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

All right. If everyone can go ahead and please take their seats, we're going to go ahead and get started. Welcome, everyone, to our 33rd Annual Media, Internet and Telecom Conference. For those of you who don't know me, I'm Matt Niknam, comm infrastructure analyst at Deutsche Bank. We're very pleased to welcome back DigitalBridge CEO, Marc Ganzi. Marc, welcome back.

Yes. Thanks, Matt. 31 years?

33 for the conference.

That's incredible.

Many of which you've been a part of.

Well, I was at Deutsche Bank from '99 to 2002, remember coming to this conference, and we were with some investors this morning laughing about that '99 conference was everything dot com, pets.com, this.com, that.com. So we've been coming here a long time.

Marc, you've been very busy since you took the helm at DigitalBridge. So maybe we can start by recapping some of the bigger milestones in '24 and what you're most focused on in terms of top priorities for the company in '25.

Well, I think the headlines coming out of '24 were, one, pretty significant beat on fundraising at $9 billion. We delivered a really strong fourth quarter, which gave us run rate FRE kind of in that $140 plus ZIP code. Still a miss to guidance and where we wanted to be in '24, but cadence that would suggest there's a strong opportunity to recover and come back here in '25. Two other headlines that I think were really important for '24 was, one, we got to almost $100 billion of assets under management. If you think about that journey 5 years ago when we merged into the public real estate investment trust, we were less than $20 billion of digital assets under management now. So we've more than 4x our digital infrastructure assets under management going from $20 billion to almost $100 billion in a very short period of time, about 4 years since the merger. So we've done a lot of hard work between now and then. And the fourth thing that I think was important last year is just the organic growth that is happening down at the portfolio companies. And that really manifested itself strongly with operating results in towers, fiber and data centers, and we'll drill into some of that. But I think what it did is it set up leasing backlogs into this year that were at record levels. We have a record backlog in terms of where our data center portfolio is today. The backlog at Zayo over $4 billion is just incredible. I mean that's really been a big surprise standout story. And then the early results that we saw at Vertical Bridge in January, the strong leasing in the fourth quarter. So when you get all of those swim lanes producing at the same time, that's a rarity. It's the opposite of triple witching. It's like triple everything going in the right direction. Usually, we have 1 or 2 of those swim lanes working pretty hard, like towers is going well and maybe fiber is down and data centers are up. But I think all of the sort of DigitalBridge basic food groups across all of our 51 companies are experiencing really good organic growth. And I think it sets up for a really strong '25. We've got great momentum in fundraising. We have spectacular momentum in terms of putting capital to work. We announced that the EU this morning had approved the Yondr acquisition, which is great. So we got European Commission approval to proceed with the closing on Yondr. That's our fifth big investment out of our third flagship fund, which indicates we're putting capital to work. And then the other thing that we said in the earnings call that's sort of the subtext is $9 billion of return capital at the same time. I know that sometimes frustrates our public investors a little bit, but because we do lose a little bit of FRE. But part of returning capital and generating great returns is what we do as an alternative asset manager. I think it's always kind of like you got to take sort of one step back to go 2 steps forward. So I like that setup because as we returned a lot of capital in '23 and '24, it's given us the window to go ask for new capital in '25. And I think when you look at the fundraising schedule in terms of the 5 products we have in market right now and the investment ideas that we're providing LPs, they're really unique. And I don't think there's another firm in the world that gives investors that kind of specific access, Matt, to the best digital infrastructure investments that we see around the planet today. So I like the setup for '25. It's really in a good spot. And I also got to thank my team. I mean it's a hard year, but our new CFO, Tom Mayrhofer, is doing a great job. We kind of reframed our guidance. [ Tim, ] Severin and I decided to reset the table for '25, deliver a different kind of cadence, which is back to sort of 4, 5 years ago where we want to be the guys that kind of underpromise and over deliver. So everything is really set up strong for '25. And as I said on the earnings call, there's a strong foundation for where the stock is today to build from here. We now have to go take that case and that argument to investors that we're trading at a massive discount to our NAV.

That's a great segue into my next question. So you think about all the milestones and the great setup, what do you think the Street is missing or getting wrong when you look at the stock price? And I guess maybe if you can be a little bit more detailed and granular around what you can do in '25 to change that perception.

Well, I think it first starts with what I did on the fourth quarter, which was owning the mistake that we made in the third quarter. We set the wrong guidance, that was on me. So I take full responsibility for us missing our guidance in the third quarter. And I think that was really a byproduct of we had the right fundraising number for the year, but it was so back-end loaded that we missed Q1, Q2 and Q3. And it's actually a lot like towers. If you miss your leasing in Q1, it just compounds and you sort of get whacked by the time you get the end of the year. If you miss Q1, you missed those commencements that happened in Q2 and Q3. Same thing happens in fundraising. It's actually a very parallel path because our fundraising commitments, our investors are with us for 11 to 13 years in a fund, much like signing a 10-year SLA on a tower. So if I have a bad first quarter and a bad second quarter, it compounds. And that's what you saw was that snowball effect in terms of our miss on guidance in Q3. I think this year, we're a lot more poised to do quite well. We've been very prescriptive about where we -- what we're going to do. The first quarter is finishing up our third fund, finishing up our second credit fund. That will last into Q2. We're launching our second private wealth product. Our first private wealth product was wildly successful. I never could have imagined we'd raise $1.1 billion in 3 months. And that we should have probably gone to private wealth a lot quicker. Our peers have all gone to private wealth, and I think it's a copycat league. So we're just backdrafting on what Blackstone has done and what ARES and Apollo have done. And I think when we finally stepped up onto that same stage as our peers, what we found out is private wealth allocators were like, look, I don't have that. I don't have access to digital infrastructure on a private basis. So what we found is that product flew off the shelf. So we're back with our second product. Andrew Cox has done an amazing job. We were really lucky to get him from KKR. He kind of fell in our lap, and he's doing an amazing job. So I'm excited to get that launch. That launch is in Q2. We should feel the impact of fundraising force. And then the 2 new products that we announced on the earnings call, I think people are really curious about, which is our new data center Realty Income Fund. It will be our first real estate product since we did the post-merger with Colony as a REIT. It will be our first reentry back into the real estate LP world. Remember, LPs in the real estate world allocate over $4 trillion of capital to private real estate. That's actually bigger than infrastructure, if you think about it in terms of where we can go fishing. So that's a much bigger pond with a lot more fish, and we're competing against the likes of strip centers and apartments and office buildings, CBD office buildings. I like that competition. I'm happy to go toe to toe with CBD office and strip malls. So we think there's a lot of opportunity for us to raise the capital. We're doing it in partnership with Goldman Sachs, which we're excited about, and that has a lot of runway. So we're launching that product in Q3. It should feel the impact of that in Q4. And then what we've talked about power, I think I've been -- you and I have been talking about power for like 2 years. We've been developing power adjacent to our data centers with partners, and those partners typically have been publicly traded utility companies. So they're getting most of the margin on our power activity. So I want to flip that script. So I think we've been really clear about our ability to build adjacent to our data center power sources behind the meter and off-grid power solutions where we can be the provider of power. We can be on grid. We're interconnected to the grid and allows us to trade power. That's a big difference because on you have interconnection much like fiber, one of these things we learned these lessons from digital infrastructure. Power is the same way. Once you're interconnected, you can go grab power from many different sources. And so there, what we have found is we own the data center, we've taken the risk. We have ownership of the customer. We should own the economics on power. It's something we actually never did in towers, and we never did it in fiber. But in data centers, you can actually move upstream, you can control the flow of power to your data centers. So microgrids, batteries, other forms of transmission, these are things that we can invest in, that we have confidence in. We've now built microgrids to a couple of our data centers. We understand how the economics work, how energy flows. And most importantly, I really like where battery storage is going. A lot of new things happening in battery storage that are extending the life of batteries. And more importantly, we can get to higher power sources. And that really helps us deal with intermittent because one of the grievances on solar and wind has fluctuations. So if we can even out those fluctuations and we can control that source of power through our own battery sources, there's a big opportunity to invest there. We think there's a $20 billion to $50 billion AUM opportunity to invest in power over the next 5 years. Remember, again, we're already building the data center. We've already got $18 billion of CapEx committed to new data center construction over 100 locations. We're the -- if you aggregate our 11 portfolio companies in data centers, we're the largest developer of data centers by third-party data centers by a long shot.

It wouldn't be a session with DigitalBridge without asking about AI. So maybe let's start and -- how would you characterize, I guess, how far along we are in the AI infrastructure build-out? And maybe we can delve into how this differs across data centers, fibers, maybe early days of whether that's impacting the local edge.

Well, I think we sat here 2 years ago, and I said we're kind of in the first inning of a 9-inning baseball game. I think last year, we were kind of bottom of the first, top of the second. I think this year, spring training, we're probably bottom of the second, staring at the top of the third. We're still in this phase where we're building a lot of LLM infrastructure. And some of that is self-performed by our customers and some of it is performed by us. But by and large, it's like, I would say, 70% self-performed and 30% industry performed. We'll see where kind of the first workloads at Stargate go and who ends up performing the first kind of 3 gigawatts for Stargate. I think that's kind of the first tell in terms of big LLM leasing where that goes. I think as you move to inference and you move to more specific locations where you're sort of hunting with a sniper rifle, not a shotgun, there's going to be a big heavy reliance on third-party data center operators like Vantage, like Switch. And I think that's where we really see an accelerated cadence of leasing in kind of '26, '27 and '28 as we move to inference. And that's where the DigitalBridge portfolio is really set up to excel. And the only reason I say that is because we take contextually the 13 years of building public cloud. We were -- we've been along for that journey for the last 11 years. Our leasing with the cloud operators really accelerated in '21, '22 and '23, which is really where you saw the cloud begin to move out of the big AZs and into the secondary AZ. So the big AZs would be Santa Clara and Nova, right? Those would be the 2 primary nodes. But then as those data center workloads proliferated to places like Reno, Goodyear, Arizona; Austin, Texas; certainly Atlanta, Quebec, Toronto, you really began to see those really what I would say, where you get those great 9% to 11% cash-on-cash yields where you have those 50-megawatt to 200-megawatt campuses, which is kind of the sweet spot for us. And then I think at Switch, it's just been a different algorithm altogether. With data sovereignty on the rise, private cloud workloads up, Switch really just found a really unique piece in the marketplace, which was this notion of Tier 5 private cloud, where a customer really wants the belt and suspenders in terms of power space. So our portfolio performed incredibly well last year. Our leasing backlog is up 22% over last year. We have over 7 gigawatts of I call lease applications, you call them the tower business interest in our data centers. That is up year-over-year. And I think that is just going to continue to be a steady cadence for at least the next 6, 7 years in terms of data center capacity. I think as it relates to the ecosystem, the big winner early is fiber. I think what we've seen out of Zayo this year was a tremendous amount of new activity in terms of bookings, new routes built. I think we announced at Metro Connect, how much new fiber we've laid in the last 2 years. People were surprised by that. We just did it quietly. And we've continued to turn up network. And where that network is really performing well is for hyperscalers. And data center connectivity, there's very few people that can operate like Zayo does on a nationwide basis where we can connect not just 2 data centers or 4 data centers, but given the uniqueness of our footprint and how many data centers we touch, there's not a data center in the United States that Zayo doesn't touch. And so that ability to deploy success-based CapEx, deploy what I would call very, very high strand count medium range and long-haul dark fiber routes, that's very unique. And that's something that Zayo is very good at. And so the old days of deploying 12 to 14 pairs into a hyperscale public cloud campus. Today, we're deploying 124 to 248 pairs. We're deploying with at least 1 or 2 customers, and the demand has been incredible. The other thing that's interesting is our data center portfolio got bigger. So we're trying to figure out how to weaponize 278 data centers that we own. And no better way to weaponize that portfolio than use Zayo. So as we're building new data centers at Vantage DataBank and Switch, we're putting Zayo right there, front of the line, first provider into the data center. And that boy, that makes it a lot easier for someone to lease when they're essentially the preferred provider. And we trust Zayo because they know they can go there first. They can get there early. The other thing I notice about the new workloads for the AI guys on fiber is it's not sort of 2 paths in and out of the data center. We're now seeing 4 paths. So this redundancy and this higher level of redundancy that AI customers want is not only more strand count, but they want more unique paths to create that extra amount of redundancy, but also they're taking those workloads in different directions. And I think it's been good. I hope the fiber business continues to be the comeback hit. That could be a really great story for '25. Early for near edge inference, I think we're just not there yet. I'm always listening very carefully to what Masa-san says. I think he's really smart, and I think he understands mobility, and I think he understands the connection between AI and mobility. A couple of weeks ago here in South Florida, he said, the real thing about AI that he gets excited about because of his experience in owning a mobile network is he believes mobile data traffic will have a 10x increase to the device once we get to true inference on the edge. That's a big statement. And if you go back to 2013 and '14 when cloud-native applications started showing up in your wireless devices, you know this because you're an analyst, look what happened to mobile data traffic. Mobile data traffic from 2011 until 2021 went up 10x. Why was that? It was because public cloud finally got to the device. So as you put the public cloud onto mobile devices, Matt, usage spikes. We see a second wave of spike coming on mobile data networks. And this is why we need more spectrum. This is why I think Commissioner Cars got it right. You got to get more spectrum out. T-Mobile is in a great position. AT&T and Verizon need more spectrum. And there's only 3 ways to deal with this conundrum of a -- whether you believe Masa's number at 10x, I'm more like 3 to 5x. I think there's a 3 to 5x increase in mobile data traffic. By the way, I can be right and Masa can be right. We can both be right, and it's like a huge win for towers. The look through is that the last time we've had these step functions in mobile data usage to cell phones go back to really the introduction of LTE, right? Go back to 2009, 2010. Look at what happened to tower leasing at SBA American Tower and Crown. And then look at what happened when we started to put cloud-native applications on mobile devices in '14, '15 and '16, look at what happened to tower leasing. The same thing is going to happen again here. And ultimately, as we build 5G, 5G is going to take 10 years. And it plays out in 3 phases, just like LTE did. You've got the overlays, which we were done. I think we can safely say that pretty much we've overlaid all the 5G networks against LTE. Then you go into what's called infill. Most of you know this in the room that when you turn up a network like an -- like when we turned up 3G and we turned up 4G, ultimately, those coverage rings shrink a little bit because of the spectral efficiency in the new radios and the usage case. So as you put more use into a cell site, you start to split the cell sites. And that creates holes, and that's infill. So 5G right now is an infill. And I think we're an infill for the next 2 to 3 years. And then we move to densification. And I was really clear at Metro Connect last week. I think densification is 2026 to 2029. We got about 1 million small cells today. We're going to 2 million by 2032. Remember, not all those small cells are just for 5G. You have to think bigger. You have to start looking at connected devices and IoT, which in the world of generative AI, we go from 29 billion connected devices, almost 60 billion connected devices by 2033. So the real winner in terms of where the mobile data traffic activity is going to be in machine-to-machine learning and device-to-device connectivity. There's a whole phase of investment coming in 5G for near edge and mobile edge, which is why I think you saw some of the early green shoots at Vertical Bridge in January when they had that massive -- we had our best leasing month in the history of the company, and that never happens. And my experience is in 31 years of tower leasing is my best month has never been in January. It's always been a November, December where all the CapEx is back-end loaded or it's pre-summertime where carriers are really deploying a lot of CapEx in Q2. So this was a real surprise. We called it the January surprise for towers. So I've been saying it, I said it at Citibank. I said it to Ray Jay, I'll sit it here. Don't sleep on towers. I think towers is one of the real opportunities that investors should be looking at right now as we set up into the next phase of generative AI.

There's a lot of impact. But while we're on towers.

Sorry, I went quick.

No, no, no, as I think about towers, is that 1 or 2 carriers? Is that broad-based? And is it -- if it is broad-based, is it all sort of this move from coverage to more infill? If we could just get a little bit more color as to why you're seeing that?

It is infill, 100%. These are new search rings. These are rings that we didn't foresee coming. So -- and by the way, it's all 3 of our customers. It wasn't just one customer in particular. It was actually a steady diet from AT&T, Verizon and T-Mobile. I think also at DigitalBridge, we've got Vertical Bridge. It's a great company. It's now the #3 tower operator. We just integrated the Verizon portfolio. And we also have build-to-suit programs in place with all 3 carriers now. So as the program with Tillman wound down, we stepped in, created a national program with AT&T that we're excited about. We already have a joint venture with Verizon, and we've had a long-standing relationship with T-Mobile, where we've been a national BTS provider. So we're in a really good spot because we're getting not only de novo co-locations, but we're also getting a ton of backlog into new builds. So that combination was why [ January was tripped ] unexpected, but it was happy to have it.

We touched on AI, and I don't want to jump off AI just yet. One obviously, question in the marketplace is, are we -- and you mentioned -- you referred to as being sort of the bottom of the second, top of the third. But how do you think about -- or how do you answer the question around are we headed for digestion? Has maybe DeepSeek turns around Microsoft lease cancellations, maybe changed the calculus at some of the larger hyperscalers around AI and what they're willing to spend at least in the near term?

Well, I think this has been the topic on the circuit for the last couple of weeks. And my observations are really -- there's 4 things I think you need to think about. One, we didn't see DeepSeek negative. We saw DeepSeek as a logical progression in the fact that costs are coming down in building generative AI applications. Remember, we opened that door. Meta's open source really was the foundation for DeepSeek, and that was relatively easy and gave them a very big head start. But to get there, it implied that Meta had to make a huge investment in their open source LLM, which they've been investing for a long time. So a subtext winner of that was Meta to a certain degree. But it's also something that we've seen before. This isn't like a new movie. Ultimately, as we've -- from the advent of the PC to the Internet to mobile phones to cloud, innovation has happened all along those sort of 4 curves. And the cost to deploy that infrastructure and the cost to deliver that service comes down over time. What we've seen in AI is that those costs -- that cost curve has come down about 40x in a period of 36 months. So the cost to build AI and to build these sort of applications like a DeepSeek is going to continue to get cheaper. And that's following a logical progression that we've seen in other subsectors. So we weren't terribly alarmed by DeepSeek, and we actually think it's part of where this goes over time. But as costs come down, something else happens at the same time. Adaptation moves rapidly faster. So if you look at the J-curve of adaptation to the Internet, to mobile devices and public cloud, you'll see it's pretty simple, like Internet sloped like this, mobile data sloped like this, cloud sloped like this, AI is sloping like this. It's the fastest adaptation we've ever seen in a technology shift. And this is kind of the -- the sort of what people are talking about when they say Jevons paradox. You have a faster adaptation and you have more data being consumed and stored at the same time. Remember, data has 2 forms. You've got storage and you've got compute, active compute and storage. And so what we've seen is as adaptation has accelerated and costs have come down, investment has accelerated. And we saw that on display in the last 2 weeks. We've had 4 of our customers come out and say, they're increasing CapEx, not decreasing CapEx. So you heard announcements from Meta, announcements from Apple, Alibaba had an announcement. And then we've seen also Oracle revised its CapEx, while Microsoft reaffirmed its CapEx. The important thing was Microsoft confirming their $80 billion of CapEx. So when Microsoft came out and said, okay, we're going to move some workloads around and we're going to shift some things. That was somewhat expected because of the relationship that they have with OpenAI, which to be direct in Sam's defense, he's shifting his providers. He's not going to go all in on Microsoft. He has -- Microsoft is one of his biggest shareholders. We have a long-term agreement to develop infrastructure with Microsoft, but also OpenAI has the opportunity to go build their own infrastructure, which, again, to Sam's defense, he's doing that, building a team. They're out looking at locations that are going to be OpenAI-only locations. And that's a logical progression in Sam's arc in terms of where OpenAI is going to go. It's going to be an independent for-profit company. And part of that is building the muscle memory to build your own data centers. So that customer is an important customer to us. And I look at data center demand as a series of buckets, right, buckets of water. And you got to look at one bucket is how many leases we signed as an industry in 2024. That bucket filled up to 6 -- effectively 7 gigawatts was the amount of leasing we did last year. And then there's this other bucket, which is how much data center capacity do we turn on? Did we light up as an industry? We lit about 6 gigawatts. So you have both of these buckets kind of at 6, but the leasing bucket was 1 gigawatt heavier. And as it spills into the bucket of construction, that bucket couldn't hold it. So we operate -- we start in 2025 with a 1 gigawatt deficit where the supply can't match the demand. And then you have the forecast this year where the industry is going to lease 8 gigawatts. We're on a cadence to lease 8 gigawatts, but we're not on a cadence to deliver 8 gigawatts of data center haul capacity. So part of the lease is you sign a lease and you have the conditions precedent to deliver to the customer. And that is you got to deliver the data hall. And that data hall has to be complete with power, space, cooling and connectivity. And if you don't deliver those 4 elements, guess what, Microsoft doesn't have to move into the data hall. And at some point, you have penalties. And if you're late, Microsoft can even potentially say, I don't want to be at this data centers. So you'd have to be really late in that instance. But by the way, it's the same in the tower business. We all have to deliver a tower in a certain point, right? You have an NTP, notice to proceed. You got to deliver the tower and it's got to be ready for the radios and antennas and coax or fiber connections. So the industry, in my 31 years of doing this, it's the same thing. It's about delivery. You got to deliver. And our industry right now is operating at a deficit, going to continue to operate at a deficit in terms of what we can deliver for a while because we have challenges. And again, I like just being super transparent with investors about what the challenges are in data center land. Data centers are great. It's a great business, it's still not as good as towers. But data centers are pretty good. And fiber is pretty good, too. But the challenge with data centers is a series of challenges that digital infrastructure has never confronted before, which is power and putting a ton of power into a small piece of real part. Power density is difficult on 10 acres, 12 acres. Think about a Vantage data center in Santa Clara where you've got 6 floors, you've got 48 megawatts stacked in 6 floors. You got to bring all that power into essentially like 4 acres. That's really hard. And so the industry has some challenges. We've already discussed what those challenges are. It's power and it's supply chain. And to build a data center requires a series of specialized components, whether it's backup Gensets, UPC units, construction crews, backup batteries, all of these things you need to deliver a data center on time. And you need fiber. You need a ton of connectivity, and that's where we have a big advantage. But having Zayo as one of our investments, it allows us to take the connectivity piece off the playing field. We're able to deliver connectivity. Both of our big portfolio companies, Switch and Vantage made deals in 2022 with Siemens. We did a ton of backup Gensets. So we planned in the middle of COVID to go take a lot of that backup capacity. So by and large, we've had very few incidents where we haven't delivered. Because again, we got a 10-year head start. We started working on this 10 years ago. So I think to the newly indoctrinated or the tourists that are in the industry, they're going to have challenges delivering data center capacity. For us that have been around a long time, I think we're planning on this for a long time. So -- but it does have challenges. And I think as long as that supply and trade imbalance exists, blips in the road like DeepSeek are not negatives, they're positives. And if you just -- if you listen to not the noise, just listen to the CapEx, you listen to what's actually really happening, stuff like this is a positive catalyst for the industry. It's not a negative.

Do you foresee anything these constraints because it seems like a pretty -- 7 gig lease, 6 split, 8 gig lease this year, another 6, it seems like going to be lit. What maybe eases some of that friction? And is there anything with the new administration that can help there?

Well, I think, look, the administration has been very constructive on both power and AI. And I applaud the current regime for doing that because I think that's -- the President has always said we want to stay competitive and we want to be the first in AI. And I agree with them. We do need to be first in AI. I think as much as the executive branch can be helpful, I think our challenge really sits at the states and always sat at the states, which is as fast as any executive order can take you on data center construction, you're still regulated by the local PUC, which control the grids in each of those states. So our ability to light up power is a state issue, not a federal issue. That being said, there's things that we can do on a federal basis, permitting to [ each ] will serve letters. But inevitably, at the end of the day, you are beholden to the state PUC. You are beholden to that regulated utility company actually turning on the power. A [ Will Serve ] only says I will serve that piece of real estate with that amount of power. It doesn't say when I'm actually going to turn on the power. So there's 2 differences between having an active Will Serve letter and having an actual commencement date of when your power is coming to that site. So again, to the untrained who think, "Oh, God, I have a piece of land in a Will Serve letter. I'm in the data center business. " You're not. You really have to be in a lot of different things. You've got to be in the -- turning on the power business, building the data hall, getting the fiber there and dealing with all of the supply chain issues and the special components. So this is not a place for tourist. It's a complicated industry.

I want to bring back a lot of the success that you've had with the data centers back to the DigitalBridge story. And there was an interesting discussion you had on the earnings call around megawatts and gigawatts in your portfolio companies at least and how that comes back to the DigitalBridge shareholder. Maybe if we can revisit that just to sort of frame how the success that the portfolio companies have had translates to success for the common sort of DigitalBridge [indiscernible].

I think that's what makes our story quite unique. And I think we started the conversation by saying, where is this disconnect in our share price. We're sitting here today at $10 to $12 a share and sum of the parts analysis would indicate we're worth somewhere between $18 and $23 a share. So we've got to take that argument to shareholders because I think just on a pure FRE basis, if we trade at 18 to 22x FRE, the stock is going to trade kind of where it is. That's not particularly exciting. But what's really unique about DigitalBridge is we have a big balance sheet, and we have really unique assets sitting on that balance sheet, which is DataBank and Vantage. Those are really good assets. Those assets continue to appreciate every quarter, particularly DataBank, which is growing at 20-plus percent CAGR growth right now. So DataBank is the only real edge compute business at scale across the United States in over 70 markets. And the second largest interconnection provider behind Equinix. So it's a really unique growth story. And I think that's going to continue to push our balance sheet up along with our GP stakes. So our balance sheet controls basically that fulcrum capital that initially goes into all of our funds. So while our assets under management increase, so does the value of the GP increases, so does the value of Vantage and DataBank increase. So we've got a balance sheet that's worth $1.5 billion today. My estimation is that balance sheet grows to $1.6 billion plus this year. We've got $190-plus million of cash. We're in a very good cash position. And then last but not least is the carried interest. And I think what we tried to do there was bridge the gap between as we like data center capacity, what does that accrue, what does that mean for the carry. And I think we've -- getting close to $100 billion of assets under management, over $40 billion of equity at work, investors, we've got to help investors do the math on carried interest. We're sitting on an arsenal of carried interest. And whether you take the low end of our guide or you take the high end of our guide, there's hundreds of millions of dollars of embedded shareholder value sitting there. And until, as I said on the call, we start turning that out, we start creating distributions as Fund I matures and Fund II starts moving into maturity and we start returning capital and we start returning profits, the stock is going to accelerate because people are going to see that, that's not episodic. They're going to see that we have 51 companies as we start exiting investments, that creates a lot of profit and it creates a lot of EPS for our shareholders. So we've got to bridge that gap. We're going to keep talking about it. We're going to talk about the power of the balance sheet. We're going to talk about carried interest. And as we light gigawatts and we turn customers into data center halls, we got to start converting that into carry, which we will.

One other sort of topic of conversation that comes up a lot with DigitalBridge is the competition. There's a lot of peers who are maybe dipping their toe or doing more with digital infrastructure. How do you maintain your differentiation stand out in this environment?

Well, I think we have a couple of really key differentiating points. One, we have an ecosystem of companies that is a force multiplier for our existing companies. We just talked about the power of Zayo working with Switch, Vantage and DataBank and how when we build a new data center, we're pushing our own fiber straight into that data center. So the power of the portfolio and that flywheel creates a ton of opportunity. And other GPs just don't have that. The likes of Blackstone, KKR and Brookfield maybe own 2 or 3 digital infrastructure investors to our 51. So we just have a little bit more connectivity and we have a little more eyes and ears. Second thing that differentiates us is we're developers. The DNA of the firm is a series of entrepreneurs that have worked together since 1994. That 30-plus years of operating experience is not what you see at a generalist GP. And so we can talk this business at a level that other GPs can't. And when you're sitting with an LP and you start going deep on our pipeline, how we build stuff, how we create opportunity, they see that difference. And we wake up every day, we've got 350 people that focus just on this. Usually, at a Blackstone or a KKR or GIP, they have 4 or 5 people working on digital. So we just have a lot more eyes and ears in terms of what we can do. And then I think the real difference for LPs today is track record. And the #1 thing you hear today, if you sit with any sovereign wealth fund, you sit with any pension system, they say, have you returned capital to me? So this notion of that $9 billion of DPI that we've created in the last 24 to 36 months, investors have taken notice of that. So as our fundraising has accelerated, and we're clearly punching above our weight class, $9 billion against $96 billion of assets under management, you look at what Antin put out last week, Antin is a similar-sized GP to us. They raised EUR 1.8 billion of last year. EQT raised like EUR 11 billion last year, and they're 4x bigger than us. So we're clearly punching above our weight class in terms of capital formation, but that's because we return capital. And then the last thing I would say about the fundraising environment that's very interesting. This is kind of a trend in the last sort of I call 12 to 18 months. Most big LPs, most big allocators around the world, whether you're talking to a sovereign wealth fund or you're talking to a GIC and ADIA or a Korean pension system, they'll tell you, look, where we want to be in the next 5 years is we want less [Technical Difficulty]. So they're actually pairing back the number of GPs they work with. When the common theme comes back, they say 2 things to me, one, we want to be with the best of the best. So we want to be with the big 5. And someone joked to me once, nobody ever got fired by putting money in a Blackstone fund. Probably true. You're not going to get fired by hiring Blackstone to do credit and private equity. The other trend that we see as they go to the big guys is they want the industry specialists. So specialization is key. So they're pairing a generalist strategy with a specialist strategy. And the 3 areas that they talk the most about are power, digital and private credit. Those are the 3 hottest topics right now in fundraising. So we look at that and say, great, we're the specialist. We've got almost $100 billion of assets under management. The nearest specialist to us was IPI at $10 billion, and they just got bought by Blue Owl. So there really isn't a comp to DigitalBridge. So when I'm out fundraising, I'm actually not competing for Blackstone and KKR and Brookfield Dollars. I was competing against other specialists, which really haven't manifested themselves. So we do operate in the space where we really have a differentiated approach, and we have a brand. I mean there's not -- right now today, 18 of the top 20 LPs in the world allocate with digital. So my focus is how do I grab the next 2? I got to get to 20 out of 20. And our brand is well recognized. And I think in our sector, in infrastructure and in alternatives, when it comes to digital investing, LPs are allocating with us. That's the choice they make. So now we've got to go out and perform. We got to keep returning capital. We've got to keep putting up the good returns. Our third fund is performing really well, performing better than our first and second fund so far. And so as long as we keep putting up returns and we keep putting money back into LPs pockets, we're going to continue to raise. And I always said the cadence is you got to kind of take one step back to go 2 steps forward. So if I return $9 billion in 3 years, my goal is to go raise $18 billion in new fresh equity. And that's what the algorithm has worked out for us, worked out really well.

And so maybe just to tie it all together with the algorithm, how should investors think about the progression of fee revenue and FRE growth at DigitalBridge. Both -- I mean, you've laid out '25 targets, but maybe if you could just leave us with what you're looking at in terms of multiyear growth profile through 2028.

Well, I think I've said it pretty clearly. I've sort of put out a marker that I think within 3 to 5 years, we should double our assets under management. I think the initiatives that we have going in power and real estate and our flagship fund really affords a steady cadence of going from $100 billion of assets to $200 billion in the next 5 years. We've generally been growing assets under management by $20 billion each year. That's kind of been the step function we've been on for the last 3 years. So with these new products coming in a sharp focus, just the sheer volume of power that's needed to power the AI economy, that intersection of pushing digital and power together is a place that we sit in a good spot. We now have experienced a few of these case studies where we've been able to build it off grid or behind the meter. And I think that's a really big opportunity. And I think also, as we've talked about before, that cleanup trade, where there's $120 billion of stranded hyperscale data centers that other GPs own, we view our partnership with Goldman as the chance to go do a cleanup trade, go buy the best investment-grade stabilized data center. That's a huge opportunity that no one is really fishing at right now. So we think we've got 2 new swim lanes that allow us to go really fast. The flagship product is working. Our core fund is working, our liquid strategies are growing and credit is going incredibly well. Our credit strategy has been, by far, our top-performing fund, believe it or not, is Credit Fund I in terms of IRRs and plus that coupon that investors get. So I said earlier at another investor conference last week, we're at about $3 billion of assets under management and credit. I'd like to double that this year. I think there's a really good path for us to double our AUM in credit, and I think we can go raise more capital in credit.

I think it's a great place to end it. Marc, thank you. Appreciate it.

Thank you. Good to see you. Thanks, Matt.