DigitalBridge Group (NYSE: DBRG) has come a long way in a few years from a legacy real estate investment trust (REIT) to a proactive investor, owner, and manager of high growth digital infrastructure around the world. At the end of 2Q22, the company had successfully “rotated” out of traditional real estate investments like hospitality, healthcare, and industrial real estate along with other managed investments to 100 percent digital infrastructure. Digital assets under management (AUM) totaling nearly $48 billion were up 37 percent on a year-over-year basis from $35 billion at the end of 2Q21. That AUM tally increases to around $55 billion when adding recently-announced transactions with AMP Capital, Switch, Inc., and Deutsche Telekom’s GD Towers, as Inside Towers reported.
By transitioning from a REIT to C-Corp and repurchasing a minority stake in its investment management (IM) platform, the company gained the flexibility to continue rapid IM growth in response to strong secular trends in mobile data and cloud computing.
The company generates its income from two main business units – Digital Investment Management or Digital IM has investments and collects fees from over 25 portfolio companies encompassing towers, fiber, data centers, small cells, and edge infrastructure on five continents; and, Digital Operating that has balance sheet investments for shares of DataBank and Vantage Stabilized Data Centers. With the revamp of its holdings and investments essentially complete, the company is scaling its fast growth Digital IM business while realizing steady and stable growth in its Digital Operating unit.
From 2Q21 through the end of 2Q22, Digital IM’s annualized fee revenues increased from $94 million to $240 million, and fee related earnings increased from $53 million to $125 million. DBRG management teams led by Marc Ganzi, CEO and Director and Jacky Wu, EVP, CFO and Treasurer, have positioned the company to take advantage of high-growth Digital IM businesses that are deemed “asset-light.” This means the company does not own the portfolio companies’ assets directly, rather these digital infrastructure assets support growing fee streams generated from long-term lease agreements with tenants.
The Digital Operating data center companies grew consolidated revenues 20 percent from $189 million in 2Q21 to $228 million in 2Q22, and consolidated EBITDA increased 23 percent from $82 million to $101 million, on a year-over-year basis, driven primarily by successful acquisitions at Vantage SDC and DataBank. In the past year, the companies grew the number of data centers to 82 and increased their leased square footage by 26 percent to 1.8 million.
Ganzi pointed out that the portfolio companies are managing through the prevailing macroeconomic environment even as supply chain delays and labor shortages affect operations in different countries. DBRG’s diversified digital infrastructure portfolio is delivering solid growth. Bookings in the quarter were up 5 percent in towers and 28 percent in fiber networks. Data center bookings increased 6-fold while small cell orders nearly tripled.
Ganzi emphasizes, “Our businesses are performing really well despite the challenging macroeconomic conditions. We’re seeing strong momentum in our capital formation activities with early validation of our new core and credit strategies, and we’re executing on exciting new investments that we believe will be the foundation of future returns.”
Looking forward, DBRG sees itself as a business builder of digital infrastructure with a business model that is investment management-focused, but with value creation driven by management’s experience and expertise in digital infrastructure businesses. DBRG has a three-phase strategy to build its digital platform. Phase I is to identify and acquire the right platform and team to capitalize on unique digital infrastructure opportunities. Phase II involves pairing capital and operating expertise with the right strategic business plan built around both greenfield and strategic mergers or acquisitions. Phase III is to follow the logos, that is, customer-driven infrastructure investment where and when its customers need facilities.
This model is being applied successfully to growth and expansion of Databank in the U.S. and Vantage SDC globally, and new tower portfolio company, Edgepoint, in southeast Asia.
By 2025, DBRG expects to have $100 billion in AUM and to double its fee earning equity under management to more than $50 billion. The company updated 2023 and 2025 midpoint guidance for Digital IM fee revenues of $330 million and $490 million, respectively, and Digital Operating revenue of $138 million and $168 million, respectively.
By John Celentano, Inside Towers Business Editor
