We've seen private equity play a much bigger role in the space. And I guess, more broadly, the prospects are sort of further industry consolidation. Obviously, a big deal that closed about a month ago. I'm wondering what are your thoughts on how the landscape evolves over the next several years? And do you, I guess, effectively see this shift towards, I guess, maybe several global platforms that can better serve these larger and more globalized customers?

Well, so how can I say this? It's what we're doing. It's exactly what we're doing. So obviously, we believe in that. I think from a global perspective, we think Vantage is a great brand. It's now in Asia. We merged that with Agile and with PCCW. So now we've got a bunch of facilities in Asia and Sureel is off and running with a great local team on the ground there. So -- and then we've got Scala in Latin America, who's led by a great CEO, Marcos Peigo. And then, of course, we've got Vantage Europe. So there's not a hyperscaler that we can't address in terms of their capacity. And so if one of the web scalers calls us and says, look, we need to dial up capacity in Seoul, Korea, and we need to be online next year. We say no problem. We need to be in Warsaw. We need to be in Zurich. We need to be in Offenbach. We say, no problem. We'll be there for you. And so that ability, as you said, to respond to a customer on a global basis and not have to say no to them is really key. And then further to that, give them a specific time line for when we can be finished. I think if you're going to play in the hyperscale space, you need to be global. Regional guys will certainly get their fair share, Matt, but that's a business that you've got to play in a big way. You've got to be able to form capital, you've got to be able to take risk. You got to know how to develop sites. And then ultimately, you've got to execute. And so that's a capability where we've really been able at DigitalBridge to differentiate ourselves.

On the M&A front, this is something I know I've always valued your sort of insight and opinion on what are you seeing more broadly in terms of opportunities within digital infrastructure? And then I guess more specifically, if you can talk a little bit to sort of the valuations you're seeing across different asset pools. I know more recently, I think you've said the pendulum maybe swinging a little bit more towards greenfield builds, at least with DigitalBridge, given some of the run up in valuation. So if you could just update us on the latest you're seeing there.

Yes. I would say, look, I think if we think about this current fund that we're investing out of, which is DCP II and you compare that to DCP I, I think we were probably 65-35 brownfield to greenfield in Fund 1. We're probably -- or maybe 70-30. This fund will probably be closer more like 60-40 in terms of brownfield to greenfield. We've seen a really big pickup in greenfield activity. And it's not so much that the M&A market was overheated, I just think we see better returns, Matt, in greenfield development now than we do M&A. And so for us, I wake up every day, and I'm a steward of other people's capital. So when people buy our shares, my responsibility is to ultimately be the best not only owner operator, but I also have to be the best investor. And once again, my background is I've been doing this for 27 years. I've been doing M&A and I've been doing site development work. And you've seen me over my career pivot in and out of brownfield and greenfield or sometimes you're doing both. And right now, actually, we're doing both. I mean, that's the great advantage of having this platform is you don't have to choose. So for example, at DataBank, we decided to make a big M&A push, and we bought zColo. And then advantage, we've kind of haven't done a ton of M&A, we've been really more focused on greenfield. So there is a great example of how we're attacking the data center industry on a global basis, and we're using both of those arrows out of our quiver. We're using the M&A arrow and we're using the greenfield arrow. You don't necessarily have to choose. You just have to be selective. You have to be mindful of what purchase price does, where interest rates are going, what's the impact of inflation, what's the impact of supply chain? Where are you investing? What are the risk-adjusted returns? Are you taking currency risk? I mean these are all the vectors that we think about in our weekly investment committee. And that's an important body of work, and we're modifying that literally, Matt, those assumptions change every week. Exit multiples are changing. Interest rates are changing. Cost to build new facilities is changing. So it's an incredibly dynamic and fluid process, and we're always recalibrating our model, and we're recalibrating risk on a weekly basis. That's the most important thing for investors to understand is that our model is, we've got to continually rerate risk on a weekly basis. And I don't know how many firms that do that, but we do that on a weekly basis.

One of the other areas, and I think you looked at this upfront, but you and Jacky have made a lot of progress, has been on the cost side, whether it's both OpEx and also on the financing costs. So can you talk a little bit about some of the progress made. I think it's an important angle that maybe oftentimes gets overlooked in these discussions.

Well, look, I think we inherited the cost structure that kind of blew our mind a little bit. I think we had 27 offices, we had 500 employees, and we said, what do all these offices do? And what do these people do? Jacky and I are sort of just no nonsense guys. And so we first hit the cost structure, just closing offices that didn't make sense. Ultimately, getting the people piece in the right place not only just the cost of the people, but also getting the right people on the bench, the people that we like and that we know and then are ready to get in the fight with us. And so now we've got the culture fixed, we got the people fixed. We've got the cost structure fixed. Then we had a chance to, first, we had to delever. We had to go from sort of 14x leverage to sub-7x leverage. Now that we've rotated the assets and we've gotten the leverage in the right place, we get to do what we really like to do, which is get into the balance sheet and get after it. And so the securitization that we did a couple of months ago was really groundbreaking. Similar to some of the groundbreaking securitizations we did in small cells, hyperscale, towers, Jacky and I have had a rich history of being able to access that marketplace because of a great ongoing dialogue with the rating agencies. And we just said to ourselves and said, look, if you look at our investment management business, Matt, it's no different than a cell tower lease, right? So think about it. Our funds are on average, 11, 12, 13 years in duration, an average cell tower lease the initial term is 5 to 10 years. So if you think about those cash flows from a mobile tower perspective, you're getting AT&T and Verizon and T-Mobile credit risk. Well, guess what, in our investment management side, we're getting state pension funds, insurance companies, sovereign wealth funds, all with investment-grade ratings. So we're getting long-term cash flows with investment-grade ratings. Boy, that sounds really familiar to something we've financed before. So we took that argument to the rating agencies, huge credit to Jacky and Tom Yanagi and the team at Barclays. We did a great job there. We spent 6 months educating them on why digital infrastructure investment management is the best in the world. It's not a private equity fund that's only around for 3 or 5 years. These are infrastructure funds that are around for a very long time, where we're investing the capital of some of the world's most prestigious institutions. So we got them to think about the credit look through. We got them to think about the duration of the cash flows. And now we've been able to finance our investment management business the right way, which is 30-year paper, 5-year ARD dates, fixed cost of debt, well below sub-4%. And I looked at -- and I looked at the old balance sheet that I inherited, where I was paying 7%, 8% on debt. It's just like that made no sense. That was a complete non-compute situation. So we're fixing that. We have an accordion feature in that financing. As we continue to raise capital, which will update in the third quarter, we had a very strong third quarter in terms of fundraising. Our ability to continue to accordion those securitizations and lever the business the right way, which is long-term institutional debt at a fixed coupon in a raising rate environment is good for DigitalBridge shareholders. So there's a massive amount of accretion coming in terms of our ability to finance this business long term, an advantage for our shareholders.

Marc, we can keep going for hours, but I know we're just about out of time. So I'm going to end it there. Hopefully, we could do this in person next year and actually in 6 months by Palm Beach. So I'm looking forward to that. Great to see you as always.

I hope everyone shows up in Palm Beach. It's a home game for me. I get to sleep in my own bed, so that's exciting.

We can't wait. We're counting down. Enjoy the tower show. Take care.

Thanks, Matt. Really good to see you. Thank you. Appreciate it.

You, too. Bye.