Colony Capital shared on its Q3 2020 earnings conference call certain realized valuation marks. Specifically, these marks were on four of its legacy Digital Infrastructure investments, over the past 16 months. These assets are part of Colony’s Separately Capitalized Portfolio Companies, meaning the valuations are on former Digital Bridge investments, made between 2014 and 2017. Specifically, Colony has taken valuation marks on Vertical Bridge, DataBank, Vantage Data Centers, and ExteNet.
Vertical Bridge – Colony’s Valuation
Vertical Bridge is the fourth largest owner of towers in the United States, with 6.3k active tower sites. In April 2019, Colony did a partial recapitalization of Vertical Bridge. Specifically, Caisse de dépôt et placement du Québec (CDPQ) acquired a 30% stake in Vertical Bridge. As a result of this transaction, Colony realized a valuation mark of an 18% IRR and 1.8x Multiple of Invested Capital (MOIC) for existing shareholders.
DataBank – Colony’s Valuation
DataBank currently operates 20 data centers, representing 54 megawatts of power capacity and 457k sqft, in the United States. In January 2020, Colony Capital purchased a 20% stake in the company for its balance sheet. As a result of this transaction, exiting shareholders realized a valuation mark of a 22.5% IRR and 2.1x Multiple of Invested Capital (MOIC).
Vantage Data Centers – Colony’s Valuation
Vantage Data Centers currently operates 13 hyperscale data centers and has 4 data centers under development. In July 2020, Colony invested $185m as part of a $1.2bn Colony-led investment for an 80% equity stake in Vantage Data Centers’ portfolio of 12 North American stabilized hyperscale data centers. As a result of this transaction, Vantage was valued at a 5.1% cap rate and exiting shareholders realized a valuation mark of a 32% IRR.
ExteNet Systems – Colony’s Valuation
ExteNet operates 32.3k small cell nodes, 430 networks and 3.6k owned fiber route miles. In mid-October 2020, John Hancock Life Insurance Company led a consortium that acquired a 30% minority stake in ExteNet. As a result of this transaction, exiting shareholders realized a valuation mark of 1.8x Multiple of Invested Capital (MOIC).
Rationale for Colony Capital’s Valuation of Digital Bridge Assets
Overall, Colony Capital has held the same ownership in some assets, but they have also marked certain assets. Providing realized valuation marks is of particular importance to Colony. This is because Colony is in the process of raising Digital Colony Partners Fund II. Importantly, this fund is the next third-party capital vehicle which Colony will invest out of.
Furthermore, the long-term, institutional nature of the investors entering Colony’s investments allows those platforms to continue growing for the future. Because the former Digital Bridge investments were made between 2014 and 2017, Colony is harvesting these companies at the appropriate time, given that digital infrastructure valuations have matured over the past years.