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

For those of you who don't know me, I'm Matt Niknam, communications infrastructure analyst here at Deutsche Bank. Very pleased to welcome back here Marc Ganzi, President and CEO of DigitalBridge. Marc, welcome back. It's great to see you.

Thanks, Matt. Good to be back in person finally.

Likewise. Well, since the last time I saw you in person, I mean it's -- you've been really, really busy. So can you talk about some of the bigger milestones you've achieved over the last 2 years at DigitalBridge? And then maybe talk about some of your top priorities for the company in '22?

Sure. I mean it's been pretty much a very fast-paced sort of first quarter of action for us. We spent the last 18 months -- first and foremost, Matt, I think, reestablishing trust with investors, which was something that was pretty fractioned at that point in time. And, look, the way you build trust with investors is you do what you say you're going to do and you do it quickly, and you exceed people's expectations. And I think that was kind of the hierarchy of objectives we set out to do that. So how did we do that? We rotated over $80 billion of assets in 24 months. We sold close to $44 billion of legacy real estate that was to investors, old, confusing and perhaps not the places you wanted to be. At the same time, in that defensive posture, we played offense. We went out and we acquired another close to $40 billion of digital assets at the same time, getting to where we are today, about $50 billion of digital AUM. And then we had the overhang of a couple of things. One, a cost structure that really didn't work. We had about $300 million of G&A. We've now pared that back on a run rate basis to about $115 million in G&A, and we keep chopping away at that. And I think a great example of that is Section 16 comp is going to be down well over 50% year-over-year. We got our first yes on say on pay, which means ISS thinks that senior management is doing the right thing and doing right by shareholders and so cost structure was really important. Deleveraging the company was important. We were 14x leveraged. Today, we're between 6 and 7x leverage, with the goal over the next 5 years to get that down to sort of 4, 4.5x corporate leverage on the HoldCo, which we think isn't quite investment grade, but it gets us within shouting distance of being there. And then I would say the last thing is just changing culture. I think you've known me a long time, and I'm a big culture person. And I think it's important to have the right people to execute the mission. And part of that was changing our Board. So we went from having a very undiverse 14-person board to a 9-person Board that's the most diverse of any of the digital REITs. So we're really excited and we're very proud of that -- of our diversity. We've really stood up our DEI program and doing really powerful things like impact data where we're building data centers at historic black colleges and universities, and building those data centers comes with a curriculum and a protocol to train young Americans in what I think is the next great vocation, which is arming them for -- to compete in a workforce that's data-driven. So whether it's data center engineering, data center application writing, these are things -- these are vocations that I think young Americans can get excited about. And so we're doing that at historic black colleges and universities. Our first ones at Morehouse College, I'm really excited about that, and that's something that I care about personally. The last thing I would say is just our stance on carbon neutral, getting to 2030 is a herculean effort. Our portfolio companies are moving in that direction. One of our great CEOs is actually sitting in the audience, Alex Gellman and his partner, Bob Page. They've -- once again, they've achieved carbon neutral this year. And so having great leaders at our companies driving that and making sure that it's important, these are the things that matter. So we've had a lot of plates spinning at the same time. And finally, things are calming down now where we get to move into the second phase of my plan, which is the acceleration phase. It will be actually the first time, I think, in 2 years, I don't have to sit in a room like this and then talk about hotels or what's happening in our medical office building portfolio, and what's happening with our $7 billion of debt. Those questions are now -- have gone away, and it allows us to really now focus, I think, on 2 really important initiatives: one, how do we keep forming capital, and how do we keep deploying that capital on great ideas. We can talk a little bit about that, about what I see and where we're going. The second thing I would say is we also get to focus on our digital operating business. So you form a lot of capital. You deploy a lot of capital in digital operating and in digital IM, and both of those business units are accelerating and moving, which is great. And that could only happen with -- unless we had a strong liquidity position and we were able to clean up the balance sheet. So now we have about $1.3 billion in total sort of liquidity, which puts us in a great position. You pair that with our ability to lever those assets, and that creates about $4 billion to $4.5 billion of purchasing power. And so we're busy putting that capital to work on the balance sheet. I think you saw that at the end of last year, what we did with Vantage in terms of buying new campuses. We've got a whole arsenal of new hyperscale campuses coming this year. It's an incredible business, Vantage. The leasing pipeline is over 1 gigawatt today, which I don't think there is another -- I don't think there's another data center operator in the world that has a leasing pipeline of 1 gigawatt. So that's a pretty impressive backlog of opportunity at Vantage. And then look at what's happening at DataBank, the acquisition of the Houston CyrusOne portfolio, very accretive acquisition. We did that about 18 to 19x. We did that with a fantastic lease that came in toe with that portfolio, plus incremental capacity to grow at the Houston 4 campus. And again we have another hyperscale customer that's coming into that asset. So the ability to have a clear line of sight on how to take an 18, 19x acquisition and bring it down to 13 to 14x, which we believe is highly accretive when you compare it to what other strategic folks are doing in terms of their M&A multiples. I think you just saw Rod Smith from American Tower talk about his data center deal. So doing the right things on the balance sheet. We've been very guarded about how we use that balance sheet capital. I think some folks would have liked us to have deployed that capital quicker. But we sort of took a very cautionary view, which is every dollar that we have on our balance sheet has even a sharper focus. We think that that capital needs to show current cash yield and has to have exposure to more than 60% investment-grade cash flows. We want to see weighted average contract durations greater than 5 years, preferably 10 or 15 years like Vantage. We want to see embedded escalators. We want to see some CPI protection. And we also want to be investing in facilities that are aimed at the future like edge computing and hyperscale. We're not going to buy sort of retail colo. We're not going to go buy enterprise fiber. We're going to buy stuff that's aimed at where we believe the future of the market is going. So that's a quick summation of where we were and where we're going.

Well, maybe to sort of -- for the benefit of the audience and those watching as well, if we can talk about DigitalBridge have this converged view of digital infrastructure is the optimal strategy. It sounds like relative to maybe some peers who are more tower dedicated, data center dedicated. So can you talk about why your vision is unique, differentiated? And then maybe as a secondary portion of that question, help us think about the synergy between digital OpCo and digital IM. It's a little bit of a unique structure.

Yes, it is. And sometimes it can be a bit confusing. And I think we'll spend this year making it very unconfusing for investors. I think that's part of our mission. But let's start with the first point, which is around convergence. I think if you're a digital REIT today, there's a heavy admission that the myopic approach to running digital REITs is perhaps outdated. And that's really because not so much that there's anything wrong with SPA's business model, there's something wrong with Digital Realty's business model or Uniti's. There's nothing wrong with those business models. What I would offer to you today is that customers are changing the way they purchase infrastructure. And more importantly, the migration of the radio access network core to the cloud is a complete paradigm shift. So there used to be a very linear one-by-one relationship between the core of your network, which was a $100 million to $200 million switch that you built somewhere. You had an OEM that built out that ecosystem, and you traditionally backhauled and towards the end of 4G, you started fronthauling that network. And the relationship between the network and the core was pretty linear. You move to an environment where the architecture begins to be decentralized and whether it's C-RAN or oRAN or whatever a CEO at a mobile carrier wants to call it. You're accepting the fact that the core of the radio access network is no longer sitting on the ground in a big expensive switch. It's sitting up in the cloud. Now to do that, and to be effective in the way that you're able to partner with customers, you have to -- if you're a tower company, you have to be able to understand that migration. And understanding that migration means you have to understand the network architecture and how network architecture is changing, which means you need a lot more fiber. You need decentralized compute hubs, which are really C-RAN hubs or oRAN hubs. You need a mixture of macro sites and small cells. Today, it's mostly macros, but eventually you start migrating to a more densified network architecture. And so to do that, you have to understand and reimagine how networks are built. And if you can't understand how to build a RAN hub or you can't understand how to build an edge compute site, you're kind of going to be left out of the equation going forward. And we saw that. We saw that on display with DISH's 5G network, by example, where we were in there quite early, largely thanks to, once again, I'm picking on Alex, but Vertical Bridge was there early and Zayo was there early. And we were identified as a key teaming partner to DISH early because we had edge compute with DataBank. We had great macro sites, and we had great fiber. And Crown was there early. So we initiated our relationship with DISH over 2.5 years ago. You saw American Tower and SBA sign their MLAs literally 2 quarters ago. So DISH made a decision, which was the groups that understood where their network spend was going and how their network was going to be built was us and Crown, and who was left behind American and SBA. Now maybe that's not fair. American and SBA are certainly getting their fair share of leasing. But if you're really going to be strategic, you have to have a converged view. You have to understand where the core of the mobile access radio network meets the cloud and how that ultimately impacts devices, consumers and nonconsumer devices. If you don't understand that and you can't sit at that table, you're outside. And I think you're going to see more of those conversations as CTOs and CIOs begin to decentralize their radio access network, being able to push that network intelligence to the edge of the periphery of the network is happening. It's not like -- that's not sort of science fiction at this point. You can talk to the carriers, and they'll tell you that. And so they've all made their decisions about where their 5G technology stack is going. And I would say, look, a great example of that is, not only Crown, but Equinix. Equinix totally understands. Charles completely understands where the stack is going. And he understands where the compute is going. And most importantly, he has the interconnection to provide that connectivity for the on-ramp to public cloud and private cloud. And that's another piece to the puzzle. You have to understand the systems integration piece that sits between AWS and Nokia and Ericsson. And somewhere in between is this metaphysical layer of the infrastructure stack, which is what we'll be talking about for the next 10 years is how do you actually play that metaphysical part of the network architecture, which is we're spending a lot of time on that as well. Sorry to go so deep on this, but this is really -- this is where things are going.

No, no.

And look, some management teams get it and some don't. And once again, I want to emphasize, it's not to suggest that owning a share of SBA is the wrong decision. And I've told that to Jeff Stoops to his face. I would just offer to investors that there's a new style of digital REIT, one that's more focused at building the architecture of the future, and that's us. And if you want to own our shares, that's what we're going to do for you is we're going to put you in exactly the right place to take advantage of where we believe some of the best secular tailwinds are going. And it's not just 5G. We talked a little bit of Vantage in terms of where the cloud is going. We're still early in the cloud adaptation. We still think there's a lot to do in terms of IoT networks. We think there's a lot to do in private 5G enterprise networks. We think there's a ton to do in artificial intelligence. So all of this stuff requires massive compute. It requires an abundance of fiber, and it requires a converged view where you can sit with a customer on an intellectual level and then back it up with the right infrastructure to get them where they want to go. That's what customers want. Simply signing an amendment for a tower, that's easy. Building the networks of the future is hard. And look, what we're doing at DigitalBridge is hard. I'm not going to suggest this mission we've been on for 2 years is easy. It's been hard at every turn. And why shouldn't the next sort of 2 to 3 years be hard. I think it gets easier -- and I think the things that we're doing are the right decisions.

And so we talked about the benefits maybe to operators. But if we think about now the benefits maybe for investors of the combination of OpCo and IM under 1 umbrella, right? Can you talk a little bit about the synergies?

Well, it's powerful. It gives us flexibility. It gives us the chance to show up when we need to show up for a customer in a big way. So if I'm sitting with a customer and they have a specific opportunity or a need, and they're saying, "Look, can you show up to this situation with $4 billion to $5 billion of equity?" We can look into their face and shake their hand and say, yes. Now how do we do that? It's the power of the balance sheet, and it's the power of the IM platform at the same time. So when you're out raising billions and billions of dollars on the IM side, and you have a suite of investment management products that can address any investment opportunity, and then you pair that with the power of the balance sheet, it allows us to step up and do things that perhaps others can't. I mean we demonstrated that on Zayo. We've demonstrated in other situations and also speed. When you have an investment management platform where we have the investment committee, we control the capital. We're managing billions of dollars for arguably the best institutions in the world. If a key customer calls me and says, "Can you show up in 48 hours and do this?" I can say, look, yes, we can. We have to obviously do the work and go through the investment committee process, but the ability to flex quickly and fast and be responsive is very powerful. And I think once again, that flexibility gives us a decided advantage vis-a-vis traditional digital REITs. And everything that we're doing is about speed and flexibility. And everything we're doing also, Matthew, is giving long-term predictable earnings. And this is the most important thing. Moving from an SOP, sum-of-the-parts model to an earnings-driven model is where we've taken the story. And if you look at our cash flows, whether they're on balance sheet in DataBank Advantage, where we have 5- to 15-year duration cash flows or whether it's DigitalBridge Partners II or our credit strategy or our SaaS strategy, which is our core strategy, our management fees are typically 10 to 12 years in duration. So both sides of our earnings are long term, visible, predictable and growing. If you look at our digital IM business, it's been growing at 25% CAGR. You look at our digital IM business this year, it's going to grow to 6% to 8% organically. So we're putting up the fastest organic growth of anybody in the digital REITs and that, once again, puts us in a very unique position. I think we just issued our second beat and raise. So we're in an environment where we're growing fast. I can't speak for the rest of the ecosystem in terms of what they're doing, but all I can do is wake up and control what we're doing every day.

You referenced $4 billion to $4.5 billion and maybe firepower, we can call it, in terms of OpCo. And obviously, you've been very active with success raising capital at the IM level as well. So when you think about deploying that, what are you seeing broadly in terms of M&A opportunities within digital infrastructure? And then as related to valuations, are you -- I think maybe last week, you had referenced, I think the term was hairline fractures in some asset classes. So we can talk to that and what you're seeing?

Well, I think we definitely saw in the third quarter and fourth quarter of last year, sort of a crescendo in terms of valuations. And we saw 3 take private situations from QTS to Cyrus to CoreSite that really set the sort of guardrails of where valuations are between 28x for Cyrus and 31x for CoreSite depending on what you believe and read. I think we could all agree that the high end of the 20s is kind of where the M&A market was from a public to private perspective. We also have seen private transactions, whether it's Dobson Fiber or there's a tower developer deal we saw that traded for 35x. And we saw the Dobson Fiber deal trade really high. These are private transactions that are sort of smaller subscale, but still indicate that the market is very healthy in terms of M&A pricing. Now that being said, the private market is always 2 quarters behind the public market. That's always been for my 27 years of doing this, I've always seen that trailing correlation. So we're starting to see a couple of things happen in the private side, which is, we've seen auctions that were launched that didn't get done that had price expectations get pulled back. And I think that's always a good sign in terms of a reality check on M&A. Without any names, faces, there have been a couple of processes that have pulled back. And I think sponsors have made the decision, they'll wait. They'll wait to get the right price that they're looking for, and whether that's the right strategy, the wrong strategy remains to be seen, but nonetheless, we are seeing assets reprice. And as a function of that, those hairline fractures that we're talking about is the demand that everyone thought would be underwritten to infinity isn't there, right? And so you have an environment. You're selling into a macro, which is tough and uncharted territories. You've got massive political unrest. You've got geopolitics at its most uncertain point in probably multiple decades. You have inflation at 40-year highs. You have interest rates moving up. And I would say we're selling into an environment where you have to believe that our customers are going to recheck their CapEx assumptions. So the growth that all these infrastructure funds had underwritten for the last 5 to 6 years, where everybody was pumping capital in, all of that is going to be revisited, I'd assume. And then you have a credit market that's beginning to close. I'm not suggesting that it's closed. I'm just suggesting to subscale middle market, digital infrastructure companies, that capital isn't there like it was a year ago. So pricing a senior lien second lien structure now becomes a unitranche loan, and it gaps out instead of L plus, 175 on the investment-grade tranche, it's now L plus 275, 300. And so you had a cost of capital where you thought you were going to be sub-3% that's now gapped up to 4.5%. And then all of a sudden, you need that extra $100 million to $200 million to go either build a hyperscale data center or go build a big fiber to the tower project, you got to go find that debt capital. And so this is why we launched our credit strategy because we see opportunity there. And we can talk about that if you wish. But I think the market is turning. I think we'll find a resting spot like we always do. Things come up, things come down. I've been through 3 of these cycles in my career since the early '90s, and we're probably ready for another cycle is my sort of belief, which is all the more reason why we've rotated to cash, and we were very conservative with how we deployed that cash last year. And so we're harvesting cash. We're sitting tight and now we're finding opportunity, again, opportunities coming to us. And I like that dynamic a lot better than chasing. I don't really like to chase assets.

You mentioned a number of macro factors. So there are a few that oftentimes come up. I think you've been very clear that DigitalBridge, as a whole, when we think about supply chain issues, I think you've been relatively okay. But I want to sort of maybe hit a couple of these. Can we start maybe with inflation? If you just think about -- maybe we can -- we can touch on supply chain within the same discussion because you've been very active, obviously, building, I think there's about $8 billion worth of capital you're putting to work this year. How do we think about the headwinds, and we'll start with inflation and maybe supply chain, if you can touch on those?

Well, I think the biggest area where inflation has hurt us is just wages in terms of what our payrolls look like versus what they looked like 2 years ago. We want to keep the best people doing what we do. We've had a significant jump in our global investment team in comp because we need to retain our team. We've got 100-plus investment professionals between Singapore, London, Boca Raton, New York and L.A. that go out and not only manage our $50 billion portfolio, but they're out fundraising, they're dealmaking. And we think that team is incredibly unique. And so I'm doing everything I can to hold that team together. Thankfully, we didn't lose anybody last year, at least anybody that we didn't want to retain, and I think the same will hold this year. We've been very forward thinking around compensation and very creative around compensation. And then being flexible from a cultural perspective, not being too stuck in the way that we manage our people, and whether people come to the office or not, we've been pretty flexible. And I think with this workforce today, you have to show a certain amount of flexibility to retain, and you've got to incent people and you've got to compensate them well. And we haven't been afraid to do that. So our retention policy has been really important, but wages are moving up. That's a total certainty. And I think the other thing around inflation is specialized labor from site acquisition to construction, to zoning, to permitting, all of these different verticals that you need to succeed, all of that pricing is gapped out. And I'm not talking 6%, 7%, I'm talking 10%, 15%, 20% because good talent to do the specialized things that we need to get done is expensive. It hasn't gotten cheaper and those prices have moved up. But the good news is our vendors have stayed with us. That vendor ecosystem that supports great businesses like VerticalBridge, and Vantage and ExteNet, all those vendors have stayed with us because we've known them for 25 years, and we've been loyal to them. And when times were bad, we employed them. When times were good, we've employed them. And I think people have good memories. I mean one of the great things about the digital infrastructure space is the ecosystem is pretty tight. Everybody knows everybody. And I think people know who the good payers are and who the vendors are -- who the companies are that vendors want to work for. And I think, once again, this is another advantage of having a Raul Martynek or an Alex Gellman or Sureel Choksi, having great CEOs that have those great vendor relationships has allowed us to continue to build through the pandemic and continue to light up new capacity or build new towers. And from a new construction perspective, we hit all of our milestones we wanted to hit in 2021. I would be -- to be totally honest with you, I do have some fear about '22. It depends on the vertical and the management team, but I think we feel pretty good about towers. We feel pretty good about fiber. That's a manpower issue, to be honest, just in terms of laying new routes and just getting the right manpower to micro trench or to hang cable, that's becoming harder and harder. I think on the DataBank side, we feel good about the -- we've got about 14 construction projects going right now to add incremental tethered capacity in our existing edge out markets, and nothing is indicated in the first quarter that we're behind. I'd say at Vantage, things are good here in North America and Canada. Asia, we're progressing well. Most of that construction is on time. But, in Europe, we do have some supply chain issues. We didn't have them last year, but now they're manifesting itself this year because of the crisis in the Ukraine. And some of our specialized componentry is manufactured in difficult places and part of getting some of that -- some of those components would come through Russia. So now we've cut that off. We're now having to air-ship that componentry out of Asia into Europe. It's more expensive. It's more time consuming. And so specialized componentry around cooling, around backup generators, there aren't 100 people that make these things. These are very specialized pieces. And I think you'll hear the same from Charles, and you'll hear the same from Andy Powers at DLR. Some of our construction in Europe will be delayed. I don't -- I can't qualify or quantify it yet, but it's not at every campus, right? We've got 12 campuses across Europe and in some campuses we're on time, in some campuses, we're going to be delayed. But we're fighting through some of that stuff, and it's just going to cost us more money. So if we think about total new construction costs and hyperscale campuses, that cost of construction is moving up, and it's largely due to supply chain. But at the same time, we are getting much higher rates in Europe than we had anticipated. I think if you look back 3 years ago where we underwrote Europe, we were wildly underestimated on rents. So our rents are coming in significantly above budget. We do have CPI increases in those European leases. And of course, all of our costs are passed through to the customer. So we feel like we've got good inflation buffer in Europe in terms of what we're building there.

On the -- just one other one in terms of macro factors, rising interest rates. You mentioned a ton of progress you and Jacky have made over the last couple of years. I think you cut leverage in half from 14 between -- to now 6 and 7 turns. How does a rising rate environment impact how you think about optimal leverage for the balance sheet? And then how does that impact, I guess, maybe the way you approach organic or inorganic growth?

Well, I think, we made a really positive move last year, getting the rating agencies to understand the long-term natures of our cash flows. Just like a tower lease, I think we were one of the first ones to do cell tower securitizations back in 2004. We were the first organization to do a small cell securitization. We're the first ones to do a hyperscale securitization. So when we came to market with an investment management securitization because our cash flows were at 10, 11, 12 years, and we got the agencies over that hump, we were able to effectively take our prefs, which were at 7% to 8% and trade those down in 3.5, 3.7, 3.8, 30-year long-term bond structures, that's really the right way to finance our business going forward. So right now, what we're doing is, as we build out that IM platform, and as we keep raising more billions of FEEUM, our ability to accordion our securitization and take on another $100 million, $200 million, $300 million, $400 million of leverage over the next 12 to 18 months allows us to delever. And the way we're going to delever is continue to exchange out and pay off the prefs because that's the easiest way for me to pick up another -- you're talking about a debt stack of $700 million at circa 7.5%. And if I can swap that out and cut that interest rate in half, I can create -- and that flows all to AFFO. That's another $20 million to $30 million direct to AFFO. So Jacky is very focused on that. We're focused on actually trying to think about how we can get a little more leverage there from the rating agencies. So we'll revisit our rack maybe later this year as we continue to fundraise and add more FEEUM, which we're doing. And I think the market likes it. And by the way, other investment managers are now -- it's a copycat league. And we're seeing some of our peers look at that structure. I won't name any names, but they all -- I know most of the guys that run a lot of these big IM businesses, and they all think it's clever and they're looking at it, and they've hired our bankers to do it. So we think we found something that's right. And ultimately, my job to our shareholders is to make sure: one, you're not exposed to the interest rate market, like I don't want to be in that place. That's never a place I've ever put our investors is having floating interest rates in this environment is a bit sort of terrifying. So we want to have long-term investment-grade bonds that people can look at every day and see what the mark-to-market is. But most importantly, take the mystery out of what is our interest expense and so people can go to bed at night knowing that our view of the balance sheet is very conservative, and that we're focused on long-term debt that has a fixed rate component. That's really the most important thing.

Got it. I'm going to pause and just open it up. If anybody in the audience has a question, just raise your hand, somebody with a mic should be there. Well, all right. So we have a lot to get through. We got a couple of minutes left, but I want to touch on Digital IM. This is one of the really unique aspects of the story. Obviously, a lot of success with your first 2 funds in terms of exceeding targets. Can you touch on some of the milestones for the business in '21? And then the outlook for this year, and maybe within that, if you can touch on some of the newer products that you referenced as well?

Well, look, at 50,000 feet, I think the most interesting thing that we hear around the globe today is, when we sit with asset allocators, they tell us a couple of things. One, first of all, they're underexposed to infrastructure. So there's a massive rotation in asset allocation with asset allocators globally, whether they're pension systems, insurance companies or sovereign wealth funds, they've openly admitted from their real asset allocation, they're a little overexposed to private equity and they're overexposed to real estate, and they're underexposed to infrastructure. And the 2 big thematics that they want to chase is renewable energy and digital. That's absolutely on every asset allocator's to-do list. So when we show up as the largest investment manager in the world in digital infrastructure, it really gives us a good sort of position to start the dialogue with an investor. We had over 78% renewals from fund 1 to fund 2, but we had close to 40 to 50 new logos that came into the second fund, which really sets us up well for, not only future funds, but new products. And as the innovator of this new strategy in digital credit and sort of digital core, these are 2 new products where, once again, asset allocators are saying, "Look, I don't have that. That's really interesting." And in an environment where there's a lot of uncertainty, core and credit are kind of nice balances, right? If you think about how to go into a risk-off environment, having a credit strategy that has a lot of downside protection, and then having a core strategy that has low correlated returns, but a current cash yield with long-term contracted cash flows, both of those strategies are really resonating with investors today. So we've sort of introduced products and strategies at the right time. And to do that, we had to hire great teams. My philosophy is, first, you hire the people, then you put together the business plan, then you put together the process, then you go fundraise. And in both of those strategies, we've been able to go out and produce deal flow. Investors also like to know that you have a proprietary backlog of deals. Credit is a great example of that. We booked 7 loans. We put those on to our balance sheet. We've already had 2 loans realized where we had returns way above the benchmark in terms of where you'd want to see those returns. Five loans still exist. We've got $120 million on the balance sheet. But most importantly, Matt, we've got a pipeline of about 29 new deals that we're underwriting right now. And that's about -- our cut of that action is about $1.3 billion to $1.5 billion on a book of close to $4 billion of loans, where we're partnering with other sponsors, we're partnering with LPs, and it's very exciting. That team is super busy. There's a lot of demand for digital credit right now. And the same thing on the -- on our core strategy, we see a lot of opportunity. And where we see the biggest opportunity that perhaps isn't evident to other investment managers is where we can partner with customers where we work closely with them, look at assets that are inside their balance sheet to have you thought about moving these assets out of the balance sheet into a permanent capital vehicle where the market will give you full credit for it at a higher valuation, and that's a dialogue that a lot of our customers are pretty, I'd say, engaged on at the moment. So 2 new strategies. And we've had a great -- as you mentioned, we've had a great success in 2020 and '21. We're guiding the Street to a similar level of success in '22. We think '23 even looks better from a fundraising perspective in terms of where we are in our product cycle. And I think people need to understand that product cycle is a function of the second fund is already 68% invested. So we closed the fund at the end of December, $8.3 billion. We're already -- we've already made a number of investments, over 10, I think, 11 investments now out of that fund, and it's performing exceptionally well. So we've got the wind at our back. We're backing great management teams. We're backing great secular ideas. And I think the appetite to raise new capital is, I don't want to say limitless, but it looks pretty good.

In the time we have left, this is going to be -- it's an interesting question, but I'm curious to get your take. You've gone through a lot of change in the last 2 years with DigitalBridge. And quite frankly, it's a herculean effort, I think you've undertaken successfully. What do you think is most misunderstood by investors about the DigitalBridge story? And then what steps or milestones do you think are necessary to unlock greater value over the next year?

Well, I think the first misunderstood part is that people still think the story is confusing and that perhaps there's more cleanup to do. We're done with that. Now we'll spend the rest of the year sitting with investors one-on-one, explaining why we're done with that. But I think the confusion and the noise around the old story to the new story is now settling in, and that's sort of the first part that we've always had to get through. The second part is this discussion of balance sheet and how to use the balance sheet and how do you weaponize it correctly. I think the balance sheet is really a big asset for us, and it's an advantage, but at the same token, we can be asset light. And what the IM business gives us the ability to be is exactly that, where we can show up in significant size and scope and scale, use the balance sheet correctly when needed, but stand up big ideas. And I think that ability to move nimbly and to move quickly and execute great ideas is something that people don't fully understand. I'd say the third thing that folks don't understand is the cadence at which we're building today. We keep talking about this to investors, and we'll go deeper as the year progresses. But we've got over $6.6 billion of greenfield construction. We've got $8 billion of CapEx, $7.8 billion of CapEx, committed this year just at the 23 portfolio companies. So literally, we fall out of bed, and we deploy almost $8 billion of AUM. So when we showed people that slide of us going from $50 billion to $100 billion of AUM over the next 5 years, people are like, "Well, how do you get there?" I said, "Well, it's pretty easy." We're on this sort of cadence where we're deploying about $7 billion to $8 billion of CapEx just in supporting the existing portfolio companies. And then as you do 2 to 3 or 4, 5 new investments a year, and then you grow credit and you grow core at the same time, our ability to double AUM inside of that 5 years is not particularly hard. That's what we're kind of guiding people. Always put crumbs out on the trail. I tried to.

I love the presentation at the -- beyond the earnings call. Well, I think we're just -- are we still good for a couple of minutes? All right, can I -- we talked about so much with digital infrastructure, different swim lanes you tend to talk about. I want to get your sense, and I'm not asking you to sort of pick your favorite child here. But if you think about bigger themes -- and maybe I'll think -- let's narrow the discussion maybe to the next 12 to 18 months. What's your outlook as we think about some of these swim lanes, whether it's towers, fiber, data centers?

Well, look, it's hard not to vote against towers over the next 12 to 18 months. We see the demand for 5G overlay and 5G macro infill as being as robust as it can be. And I think that's what gives -- should give tower investors some optimism or exuberance about what's happening. So I naturally as a -- at the core a tower guy, I get excited about that. And it's not just here in the U.S. I think we're starting to see that in LatAm, we're certainly seeing it in Asia at Edgepoint where customers are going straight to 5G. And I think Europe is a bit cloudy at the moment, I think, in terms of the carriers' ability to fund, but most importantly, to understand the business case and whether 5G makes any sense and whether or not our customers can make money. Our customers can't make money, that doesn't make any sense. That's a bad value proposition for their shareholders. So we have to help them. We have to come up with new models for how to finance 5G in Europe. And we've got to make it accretive for the mobile operators in Europe, which means perhaps doing more shared network, more oRAN. And we've got to get out there and evangelize that a little more and try to get carriers to work together. It's the only way the European carriers are going to survive and make money. And part of our business is not only making money and making a profit, but we also -- this has to be a good value proposition for our customers. If it's not good for Orange or Telefonica or Vodafone or DT, we don't have a business in 5 to 10 years if they don't survive and we provide the ability for them to grow and be healthy. So I think that's -- I'm near term, very bullish on towers, very bullish on hyperscale. I mean I don't know how we can't be. We've got 1 gigawatt of leasing in our pipeline right now between North America, Asia and Europe. It's -- that pipeline, just to give you context, Matthew, 2 years ago, that pipeline was like 135 megawatts. So we've gone from 135 megawatts to 1 gigawatt in a period of 24 months. So there really seems to be no slowing down Sureel and Vantage. They're out kicking their coverage. They're out leasing their competitors. They're quicker, they're private, they're fast. And look, that's one of the great advantages of having the IM business. I can finance my Vantage Asia business, European business, North American business with different funds, different co-investment vehicles, different continuation vehicles and so I never run out of capital. And so as the other guys figure out how to write -- because some of these commitments are like $1 billion of commitment. You go build 156-megawatt campus in Johannesburg. That's $1 billion commitment from us with 1 tenant. And so we can do that and not get punished. Imagine if one of the public guys warehoused 100 acres of land in Johannesburg for a year, you'd punish them for that. We don't get punished. That's the ability of having the flexibility of the IM platform and having the balance sheet. And then when a campus gets built, like Johannesburg or like a campus gets built in Santa Clara or Quebec City, we can then migrate that into the balance sheet where it has permanency and it's well understood by the investment community. That flexibility is something that the other digital REITs just don't have.

I think we're just about out of time. So maybe we'll end it there. Marc, thank you so much. Great to see you in person.

Good to see you. Appreciate it.