DigitalBridge Group (NYSE: DBRG) has completed its rotation to 100 percent digital infrastructure, having jettisoned virtually all of its holdings and management of passive real estate. In the process, the company revamped its corporate structure from a REIT to a C-Corp for tax and operating purposes. More importantly, it has topped up its investment coffers to expand its worldwide digital infrastructure platform in response to escalating demand for high-speed, low latency applications and services. Now DBRG is on the hunt.
Two Business Units
Understand that the company makes money through its two business units: Digital Investment Management (IM) and Digital Operating. Digital IM has investments in 26 portfolio infrastructure companies encompassing towers, fiber, data centers, small cells, and edge infrastructure. It raises capital from limited partners for investment funds such as DigitalBridge Partners Fund I and DPF II, invests these funds in target companies, then takes a percentage of fee related earnings (FRE) and fee-earning equity under management (FEEUM) from the operations of these portfolio companies.
Digital Operating has balance sheet investments to two key data center businesses: Vantage Stabilized Data Centers, and DataBank. DBRG takes a portion of each company’s revenues and EBITDA while supporting both companies with expansions and associated M&A activity. For instance, it helped DataBank acquire from CyrusOne four existing data centers in Houston, TX for $670 million in January 2022. The company touts its data center performance claiming its companies, Vantage SDC, Scala and Databank, leased a total of 290 MW of capacity in 2021, ahead of its public U.S. data center peers such as Equinix and Digital Realty. As of March 31, Digital Operating had 78 data centers covering nearly 2 million critical IT sq. ft., of which 81 percent is leased.
At the end of the quarter, DBRG reported assets under management of nearly $47 billion, up 45 percent year-over-year. The company is projecting more than $60 billion in AUM by year end 2022, once several announced deals close. Reaching this level represents a 64 percent CAGR from $13.5 billion in 2019.
With an emphasis on Digital IM, DBRG sees its asset-light model and expertise investing across the ecosystem as key differentiators to compete and grow faster than its digital infrastructure peers, especially in towers and data centers. For 2022, DBRG has budgeted $7-8 billion in growth and expansion capex.
Making Deals
A series of recent rapid-fire deals since the beginning of 2022, as Inside Towers reported, demonstrate the company’s strategic dealmaking acumen.
In late March, following the DataBank deal, DigitalBridge Investments acquired 3,322 towers in Belgium, including 2,158 owned sites and 1,164 third-party sites from Brussels-based Telenet for $820 million. Telenet brings a tower tenancy ratio of 1.6x and is poised to benefit from 5G deployments across Belgium. Telenet will become a Digital IM portfolio company.
In early April, DBRG’s Digital Credit division, in partnership with Canada-based CPPIB Credit Investments III, offered a $220 million holding company term loan to support the continued growth of Everstream Solutions of Cleveland, OH. Everstream operates a business-only, enterprise-grade fiber network for large and mid-sized enterprises with over 27,000 route miles of fiber, speeds up to 100 Gbps, and business services (low latency dedicated internet, WAN and dark fiber).
Then in mid-April, DBRG bought out Wafra’s 31.5 percent share of Digital IM for $800 million in stock and cash. The deal gives Wafra a stake in DBRG at the corporate level and takes DBRG’s share of Digital IM FRE to 100 percent. Digital IM FRE is projected to grow organically at over 20 percent through 2025.
In late April, DigitalBridge Investments acquired AMP Capital’s global infrastructure equity investment management business for $328 million. AMP Capital’s international infrastructure equity platform comprises four investment funds with $5.5 billion in FEEUM, including the $1.4 billion Global Infrastructure Fund I (GIF I) and $3.4 billion GIF II. The AMP Capital acquisition strategically positions Digital IM to capitalize on smaller, high-return mid-market investment opportunities. GIF I and II deal sizes are in the $220-280 million range compared to DPF I and II in the $800-900 million range. AMP Capital’s investment team becomes part of Digital IM.
By John Celentano, Inside Towers Business Editor
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