DigitalBridge Group (NYSE: DBRG) today announced its Q4 and full-year 2021 earnings, with the company providing updates on its balance sheet data center investments in DataBank and Vantage SDC, developments at the portfolio companies held through its investment management business, and its new investment management strategies in digital infrastructure called Credit, Core, and Ventures.
DigitalBridge Balance Sheet – Q4 and Full-Year 2021
DigitalBridge’s Digital Operating Balance Sheet has $1.23bn of AUM comprised of minority interests in DataBank (20%) and Vantage SDC (13%). As of Q4 2021, DigitalBridge, through DataBank and Vantage SDC owned 78 data centers, with 300+ megawatts of power capacity across 1.95 million critical IT sqft, which were 79.7% utilized.
Overall, this portfolio produces $790m of annual revenue (MRR). Also, in Q4 2021, these data centers secured $15.3m of annualized bookings, a 7.8% decrease from $16.6m, in the prior quarter.
DataBank’s data center portfolio comprises 65+ facilities and 2.0 million sqft of raised floor space, pro forma for pending acquisitions. In 2021, DataBank generated core (i.e., pre-zColo) revenue growth of 7.8% and EBITDA growth of 6.8%. Presently, DataBank’s sales pipeline stands at over $27m in potential new organic bookings.
In January 2022, DataBank agreed to acquire four data centers in Houston, Texas from CyrusOne for total consideration of $670m. Specifically, DataBank is acquiring CyrusOne’s Houston West I, II, & III, and Houston Galleria data centers.
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%.
Additionally, DigitalBridge’s Marc Ganzi highlighted the possibility of Vantage SDC acquiring mature hyperscale data center campuses from Vantage Europe in the future. Indeed, this represents a way for DigitalBridge to add exposure to Europe onto its balance sheet.
DigitalBridge Portfolio Companies – Activity Updates – Q4 2021
Below we highlight various portfolio company updates from DigitalBridge’s investment management business (i.e., non-balance sheet) during Q4 2021. Specifically, these DigitalBridge portfolio companies are held through DigitalBridge Partners I (DBP I), DigitalBridge Partners II (DBP II), separately capitalized vehicles (legacy Digital Bridge Holdings), and co-investments.
Beyond the updates highlighted below, DigitalBridge’s portfolio companies Scala Data Centers, EdgePoint Infrastructure, and Highline do Brasil, collectively, received an initial $75m equity commitment from the International Finance Corporation (IFC), a member of the World Bank Group.
In December 2021, DigitalBridge’s DBP II completed the acquisition of the macro tower portfolios, comprising 367 sites, from two of Iceland’s largest wireless carriers, Sýn hf and Nova hf, creating a new company called ÍslandsTurnar.
Andean Telecom Partners (ATP)
In February 2022, DigitalBridge-backed Andean Telecom Partners (ATP) acquired BTS Towers an independent tower company with sites in Colombia, Peru, Ecuador, and Paraguay.
Vantage Data Centers
During 2021, Vantage Data Centers secured ~195 megawatts of total leasing globally. For 2022, Vantage is targeting a 10% increase in its annual leasing activity, implying ~215 megawatts of leasing for the year.
Overall, Vantage Data Centers’ hyperscale leasing pipeline stands at over 800 megawatts of opportunity between the United States, Canada, Europe, and Asia-Pacific.
Xenith IG (Superloop’s Hong Kong and Singapore Fiber)
In October 2021, DigitalBridge’s DBP II alongside Columbia Capital, agreed to acquire Superloop’s Hong Kong fiber operations and select Singapore fiber assets for ~$104m USD. Superloop’s Hong Kong fiber assets comprise 158 miles (255 kilometers) of fiber, connecting to 34 buildings. While the company’s Singapore fiber assets comprise 161 miles (259 kilometers) of fiber, connecting to 69 buildings.
In February 2022, DigitalBridge acquired Mundo, a fiber-to-the-home (FTTH) broadband provider to households and businesses in Chile. Presently, Mundo owns one of the largest FTTH networks in Chile, reaching over 3 million homes passed.
Investment Management – Business Updates – Q4 2021
DigitalBridge Partners II (DBP II)
On December 31, 2021, DigitalBridge closed its second flagship private equity fund, DigitalBridge Partners II (DBP II), with $8.3bn in equity capital commitments. Of the total equity raised, DBP II has committed 2/3rds to-date, across 8 new platform investments in the Americas, Europe, and Asia-Pacific.
DigitalBridge has seeded, via its balance sheet, and is seeking to grow third-party capital for three new investment management strategies, namely Credit, Core, and Ventures. By extending its mandate beyond value-add digital infrastructure investing, DigitalBridge aims to invest, operate, and capitalize on the $400bn+ of anticipated annual global capital expenditures, with the appropriate risk-adjusted capital source.
As shown above, DigitalBridge’s Credit and Core strategies will target lower risk and lower return digital infrastructure investments than the firm’s flagship DigitalBridge Partners (DBP) value-add funds. However, commensurate with the profiles of these strategies, their management fee rate will be lower, at 0.9% to 1.0% per annum, versus DigitalBridge’s DBP funds, which target management fees of 1.5% per annum.
Conversely, DigitalBridge’s Ventures strategy will seek higher risk and higher return digital infrastructure investments than the DBP funds.
DigitalBridge’s Credit strategy is led by Dean Criares, formerly of Sound Harbor Partners. The strategy focuses on investing in two products:
- Private Credit: first lien term loans, construction/delay-draw loans, unitranche, second lien term loans, mezzanine debt, HoldCo notes, and preferred equity
- Liquid Credit: primarily first lien term loans, with the use of proceeds being for acquisitions, leveraged buyouts, and recapitalizations
To-date, DigitalBridge’s Credit strategy has closed 6 loans and is about to close its 7th. Prior to forming third-party capital, DigitalBridge is warehousing these first 6 loans on its balance sheet, which total ~$120m.
Further, the strategy has a pipeline of 28 new opportunities, totaling $1.6bn, across all sub-sectors of digital infrastructure.
DigitalBridge’s Core strategy is led by Matt Evans, formerly of AMP Capital, and Peter Hopper, formerly of DH Capital. The strategy targets investing in long-duration, predictable-return assets, with its key criteria being:
- Long-duration contracts with investment grade counterparties
- Cash/yield generating assets (e.g., low exposure to development projects)
- Developed market economies
- Lower risk/return profile
- Capitalized with low leverage
DigitalBridge’s Ventures strategy is led by Alexandre Villela, formerly of Qualcomm Ventures and Intel Capital. The strategy seeks to invest in late-stage growth companies across the emerging digital infrastructure technology vertical. Further, Ventures will support market share gaining companies alongside other top-tier venture capital investors.
More specifically, DigitalBridge notes the opportunity to invest in technology that supports the software-defined layer of networks, which is directly adjacent to the physical layer of digital infrastructure.
Initially, DigitalBridge’s Ventures strategy has launched a ‘pilot’ fund internally and has made two investments to-date. As such, the Ventures strategy will start-out smaller than DigitalBridge’s Credit and Core strategies.