DigitalBridge Group (NYSE: DBRG) today announced that it has closed its second flagship private equity fund, DigitalBridge Partners II (DBP II) – which was formerly known as Digital Colony Partners II (DCP II) – with $8.3bn in equity capital commitments.
DigitalBridge Partners II (DBP II) – Fund Overview
DigitalBridge’s $8.3bn capital raise for DigitalBridge Partners II (DBP II), surpassed the fund’s original target of $6.0bn, by 38%. Additionally, DBP II closed with more than double the capital commitments of its predecessor, the $4.1bn Digital Colony Partners I (DCP I) fund. Note, the below chart shows DigitalBridge’s capital raise as of Q3 2021.
However, it appears that DBP II did not meet its extended hard cap of $8.6bn, as referenced in Q3 2021. Additionally, of the total equity raised of $8.3bn, DBP II has committed $4.5bn+, equating to 50%+ of its total capital commitments.
Timeline and Re-Ups
DigitalBridge launched fundraising for DigitalBridge Partners II (DBP II) in the summer of 2020 and the process was materially concluded in early Q4 2021. Indeed, this implies a total fundraising timeline of ~1.5 years.
Through this fundraising process, DBP II secured a re-up rate, from the predecessor DCP I fund, of 70%+ based on the number of investors.
As of Q3 2021, ~90% of DBP II’s assets under management (AUM) were fee-producing, known as fee-earning equity under management (FEEUM). On this FEEUM, DBP II had an average management fee rate of 1.1%.
Applying the same 90% FEEUM-to-AUM ratio to DBP II’s $8.3bn of AUM raised, implies ~$7.5bn of FEEUM. As such, this ~$7.5bn of FEEUM will produce ~$82m of management fees annually for DigitalBridge’s Investment Management business.
Uniquely, in July 2021, DigitalBridge closed $500m of securitized notes which were backed by the firm’s investment management fees. Specifically, the debt sizing was based on the servicing capability of DigitalBridge’s management fee collateral and can increase as DigitalBridge raises additional capital.
For this securitization, DigitalBridge’s management fee collateral must always represent at least 60% of the borrowing base value. While the remaining 40% of the borrowing base can derive from DigitalBridge’s balance sheet investments (i.e., DataBank and Vantage SDC).
Ultimately, by raising additional equity capital, DigitalBridge will have a larger management fee base, which in turn allows the company to pursue further management fee securitizations in the future. Overall, these management fee securitizations enable DigitalBridge to lower its effective cost of capital for the broader business. Particularly, the Class A-2 Notes have a cost of 3.933%, while the VFN Notes have pricing at 3-month LIBOR + 3%.
Portfolio Companies – DigitalBridge Partners II (DBP II)
DigitalBridge Partners II (DBP II) has already committed or invested in 9 portfolio companies across towers, easements, hyperscale data centers, edge infrastructure, indoor DAS infrastructure, and fiber. Specifically, these portfolio companies include:
- Towers: Vantage Towers, EdgePoint Infrastructure, Vertical Bridge, ÍslandsTurnar
- Data Centers: Vantage Data Centers APAC (includes PCCW’s data centers and AgileDC), AtlasEdge Data Centres
- Fiber: Superloop (Hong Kong and Singapore fiber)
- Small Cells, DAS, & Other: Landmark Infrastructure Partners / Landmark Dividend, Boingo Wireless
For a complete list of the digital infrastructure portfolio companies that DigitalBridge holds through Digital Operating (i.e., via its balance sheet) and its Investment Management business (e.g., DigitalBridge Partners II), check-out Dgtl Infra’s breakdown here.
Transaction Advisors – DigitalBridge
DigitalBridge’s legal advisor was Simpson Thacher & Bartlett, which advised on the formation and fundraising of DigitalBridge Partners II (DBP II).