Colony Capital (NYSE: CLNY) is a “global digital infrastructure, real estate, and investment management” firm. With a new management team led by industry veteran Marc Ganzi, the company plans to “rotate” its business from a classic real estate investment trust to a highly diversified digital infrastructure player.
Colony Capital is an established REIT managing assets in six legacy segments including industrial, healthcare and hospitality properties and “embedded institutional and retail” investments.
In 2018, Colony Capital and Digital Bridge Holdings launched Digital Colony with Ganzi at the helm.
At that time, Colony Capital had $42 billion assets under management (AUM). The legacy businesses accounted for 98 percent of the total while Digital Colony’s digital assets made up the other 2 percent.
In two years since, the firm’s AUM has grown to $50 billion. Legacy assets account for 59 percent and digital assets have grown to 41 percent of the total.
By 2022, Colony Capital’s plans to have AUM well above $50 billion with 100 percent in a complete converged digital ecosystem comprising towers, small cells, data centers and fiber optic networks.
The strategy is to move the business towards high-growth areas driven by demand for high-speed mobile data connectivity and transport, and data storage and processing.
Digital Colony’s value proposition is that it satisfies a wide range of customer needs with comprehensive digital solutions. This capability gives it a competitive advantage over “siloed” companies offering only towers, fiber or data centers.
The company sees digital connectivity as a huge and growing market as all aspects of our personal, professional and consumer lives – work, school, shopping, entertainment, and professional services – are migrating to digital platforms. While digital connectivity trends were already evident, COVID-19 has amplified the need for people to stay connected both personally and professionally.
Digital Colony sizes its total addressable market of its digital infrastructure portfolio at around $240 billion a year in capital expenditures and M&A activity. Of that total, the global wireless carrier capex is expected to be $90-100 billion a year over the next three to five years.
Digital Colony’s projected deployment of $2.5 billion a year represents just 1 percent of TAM, indicating substantial upside potential.
The company’s digital portfolio comprises assets from 15 different companies that are complementary with products and services that can be mixed-and-matched to fit a myriad of customer applications.
Target customers include wireless service providers, Enterprises and institutions in numerous vertical markets and hyperscalers such as Amazon, Google and Microsoft.
Colony Capital believes it is a leading owner, operator and investment manager of companies that are enabling the next generation of mobility and internet connectivity.
Digital Colony’s progress to date has come from organic growth along with a series of acquisitions and strategic investments in infrastructure companies in North and South America, Europe and Asia.
Tower companies such as Vertical Bridge in North America, MTP in Mexico, Highline and ATP in South America and Digita in Europe together own and operate around 350,000 towers that provide critical network coverage and capacity.
ExteNet and Freshwave furnish small cells that enable network densification in high demand urban areas. The two companies have over 35,000 nodes in operation.
Through key investments in data center companies like Vantage Data Centers, a leading global provider of hyperscale data center campuses, Scala Data Centers, and Zayo, Digital Colony has over 95 Enterprise and hyperscale locations. Data centers will continue to play a critical role in the “ingestion, computation, storage and management of information.”
The company is aligning its data center assets with wireless towers, small cells and fiber to support mobile edge computing when and where it is needed.
Ganzi states that 5G will not happen without fiber connectivity.
To that end, Digital Colony’s investment in Zayo, ExteNet and Beanfield Technologies with its Openface and Aptum acquisitions provides more than 135,000 route-miles of fiber that provide mission critical connectivity to wireless carriers and private network operators alike.
Colony Capital will continue to systematically sell off or divest its traditional, yet challenged, real estate businesses in office buildings, retail, hotels and senior living homes.
The company will use those proceeds and other financing instruments to continue investing in high-growth digital infrastructure that positions it for long term profitability and increasing shareholder value.
By John Celentano, Inside Towers Business Editor