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

Good afternoon, everyone. We can get started with the last presentation of the day. This is Craig Siegenthaler from Bank of America, and it's my pleasure to introduce Marc Ganzi, CEO of DigitalBridge. Marc originally founded DigitalBridge in 2013 and built the firm into a leading global manager of digital infrastructure assets. Previously, Marc founded Global Tower Partners, which grew to become one of the largest privately owned tower companies in the U.S. before it was acquired by American Tower Corporation in 2013. Marc, thank you for joining us.

Thanks, Craig. Good to be here.

Some quick background on DigitalBridge before we get started. DigitalBridge is the only pure-play global alt manager dedicated to investing in digital infrastructure. Its investment portfolio spans across 5 key verticals: data centers, cell towers, fiber networks and also edge infrastructure. I might have missed one of them. But DigitalBridge has a 25-plus year management track record and manages $75 billion AUM across the digital ecosystem. This is the first financial conference that they attended having transitioned from a diversified REIT to a pure play alt manager just recently. Before I begin, I actually had more of a personal question for you, Marc, I heard you're ski racer. Do you still race?

I try not to. I tried to just maybe once or twice a year ski in charity races, but I've kind of hung up my cleats, so to speak.

How fast do you go actually?

I don't know. I think if it's the last charity race I skied I think we're going about 35, 40 miles an hour. More of a giant slalom format, but growing up in grade school and high school and college, I ski raced.

Very cool. So let's get into kind of a little bit of history here. How did you get started in digital infrastructure?

Well, my first start was I built my first company in 1994, Apex Site Management. We were at that point in time, building literally the first digital PCS network. So if you remember when the cell phones went from analog to digital, that was literally in the early 1990s. And so we started a business there myself and 2 guys from [indiscernible] and grew that to be the largest property manager of towers and rooftop infrastructure and ultimately merged that in with another company called SpectraSite in 1999. We took that public. BofA Merrill Lynch was one of the underwriters. And we -- that was a great run. I stayed there as the President for about a year, really didn't love running a public tower company at that time and actually had the opportunity to go to New York and work for Deutsche Bank in their merchant bank. So I took that opportunity and spent 3 years serving off my non-compete working in the private equity space. So one of these sort of interesting CEOs that's been an entrepreneur founder, moved into the GP space, then moved back out again, starting Global Tower Partners in 2003, building the first cell tower REIT. And then in 2013, starting DigitalBridge and being back in the GP investor space. So kind of had a unique career where I've toggled back and forth between being an operator and being a GP.

Now given the transition from a REIT and for those of us like me that are pretty new to DigitalBridge, what does DigitalBridge look like and do today?

Well, look, today, we are a multi-strat alternative asset manager. We operate on a global scale, headquartered here in South Florida. We moved our headquarters from L.A. to South Florida at the beginning of COVID. Big presence in London, have about 100 people in our London office. We have about 35 people in our Singapore office, about 70 professionals in New York City. And when I say multi-strat, we have our sort of flagship infrastructure funds. We have continuation funds. We have our core fund. We have our credit fund. We have our late-stage venture growth fund, and then we have two liquid securities funds. And so we have multiple strategies, Craig, but all focused around one core thematic, which is this notion of digital infrastructure and being at that street corner. And as I like to say to the team, we try to own that street corner. And so we just published earnings today, now at $80 billion of assets. We grew AUM by $5 billion inside the quarter. And the reason we like owning that street corner is because we think there is a secular thematic that is super interesting. And we think that wallet size continues to grow. It's not shrinking. So when you think about the world of asset allocation today and you're sitting with LPs, and they're talking to you about their denominator, they're talking about their numerator, and you really drill down at the client level. We've walked away with kind of 3 sort of themes in the last 18 months around allocators. One, most LPs are underallocated infrastructure. Check. Second thing is they're definitely underallocated to digital infrastructure. And then the third thing that we've learned in this journey over the last 10 years is LPs generally like to be with the best of the best, whoever that best is, whether it's the best in private equity, whether it's the best in real estate, whether it's the best in infrastructure or credit. We do think they -- normally, the gravitational pull takes you to where they feel like the best ones are. So it's no mistake that people like Blackstone and Brookfield and Ares are very good at fundraising and do quite well there. And they have a great multi-decade track record. We perhaps have a younger track record being 10 years old. But I do think that $80 billion of AUM on a factor of 2x to 3x, we're the largest manager of digital infrastructure in the world. And we've made a decision that, that's the place we want to be. The reason we want to be there is not only the 3 things that I've just told you, but there's a fourth factor that we think is really incredibly important right now, which is basically the wallet size of digital infrastructure. And so if you turn the clock back to when we started the firm in 2013, between the listed infrastructure and private infrastructure build, digital infrastructure was probably a $5 trillion in $6 trillion wallet when we started. Today, that is about $14 trillion, growing to $15 trillion this year. And the key to that is it's those secular tailwinds. It's artificial intelligence. It's cloud computing, it's private 5G networks, it's 5G networks. It's WiFi 6. It's low earth orbiting satellites. There's so much happening today, Craig, in our swim lanes that our TAM is growing to the tune of about. It was $500 billion a year, maybe this year, it grows $600 billion to $700 billion because of AI. And meanwhile, artificial intelligence will cost $6 trillion to $7 trillion to develop over the next 6 years. So what's interesting is that wallet grows, and we look at our AUM growth, which has generally been on a, call it, $12 billion to $20 billion cadence for the last 3 years. We're still not taking enough of that wallet, right? That wallet size is essentially going to $15 trillion. So we think that's ultimately going to be very important for us because we can raise money around the opportunities that we have whether it's credit or core or our flagship funds or continuation vehicles. But also there's a general recognition that digital infrastructure is really important. So if you listen to the narrative at places like at Brookfield or Blackstone or EQT or some of our peers, they're all talking about this thematic. They're talking about data centers. They're talking about mobile towers. Why? Because it's a great place to park capital, long-term contracts, it's infrastructure, 10- to 30-year cash flows, mostly investment-grade counterparties. And so it's a good place to be investing. So we like our direction of travel. We like kind of the cadence we're in. And certainly, we like our position in the street corner that we sit on today.

Given your long-term contracts, how do they adjust for inflation, if inflation stays elevated?

It's a great question. So there's 2-ways contracts generally move in our industry. Usually, a fixed escalator somewhere between 3% and 5% or it could be a CPI escalator with some type of floor. So generally, our cash flows down at the 50-plus portfolio companies we own are generally moving up every year on the basis of their escalator. But also the great thing we love about digital infrastructure is the majority of our customers amend their contracts, typically 3- to 7-year cycles, they're amending their contracts. Why are they amending their contracts? Because they're adding more gear. So if it's a cloud player, they're adding another server. If it's a 5G mobile operator, they're adding another antenna. If it's a dark fiber provider that's trying to get connectivity from a data center to another data center, they're adding two or four pairs of dark fiber. So once a customer gets in place, they tend to be very sticky. They don't move. And most importantly, not only do we get the escalator, but our customers keep growing with us. They keep adding incremental equipment and this is what the other infrastructure investors have figured out in the last 3 or 4 years is that this is a very durable sector with strong embedded growth.

So digital infrastructure seems like it is in a hot moment here where you have both GPs investing more, you have LPs demanding more. So where do you see the industry evolving over the next several years here?

Well, I think that, generally speaking, we are in the sort of cadence of $500 billion to $700 billion of CapEx added every year. So that does create a lot of room for everybody, not just ourselves, but certainly, it adds room for the other alternative managers that are out there, the infrastructure, GPs. So we don't see a significant decline in opportunity set. In fact, I would offer to you that the opportunity set is growing not only in our value-add flagship funds, but the adjacencies that we've created in core, our listed securities funds, our late-stage venture growth funds, all of those business units are growing at the same time, which is pretty exciting. So this transition from diversified REIT into multi-strat alternative asset manager, I think was timed correctly. It was a good time and a good decision for us to do it. And generally, a recognition that traditional REITs, traditional digital infrastructure REITs like American Tower, Equinix, Digital Realty, all of them are actually now creating joint ventures where they're out raising third-party capital to grow, because they recognize, particularly when you're dealing with cloud and AI, it's not a $20 million CapEx opportunity. It's not $100 million. If you're building a cloud-enabled data center, it's measured in $800 million, $900 million, $1 billion of CapEx for one location. And so being in an asset-light format, it really provides us the opportunity to go fast and to do more with our customers and our customers need a lot of help right now.

Specifically on limited partners, where are their allocations on average to digital assets today? And where do you see that going in 5 to 10 years?

So I think when we first got in the business, asset allocators, we were pitching this as a value-add sort of private equity idea. And then ultimately, we found out that, that probably wasn't the right swim lane for us. So we moved more into the infra bucket. And we also went out and saw real estate investors. Because some of the things we do like tower REITs and data center REITs that does lend itself a little bit to real estate investors. So I'd say today, our composition is probably about 90% of it is infra LPs. And that's -- and coming out of that pie, that piece of that allocation, I'd say another, call it, 10% is someone that might have us from a core allocation or might have us from a real estate allocation. But very much so, when we're sitting with an LP, we're usually sitting with the director or the head of infrastructure, named U.S. pension or named Canadian pension or named sovereign wealth fund. Our target audience when we're out pitching is generally that audience. And then if it's credit, obviously, we migrate into the credit suite of an LP. And I think we've gotten a little bit better in terms of how we're a bit more surgical in fundraising and making the conversation, Craig, more strategic with LPs. I think there's been a real pivot in our fundraising in the last 18 months, which is really thinking about clients on a holistic basis. This is something we didn't do 2 years ago. But today, with a global fundraising team of 28 people, very strong now in Asia, very strong in Europe, very strong in North America, very strong in the GCC. We're having really good conversations that don't always involve a fun product. But really, the best conversations I'm having with LPs is actually when I don't have a funding market, when I can sit down with them and say to them, where do you want to go? What's your architecture? How do we give you the right exposure? Are you willing to take EM exposure? Do you want more alpha? Do you want more yield? And so again, having that multiple arrows in our quiver gives us a chance to have a really strategic conversation with an LP now. And the goal is ultimately to have LPs use not just one product, but have them buying multiple products from DigitalBridge that are looking at our ecosystem and our flywheel that is differentiated, let's say, versus another alternative asset manager.

I was curious on your investment performance. Are you able to summarize high level track records, net IRs, MOEX data points like that just to summarize? Because the funds are flowing really well. The performance would support that.

The performance is good. I would say our vintage on our first fund was a 2019 fund. Fundraising stopped in 2020. We were fully invested by mid-2021. And we're just now moving into harvest in that first fund. And so the fund model there is literally projecting right where we thought it would, and we reported today our first Fund I and Fund II performance. Prior to the first fund, we had a series of 6 continuation funds that were single asset purpose vehicles. And we don't get to report those. But we've had 3 recaps in those businesses. Vertical Bridge got recapped, DataBank got recapped and now Vantage is now being recapped. And so those results are very strong because, as you can imagine, those are businesses that are 7, 8, 9 years old, which had the chance to create that compounding that we like, which is the impact of the amendments, the escalators and the value creation you get in digital infrastructure that really manifests itself between years 6 and 10 when you start compounding cash flow. So we're a little young in the first fund vintage, certainly young in the second fund vintage. But when investors due diligence on us, and we do have a 25-year track record of my career, and my partner, Ben Jenkins, who was 16 years of Blackstone, helping them run their communications fund. So if investors ask the right questions and diligence, they get a very big track record. And that track record is very clear about what our capabilities are outside of DigitalBridge, inside DigitalBridge. And I think this will be an important year for us. I think we delivered a little over about $4.6 billion of DPI in the last 18 months. We've got a business plan, as we said on our call this morning, to deliver another $5.6 billion of DPI this year. And that will put us in a pretty good place where we've delivered about $10 billion of DPI over a 2.5-year period. That will be a lot of track record. That's returning a lot of capital back to LPs. And in turn, it gives us the chance to ask for that capital back.

So I want to hit on AI, artificial intelligence, generative AI, like big topics and financial services. I was curious how you're exposed and also what role your portfolio companies are playing in the theme of artificial intelligence?

So we're literally at the ground floor of AI. Customers that we've had for a decade or more are building these big language learning based models. And so I tell investors, look, AI is going to take about minimum 10 years to build and the reference point I give people is think about public cloud, this year, public cloud will be 11 years old. And we've spent about $3.8 trillion of CapEx manifesting the public cloud, which is about 13 gigawatts of power. And so that $3.7 trillion of CapEx is not only the data center spend, but the servers, the fiber optic cabling, the edge computing, all of that infrastructure that it requires to make public cloud work. We believe AI follows a very similar flight path as public cloud has followed. So look, we think it's 10 years, but there's only one big difference. We're going to spend twice the CapEx. We'll spend close to $6 trillion to $7 trillion in CapEx and the total amount of compute power will be about 50 gigawatts. So remember, again, we're 10 years into public cloud, and we're at about 13 gigawatts of power consumed at data centers. We're talking about that going up by a factor of almost 3.5x over the next 10 years. So just to make artificial intelligence work properly, which is true generative AI applications, which is what financial services firms like BofA want, like DigitalBridge wants, like all these investors want, that will take time. We'll spend 3 years building these language-based models. Those language models kick in what's called inference. And then when you get to inference, ultimately, the model start thinking for themselves. And that's where we really get the scale and the efficiencies that I think enterprise wants. So that transition, we're probably still 12 to 18 months away from being in true generative AI. And then once we do get to generative AI, it then moves to what we call edge AI. That's about 5 to 6 years away. And then we have sort of what I would call more consumer-based AI, which is down at the street level, which is probably 7, 8 years off, which where those applications are sitting at cell towers, small cells, mobile infrastructure that's more edge based. So what's really interesting about AI is if it does follow the cloud, the ecosystem of digital infrastructure continues to benefit as you build that out, right? More fiber, more edge computing sites, more cell towers, more small cells, all of the associated ecosystem that's needed and that just creates more investable opportunities, not only on the equity side, but also think about our core strategy and think about our credit side. We're super busy in credit today. I think digital infrastructure credit is hundreds of billions of dollars of TAM opportunities. So we're in the middle of launching our second strategy. Our first strategy was really successful, and we really like what we see on the credit side as well.

So Marc, the transition from that being a REIT was a big deal, and you've done that. I have $75 billion of AUM now, but I think you're [indiscernible] after the quarter today, right? So I should [indiscernible].

You can say that. I'm giving away [indiscernible].

All dedicated to digital infrastructure. So what is your plan now for the future? Like what are the next steps over the next 5 years in terms of objectives?

So our 5-year objective is, I think, of this business sort of vertically and I think about it horizontally. I think as we think about the horizontal purview of where we are, we definitely want to continue to grow our credit sleeve. That's really important to us. We think that's going to be a really big opportunity for us. We have stayed out of private equity heretofore, but there's a lot happening in digital private equity. So we're looking at that historically, when we've looked at a new strategy, we're generally a builder, not a buyer, but we are looking at build versus buying private equity, and I think this is the year we'll make that decision, and we'll announce that. The third thing we've been looking at is energy transition. And why is that important? It's important, because all of the things that we build consume energy and consumes mass quantities of energy. And ultimately, when you talk to other managers in the infrastructure space, they'll tell you the biggest challenge we have right now empowering this next generation of technology is renewable energy. And so when we look at the aging transmission grid in the U.S. and in Europe and literally, there's less than 10 gigawatts of power available to power European and U.S. data center space. You have to rethink the transmission grid, you have to rethink renewable energy, and you have to think about how to get behind the meter and ultimately store that energy and bring it into the digital infrastructure. So we've been spending the last 2 years thinking through that, how do we create unique solutions? And ultimately, we went out and we bought an infrastructure GP 2 years ago. We bought AMP Capital. We bought their infrastructure equity business. Really good trade for us, it demonstrated we could go buy another GP. We could fully integrate it. We integrated the team, got all the synergies out of it. In fact, we got probably about $2 million of cost synergies better than we thought. And then we renamed it. So we called it, instead of AMP Capital, we called it InfraBridge. They had a Fund I and Fund II. We're really focused there on energy transition, digital logistics and middle market digital infrastructure, which is that kind of $100 million to $200 million ticket that we don't write. So we're really enjoying this sort of adventure into middle market infrastructure. And we've done a great job turning those funds around, because AMP had kind of a challenging time with the previous management team. And we've learned a lot in that process. Beyond just the capability of being able to buy another GP and integrate it on our platform, we've also learned that the energy transition sleeve of what AMP was doing was very important to us. And so there was a strategic benefit there. And so we're very focused on that. We're going to grow that. We've got some great assets in those 2 funds that might lend itself towards continuation vehicles. And so we're going to keep executing our playbook on those set of assets, and it's working really quite well. So the vision for us is obviously develop a private equity strategy, continue to grow credit, continue to grow our middle market infrastructure business and then really focus on our flagship funds. So we're in market right now with our third strategy. It's going quite well. In terms of the fundraising, a little slower than I would like. But nonetheless, we're about where we thought we would be. Check sizes are a little smaller, but we've taken in a lot of new logos. As I said, we're growing our credit strategy this year. We're out fundraising on our late-stage venture growth fund. And so this is the first time we've actually had 3 products in market at the same time. And all the products are moving in the right direction of travel, that's hard to do, as you know, when you're out raising multiple products at the same time as a multi-strat alternative asset manager. But we're hitting our marks. We like where we are. And ultimately, as we've said a few times, we're roughly about $80 billion of AUM today. We think we're on a steady cadence to grow AUM between $15 billion to $20 billion. We put out guidance today around fundraising. We'll raise another $7 billion of fee-bearing capital this year. Hard to say if there's a beat there or if there's a miss. I think there's maybe more upside to a beat than there is a miss as we're starting to see allocators come back now. It was kind of a tough fourth quarter. It was a sort of a sleepy start to Q1, but now it's really picked up a little bit. And we do think LPs are ready to allocate now.

Okay. What are your capital return priorities today? I know it's probably changed from the REIT model today between M&A, organic, dividend, maybe buybacks, probably no buybacks given the growth trajectory, but...

It's interesting, another analyst from one of your competitors asked that same question about 2 hours ago. I said, look, there's 5 ways that we can be thoughtful about deploying the cash on our balance sheet. And we ended the quarter with about $150-plus million of cash, plus a fully undrawn revolver. So we have about $450 million, $460 million in dry powder. We've actually executed all 5 decisions previously in the last 2 to 3 years, which just goes to show you we're very pragmatic, we're very nimble about how we think about it. But I think the key word to that is being opportunistic and making sure that we deliver the correct return. And the return that we benchmark ourselves to internally is we want a 20% return on that cash. That cash is precious. So it has to have a very high bar in terms of its return. The #1 place we put capital so far is in our products. So as the sponsor of the GP commitment. And then, of course, the management team and my entire investment management team writes a check to go parallel with our balance sheet. So we generally, as I like to say, we eat what we cook. And so we're very good at that. That's kind of priority one. Priority 2 is, over the last 2 years, we've been deleveraging. And so when we took over, when we did the merger with Colony Capital and became that diversified REIT over 4 years ago, we inherited about $17 billion of debt. Today, we've got about $300 million of securitized debt. We've got a little less than $800 million of preferred equity. And we're -- on a pro forma basis, we're roughly around 5 to 6x leveraged. So we've taken leverage way down in the last, particularly the last 2 years, but we're always opportunistically looking to take down those prefs or to delever. And ultimately, target leverage for us should be between 3.5x and 4x as an infrastructure alternative asset manager. The third thing we look at is share buybacks. You're right about that. We've done that. We bought our own stock back frequently. So that's the third opportunity. The fourth is M&A. So as we look at AMP Capital, that's definitely something that we want to be opportunistic. We know M&A prices are pretty hot right now. So we're being very disciplined. We've looked at a lot of potential acquisitions in the middle-market infra space, adding to that InfraBridge strategy, and we've looked at PE and we've looked at credit. So we're out shopping. We haven't really found anything this year that sort of speaks to compelling value. We have a lot of discussions, got a pretty big pipeline. And generally, a lot of the small-scale private guys, they do want to jump into a bigger platform, particularly for fundraising and for back office and SEC, there's a lot that we bring to that party. So I'd say the fifth thing that we look at is standing up new businesses. So we'll put capital to work to stand up a new business. We did that with our credit strategy. We did it with our liquid securities portfolio. We've done it with our late-stage growth fund. And we look at that as an investment in a business. We think of a new strategy as a new platform. So ultimately, deleveraging, buybacks, M&A, GP commits and standing up new businesses are kind of the 5 things that we think about in terms of trying to put capital to work and ultimately then return that capital back to the balance sheet with an appropriate return.

Great. At this point, I just want to check the audience and to see if there's any questions. I have one more up here. Okay, we've got one here in the front.

Competition seems to be increasing in the space, and it seems like you'll grow even larger with some of the larger alt managers that you mentioned, growing their presence. And I know you mentioned that the industry and the opportunity set is also growing. So I guess, what do you think are the biggest -- like what do you think the biggest impact of the increased competition will be whether that's on fundraising or just the opportunity set itself, how do you think that will impact you guys?

Sure. So the analogy that I give people sometimes is my family was in the restaurant business for almost 90 years in New York City and grew around the U.S. And when I watched my dad built his business, and I'd see a competing restaurant open up next door that did what he did, I'd say, "dad, that's horrible for business." [ He got ] "No, you don't get it". When somebody opens up next door to us, it's another steakhouse, we do quite well. Actually, sales go up 20% to 30%. What's interesting about the increased competition or the increased exposure around digital infrastructure, it's actually really validated us. It's been very interesting. I'd actually tell you commitments for us have gone up. We feel like we're taking more wallet, not less wallet than we previously did. And I think as other GPs go out and talk about digital, they can't talk about it like we talk about it. We talk about it at a level that's very industrial. Having personally have built stuff and climbed to tower and been inside data center halls and sat in zoning meetings, I have a very different perspective than perhaps maybe some of our peers do that are at this conference. I can sit here and certainly talk to talk and be at this conference and understand how to talk this language. But I have another gear and I have another language that other GPs don't have. And so having those -- we started in '94, this will be the 30th year I've been doing this. That's a long time. You learn, you have a lot of battle scars. You make a lot of mistakes and hopefully, you get better. I would say the other thing that's interesting is customers. And we can talk about clients all day long and fundraising and how competitive that is. And when you're on the fundraising trail and you're in Asia, you're in the Middle East or in Europe, I'm constantly bumping into my peers at other alternative asset managers, whether it's bumping into Jonathan Gray or Michael [indiscernible] or Marc Rowan, I see these guys all the time in there. They're voracious. I mean they're fierce fundraisers, right? And so are we. And we know we're competing against them, and we like it. We enjoy the competition. But there's an extra something that we have that they don't have, which is I have a stable of 30 years of customers. And this is really important. As we reported today, we've got about $15 billion of growth CapEx already on the books for this year. So if we wake up, we fall out of bed. We're building $15 billion of infrastructure. Our peers can't say that. So we have over almost close to $12 billion of committed contracts for new data center builds just this year alone. That's committed CapEx that nobody else has of that magnitude. And so those releases we signed 18 months ago, right? And we're building those data centers now. We have 5 gigawatts of power committed to what we're doing. And again, those were decisions we actually made 2 or 3 years ago. And so having this industrial knowledge of if you're going to go deliver a big workload for an AI customer, you had to be working on it 2 years ago. You'd have to had the land, the power, the building permits, the will serve letter and you have to have the trust of the customer. This notion of trust, not only with LPs, but having the trust of a Microsoft or a Google or an Amazon or Deutsche Telekom or Verizon, that's trust that I've earned over 30 years of building and owning infrastructure for them. They don't hand those keys over very easily. It doesn't matter if their name is GPB or GP. We've got some great competitors in the GP space and they have great reputations, and they have a great brand. But at the end of the day, a customer needs to know their data center secure that they know the fiber is going to stay connected and that, that cell tower is not going to fall over. And that is something that we bring to the party that perhaps other GPs don't bring. So when we talk about taking wallet and taking market share, we do compete a little bit differently. And the other factor of this is we do have over 50 portfolio companies around the world. from Asia to Africa to Europe to the United States to Latin America, we operate globally, and we operate in this space. And again, it's coming back to that notion, Craig, of owning the street corner, right? Being a master of one thing, not trying to be a master of 10 different things. And so that's our proposition to investors as we think we do bring something a little unique, and we offer something that perhaps our peers don't offer yet today. Not to suggest they can't do it. But again, they have so much on their place, these big in for GPs or these big just general GPs that we compete against. They've got private REITs, they've got private equity, they've got real estate. They've got headaches, not to say we don't have headaches, but it's a little quieter in digital infrastructure land than it is in some of these other air pockets of challenges today.

Let's see. Is there another question in the audience?

I'm sort of curious, you just went through some of those names that are your end users, the Silicon Valley, big names. They seem very, very sophisticated to me. Is it more and more difficult for you folks to generate returns when you have sort of a counterparty that's -- they really know what they're doing? Like you said, they've been doing cloud for 11 years. They know what that facility cost. I'm sort of curious how that works on your returns?

I would say 2 or 3 years ago, those returns were tight, particularly on a cash-on-cash basis. You were seeing yields kind of in the 5%, 6% cap range to sort of move to real estate language for a second. Today, we're seeing those yields more up in the 9%, 10%, 11%, 12% range. And remember, we're building for the anchor customer. That doesn't preclude us from adding the second customer, the third customer, the fourth customer. So if the way -- pick any cloud company who's sophisticated has liquidity can go build a data center, and we build for them. And they ultimately have decided that building data centers, they're not going to get credit in Wall Street for owning a data center. The same thing the mobile operators figured out 20 years ago, when they sold all their towers. And so infrastructure when it's locked in a corporate balance sheet doesn't get fairly valued. And they've figured that out. They figured it out like the mobile operators have, and they've also sold off some of their fiber assets. So we think this infrastructure when it sits in our hands, when we can load that second, third and fourth customer, the return profile changes. If I just went out and built a single tenant tower for the last 25 years, I would have made no money. But most of my towers end up being at 2.5 to 3 tenants per tower, and we get a high 20s levered return. That's pretty good, usually about 3 MOIC. Data centers are starting to move in that direction based on scarcity. It's really hard to build a data center. Getting a will serve letter for power from a utility company, really hard as well. And so by having a land bank and having these global operations where we've got multiple shovels in the ground at the same time, when a big cloud customer shows up to us and says, look, we need you to go fast in Melbourne, can you do it? We say yes. When a particular cloud customer came to us in Johannesburg and said, nobody wants to build in Johannesburg, can you do it? We said, "yes, we'll do it". 100-megawatt data center turned up in 18 months. That ability to move quick where they don't have to put out the capital and they don't have to put all their people into Johannesburg or Melbourne, or Berlin or Milan, pick any city where we go. Having that scale is so important and having that track record for 10, 20 years where you've shown up for a customer and you're able to deliver for them gives us that opportunity to pitch being the outsourced partner to them. Now I'm not going to tell they don't build data centers themselves. They do. Today, I would tell you that most of the cloud guys self-perform about 30% to 40% of the time. And then they outsource 60% to 70% of the time. You go to towers, it's like 90% outsourced. You go to fiber, it's like 100% almost outsourced. Nobody builds their own fiber anymore, it's too expensive. So shared infrastructure is the way you get to the right return at the end of the day. If I go build a great data center again, I'll pick on Melbourne. If I go build a data center for a cloud company A in Melbourne, and I turn up 50 megawatts for them. I'm only going to get an unlevered return of like 8%, 9% in a market like Melbourne, which is pretty tight. If I securitize it, that return moves to 14%, 15%. I pick up 400 and 500 basis points available. But then if I build 2 more small data halls next to it, and I put in Cloud Guide G and Cloud Guide C, all of a sudden, my returns jump. And then you get to that high teens, low 20s IRR and you get into that 2.5, 3 mark territory, which is really what makes digital infrastructure appealing for LPs today. And we can do that all day long. There's a lot in our backlog to go do those kind of deals.

Great. Thanks for the question. And I think we are running out of time. So Marc, on behalf of all us at Bank of America, thank you very much for joining us.

Thank you. Thanks, Craig. Good to be here.