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

All right. Welcome, everybody. Last year, Marc Ganzi, the Founder and CEO of DigitalBridge. He got a cleanup for telecom infrastructure and outlined tremendous themes and so we decided not to make the same mistake this year. And invited Marc to kick off the conference, particularly from a telecom infrastructure standpoint because he really just has such a unique perspective. So Marc, thank you very much for coming, and thanks for helping us to kick off this great conference.

Yes. Thanks, Brett. Good to be here again.

You have a little bit of -- you had a very different business model in terms of how DigitalBridge has been designed to approach investing in telecom infrastructure, not just domestically but globally. I was hoping you can maybe just start off and remind the group here about the structure you put together, and then we can start talking a bit about some of the business opportunities that you positioned the company to pursue.

Yes. So. Look, we were -- 3 years ago, we were a REIT, we were a diversified REIT investing in commercial real estate and in digital infrastructure. And we made the decision to focus exclusively on investing and owning digital infrastructure. We thought that was the right direction of travel. I think what we couldn't anticipate 3 years ago was the velocity of the CapEx at which our customers were spending really to proliferate 5G networks, private cloud, public cloud, we'll talk about AI in a little bit. But just the CapEx has changed radically, Brett, since you and I have known each other 25 years. Think about a big year of CapEx was $100 million or $200 million. And this year, we'll put $7.8 billion of greenfield construction to work around the globe. And that quantum of capital just seems to keep growing and growing, growing. So the business model had to change. And I think what we offered to investors about 1.5 years ago was perhaps that you could invest and own in digital infrastructure in an asset-light model. And at that time, I think the story was a transition story. It was widely misunderstood. And I think 18 months into that journey, I think investors are now beginning to appreciate what we're doing. Because in this environment where capital is so scarce and difficult to aggregate, our model is working. We're able to show up for customers. We're able to meet those demands. And to be candid with you, we're playing offense. And I really like in an environment like this, the ability to play offense. We've got a strong balance sheet. We're still investing out of some of our private funds. We have an incredible co-invest program, where we have the top limited partners in the world, the top institutional investors in the world that partner with us and go deeper into specific opportunities, and we can talk about that a little bit, too. But the ability to go anywhere and the ability to form capital and to continue to show up for customers, that's our mantra right now. And look, it's working. I think our ability to deploy not only the $7.8 billion of greenfield CapEx, but at the same time, we're raising $8 billion of equity this year. We'll place somewhere between $7.5 billion and $11 billion of debt this year in a very challenging market across securitization, private markets and institutional bank markets. But -- it's again, this ability -- what I've discovered being as CEO for the last 30 years is it's in these difficult environments if you can raise capital, advantage -- advantage, you, because it enables you to continue to perform for customers, but it also allows us to go out and take advantage of opportunities that are going to reprice themselves. And I think we're pretty excited about that. So capital formation has been really important. And look, at the end of the day, our peers have followed us. I mean if you look at what Equinix did in xScale, they went out and got GIC. You look at what American Tower had to do to fund CoreSite, they had to call on Stonepeak to go fund that transaction. Digital Realty is doing a series of private capital transactions. And so this is the direction of travel. I think if you're going to be in digital infrastructure and you're going to make big commitments with customers, you've got to have the build to form capital. And for us now, the story is clean. Our balance sheet is clean. We've made a commitment to de-consolidate our last 2 assets, which is DataBank and Vantage which are both on schedule. And having a clean balance sheet and having a clean story, investors are now coming into the story in a significant way. We've had a great year in terms of performance. We had a really clean second quarter, and we anticipate the quarters will continue to be clean from here on in.

And just in terms of that last point on And just in terms of that last point on de-consolidation targeted time line and then to the extent proceeds come in, how would you think about recycling targeted time line and then to the extent proceeds come in, how would you think about recycling or reallocating?

It's a good question. So -- we've been really clear, Databank will be first. That will happen inside this quarter. We've been really direct about that. Vantage SDC, which is our stabilized data center REIT, private REIT that we own on a balance sheet with some institutional capital, that will also fall probably somewhere straddled between the third and fourth quarter, but a clear plan to get that done this year. And in terms of recycling capital, I think our best ideas are continuing to invest in ourselves. And so investing in ourselves really involve sort of 4 quadrants of thinking. One is buying our shares back. The second is paying down indebtedness. The third is continuing to reinvest in our funds group. And then the fourth is accretive M&A. We've been really clear about that. There are other digital-light GPs out there that also subscribe to our asset-light model that are subscale. And so we've been looking at a series of different acquisitions out there and as multiples have come in a little bit in our peer set, those acquisitions get more attractive and more accretive. So my philosophy in managing the balance sheet and deploying capital is to be incredibly pragmatic, have a high hurdle rate. Our hurdle rate has gone up because of the cost of capital. So I think you're going to see us do all of those things. And we've demonstrated our ability to pay down debt, to buy our shares back to do M&A. And then last but not least, continue to invest in our funds, which are performing really well.

We're trying to get a slide up that gives maybe a global picture of what the business looks like, and you alluded to this. You really are the only way that public investors can invest in a business that has global exposure to telecom infrastructure and your portfolio companies hit, I think, every type of asset class within telecom infrastructure and you're in most of the key regions, what is it about being global and diversified in your portfolio that you think is the right model? And historically, the public companies have been very singularly focused on one thing with one type of corporate structure generally a REIT structure.

Well, look, I don't think the traditional way of owning digital infrastructure was the wrong way to own it. I think there was a myopic approach to towers and fiber and data centers that has made sense for the last 20 years, But the world has changed. In a software-defined environment where our customers are buying different parts of the ecosystem in different parts of the world, the ability to show up and manifest ourselves on a global scale, $74 billion of assets managed globally, 40 different investments. We operate in Asia. We operate in Europe. We operate in North America, now have built 2 campuses in South Africa. So it's just for us, it's just the direction of travel at the end of the day. Our customers just don't want to buy one rack in a data center. They don't want to buy one peering point. They don't want to buy 2 strands of dark fiber. They really want you to show up and be able to deliver holistically a network. And that's happening. I think we've seen situations where we can show up with Zayo, with DataBank and Vertical Bridge and go build a network for somebody. And that ability to deliver a network, I think, is what is the changing narrative. That's going to be incredibly important in AI and we'll get to that in a second. But I think everyone thinks, okay, AI is just about big hyper-scale high-power density, big campuses, no, it's more than that. There's a lot of different aspects to delivering AI. And so we want to be the landlord of choice to the world's leading logos, and we have rapidly become that in the last 3 to 4 years, just that the velocity of the capital that we've put to work and the success-based CapEx that we're deploying, we're just getting more at bats than the strategics because we have the geographic footprint, we have the ability to show up with the product and go anywhere, and we have the capital. So when you can deliver geography and you can deliver network and you have the capital to invest in customers, you win. And I can guarantee you our competitors can't say that today, but we can.

You referenced earlier the nearly $8 billion of capital that your companies will be investing this year. Where is that going? What's been overweighted right now?

So that will be about 65% to 70% in data centers. And that will be distributed probably about 70% into public cloud and 30% in a private cloud. And when I say private and public cloud, keep in mind, DataBank does both from an edge perspective. So we're deploying a lot of that capital, as you can imagine, behind the world's most important hyperscale logos who are deploying networks all around the world. I think if you look at that CapEx that we're going to deploy, we currently have roughly about 2.8 gigawatts of in-construction activity right now. So that's a lot of power. And again, we're delivering that on 4 different continents at the same time, all very synchronized and going in the direction of travel that the customers want. And there's more behind that. We've actually seen our leasing backlogs at DataBank and Vantage and Scala and AtlasEdge and Nama. All of our data center platforms are up anywhere from 2x to 5x. So to me, backlog is really the health of any business, whether it's towers or fiber or data centers, your leasing backlog really tells you the story. Just take, for example, DataBank, which is our domestic U.S. edge computing business, their backlog has gone up 5x in 12 months. And we literally can't build data centers fast enough to keep up with the edge demand that's happening in these secondary and tertiary markets as public cloud has now proliferated out to the edge. And that won't slow down. I think maybe CapEx moderates at some point for the hyper-scalers on the edge side, but we do believe over the next kind of 3 to 5 years, edge is where you want to be. And the way we define edge, of course, is these Tier 2, Tier 3 markets, and that's working. DataBank's had a great year. They're at about 298% of plan and it's September. I don't think I have a portfolio company that hit 300% of plan by September. That's a new one.

And what's driving it? I'm sure that AI is part of the answer, but clearly, you were beginning to see the backlog fill before everyone incessantly talked about AI. So holistically, how are you thinking about what's driving the funnel?

Well, I think for DataBank, it's really about edge workloads. It's not about AI. Edge AI comes probably another 2 to 3 years down the road. So literally, what they're doing right now is supporting public cloud, supporting enterprise supporting mobile infrastructure. When you move into a decentralized RAN, you can start putting those radio access network cores in different locations. And keep in mind, where most mobile users are as the edge anyway. So if you think about where Nokia and Ericsson are deploying those software-defined networks, they're deploying in our data centers and on the edge: low latency environments that can quickly cross connect out to towers and small cells and that ability to take workload from 10 milliseconds down to 2 milliseconds is, as any of the CEOs will tell you tomorrow or on Thursday, they'll tell you that's a big difference in terms of the user experience. So Databank just happens to be the right company at the right time and the right -- with the right product. I think on the AI side, that's where really Vantage and Scala, which build big hyper-scale campuses are benefiting. And for Vantage, we're growing the fastest probably in Europe has been our best theater, North America, close second and Asia third and the GCC and Africa fourth and then Scala's our Latin America-based hyper-scale data center operator. And that business has also exploded. So -- but those leases are now not measured in 5 megawatts or 20 megawatts. Those leases are now measured in 50 to 300 megawatts. And then on the other side, we have Switch, which we took private about a year ago, and that business has also exploded. As enterprises and even the hyper-scalers want private cloud environments. So a lot of the initial big workloads for AI are sitting in private cloud. They're not in public cloud because really those language models are in a phase where they're learning. We haven't reached sort of the intuitive phase of these models. And so those environments need to be highly secure. And I think this is an area where Switch has really performed well. I think I said it a year ago at this conference that Switch will be better served being a private company than a public company. It was hard for public investors to get their minds wrapped around what Rob was doing in the private cloud. But since we've owned the company, we basically have hit our 5-year leasing forecast we hit in 1 year, just to give you a sense of how fast the leasing is coming for Switch. And look, I think Switch also is one of those unique stories where they have the right product and they have a highly secure environment. That Tier 5 environment where you've got 100% uptime is really important to the AI folks in the initial phases. They want to know they have a secure place to build out those language models. And the other thing that's really working for Switch right now is it's 100% renewable. And so you and I were talking before this about power and how difficult it is to procure power today. You look at arguably the two most important data center markets in the United States right here in the Valley and also out in Virginia. Both of these markets are shut down. The next upgrade to the grid here in Santa Clara with SVP is -- effectively it was 2026 and now that's being pushed out to 2028. And you can't even talk to Pacific Gas and Electric. They won't be able to deliver you 20 megawatts of contiguous power. You have a real power problem here in Northern California, which is really arguably the most important area for innovation in the United States. And then you go to Data Center Alley in Virginia. And the governor has done a great job there. Senator Warner has done a great job there. That looked like it was going to be a 5-year problem. They've now got it reined into about 3 years, and they've created some other counties where you can develop data centers. But where the customers want to be, most importantly, that part of the grid is shut down until 2025, 2026. So it's really brought to the forefront the scarcity of power and most importantly, the relevance of renewable power. And Switch being 100% renewable like, for example, in Reno, we've got 11 million square feet of data center capacity. We've leased into about $1.7 million of that. So I've got about 9.5 million square feet of expansion space. It's 100% solar. We share a solar farm with Tesla there. And that market is effectively depending on your -- the route of fiber you take, you're anywhere from 2 milliseconds to 10 milliseconds right here to the Valley. So Reno is becoming really the proxy for Silicon Valley for data center activity. And so a lot of the big workloads that you're going to see from the AI folks are going to end up in Reno. I think well, I know It's going where the power is basically. Where the power is. And also, I think, look, Microsoft, Amazon, Google, Salesforce, Oracle, these guys have it right, Apple they've made it very clear that if you don't have renewable power, they're not going to do business with you in the future. But that's -- for them, it's no longer a nice-to-have. It's table stakes. And so -- we're continuing to build renewable data centers with Rob and the team at Switch. The good news is Vantage is now learning what Rob's done, DataBank's learning and having these amazing ecosystem of companies where they can pass knowledge to each other is really beneficial. And Rob is really smart. He is -- he's got an incredible nose for innovation and the company has over 300 patents, as you know. So I think that those applied learnings are going to help in the edge. They're going to help in hyper-scale. And -- but it doesn't solve the problem. I think if we look down the road depending on the reports that you believe, whether it's 35 gigawatts or 38 gigawatts that's going to be built over the next 7, 8 years, we know that the existing transmission infrastructure in this country is inadequate to satiate what's coming from AI. So there is this kind of cliff moment where it's maybe 3, 4 years down the road where the existing grid infrastructure in the U.S. just runs out of the capacity to deliver the power. We can generate the power, but we just can't deliver it. And so that becomes a real problem. Look at what Texas is doing. Texas is redoing their entire infrastructure grid right now, which is ERCOT, which was a big project in Texas, but that's going to take 10 years. So the thinking has to happen now. We have to be out in front of this and I don't think we can sit there and wait for government to come up with a solution. This is going to be a private sector-based solution. And that's, for example, what we're doing at Switch. We're not waiting on the state of Nevada. We're not waiting on the state of Michigan. We're not waiting on Georgia. We're not waiting on Texas. We're creating our own power narrative. And ultimately, the goal for us is we need to get behind the meter. Right now, we're in front of the meter, but the goal is in the next 2 to 4 years, I've said it very clearly, the vision for DigitalBridge is we not only have to be the most important landlord in the digital space, but we also have to be the most -- the largest landlord that delivers carbon-neutral solutions for our customers. Because I think if we can help solve that problem for our customers, the key is they're going to come back and do more repeat business with us, which what I've learned in 29 years of this is, if you take care of the customer, they'll take care of you back, and we've got really good customer relationships.

So how is that shaping where you want to invest capital geographically? Obviously, in the Nevada desert, you have a lot of sun and a lot of space, but that's a unique situation.

That's a unique situation. I think we've used hydro. We've used solar. We've used wind. In Europe, we're looking at a lot of wind solutions. So for example, in Dublin and Cardiff, where you've got a lot of wind, there, we're looking to deploy significant amounts of wind farms adjacent to the data centers and right now sell into the grid or eventually go around the grid and create our own substations. We've done that in Brazil. Scala has done that, where we've sourced all of our power through hydro. And then what we've done in Campinas is we've created our own substation, we become our own power company. And now what we've done is we've just bypassed the national infrastructure. We have our own infrastructure. And so we deploy that into our campus. And at the end of the day, that's what the hyper-scalers want. They want you to deliver 100% green source solution for power.

And this is not just for ESG. This is business continuity.

This is survival. I don't think it's ESG. And some people think a year ago when I said that, that I was being a bit dramatic, I wasn't. I'm just doing the math, right? There's just an infinite amount of power. And we see demand just sort of stepping up each year in terms of total quantum. Maybe that plateaus and the industry is delivering 5 to 6 gigawatts a year. I mean we're on pace as an industry to deliver about 5 to 6 gigawatts this year. It will be the most power that the data center sector has delivered in the history of the business will be this year, 2023. And then at the same token, we're all investors in the room. So you got to pay for it. How do we pay for it at the same time, how do you form the capital to go out and do it?

Yes. Well, speaking of paying for it, I mean, we've been dealing with inflationary cost pressures now for over a year, particularly energy cost of capital has gone up based on where interest rates are. How much success have your portfolio companies, we'll stick with the data center space right now, had a passing through the higher cost of doing business and of investing to make sure you can still get the returns that you need to get relative to your cost of capital?

Well, we looked at it as there were 3 vectors that we were focused on, and we had a data center off-site last December, where we talked exactly about this, which was, one, how do we get to our lowest cost of capital. We put our 6 CEOs in a room and came up with a game plan, and it's worked well, but it's hard. The second is how do we provision as a collective group to looking at the 350-plus data centers we own worldwide and the amount of power that DigitalBridge portfolio companies are consuming. I think we're probably #1 now, or certainly there close to Equinix in terms of just square footage and power, not in terms of probably EBIT and earnings they're a little bit older than us. But the key to that is showing up as a global data center provider so that we can level the playing field in negotiating in terms of chillers, generators and the respective hardware or componentry that we put into those data centers from electrical work. And I think we've been able to do a good job of getting our cost down. It took some time to get there, but I think this year has been a good year. Last year was a really tough year. And at the same time, as you know, Brett, rents are just like this. So we've seen a complete repricing of our new inventory and we haven't seen any pushback on that pricing. And so what we've done is we've priced effectively ahead of interest rates, and we priced ahead of inflation. And so it's no surprise that when you read the reports from CBRE or Jones Lang, you've seen rental increases in the order of magnitude of 20% to 25% in some of the big flat markets in Europe and the core markets here in the U.S. There's been some markets where we've priced, Brett, above that. Where rents have moved significantly up. And so -- but at the same time, we're also assuming that the cost of capital is going up and that we don't see cost of capital declining until probably second quarter next year. This will be the first time we think we see a real rate cut, where we can start seeing the cost of debt go down. So to that end, we securitized most of our debt in 2020 and '21 and '22. And so we have no material debt maturities in any of our portfolio companies in '23 or '24. And in fact, 78% of our debt is fixed, and it's fixed on 2020 and 2021 interest rates. So we kind of had a hunch this was going to happen. And so we cleaned up the balance sheets of all of our portfolio companies. And the most important thing is we spent the last 2 years deleveraging. So we had basically a 47% loan-to-value ratio. Today, we're at about 43%. And in this market, it's really hard to delever. Well, how do you delever? You go out and you lease, you cut costs, and that's what we did. So there's a way to get there, but I think the key from our perspective is having the youngest fleet in the industry, our average data center is less than 3 years old across the planet. So we have the youngest inventory out there. We're a lot younger than DLR, we're a lot younger than Equinix. And so having a younger set of assets with the right power density, the right fiber, the right cooling configuration we've been able to price a little higher than our peers. We don't give out rental rates, but we can tell you with total certainty that rents today are very strong. And 3, 4 years ago, I think the industry, we were price takers. And I think today, we're really the price maker. And that's been the shift in what's happening in data center land.

Another side effect of the higher cost of capital is just really chilled the M&A environment. And it's normal we see this every time rates go up, the sellers of assets pause. They don't want to take a lower price, they wait -- where are we in the cycle of M&A coming back into telecom infrastructure? And do you think this is going to be a big opportunity for the DigitalBridge portfolio companies?

I think it's a huge opportunity. We are doing M&A. We're doing tuck-ins, small tuck-in M&As. We're very active right now in the investment committee. There's 3 to 5 new deals a week. You are right, people are sitting on the sidelines. They're kind of doing this. They're putting their hands underneath their legs and waiting. I think it's -- this isn't like '08 and '09 right? This is more like '01, '02, more like dot-com crash. And I think it took us to come out of the dot-com crash and probably 24 months to get out of that. And I don't know what we're going to call this correction, whatever we want to call it, the power correction maybe, I don't know if we'll have to figure out, the COVID correction. But we're probably maybe halfway through that M&A stalemate. And remember, in '03, the M&A market really picked up. And the way the M&A market picked up was mostly through restructurings. So we were super busy at that point in time in my career, I think I was at Deutsche Bank, and we were doing mostly restructuring. That was on the private equity side of DB. And that market took 2 years to sort itself out, and then it was '03 to '05 until we got back to a normal M&A cadence, which was '05, '06. So really, if you look at that dot-com crash from '01 to 2005, it was actually a 4-year window where it took multiples for years to recover coming out of the dot-com crash.

But telecom infrastructure is a much more established category. That money is far more sophisticated and deeper -- so do you think we could see a faster recovery into a normalized M&A environment?

Well, I think we will. I think it doesn't happen until next year. I think interest rates have to sort of reveal themselves a little bit more I also think this notion of private lending against bank lending against securitized lending, the banks are relatively closed for business. Regulators have put a very high bar on the carrying cost of bank debt on balance sheet. So what we're seeing is the banks are still sort of trying to really go out and syndicate a lot of the bank debt they put on in '01 and '02. And so until these big banks sort of flush through their balance sheets, you're going to continue to see the rise of private debt capital formation. And the rise of unitranche loans. And so we're seeing that in the marketplace. I think we're constantly pricing out providers of capital like Apollo or Ares or even some of our peer GPs like Blackstone or Brookfield. What you do see is there's a lot more collaborative approach to lending. And I think you're seeing a hybrid of senior banks and private lenders coming together. And we haven't seen that in a very long time. But that's a function of really just an evaporation of the liquidity in the system. And I think that -- again, that will continue for at least another year. I know, for example, we have a series of credit funds. Our credit fund is doing incredibly well, way ahead of plan, returns are up, yields are up, and we've got a pipeline that's 30 deals deep, and we're saying no more than we're saying yes. So we're being very selective as are other folks like Apollo and Ares and people that do this on a day-to-day basis. I think in terms of the M&A market, just to come back on that, I think everyone for years and years used to think M&A was just a game that was played by strategics. And I think the chessboard has shifted. And I think you have infrastructure GPs, but now you have LPs on a direct basis doing deals. And so we see very sophisticated large sovereign wealth funds. We see sophisticated insurance companies and pension systems being more active on a direct basis. And so that does add another buyer set to the ecosystem. I mean, the deal we did for Beanfield with OMERS is a great example of that. There were strategics that showed up to that auction. There were GPs that showed up to that auction. And then there were direct LPs that showed up to that auction. The 2 best bidders were 2 Canadian pension systems. And the highest bidder was for that asset was OMERS. And so we were happy to partner with OMERS. And some of these transactions also require you to be creative. And I think, again, one of the areas where an asset-light model works is we have over 200-plus global LPs. We have the top 10 global investors in the world. When there's a really interesting M&A trade, we go partner with them. And that's, again, a solution set that we have that others don't have. All right?

Alright. We're running out of time. I want to talk about fiber. I've covered the telecom space for a very long time in their public iterations, the public fiber companies have never really lived up to public market investors' expectations, one of which was Zayo, which you now own and operate. Can you talk about how you think about where fiber is in the evolution of real telecom infrastructure, value creation? Maybe talk a little more about what you're doing in Zayo?

Yes. Well, first, look, fiber is infrastructure whether in its most basic format, it is the critical arteries that connect everything, connecting cell towers to RAN hubs to data centers. So it's vital, it's critical. And I think where the Street has gotten a miss with fiber is that a lot like data centers, there's 5 or 6 different business models embedded in fiber. But not all fiber businesses are the same, just like not all data center business is the same. So again, we come back to the same thing you and I've talked about for 20 years. If it's digital infrastructure, it's got to fit sort of 4 quadrants, right, which is, first and foremost, do you have a long-term lease. Second, do you have high exposure to investment-grade counterparties? Third, do you own the fee, you own the land? And then four, do you have a unique permit? Do you have a barrier to entry? I think why you love towers for so long is if you get a great building permit in Burlingame by the airport, no one's going to build a tower next to you. In the data center space, if you have a great will-serve letter from the power company for 90 megawatts in the middle of Santa Clara, nobody is going to be able to build next to you. The problem with fiber is there's no privacy to permitting, as you know. As long as you're filed as a CLEC in a state, you can go on the same pole run the same fiber as the ILEC, as the cable co and as the over-builder. So there's no uniqueness. So it sort of fails in that fourth and final quadrant, which is you don't have anything that's unique or exclusive in terms of being able to box out your competitors. I know some people would tell you in the cable business, the cable guys feel like they have -- some of the cable guys feel like they have a unique franchise agreement in some cities, they do have a franchise agreement. But most cities now have a second franchisee. So you don't close the zoning door behind you in fiber. And even if you build a really unique suboceanic cable route, somebody can come right behind you and build another suboceanic cable out in the same place. So I think that's one of the areas where there's a lot of competition. And when you have a lot of competition, you can't set terms. And so a lot of the fiber agreements tend to be between 2 years and 5 years in duration except for dark fiber, which, as you know, is 10 to 25, 30 years. And so the term of the cash flows is shorter, you're less exposed to investment-grade counterparties and you don't own the fee, you don't own land. You're typically running through an easement. And so it kind of -- while it's infrastructure, it just kind of has some small blemishes compared to towers and data centers. And so I think that's where investors get a little sideways where the fiber is. And look, the industry hasn't been a particularly great industry to own because most of the stuff trades at 8x to 12x to 13x and then there was this euphoric moment, where infrastructure capital came into fiber in the last 3 or 4 years where people started paying mid-20s for fiber businesses. And we challenged that. We sort of said 2, 4 years ago, I said, we're out. We're not doing that. And so we stayed out of resi fiber and a lot of people made big bets, huge bets, particularly in Europe, where you're seeing a lot of bankruptcies now, and you just can't pay mid-20s for fiber assets. It just doesn't work. That dog doesn't hunt. But in the situation, they were we paid 10.8x, that did work for us -- and we sold the data center business at 16x and so we delevered the business. And we also knew that Zayo had a really good and unique plan. It had unique long-haul routes. It had unique metro rings, and we knew that the business wasn't being managed well. We knew we had to change the product set. We had to change the sales team, changed the commission structure. We changed the capital structure. We're going to probably change the capital structure again. And ultimately, now Zayo is posting strong high single-digit, low double-digit growth for the first time, organically, for the first time in 3 years. So it's taken us 3 years to fix it. I'm not here to tell you we're completely out of the woods, but the products that are working are SD-WAN, data center connectivity, fiber to node, fiber to towers, fiber to data centers. E-rate's working. We just won a $96 million grant from the NTIA to go build out some rural networks. And so we've had to work a little harder. We've had to be a little more creative, but now we've got the engine fixed. We finally have the right management team in place. We had to fix the back office. We had to reinvest in the network. We spent over $190 million in voluntary CapEx the last 2 years to fix certain pinch points in the network. But fiber is hard. It's not an easy business. What I love about data centers is you signed a 15-year lease with an investment-grade tenant and they control the data hall. In the fiber business, as you know, that's not the case.

Is the end market supportive of owning a fiber asset? Do you see, for example, AI or other themes driving up demand for the infrastructure?

Well, what we do see is, particularly on certain low latency data center routes, we're seeing customers go from 4 pairs to 12 pairs to 24 pairs now to 200 to 400 pairs. So the good news is like a tower lease as a customer takes more capacity on that network, yes, our rates do go up. we have the ability on our master service agreements with those carriers as they take more pairs, we get more rent. So that's working. That's great. That actually feels like towers a little bit. The gift keeps giving, the amendments. So that's going well. I think SD-WAN is working. But it's -- again, it's hard. I think if you're focused on the hyperscalers and you're building the right routes and the other thing is capital efficiency. I think the previous management team was sort of believed it was an open checkbook, and I challenged that about 1.5 years ago, I said, look, we got to stop putting up all the CapEx because we know in other successful digital infrastructure business models, you have a combination of NRC and MRC. So now what we've done is we're massively lowering the CapEx and say, we'll cut CapEx by -- gross CapEx, we'll cut by 50% this year. Net CapEx will cut by 65%. And our paybacks instead of being -- the previous management team thought a 5-year payback was good; today, we think sub 24 months is a good payback, and that's what we're getting. Really good capital efficiency, which is why we're turning the story.

All right. That's a great place to end. Marc, thank you so much for being here.

Thanks, Brett. Good to see you.