DigitalBridge Group (NYSE: DBRG) today announced its Q1 2022 earnings and provided updates on its portfolio companies held through its investment management unit, its balance sheet data center investments in DataBank and Vantage SDC, as well as its view on construction and labor cost inflation in the digital infrastructure sub-sectors of towers, data centers, and fiber.

Cost Inflation: Construction and Labor – DigitalBridge

During the Q1 2022 earnings call, Marc Ganzi, CEO of DigitalBridge commented on the impacts of cost inflation to its 26 digital infrastructure portfolio companies globally. In particular, DigitalBridge’s Ganzi divided the issue of cost inflation into construction costs and labor costs, which can be characterized as follows:

  • Construction Costs: DigitalBridge is not experiencing a “material deviation” in construction costs. Rather, of the $7.8bn in growth capital expenditures that DigitalBridge’s portfolio companies have committed to for 2022, Ganzi expects only a 3% to 4% variation in costs, from a company’s originally budgeted plans. In absolute terms, this implies a difference of ~$235m to ~$310m in capital expenditure budgets
  • Labor Costs: DigitalBridge’s Ganzi states that “I am concerned about labor”, adding “the cost of labor has skyrocketed, the competition for labor is intense” and noting that the real challenge is “getting people to come to work”. Within digital infrastructure, Ganzi points to the “front lines of construction” as most heavily impacted, with tower climbers, data center engineers, and people that do micro trenching for fiber builds all in high demand. In turn, Ganzi notes that wages at DigitalBridge’s portfolio companies have increased “anywhere from 3% to 10%”

DigitalBridge Portfolio Companies – Q1 2022

DigitalBridge’s investment management business (i.e., non-balance sheet) provided a number of portfolio company updates during Q1 2022. Specifically, these DigitalBridge portfolio companies are held through its value-add funds, DigitalBridge Partners I (DBP I) and DigitalBridge Partners II (DBP II), as well as the firm’s new investment management strategies, which include Ventures, Core+ Equity, and Credit.

Each of DigitalBridge’s investment strategies offers a varying degree of risk and target returns, as outlined below:

Next, are portfolio company updates from DigitalBridge’s investment management business, within the digital infrastructure sub-sectors of towers, data centers, and fiber:

Towers

Vertical Bridge

In March 2022, Vertical Bridge, the fourth largest independent tower company in the United States, which is backed by DigitalBridge Partners II (DBP II), completed an asset-backed securitization, issuing $1.368bn of tower revenue notes, which were collateralized by a portfolio of 3.5k U.S. tower sites.

Telenet’s Towers in Belgium

In March 2022, DigitalBridge, through its Core+ Equity strategy, agreed to acquire the mobile telecommunications tower business of Telenet Group, a wireless carrier in Belgium, at an enterprise value of €745m ($820m USD). Particulalry, Telenet’s tower business comprises a nationwide footprint of 3.3k sites in Belgium, including 2.16k owned sites and 1.16k third-party sites.

EdgePoint Infrastructure

In April 2022, EdgePoint Infrastructure, an independent tower company in Southeast Asia, which is owned by DigitalBridge Partners II (DBP II), agreed to acquire 2.9k towers in the Philippines for ~$666m, from PLDT, a telecommunications operator in the Philippines.

Data Centers

Vantage Data Centers

In March 2022, Vantage Data Centers, a hyperscale data center operator, which is backed by lead investor DigitalBridge, announced its plans to invest an additional $900m Canadian dollars ($713m USD) to expand its operations in Montreal and Quebec City, Canada.

Fiber

Netomnia and YouFibre

In April 2022, DigitalBridge led a new equity funding round of £295m ($385m USD) for Netomnia, a UK fiber-to-the-premises (FTTP) alternative network operator, and its partner, YouFibre, an internet service provider (ISP), which serves UK homes and businesses with high-speed broadband.

Xenith IG (Superloop’s Hong Kong and Singapore Fiber)

In April 2022, DigitalBridge Partners II (DBP II) alongside Columbia Capital, closed its acquisition of Superloop’s Hong Kong fiber operations and select Singapore fiber assets for ~$104m USD. DigitalBridge intends to rebrand Superloop’s fiber assets as Xenith IG.

Everstream Solutions

In April 2022, DigitalBridge, through its Credit strategy, participated in the $1bn debt financing of Everstream Solutions, a dark and enterprise fiber provider in the Midwest and Mid-Atlantic regions of the U.S. Specifically, DigitalBridge Credit led, in-partnership with CPP Investments, a $220m commitment to Everstream in the form of a junior, holding company term loan.

Ventures

Celona

In March 2022, DigitalBridge, through its Ventures strategy, led a $60m Series C funding round in Celona, an enterprise networking company. This investment was made alongside Celona’s existing investors, including NTTVC, Lightspeed Venture Partners, Norwest Venture Partners, Qualcomm Ventures, and Cervin Ventures.

Liqid

In May 2022, DigitalBridge, through its Ventures strategy, alongside Blackwells Capital, made an investment into Liqid, a software company delivering data center composability.

Investment Management Unit – Entering Mid-Market

In April 2022, DigitalBridge agreed to acquire AMP Capital’s international infrastructure equity investment management business, for upfront cash consideration of $328m and total value, including earnouts, of up to $457m.

AMP Capital’s international infrastructure equity business fits directly adjacent to DigitalBridge’s flagship value-add digital infrastructure equity investment funds, namely DigitalBridge Partners I (DBP I) and DigitalBridge Partners II (DBP II). Particularly, the acquisition will scale and enhance DigitalBridge’s capabilities in the mid-market infrastructure segment.

Portfolio Companies – Digital Infrastructure

As part of this transaction, DigitalBridge will become the investment manager for AMP Capital’s existing digital infrastructure portfolio companies, including:

  • Everstream Solutions: super-regional dark and enterprise fiber provider with a network spanning over 27k fiber route miles throughout 10 states in the Midwest and Mid-Atlantic
  • VX Fiber: headquartered in Sweden, VX Fiber designs, builds, and operates fiber-to-the-premises (FTTP) open access networks in South Africa, the UK, and Belgium
  • Expedient Data Centers: operates 11 data centers in the United States and provides services including retail colocation, managed cloud, managed services, and network access products
  • Telecom Infrastructure Partners (TIP): ground lease aggregator which has a commitment of up to $350m in equity and plans to invest in 10k+ wireless site leases

DigitalBridge Balance Sheet – Q1 2022

DigitalBridge’s Digital Operating Balance Sheet has $1.46bn of assets under management (AUM) comprised of minority interests in DataBank (21.8%) and Vantage SDC (13%). As of Q1 2022, DigitalBridge, through DataBank and Vantage SDC owns 78 data centers, with 300+ megawatts of power capacity across 1.98 million critical IT sqft, which have an 81.2% utilization rate.

Overall, this portfolio produces $812m of annual revenue (MRR), up 2.8% quarter-over-quarter. Also, in Q1 2022, these data centers secured $14.2m of annualized bookings, a 7.2% decrease from $15.3m, in the prior quarter. Finally, DataBank and Vantage SDC realized aggregate quarterly churn of 0.9% during Q1 2022, an improvement of 1.0% quarter-over-quarter.

Note: DigitalBridge’s consolidated metrics exclude DataBank’s acquisition of four data centers in Houston, Texas from CyrusOne for $670m, which closed in March 2022.

DataBank

DataBank’s data center portfolio comprises 65+ facilities, in 27+ markets, across 2.0 million sqft of raised floor space. In Q1 2022, DataBank was ahead of budget by ~1.4%, in terms of EBITDA growth. Furthermore, in terms of leasing, DataBank’s sales pipeline stands at over $28m in potential new organic bookings – a record for the company.

Vantage SDC (Stabilized Data Centers)

Vantage SDC operates 13 data centers, representing 177 megawatts of power capacity. Overall, these data centers comprise 1.5 million sqft, with a portfolio utilization of ~95%.

LEAVE A REPLY

Please enter your comment!
Please enter your name here