Q3 2024 DigitalBridge Group Inc Earnings Call
Greetings and welcome to the Digital Bridge Group, Inc. Third quarter 'twenty 'twenty four earnings call. At this time all participants are in a listen only mode. A brief question and answer session will follow the formal presentation should anyone require operator assistance during the conference. Please press star.
Your ROE on your telephone keypad as a reminder, this conference is being recorded.
Speaker Change: It is now my pleasure to introduce your host Severin White managing director head of public Investor Relations. Thank you you may begin.
Severin White: Good morning, everyone and welcome to digital bridges third quarter 2024 earnings conference call speaking on the call today from the company as Marc Ganzi, our CEO and Tom Bear offer our CFO.
Severin White: I'll quickly cover the safe Harbor 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.
Severin White: All information discussed on this call is as of today November one 2024, and digital bridge does not intend and undertakes no duty to update it for future events or circumstances.
Severin White: For more information please refer to the risk factors discussed in our most recent Form 10-K.
Severin White: Filed with the SEC for the year ending December 31, 2023, and our Form 10-Q to be filed with the SEC for the quarter ending September 32024.
Severin White: With that let's get started.
Speaker Change: Turn the call over to Marc Ganzi, our CEO Mark.
Thanks, Kevin and welcome everyone to our third quarter 2020 for business update.
Speaker Change: We appreciate you joining us on the call and look forward to answering your questions during the Q&A session.
Speaker Change: So that's.
Speaker Change: Let's get started with the first item today financial performance. This.
Speaker Change: This quarter <unk> continued to deliver peer leading growth in fee revenues and fee related earnings.
Speaker Change: Our investment platform continues to scale.
Speaker Change: We delivered another quarter of mid teens fee revenue growth.
Speaker Change: Combined with expanding margins as revenues continue to grow faster than expenses.
Speaker Change: FRE was up 42% year on year, and FRE margins were up 500 basis points to 34%.
Speaker Change: Persistent revenue growth and expanding margins are central to the digital bridge investment thesis and we've continued to deliver here.
Second and probably the most important part of this quarter was capital formation.
Speaker Change: We are well positioned to exceed our 7 billion dollar annual fundraising target.
Speaker Change: With $6 1 billion already raised to date.
Speaker Change: We'll talk a bit more about this in a minute, but it is important to note that the timing and composition of those commitments will shift some of the reoccurring FRE impact into 2025.
Speaker Change: And Tom will walk you through that and how it impacts our in period FRE for 2024.
Speaker Change: Later in the call.
Speaker Change: Third capital deployment.
Speaker Change: Where we're seeing the best opportunities to put that capital to work today, It's really simple in this period, it's been in both our existing platforms and into new opportunities in the datacenter and tower vertical.
Putting more capital behind growth at Databank and vertical bridge as well as new portfolio of companies like Yonder and J tower. It was an exceptionally busy quarter in deploying capital and we're seeing really good opportunities in this market environment today.
Speaker Change: Let's start by talking about the uptick we're seeing in capital formation, and how that sets us up for the end of the year next slide please.
Speaker Change: So look the headline says it all I am pleased to report that we had $6 1 billion in capital formation year to date. This has been a tremendous quarter.
Speaker Change: And again.
I want to reconfirm with you digital bridge is set to exceed our 7 billion dollar capital formation target.
Speaker Change: Last quarter, we were in line with the prior year at the same point and today, we're tracking 13% ahead of last year.
Speaker Change: And the momentum has been picking up and as you can see we've raised $1 9 billion.
Speaker Change: And just the last 30 days alone and have less than 1 billion to go with two months left in the calendar year to exceed our budget and our targets, which we have strong conviction around.
Speaker Change: Since our last report fundraising has been dominated by our co investment around data bank with the odd Super transaction.
Speaker Change: Steady commitments toward digital bridge partners three flagship strategy.
Speaker Change: We have a very surgical approach to closing out another 30 to 40, new logos on a global basis through the end of the year.
Speaker Change: Which positions us to meet and again exceed our $7 billion target.
Speaker Change: Next slide please.
Speaker Change: Yeah.
Speaker Change: One of the natural topics is dominated this past year with investors has been the broader fundraising environment.
Investors want to understand how a heightened interest in AI.
Speaker Change: Digital infrastructure squares, and some of the forces impacting private markets.
Speaker Change: You've heard it its realizations it's D P I.
Speaker Change: As well as the changing and shifting macro conditions around the globe today.
Speaker Change: You can see we're starting to see a noticeable uptick in fundraising commitments.
Speaker Change: And our pipeline continues to grow as investors respond to the growing demand for.
Speaker Change: Our new data centers and network capacity.
Speaker Change: But at the same time, we're beginning to see the private markets of thawing.
And the process of educating el piece about the implications of AI and digital infrastructure is beginning to bear fruit.
Speaker Change: Simply put there are growing intent is increasing matching up with an expanding capability.
Speaker Change: As our growing L. P base dedicated more capacity to owning the picks and shovels VII and we think this is the best way to play out.
Speaker Change: To focus on the digital infrastructure thats required to power the AI economy.
Speaker Change: This is ringing true with Lps all around the globe today.
Speaker Change: So we've been building momentum every quarter and new capital formation, and we expect our fourth quarter to be the best this year with.
Speaker Change: With 3 billion or more a fresh capital.
Speaker Change: We raised almost two thirds of that $1 9 billion in the first month.
Speaker Change: And we have high confidence again that we're going to beat our targets for the year as our capital formation process, it's been accelerating and we will continue to accelerate from now to the end of the year.
Speaker Change: When that new fee M is achieved it generates reoccurring fees that drive our growth in future periods, which in turn will accelerate our FRE growth.
Next slide please.
Speaker Change: Ultimately the capital formation is driven by an increasingly global platform with a growing investor base.
Speaker Change: <unk> talked about it at our Investor day, I've talked about it throughout this year.
Speaker Change: Our capital formation team of over 30 professionals on a global basis is operating at scale and most importantly is now pitching our multi strat strategy.
As you can see on the left.
Speaker Change: That $3 billion in Q4 capital formation is coming from around the world.
Speaker Change: And across our different investment solutions and this is the key point of inflection for digital bridge is the fact that we can raise capital all around the globe and across different products.
Speaker Change: This quarter share in the fourth quarter, we expect our fundraising to be dominated by North America and Asia in particular, as we closeout some important logos by the end of the year.
Speaker Change: One other thing to note about capital formation has been our strong re up rate.
Speaker Change: As well as a growing contribution from new logos at the same time.
Speaker Change: This is not only a great validation from our existing investors, but adding new Lps.
Speaker Change: Is a big long term priority for us and we're making progress on both fronts.
Speaker Change: One area that I highlighted last quarter, that's particularly relevant and it's been growing at a rapid pace since our private wealth channel.
Speaker Change: Where we recently brought on Andrew Cox to head up our global wealth solutions.
Speaker Change: Andrew has been a key contributor and strategists at leading global investment firms, including most recently at KKR.
Speaker Change: Luxor and Goldman.
Speaker Change: There he was focused on the private wealth channel, which we think is a multibillion dollar opportunity for desert Ridge overtime.
Speaker Change: We've seen early success with the data center sidecar vehicle, we talked about last quarter and we expect that by the end of the year, we have raised over $1 billion from the private wealth vertical channel for that product.
Speaker Change: That was $1 billion that we did not have factored into our business plan for 2024.
Speaker Change: Andrew and his team are already designing new products and investment solutions.
Speaker Change: The demand for this channel.
Speaker Change: So stay tuned we're super excited about this we're excited about the depth of our pipeline.
Speaker Change: Of logos that are looking at our existing products that we plan to close between now and the end of the year.
Speaker Change: We're super excited about our ability to scale, our private wealth channel.
Speaker Change: And to continue to add new capital from new verticals.
Speaker Change: This is part of the plan in terms of scaling.
Speaker Change: And getting digital bridge to operate at the next level.
Speaker Change: Next page please.
Speaker Change: I want to finish with some perspective on a few recent transactions that highlight our continued investment activity across the a infrastructure ecosystem.
Speaker Change: This includes backing.
Speaker Change: Two of our most trusted and successful platforms with over 5 billion of fresh capital as well as launching new platforms that'll be the source of future returns in the coming years.
Speaker Change: First vertical bridge, our flagship private North American Tower Company recently signed a 3.3 billion dollar deal with Verizon to purchase its remaining own tower portfolio of over 6300 macro sites.
Speaker Change: Increasing vertical bridges macro footprint by over 50%, while reinforcing their profile as the largest private cell tower operator in the United States operating at scale.
Speaker Change: The next transaction I want to highlight is Databank, where we brought in our partners from Australia Super to lead a $2 billion equity raise to fuel the growth of three new campuses that will add almost 800 megawatts of edge compute power tripling the company's footprint today.
Speaker Change: Relatives team are hitting on all cylinders and now they are incredibly well capitalized to build out the next phase of their growth as they address the key market.
Speaker Change: Of edge compute workloads, we're really excited about what's happening at Databank and now rolls got the capital to go execute on that vision.
Speaker Change: Next up we also established two new platforms earlier this month.
Speaker Change: The first J tower.
It's the largest independent tower company operating in Japan today.
We're honored to be the controlling shareholder this business in partnership with management.
Speaker Change: As some of you know Japan is historically a relatively closed market.
Speaker Change: Our successful bid highlights the trust.
Speaker Change: Our carrier partners have in our experience in operating mission critical infrastructure on a global basis.
Speaker Change: Owning and operating eight tower platforms on a global basis was incredibly relevant here.
Speaker Change: So it was our approach to the Japanese market.
Speaker Change: In the years of time, we put in into building trust with those customers and the management of J tower and its shareholders that was not an easy process, but again at digital bridge, we're playing for the long haul.
Speaker Change: In some transactions take years and years to cultivate like our relationship with Verizon that manifested itself through years and years of hard work. So these are difficult transaction to execute.
Speaker Change: And we do it through our relationships and our patients and our perseverance.
Speaker Change: Finally, we recently reached an agreement to acquire Yonder.
Speaker Change: A global Hyperscale data center platform operating in nine markets across North America, Europe and Asia.
Speaker Change: Yonder has over 420 megawatts of lease capacity today and potential capacity to grow to over a gigawatt.
Speaker Change: We're excited to be supporting their continued growth.
Speaker Change: And what is one of the most attractive segments of the datacenter ecosystem today.
Speaker Change: Leveraging our key customer relationships.
Speaker Change: Our operating experience as builders are great businesses, and the data center sector.
Speaker Change: With that I'll turn the call over to Tom to cover the financial section.
Speaker Change: Tom.
Tom Bear: Thanks, Mark and good morning, everyone.
As a reminder, this earnings presentation is available within the shareholders section of our website.
Tom Bear: Today, I'll start with our quarterly financial highlights.
Followed by an update on our 2024 guidance informed by the pace and composition of our fundraising progress and finish by covering our non-GAAP metrics and balance sheet profile.
Tom Bear: Yeah.
Tom Bear: Starting with our third quarter results, we recorded $77 million in fee revenue and $26 million in fee related earnings both up substantially over the prior year period on a higher capital base. Additionally.
Tom Bear: Additionally, we formed $1 8 billion of new capital during the quarter and as of September 30, our fee, earning equity under management stood at $34 billion, which represents a $4 2 billion.
Tom Bear: Or a 14% increase over the same period in 2023.
Speaker Change: And as Mark mentioned earlier, we've continued to raise capital through October and have a strong pipeline and visibility on fundraising through the end of the year and into 2025.
Speaker Change: In the third quarter, we also generated approximately $11 million in distributable earnings largely from recurring asset management operations and contributions from principal investments well.
Speaker Change: While also benefiting from reduced interest expense after a distinguishing our 2025 senior notes.
Speaker Change: Moving to the next page, we believe that the year to date capital raising and investment activity has positioned us well for 2025 and beyond.
Speaker Change: As our year end financial profile becomes clear.
Speaker Change: Wanted to provide an update with respect to some of the key 2024 financial metrics on which we have previously provided guidance.
Speaker Change: We raised $4 $2 billion of new capital during the first three quarters of the year and are close to 6 billion year to date as we sit here today, giving us confidence in hitting our $7 billion target.
We're also progressing towards our target on fee, earning equity under management.
Speaker Change: Although we are likely to end the year near the low end of our original range of 36 to 38 billion based on realizations and other offsets to new capital raised and as a result, we revise the target downward slightly to $35 million to $37 million.
Speaker Change: Yeah.
Speaker Change: From a revenue and FRE perspective, we continued to generate healthy year over year growth.
Speaker Change: I believe that the fundraising activity this year will pay dividends going forward.
However, the capital that we've raised this year has skewed more than expected towards co invest capital and funds that charge fees on invested capital rather than committed capital that generate catch up fees.
Speaker Change: Which will result in lower fee revenue in calendar year 2024 on the capital that we have raised.
Speaker Change: We're at 303 million our fee revenue on an LTM basis.
Speaker Change: And are likely to come in between 305 and $320 million of fee revenue for calendar year 'twenty 'twenty four.
Speaker Change: It will be short of our range of $3 35 to $3 60, but still represent a meaningful increase of between 14 and 20% over the $267 million reported in 2023.
Speaker Change: With respect to FRE, we're at $72 million year to date and $98 million on an LTM basis and expect to end 2024 with between 101 hundred $10 million of fee related earnings, which would represent greater than a 20% growth versus 2023.
Speaker Change: A significant driver of the shortfall versus guidance relates to the composition and timing of the capital raise this year.
Speaker Change: As I mentioned, we've had a larger contribution from Congress and budgeted.
Speaker Change: Which has a lower fee structure, then final commitments and more importantly for 'twenty 'twenty four does not generate catch up fees the way their commitments to our flagship strategy do.
Speaker Change: We believe that this is largely a timing and a pace issue and not an indicator as to the absolute amount of capital that we will ultimately raise in our fund products. We're confident that all of our funds that are in the market will complete their capital raises successfully but some of this will rollover into 2025.
Speaker Change: On the next few slides I'll give you a sense for our conviction behind the company's growth prospects. Despite the shortfall in our 2020 for revenue and a hurry as compared to the original guidance.
Speaker Change: Turning to the next page the $1 8 billion of new capital formation in the quarter.
Speaker Change: <unk> into a $1 4 billion dollar net increase in our fee, earning equity under management from $32 7 billion at the end of the second quarter to $34 1 billion at the end of the third quarter.
This growth is driven by capital formation in the D V P series.
Speaker Change: And credit strategies.
Speaker Change: As of September 30, we raised $4 2 billion of fee paying commitments in 2024 and as we've highlighted earlier, we've already had a great start to the fourth quarter and have a strong near term fundraising pipeline as we look forward to the rest of the year and the start of 2025.
Speaker Change: Moving to the next page, which summarizes our non-GAAP financial results.
Speaker Change: The company reported $77 million of fee revenue in the third quarter.
Speaker Change: Marking a 16% increase from the same period last year.
Speaker Change: The $26 million of FRE generated in the third quarter represents a 42% increase over the comparable period in the prior year and the L. T. M fee related earnings increased to 98 million the highest that we've reported over any 12 month period.
Speaker Change: Yeah.
Speaker Change: We also continued to see steady and consistent improvement in operating margins as growth in revenue exceeds compensation and administrative expense growth.
Speaker Change: Our margin increased from 28% to 34% when compared to the third quarter of 2023.
Speaker Change: We expect this trend to continue as we raise additional capital over the next several quarters.
Speaker Change: Turning to the next page, which summarizes our carried interest and principal investment income.
Speaker Change: We reported a gross carried interest reversal of $15 8 million in the third quarter, which after associated compensation expense and Noncontrolling interests resulted in net carried interest reversal of $7 7 million for the quarter.
Speaker Change: As a reminder, the company accrued carried interest based on quarterly changes in fair value of the investments held across our portfolio of funds and does not represent a cash realization unless it's classified under realized carried interest.
Speaker Change: On our balance sheet, we've accrued gross.
Speaker Change: Carried interest.
Speaker Change: Approximately 940 million with net of compensation and controlling interests, representing 181 million of net accrued carried interest of <unk> shareholders.
Speaker Change: Principal investment income, which is primarily income earned on the capital invested alongside our limited partners the $6 5 million in the third quarter.
Speaker Change: Moving to the next page This chart I think highlights the stability and consistency in growth both in revenues and margin as we present those here on an LTM basis.
Speaker Change: LTM margin has ticked up from 31% to 32% as of the third quarter.
Speaker Change: Based on our fundraising outlook I expect this chart to continue to show steady and consistent growth in LTM fee revenues.
Speaker Change: F R E and margin over the coming quarters.
Speaker Change: The third quarter saw $1 6 billion of inflows primarily capital raised in D. B P funds and co investments slightly offset by a 300 million of outflows.
Speaker Change: Turning to the final page of the financial section, you'll see that the company continues to maintain a strong balance sheet with $1 4 billion of capital invested alongside our limited partners and ample liquidity we continue.
Speaker Change: To evaluate the appropriate capital structure for the business, including our preferred stock obligations.
Okay.
Speaker Change: Available corporate cash as of September 30 was $127 million with total current liquidity of $427 million.
Speaker Change: With that I'll wrap up the financial section of our presentation, and we'll turn it back to Mark for his final remarks.
Mark: Thanks, Tom.
Mark: I'd like to wrap up our third quarter report by covering the progress you've made on the.
Mark: Second half of 2024 priorities that I outlined last quarter.
Mark: As well as putting into context, where we are focused on the longer term.
First on continuing to deliver peer leading management fee revenue growth and operating margin expansion, we check the box here.
Mark: Revenues were up over 16% FRE growth up 42% and we expanded FRE margins to over 34%.
Mark: As I noted earlier delivering here is central to the Desert Ridge thesis.
Mark: Got to grow FRE gonna grow our margins and at the same time, we've got to continue to generate new revenues.
Mark: Two.
Mark: Successfully forming 7 billion in new field.
Mark: Here, we're clearly on track to deliver in fact, what I would tell you is we're in a position to exceed.
Mark: With over $6 1 billion of committed capital as of today.
Mark: We're well ahead of last year and with under a 1 billion remaining to go with just over two months of fundraising left in the calendar year.
Mark: Third.
Mark: Is we're going to accelerate FRE growth into the back half of 'twenty 'twenty four on the back of new equity commitments.
Look as Tom noted the timing of capital formation, which is happening later in the year than expected and the composition of that fundraising with more co invest and less digital rich partners, III, which generates catch up fees at <unk>.
Mark: Impacted our ability to deliver into the in period FRE that we'd expected now here's the key and the key takeaway from today's call.
Mark: The silver lining is that as new capital formation is activated.
Mark: Like we've just done here in this quarter those reoccurring fees will benefit future periods.
Mark: We remain convicted in our ability to execute our business plan.
Mark: Number four.
Mark: Continued to maintain a strong balance sheet and liquidity position here.
Mark: Here, we can check the box again.
Mark: With cash in our balance sheet, both stable and consistent with the prior quarter.
Mark: The last item number five.
Mark: This really centers around corporate M&A, as we evaluate accretive acquisitions of adjacent asset managers.
Mark: We havent closed anything this year, but we continue to have a compelling pipeline and we expect to be active in the year.
Mark: Finally, before I turn the call over to Q&A I want to highlight management's key long term priorities.
Mark: <unk>, both our investment thesis and our strategic focus.
Well delivering the results in 'twenty 'twenty four is super important.
Mark: We want to make sure that every investor understands that we remain committed to delivering our long term fee revenue and FRE targets.
Mark: Doubling P M. In the next five years with margins expanding from the thirties to the mid Forty's.
Mark: Make no mistake, we will deliver on this plan.
Mark: Second continuing to create value of our portfolio companies by leveraging our heritage as business builders.
Mark: This drives investment results, which in turn drive carried interest for you our shareholders.
Mark: And the next cycle of capital formation that Youre, beginning to see here in the third quarter.
Mark: Finally on capital allocation.
Mark: This is about redeploying our free cash flow that our business is now generating into high return on invested capital uses.
Mark: First including compounding capital alongside of our Lps take.
Mark: Taking advantage of strategic accretive tuck in M&A.
Mark: And continuing to optimize our capital structure when it makes sense at the right price.
These three priorities remain at the center of our roadmap and inform the decisions that we make about how we form and deploy capital across the infrastructure ecosystem to the benefit of our limited partners and of course to the benefit of you our shareholders.
Mark: So with that I want to thank you for your ongoing interest in digital bridge and attention today and look forward to updating you next quarter.
Mark: On our progress as we close out 2020 for.
Mark: Operator, please open up the call to Q&A and thank you again.
Speaker Change: 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 he would like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your hand.
Mark: Before pressing the star keys, one moment, please while they pull for questions.
Mark: Yeah.
Speaker Change: The first question is from Jade Rahmani from K B W. Please go ahead.
Mark: Yeah.
Speaker Change: Thank you very much.
I think you should address at the outset the disconnect that exists between the positive industry backdrop, our digital infrastructure, which we're all familiar with positive news flow about specific deals specifically things that have come out even in the last few weeks and yet the disappointing.
It does seem like the mix shift in fund raising is toward co invest.
Speaker Change: And so the question is whether digital or bridge is best suited as a merchant bank type of entity rather than.
Running the flagship funds. So I guess, if you could just ask loves any investor concerns as it relates to the fund raising outlook.
Speaker Change: Yeah good morning.
Speaker Change: Thanks Jade.
Speaker Change: First of all co invest as a part of.
Is it part of what we do right. It's our heritage, It's where we started and everything we're doing in co invest linked up to the flagship funds. So the.
Speaker Change: The ability to scale and create outsized outcomes.
Speaker Change: Relies greatly jade on co invest.
Speaker Change: You have to remember when we're raising primary or secondary capital like we did in this quarter.
Speaker Change: It's being deployed immediately into growing the physical plant, which is growing NOI growing EBITDA across the 40 plus businesses that we own. So it's a powerful force multiplier and at the same time, what it does is it creates more scale and it creates more carried interest on the investments inside those phones. So it is vital and given the amount of capex that our.
Speaker Change: So spending right now Jade you have to have a big co invest program or you don't have the ability to get back to get the big bookings.
Speaker Change: I'll give you a case study in that for a second which is switch you know we raised over $2 billion a ton of essence, which we've continued to add capital to switch and since we've taken that business private we've almost tripled the earnings there.
Speaker Change: In a short period of time two years, how do you do that Jade you do that through having what I call ready aim fire capital Vantage has it data bank has it switch has it scholar has at all of our Big Hyperscale data center platforms around the world have visibility to show up for customers and perform at a level, where candidly other data center operators cannot put.
Speaker Change: So that's co invest.
Speaker Change: Second our fund products are working well.
Speaker Change: Whether it's our credit strategy, our flagship strategy, our private wealth channel what I can tell you in this quarter.
Speaker Change: Is given the velocity and the acceleration in fundraising I have total conviction around all of these products working and working simultaneously.
Speaker Change: Year ago, Jade, we were just a one product shop today, we have credit we have private wealth, we have flagship and we have co investments all of those products. In this quarter are working and they are performing that is the headline you need to walk away with them. This quarter not that we're a merchant bank, we are a global alternative asset manager.
Speaker Change: With multiple strategies in all of those strategies are winning.
Speaker Change: And our performing that's.
Speaker Change: That's the key takeaway from this quarter.
Speaker Change: Certainly I'm sure you're frustrated as we are with where we are in terms of FRE, but given the slow velocity of fund raising in Q1 and Q2 and at the beginning of Q3 that had an impact as it relates to our performance in calendar year <unk>.
Speaker Change: Again, we were very convicted around where we're going next year.
Speaker Change: A main completely unchanged in our five year view of where this business is going and a lot of this is timing, but we're actually quite pleased with the fundraising not pleased with the result, but extremely pleased with where we are in fundraising and the pipeline for the rest of the fourth quarter. Jade is incredibly strong we've got over 40 dedicated accounts that amalgamate October three.
Speaker Change: And as a possible opportunity.
Speaker Change: And the fundraising pipeline is very strong between now and the end of the year.
Speaker Change: And these are high probability accounts that are doing flagship credit.
Speaker Change: First in private wealth again, those are really the four pillars upon raising right now Jade and again last comment to you all of those products are working and where our multi strat global asset manager, that's who we are we're not a merchant bank.
Speaker Change: Can you discuss what drove the carried interest reversal that was also a surprise.
Speaker Change: Okay.
Speaker Change: There wasn't anything really individually meaningful in that.
Speaker Change: It was sort of.
Speaker Change: Portfolio valuations that were appreciating or roughly in line with our preferred returns and so you know kind of there was a little bit of up and a little bit of down across a number of different funds and products.
Speaker Change: But there was no like individual significant driver.
Speaker Change: Thank you.
Speaker Change: Okay.
Speaker Change: The next question is from Rick Prentiss from Raymond James. Please go ahead.
Yes, good morning, guys.
Speaker Change: Hi, Rick.
Rick Prentiss: Hey couple of questions.
Rick Prentiss: Mark I think we were off on ours was was composition you guys have hit on that a couple of times the composition and fundraising kind of it was coming in line with where we were backend loaded with the compositions the big key man.
Rick Prentiss: Maybe you guys can walk us through how much of the catch up fees that we were thinking we'd come in 24, how much have moved out into 'twenty. Five first just give us kind of a magnitude of what happened with composition and how does the catch up the move upwards of 25.
Speaker Change: Yeah, I'll, let Tom start and I can backfill behind them, but we have pretty good clarity on that good Tom sure.
Tom Bear: So year to date at September 30, we had about 10 million, we've had about $10 million of catch up fees those tend to kind of accelerate as the longer our funds in the market. So I would I wouldn't be surprised if we have between five and $10 million in the fourth quarter.
Tom Bear: So in our original guidance for the year, we had $40 million.
Tom Bear: So roughly speaking I wouldn't be surprised if we ended up with half of those in 'twenty four and half of those roll into 'twenty five something on that order of magnitude.
Speaker Change: Okay and then.
Speaker Change: Then the other thing I would just mentioned Rick is to your point about.
Timing issues and when fees activate when they don't activate.
Speaker Change: Co invests in fees activate when we closed on an investment so when that investment closes and the capital is invested those fees kicked in at that point. So when you get a big.
Speaker Change: Primary commitment of capital like a super and data bank, we're deploying that capital over the next 12 to 18 months. So those fees activate as you commit the capital as you invest the capital not committed so co investment the piece kick in on invested not committed so theres a little bit of timing, there and that takes anywhere from one quarter to four quarters.
Speaker Change: To deploy all that capex, whether it's vantage switch data bank Scala any of the Big data center operators, but we're rolling the Capex and capital calls are happening every 30 to 60 to 90 days second our.
Our credit strategy as you know from other other alternative asset managers.
Speaker Change: From a credit perspective that is also on invested.
Speaker Change: Our credit funds.
Speaker Change: Don't pay us fees on committed capital and another part of our credit strategy, that's working quite well Ric as that's amaze, that's really kind of the state of the art for folks that are big in credit whether its Apollo Ares ourselves. We all have that's amazed where investor will take a commitment to the fund and then side by side with that Rick they'll commit incremental capital.
Speaker Change: Paul where it's in a separately managed account in SMA and we have discretion over those estimates.
Speaker Change: A deal, let's say they like a residential fiber deal in the U S and they'll commit 50 to that they like a tower deal in Europe are on credit they'll commit 50 to that the minute that loan closes those fees activate and so again, there's a timing lag there as it relates to how we get paid in credit so co invest and credit had a slightly different cadence than.
Speaker Change: Flagship.
Speaker Change: And you know our private wealth channel that is uncommitted capital. So that's good news that looks a lot like the flagship product.
Speaker Change: We scale, our private wealth product, we were targeting $600 million, we're well, we're going to exceed that significantly inside this quarter. The private wealth product is working really well and so as Tom said those fees will catch up in the first quarter of next year.
Speaker Change: I hope that's helpful.
It is timing is obviously important.
Speaker Change: What on the flagship side.
Speaker Change: Where are we add on on fund three and what is the hard caps were flowing through how should we think about that one because that does drive earlier recognition of catch up fees.
Speaker Change: Yeah. So we're performing quite well on flagship I don't I don't think we're at Liberty to give you the specific number as of today.
We literally have commitments coming in every day, including last night with some commitments come in so.
Again, we were targeting in the third strategy 8 billion on the cover.
Speaker Change: We haven't put a hard cap on that yet we've had some conversations with our our top limited partners.
Speaker Change: We feel very good about hitting that 8 billion number.
Speaker Change: Got it.
Speaker Change: In Q1 of next year, that's kind of what we're targeting we have really good momentum got over 130 accounts in the data room working on that fund and so we could have a beat to that but you know our goal is just to hit the number and deliver that number inside of Q1 next year and our team has again.
Speaker Change: Strong strong conviction that we're going to hit that number, but we're well on our way there Rick.
Rick Prentiss: Definitely well north of 50%.
Rick Prentiss: Of that strategy and we've got a clear path to get to that $30 billion target.
Rick Prentiss: Okay and then last one for me is is obviously carried interest is a large component of what the value of the stock could be recognition of carried interest is important like Jay said, obviously, there was an accounting item just on a mark to market or fair valuations well, there's been a lot of news out there are a lot of rumors out there about some of the portfolio companies can.
Speaker Change: Ask you to address rumors, but it's just as we think about carried interest performance. How should we think about the timing of that the recognition of that and it feels like there was some prioritization on getting some of that realized in the not so distant future, but whatever you can elaborate.
Rick Prentiss: Would really help.
Speaker Change: Yeah. Thanks, Rick I mean look carried interest is a big big part of our value proposition because you know when we laid out the sum of the parts analysis on digital bridge last year.
Speaker Change: We targeted about $1 billion board of 1 billion five off our balance sheet. Another seven to 800 off of carried interest in the asset manager of course based on some multiple of FRE, which gets into some of the parts valuation of what gingerbread sport today no on carried interest you know we've always been very very transparent about what we do in terms of selling a portfolio.
Speaker Change: Companies.
Speaker Change: We have great assets, they are super valuable a lot.
Speaker Change: A lot of rumors in the marketplace around number of our assets. We don't address those rumors directly but I will tell you as people do come in they inquire about buying our platforms. If we find that there is compelling value and compelling value for us is 30% to 40% premium to NAV, which is where we saw milestone which is where we sold our vantage towers position.
Speaker Change: And where we sold other assets previously we tend to be very conservative in how we Mark Our book Tom Walk you through the reversals and Gary inside of this quarter and again, it's a framework, where we have independence Rick in terms of marketing your assets versus the investments in for example, I'm not on the valuation Committee.
Speaker Change: These are assets, we are independents around that no one on the investment team interferes with that process and so we generally tend to be very conservative in how we mark our assets.
Speaker Change: And then we have third party validation around that process.
Speaker Change: The rumors that you are hearing in the marketplace as a function of the fact that we have very attractive businesses.
Speaker Change: They're rumored to be an IPO, whether they're rumored to be for sale or whether they're rumored to be process has kicked off we've also been very clear with investors that we are creating more DPI.
That's important.
Speaker Change: The data bank transaction has some DPI related to it some of the things that we're doing advantage has some DPI T O.
For this year and next year and so there's other opportunities for us to create those outcomes that we like whether its rumor or facts I think time will tell but we are actively looking.
Speaker Change: Looking at certain assets in fund one.
Speaker Change: And we will look to obviously create those rate outcomes and when we do obviously go to sell some of those assets in fund one it will generate material carried interest each year and so.
Speaker Change: That's our plan I think we havent been pretty secretive about that I think we've told everyone out there that we're focused on DPI.
Speaker Change: But at the right time, Rick right, we need interest rates to cooperate multiples to cooperate and we know the platforms, we're building or some of the best in the world. So I'm in no rush, it's the only thing artificially, but if someone does come to us with compelling value.
Speaker Change: Of course, we're going to sell and we always believe everything everything is built into the bridge at the right price and at a premium to NAV.
Speaker Change: We demonstrated that on vantage towers, we demonstrated that unwound stone and we've done that in a few other instances, where we sold assets.
Speaker Change: I think the punch line is.
Speaker Change: There's a bunch of potential opportunities sitting out there, we're evaluating all of them and everyday we're remarketing our assets in terms of whether they are for sale or whether they were going to hold them and continue to grow them or whether they're going to raise more co invest capital to keep growing those are kind of the three decisions. We wake up every day on the 40 plus companies we own.
Speaker Change: Great. Thanks, guys.
Speaker Change: Thank you.
Speaker Change: The next question is from Richard <unk> from Jpmorgan. Please go ahead.
Speaker Change: Hi, I guess I was just wanted to follow up on the capital formation environment, and you're saying it's accelerating.
Speaker Change: You know us.
Speaker Change: Some of the questions earlier about D V P three and kind of a later close.
Speaker Change: As we kind of go into next year or is this kind of.
Speaker Change: Did you see an acceleration as.
Speaker Change: Next year starts.
Speaker Change: Is this kind of culminating around D V. P. Three closing the first quarter, just kind of getting a sense of how you see where things are going over the next call. It six to 12 months.
Speaker Change: Well I don't see a culminating in fact.
Speaker Change: I think this is the sort of normal cadence Richard that we're trying to develop your digital bridge that moving away from being a sort of a one product shop into being a multi strat firm that focuses on the ecosystem and.
Speaker Change: I think we laid it out in the third quarter here, which is as I said earlier all the products are taking and they're working that has continued here in the fourth quarter. In fact, even further validation of what we're doing in terms of credit flagship private wealth and co investments. Those are all products that are working well for us as we move into next year.
Speaker Change: And we will certainly have a more detailed conversation in our fourth quarter call. We've got new products that we're launching next year new strategies that we're launching next year, certainly finishing up the flagship product.
Speaker Change: <unk>.
The credit strategy will continue to foreign capital next year.
Speaker Change: We're certainly looking at other ideas around.
Speaker Change: Other forms of private wealth products that we're going to put in the market. Early Q1 next year and then we're of course looking at Infra bridge when looking at our core fund staff, one our strategic asset fund is performing really well.
Speaker Change: In fact, we've invested all of that capital out of our core fund, we're looking at a potential continuation of that strategy. So the key Richard is not to be reliant just on flagship.
Speaker Change: If you take away one highlight from this call. Despite the you know the FRE.
Speaker Change: Sorry, not being where we want it to be you have to take away from this quarter and certainly in the next quarter.
Speaker Change: All of the strategies that we worked really hard to develop in the last 18 months are now validating that's really important because what that does is it sets us up to continue to grow private well continuing to credit continued to grow core continued to grow flagship.
Speaker Change: And with the opportunity to introduce new products around you know pruning digital assets and long term vehicles and private wealth channels and of course, our focus around energy, which we're really excited about for next year. So there's a lot of things that we're doing that are setting us up for success, but the key thing is this is really a quarter that validates that we're no longer.
Speaker Change: Longer a one strategy shop.
Speaker Change: That's the key headline coming out of this quarter strong fund raising validation of the products and the fact that we are now multi strat firms and those strategies are all taking and are being and from my perspective. There are successful from a fundraising perspective.
Speaker Change: And.
Speaker Change: Regarding the data center side car for private wealth.
Speaker Change: Saying that the expectation is up from 600 million to a $1 billion, but do you assume that that's going to be an ongoing product and that could be a nice kind of continuous channel in for from that asset class.
Speaker Change: Yeah, No. We're really excited about it I mean, what Andrew good at Goldman and what he did at KKR was not just the one product he built multiple products.
Speaker Change: And his cadence was raising billions of dollars a year not $1 billion a year. So you know what what we figured out in the AI data Center sidecar vehicle is that we could get private wealth clients access to a couple of really good companies really fast and investors really liked that idea, but thinking about where you can go with that theres other forms of a items other G.
Speaker Change: Geographies, there's other verticals like fiber and towers.
Speaker Change: Digital real estate, there's all kinds of things that we can be doing across the private wealth platform and then the other thing that I really like about this Tom you were talking about last night is we do have a big co investment product, we can plug our private wealth channel into that and they can take 10% to 20% of a co invest and by the way that generates feeds the needs. So we re.
See the private wealth group here at digital bridge accelerating.
Speaker Change: Products that are lined up for next year that we think are going to be very successful and I think as investors get more exposure to Andrew you'll see what I'm talking about he is an exceptional executive great pedigree, and it's going to build a really good team here that can have they can deliver really reliable fundraising for us and new strategies in the years to come.
Speaker Change: Great. Thank you.
Speaker Change: Okay.
Speaker Change: The next question is from Eric Live child from Wells Fargo. Please go ahead.
Speaker Change: Great I appreciate you taking the question.
Speaker Change: You know Mark you guys have been you know more active recently with some M&A you know the vertical bridge horizon deal. The J tower steel you highlighted.
Speaker Change: And we've seen some other large deals like air trunk in the datacenter space, So where are we in terms of.
Speaker Change: The M&A environment, where you're finding value from acquisitions and what what the pipeline looks like.
Speaker Change: Okay.
Yeah. Thanks, Eric So we're proceeding to invest out of the third flagship strategy and that's going quite well.
Speaker Change: You know Yonder was a great example that we read.
Speaker Change: We didn't disclose the multiple but it was good value at least from a data center perspective. It was good value that certainly wasn't the the lofty multiple that was on your trunk. It was at a multiple much much much lower than that and so we found some value there and younger because I think a lot of folks are sort of focused on your trunk and we had a second team that was working on yonder, while we're working on there.
Speaker Change: Drunk so.
Speaker Change: I'm happy with that outcome, because it's a great asset.
Speaker Change: It's got a great footprint and on a relative basis, we came in as a smart buyer there against what was what was paid for with regard shrunk I think the other things that youre seeing us do in the third strategy.
Speaker Change: Tower was something that we've worked on for two years. These things take a long time to gestate, we really like the Japanese tower market carriers are finally, starting to share infrastructure. There that's kind of the tip on why do you want to be in a market like that historically Japanese curious of non trevino shared our training infrastructure now they are in J tower and has proven that out.
Speaker Change: So we're pretty bullish on that and being the first to the Japanese tower market as a as a foreign owner, an investor and operator, we think that's really exciting.
Speaker Change: Gonna do big things with the J tower platform. So that's exciting the vertical British deal.
Speaker Change: Just about continuing a three decade partnership with Verizon It started when Alex and I were building designs for Bellini mobile and it's continued through 30 years of trust and hard work and we were really happy with that outcome and.
Speaker Change: Raising a bunch of co invest around that idea and strategy investors in winding up of that.
Speaker Change: Long term lease with an investment grade customers. So again its another situation, where if you have the best assets in particular market, let's make no mistake. We think the Verizon towers are the best tower assets in North America investors lineup for those opportunities work.
That's where it co invest really works well for us when you go and you can stand up and go get an opportunity like that.
Speaker Change: When.
Speaker Change: There are a bunch of people have lost immediately flocked to our Q to say I'd like to co invest with you.
Speaker Change: So for that opportunity we get paid.
Speaker Change: Get paid for taking that risk and get paid for winning and so co investment is good. It just comes in at a slightly lower fee and it comes in on invested versus committed capital. So.
Speaker Change: I like what we did in the quarter again, I think Verizon was a big win I think certainly what we did with data bank with.
Speaker Change: Australia Super was a huge win for us.
Speaker Change: And then of course, Yonder and J tower and a few other things we're working on the pipeline remains robust.
Speaker Change: Robust we've got.
Speaker Change: Over 20 ideas, we're working on there's over $10 billion of new opportunities sitting in the flagship fund we're incredibly active investing out of the third strategy and we're also as I said, we're incredibly active in looking at dispositions out of the first fund as well so there's a little bit of puts and takes here.
Speaker Change: And all in all from the from an M&A perspective.
We are finding value Eric I think data centers, it's hard to find value let's be honest.
Speaker Change: If they're really good investment grade assets also hard to find value I think you saw the vertical bridge trade and you've seen some other tower assets trade around the world towers on a private basis and really haven't retreated maybe multiples have come in three to four turns but not much data centers you could argue with the air China deal that moved up.
Speaker Change: Two to four turns and fiber continues to be pockets of value. I mean, we obviously saw the deal that T. Mo did we signed the deal with Verizon did with frontier the fiber market is really active.
Speaker Change: You can find good value, but also for the really good assets, they're going to trade up and traded at a high multiple but we do think the area, where you can find value as fiber, it's just a little harder in datacenters and you've got to be careful about where you buy and towers and most importantly, you got to be careful about who your customers.
Speaker Change: From an investment grade non investment irrespective, so we stuck with the best.
Speaker Change: Investment grade customers that we know in this hemisphere and decided to go along with Verizon.
Speaker Change: Great. Thanks for that Mark and just one follow up I think you mentioned in your prepared remarks that you expected to close on some asset manager acquisitions in the fourth quarter, if I heard that correctly. So maybe you could elaborate on that a little bit.
Speaker Change: What are you kind of looking for with these acquisitions is it access to additional products like a traditional private equity energy expertise access to new Lps more geographic distribution kind of what are the underwriting criteria when youre looking at these these transactions.
Speaker Change: You just answered my question. Thank you.
Speaker Change: All the above.
Speaker Change: M&A for Us first and foremost it has to fit our financial profile. So you know.
Speaker Change: We're looking for at least the two five times return on their money. We're looking for returns more than when we're investing in our balance sheet I wont private equity returns I'm wondering for structure returns so Tom's.
Tom's background private equity Carlyle, he and I are the stewards of the balance sheet, we protect it and so we're looking for returns north of 20% and north of a two and a half Mike and so in asset management land multiples are kind of frothy at the moment, we've seen some big trades in some big multiples. So we're being selective and we're trying to find the right pockets of value Gander.
Speaker Change: Find the right get it right I mean, when you're buying an asset manager if you're going to buy the right people. So you know we've been pretty clear that we want to scale. Our credit platform. We have been very very focused on that and we have some really good ideas on that that we're actioning right now and most importantly, it has to be accretive and it must be accretive day one.
Speaker Change: Has been accretive to our shareholders in everything that we are looking at actually is accretive day, one to two our share price. So we love the idea of going deeper in credit.
Want to over a five year time period build a $20 billion AUM credit business, that's been advising ambition for credit and we think we can get there.
Speaker Change: There's over $80 billion of digital infrastructure LBO paper maturing in the next 24 months private credit is not going away and in fact I would offer to you that I think it's scaling.
Speaker Change: Continue to get bigger so we're really focused on our credit platform and how we can scale that.
Speaker Change: And those are things that are happening inside this quarter as we speak you know whether they manifest themselves in the closing this year or not is not clear, but what I would say is that as a high priority for myself and Tom and then as we are focused on scaling our credit platform second you've hit the nail on that again, we've always said private equity is interesting to us it's a natural adjacency because of.
Speaker Change: Some of the great firms out there that do you know.
Telcos cable that your spectrum are theirs.
Speaker Change: There's a bunch of private equity firms, we like we diligence we've had conversations with it is clearly on our shopping list is probably number two would be to be in digital private equity and so theres a couple of targets that that we really like and again. These deals don't happen fast and you have to build relationships earn because ultimately one transacting with us usually in foundry.
Speaker Change: And somebody who has been running that strategy or that fund business for a decade or two decades or some of the guys. We're talking to have actually been in the business.
Speaker Change: So we want to find the right partners one find the right people that have kind of our attitude our work ethic, our culture and that's not always easy.
Speaker Change: But I would say on the private equity side, we definitely feel like sometime in next year.
Speaker Change: That's a space that we will enter.
Speaker Change: We've talked about entering into organically, where we build up our own product.
Speaker Change: And we've also discussed about doing it through M&A.
Speaker Change: Energy same thing.
Speaker Change: We've been building it organically and building a lot of energy projects around the world by our own.
Speaker Change: That's going to manifest itself next year in the form of some strategies that will produce fee and carry.
Speaker Change: But also we're not afraid to go out and do M&A as well, there's some really interesting GPS that do.
Energy transition that or I won't call them subscale, but maybe have five to 10 $20 billion of M. They're FRE is sort of you know modestly breakeven a little higher than breakeven and theyre trying to scale to like we all are.
Speaker Change: In fund raising even for alternative energy, if you're subscale G. P. In the energy space, It's hard to go out and fundraise Theres very few folks that are fund raising at scale in the alternative energy space. So we've identified three or four targets that really like in that space. We're spending time with them again building relationships and it takes time, but at the same time, we're doing some projects with somebody.
Speaker Change: We're testing it.
Speaker Change: Seeing how they operate in a solar project are wind project or micro grid. So a lot of things that we're deploying on the energy side, we are deploying with other GPS and getting to know them and figure out what's a good fit for us So I'd say, it's credit first.
Speaker Change: I would say its private equity second.
Speaker Change: With the close third being energy transition those are the three areas that we're focused on and again.
Speaker Change: It's got to be accretive day, one looking for north of a 20 IRR and two five times our money, we want to be really prudent about how we use the balance sheet.
Speaker Change: Throughout the year, we've been intimating that we're going to do M&A, but I think what you're hearing from me today has very specific metrics very specific targets and very specific verticals. We now have a very clear path in terms of what we're doing.
Speaker Change: Cant telegraph more than that but on separate kicking me under the table. So that's where we stand on M&A right now.
Speaker Change: All right fair enough. Thanks, Mark.
Speaker Change: Thank you Sir.
Okay.
Speaker Change: The next question is from Jonathan Atkin from RBC capital markets. Please go ahead.
Jonathan Atkin: Thanks for taking the question good morning.
Jonathan Atkin: A couple from my side, you earlier indicated that digital bridge as GP interests and minority Stakes in some of your data center companies have been under appreciated by the market and I'm just wondering any latest thoughts on monetizing those assets and what would be the use of funds. If you were to sell.
Speaker Change: So again in terms of our private assets on our balance sheet assets, maybe fine tune the questionable itself about yeah, yeah, Beth yet about the balance sheet assets.
Speaker Change: Uh huh.
So look on the balance sheet, we've got really two two pillars of value.
Speaker Change: There are the positions in Databank advantage and then obviously, there's the GP Stakes. So maybe we could just start with the where we are.
We are in terms of data bank advantage.
Speaker Change: Today, we are holding database advantage S D C at $675 million.
Speaker Change: We're holding the ditch a great partner series of $3 40, and then the rest of our GP Stakes at $3 62.
Speaker Change: They got the data and can manage is D. C assets, we just talked about raising over $2 billion for database there will be some secondary involved in that that secondary closing will happen later in the quarter. If not first quarter next year, we do plan Jonathan to bring some capital back on database, Tom and I are sort of deciding how much secondary won't.
Speaker Change: Now in consultation with the board, but given the market, where we raised money was on Super. We're we're excited I think that's a good validation of our hard work and I don't know Tom do you want to comment on that at all feel free to.
Yeah look I think there's two components to it which was you articulated the regular way G. P investments in the funds the D V T series.
Tom: I think those will just have continuous churn and realizations on those will fund our commitments on the next fund and kind of continue to churn.
Speaker Change: Without making any commitments.
Speaker Change: Commitments or promises to the X.
Speaker Change: But there was a.
Speaker Change: A meaningful transaction related to one of the large.
Speaker Change: Positions on the balance sheet I think we.
Speaker Change: And evaluate the capital structure and he's out in Nevada Dunwoody.
Speaker Change: We used to pay down the preferred or something like that but you know I look at them in two different buckets.
The GP investments are just part of the business, where I was going to have one it's a little bit of a vol kind of feeding itself. That's the investments we'll feed that commenced in the next time.
The.
Speaker Change: Data back advantage or.
Speaker Change: More singular investments thing.
Speaker Change: We'll have probably unique usage, if the warehouse significant transaction at some point, which is not embarked in interest at some point in the future. Yes. I think also on vantage is D. C. Those assets are proving to be really unique.
Speaker Change: And very defensible, so I kind of like that asset sitting there and sort of accruing, where it's accruing and theres. Some renewals that are coming up where to be very direct route to market by a lot now.
Speaker Change: And vintage STC, Jonathan as you probably remember owns most of those Santa Clara data centers, which are really valuable that sit in some really strategic locations, where those rents were done Tom seven eight years ago and now if you check the market.
Speaker Change: Those rents are much higher so we'd certainly like to extract maximum value on vantage is D C before thinking about any monetization plan.
Speaker Change: It comes back to a database manager D. C. We've got two really high quality assets investment grade assets that are generating steady and consistent double digit organic growth and returns in the high teens and farm money, that's exactly what our balance sheet should be doing at.
Speaker Change: At the end of the day, so we're very comfortable with those positions I would say the super the $2 billion plus Fundraised, we're going to take some secondary off the table the valuation is very compelling.
Speaker Change: And again, it's an area, where we can prove that at a premium to NAV with a small premium or large premiums when there's an opportunity to return capital back to the balance sheet, Tom you and I will think through that and we'll do it thoughtfully.
Thank you maybe just two quick ones fiber investments.
Speaker Change: A lot of AI driven demand in fiber new routes and so forth and just kind of the appetite to do.
Speaker Change: Boy capital expansion, I guess taken Jose or maybe primarily they are I suppose and then Latin America. If you could maybe just give us a little bit of a update on what you're seeing with towers and data centers to your investments there.
Well.
Speaker Change: Let's just start with Latin America really fast you know I was down in the region last week.
Speaker Change: You know pretty exciting I mean, particularly in Brazil, Brazil has a lot of exciting things happening.
We.
We had a very good quarter down and Scala they continue to win T logos and more importantly, you know.
Speaker Change: The Guy has the powers so much like in the United States, Jonathan you've got to have the power and you've got to have contiguous power and you've got to have it in rent locations.
Speaker Change: Gala, where we're lining up another 500 megawatts in our new our new substation or new micro grid therein, Tambor and got a chance to actually go see that microcredit getting built which is pretty exciting and that's pretty cool because that micro grid is bringing in all of that hydro power from the north and skol as one of our really sort of bright shining portfolio companies, where we've got 100%.
Speaker Change: Noble energy.
Speaker Change: Those data centers, we lease that transmission infrastructure, we bring that hydro from Brazilian from minutes rise and so 90% of the power in Brazil is renewables. So it's a great market and we're really excited about what we're doing there and some follow but we're looking at challenger markets like Bogota Santiago Mexico.
Speaker Change: City, and we're seeing a significant uptick from the hyperscale or in those markets. So data centers in Latin America has been one of the bright stars in where we're going to continue to support solid and we're very excited about it.
Speaker Change: Our fiber business is down in the region are performing well, we've got one fiber business in Chile, It's a wholesale operator, where we operated infrastructure for other folks we're.
Speaker Change: We're ahead of plan there really like what's going on there and we're excited we have three tower companies in the region all of them posting positive organic growth.
And the what I would call sort of high single digits low double digits, but.
Speaker Change: The big standout was really the Andean region.
Speaker Change: A T P, which is Chile, Colombia, Peru, those guys are kind of on pace to post somewhere between 14 and 15% organic growth. This year highlighted Brazil is doing well as we're starting to see massive pickup in colon for five G. Five G amendments and five G overlays and densification sites, where sort of predicting kind of 9% to 10% growth there.
Speaker Change: And Mexico is just sort of steady.
Speaker Change: It's not a super exciting market, but it is a very consistent market for us. So there were kind of delivering.
Speaker Change: Escalators, we're delivering about four 5% organic growth with the escalators given the inflation rates in Mexico, right now that that growth rate looks more like 10 or 11%. So unlike all three of our tower business is in the region, they're all performing quite well we've got good customers got enacted built to suit pipeline.
Speaker Change: Over 2000 towers and construction between M. D ph D online timeline alone, we'll deliver 1200 Bts San Francis here. So there's a lot of Bts work to do there we're seeing really good fine to Densification and we're generally really constructive on towers in Latin America, right now and I think you saw last week SBA Paydowns.
Speaker Change: For Central America standards, they paid us a nice price for a set of assets with millicom, which is not exactly that's not an investment grade customer, but it is a good customer and I think you'd see SBA breaking out its balance sheet for the first time in a while and where they go and they went to Latin America, which by the way as you look through the tough times and the tower industry.
Going all the way back to the Dot Com crash when American tower needed to go do a good tower deal where did they go through into Mexico and that deal with Nextel was one of the best deals that American tower ever did it was dollar based good customer and it really helps you know American tower navigate some challenges no one and no. Two so we continue to believe that Latin America is a really important market for the tower industry.
Speaker Change: American tower supports that view SBA supports that view, we support that view that we remain incredibly constructive on towers in Latin America.
Speaker Change: Okay.
Speaker Change: And then so on fiber I guess the question was also U S. Because there's been some headlines out of it.
Speaker Change: Unity and women Hyperscale demand.
Speaker Change: A lot of long haul.
Speaker Change: What's kind of your perspective on on the trends driving fiber investments.
Speaker Change: Look on fiber.
Speaker Change: There's a lot happening right and each theater presents different challenges and opportunities and I won't go into granular detail, but.
Speaker Change: Europe, I think you've got a bit of a shake out happening we see some of the Alt nets that can't make their interest payments that need to be restructured or pushed into other vehicles. So there has to be kind of a cleanup trade in the online space, particularly in the U K.
Speaker Change: And in Germany, we saw a lot of Alt nets at very high valuations with a lot of that so.
The fiber to the home model in Europe, and it works great in France, but the rest of the countries there needs to be a little bit of cleanup.
Speaker Change: Probably some rationalization I think on an enterprise fiber in Europe, you know, we continue to really be constructive on jail.
Speaker Change: <unk> E networks, we're watching Europe fiber watching cole I'll put up good numbers all of US are I think performing quite well.
Speaker Change: A lot of that as you know Jonathan as datacenter connectivity and long long haul routes connecting some of the flat markets. Those are really constructive routes I think some of the best routes and say it was built recently for example, like Dublin to flowers flower to Paris. Those are great Rouse. The Hyperscale is really want those routes and.
Speaker Change: We're generally constructive on datacenter connectivity in Europe, and in Asia, and North America, I'd say back here in the U S on fiber to the home we've we've.
Speaker Change: You need to make our investments you know cautiously, but a good value.
Speaker Change: And we're continuing to see increased bookings obviously, that's the goal.
Speaker Change: I never stream on the datacenter connectivity side dark fiber long haul all of those things that you mentioned, Jonathan are proving to be constructive areas of focus and traditional enterprise.
Speaker Change: It is competitive I think we're winning our fair share of logos and some of our competitors are winning their fair share of logos, but we're generally constructive on.
Speaker Change: Enterprise fiber in the U S and.
Speaker Change: We're cautious on residential fiber just because you've got the legacy telcos, you've got cable companies and you've got fiber overbuild or you just got to be really careful Jonathan the geographies that you pick it's it's still super competitive, but again as I said.
Speaker Change: Some earlier comments today look at you know look at what happened with what with what T mobile did.
Speaker Change: KKR.
Speaker Change: Right outcome for our friends at <unk>.
Speaker Change: I'll kill and.
Speaker Change: When you look at obviously, what happened with frontier Verizon, We think Hans made a good trade. There. We think that's a good outcome for frontier shareholders and it's a strong investment for horizon. So I think the M&A market and fiber is going to continue to be consistent if not heat up a little bit Jonathan.
Speaker Change: And we certainly like you know long haul fiber and data center connectivity in Asia.
Speaker Change: Another air pockets of good growth for us as well.
Jonathan Atkin: Thank you.
Speaker Change: Thanks.
Speaker Change: The next question is from Anthony Hau from China Securities. Please go ahead.
Anthony Hau: Good morning, guys. Thanks for taking my question.
Anthony Hau: Was curious what the economics for the private wealth products and the data center sites sidecar product and has this platform been fully built out with a proper team.
Anthony Hau: Okay.
Anthony Hau: Is that platform has been built out.
Private wealth I mean, it's pretty easy or the way we built the private wealth channels. We hired Andrew He joined the team of 30, plus investment professionals that run our marketing team on a global basis ended up by Kevin Smith and Leslie Gordon.
Anthony Hau: What we loved about that product as it required literally no mystery name.
Anthony Hau: We're literally getting 100% flow through.
Anthony Hau: On that product in terms of margin contribution and FRE contribution. So those are the kinds of things we wanted to do.
Indeed in due course, I think Andrew's goal is to get a bunch of desire for to six Ftes next year and the 2025 budget and we think he's cadence can double versus what he did last year and so we think the private wealth channels incredibly profitable. So we can raise a billions $2 billion a year and our average fee rate of 100 basis points.
That turns out to be I think a very profitable product with us with a very small team. So we're excited about that I again I cannot reiterate how important is that we've developed this new channel.
Really has opened our eyes and by the way just listening to Aries and Apollo Blackstone and can't yard other other alternative asset managers that are performing quite well in this vertical and now that we have this product and we're a digital specialists immediately and we're performing quite well. So we're excited about it's a very profitable venture for us.
Anthony Hau: Yes.
Anthony Hau: And these products are going to perform extremely well.
Speaker Change: And Mark you mentioned that like you know that 24 plant didn't factor in $1 billion raised from the private wealth.
Speaker Change: <unk> platform <unk>.
Speaker Change: Product fell below your expectations in terms of capital formation.
Speaker Change: Well look we'll get into that in the next quarterly call. When we sort of lay out our fund raising guidance for 2025, but I think I, just sort of telegraphed a little bit to you, which is you know well.
Speaker Change: We will raise over $1 billion. This year, we're pretty consistent that we should do that next year if not higher.
Speaker Change: I'm not going to give you an exact number of how much higher we're gonna go next year, but the products that Andrew and Kevin and I are designing right now for launch in Q1 next year, we think are going to be very attractive and they're going to take quite fast and so we've got a couple of products on the runway will sort of be a little bit more I think prescriptive in the Q4 call early next.
Speaker Change: Year and lay out for you our business plan to private work furniture, we're very excited.
Speaker Change: To be honest I'm very surprised how fast is to get to it in the uptake on this product was a lot faster than I expected it exceeded my expectations.
Speaker Change: Just last one for me has the quota bearing sales rep that you guys recently hire started generating revenue yet.
Speaker Change: Actually yes.
It was two accounts in the last.
Speaker Change: Seven days so.
Speaker Change: We're excited I think.
Speaker Change: We've developed some really great relationships with some of the pension funds in Germany and.
Speaker Change: Since Switzerland, and Austria, and this is where <unk> has been really great. He understands that market, so well and so we're performing well in that area and.
Speaker Change: Look it's not just him it's a team effort right and so there's so many folks on your sales team that are performing this quarter.
We had a bunch of logos closed last night all around the globe.
Speaker Change: And it's not just one region right I think we laid that out in the earnings call. It's Asia is really important in this quarter. The Gulf is important just got back from there from three days of marketing. There are go to Asia next week, North Americas, performing quite well, we're starting to see green shoots out of Europe.
Speaker Change: All four regions are going to perform for us the rest of this quarter and are going to perform extremely well in 2025, there's a lot of momentum carrying into twenty-five and theres a lot of accounts that we're focused on that are closing now here in.
Speaker Change: In 2004.
Speaker Change: I can't emphasize it enough.
Speaker Change: The things that we've laid out for you throughout the year.
Speaker Change: Disappointed in our results in Q1 and Q2, we've now seen that turn in Q3 Q4 will by far be our best performing quarter and the real headline here is all four regions are producing capital.
Speaker Change: In all four core products that I mentioned are producing capital converse private wealth credit and collection all of those products are taking commitments right now in all four regions are producing commitments and that's why we have all this conviction leading up to the end of the year and fundraising.
Speaker Change: Thank you.
Speaker Change: The next question is a follow up from Jade Rahmani from K B W. Please go ahead.
Speaker Change: Okay.
Speaker Change: James Your line is open.
Speaker Change: Can't leave them there.
Speaker Change: There are no further questions at this time I would like to turn the floor back over to Marc Ganzi for closing comments.
Marc Ganzi: Well look thanks, everyone I appreciate your time and attention in what I think is a quarter that kind of has a little bit of a tale of two cities.
Obviously, we own our FRE print, we certainly Tom and I would have liked it to have been better, but we do think that what is happening here at desert Ridge is really exciting and as validation of the hard work that we've put in for the last year that transition from a singular focused flagship only digital infrastructure firm to a multi strat.
Marc Ganzi: <unk> is on display in this quarter.
Marc Ganzi: <unk> is the big I think headline for this quarter the delivery of six one on our way to seven but most importantly, our conviction and confidence in exceeding Seth.
Marc Ganzi: The last thing I would say is.
Marc Ganzi: Now Tom in the tier three quarters, the things that he and I are focused on are really continuing to generate revenue.
Marc Ganzi: Most importantly, focusing on profitability and I think youre going to see that manifest itself.
Marc Ganzi: Little bit in the fourth quarter, but certainly in the first and second quarter 'twenty five as we begin to focus on mining costs and improving margins, we talked about the margin improvement of 500 basis points. We can do better we will do better and we're going to produce better margins next year in terms of our profitability. So that's really our core focus right aren't folk.
Marc Ganzi: This is continue to drive the revenue growth with fundraising.
Continue to manage our assets smartly and acutely where theres good exit opportunities that exist will take those shots if not we're gonna continued compounding rou value.
Marc Ganzi: And then the last thing I would say is as we scale into all of this fund raising that we've delivered here in the fourth quarter and certainly in the fourth quarter of this year and Q1 next year improvement in the margins, that's a big opportunity for us.
Marc Ganzi: You'll begin to see that manifest itself in Q4, and certainly you'll see it manifests itself in Q1 and Q2 next year as we bring in the capital we get the catch up fees and we turned some of these products that are based on invested capital into fee bearing products quickly. So that's our focus.
Speaker Change: We look forward to connecting with each and every one of you. We're always open for for comment and the opportunity to sit with all of our investors I want to close and saying I want to thank our entire team, particularly our sales and marketing team Kevin Leslie on the <unk>.
Speaker Change: Entire capital formation team are doing a very good jobs in a tough market and we are delivering exceptional results here in the quarter and we're going to continue to deliver exceptional results next quarter, but I'd be remiss if I didn't thank our team there working hard they are traveling meeting with clients and most importantly, they're now delivering significant commitments and that's going to really propel us into 'twenty five.
Speaker Change: And it gives us the conviction around our five year plan, we remain totally convicted around our five year plan and I would say, we're more excited about where we're at today than we were in previous quarters. This year and we look forward to continuing the dialogue with you next quarter delivering the results.
Speaker Change: Thank you and I look forward to connecting with all of you have a great weekend take care.
Speaker Change: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
[music].
Speaker Change: Yeah.
Speaker Change: [music].
Speaker Change: Sure.
Speaker Change: [music].