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

All right. Marc, thank you very much for being here.

Good to be here.

All right. So let's kick things off with the fundraising environment, if we can. So in the second quarter, you put up solid fundraising results, $2.7 billion you raised in the quarter. That said, how would you describe the current fundraising environment, and as part of that, the appetite of LPs to invest in digital infrastructure?

Well, look, I think the -- everyone in this room is heavily reliant upon raising capital, whether it's debt capital or equity capital. We've had a good solid first half of the year in terms of raising equity capital. At the same time, we've raised close to over $5 billion of debt capital at the same time. So the ability to raise over $8.5 billion of debt and equity at the same time in this environment, I think is pretty, pretty good. I think what we're hearing on the road, just to go back to the equity side is I think investors have an appreciation for quality businesses today. And we're going back in time to 2001, 2002. And people ask me what works right now and I say, look, you got to go back to fundamentals. You got to go back to discounted cash flows. You got to go back to underwriting. You got to look at investment-grade concentration versus non-investment-grade contraction. Stuff that's getting financed right now is the stuff that is investment grade, has durability in contracts or if you can demonstrate a strategic mode, if you've got a permitting advantage, if you've got a power advantage in data centers, we'll get to that in a second. But investors are incredibly discerning right now because they know that there's a lot of really good opportunities out there. And so, when we hit the road and we go and compete for capital, we're running into other people that have good ideas, whether it's renewable energy, whether it's credit, which is very much in favor right now with private LPs. But the market is definitely bifurcating between the haves and the have-nots, and stuff that's out of favor right now is private equity, real estate, certain liquid security products aren't performing well. And so, the global fundraising environment is challenging, but I think if you have good ideas and you've got good track record and you're not a first-time fund, you're going to find that there's a good reception for what you're doing. And at the same time, I think also investors are very sophisticated now that if you're running a company, and you have a really good company, and you've got a good value proposition for co-investment where you want to raise that primary capital to go build that next 500 towers or go build those -- that next hyperscale campus for $800 million. There are certain investors that will want to do that, versus doing a fund structure. So markets are not closed. They're definitely open, but allocations are down. It's more discerning, and we think the fundraising environment will pick up in the second half of this year, and we're actually pretty optimistic about private capital formation in 2024. So it's not -- by all means, it's not impossible, but I think it requires a really good story, a really good track record and a really good team. And I think what worked for us in the second quarter was we have a great team. And we have a very good track record and our ideas are resonating with LPs right now.

So taking what you just said and putting it together, what it sounds like is you're winning on the fundraising fund as a result of the quality of the companies that you actually invest in. And then as part of that also being able to offer that co-investment to give LPs additional access to the flavors of digital infrastructure that they want to be invested in?

Yes. We have over 200 LPs worldwide. I think they're really sophisticated. I think investors have gotten more discerning and more sophisticated. And so I think by being in our products, whether it's core, whether it's credit, whether it's our flagship series, the ability to sit with an investor, we have a much bigger fundraising team now. We've got 30 people that go out and fundraise, and I think their ability and their education level is much higher than it was when we started DigitalBridge 10 years ago. So I think now we have product specialists. We have people that cover certain LPs. They can sit with an LP and say, by the way, because you came into the credit fund, here's a really great co-invest idea that we have, which is CoreWeave. So we did a debt deal with some friends yesterday that was really well received. And that was a good idea. So investors, our credit investors lined up for that and they said, "I wanted to co-invest", and so we were able to provide that. Same thing when there is a really good idea like Switch. It was a story that wasn't fully understood as a public company, but now as a private company. Private cloud is working. A lot of big language models are going to sit in private cloud. And so Switch's growth in the last year has been incredible. So our ability to close on that business, with our capital, and then run it for a couple of quarters and that would be very successful and now is giving us the tailwind to go to investors and say, "Do you want to be a part of Switch?" And everyone's saying, "Of course, I want to be in private cloud. And of course, I want to be in 100% renewable data centers." That's a 2 foot, right? That's digital and renewable energy. So certain things are hitting really well, and the ability for the team to go out and pair those ideas, pair those ideas correctly with the right LPs, that's a bit more art than it is science. And I think our team has done a really good job of that so far this year.

All right. I want to switch gears from here, no pun intended. And talk about how you're thinking about the investing environment. Marc, you were on this stage a few years ago, and I remember you were talking about the valuation environment. You're talking about how multiples had gone up, which made building much more attractive than buying. As we sit here today, how do you think about the buy versus build calculus across the verticals of digital infrastructure?

Well, let's just start with what Steve said. I think Zayo is in a great spot, and we've got a great partner in EQT and we've had a lot of different brownfield ideas come across our desk in the last 18 months, but the attractiveness of new route development and building new routes that are returning capital inside of 4 to 5 years is way more attractive than paying 14x, 18x for something. That doesn't make any sense to me. Plus, when I build -- well, I don't build it. When the Zayo team goes and builds it in it's new routes, in it's low latency, high strand count routes that we control, and we control that quality of the strand count, and we know it's our network, and it's something we built, I like that a lot better at a 4 to 5 entry multiple than buying someone else's 20-year-old aging network at 14x, 18x. So again, it comes back to those fundamentals of underwriting, right? I mean this is an environment where every decision you make around capital allocation is under a microscope. And so we're deploying about $8 billion of greenfield CapEx this year at DigitalBridge. We've already deployed almost $4 billion through the half turn, and a little under $6 billion will be put into data centers. About $1.5 billion will be put into fiber, another $1.5 billion will be put into towers. And what we're seeing in this environment is our customers need us more than ever. And I think when you have capital and you have good execution down at the street level like a Zayo or like a vertical bridge or like a DataBank or a Vantage, those companies are getting a lot of bats. We said in our earnings call, DataBank beat their leasing budget by 490% in the second quarter. I've never had a portfolio company beat a budget by 490%. We already call Raul, the sandbagger of all sandbaggers, but this was ridiculous. This was a whole different level. But it's a combination of having good ideas, having good product, having a good team and having capital. And so, Raul is ultimately delivering great single-tenant yields on those campuses. Same thing that Raul is doing, same thing that Alex is doing at Vertical Bridge and the same thing we're doing at Zayo. We like greenfield right now. It's working. And it's not to suggest that M&A is dead, as Steve said, there's a lot of really good ideas in M&A, and we're prosecuting those new ideas out of our flagship fund, and we've got over 20 new ideas that we're working on in terms of brownfield. But today, that capital is a bit more precious. So we're, I think, a little bit more cautious, but it's not to suggest that we won't deploy capital. We will, in the back half of this year in brownfield, but we're going to continue on that cadence of deploying the second half of that $4 billion in the back half of the year.

All right. Over the course of the past year, we've seen a sharp rise in the cost of capital. This has negatively impacted valuations for public companies. But it seems as though private market valuations really haven't changed much to reflect the higher cost of capital environment. Have you seen any changes in those valuations in the private market recently? And as part of that, where do you think valuations are a year from now?

Well, I do think valuations have changed in private markets. I don't think we could sit here today with a straight face and say, "Private data center transactions are going to get done at 30x." I don't think that exists. Now will good data center deals get done in the mid-20s? I think that answer is yes. We saw Compass get done with Brookfield at a really high price, and that was a good outcome for Chris and for his team. And I think it's a good outcome for what Brookfield wants to do. Blackstone announced a couple of days ago, they were going to deploy $8 billion into AI data centers. So capital is out there. Capital will be deployed. In terms of other verticals in M&A, I think towers is still holding in on a private market basis. I think we here in the U.S., we look at M&A transactions all the time. Bob Paige does a great job with Vertical Bridge running our M&A team. And we haven't seen a degradation in M&A multiples in small ball. And small ball sort of that kind of 5 towers to 50 towers. That stuff is still pricing in the mid-20s. Maybe it's not pricing out of 30x or 40x for a single build, but good quality digital infrastructure is still going to price at a premium, I think. And so maybe the M&A environment is a bit more tempered and we have this sort of a standoff between buyers and sellers because obviously, sellers want that premium multiple when interest rates were 0, when base rates were 0, and sellers obviously want to pay as little as possible. So there's a bit of a bridge in disconnect in valuations. And I think that will break sometime more in the back half of this year, early next year. But we definitely are in a moment where the deal environment has pumped the brakes, which again is why we have pivoted to focusing on our portfolio companies and focusing on greenfield.

To that point, I'm focusing on greenfield. You invest across the spectrum of digital infrastructure. Based on the opportunities that you see, how are you prioritizing each of the subsegments of digital infrastructure: towers, small cells, edge enterprise data centers, hyperscale data centers, fiber. Are you more inclined to put money to work in one area versus another? How are you thinking about it?

Well, I think we operate in 4 different geographies: Asia, LatAm, North America and Europe. And across those different regions, we're allocating specifically more capital in specific verticals than other places. We own 29 companies. So I think playing digital infrastructure in an asset-light model like we do, gives public investors a chance to own what I call sort of the combat in digital infrastructure. You don't have to sit there and say, "Okay, I want to bet on fiber in Europe. I want to go bet on hyperscale data centers in Asia." We have the ability to play the whole spectrum. So we don't have to choose whether we're risk-off on fiber and we're risk-on on hyperscale or whether we're risk-on on small cells and risk-off on towers. Each geography presents, I think, a very different business case and a very different opportunity and a very different risk reward. So for example, we did a edge data center play in Southeast Asia called AIMS, which is heavily focused on interconnection and building Edge compute in Southeast Asia. It was a bit counterintuitive because Edge really hasn't come to Southeast Asia yet, but we're preparing for the next 3 to 5 years. So it was a long-term bet on Edge computing in Southeast Asia because we think -- we think Kuala Lumpur is going to be one of the great innovation centers in the world over time. And that was a bet on the sector, that was a bet on the geography, but also we have a great partner and a great CEO. So I'm not overweight or underweight anything specifically. I do think our attitudes change every 6 to 12 months about different geos that we like and different subsectors we like. There's no doubt right now what is working, particularly strong right now is Edge computing in the United States is working. DataBank is putting up big wins and big numbers. And I think you heard that from Charles at Equinix in terms of his earnings. He's very optimistic about what he's doing. I think some of the things that we're doing in Europe on the hyperscale side are really unique. We made a long-term bet 3 years ago to invest in a lot of land, which was risky at the time. But we felt like the combination of the land and the permits and the will-serve letters would be well-timed, as we sort of continue to proliferate public cloud. And the thesis there was, yes, AI would come, but data sovereignty was much bigger than AI in Europe. And that's sort of a trend that we looked at, and we focused very much on that. And now Vantage Europe is producing incredible results because they planned, they had land and they had permits and they had power. Power is the big commodity. So I think as we crystal ball ahead, I think you -- Steve was talking about small cells and private networks. We are seeing a rise in private 5G networks. That's been something that our deal team at Boingo has really been taking advantage of. That was another business that I think was a little misunderstood as a public company. But we brought it private, we gave it capital, and we do think that private networking is a big opportunity. So having a management team that's solely focused on that is a real advantage for us. And so some of the things that we're doing in private 5G networks, particularly in an enterprise setting or in a commercial public setting like airports or convention centers is really very fascinating. So I'm excited about that. That's something that we're -- we've been spending a lot of time on. And there's other subverticals we've been looking at. We've been looking at terrestrial-based satellite stuff, more digital media infrastructure like we did in Europe. So there's other subverticals of digital infrastructure that don't get a lot of shine, but we're spending time on those ideas and we're executing now in our next strategy.

Yes. I was going to ask you about the geographical focus, but I think based on your answer, it's very much dependent on: one, the subsector; and then, two, the geography. So we'll skip over that one. But I do want to talk to you about offering a holistic solution. When you came, you had your Analyst Day, I think it was in 2021. One of the things you talked heavily about was the ability to offer a converged solution to your customers. I'm curious, as we stand here 2 years after that Analyst Day, is it working out the way that you thought it has and if you could give us examples of where DigitalBridge has won as a result of offering that converged solution.

Well, first of all, it hasn't played out like I would have liked to have it played out. And I always admit, I'm pretty candid. If something doesn't play out the way I think it played out, I'll express my disappointment. I think we have more opportunity there and we have more work to do. Some of our 29 CEOs collaborate better than others. I think the ones that do collaborate and have good organizations that have a lot of depth that are more mature companies, in terms of their growth trajectory, are you able to work together and win. I mean, Steve and Alex are a great example of that. They worked together on going after a particular initiative related to the Biden infrastructure bill and they won, and they jointly bid on that together, and it was the combination of their resources and their team and Dale Carey was a big part of that, and Jonathan Adelstein was, and we've just got a great team. And so when you've got professionals sitting in the right chair, that know how to attack that situation, you are able to show up with a bigger force. So we're able to show up with the largest private tower company and the largest private fiber company. And that initiative, that particular award, was very specific to what it needed. And we were able to address the needs of that particular RFP to win. And so we see more examples of that. There's some stuff that, for example, Switch and Vantage are working on to address some of the power issues in Santa Clara for customers. So historically, Switch has really stayed out of public cloud hyperscale campuses, and Rob has really gravitated to private cloud. But Rob has an enormous amount of power and space and land and he can keep building in Reno. And so as our customers have outgrown Santa Clara, we've now opened up a whole new horizon of data center space in Reno, and that's working really well. And that was because [indiscernible] and Rob worked together to help our customers. So we do see common interest in this, and there's more ways we're going to work together. I think everyone is busy right now. And so asking our CEOs to take a day or 2 out of their lives and to all of us sit in the room together and think about ways we can work together, that is hard to do. We try to do it once a year. And the good news is there's more we can do, and I think there's only upside to it. But I think when we do show up in the power of the portfolio like we've done for DISH, where we had 4 portfolio companies show up to serve DISH, we're able to compete head-to-head with Crown and have that same type of offering, except we had the Edge data centers and Crown didn't. So there's examples of it. We don't run out and put out press releases when our portfolio companies work together and win because that sometimes doesn't feel right, but they are out there working together and they are collaborating.

All right. Let's talk about Generative AI. So on your earnings call, you dedicated quite a significant portion of the call to talking about that opportunity set. Could we dive a bit deeper into the demand that you're seeing associated with GenAI? And then as part of that, how it's manifesting itself across your portfolio of companies currently?

Well, I think it's one of these big moments where we all will look back and say, "Yes, this started at this time, and this is what I was doing." And you have to make a decision as an executive or as a CEO, how deep do you want to play in that vertical? I think my journey in the mid-90s started with Alex. And when Alex actually explained to me how an analog cell phone was going to transition to a digital phone -- that was 1994, we both agreed that our lives were going to change forever. And so as we built 2G networks and digital PCS and then we hooked up with Dale Carey at SpectraSite and that was one of those moments where I look back and say that was a once-in-a-generational aha moment. The same thing happened in 2013 when we started building public cloud. And as we built public cloud over the last 10 years and we look backwards, we say, "Wow, look, how far we've come." Somewhere between 11,000 megawatts and 13,000 megawatts lit by everyone in this room. Trillions of dollars, as Steve said, in CapEx built not only in data center space, power and cooling, but connectivity. And then all of the ecosystem that's fallen down from public cloud has just been prolific in terms of how it's changed our lives. AI is going to have that same impact, whether you're a believer or whether you don't believe it. You don't have to believe, but I will tell you right now, having been at this conference in 2013 and now sitting here in 2023, we're going to look back in 10 years and we're going to say, "That was the moment." Now the key to this is, I think of -- I really think in 5- and 10-year increments. That's the way I've always built businesses. And we made a decision 3.5 years ago to merge into a public entity and change the trajectory of our firm. And now AI is sort of changing our outlook on how we're going to raise capital, how we're going to invest capital and ultimately, the rigor that we're going to put our portfolio companies through on how to deploy that capital in a success-based way for customers. We think it's a decade build just like we thought public cloud was a decade build, just like we think 5G is probably a 7-, 8-year build, and you have to take the long view on all of this. Everyone in this room is either an operator or an investor. And whether you believe me or not, I really don't care, you have to form your own view and you have to form your own strategy and you have to make a decision where you're going to play in the ecosystem. Here's the good news. For everyone in this room, you will play in the ecosystem. Whether you choose to believe it or not or like it or not, you will have a part in the ecosystem. Because over that 10 years, there's kind of -- we're playing sort of a 3-dimensional game of chess, which is latency, size of the power of compute and then which is ultimately the number of megawatts that we're pushing through that. And then you have to think about the applications that sit on top of it. And so right now, if we're playing that 9-inning baseball game, we're literally like top of the first. We're very early because right now, all we're doing is proliferating large language models that are in learning mode. And that's going to continue for the next 2 to 3 years. Ultimately, these networks become intuitive, right? And those learning models turn into intuition models and they start making decisions. And then as it does that, what happens inevitably is you have what's called data gravity. And data gravity is ultimately -- the data is going to fall to where it's ultimately being used, which it has consumer-based applications. It's going to have enterprise-based applications. It will absolutely have machine-to-machine applications, which I think is actually the bigger part of this narrative. And so as you work your way through time and through that baseball game, we started at the beginning, which is a lot of the big workloads are happening in private clouds, but they're happening in hyperscale campuses, which are usually been reserved for the hyperscalers, but also that's happening at Switch. So a lot of these models need to be built in very secure environments, a lot of power, a lot of connectivity and a lot of security because these -- the customers that we work with, they're very hyper to their security. And so these are big workloads, and we're talking 50- to 200-megawatt workloads at the beginning. And anyone who has 100 megawatts of contiguous space in this room, you've been called, right? Put you -- like I'm seeing some hands go like this. Everyone has been called who's got a large space. See Randy back there, Randy's going like this. He's like, "Yes, I've been called." And if Crosby was here, he'd be doing that, we're sure Chris, he's in the room somewhere. But we've all been called because it's an arm's race for these guys to get the space, to get the power and they can't do it themselves. If you go back 7 years ago, the industry was self-performing 70-30, maybe 60-40, depending on how you look at it. COVID changed all that. They dismantled their apparatus for building data centers, and now it's 70-30 the other way, where the industry is leasing from us and 30% self-performing. I would never sit in a meeting, with any of the hyperscalers and tell them they can't build data centers. They want 100% can build their own data centers. Now the second question is, is that capital efficient? And the answer is no. Is it an efficient use of their time? No. Are they in an arms race to see who will have the best Generative AI work model? Yes. So we enable that, right? DigitalBridge enables it. At the end of the day, Compass will enable it. Edge Connect will enable it. We all are enabling that. And it's just a function of do we have the capital? Do we have the speed? Do we have the permits? Do we have the power? So the second phase of that, we get 2 to 3 years down the road and we start delivering these edge workloads as the models start proliferating and data proliferates out to the Edge, you get different applications. IoT networks, smart cities, enterprises deploying their own AI, models inside of factory settings, that gets exciting. Because now what's happening is the data is pushing closer to the enterprise. And I was talking about this morning with Keri from Colt, right there. Hi, Keri. Came over from the U.K. They got really cool CEOs like Keri come to this conference because that's what makes this conference unique. But we were talking about this morning about where does data go? And some of that data will ultimately sit in the enterprise. And some of that data will be generated in the enterprise coming back to that language-based model, right? So there's this flow of information that comes when models start talking to each other. And so she's excited because she owns the pipes. And ultimately, she owns the customers on the enterprise side. So it's a big opportunity for Zayo. It's a big opportunity for Colt. And so that gets me excited because that's kind of the 2- to 3-, 4-year time frame. And we see businesses like AIMS and DataBank and Atlas Edge being really busy. Has those workloads sort of looked like 2 megawatts to 20 megawatts? And by the way, for a company like DataBank or Atlas Edge or AIMS, 20 megawatts is a lot of capacity. That's a big opportunity. And then as we move out to the near edge, the workloads go from sort of 2 megawatts to 500 kW. And we're starting to look at applications that are more consumer-facing, could be augmented reality, it could be virtualized shopping. I mean there's a whole set of consumer applications that happen on the near edge. And the latency there is like less than 2 milliseconds, where the latency today, acceptable latency you and I were talking about this morning is sort of 10 milliseconds, 20 milliseconds, that works for right now. But as you start migrating up and data gravity falls, to the devices and to the applications into the machines, you go from 5 milliseconds to 2 milliseconds to less than 1 millisecond. And then we arrive at the end of the journey from an infrastructure perspective, which is MicroEdge. And that's cell towers, that's kind of the next generation of 5G networks or 6G networks, which will ultimately power autonomous vehicles. It will ultimately power autonomous airplanes and drones delivering packages, delivering a Domino's Pizza. None of that -- every auto executive will tell you autonomous vehicles are still like 7, 8 years away. Why? Because we know to achieve MicroEdge, you need dense fiber, you need small cells, you need towers, you need Edge data centers. And I'll come back to where this conversation started, which is everyone in this room will have a part in what's happening. It just maybe, your part maybe 5 years down the road or Alex's part maybe 7 or 8 years down the road, but Alex's business is fine. He's happy putting up 8%, 9% organic growth and leave him alone, but he'll be fine. Trust me, you're going to be okay. But I think it's important to understand that they're, just like public cloud, there was a whole ecosystem, Michael, that got created out of that. AI is doing the same thing. We just choose everyone in this room is playing in the infrastructure piece. But remember, there's software, there's applications and there's other business models that are now being written, the same way stuff was being written in '13, '14 and '15 from a SaaS perspective. So it's really exciting, and I'm sorry, we're drilling down on this, but I think this is the journey we're all on together, whether we choose to accept it or not. I've accepted it. I'm embracing it. I'm learning every day. It's really exciting. I learn mostly from my team and from our CEOs, but we have a lot of work to do. You ask, how it's impacting our businesses. It's absolutely sort of table stakes right now is the data centers, the big data centers, the places where we have available power, space and cooling and we can deliver quickly. Those are the businesses that are working right now. And we have a lot of stuff that's on the drawing board to be built. But initially, it's really private and public cloud for us. That will occupy a lot of our time over the next 2 to 3 years in AI. Certainly, the connectivity piece that Steve spoke about earlier, Zayo is going to be really busy, providing that AI connectivity. And AI connectivity is not just data centers. If you think it's just data center connectivity, you're not understanding what's happening. It's also enterprise connectivity. And it's also the virtualization of those networks at the same time. And we've got another international. I see Bevan is here, who's a great brilliant mind in the space, founder Megaport, and that's a great business. Because the virtualization of cross-connects is only going to enable the proliferation of large language models to move quicker. And so these are important businesses in the future. And if you don't understand the virtualization of the network, you're probably going to be left behind, much like we talk about software-defined networks 3 years ago. If you don't understand that in mobile networks, you're not going to be building towers 3 to 5 years from now. So it's all changing. It's all quick and it's impacting all of our businesses, not just one specific business.

Very detailed explanation. Thank you very much for that.

Sorry.

No worries. So I would agree with you that I think this represents a generational shift, akin to what we saw with the Internet and then also with the advent of the cloud. As we think of -- as an industry delivering on this opportunity set, what are the greatest challenges that you think we face?

I think at 50,000 feet, we face a liquidity challenge. I think every business today is, every CEO in this room is thinking about their treasury forecast, not only where they are today, but where are you in '24 and '25. Some of you are thinking about your debt maturities in '25 and '26. Some of you were thinking about doing a securitization right now. Liquidity is king, I said it on this stage last year. We were very focused on preserving cash down at our portfolio companies last year. That was one of the things we said we were focused on. There was a reason we said that, was because we were looking at debt maturities, and we were saying, look, most of our portfolio ages out in '26, '27 and '28 because of the work we did in '21 and '22. So we started that planning in 2020 to get to this place where we de-levered our portfolio, we built cash, because we felt like a storm was coming. And so, now our companies are well-positioned to take advantage of that and fundraising has gone well for us. So we've armed ourselves with a lot of dry powder and a lot of capital, but I'll continue to believe that the #1 scarce commodity we have on this planet is capital. A very close second is power. And the great challenge that I will face in my career over the next 10 years is how do I ultimately create the same amount of power on a renewable basis than I'm taking out of the planet. You've heard me say this now a couple of times. And I think this is for me at least, I know, as I chart the path at DigitalBridge, I have to solve the energy issue. If I don't solve the energy issue, I will be entirely irrelevant in 5 years because -- it's not because I'm an environmentalist, some of you know me, know me I have a penchant for things that perhaps aren't ESG-friendly, but we all have a responsibility to think about this. And so when we bought Switch, and we learned a lot from Rob and his team and Gabe and those guys do a great job. And our other data center CEOs are now following that lead and are taking advantage of that past knowledge. But I look at it in a very different way, which is that we absolutely have to be customer-focused. Everyone in this room wakes up every day, and we say, how do we take care of our customers? Our customers don't want to be in data centers that don't have renewable energy. Scale is another great business we own in Brazil, 100% renewable energy, 90% of that hydro sourced, and he's taking market share. He's taking market share because he has a good product and in fact, he's taken too much market share. We've asked them to pump the brakes a little bit because he's growing so fast. But customers want that solution. The hyperscalers want to know that you're solving their ESG score for them. And so we're spending, we made a bet in buying InfraBridge last year, which was an infrastructure play because we knew we had to develop a renewable sleeve, ultimately to focus on how do we put back into the planet what we've taken out. So there's a little bit of a -- there's a moral layer to that, there's a customer essential layer to that, and I think there's a positive return on investment to that. Switch is showing us that. They're getting higher rates because they have a great product, it's a very secure environment. But also they provide 100% renewable energy. And I think any data center operator in the room knows what I'm talking about. If you can't provide that extra solution, you're not going to win jump balls against the likes of Switch or Scala or Vantage. So I think that's one of our big challenges. People ask me about interest rates and inflation and supply chain, all that stuff is cyclical, and it works itself out. But ultimately, in the planet we live in today, with the amount of power compute that's coming, if we can't solve the power issue, we're in a lot of trouble. And it's not just here in the U.S. There's power grid issues in Singapore. There's power grid issues in Hong Kong, in Offenbach, in Dublin which is shut down right now, in Amsterdam. So you can go all around the world and we bump up into power grids that are completely stressed. And so we have to find new alternatives. And new alternatives is we find adjacent markets where we find alternative energy sources. And I think we're doing both at the same time, but I do think the ability to bring renewable power to towers, to data centers, to small cells, even as some of the fiber plant, this will be a big catalyst for us. So we're spending a lot of time and energy on that.

Well, you addressed my next question, which is how do we find the power. But this is the last question that I'm going to ask you and then we'll break. From my conversations today, the magnitude of demand is absolutely astounding. We're still building out the Internet in some parts of the world. We're still building out the cloud, and then all of a sudden, here comes a new technology that requires massive additional investment. As part of that, my question for you bluntly is, how are we going to finance all of this? And do you think the depth of the equity and debt markets are deep enough for us to finance all of this?

Well, it's -- it's hard to put a perfect crystal ball on that. I think, I wake up every day and I worry about -- now, I'm worrying about my 2024 plan. My '23 plan is now behind me. And I have a pretty good line of sight that we're going to hit all the metrics that we need to hit. I actually worry more about '25 and '26, looking further down the road. Because if you look at the amount of debt that has to get refinanced, from leverage buyouts and from securitizations that hit their ARD date, there's a pretty significant wall of refinancings out there. So I think the world has to go through this digestion phase, which is going through right now, which is why you don't see liquidity flowing as fast as it flew through COVID. And as we sort of come out of the COVID hangover and we start moving into the future, everything has to be repriced. So debt's being repriced, returns are being repriced and ultimately, it starts with an investor's portfolio -- institutional investor portfolios. And so if you're paying attention, you should be looking at the annual reports of sovereign wealth funds or U.S. pension systems or reassurance companies, and you should pay very careful attention to their asset allocation strategies. Where are they deploying capital? And that asset allocation pie, as you know, Michael, because you follow the sector, it's changed. And it's changed a lot in the last 3 to 5 years. The good news is, we are still very under-allocated from a private market perspective to: a, infrastructure; and then b, the subvertical digital infrastructure. And if you look at some of the work that, for example, PEI does or some of the consultants do like Hamilton Lane, you read these fundraising reports, you start to get a feel for where capital inflows are and capital outflows are. So outflows are stuff that goes to funds and portfolio companies and inflows go to returns. And so part of what keeps this magical vehicle going is that you also have to have exits, which returns capital back to LPs, and then they book the returns and then they bring it back to you. So last year, we exited 3 businesses at DigitalBridge. We're going to exit a few more businesses this year. And I know some of our private equity/infra GP brethren and sisters are exiting businesses as well. And so there has to be return of capital before you can expect to get more capital. And so that's a cycle, right? And that's a cycle that's playing out right now. I think for everyone in this room, the good news is, there's 2 trends that weigh heavily in this conference's favor, which is digital infrastructure by most major institutional investors is under-allocated anywhere from 50 basis points to as high as 250 to 300 basis points. So if an asset allocation pie is, let's say, pick a U.S. pension system, and they're putting 25% in fixed income, 25% into public equities and 20% in alts and 30% in private equity, where do we all sit in this room? We sit in alts, most of us do, alternative asset management which is infrastructure. And in that infrastructure bucket, most folks have less than 3% dedicated to digital. Most consultants are telling them, because it's a digital-based economy, you've got to be at least 5% in the digital infrastructure. And at the same time, that pie on renewables is less than 1% to 2%, and those same consultants are telling them, you've got to have 3% to 5% allocation in renewable energy. So I leave this conference the same way I enter it, which is optimistic because we still have a lot more capital in this room that we have to go raise collectively, not just us, but other GPs and some of the CEOs here. There's room for us to grow, which is good news. And then the advent of private debt. The way that we've historically gotten debt was, no indifference. You call Dan and Cecile and say, "I need some debt. You get them on speed dial and debt shows up 30, 45 days later." Yes, TD will provide debt and thank you to TD. They're one of our biggest lenders. We appreciate their support. But the senior bank market only carries you so far. And so we're going to be in this environment of private credit for the next 2 to 3 years. So most of you not only will deal with TD, but you're going to have to go deal with Aeris, you're going to have to go deal with Apollo, maybe you deal with DigitalBridge on our credit side. But private debt capital formation is here to stay. That's a big trend. And it's another area where asset allocators are under-allocated, which is why you see the likes of Aeris and some other some other debt shops doing really well. So more capital to be formed, we're under-allocated, both in debt and equity. And so I do think most of what we have to finance will get built. Just be patient. Everything takes longer. Someone asked me the other day at Investors who said, "Well, what's it like out there?" And I said, "Well, it's really simple. You got to work 4x as hard to get half the money." And they were like -- they stopped and they're like, "Well, wait a second. You work 60 hours a week. So how can you work 240 hours a week?" I'd say I'm not working 240 hours a week, I'm just telling you, you got to have more at bats, and you're going to get more nose and you just got to be patient. And ultimately, great businesses and great CEOs are built on one common characteristic, which is a combination of a little bit of fortitude but the ability to get back up even when someone says no, you got to go back at it again and again and again. So what will happen over the next 2 years, if you're running any of these digital infrastructure businesses, just be prepared for some nose, be prepared to be patient and just you're going to have to turn over more rocks for capital. But it's out there. It exists. You will get financed. It's just going to take you longer and you're going to have to have more meetings, but I'm still optimistic.

Marc, it's always a pleasure to sit down with you.

Thanks, Michael. Appreciate you.

Thank you for being here.