Q1 2023 DigitalBridge Group Inc Earnings Call

Greetings and welcome to the digital Bridge group first quarter 2023 earnings call. At this time all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance. During the conference. Please press star zero on your telephone.

Keypad as a reminder, this conference is being recorded it is now my pleasure to introduce your host Safran White managing director head of public Investor Relations. Please go ahead.

Good morning, everyone and welcome to the digital bridge's first quarter 2023 earnings conference call.

Speaking on the call today from the company as Marc Ganzi, our CEO Jacqui woo our CFO .

I'll quickly cover the Safe Harbor, and then we can get started some.

Some of the statements that we make today regarding our business operations and financial performance may be considered forward looking and such statements involve a number of risks and uncertainties that could cause actual results to differ materially.

All information discussed on this call is as of today May three 2023, and digital bridge does not intend and undertakes no duty to update it for future events or circumstances.

For more information please refer to the risk factors discussed in our most recent Form 10-K filed with the FCC for the year ending December 31, 2022, and our Form 10-Q to be filed with the SEC for the quarter ending March 31 2023.

Great, Let's get started with Mark providing a why don't you update Jackie will outline our financial results and turn it back over to Mark to discuss how we're executing the digital bridge playbook in today's market.

With that I'll turn the call over to Marc Ganzi, Our C E O.

Mark.

Kevin.

So today, let's start with an update on our key 2023 priorities the three things that matter.

Which I outlined last quarter and I'll continue to do that throughout the course of this year.

First I'm pleased to report the gingerbread just made tangible progress on fundraising.

On simplification.

And on portfolio level performance.

The first quarter.

We are back to generating strong year over year growth in our investment management platform.

With fee income up over 36% and FRE up 40% driven by higher fees on co invest.

The acquisition had been for bridge.

And see them activating across our nucor and credit strategies, which we telegraphed last quarter.

New capital formation was up substantially year over year and.

And on top of that we're seeing our first commitments now in our flagship did your bridge partner series strategy.

These developments give us higher confidence, we will be able to deliver on our capital formation targets in 2023 to.

To be clear, we're sticking with our guidance.

With respect to simplification, we've made continued progress selling bright spire for $200 million.

Paying off our 2023 converts and advancing our alternative asset manager profile with enhanced reporting as we move closer to deconsolidation.

I'll cover portfolio performance a bit later, but the headline is our portfolios continue to perform.

With growth across all of the verticals that we serve today in digital infrastructure.

So that's detailed fund raising and our simplification progress before we get into the financials.

Next slide please.

As you know scaling P M as our number one J P. I. This year, it's the metric that will drive revenue earnings cash flows and unlock substantial shareholder value.

The first quarter of 2023.

Our fee, earning equity under management increased $8 9 billion.

Poor and credit.

And the full contribution from the interim bridge acquisition, we closed in February .

On the right you see a commensurate increase in AUM, which.

That was up 49% year over year to $69 3 billion.

Well looking forward to continuing to deliver strong growth all year on these metrics, but most importantly on field.

Next slide please.

New capital formation.

This is what drives future fee income.

In the first quarter raised about $700 million.

We're gonna principally by new fee paying co invest along some alongside of some of our most critical platforms, including G. D towers switch high lined up Brazil and vantage.

As you know many of our anchor investors utilize their fee free co invest allocation last year.

So the proportion of fee paying co invest is set to rise in 2023.

Another interesting feature around co invest is that as the platforms grow there's an embedded structural growth in co investment.

This is a simple algorithm the more companies we have under management in our funds.

Tomorrow co invest to support these ongoing investments like Greenfield development that we're engaged in today, which we'll talk about a little bit later.

As we execute our buy and build playbook across our platforms businesses scale and increase in value as well.

The powerful combination.

In addition to that also our corn credit funds.

As I mentioned, we're seeing good momentum in fundraising and we remain confident we are set to achieve our 2023 targets.

Next slide please.

On simplification, we've made important progress on two of our key objectives. This year, one selling 100% of price bar for a little over $200 million.

That's a noncore asset in the last he just condition and our disposal of legacy assets.

I think we're down to less than $50 million and legacy assets today.

So just to be clear, it's something that really we're not going to be focusing on go forward with.

Focus on our single.

This unit, which is our high growth digital infrastructure investment manager on a global basis.

Another key priority for me deleveraging I've been very clear about this in.

In April we paid off $200 million of our 2023 convertible notes in cash, bringing our corporate debt down 35%.

When we call our 2025 converts in July well achieved our goals on corporate debt for the year.

The next step I've got my sights of deconsolidation.

Number one thing we talk to with investors today. So here we are the final stage of the data bank recap, it's in flight and it's on track to wrap up this summer.

And I continue to be optimistic that we'll be able to execute a similar sell down and our ownership of vantage S. D. C. By the end of this year.

I'm really looking forward to checking the box, which will make it a lot easier to decipher our financial profile.

Clear noncontrolling investment level debt off our books and results in tangible cost savings and managing our business.

This plus paying off the converts leaves us with $300 million of securitized debt. It takes our corporate leverage inside of two five times.

This is absolutely seminal to our success as we navigate the current financial environment.

With that I want to turn the call over to Jacky to walk you through our financial section and highlight the progress, we're making aligning our financial reporting with our alternative asset management peers, So Jackie over to you.

Thank you Mark and good morning, everyone.

As a reminder, in addition to the release of our first quarter earnings we filed a supplemental financial report this morning, which is available within the shareholder section of our website.

Turning to page 12, our first quarter highlights I've tried to positively with fee revenues and fee related earnings up year over year.

Total company distributable earnings was negative $3 million, excluding a noncash write down of a wellness infrastructure business now our desktop BOE earnings would have been positive $4 million or <unk> <unk> per share.

Assets under management were $69 billion in the first quarter, which grew by 49% from $47 billion.

Here driven by the acquisition of E&P capital infrastructure equity.

Recently rebranded as Edinburgh Bridge, and significant new co investment and new digital core and credit product AUM.

Earning equity under management is up 47% year over year to $28 billion with approximately $700 million of fee paying capital raised year to date amidst a very difficult fund raising environment.

Moving to page 13, the company saw strong year over year growth driven by the expansion of our investment management business and continued simplification of our corporate structure.

But the first quarter reported total consolidated revenues were $250 million, which represents a 7% increase from the same period last year.

As previously noted our reported revenues now include contributions from carried interest and principal investment income, which aligned our presentation more closely with our peers in the public alternative investment management space.

GAAP net loss attributable to common stockholders was $212 million.

Total company adjusted EBITDA was $26 million, which grew by 25% from $20 million in the same period last year.

March we harvested our entire brights buyer interest for total proceeds of $202 million, which eliminated $7 million of dividend income in the quarter, but provided us with additional firepower to invest in high quality digital infrastructure assets and further simplify our business.

Away from what remains of the non core legacy business.

Moving to page 14, the company continues to expand its investment management earnings from additional fee, earning equity under management generated by new strategies and the acquisition and for bridge.

B income excluding incentive fees increased by 36% and our share of fee related earnings increased 103% from the same period last year, primarily driven by $11 million of fee income from infra bridge, which represent less than two months of fees from that recently acquired.

Platform and the benefit from digital bridge's acquisition of Whoppers ownership and the company's investment management business.

Digital I am distributable earnings increased significantly to $32 million for the quarter compared to $9 million in the same period last year.

Moving to page 15, the company share of digital operating revenues were $27 million down 25% year over year, while adjusted EBITDA was $12 million down 23% from one to 2022.

The year over year decrease was the result of the recapitalization of our data bank investment further moving the company towards the ultimate deconsolidation of the operating business segment from our consolidated financial statements.

As a reminder, in the fourth quarter of 2022 Digital bridge, we received $107 million of proceeds from the recapitalization of data bank, which reduced our ownership from 13, 5% collected at 11%.

There were no incremental reductions in our ownership this quarter. However, we anticipate the deconsolidation of the operating segment as the year progresses.

Operating distributable earnings decreased to $5 million from $7 million in the same period last year.

Turning to page 16, and you can see that now with the addition of Infra bridge, we will see greater scale and growth in our high margin investment management business.

Since the first quarter of 2022, our annualized fee revenues increased from $120 million to $237 million and fee related earnings increased from $73 million to $138 million.

Looking at the right side of the page our run rate fee revenues were $252 million run rate provides an indication of expected revenues and is calculated by multiplying committed E. U N at the end of the quarter, but the weighted average effective annual fee rate.

Turning to page 17, the company has completed key strategic corporate initiatives in the first quarter such as the input bridge acquisition.

Bright spire share sale generated $202 million on liquidity and the $200 million repayment of convertible notes at maturity in April which further reduced our company's leverage profile.

Our balance sheet remains strong and is firepower for accretive uses with approximately $500 million of liquidity, including the full $300 million available from our securitization revolver.

Following the anticipated a deconsolidation of our operating segment were largely left our target remaining corporate debt of only $300 million, which isn't expected to be repaid or refinanced until 2025.

And as we have discussed in prior quarters, our effective leverage ratios will be in the low single digits positioning digital bridge for long term shareholder success.

Moving to page 18, we have highlighted the continued improvements to our financial reporting and disclosures as we simplify the business and finalize our transformation to a single segment alternative asset manager.

Looking at the left side of the page to align more closely with our alternative asset manage our peers. We re categorized carried interest allocation and principal investment income into revenues.

We have also consolidated interest income with other income on our P&L.

Turning to the right side of the page, we now present, our supplemental balance sheet with assets and liabilities on a segment basis, providing a financial profile with added transparency that's easier to understand as we move towards deconsolidation, our operating segment.

One of the clearest takeaways from this enhanced presentation is that once we complete our deconsolidation of the operating segment digital bridge as a high growth asset light low leverage investment management platform focused on digital infrastructure investing in superior asset management.

In summary, we are very pleased with the progress we've made to start the year digital bridge's three statements financials are now healthier.

Secondly, simplified.

Certainly relative to the very complicated structure, and Mark and I inherited three years earlier and the company remains poised for growth as we scale, our asset light low leverage I am business with promising growth prospects led by our fundraising machine.

We look forward to the quarters to come and achieving critical milestones and fund raising for future flagship fund and progression towards deconsolidation, our operating assets.

And with that I'll turn it back tomorrow.

Thanks Jackie.

Before I get into how were executing in today's markets I wanted to highlight what we see is the tale of two cities in digital infrastructure today.

In both equity and credit markets.

Significant dispersion in performance between high quality in favor companies that are trading largely in line with broader markets.

Out of favorite companies that are exhibiting material underperformance.

And while that gives both the bulls and bear something to talk about.

Virginia rich it both underscores the relevance of the investment decisions, we've taken over the past few years.

Building some of the most high profile high quality platforms in the digital infrastructure space.

But it also creates new opportunities for.

For us as we deploy capital going forward.

Next slide please.

So in the face of a dynamic macro environment.

And the dispersion, we're seeing in digital infrastructure markets today, what's the playbook, we're executing.

Number one we're forming fresh capital.

Fuel the next phase of our growth and support our portfolio companies that's.

That's a sharp focus on raising $8 billion this year and new equity.

Also capitalizing our strong track record in credit markets.

Where we have secured over $2 3 billion in new commitments just in the last few months.

Here's a simple truth in this market today.

<unk> companies continue to attract capital.

Number two we're investing in our customers and our best ideas.

<unk> capital with discipline into new opportunities.

The cycles, creating for us and continuing to invest through our existing platforms and greenfield capex to support our existing customers.

Finally, driving great outcomes for our stakeholders with portfolio company performance.

Underpinned by strong leasing results that catalyzed solid returns and steady growth and just kind of cashless.

Next slide please.

So to start you have to form capital effectively and to do that you have to have the right people.

Right process and the right relationships.

We're in the early innings of our growth phase so to.

Help us tap into significant pools of capital on a global basis, we're substantially expanding our capital formation team from 13 people a few years ago to 23 people today talking to Lps on a global basis.

We've also expanded our LP base substantially.

<unk> most of our efforts have been focused on the top 100 global infrastructure investors.

He's our most significant partnerships and they will continue to remain vital to our success.

But as we expand our product offerings.

Launch new vintages of our mature strategies.

Creasing lead tapping into the top 1000 institutional Lps.

There's a lot of room for us to continue to grow even before we eventually target regional Lps and high net worth capital, where we've spent very little time.

This is the benefit of being in your five not 25 of our growing trajectory. There's a lot of room for us to grow here and there's a lot of room for us to continue to fund raise and make new relationships at different rich and this is what we're seeing in this environment today.

Next page please.

So in addition to having the right people processes and relationships it.

It helps a lot to have the right condition.

Our business continues to be driven by very strong secular tailwind driven by persistent global demand for connectivity and compute.

Institutional investors want to fund that growth.

Their enthusiasm has been demonstrated.

Strong growth, we've seen in our assets under management over the past few years.

As you can see we're on track to hit our 2025 AUM target, we laid out a couple of years ago.

Which is 100 billion and assets under management.

Even more importantly, investor appetite for digital infrastructure continues to show up in surveys the capture their intent to increase their allocation to infrastructure and most importantly digital infrastructure in particular.

We are growing faster and taking share in a sector, that's already experiencing an uplift in investor and L. P allocations.

At the <unk> level, we're benefiting from the fact that we've got lots of room to continue to expand geographically building on our success growing European and Asian portfolios are growing product offerings as a part of our full stack strategy.

Give up he has diversified exposure to the.

Sector.

And as I've mentioned.

Growing our investment and capital formation teams to support and catalyze this growth.

These are all important tailwind that exist because we're in a great sector.

We're early in our lifecycle.

Setting us up for continued attractive growth over the coming years.

Next slide please.

So I talked about the tale of two cities earlier in this section and.

And what's happening in digital infrastructure markets today, and how in favor platforms continue to attract capital.

By design, we have focused our investing on the highest quality platforms over the past few years.

In anticipation of the more discerning market.

It's not an accident in terms of the assets that we acquired in the platforms and management teams, we've been backing over last three to four years.

Knowing what you were buying.

And then everything trades together market is key.

And deep domain expertise and experience has served us well.

Not surprisingly we've been successful in this market.

Attracting significant capital in 2023 to support the continued growth and expansion of our portfolio.

On the equity side, we raised $700 million of fresh co invest alongside companies like Gd towers and switch great businesses high quality. Good logos and then most importantly, and great sectors towers and private cloud data centers.

Advantage EMEA, we signed a very successful recap valuing a collection of stabilized assets of $2 7 billion and attractive valuation generate carried interest.

Shareholders and post solid returns that will facilitate our capital formation efforts.

On the credit side raised $2 3 billion, including $1 billion of data bank and securitized financing.

It reduces our interest cost.

Scala you should the first green bond in the sector in Brazil, and Atlas edge closed a scalable 525 million pound credit facility to support its continued growth.

Building portfolios that withstand different market condition and continue to attract it.

Capital has served me well over many market cycles.

Our current portfolio is demonstrating this today.

Rich.

No.

Second.

What's interesting today as market conditions have created opportunities once again to find value and selected sub verticals that we opted not to invest in during the peak cycle over the last three to four years.

When everything traded together ease.

These investments didn't present, the appropriate risk return profile at digital bridge.

This isn't to suggest that these are bad assets or didn't work for others. We made the decision to opt out of this risk profile and the environment that we just went through over the last three to four years.

This has allowed us to just off our value playbook and.

And expand the university of opportunities we're looking at all.

Augmenting the highest quality platforms, we're always evaluating.

Markets are finally pricing and the difference between a stabilized Hyperscale data center asset.

In our Colo data center with short term contracts and limited fiber connectivity.

Wholesale dark fiber isn't the same as fiber to the home.

Investing in the U S is different than investing in India.

This is the discerning markets that we're now in today.

As we evaluate value opportunities. We're looking at first good businesses that may have been financed poorly.

Or maybe having trouble in todays market financing their growth.

Good businesses that don't have access to capital.

Two.

We're also looking at good businesses that serve and out of favor sub vertical where the company is executing well.

And third buying and lending below replacement cost.

That's always been a great value proposition for us.

And lastly, executing consolidation plays.

So just as importantly, we're also not interested in bad businesses, where they're trading had a good price for a great price.

It's something we actively avoid.

Ultimately as a net buyer digital infrastructure we.

Couldn't be more pleased with the development.

We get to hunt quality and value as risk return dynamics aligned with our internal models.

Next slide please.

No.

On the topic of disciplined capital allocation I want to update everybody on what we're doing in Greenfield.

Your ability in today's market to build and show up for customers on a global basis is a key differentiator for digital rich Green.

Greenfield matters showing up for customers matters.

In 2023, our portfolio companies are budgeted at over 7 billion and growth Capex to support the growth of our customers.

We have shovels in the ground around the world on five continents across all the verticals in digital infrastructure.

Our busiest in North America, where we're deploying $3 2 billion of success based capex.

America is the 1 billion to support data centers.

Ours is.

They aimed towards <unk> and fiber build out.

In Europe , we have plans to spend $2 7 billion on data centers fiber and edge infrastructure.

And finally in Asia, our newest geography, we're spending nearly 700 million on Greenfield data centers.

Building out edge point, South East Asia Tower platform and <unk> fiber network.

We love to build.

It's generally powers the best returns and most importantly, it deepens our relationships with key tech and telco providers on a global basis as we help them deploy next generation networks.

Next slide please.

Lastly, today I want to talk about portfolio performance. This is really where we're making a difference today.

The investments that we made in our new platforms.

And the Greenfield Capex that I, just described ultimately drives portfolio performance in the form of new leasing.

Organic cash flow growth.

Here, we've continued to deliver.

MLR across our portfolio is up in all of our four key verticals driven by organic investment led growth.

The persistence and resilience of our growth drives returns for investors over time.

On the right hand side of the page, we've highlighted conservative portfolio debt metrics, you've heard me talk about this for the last few corners.

To be able to weather changing market conditions.

As we build our portfolios to be able to accomplish that with a significant margin of safety.

43% loan to value.

98% of our debt is fixed.

And we have over seven years of remaining average tenor across these facilities.

This is really an impressive scorecard and shows our commitment.

Managing our balance sheets on a fiscally responsible manner.

Next page please.

So, let's wrap up with a review of my checklist for 2020 three.

As you can see one track across the board.

I continue to have high conviction well hit our fundraising goals based on our fund raising to date and early indications around our flagship strategies.

We've made tangible progress on simplification with improved reporting aligned with our peers.

I'm looking forward to deconsolidation later this year as well as advancing our capital structure optimization to continue to Delever and drive higher earnings and cash flows.

Finally down at the portfolio company level.

We've already had success funding the growth with success based capex behind the most powerful investment great logos in the world backing.

Backing some of the most exciting and innovative technologies that are shaping our planet today.

This is where it gets exciting for me on a personal basis because look the work we do with digital bridge matters.

Our team has been on the front end of every major technology migration path for the last three decades.

<unk> <unk> to <unk> and ultimately now today to five G.

Enterprise data switching to public cloud and now migrating to private cloud and hybrid cloud workloads and now the race for the commercialization of artificial intelligence.

We sit in a unique position and we built some of the most mission critical infrastructure in the world.

And it's a privilege.

It's a privilege we don't take lightly.

This is why first and foremost I remain committed and focused to supporting our customer logos on a global basis.

The ability to show up for them around the world today across all parts of the ecosystem is what makes digital bridge unique and.

In fact, I would offer to you this is our competitive advantage.

So I'll close today with thanking you for your attention and as always your support as we continue to execute on the final stages of our transition to a fast growing alternative asset management Levered.

Levered on the powerful tailwind digital infrastructure.

Really looking forward to updating you next quarter on our continued progress.

I don't want to thank you for your time today.

Now operator, please turn it over to the Q&A session.

Thank you.

Thank you we will now be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May Press Star two if you would like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset.

For pressing the star keys.

Your first question comes from Michael Elias with T D Cowen and company. Please go ahead.

Great. Thanks for taking the question guys two if I may.

First as it relates to the data center space, there's been a lot of noise around tech layoffs and decelerating cloud growth on the Hyperscale side, and then also belt tightening on the enterprise side I would love to get a sense for what Youre seeing from a demand perspective with both verticals of customers and then second in the in the session.

Session, you talked about high quality platforms, just given the recent deal that you did with vantage in Europe I'm curious on how you're thinking about the long term ambitions for that business to the extent you're willing to share.

Well good morning, Thank you.

So first and foremost, let's let's just get right into demand coming out of the quarter.

The the metric that I look at and that we track every week and our monthly and our Monday morning meeting.

His sales pipeline depth.

And if you look for example here domestically in the U S. It data bank and vantage both of those domestic pipelines are up year over year significantly not minor Lee I want to emphasize the word significantly. So this notion of demand slowing down on hyper edge, which is what data bank does.

And on Hyperscale, which is what vantage does and then of course, you know private tier five cloud environments, which is what switch does.

So all of those.

Companies, Michael are massively up year over year.

So this is Q1, we're talking about Q1 2023, just to give you. An example, when we were in diligence looking at switch a.

A year ago.

Back in Q1 of 2022.

The entire leasing pipeline was 57 megawatts.

That leasing pipeline sits north of 500 megawatts.

Okay, just to give you a sense of what's happening at switch, which as you know very secure and workload environments, 100% renewable energy and great locations that are candidly you know perimeter markets that are alternatives to Santa Clara and Northern Virginia.

So we're seeing that our customers want those highly secure workloads and they want to be in environments that have 100% renewable energy that is no longer it nice to have that as a must have for customers' data back same thing leasing pipeline up two X year over year. If you go back a year ago. The leasing pipeline total contract value was at about 180.

The annualized revenue today that leasing pipeline sits at $380 million in terms of backlog and interest coming from cloud players.

Mobile operators see around Oran deployment and now the initial deployments of AI.

And then lastly, vantage that leasing pipeline also up year over year, so domestic leasing and high bridge.

Public cloud and private cloud, which are the three spaces that we occupy with three of the best platforms our year over year.

Revenues are up EBITDA is up.

And leasing is up.

Of the three metrics that you need to be focused on any intelligent investor should be looking at those things.

And that's what's happening those companies are outperforming.

There are market conditions they.

They're winning the jump balls.

You know between them and other competitors and candidly why did we do the deal with vantage Europe in this quarter two to create that continuation fun one to create a path ultimately were great assets can be harvested.

But secondly, we're recycling capital we have over 400 megawatts of new opportunity in Europe with vantage Europe , we need capital to keep supporting that business and that's what we're doing we're raising incremental capital to support our customers as I said before we have over $7 billion of new construction going on right now.

And the leasing volumes are building theyre not declining. So this is a major major opportunity for US look I go back to 2002 and 2009, when we were building businesses in the digital infrastructure space and the playbook is playing out just as I said it was going to play a year ago. If you recall I said, we're going to have a recession.

And I told this to all of our Lps a year ago and I said. This is when you find out with a good team is actually step up and get it done and others other folks sort of attract and they try to weather the storm.

You lean on your front foot and Yugo play offense, what we're doing right now is we're playing offense.

And our customers need our meet our capabilities they.

They need our our land our entitlements are power, we did a very good job of assembling a lot of really good land with a lot of really good building permits and a lot of really good will serve letters from utility companies over a year ago, because we thought the world was going to continue to migrate to the things that we were doing and that decision in that call was correct and so now.

We're funding that Capex and it's all success based capex.

And the reward is you get 10.

10 to 15 year contracts with investment grade logos with great CPI escalators with inflation protection cost pass throughs and so we're seeing incredible single tenant yields like we've never seen before.

Much how it played out no $9 10 in the tower space.

You had capital you have the ability to build it was your advantage and so we grew through that cycle.

2009, and 2010, we grew a lot and so what youre seeing right now is the conviction call. We made a year ago now playing out at the operating companies and that took a little bit of foresight and it took a little bit of courage.

And I'm, sorry, I lost the second part of your question because I got a little excited.

No worries the question was about longer term ambitions for vantage.

Look I think you know.

Vantage has has you know three businesses Asia, North America, and Europe and.

Asia is producing really well, it's our youngest business.

Less than two years old Vantage North America, I said earlier.

A lot of leasing demand right now over 400 megawatts of new opportunities have come into the funnel in the last 90 days.

Vantage Europe sits at over 400 megawatts of new opportunity both of those businesses vantage Europe advantage USA are growing really fast and we're raising capital for for both of those entities as you saw in the first quarter.

I think long term, we've created two permanent capital vehicles vantage S. D C, which a portion of that sits on our balance sheet, great set of stabilized assets now we've created our vantage Europe stabilized platform.

And so now we have the vehicles to continue to harvest these assets and put them in the right place, but most importantly pair it with the right capital that's really that's where I think we are a little bit different we have disability.

Sifting through over a thousand Lps on a global basis, and we know the insurance companies and the pensions that want yield they want safety. They want 10 to 15 year contracts with investment grade logos.

And they're looking for a 12% to 13, IRR, but theyre looking for 6% to 7% cash yield.

Our stabilized permanent capital vehicles with vantage North American vantage Europe , very misunderstood by the public Investor community what are.

Are they.

The path to create liquidity for vantage, it's a path to recycle capital.

Importantly, the opportunity for us to bring to some of your Lps, what theyre looking for.

Which is the ability to buy on a direct basis, our core product.

That has incredibly predictable cash flows embedded escalators little bit of growth. Most of these data centers are 80 mid eighty's occupied. So we are we have incremental leasing as you've seen in vantage FTC.

And so we believe vantage as the Premier Hyperscale data center owner developer in the world today.

What's the real and his team have built in five years is incredible you go back five years ago, we bought that business for a $1 billion little over $1 billion from silver Lake and.

Now today on a global basis.

It's hard to put a value on it but on a consolidated basis. If you roll up all the EBITDA for vantage Asia vantage USA and vantage Europe , it would be well well north of you know.

Ah you know somewhere in the order of magnitude of close to $5 million to $600 million of run rate EBITDA. So it's a business that's probably worth about $15 billion.

Today's valuations, which have come down so creating that $14 billion of value in a period of five years was not easy but.

But we did it through our playbook, which is buy and bill we did some small acquisitions, but mostly we have been building and building with the right customers with the right return profile and creating the right returns. So we're very happy with whats. The real has done it's a great business. It's a great company and it's one of 41 assets 41 companies we own here.

A digit range and we're doing that at every portfolio company.

They book that we're executing with cereal is not that different from what we're doing at skol in Brazil, so not that different from what we're going to be doing with Ames in Kuala Lumpur.

We've got great businesses, great Ceos, but most importantly, we have great great customer relationships and we take over our platform, we could go deep and execute with customers on a global scale.

Really great color Mark Thank you so much.

Youre welcome.

Next question, Dan Day with B Riley Securities. Please go ahead.

Oh, yes. Good morning, guys. Appreciate you taking the questions. So first one just I think we all understand the recap process the timeline for data bank fairly well.

At this point, but looking at vantage is D. C. Maybe just talk through what you think your best options are to monetize that asset.

Would you consider a full sale of the stake rather than kind of leaving yourself with a stub like it seems like you plan to do with data Bank and then.

If you can just remind us what the total cost basis is on vantage FCC and obviously given the moves in cap rates over the last year or two just whether you think you can recoup that are out in a sale.

So great question look database, it's been a fantastic investment for US you know, we've got $218 million into that deal today.

We've created a tremendous amount of value in that business and obviously, the $6 2 billion headline valuation created.

<unk>, an incredible uplift for our public shareholders.

You know today, we're holding that at about $480 million today. So it's a.

Tremendous amount of value that's been created a data bank vantage S. D. C $218 million is where we're holding that today and I think you know the two assets have different flight path. So, let's just talk about them for a second.

One on vantage is D. C. We are in the process of taking a new capital.

Been out looking to raise new capital for vantage S. D. C. I would say Jackie in the last 45 days, we started that process right.

Lot of Investor appetite for stabilized U S data centers that are producing effectively a high six low seven yield.

And even with treasuries, where they are today, that's still pretty attractive on a risk adjusted basis. So some insurance companies and some pension funds and some fund managers want exposure to that because they don't have it and we have it. So you know that process is going well Jackie has is actually running the vantage STC process and we expect to have a good result.

Very soon in terms of what we're doing from a deconsolidation perspective.

Data bank as I mentioned.

On the last call, we reopened our fund raising on April one.

We shut that fundraising down for a period of six months, we had a great first closing with Swiss life, EDF and a few others.

And now we are moving into the last phase of capital formation there.

And we're forming capital you know right now as we speak.

So to be clear that is a continuation fund that had an open fund raising period until the end of the summer.

And the way we structured that was it allows us to take an investor capital overtime, where vantage STC, we took the capital than many years ago and that has now been closed and so what we're doing is we had to re initiate a new capital formation plants. So very two very very different processes on the data bank process. We continue to take subscriptions. It that's what I can tell.

Today we're.

We're having great success investors are signing up into that vehicle and the business is absolutely performed.

You know when we were out you know over a year ago as most of you know from your public disclosures worried about $220 million of run rate EBITDA a year ago in the second quarter of 2022 as.

As we aim our guidance for the end of this year Databank is on a path to get to about 290 to 300 million of EBITDA by the end of this year. So the growth has just been absolutely meteoric data bank ROE on the team have done an amazing job being in these tier two and tier three markets, where we have hyper edge workloads, you talked about their leasing backlog being up over.

<unk> $380 million in annual rent is leasing backlog today, that's double what it was last year.

So we think we're doing the right thing on data Bank I mean look if I can own 100% of data bank and we were still a REIT I would keep databank databank would be a fantastic success story, but you know we're not a REIT, we're not where an alternative investment manager we continue to use other people's capital to grow our best assets in data bank, absolutely fits that profile.

So we have the ability to raise another $600 million of capital into the continuation fund.

We're going to do our best to you know raise that and ultimately you know we will have a position that will be left if we raise the full 600 that will probably get us down to a position I would say you know probably that 200 million Bucks will be the position. If we raise the full 203 300 gets us to that.

So if we if we raise 600 well have about 300 left we've got our raised $200 million to deconsolidation. That's the key metric for public shareholders and again I'll say it again, we continued to take subscriptions and we continue to be very very convicted around our ability to deconsolidation.

<unk> data bank very shortly that is all I can tell you inside of that today.

We're in the middle of the second quarter and we.

We feel very good about where we are in Databank I'll leave it there for today.

Yeah.

Thanks, Mark I'll, just ask one more that hopefully we'll have a pretty quick answer any update on the timing to our investor day in 2023.

Yes, so as soon as we have both of these assets deconsolidation, we will host an investor day.

So if I was just looking at you know I can't give you a specific time severance looking at me with a big Smile right now, but it will be you know on the back half of this year second half of this year, we'll have an investor day, and we're looking forward to sharing with everyone. You know the final results of the deconsolidation and of course, an update on.

Fund, raising which we're happy to talk about today and then of course, just our leverage profile, which we're very delighted about where we are.

And are you know Jackie and is the progress on taking $10 million of cost out of the business. This year I mean, we've got a very simple few things we got to do this year.

And inside this quarter, you know, we're making great great great progress on all of those initiatives.

Awesome, well look forward to seeing you guys out there I'll turn it over.

Likewise, thank you. Thank you.

Next question Ric Prentiss with Raymond James Please go ahead.

Thanks, Good morning, everybody.

Rick in the morning, Rick.

A couple of things, obviously I think we're all looking forward to.

Piece is starting to slow down a little bit, but jacky I think in the quarter you called out a couple of things just to make sure distributable earnings took a hit because of the wellness.

Had a couple of quarters in a row with some oddities. There are we thinking that we're able to see positive distributable earnings as we look through the rest of your or are there. Some more of these moving pieces. The one timers that happened.

Yeah sure. This is the last quarter in which we have some clean ups and.

And certainly with respect to the wellness now what we've done is taken a $7 million impairment on our distributable earnings.

That's just the interest income that we.

What would have recognized from last year, so absent that on a go forward basis, you'll see that even just normalizing for that we're already at positive this real earnings.

And carried interest was a little bit odd there was there anything with the bright spot yourself that was the place that or how should we think about what's the path Ontario's is because obviously an important area for evaluation.

Yeah sure. So on the carried interest side that is simply associated with the fact that we marked up our funds about 1%.

But then relative to the prop up 8% that we booked a noncash.

Income and impact associate with that differential in terms of bright spire, we basically did a cleanup trade at a value that was close to where we are already hasn't barked. So there was a little bit of an impairment of about 10 million Bucks worth.

For price buyer itself, but that didn't impact our carried interest going through operating.

But what we did do was it does impact just about earnings relative to prior quarter. Since we would have recognized the bright spot our dividend's about $7 million a quarter in prior quarters.

Okay.

The key here is.

Rick the key is here if you come up to 50000 feet for a second.

This is really the last cleanup quarter I hope that that's really clear to everybody. We had the last sales of some what I call. One off real estate assets are now done there was a hotel asset we sold in Paris.

We did the bright spot a cleanup trade and then we took the full mark on the wellness note now look you know on the wellness note, we can't be more clear we have strong rights. We have an inter credit agreement. We believe we will be paid back we don't know the amount of recovery on that note, but we felt like this was the right quarter to put an end to the.

Legacy assets.

This was it so we made the decision that this was the right time to do it.

It's been already a fairly turbulent year in broader markets. So why not take this now get the cleanup trade done with bright star with the wellness note and the remaining assets. So that the rest of this year is a very easy and clean print for investors to understand that look that's not popular we we could have said, okay, let's just wait and we will.

Mark the wellness note, let's kick the can down the road, maybe we get full recovery, maybe we don't but I think the reality is our investors are going to appreciate the next three quarters being clean us having strong EPS and distributable earnings and then obviously as the fundraising cadence kicks in to the back half of this year.

E P. S in turn responds and we've got a very easy simple algorithm for investors to understand this is the setup quarter going into the back half of this year and we feel again, if you're not hearing the conviction in my voice, we feel very good about what we're doing on fund raising we feel very good about how our portfolio companies are performing Jackie.

You've done a very good job on cost, we like our leverage profile and we like exactly where we are and deconsolidation everything that I've mapped for this year.

Coming to fruition.

And so this really for US was the last of the you know what I'd like to call colony cleanup on all three.

That's now done and it's behind Us and so we feel convicted around that.

Good to have a clean up stuff.

Oh, Yeah, one yeah.

One I think we saw form do you get filed last week about the P. P three and some placement fees and agency fees.

Any update you can do knowing that were mid quarter, there's not maybe a lot you can say, but the form M seems to suggest to your point on fundraising that the DPP three is.

Closer and closer.

Yeah.

So look.

[laughter], it's always fun when these filings come out and where we're not allowed to be incredibly transparent with with you guys. So let me try to walk a very fine line with you Rick what I would tell you is we obviously have received our first commitments are in.

And the new strategy.

It's going very well a I wish I could give you a lot more detail, but given compliance rules I've gotta have my hands kind of tight until next quarter, but what we can tell you is you know the first commitments are in.

You are correct. There were some commitments that filing was related to some investors in Korea, and so I think the good news is is we're attracting not only re ups, but most importantly, we're attracting new capital. Rick. This is really the highlight of what youre going to see in our second quarter is.

The fundraising team that Kevin Smith, and Leslie Golden run that's done an amazing job. We've got 27 people around the world raising money I think you saw that slide in our deck today around just the top 1000 accounts.

And it's really incredible.

How much more depth, our fundraising team has particularly in a market in a theater like Asia, Rick where we literally had no fundraising capabilities and fund two and now you go to this new strategy and we've got a sales team in place there in Asia now five people fundraising and.

And they are having tremendous success with new logos.

And you know as we think about some of the first commitments that are rolling in getting new logos.

And in the first phase of our fundraising process, usually you just get re ups. So the fact that we're getting re ups and we're getting new commitments to me is very exciting because you know for us to achieve our objectives of what we wanted to do this year. The re ups are important and as we said, where we think we're gonna get 90 to 90, 293% re ups and this new.

Strategy, but it's really.

The $30 billion of new capital Rick that we're talking to the over 200 Lps that were not in fund one and two are there.

We're working with us on the new strategy, that's where we think we have the momentum over $30 billion of new logos in the data room doing the work that's what's moving the needle for us in this quarter during Q2, and it's what's going to move the needle obviously in Q3 and Q4. This year again I want to say it with total conviction, we believe we will hit.

Our $8 billion fundraising goal for this year my goal is to beat that.

And I haven't changed my tune on that and that's because we're sitting in this quarter and we're looking at the back half of this year and it looks it looks very good from our perspective.

Last one for me because I wanted to make sure you got the clean quarter of fund raising of the TPP. Three slide 20 is an interesting slide that's where it was a lot of pain right investors on this call are feeling that pain the out of favor versus the in favor.

What is causing that systemic difference in favor of digital infrastructure versus out of favor what will close the gap and add there. If you were to do the similar chart with all asset managers, how to all asset managers compare to that slide is are in favor and out of favor all asset managers, but just trying to think of what closes that gap wisely.

What closes the gap in house all of the assets kind of looking at that chart.

As always Rick you're asking the right question, so let's start out with digital infrastructure.

The out of favor stuff is stuff, that's just aging and its legacy assets and I don't you know I don't like to pick on certain companies and it's not my job to do that but what I would tell you is in enterprise data centers, and then legacy older fiber and resi fiber, it's all about the duration of the <unk>.

<unk> cash flows and the quality of the assets so for folks that own legacy co location enterprise data centers that are now 20 years old.

That's as you know Rick.

Lack of functionality they.

They lack power density they lack connectivity they lack the ability to scale and so when you have a 40 megawatt opportunity with.

With someone like a public cloud player that starts with an a and you've got a data center that only has six megawatts of power.

Not going to be able to force 40 megawatts into a six megawatt data center now if it's a beautiful brand new data center sitting in Bluff, Dale, Utah, and Theres 60 megawatts of power and it happens to be data bank and we're doing a jump ball against the legacy co Lo data center that had six megawatts, we're winning that jump ball, Rick 100% of the time, because we have the land.

We have the power and we have the ability to deliver for the customer so owning new data centers.

That were built literally in the last three to five years like what role has done a data bank like what's the real has done advantage and what <unk> is doing it switch having new state of the art inventory with power density that can ultimately fulfill what the customer is looking for and our ability to deliver that space in the next nine months, that's competitive advantage and so that's in phase.

Right tier five private cloud public cloud advantage in hyper edge with data bank. Those are the assets you want to own in this environment, we own them. They are performing and the leasing results are now showing an manifesting themselves. So that's really the tale of two cities in the datacenter space you can't take a 20 year old data center and make it a 2023.

<unk> cloud data center, unless youre going to level the entire data center go buy a bunch more land rezoning get a new well serve letter and so these these businesses that own these aging assets.

Or are having this sort of you know come to Jesus moment in terms of their ability to reconcile themselves with what their profile is we don't own those types of assets to be clear, we've steered clear of those types of assets and the same thing in the fiber space I think you Rip you and I've talked about it for three years at your conference in Park City I've stood up in front of the room three years ago.

At your conference I said look we're not investing in resi fiber, we're not going to spend 20 times EBITDA to buy a business that has a month to month 30 day cash flows. We just didn't think that was the right use of capital now as we move into this cycle.

And these assets are priced in the high teens down into the low teens. Some of these pricing and a single digit multiple range, we now see a value opportunity and thats. What we are highlighting today in our presentation is that as we look to this new strategy and the new fundraising that were deploying were seeing this repricing of risk that is really attractive much like Rick when you were in Iowa.

Round, two and no three when the CLEC space repriced when the sprint affiliates in the AT&T affiliates repriced in the power sector. I don't know 10 wind towers reprice. This does that window that windows opening up and so some of these out of favor assets. We think actually now we're going to come back and tell you Hey look resin fiber is kind of interesting now, but a bunch of bankruptcies in Europe .

There's going to be some some restructurings in the U S and we want a plan that I don't have a fundamental problem with cable or residential fiber I just didn't like the valuations that were trading out in 'twenty, one and 22 now that those valuations have come into the right range you can put the right capital structure on those businesses and you can be really successful so we.

We're excited we're open for business, we have new capital got a big pipeline of new deals. We're looking at I think we have $17 billion of new opportunities sitting in our flagship funds and so we're busy right now Rick Theres a lot to do.

This environment, if you know where to go and you know what you're doing.

Great. Thanks take care guys.

Rick I didn't answer your second question, sorry, now a tale of two cities in the alternative asset manager space look I'll hit it straight on.

There's no doubt we're trading at a discount to our peers I'll, just one that narrative straight up and right now why we've been a confusing story, we've been a transition from a REIT into an alternative asset manager. We've had these legacy cleanup issues, we had high leverage and now we fixed all that.

So once we get through deconsolidation, we're gonna be levered at about two three to $2. Two times, we'll have $300 million of securitized debt. That's the only debt we will have.

So it makes it really easy for investors to look at our leverage profile and say well did you reach that 300 million of securitized debt. Its a fixed cost it's not floating and oh by the way we have this incredible alternative asset management business, that's growing north of 30%.

We think the rhythm for us and the cadence gets a lot easier as we deconsolidation as we continue to fund raise we continue to take costs out of the business. All of these things are working for us and ultimately what that means is cashless free cash flows EPS and we become an EPS driven story, that's what investors want to see from us and that's what we're doing.

So we'll close that gap, we trade at a discount to some of our peers, whether it's a I won't pick names, but there are a couple of alternative asset managers that trade at 18, 19 times and we think we can move up into that level on an FRE multiple and if you look at where our guidance is for the end of this year and soon we'll have guidance going into next year.

We do believe we traded a discount but that's the opportunity for investors to jumping now enjoying digital rich.

Yeah.

Next question, Eric Web chat with Wells Fargo. Please go ahead.

Oh, great. Thanks for taking the question.

I wanted to ask about just your current liquidity situation, obviously, you'll bring in some additional cash once you complete the deconsolidation events with vantage STC and database. So maybe you could talk about how youre thinking today about deploying that capital, whether it's M&A or other I am platforms paying down preferreds repurchasing stock anything else.

The tie up on your list.

Yes, Thank you nice to hear from you.

So look this this may sound a little boring, but you know we will continue to opportunistically buy the preferreds when it makes sense Jack he has been leading that program with seven and they're doing a good job in.

We bought some in the last quarter and hopefully, we'll get a chance to buy more in this quarter and so we're being incredibly selective you know we do have an internal rate of return that we're looking for on those preferreds, you know and there's a there's an IRR were a buyer and theres an IRR. We're candidly you know we're going to hold them and so I can't be more prescriptive not but that's what we're doing.

I think in terms of other uses of the cash.

We have continued to due diligence on a number of other alternative asset managers last G piece. We think there is a really good opportunity to buy adjacent G. P's, whether it's in credit whether it's in private equity whether it's other forms of infrastructure like renewable energy.

We're out there talking to.

Numerous folks.

I'll leave it and Theres, some folks that we like that fit our culture.

For us look at the end of the day. It is the culture fit right. We are in the people business. So finding people that sort of have our our drive and you know our motivation.

For building, great companies and our passion Oh, that's not easy, but there are some folks that we think.

Are a lot like us that don't have that scale and scale matters today.

I think you hear that whether it's in digital infrastructure or whether it's in the alternative asset management world, whether you're talking about Jonathan Gray or Youre talking to Mike from areas you were talking to Mark Rone at Apollo The I'll say the same thing in this environment. The scaled alternative asset managers are having success because they have the right products that match up with the investor base, Here's what's happening.

It didn't rich, we actually have the right products that match up with what investors are looking for so this is why we're having success in fundraising where we're having success in raising debt capital and why we're having success in selling assets as well and buying assets. So you know in art a little corner are little street corner of digital infrastructure, we have that scale and we have that size and.

So I think the benefits of scale will manifest itself. This year youre going to see it in our financial results and Youre going to see it in the performance of the company and its again back to creating cash flow.

This is a free cash flow story. This is an EPS story. This is the hard work that Jackie and Ive been on for the last two years is to turn this into a very simple business that creates earnings for investors. That's it so in terms of capital allocation.

Certainly we'll buyback Chris certainly if there's an opportunity to buy back common at the right price. We will do that we've demonstrated that time and time again and of course, we want to put that cash to work in an intelligent ways, where we can buy stuff at accretive multiples I mean, we did the A&P deal at effectively a six five times multiple we managed to get the cost synergies out of that business.

We've got a stabilized we've got it in the right place that's fully integrated on schedule. So now you're seeing that show up in the numbers are.

In this quarter.

So good question. Thank you.

Yeah just.

Just one more for me just wanted to check in on your towers business. It looks like leasing was up 26%, which obviously seems pretty impressive, especially given a lot of power businesses at least in the U S are slightly more mature. So maybe you could kind of disaggregate, how those are performing across the globe, where youre seeing that strength and it certainly seems like in the U S at least.

People are a little worried about you know we might start to see a downturn in leasing in the next six to 12 months in particular with one carrier who is showing some signs of distress. So any any kind of commentary on that would be great.

Yeah. So look I mean, this is again another benefit of being a global operator of towers. So having that what we think is the premier tower platform in Europe , and Gd towers, having.

Having a really.

As <unk> gets rolled out the real surprise winters here, where edge point and highlighting an ATP. So these are really for most men.

Main street investors, they would say that's a little emerging markets Southeast Asia, Colombia, Chile, Peru, and Brazil, We've got really meteoric growth in those tower assets. Those tower assets are performing exceptionally well right now so a lot of that growth is driven by five G.

Driven by coverage and you know in those markets. We have the best platform. So those platforms being a T P and edge point of really market leaders and they're taking outsized market share back here in the U S. Our biggest asset is vertical bridge we.

I actually just had a board meeting yesterday business continues to perform leasing is on plan.

What I would say is.

The opportunities for vertical bridge have gotten stronger interestingly enough. Once again, it's back to that narrative look like going turning the clock back to 2009 and 2010, when you have capital, which vertical bridge does have its free cash flow positive. It takes all of its free cash flow as a private REIT reinvest into new builds and reinvest into.

Other projects that the carriers want in terms of ran hubs and other associated.

<unk> deployments and so Alex is taking outsized market share is it's a combination of amendments newbuild and de Novo co location and adjacent types of leasing that support the <unk> ecosystem. So I'd give that team a lot of credit they're very creative.

They've managed to find new customer opportunities.

Leasing space to cable companies.

Doing some interesting things with them certainly with the with some of the Leo satellite providers. So theres. Some ground based infrastructure that has some tower related components. So the opportunity to work with some of the Leo providers, it's been really interesting and that's what you Gotta do you Gotta go out and you've got to find the edges of the leasing and sometimes that.

Not just T mobile Verizon and AT&T, but you've Gotta go a step further and you've got a lease space from the likes of a Comcast or a one web gogo.

And certainly you know what what.

Our relationship with the.

With with Elon as group that's been good as well he's he's now leasing some ground based infrastructure. So there's other ways to play the space and Theres other ways to lease.

Tower infrastructure here in the United States, and Alex and I have been doing it since 1994. So we know how to go find those smaller incremental tuck in lease up opportunities and that's why he is going to deliver very strong growth. This year, we think Alex will deliver or Jackie similar to an eight 9% growth. This year in the domestic U S tower business, that's right. So towers is.

Still are our number one asset class, although datacenters has become a big part of what we do.

Our heritage and our lineage tracks back to the tower business and we were we were really happy with the organic cash flow growth and this quarter really strong print.

Great. Thank you Mark.

Thanks.

Next question, Jonathan Atkin with RBC capital markets. Please go ahead.

Thanks, So slide 20 talks a little bit about growth rates by kind of asset category and small cells and edge, maybe drilling down on small cells and tagging onto the last question.

What are you seeing there that might lead to.

It would be a change in the rate of growth going forward or are we going to kind of see these single digit sorts of percentage growth rates.

For the foreseeable future or for small cells.

So look I think on the small cell side Jonathan.

Jonathan good to hear from you by the way.

On the small cell side, we've continued to see you know what I would say sort of green shoots here in the quarter and the second quarter.

You know good bookings from.

From all three customers, we've seen a return of a bookings from from AT&T and Verizon, which has been good I mean, it's not these aren't.

In thousands of nodes, but.

We are seeing an increase in the backlog and certainly in our indoor business when you've got projects like MGM and some of the big football stadiums and airports. We have we're seeing incremental leasing thats being driven out of that so we're pretty excited about that on the indoor side, you know it at X and that in particular.

All the carriers are going to have to invest in Wi Fi six and five G upgrades and so we're seeing that upgrade cycle now happen.

And I think you know one of the biggest projects of courses is the MGM opportunity, which is the largest casino operator in the world and we've got that long term exclusive with them and so we're building out our infrastructure and so we took a new commitments from all three of the carriers and inside those properties and then obviously in the big venues, we're seeing an increase in.

Please up there so <unk>.

A really strong captive indoor business is very helpful. And also I think the other area that we're seeing some some some silver linings here is just private <unk> networks.

This is an area, where both boingo andexanet and fresh wave about a lot of success remember we own three small cell companies fresh wave in the U K a boingo here in the U S and extend out here in the U S and so all three companies posted positive.

Growth in the private five G network space and I think if we were sort of playing a nine inning baseball game, Jonathan you'd say, we're probably in the first inning of that maybe second inning.

So some of those private <unk> networks at enterprises, it's hitting airports.

Got a private <unk> network, we're lighting up you know for the La Dodgers at.

At Boingo, that's really exciting that's an interesting project and so there's a lot happening in that space.

I think the lease up is going to continue to be.

Moderate to strong as the year progresses, but once again, it's an environment, Jonathan where Capex is is somewhat muted with our customer apartments customer partners.

You know.

We're seeing that we're taking outsized market share and it's our ability to have a strong balance sheet at those companies and have.

Discretionary capex to put to work.

And if we could do that and we can pull some of AT&T and Verizon and T. Mobile's Capex up earlier, they make those commitments provided that were where you.

Our balance sheet to help finance their growth and that's our job right our job at the end of the day.

To show up for customers as I said on our quarterly call today and to help them defray some of that Capex and push some of those commitments up earlier in the year as opposed to waiting until the fourth quarter No jacket. Jackie ran treasury. It was part of the Treasury team and Verizon and the strongest capex quarter is always the fourth quarter.

Because customers sort of sit on their capex and they wait to the end of the year, but to the extent that we can front end some of that capex, particularly in small cells, Jonathan which are really expensive.

That helps them push some of those commitments up earlier in the year. So that's kind of what we're seeing in the small cell space. It's been a it's been a relatively good year so far.

And then lastly, just any update on.

CFO transition in replacement.

Well he is still here he has not yet I'm getting Jackie is is working with our bench acres in one of our board members. They formed a committee.

A bunch of really strong candidates.

We're into that process the timeline remains unchanged.

Jackie is slated to leave at the end of the year.

And what I would tell you is I think.

The final candidates that we're looking at are all very strong strong emphasis on alternative asset manager. So jackie's background was with digital rights and now that we've made the transition to alternative asset manager, what youre going to see as the CFO that aligns with that future go forward.

Well Ms. Jackie we've asked them to stick around on some boards, we we've asked them to stick around to do karaoke with us wherever he wants to do he is always welcome to hang out with US we're going to miss him.

But right now he is squarely in the chair very focused and we.

We know we've got a job to do between now and the end of the year and part of that job is obviously, finding a inadequate replacement.

For Jackie which will be hard, but we do have some really good candidates.

And that process I would say is 50% complete I'd say, we're sort of play in the back nine now in terms of who we're vetting and we've got our focus on and just stay tuned but we're on target like everything else. We're doing this is another situation where we are on target.

Great. Thanks, a lot.

Thank you your question Richard Choe with Jpmorgan. Please go ahead.

Hi, I wanted to follow up on the 8 billion in capital raise how much of that is not going to be I guess.

Digital partner series, how much over that.

Should we expect to be in kind of from core and co invest.

Others.

Hey, Richard how are you. So I think I've said this in the last quarterly call. How the 8 billion sort of plays out I'm on record publicly saying that so I don't feel uncomfortable saying it.

We believe that Theres 2 billion related to corn credit, we believe Theres 2 billion related to co invest and then we believe Theres 4 billion related to flagship now.

Richard There's no perfect science to that right. So what I would tell you is in all three of those swim lanes.

We're taking commitments in today. So for example, we were very clear with you, we're taking and commitments to data bank that'll be co invest.

We're continuing to take commitments and in credit and core in this in this quarter that credit and core and then as we said.

Now that its sort of seeped out through this filing to.

To be clear with everybody we have taken in our first commitments on our new flagship product and what we can tell you about that product is.

We were always very clear that the first close would be in the second quarter and we've also been very clear about the cadence at which big Lps are allocating right now mentioned a couple of Big U S pension systems that usually clear their allocations in March have now set the release of their allocations to June just to make sure that their liquidity was there and all of those big.

Pensions have been very clear with us that June July is kind of their timeframe for leasing allocation. So this isn't something similar that you've probably heard on the earnings call or that you've heard on the Blackstone call, but you've heard it with other alternative asset managers.

Fund raising generally speaking has kind of been a.

A little bit slow rolled some would tell you 60 days and we'll tell you in 90 days. The good news is we raise money in the first quarter, we are raising a lot of money here in the second quarter, we're going to continue to raise capital in the third and fourth quarter and again I want to be clear with everyone. We are very convicted in that 8 billion number.

And our goal remains the same Richard which is we have conviction that we're going to beat it. So that's what I'm focused on and from from the information we have sitting in this quarter, we feel really good about fundraising.

Got it and then on the resi fiber side would it be something that you would need a lot of scale would this just be more kind of one offs.

Our trading potentially.

<unk> prices.

The kind of color there because it's something you didn't seem very interested in this.

Especially at high valuation.

Yeah. So look I think again this has been a fairly.

Long standing debate between me and the and the resi fiber space, but.

My issue with with the sector has been largely this notion of overbuilding Richard.

And I think what is what has plagued the sector in previous cycles, you got to go back to 2001 and take a look at the unraveling of the CLEC space.

And what went wrong there.

Ron There is there was a lot of capital chasing the idea of putting fiber into the <unk> office buildings all across the U S.

You know folks like Kleiner Perkins folks like Sam Zell, and many other folks that were extremely well funded.

Raced to run fiber down the same street penetrate the same buildings and next thing you knew you had 456 different carriers all lining up the same building, saying they were going to get 35% penetration.

If you take five carriers and everybody has a 30% penetration that's 150% penetration that math doesn't work in an environment, where we were 80% to 90% penetrated the same thing is happening in residential fiber today, which is on some streets not all you have two three and four providers and if everyone's underwriting to a 30% penetration and you're fighting it.

Two an environment, we have a strong our book now is getting Caf funding and it is getting funding from NTIA through the build back better America Bill the boxer have never been positioned better to play defense.

Gets over builders and against cable companies.

And so for example, Richard your firm J P. M does great research on this I really enjoy reading it looking at the percentages of who's occupying in winning over builders are not succeeding Richard you notice they have less than 3% of the market.

Who's winning.

The basically the incumbents in the cable cost.

And they have such a large strategic moat that when you bring these over builders that are coming in and you see these infrastructure funds paying 20 to 25 times. We know how this movie is it ends a lot like how the CLEC space ended in 2002 and 2003, so there's pain coming some of that pain is already manifest itself in Europe , we've been very patient we stayed on the sidelines.

We waited we focused on enterprise fiber and most importantly, wholesale and transport business. The businesses that are infrastructure in nature like Seo, that's performing quite well right now and that's the bet that we made and look I don't I'm not sitting here, saying that I'm right or that I'm wrong. All I can do Richard is investors give me money.

It's my responsibility to invest for pensions sovereign wealth funds insurance companies and invest our capital wisely.

That prism, which I look through it.

Is largely predicated on my experiences of going through <unk> and going through it.

In studying cycles and looking at what I call pattern recognition a lot of what we do at digital bridge and our private investing team is I remind the team to go back and study the past. So we don't make those mistakes go forward and that was our conviction call no. One when we stayed out of the residential fiber wars that were happening.

And it was the right call.

It was the right call based on having a perspective on what went wrong in a one.

In the enterprise fiber space in the CLEC space. So that's where we are today.

Now that being said theres going to be restructurings.

And so our credit team by example, our credit fund, which is led by Dean and Mike and Chris Moon, and Josh parish, they've done a great job of investing in residential fiber why we're part of the rescue capital where part of the second lien structure, where taking secondary stakes and we're getting rewarded we're getting returns in the low to mid teens on a risk <unk>.

Adjusted basis, and maybe that's the right way to play residential fibers, playing it through the capital structure. So there's different ways to play digital infrastructure, Here's the key if you're a common shareholder digit rich you don't have to make that decision.

Here with the deepest most experienced management team in the world of digital infrastructure 278 professionals that wake up every day and we see every opportunity whether it's core whether it's credit whether it's our flagship fund whether it's our venture growth fund, we see every opportunity.

And what we do really well is we triage those opportunities quickly and we put it with the right capital. That's the key the ability to own that street corner build a pair capital with opportunity as what digital which is about now and that story as I said will manifest itself more clearly through the back half of this year, but like I said, we feel really good about the calls that we've made over the line.

Two to three years the portfolio Richard is performing and it's performing really well.

Great. Thank you.

Thank you Richard look forward to seeing you soon.

Next question, Matt nickname with Deutsche Bank. Please go ahead.

Hey, guys. Thanks for taking the question I'm just wondering mark maybe if you can talk about the latest you're seeing across the key swim lanes in digital infrastructure, just around valuations and whether you're seeing that gap between public and private market multiples are tightened at all so that's question one and then second question you talked to.

Expanding the team and footprint to target a broader set of institutional Lps I'm just wondering if you can.

You talked about some of the early progress here and whether this is embedded in the plan.

Trim corporate overhead from I guess, it was about $50 million this year to 40 mill by 2025.

I'll take that.

Sure. So in terms of private versus public multiples look we're still seeing that private multiples and private valuations have held up especially as what mark talked about good African great assets continue to trade very well and continue to have be mark very well across across the board.

<unk>.

Certainly bad assets is a different story, but I would say that what we're seeing in the public space that we are seeing.

The recovery in valuations across our sector and I think it's because people are realizing that it is a very resilient sector. It has kind of a tailwind and there continues to be strong demand across bookings and pipeline with the end customers end users.

Yes, I think that's right I think that the again is back to that question, we got a little bit earlier about the tale of two cities to I think you know what we're seeing is high quality digital assets. You know, we're gonna traded at a premium I mean, we saw for example, a EU network still get done.

A bottle or put some capital in the fiber deal both those valuations Jackie we're really high and we don't have perfect colour on the valuations, but we've been told that those values were for high quality assets held in and so I think look.

Ben is Europe is a great example of that right, we effectively got that done at a at a low five cap rate and when we say that number investors look at us and go Wow. That's a that's an impressive outcome in light of the fact that you know the world is in a turbulent place, but there is an appreciation I think for high quality assets I think that's what you're seeing.

Today, Matt is that if you have an asset it's 98% investment grade 15 year contract CPI escalators utility pass throughs, and you've got great inflation protection. Some investors will say, hey, up 5% to 6% cash on cash yield is exactly what I want right now, but that actually has more certainty than treasuries and in some respects.

So.

And I think the other part of that deal was those data centers are roughly mid eighty's occupied there's incremental leasing that's coming in so that drives returns as well and so you've got the opportunity to generate a 12% to 14% IRR on an asset that literally has no risk.

And I would offer that investing in cloud infrastructure is about a safer bet as youre going to make today in this environment. So.

And value will continue to be I think this is a question Matt that you and I will go through the rest of this year Youll continue to ask US how we are public multiples holding up our private you're tracking public on tracking private but so far through the first quarter of this year.

The assets that the businesses, we're selling are getting good value and we've also been very clear that there are some assets we have a strategic reviews going on right now where we're going to sell some things and there's some assets, we're buying but I think the buy market is getting better and the sale market is holding up if you have high quality assets to sell and so the good news is in a in a poor.

Folio like ours that has high quality values are holding in you saw that in our quarterly marks we didn't have a a write down in any of our valuations. It was a slight mark.

Not a lot, but it really shows and one of the toughest quarters in a long time, our portfolio actually got marked up again it wasn't a lot but it was key to say, we defended our valuations because mostly because of leasing Matt.

When we're when we're valuing our portfolio its public comps private comps and discounted cashless DCF in our Dcs are way up year over year.

The organic leasing and the escalators and so what kept our portfolio cranking in Q1 of this year with core organic growth not having a lot of leverage.

But delivering strong results in leasing taking advantage of our escalators that are CPI based and so we had a very strong quarter in terms of performance at the operating company level.

Got it and just on the.

Think about the broader set of institutional piece you were targeting just curious if that's embedded within the corporate and other overhead targets you'd referenced on the last call.

No.

Okay. Okay. We could we can we can maybe take that offline.

But I appreciate that.

Next question, Jason exception with VW. Please go ahead.

Hi.

So a couple of questions.

Matt just one Matt one thing I've I misunderstood. The question. So the fundraising team just you know that that G&A is than I am.

To be clear.

So where we allocate those costs is related to our investment management is because they are the ones raising all the capital sorry, if we weren't clear about that I apologize go ahead next question.

Hi.

So are you guys seeing a broader audience for digital infrastructure given the correction that's playing out in the traditional commercial real estate sectors.

CRE service companies like CBRE, and J O L. Dave made infrastructure and technology a focus area. So just wanted to hear your perspective on that.

Sure look we do a lot of work with J O L and CBRE and Bob's Atlantic as a partner of ours.

We use them on our fund management services side, they're Seabury, Calvin Division puts capital into our funds and as a co investor.

And vantage at D C and some other things so I give CBRE a lot of credit I give J O L. The same credit, but both of them had been very focused on digital transformation and how it impacts commercial real estate I think CBRE is pushing to investing with us side by side is a great example that they recognize that digital is a big part of what they are going forward both CV.

You're already in J O L have datacenter advisory services and they do a lot of really good work around the data center space and so it's a recognition to be honest that commercial real estate is changing.

And a big part of commercial real estate is the data center space.

Why because those are commercial tenants. They are signing long term leases and ultimately you know data centers, you know, particularly in the Hyperscale and the tier five private cloud environment those are real estate businesses.

We own the land we own the building we manage it tenants signed leases and at the end of the day, Yes. It is mission critical infrastructure to the cloud into the private cloud, but fundamentally.

The tenants of that business model, our real estate.

And permitting entitlements.

Buildings PP&E leases.

All the accounting related to data centers is real estate based as Jackie knows and so I think you know with commercial real estate changing.

Youre going to see these advisory firms change and adapt they have to they have to do to continue to stay alive. So it's a it's a thoughtful question I appreciate it.

Yeah. Thank you and then secondly, what are your current thoughts about complementary opportunities in traditional infrastructure and clean energy.

Well look thank you that's actually a big part of what we're doing in Infra bridge I think one of the great things that we.

Sauce in the A&P acquisition was the ability to go attack.

The renewable energy space, I think ive outlined for investors over the last year, how important. It is switch you know a lot of why we did switches, we really liked rob's forward thinking approach to having 100% renewable datacenters.

That is really important to our customers and so we're spending time around the <unk>.

Renewable space, because we know that the future of the business is going to be embedded on the notion that we can create power that doesn't take out of the carbon footprint out of this planet.

And this is really serious I mean, this is something that ultimately.

Is going to drive performance for us long term.

We talked a little bit about AI at the beginning of this call today.

And we think about the last 10 years in the datacenter space was built building public cloud.

Four to five trillion dollars of infrastructure embedded and building the public cloud.

What we know about AI going forward is that it takes up three times more compute.

And so imagine we've spent the last 10 years building public cloud and we're still building. It today. We're not finished building the public cloud. We've just started really building private cloud in the last three to four years. The work that switch is doing and now we have this opportunity.

To go build out AI infrastructure.

And you've got four incredibly well capitalized companies all running at this hard whether it's Microsoft through chat, whether it's Amazon whether its a open AI with Google and.

And of course, you know.

The work that met is doing so they're all racing to go build this infrastructure in an environment, where interest rates are high and capitals more constrained and then you put on top of that that we need three times more of the compute the lift is big.

So we will continue to update investors on this over the next couple of quarters.

But what we also know is that the power that is needed to drive AI and these new initiatives, there's not enough power sufficient in the United States is grid to accommodate it. So we have to come up with alternative sources of energy problems.

Problem in Europe , so whether its wind whether it's solar.

It's other alternative forms of energy creation, we're looking at everything right now we have to.

This is an absolute.

Deputy for digital which going forward is having access to renewable energy to power. The next generation of technology.

Great. Thank you.

There are no further questions I would like to turn the floor over to Mark Nancy for closing remarks.

Well look thank you everyone. We really appreciate everyone's time and diligence on didn't rich.

We recognized this quarter was an important quarter for us.

As I said at the onset of this conversation.

There are really three things that matter at this point in time.

First and foremost we've got to continue to raise capital.

We're doing that both in debt and equity and we've made tremendous progress there.

Two I've made it a key priority to maintain our liquidity and delever our balance sheet. We did that in this quarter paying off the converts we have a strong liquid position and we're going to continue to preserve liquidity to be opportunistic go forward.

Three we've got to perform and performing is performing for customers performing for Lps and performing for you our public shareholders.

And to do that we've got to obviously continue to grow our portfolio of companies. We've got to continue to show up for customers and we've got to continue to be responsible and prudent with the money that you gave us and we're making that happen.

Cost out of the business in terms of our run rate G&A over $9 million of cost out of the business in the first quarter.

Going to continue to be thoughtful about how we spend your money and ultimately drive this business towards an earnings base model. That's the key cash flows are what drives great businesses in these environments and that's what we're doing at digit rich. This was an important quarter. It was a foundational quarter.

We're really excited to play the next three quarters out with a very clean narrative in a cleaner story and we're looking forward to having conversations with all of our shareholders over the coming weeks to talk about the things that we're doing.

It's an open invitation please.

Reach out to seven and our team if you wish to have further conversations with us I'd. Welcome every conversation with our public shareholders and I want to thank you for your patience I want to thank you for your support and with that we'll end the call today, everyone have a great day. Thank you.

This concludes today's teleconference. You may disconnect your lines at this time and thank you for your participation.

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