In 2020, the total addressable market (TAM) for investing (i.e., capital expenditures) in digital infrastructure, which includes towers, data centers, fiber, and small cells, reached $380bn of total spend across greenfield and brownfield. Specifically, this capital spending in the four sub-sectors of digital infrastructure went towards building:

  1. Towers: 87k new towers
  2. Data Centers: 1,400 megawatts of new hyperscale & colocation power capacity
  3. Fiber: 39 million new fiber strand miles
  4. Small Cells: 133k new small cell nodes

Projecting into the future, this digital infrastructure TAM will grow by 4% to $396bn in 2021. Additionally, for 2022 the digital infrastructure TAM will increase again by 4% to $412bn.

Digital Infrastructure – Total Addressable Market – Greenfield and Brownfield Mix

While the total addressable market (TAM) for digital infrastructure is growing, the mix between greenfield and brownfield (i.e., M&A) capital expenditures is shifting. In 2020, total capital expenditures into digital infrastructure had a weighting of 60% greenfield ($228bn) and 40% brownfield ($152bn) investments.

Digital Infrastructure TAM and CapEx Mix
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For 2021 and 2022, the mix of overall investment will shift further towards greenfield. This is because comparatively fewer assets and businesses are for sale, relative to the volume of capital entering the sector. Specifically, TAM or capital expenditures into digital infrastructure for the coming years will be:

  • 2021: 65% greenfield ($257bn) and 35% brownfield ($139bn) investments
  • 2022: 70% greenfield ($288bn) and 30% brownfield ($124bn) investments

Colony Capital – Greenfield and Brownfield Mix

Across Colony Capital’s 19 digital infrastructure portfolio companies, the firm is weighting its investments even more towards greenfield opportunities, than the market as a whole. Indeed, in 2020, Colony’s total capital expenditures into digital infrastructure were weighted 75% towards greenfield and 25% for brownfield investments.

For 2021, the firm once again excepts its digital infrastructure investments to skew more heavily towards greenfield investing relative to the market TAM as a whole, albeit at a smaller magnitude. Specifically, Colony Capital’s total capital expenditures into digital infrastructure for 2021 will be placed 70% towards greenfield and 30% for brownfield investments.

Colony Capital’s Greenfield Rationale

Overall, Colony Capital’s strategy is quite purposeful. Specifically, it views current brownfield (i.e., M&A) digital infrastructure opportunities are trading at 3x to 4x replacement cost in the private markets.

For example, recent tower precedent M&A transactions in the United States from American Tower and SBA Communications have reached valuations of over $1.0m per tower. Whilst in Europe, tower precedent M&A transactions from Cellnex have reached valuations of over €400k per tower.

Colony Capital frames its buy-versus-build decision by comparing brownfield valuations against the cost to build new towers in each market. Specifically, the firm states that its benchmark for building towers in various global markets is the following:

  • United States: $235k per tower
  • Europe: €115k per tower (equivalent to $135k per tower)
  • Latin America: $68k to $90k per tower

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