Q4 2024 DigitalBridge Group Inc Earnings Call
Speaker Change: 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.
Speaker Change: All information discussed on this call is as of today February 20th 2025, 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 to be filed with the FCC for the year ending December 31 2024.
Speaker Change: With that let's get started I'll turn the call over to Marc Ganzi, Our C E O.
Speaker Change: Mark.
Marc Ganzi: Thanks Evan.
Speaker Change: Let's start with our business update.
And put performance in the fourth quarter over the course of 'twenty 'twenty four into proper perspective.
Speaker Change: There are three core headlines, but I want to talk to you about today.
Speaker Change: Fundraising.
Speaker Change: How we're investing and how we intend to scale the business.
Speaker Change: Let's start with fund raising this is the key first headline.
Speaker Change: We had record fund raising of 9 billion in 'twenty 'twenty for.
Speaker Change: That includes 4.8 billion in the fourth quarter, putting US 28% ahead of our $7 billion annual target and marking a very strong finish to the year.
Speaker Change: Next we outlined our objectives for 'twenty 'twenty four I highlighted we had 15 billion of Capex, we were scheduled to deploy.
Speaker Change: Principally into the data center sector.
Speaker Change: Here, we actually ended up putting to work around 16 billion in 2024 at the portfolio level.
Speaker Change: Framing that in proper perspective, as an asset manager or assets under management grew from 80 billion to 96 billion and a period of one year. This is over a 20% growth rate in terms of the assets and really showing proof positive that we're scaling the business.
Speaker Change: The last piece I want to highlight which is central to our investment thesis and Tom will cover in greater detail is our ability to deliver strong financial performance with growing revenues and earnings.
Speaker Change: And look I know this was a tough year in terms of our ability to deliver on those numbers in the second and third quarter, but I think in the fourth quarter, we put that to bed manner.
Speaker Change: Management fees grew over 20% this year and over 35% in the fourth quarter, while fee related earnings grew over 30% in both the fourth quarter and over the course of 'twenty 'twenty four with margins expanding in a trend that we expect to continue as digital rich scales.
Speaker Change: And this is really the key tenants of what we're planning to deliver this year is scale and I'll talk a little bit more about it in the third section of my presentation and commentary today. So let's go to the next page.
Speaker Change: So on fundraising as I mentioned, we generated record capital formation of <unk> 9 billion in 'twenty 'twenty four.
Speaker Change: With a strong finish to the year of $4 8 billion in the fourth quarter alone.
Speaker Change: We've asked public investors in the past not too focused on quarterly fluctuations and trust that we will get the job done on fundraising.
Speaker Change: We have long term relationships that they'll PS and our ability to grow our capital base over a year or longer is a much more relevant measure and look in the public environment not all investors are prepared to be that patient.
Speaker Change: We're gratified to get delivered fund raising 28% ahead of the $7 billion target.
Speaker Change: At $5 5 billion co invest capital to go out and buy and build new data center capacity to meet persistent cloud and rapidly expanding and demand was the biggest driver of fund raising over the course of the year.
Speaker Change: Including significant commitments to fund growth at data Bank led by our Super as well as a fourth quarter commitment to support the acquisition of Yonder or seven distinct data center platform.
Speaker Change: In 'twenty 'twenty four we raised $2 7 billion around our third flagship strategy, which now has total commitments over $5 5 billion.
Speaker Change: This platform gives investors diversified global exposure to the digital infrastructure ecosystem.
Speaker Change: This is where investors typically start their journey with us and we've continued to expand our roster of lp's over the course of the year and will continue to raise capital in this flagship product through the second quarter of this year.
Speaker Change: Finally in our core credit and liquid strategies, we added around $800 million of new capital driven by commitments to our second credit strategy and Alpha that's attracting capital to our liquid strategies I Wanna get Big credits My partner, Alan Bethesda, and his team for for a particularly strong 2024.
Speaker Change: Look fund raising in essence is the lifeblood of our platform.
Speaker Change: To continue scaling to meet the demands of large capital intensive and rapidly growing addressable markets and in 'twenty 'twenty four we're pleased to have met the call.
Speaker Change: Next slide please.
Speaker Change: So I wanted to drill down on fund raising and particularly focused on co investment and how the composition of our fund raising not only impacted our ability to achieve our earnings targets, but also highlights co investments strategic relevance to our platform.
As you can see here on this slide we definitely raised a lot more co invest than we planned at the beginning of the year.
Speaker Change: Why did this happen well first and foremost it was driven by strong bookings growth across our data center companies responding to AI and cloud demand.
Speaker Change: This in turn impacted our ability to generate our 'twenty 'twenty four FRE in line with our guidance.
Speaker Change: That being said I'm not going to apologize for $9 billion of fundraising.
Speaker Change: Even though we raised that at a lower blended rate of 70 basis points. It had the same impact of raising $7 billion at 90 basis points, our typical blended fee rate.
Speaker Change: Further in 'twenty twenty-five I'll want to telegraph to you know that we expect to raise less co investment in 2020 five.
Speaker Change: We expect this to be in our typical share of fund raising in the 30% to 35% range.
Speaker Change: I also want to take the opportunity to highlight why strategically co investment represents a really key component of our differentiated buy and build strategy.
Speaker Change: One it gives us an ability to fundraise continuously.
Speaker Change: That generates persistent capital flows to fuel growth at our poor COSE and develop a steady cadence of off cycle capital formation at the corporate level. It really keeps the dialogue fresh with our L piece. This is important.
Speaker Change: Number two while co investment doesn't generate low fees.
Speaker Change: It actually represents high margin incremental revenue.
Speaker Change: We're already managing the assets.
Speaker Change: With little additional costs.
Speaker Change: Finally, co invest expands our carry eligible capital under management, allowing us to build carry value to <unk> shareholders of a larger capital base.
Speaker Change: And look while carry continues to be episodic in nature. It is a very important part of our long term strategic growth and it is a huge part of our embedded value of the digital bridge share price.
Speaker Change: We've got to take that argument to shareholders this year and deliver.
Speaker Change: On carried interest and make sure that that manifests itself in our FRE and our distributable earnings, which we intend to do this year.
Speaker Change: <unk> mine, we raised more co invest and we expected this year and while that impacted our ability to achieve our FRE targets based on timing, we see it as an incredibly strategic facet of our investment program next slide please.
Speaker Change: When we look at fund raising I want to broaden the aperture beyond P M and put in perspective, the total quantum of capital that we successfully raised in 2020 four.
Speaker Change: Raising this capital is critical to supporting the growth of our portfolio companies as well as our ability to unlock capital that generates D. P. I.
Speaker Change: As you heard throughout 'twenty 'twenty four D. P. I is the critical metric, which L. PS judge G piece today.
Speaker Change: If you're not delivering DPI, it's really difficult to go out and ask for new capital.
Speaker Change: We delivered on DPI in 'twenty 'twenty four.
Speaker Change: And look this is what matters at the end of the day, it's not only about delivering DPI. It's also about supporting our portfolio companies and their ability to meet customer bookings and orders.
Speaker Change: And at the same time, achieving a key critical function, which is returning capital back to our Lps.
Speaker Change: And 'twenty 'twenty four we raised over $24 billion in capital through a combination of primary equity to fuel new investments.
Speaker Change: And secondary equity to generate DPI.
Speaker Change: Then on the other side of Ledger, we continued to be very successful accessing the debt capital markets.
Speaker Change: Access to the debt capital markets, we do through a variety of different techniques and relationships.
Speaker Change: First and foremost we were successful in tapping the traditional bank financing market.
Second we were also very successful in accessing the securitized market.
Speaker Change: Where we've been very very successful historically at lowering our portfolio company's cost of capital through a b S and C. M. B S issuances in.
Speaker Change: In fact last week you saw that on display with the successful issuance of securitized notes at Vale.
Speaker Change: That transaction alone was initially 28 times oversubscribed.
Speaker Change: The power of the digital rich portfolio and the power of our ability to get out and talk to institutional investors and raise capital is what differentiates our platform.
Speaker Change: Next slide please.
Speaker Change: And 'twenty 'twenty four we invested in a number of new platforms.
Speaker Change: And partnered with key limited partners to continue to build and scale our businesses.
Speaker Change: In terms of new businesses, we took J tower, the largest independent tower co in Japan, private and announced the acquisition of Yonder, Our seventh global data Center platform.
Speaker Change: We also have invested in a number of our established platforms in 'twenty 'twenty four including the bolt on acquisition of Verizon cell towers for $3 3 billion.
Speaker Change: This added over 6300 towers to vertical bridges portfolio, making it the number three tower portfolio in the United States.
Speaker Change: We talked last quarter about the equity raise the database.
Speaker Change: Our edge data center platform here in the United States.
Speaker Change: We're all Super let a two plus billion dollar equity raise which was recently upsized and gave us the opportunity to harvest. Some gains we had built up on our balance sheet.
Speaker Change: I think this is critical the ability to use the balance sheet and a tactical and strategic way while at the same time delivering over two times Moit for you our public shareholders off the balance sheet really is proof positive that when we use the balance sheet correctly, we generate the right outcomes for you our shareholders data bank is exhibit a and how you use the balance sheet.
Speaker Change: And how you create great returns and return capital to you our public shareholders.
Speaker Change: Finally, we brought in partners at Silver Lake an idea to join US in supporting the continued growth advantage and landmark.
Speaker Change: Both of these financings were incredibly strategic and tactical as both of those platforms continued to exceed their underwriting and continue to generate new bookings and new acquisition opportunities I'm really excited about the growth potential advantage and I'm really excited about what we're doing in landmark in terms of buying land under critical mission infrastructure assets like towers.
Speaker Change: And data centers and other forms of infrastructure.
Speaker Change: Next slide please.
Speaker Change: The third component of our roadmap for 'twenty twenty-five its all about scaling digital bridge.
Speaker Change: In 'twenty 'twenty four we generated strong financial performance, perhaps not exactly the financial performance. We wanted from a timing perspective, but again with double digit revenue growth and expanding margins aligning with our long term roadmap.
Speaker Change: And that's the key when Youre investing in infrastructure you have to invest for the long term.
This is the simple thesis that we're focused on and we will continue to deliver against in 2025.
Speaker Change: Capital allocation is increasingly relevant as digital rich begins to generate a steadier cadence of cashflow, which we expect to be supplemented by carried interest over the coming years.
Speaker Change: This is a component of our business plan that we will continue to talk about in 'twenty twenty-five carried interest is a very big part of our business model.
Speaker Change: Just think about where we've grown assets under management from 80 billion to 96 billion.
Speaker Change: Why are we generated 96 billion a M that equity is at work that is a critical thing for investors to get their minds wrapped around as the assets under management grow.
Speaker Change: The profits interest and the carried interest grows at the same time.
Speaker Change: That cadence will become more pronounced and more steady and again the goal is to remove the episodic nature of that so you our shareholders will enjoy the benefit of that hard work.
Speaker Change: In 'twenty 'twenty four the bulk of our corporate capital deployment was alongside our Lps in the form of G. P co invest.
Speaker Change: Principally into our newest flagship strategy.
Speaker Change: We love eating our own cooking and the idea of compounding capital on a fee free carry free basis for you our shareholders is a great use of capital.
Speaker Change: As we look forward to 2025, we expect our G. P co invest allocation to be supplemented by complementary and strategic M&A.
Speaker Change: Next slide please.
Speaker Change: So what does the didgeridoo roadmap feed into.
Speaker Change: Why our fund raising investing in scaling so critical to you our shareholders.
Speaker Change: As you can see when we are successful in these three arenas. It allows us to really deliver on our mission statement to be the infrastructure partner to the digital economy.
Speaker Change: Raising and deploying capital successfully.
Speaker Change: That's the global scale that drives efficiency growth and market presence.
Speaker Change: And at the end of the day. This allows us to show up for our customers where they need us.
Speaker Change: This was on display in 'twenty 'twenty four.
Speaker Change: It's a formula that's resulted in building the third largest global data center footprint.
Speaker Change: Across seven separate platforms and the fourth largest independent global tower portfolio across 10 different companies.
Speaker Change: With that I want to turn the call over to my partner Tom to walk you through our financial results.
Tom: Thanks, Mark and good morning, everyone. As a reminder, this earnings presentation is available within the shareholder section of our website.
Tom: Hey, I'll start with our financial highlights for the fourth quarter and full year 2024, followed by our non-GAAP metrics and balance sheet profile and will finish by covering our outlook for 2025.
Tom: Starting with fee revenues, we recorded $102 million in fee revenue in the fourth quarter, which resulted in full year fees of $330 million increase year over year of 37% for the fourth quarter and 23% for the full year.
Tom: This was driven by capital raised in our flagship strategy and to a lesser extent, a particularly strong year in our liquid funds.
Tom: The increased revenue generated fee related earnings of $35 million in the fourth quarter and $107 million for the full year 2024.
Tom: Increases of over 30% for both periods.
Tom: As of December 31st our fee, earning equity under management stood at $35 5 billion, an increase of 8% compared to the prior year.
Tom: Additionally, we have $4 $5 billion of capital that will begin adding to see EM in 2020 five as the fees on that capital are activated.
Tom: We ended.
The year on a particularly strong note as far as capital formation, raising $4 8 billion of new capital in the fourth quarter, bringing.
Tom: Bringing us to 9 billion of capital raised for the year.
Tom: We continue to maintain substantial liquidity with $140 million of corporate cash and total liquidity of $440 million, including our undrawn corporate revolver.
Tom: Over the course of the year, we funded $88 million towards our GP commitments and as discussed in prior quarters eliminated $78 million senior notes in the first half of the year.
Tom: Turning to the next page as mentioned, we had a particularly strong close to the year from a capital raising perspective.
Tom: With meaningful increases in P. M. In our D V P series and counter ethanol offerings offset partially by capital return to limited partners and a reduction in fee M within our inference platform.
Tom: Within the <unk> platform one of the funds at the end of its investment period in December and we now earn fees on invested as opposed to committed capital in that fund.
Tom: Moving to the next page, which summarizes our non-GAAP financial results.
Tom: Full year fee related earnings increased to 107 million from $82 million last year, representing a 31% increase.
Tom: We generated approximately $20 million of distributable earnings in the fourth quarter, resulting in 53 million for the full year and 8% increase over our distributor earnings for 2023.
Tom: Turning to the next page, which summarizes our carried interest and principal investment income.
Tom: We reported a net carried interest reversal of 18 million in the fourth quarter.
Tom: On the right hand side of the page, we present, our full year results, which reduces the noise associated with quarter to quarter fluctuations and shows positive net carried interest revenue of $46 6 million for 2024.
Tom: Increasing our share of the net carried interest asset from a 120 million in the beginning of the year to 167 million at the end of the year.
Tom: As a reminder, the company accrued carried interest based on quarterly changes in fair value of the investments held across our portfolio of fun.
Tom: And does not represent a cash realization unless it's classified under realized carry interest.
Tom: Net principal investment earnings were roughly flat for the fourth quarter and $22 6 million for the full year.
Tom: This primarily represents income earned on the capital invested alongside our limited partners.
Tom: Moving to the next page this chart as I've talked about in prior quarters.
Tom: I think the stability and consistency in growth both in revenues and margins that we've experienced over the last two years LTM margin has steadily ticked up to 32% as of the fourth quarter.
Tom: Based on our fundraising outlook I expect this chart to continue to show growth in LTM revenues, FRE and margin over the coming quarters as we benefit from catch up fees on our flagship fundraising.
Tom: The fourth quarter saw a $3 2 billion of fee M influences, primarily capital raised in the D V. P funds and a few large contrast mint's.
Tom: Offset by $1 6 billion of outflows.
Tom: Principally related to the expiration of the commitment period on one of the <unk> funds that I mentioned earlier on the call.
Tom: Turning to the next page.
Tom: You'll see that the company continues to maintain a strong balance sheet with $1 4 billion of investments alongside our limited partners and ample liquidity.
Tom: We continue to evaluate the appropriate capital structure for the business, including our preferred stock obligations.
Tom: As mentioned earlier available corporate cash as of December 31st was $140 million with total current liquidity of $440 million, including our 300 million Undrawn revolver.
Turning to the final page of the financial section I'd like to provide some guidance on what we expect for 2025 and how that compares to our longer term financial objectives that I laid out at our Investor day in May last year.
Tom: Over the course of 2025, we expect to continue progressing toward our longer term goals for P. M FRE and FRE margin.
Tom: We believe that we have the opportunity to grow for him to $40 billion over the course of 2025 on a net basis when taking into account capital raised offset by distributions to limited partners.
Tom: Additionally, we expect to grow FRE between 10, and 20% as compared to 2024 and.
Tom: And improve our operating margins by approximately 200 basis points over the course of 2025.
Tom: Lastly, I would note that unlike 'twenty 'twenty, four and which our FRE performance was disproportionately back ended we.
We would expect our performance for 2025 to be somewhat front loaded from a quarterly perspective this year due to the timing of expected fundraising.
Tom: With that I'll wrap up the financial results section of our presentation and turn it back to Mark.
Mark: Thanks, Tom.
Speaker Change: Let's look ahead to our 'twenty twenty-five roadmap now and cover what I like to say the key three things that really matter.
Speaker Change: This may sound a bit like a broken record, but first its fundraising where we've set out a net target to grow our fee, earning AUM to over $40 billion over the course of the year.
Speaker Change: Our fee revenue and earnings growth are more closely correlated to our active theme over the period. So it is a better proxy for our financial performance.
Speaker Change: And look this year, we're going to make sure that that cadence is in line with our fund raising that tracks for FRE and that it's predictable and it's easy for you our investors to understand and that you can bank on us in terms of being able to predict that earnings potential and that earnings growth throughout the year.
Speaker Change: Taking P M from 35.5 to over 40 billion over the course of the year will involve finishing fund raising for our third flagship and second credit strategies.
Speaker Change: At the same time, we'll be launching two new investment products and continuing to build on our initial success in tapping the private wealth channel, where Andrew Cox has done a great job for us.
Speaker Change: When it comes to investing in addition to building out cloud and AI training data centers, we're starting to see customers look ahead and around the corner and prepare for the next phase of AI is.
Speaker Change: Prints.
Speaker Change: We're location matters and performance across the entire network matters.
Speaker Change: Can you talk a little bit more about this in a few pages.
Speaker Change: Finally, as I said earlier today, continuing to scale our platform digital bridge.
Speaker Change: I am just walked you through our guidance and I believe we're in a great position to continue to deliver the double digit earnings growth and expanding margins that are central to our investment thesis.
Speaker Change: This really is the year, where we scale and most importantly get efficiency in our platform.
Speaker Change: Next slide please.
Speaker Change: So when we look at 2025, it's going to be all about continuing to scale, our multi strat platform.
Speaker Change: As you can see here, we've mapped out our fundraising cadence by product over the course of the year. So there's no mystery to where we're doing our fundraising.
Speaker Change: The first half of the year as I said earlier will be focused on finalizing capital formation around our third flagship jitter rich partner strategy as well as our second credit fund.
Speaker Change: Then as we get into the second half Youre going to see new strategic capital formation initiatives, we've been developing kick into high gear.
Speaker Change: Including our second private wealth offering and strategies built around digital energy and stabilized data center assets.
Speaker Change: We think these new product offerings are not only natural but strategic.
Speaker Change: And really offer the potential to scale in size over time as we've been actively engaged with T. L. P to architect these solutions that really fit the clients' mandate.
Speaker Change: That's really critical bringing products to market that L. P. 's want and that are topical and have the secular tailwind that investors are really craving today.
Speaker Change: Without the year, our co investment program will continue to form capital.
Speaker Change: Some of our best new ideas that we formulated our third fund whether it's J tower Ob M or yonder. These are the next great platforms that we're scaling of digital ridge and they will require co invest capital and we will deliver on forming that capital.
Speaker Change: So when you take a step back between new capital formation and investment realizations. We see this multi strategy program generating 4 billion or more of net growth, bringing our fumed over $40 billion by the end of next year.
Speaker Change: Next slide please.
Speaker Change: So when you flip from fund raising to evaluating the investing landscape in 2025, one of the big questions out there is around how technology advances like deep seek are impacting hyperscale capex and more broadly the investment in the AI infrastructure ecosystem.
Speaker Change: Interestingly when we updated our 'twenty twenty-five capex targets for the big five Hyperscale ours over the past couple of weeks. The total is actually 20% higher than it was just six months ago Rai.
Speaker Change: Rising from 250 billion to over 300 billion.
Speaker Change: So the velocity of what's happening in terms of Capex for our customers is not flowing down it's actually increasing.
Speaker Change: Serving cloud and growing generative air workloads is generating very good incremental margins for these companies. So they're motivated to build the capacity to meet demand and avoid hitting bottlenecks in their business cases.
Speaker Change: And look everyone thinks it's all about data centers.
Speaker Change: That is simply just not true it's about an ecosystem you need the delivery mechanism to bring generative AI to devices to.
Speaker Change: To Iot networks to autonomous vehicles to mobile phones.
Speaker Change: Two wireless utility meter readings you.
Speaker Change: Refrigerator all of this is about the delivery and the promise of AI not about building the biggest data center in the middle of North Dakota, where Iowa. This is really about an ecosystem. We learned this in public cloud.
Speaker Change: So look it's worth noting these numbers don't include some of the emerging players that we're starting to see become more active particularly open AI and some of its partners.
Speaker Change: Let's turn to the next slide to understand some of the drivers of this incremental demand.
Speaker Change: Look in the media you have seen this active debate over the past month.
Speaker Change: Or so around who is right.
Speaker Change: And when it comes to the direction of travel on AI investment and I'm not here to tell you who's right.
Speaker Change: What I am here to tell you is I've been doing this for three decades and I've been building infrastructure since early 19 nineties.
Speaker Change: And what I can share with you is on one hand investors are talking about the need to accelerate investment to scale compute.
Speaker Change: The Stargate project got a lot of attention outlining its gold to invest up to 500 billion over the next five years just to support the needs of one customer open AI.
Speaker Change: On the other hand, you contrast that with the concern around the impact of a model like deep seek which appears to materially lower the investment necessary to develop high performance large language models.
Speaker Change: While we've never been able to validate the cost to build deep seek there are valuable lessons to be learned and its protocol and the language that it uses to perform.
Speaker Change: Our perspective is that actually both sides are right you don't have to choose and actually this is really just about how the technology works.
And that's captured well by J bonds paradox, which many of you become familiar with as the debate has evolved and played out in the public Forum.
Speaker Change: Here, we've overlaid the cost of compute.
Speaker Change: Which goes down on a per unit basis overtime, which is natural stimulating consumption and demand for more compute resources. None of this is really new news for us.
Speaker Change: Deep seek is simply the latest development and a trend towards improving efficiency that was honestly already in place.
Speaker Change: It's a trend that ultimately is only good for stimulating demand, which we believe is one of the reasons you see Kuiper scale investment.
Speaker Change: That we've outlined on the prior page and it's only accelerating.
Speaker Change: They're building to meet the demand driven by the natural and necessary efficiencies of technology and breakthroughs that we're seeing across the entire AI ecosystem.
Speaker Change: Next slide please.
Speaker Change: On this slide you see in practice, how lower cost actually drives demand for more better and faster computer overtime.
Speaker Change: On the left side Theres, great detail on the generative AI large language model cost curve, which has been decreasing exponentially.
Speaker Change: Here you can see deep seek on the lower right part of the graph.
Speaker Change: And that's only part of the story, while on the right hand side, you see successive waves of technology adaptation that in every case had been catalyzed by cheaper more ubiquitous compute.
Speaker Change: Width and connectivity.
Speaker Change: Look again Trust me I've lived and manage digital infrastructure businesses through all of these cycles.
Speaker Change: We were there in the early nineties building the first mobile network towers.
Speaker Change: We had a business that built the first fiber networks in 1997 post the Telecom Reform Act of 1997.
Speaker Change: We were also really critical in the early two thousands building critical three G and for G infrastructure.
Speaker Change: That really provided the backbone of mobile data, which fueled exponential growth and investment.
Speaker Change: And now as we look at how we ultimately built public cloud over the last 10 years and now the opportunity to build AI.
Speaker Change: So look today I can attest to this next wave.
Speaker Change: Through experience.
Speaker Change: Earlier this week at the board meeting of one of our growth stage investments articulate the CEO went out of his way to highlight the uptick in pipeline specifically tied to the most recent deployment of deep sea.
Speaker Change: With enterprise customers activated by the improving affordability of developing customer AI capabilities.
Speaker Change: So there it is on display exhibit a when you have lower cost compute and it becomes more ubiquitous it's easier for smaller enterprises to make that Capex decision to go build their own generative AI and that's exactly what we're doing at articulate one of the over 50 investments that we have.
Speaker Change: So our per view and our view here is we get to see at all we see it from the infrastructure side, we see it from the customer side and of course now we're seeing it from the generative AI side.
Speaker Change: The key to this slide is really simple bottomline. The natural innovation you see today across the AI ecosystem is driving some of the most rapid adaptation I've ever seen of the new technology in history.
Speaker Change: Next slide please.
Speaker Change: So let's take a look at how some of these developments are playing out in our ecosystem.
Speaker Change: First one of the noticeable trends that we're starting to see with our own hyperscale customers.
Speaker Change: Is the focus on the next phase of AI, which is inference.
Speaker Change: While data centers remain at the core of the opportunity the Giga scale investment that you're seeing in training clusters is increasingly going to be augmented by compute footprints that serve inference.
Speaker Change: Which is the actual used our application of those pre trained generative AI models in our daily lives.
Speaker Change: Here as I said earlier location and performance in the rest of the network start to matter a lot more.
Speaker Change: We saw this play out in public cloud from the time period of 2013 to 2024.
As you can see on the left hand side of the slide capacity today is dominated by training.
Speaker Change: But over the next few years, we expect inference represent the bulk of workloads and data centers as applications and platforms embedded with AI begin to proliferate.
Speaker Change: That proliferation is really the dissemination of that data and those applications and those models move out to consumers.
Speaker Change: Two devices to enterprises and to government agencies alike.
Speaker Change: But to do that you have to have the network infrastructure to deliver those workloads and again history has a way of repeating itself.
Speaker Change: Look at the growth in the rapid growth at Databank and companies like Equinix that do edge computing Theres no mystery to why public cloud workloads have moved closer and closer to the actual use cases.
Speaker Change: Generative AI will follow that exact same footprint, except it's more pronounced.
Speaker Change: And there's more consumption, which requires more dark fiber it requires more small cell infrastructure and it requires more mobile edge infrastructure, which will come in the form of towers and edge data centers.
Speaker Change: We're just at the beginning of really building out the generative AI delivery mechanism for infrastructure. This is really exciting to us and this is the thing that we're talking with Lp's about today, not big hyperscale campuses, but actually the associated ecosystem. It takes to deliver the promise of generative AI.
Speaker Change: Next slide please.
Speaker Change: A good framework for the profile of inference is to think of it as cloud to Dido.
Speaker Change: Inference workloads are really about infusing traditional cloud based use cases with new intelligence.
Speaker Change: Essentially the same activities that we used for public cloud today, but those become faster more efficient and ultimately more useful.
Just like the cloud these use cases rely on infrastructure, that's closer to the enterprise and to the consumer.
Speaker Change: You can see on the right hand side here, a agents will increasingly execute and orchestrate. These common use cases.
Speaker Change: Whether it's search enterprise workflows E Commerce, social media. These are all latency sensitive workloads that will benefit from.
Speaker Change: From the integration generative AI agents and accelerate the age of insurance.
Speaker Change: Next slide please.
Speaker Change: So look before I wrap it up.
Speaker Change: To put these industry wide trends into perspective, and bring them down and distillate at the digirad shareholder level.
Speaker Change: To see how they're manifesting across our portfolio.
Speaker Change: The demand for cloud and AI training and inference workloads is driving rapid growth across our data center platforms globally, which.
Speaker Change: Which we've gone from under a gigawatt of cumulative capacity four years ago to today, almost four gigawatts of leased capacity across our portfolio that was late at the end of 2024.
Speaker Change: By the end of this year, we expect capacity to have grown at a 68% CAGR growth rate over the past five years, that's amazing as it is industry leading.
Speaker Change: Just as importantly, we've got a secured power bank that's second to none.
Speaker Change: That's almost four times that size over 16, Gigawatts positioning us to continue to scale in the years ahead.
Speaker Change: I can't tell you how valuable it is to have a land bank in a power bank that we can lease into over 12 gigawatts over the next two to three years.
Speaker Change: While many of our G P competitors and other real estate developers are trying to secure the power we have the power in place today and we have the land and we have the building permits. This is really an advantage that was embedded in the fact that we started down this journey over 10 years ago, not 12 months ago, not 24 months ago, we're not new to the sector.
Speaker Change: Been here from the gecko.
Speaker Change: So we've talked about this that.
Speaker Change: The most important component today is power.
It's key to the equation so.
Speaker Change: So we spent a lot of time at the portfolio company level supporting their efforts to bank. This future capacity and here. It is on display for you. Our investors today, we're excited about having the ability to meet customer demand because our power is already secured.
Speaker Change: Next slide please.
Speaker Change: So we talked a lot about megawatts gigawatts.
Speaker Change: Really what we've never done is we've never explain what that means for you did with shareholders and we need to do that.
Speaker Change: We need to unpack the value of a megawatt to you our shareholders.
Speaker Change: So let me try to do this in a way that's easy intangible and really ties to the fee streams that we generate.
Speaker Change: Managing an increasingly large pool of capital.
Speaker Change: The carry participation digirad shareholders benefit from is embedded in the value of our data center businesses.
Speaker Change: So the example, you see here looks quite detailed and we're sorry for the detail, but it's important that you understand it.
Speaker Change: It's actually a pretty simple analysis using market based assumptions.
Speaker Change: That highlights the potential for substantial value creation via carried interest.
Speaker Change: Starting at the top with Capex around $10 million per megawatts as you work your way down it's reasonable to see how we can generate a two times more <unk> on our equity investment.
Speaker Change: Which translates in this example to around $290000 of carry per megawatt for every $5 million of equity deployed this is actually a pretty simple algorithm.
Speaker Change: Whats, particularly compelling is that $290000 per megawatt turns into $290 million when you're building a gigawatt scale, which I just showed you on the previous slide we are doing that.
Speaker Change: So in this scenario, one gigawatt equates to $1.55 a value on a per share basis.
Speaker Change: This is the kind of value creation, we're talking about we highlight the growing embedded value of carry for digirad shareholders.
Speaker Change: It's why we raised co investment to fuel growth at our existing portfolio companies and why we continue to apply our buy and build strategy to new platforms.
Speaker Change: So look I hope this helps put it all together for you and explains our investment program and a perspective.
Speaker Change: That is really tied to numbers and tied to the share price.
Speaker Change: Certainly welcome to apply your own assumptions, we're always happy to have that debate with all of our shareholders and look at the end of the day at the theoretical framework, but.
Speaker Change: But we find it useful to bridge the translation between megawatts and what it means to you our shareholders at digital Bridge next.
Speaker Change: Next slide please.
Speaker Change: So as always what I tried to do here in our fourth quarter earnings at the beginning of each year is I tried to lay out what my agenda is for the coming year.
Speaker Change: So let's cover the I 20, twenty-five CEO checklist.
Speaker Change: One we talked about fundraising.
Speaker Change: <unk> to hit net P. M of over 40 billion by the end of this year.
Speaker Change: That'll involve finalizing capital formation around the third flagship fund and our second credit fund.
Speaker Change: And then successfully launching our two new strategies built around digital energy.
Speaker Change: And stabilized investment grade Datacenters.
Speaker Change: The third piece of that is launching our second private wealth offering which is already in flight I'm really excited about this we had forecasted that we could raise $600 million in our private wealth channel last year, we massively outperformed that raising over $1 billion of capital I'm really excited about what we can do here as we scale that part of our business.
Speaker Change: Two on the investment side, we expect to deploy another approximately $20 billion into AI infrastructure to support cloud and AI build outs from training clusters to the early stages of inference focused on deployments at the edge, we plan to be the leading investor. This year as we were in the previous year.
Speaker Change: <unk> in the AI infrastructure ecosystem again, it's not just about big Hyperscale data center campuses, it's about bringing that connectivity and ultimately making sure that those workloads get to the right place and we have the right portfolio companies and we have the right investment strategies to enable that.
Speaker Change: The third key objective is around scale.
Speaker Change: Been using this word a lot today and it's really important.
Speaker Change: Continuing to generate double digit earnings growth and expanding our margins is at the core of what the digital bridge investment thesis is go forward.
Speaker Change: We will make our business more efficient we will make our business more profitable and we're going to deliver better earnings growth for you our shareholders.
Speaker Change: All of these initiatives position us to support the accelerating growth that we're seeing across the digital infrastructure.
Speaker Change: System, and AI cloud and mobility.
Speaker Change: So I'll wrap it up today I deeply appreciate your ongoing interest in desert ridge and with that I'm happy to open up the call to Q&A operator.
Speaker Change: We will now be conducting a question and answer session.
Speaker Change: I'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is as our question queue. You May press star two to remove yourself from the queue for participants using speaker equipment and may be necessary to pick up your handset before pressing the starkey.
Speaker Change: First question comes from Michael Elliot with TD Cowen. Please go ahead.
Michael Elliot: Great. Thanks for taking the question two from me first the color you guys provided on value creation per megawatt in gigawatt was really helpful and just for what it's worth it do you think it can get conservative.
Michael Elliot: <unk> point 2024 was a record leasing year for the data center industry as we look at that quality of qualified demand pipeline across our data center platforms. Entering 2025, just wanted to get a sense for how that compares to the pipeline. We had this time last year and then the second question for you Mark If I ask you to put your prognostication hat.
Michael Elliot: How do we see Hyperscale data center development yields and pricing evolving in 2025.
Mark: Yeah sure good morning, Michael and thank you those are two really thoughtful questions.
Michael Elliot: Let's first talk about leasing pipelines.
Mark: And again, Michael I want to draw your attention not just data centers.
Mark: People are missing the joke completely you'd have to look at towers you have to look at small cell infrastructure you have to look at fiber and you have to look at data centers. So I'll address your first point, which is just on data center pipelines.
Mark: Our pipeline is up year over year. So if you look back last year in terms of what was in the Q in terms of total.
Mark: Megawatts, which now we actually translate to Gigawatts.
Mark: We had a leasing pipeline last year across our seven platforms of just a little over five gigawatts of total <unk>.
Mark: Interest in our portfolio.
Mark: We ultimately translate that today to just over 6.2 gigawatts of new leasing proposals. So a few contrast, this year versus last year the pipeline not the actual leasing results are up year over year about 22% in terms of pipeline, but what I find actually really interesting is that across the globe.
Mark: In terms of towers, our pipelines are up materially and most importantly, the real surprises fiber.
Michael Elliot: Taking a look at our enterprise fiber business as Michael those pipelines are up over 50% year over year, largely fueled by dark fiber transport routes Metro rings, and most importantly datacenter connectivity.
Michael Elliot: So the entire ecosystem is performing it's not just about data centers, we're going to keep pounding that into People's heads. This year, because we are the investor that looks at the entire ecosystem, where not just following a trend again 30 years of experience 30 years of delivering returns.
Michael Elliot: We're not that fussed about AI or deep seek its just another generational tectonic shift that we're there and we're building infrastructure for our customers and our partners.
Michael Elliot: <unk> never get too high and the highest never get too low on Lowe's, but our leasing pipeline across the globe is up 22% year over year in terms of activity and new customer applications.
Speaker Change: Your second question, Michael again, I think was go.
Michael Elliot: Go ahead.
Michael Elliot: Loan pricing development.
Michael Elliot: Yeah look it's it's really interesting and some locations where we have an advantage, which is we have the power and we have the permits and we have the land and we already have an existing campus, where we're bolting on and we can deliver for our customer inside of a 18 months framework.
Michael Elliot: We can kind of set our own price.
Michael Elliot: If it's a de novo Greenfield and it's in the Middle of you know, Texas somewhere.
Michael Elliot: And there's five different options for the customer for choose to choose from we're probably not the right partner for you.
Michael Elliot: Let me frame that correctly.
Michael Elliot: There's a lot of tourists playing in datacenter land now and just because they have land and power. They believe theyre in the datacenter business.
Michael Elliot: We've been building strategic campuses with incredible reliability redundancy power cooling and connectivity.
Michael Elliot: Are things that take a long time to develop that muscle memory in house and again, having started down that path over 10 years ago, we feel incredibly well prepared to to work with our customers and deliver the right workloads. In addition to that some of our companies have a real distinct advantage around not only power, but having the right sources of power.
Michael Elliot: Having micro grids to control the flow of that power and also more importantly, having the right security.
Michael Elliot: When our customers looking to develop a private cloud environment, where they need 100% reliability, they turned to us and switch.
Michael Elliot: So having different distinct platforms like data bank that delivers edge compute in secondary markets, where we can be incredibly surgical.
Michael Elliot: Our relationship with our customers, Michael we try to build data centers that create the right investment outcomes and that's not accidental. It takes time so for our portfolio, we have not seen development yields retreat. We've.
Michael Elliot: We've seen development yields actually stabilized and we had the chance to take higher prices last year, and perhaps take a little bit of advantage of the situation. We strategically chose not to do that.
Michael Elliot: So we've been able to maintain our yields through 'twenty four looking at our pipeline and twenty-five we'll be able to continue to to to deliver the right yields on a cash on cash basis, and then obviously our ability to tap the a M. A b S and C. N B S market, which was on display last week and is on display.
Michael Elliot: This week and next week heading to a B S. West we've got four new issuances coming to the market next week, our ability to tap the credit markets is incredibly efficient and we have a big team that works on that internally and it's a real competitive advantage for us that only takes that cash on cash yield it turns it into a levered yield and it turns into a long term levered yield with vet.
Michael Elliot: A few covenants and no cash traps. So theres a lot of things that we do that are very specific to our tactics that preserves our returns and our yields again, we're not going to go chase raw land and power banks with with no customer lease tethered to it that's just not a strategy. That's a that's a hope strategy that's not what we do everything we're building has a customer lease.
Michael Elliot: Tethered to it and it's usually in a market that we've been in for a while there's a lot of thought and intention on what we're doing we're not going to be the one that chases down the yields down to that six 7% range, we're still feeling still seeing our single tenant yields in the double digit range and that's we're going to continue to deploy capital is in the right locations with the right customers with the right set of <unk>.
Michael Elliot: Terms attached to it.
Speaker Change: That's helpful color. Thank you very much mark.
Michael Elliot: Thanks, Michael.
Speaker Change: Next question Jade Rahmani with <unk>. Please go ahead.
Speaker Change: Such funds one and two are 2018 in 'twenty 'twenty vintage the expense do you expect most exits and monetization to take place this year and next.
Speaker Change: Hey, good morning, Jade how are you so right now Jade, we're super focused on delivering D. P eye on and for bridge, one and our first flagship so and for bridge. One is is busy you know winding down that portfolio.
Speaker Change: We've got exits that are in flight there. So we're excited about returning capital back to our Infra Bridge platform and then of course in fund one.
Speaker Change: We've also begun the process of creating D. P I, there and we intend to deliver.
Speaker Change: Deliver more DPI cross the first funds I would say our average hold jade tends to be between five and nine years I think the vintage unfun too even though we exited advantage towers quite early because we bought the Deutsche Telekom portfolio, we're still assessing whether we're going to exit anything and fun too.
Speaker Change: There are some rumors in the marketplace about two of our assets in fund two being up for sale I can't really speak to that but what I will say Jade is.
Speaker Change: We're always an astute seller when we can achieve an outcome that is somewhere at a 20% to 40% premium to our NAV, that's where we've become a very interested seller I would say the vintage on 2018 is moving into a zone, where it would be logical to assume that we will begin to exit some of those positions.
Speaker Change: I think you saw a press release around our vantage EMEA, which is our European data Center platform.
Speaker Change: We brought in some new partners there in a super in G. I see we continued to put capital into our European Vantage Yieldco, which allows us to sell assets from the Deb code to the Yieldco, creating more DPI for our investors. So.
Speaker Change: That was one example, jade where we did deliver a really great outcome for fun, one investors and we have a couple of other assets in fund one that are currently.
Speaker Change: And what I would call strategic review.
Speaker Change: Which means it could be a held for disposition.
Speaker Change: It could be sold to a strategic it could move into a continuation fund them Theres a variety of levers that we can pull to create liquidity for our investors I think one thing I would tell you Jade is in 'twenty, three and 'twenty four.
Speaker Change: We had eight different <unk>.
Speaker Change: D P I outcomes for our investors, we returned over $9 billion of liquidity back to L piece I know, sometimes in the asset management space Jade that's not super popular as we we have to give up management fees, but I've always made it incredibly clear.
Speaker Change: For us to go out and continue to raise the kind of capital raise last year 9 billion 2 billion ahead of what we told you we were going to do you've got to deliver DPI and so this year there'll be more of that.
Speaker Change: We will deliver D. P. I, we absolutely anticipate delivering some carried interest for our shareholders and we do think the environment is quite ripe for digital bridge to return capital create the right returns and most importantly returned carried interest to our public shareholders.
Speaker Change: Looking at digital bridge is on capital allocation can you talk to how much preferred has been repurchased so far this year and what do you expect because you know although the cost of the preferred isn't too bad in terms of our cost of capital. It has a big outsized impact on E. P. S around 30 cents a share therefore buying back preferred.
Speaker Change: It is an accretive use and do you expect to do much of that this year.
Speaker Change: Yeah. Thanks Jade.
Speaker Change: No we did not purchase any of the preferreds last year as they traded back up into par we didn't really see a a total return or an absolute return that was comparable to some of the things that we were doing on the balance sheet. I mean from my perspective, if you take a look at our third fund and we look at where the returns are in the third fund there are about three to 400 basis points wide of fun, one and fun too.
Speaker Change: And when you are getting sort of high teens types returns in your funds and you look at the buybacks on the Prefs being kind of a seven 8% trade I view that as actually not the highest and best use of our balance sheet today.
Speaker Change: We have been very opportunistic in the past buying back our preferreds as you know Jade interest rates moved away from us in the last two years, where the press do seem like a reasonably low cost of capital, but as interest rates for now coming down and we're seeing the securitization market place return again, using the Z O fiber transactions as a proxy Jade, which went all the way down to single B.
Speaker Change: You could really see that total that total instrument priced you know just around 6%. So we're looking at that very carefully Tom and I are spending a lot of time looking at our existing securitization stack.
Speaker Change: I would say we will be active in that marketplace. This year.
Speaker Change: We've gone on to raise a lot more capital we have a much bigger fan base for the agencies to take a look at and so if there's the opportunity to go raise debt capital you know sub 7%, which we think we can do.
Speaker Change: There's a great opportunity to continue to take down the prefs overtime I agree with your proposition that 30 sensors as a significant leakage, but as if interest rates can rein in and we can see a path to raising capital back in that 5% zone I think youre going to see us be very opportunistic I don't know Tom if you want to add anything to that but I think you and I are talking a lot about it yeah, no I agree with everything.
Speaker Change: Mark said I think the preferreds are on their face are relatively attractive securities for us they have.
Speaker Change: Hmm.
Speaker Change: Little in the way of covenants or no covenants no maturity, we are sensitive to the absolute magnitude of them. So.
Speaker Change: So that's the only thing I'd add is you know we are sensitive to the absolute magnitude of the preferreds outstanding but on individual basis I think the structure is relatively favorable for us.
Speaker Change: Thanks, Jade any other questions Jamie.
Jamie: Yeah, if I could ask one more because I get a lot of questions on this which is the fund performance slide.
Jamie: Are those returns in line with your targets.
Jamie: Or do you expect any improvement with our realizations.
Jamie: Yeah. So we've we've had two quarters, where the absolute IRR Jade has gone down a little bit we actually since Tom has taken over we've put in a new framework for how we do our quarterly valuations, which I'm really proud of a lot of transparency a lot of independents and those marks and a new framework, that's consistent with what the FCC expects of us.
Jamie: So that did drag our returns back a little bit over the summer, which impacted the Q3, we had a little more of that come through in Q4.
Jamie: But I think what I would tell you is you know we get paid on week Jade its really important to understand that we don't get paid on IRR and actually in this quarter are Mike multiple went up across the funds and so that means carried interest is increasing over time and I think youre going to see that impact this year more pronounced as many of our portfolio companies had a great year.
Speaker Change: We now are getting to see the full impact of those financials and as I said before the performance at the portfolio company level in 'twenty four was outstanding. So we had record leasing in towers, we had record leasing and fiber I think I said that to Michael earlier, the fiber business has really come back youre going to see I think a real uptick in some of those businesses.
Speaker Change: In our marks in Q1, and then of course, the datacenter businesses are all performing at a really really high level businesses like Scala and switch.
Speaker Change: And data Banco real standouts for us in <unk> and 'twenty 'twenty four so I do anticipate.
Speaker Change: Dissipate that the portfolio will continue to perform really well it is in line with where the fund models predicted they would be and as as we generate liquidity and we generate D. P. I generally we sell assets on average Jade. If you look back at the last eight exits there were approximate about a 20% to 30% premium to NAV.
Speaker Change: Telegraphing to you that the portfolio is I don't want to say under Mark's, but when we sell stuff. We generally sell at a premium to NAV. That's been the historic performance of our funds. The last two years. If you look at exits like Wild Stoner vantage EMEA, where you look at a wild Wild stone, which was our Billboard business all three are.
Speaker Change: Those exits were at a significant premium to NAV and so as we begin to return capital in fund one returned capital and encourage one youre going to see that obviously the portfolio should logically a tick up here in Q1 and moving into the balance of 2025, I think we feel really good about fund performance I feel.
Speaker Change: Really confident and in Tom's team and the independents, which we mark the assets.
I am a big believer in independents, and so setting up a team that does that that's independent from our investment team is really critical because it really gives our L. P is a lot of confidence in our NAV. This isn't like a synthetic nab game for us we're very very accurate in terms of where we mark the assets.
Speaker Change: Thank you very much.
Speaker Change: Thanks Jade.
Speaker Change: Next question Ric Prentiss with Raymond James Please go ahead.
Ric Prentiss: Good morning, everybody.
Speaker Change: Good morning, Rick a question a couple of questions for you I want to start on fundraising Mark that was of your three bullets fund raising invest in scale always the number one there.
Ric Prentiss: When we think about the GPI.
Ric Prentiss: Talked about it a couple of times how important. It is you mentioned just the previous question 9 billion returned over 'twenty three 'twenty four combined how much is baked into the twenty-five ending theme as far as DTI is at a similar level to the $4 5 billion that we saw in 'twenty four is an acceleration given what you said on.
Ric Prentiss: Flagship one neutral bridge to Oracle bridge, one how much GPI are we thinking is baked into to twenty-five ballpark.
Ric Prentiss: So thanks, Rick it's a it's a really good question and you're you're very astute so.
Ric Prentiss: The way, we think about it is just in terms of total film.
Ric Prentiss: What we did in 2024 was about 36 billion, we're guiding the street to 40 billion plus for 2025 and that assumes a little bit of what I call chutes and ladders right everyone's all everyone's played that game before so the ladder up is fund raising in the chute is D. P I and so we.
Speaker Change: We are telegraphing to the street that obviously, we want to grow our revenue base and I think we're gonna do good job of doing that but we're also telegraphing to you as as Jay pointed out very carefully theres a couple of assets that are in play and we are anticipating Rick returning you know more DPI through the course of.
Speaker Change: 2025, it's the natural progression of what we do and also what that does is it frees up capital for investors, who bring that capital back into Rick our new products and we're super Super focused on that so ultimately we think we can form.
Speaker Change: Low side of the guide kind of five to 6 billion of new capital $1 billion to $2 billion in DPI and that gets you sort of two or 4 billion net fee M number that's our guidance that's what we're putting out there and obviously given the lessons of last year, we're going to be pretty thoughtful I guess is the word I want to use around guidance.
Speaker Change: And we want to make sure that we can deliver a quarter like this quarter, where we beat your estimates Rick and that's kind of the cadence that Tom's trying to instill in this company and the discipline around the numbers and I'm in the discipline around the guidance I don't know Tom if you want to add anything to that but I think that's that's pretty straightforward yeah, no that's exactly it.
Speaker Change: Now under promise over deliver something we want to be able to count on.
Speaker Change: Do you think it is a longer term guidance on the slide 21, the Investor day target for 'twenty 'twenty eight of 60 to 70 billion film that implies an acceleration is that a thought that gross fundraising gets higher DTI is less how's how's the mix of what leads to that kind of acceleration that.
Speaker Change: If we do and see them at $40 billion and twenty-five we could add another 20 to 30 billion over three years.
Speaker Change: Yep.
Speaker Change: When you're thinking about it the right way, we haven't spent a ton of time talking about new product launches Rick but.
Speaker Change: Look this is something that our investors need to start really getting their minds wrapped around we're a multi strategy firm now we are not a one trick pony.
Speaker Change: Our credit business is performing exceptionally well it took me four to five years, with Dean and Mike and Josh Paris, and Chris Moon, and Horus and the entire team to get that mechanism going youre going to see a massive acceleration in them and our credit platform. This year.
Speaker Change: We're seeing opportunities that are fantastic our returns in credit or actually better than our flagship funds, which is kind of a bit perverse in my mind I never thought our credit business would outperform our flagship funds, but our credit product. Rick is one of the best performing credit products in the world and our team is scaling writing significant loans generating massive S. Amaze and co investments you are.
Speaker Change: Gonna be hearing a lot about credit in Q1, and Q2 were in the right place. So that took us a little while to get there our liquid portfolio led by one strategy by Bill Hughes now in Bethesda that business is now incredibly profitable, they're raising money alan's, creating great returns and that's going to generate more capital every quarter that team keeps bringing in more capital.
Speaker Change: Number three our private wealth channel Ledbury, Andrew Cox, we were really really honored and privileged to get Andrew on our team. He was a top player kind of fell into our lap had moved to South Florida was at KKR for many years, where he built the private wealth platform I told you Andrew in his first year outperformed almost two extra budget he's got a new product in the market.
Speaker Change: We're really excited about that product I'm on the road with Andrew a lot talking to some of the biggest private wealth channels in the world. We have a lot of conviction Rick around private wealth capital formation and keep in mind, what we're raising is just a fraction of what people like Aries and Blackstone and Apollo raising so we think we can go take the argument to investors private wealth investors.
Speaker Change: That the digital product digital bridge product is a better product than our peer set and we're winning that battle.
And I'm really excited about that and the last thing I would say as Rick.
Speaker Change: You know the things that we're doing around power and the things we're doing around stabilized data centers are really interesting unique.
Speaker Change: Groundbreaking in fact, those two teams are now seeded those strategies are now launching and that's going to provide yet another channel for us to grow.
Speaker Change: I've said it publicly many times Rick for every trillion dollars you spend on data centers, you're going to spend 500 billion on power power is a massive opportunity and no. One has gotten it right nobody understands the issues no one understands the bottlenecks, we do and we're building that power infrastructure adjacent to our global leading data center portfolio.
Speaker Change: <unk> 16, Gigawatts of on power demand is a bigger power banks and DLR and it's a bigger power bank than Equinix, we have the biggest power bank in the world by far it's not even close and so our ability to lease into that and to build power, sometimes renewable sometimes not but providing those power solutions and building those adjacencies to our dataset.
Ric Prentiss: Enters Rick is a huge opportunity I can't even put a number on the Tam in terms of what we can do in power. So this firm has evolved Rick you know we were read at one point, we became a C Corp. We became an alternative asset manager. We did all of that in 24 months. It was pretty frenetic now we've settled into what we are we're a global al.
Ric Prentiss: Turning to asset manager, we have great teams, we have great products, we have an incredible fundraising mechanism led by Kevin Smith, <unk> Muzzy Golden what they did last year in the fourth quarter was heroic are very few firms on the planet almost <unk> 5 billion in the fourth quarter like we did even the bigger firms that we that we com set against didn't raise $5 billion in the fourth quarter.
Ric Prentiss: So we think we're punching above our weight class. We think we have the right products. We have no. We have the right people and investors are really kicking into these new thematic that we're focused on Rick. So I have this long term conviction around what we're doing in the next three years I think we finally have our fund raising cadence in line and in an order and most.
Ric Prentiss: As we keep returning capital Rick It gives us the opportunity to ask all piece to bring it back and that's what you saw in the fourth quarter capital came back and it didn't come back just in our flagship strategy Rick people need to again, except that we're a multi strat firm. It's not just about the Digirad flagship series, it's about all the other products that we offer and the solutions because at the end of the day Rick.
Ric Prentiss: What I've learned in the last year of being an alternative asset manager you really have to formulate strategies for clients L. P. As just don't want your simple flagship fund they want solutions and somewhat yield somewhat protection on downside somewhat to play in value add.
Ric Prentiss: Some want to play and are on our you know our value add long fund led by <unk> and so now having this sort of multi asset multi product approach really allows Kevin and Leslie to sit with a client and say how can we help you and so the dialogue has evolved from selling one product three or four years ago to now being in the client solution set which again is a lot.
Speaker Change: Like what Blackstone does Ares Apollo KKR, we provide those set of solutions, but totally focused at the digital economy and in AI and that's resonating with investors today, Rick that's the big change in this firm in the last 12 months.
Speaker Change: That's very helpful and I are I think you're right I think the industry needs to kind of focus on your power bank.
Speaker Change: Your megawatt what Youre Gigawatts somebody we can move that ball forward and trying to get people understanding exactly what's what's the valuable asset what turns into monetization.
Speaker Change: Second question I've got I. Appreciate the time here is you've mentioned obviously several times well if we go to the countless transcript carried interest carried interest carried interest we're going to see some of that and twenty-five talked about moving from episodic to more steady how do you do that is it just the longevity of the funds is the interest but but.
Speaker Change: Any of the carried interest benefit is really in the stock price today.
Speaker Change: Do you move it from episodic to steady and then get it into the stock price.
Speaker Change: Well look you said it correctly, we don't get credit for it I mean, if you look at the sum of the parts of what Digi ridges today, just based on our run rate FRE for this quarter at 140, the implied multiple on our business is actually trading at a discount to our peer set we actually think digital ridge is a better platform than other G piece, because we don't.
Speaker Change: Have funds that have a two three or five year duration, Rick we have long term perpetual capital vehicles, we have continuation funds and our average infrastructure fund Ric as you know is 11 to 13 years. So the steadiness of our FRE and our cash flows is certainly a lot more durable than somebody that's just exposed to credit or private equity, which are shorter term products.
Speaker Change: We've got to do a better job Severn myself and Tom explaining to investors. This year, the durability of our cashless and the duration of it and so that's really important.
Speaker Change: <unk> our firm as a as a steadier long term set of cash flows the balance sheet is really powerful we're gonna take that case to investors as well what.
Speaker Change: What we did a data bank. This year was incredible what we've been able to do advantages incredible the performance of our funds are strong and so we've used the balance sheet in an intelligent way, we don't get credit for our balance sheet, which is between 1 billion to two 1 billion for minimum based on last year's marks so as data bank and vantage and other assets begin to scale the balance sheet grows the last component.
Speaker Change: <unk> of the sort of 123 on digit rich is carried interest and again, we don't get credit for it until we start taking the episodic nature out of it we understand how that works I mentioned, we have over 50 companies Rick today and just in this year alone, we're gonna make somewhere between credit and our flagship strategy and ventures and other things that we're doing in power we're gonna.
Speaker Change: We make about 12 to 20 distinct investments. This year as you saw we grew AUM from 80 billion to 96 billion.
Speaker Change: It was an incredible step up and just a one year period 16 billion. We told you today, we're going to deploy 20 billion of capital and we're going to exit 2 billion of assets or 2 billion of film, which would probably be about 4 billion. A M. So if you look at that we should add another 16 billion of AUM. This year that takes us well into the you know kind of 112 region by my math.
Marc Ganzi: One tend to kind of 112 and at the same time, our more multiple continues to grow and compound and so this is also important because as we exit you know we're not exiting the legacy investments Rick anymore of the original digital bridge six we're now exiting fund one and we're exiting fun too.
Speaker Change: Some investments over the next two to three years, and that's where that carried interest kicks in that's where public shareholders begin to see the benefit of that so I think that.
We absolutely will have a more consistent delivery in carried interest this year and I think if Tom and I can do that and we can demonstrate two or three exits where public shareholders. When it's not episodic and send something you can begin to underwrite and we're not promising it in our guidance. This year, but we are telegraphing to you that one the portfolio was moving up in value.
Speaker Change: On a white multiple basis, which is we're paid off of Mike were not paid off of IRR and then to.
Speaker Change: That we absolutely given the vintage of fund one and the vintage of Infra Bridge, one we anticipate returning capital back to shareholders I don't know Tom if you've got.
Speaker Change: I think it's.
Speaker Change: It's all a matter of the vintage and the kind of seasoning, you know where I think as Mark mentioned a few minutes ago.
<unk> one is really now entering kind of prime.
Speaker Change: Vintage period for starting to exit a fun twos sort of Hudson earlier, we're kind of getting there, but but in general it's a matter of time and seasoning as we get over the next year or two to a point, where you know we're regularly selling you know maybe not as many new companies were buying but we're regularly selling a couple of assets a year.
Speaker Change: That'd be great and I will echo Michael's comments kind of slide 31 is great. So thanks, guys. Appreciate all the color.
Speaker Change: Thanks, Rick.
Richard Choe: Next question Richard Choe with Jpmorgan. Please go ahead.
Richard Choe: Hi, I wanted to follow up on the sales and fundraising infrastructure can we get an update there.
Speaker Change: I'm, sorry, Richard the the what sorry.
Richard Choe: The fund raising and sales infrastructure that you outlined at the analyst day.
Speaker Change: Yeah no. Thank you so.
Speaker Change: The global sales team today, Richard is is 38 in total we've.
Speaker Change: We've continued to invest in ourselves force led by Kevin Smith and.
Speaker Change: And his number two Leslie Golden both really great professionals with them a lot of track record. We did Andrew we did add Andrew Cox and the private wealth channel, we anticipate adding at least two if not four fulltime employees to support Andrew as we scale, our private wealth fundraising mechanism.
Speaker Change: But you know we we run that platform just you know Richard on a global basis, We've got a team based in London, We've got a team that is based.
Speaker Change: Based here in the U S and in Boca and in New York and then we have a team of course in Asia headquartered out of Singapore. So.
Speaker Change: We highlighted it on analyst day. It was 28 full time employees in 'twenty 'twenty four today, we're at 35 full time employees in our fundraising team. We've continued to scale. We've added specialists in credit Chris valves on has been amazing in terms of raising capital for our credit team Andrew Cox on private wealth and I think what you.
Speaker Change: See as we look at it Richard in sort of two axes, one geography to product set but really having salespeople in market in geographies, where we can really go out and bring those products to the market I would highlight our Asia team just by example.
Speaker Change: We've got a great team in Asia, we saw a pronounced really really pronounced performance in Asia this year and fundraising.
Speaker Change: We've got also and a fantastic team and in.
Speaker Change: In the in the golf and the G. C. C led by Silvio tablet he's been fantastic. He is supported by by two full time people that do fund raising there in the Gulf out of Abu Dhabi and really the Gulf and Asia were really standouts for us in terms of fund raising but then again you know North America is our home market, we've gotten fantastic commitments out of our flagship front from you.
Speaker Change: Pensions, we partnered up with CDP Q1, Yonder, a huge co investment for them and these are great situations, great client relationships that are paying us fee and carry and by having a bigger team with more geographic reach Richard we can really bring our multi strat approach to the market sit with L. PS really treat them as.
Speaker Change: Ants and bring them those very tailored approaches that we talked about in our earnings call. Today. So the team has gotten bigger the performance has increased our product set has increased and our ability to have product specialists in the geographies that we think are the hot opportunities for fundraising has really proven out this year and youre going to see that Richard onto.
Speaker Change: Planned twenty-five we're expecting even better results from our team.
Speaker Change: No that makes sense.
Speaker Change: I guess going back to an earlier comment you are saying that.
Speaker Change: A lot of the data center growth from AI is absolutely captured mostly in datacenters, but youre starting to see that a lot in fiber now can you talk a little bit.
Speaker Change: Obviously seeing in fiber, but how that.
Speaker Change: Lays out over this year and maybe next year for small cells and towers and other edge infrastructure.
Speaker Change: Just because I think a lot of people are waiting for it and they just haven't seen it.
Speaker Change: Yeah, well I think look across fiber small cells and towers as I said, we saw a pronounced pickups in the fourth quarter and I'm just looking at the data from January Richard particularly on on towers.
We actually had our best January of leasing in the domestic U S market in the history of Alex gum and had been together for 31 years in towers. This was the best January he and I've ever seen.
Speaker Change: And I can't put my finger on it but what I would say is you know as generative AI moves to the mobile device, you're going to see a massive pickup in mobile data traffic. Some people Richard as you know estimate a 10 times pickup in mobile data traffic I don't entirely subscribe to that view I think sort of three to five times feels more dirt.
Speaker Change: Actually correct, but as you know with a finite amount of spectrum, Richard you've got engaged in what's called frequency reuse and the only way to do that is cell splitting and putting more macros online eventually densify between the gap so that splitting with small cell infrastructure. So we've seen a big pickup in macro leasing we think that continues and that investment by the carriers.
Speaker Change: As was announced last week and are in the earnings of T Mobile AT&T and Verizon, but it's not just there we've seen pronounced you know cap.
Speaker Change: Capex expenditures in Europe at Gd towers, and some of our European tower platforms, our edge point had a great year of leasing in southeast Asia, a T. P down in the Andean region had a record year, 18% organic growth there and in Brazil in high line. We also had double digit organic growth. So we run a global tower business obviously.
Speaker Change: Vertical bridges, our flagship property Gd towers in Europe, as our flagship property both of those businesses exceeded their guidance in 'twenty four they're both off to great starts and leasing and I think you know the fiber business has been an incredible surprise to me you look at businesses like Zenith IGN J O N Z O Europe, now, which is now a separate entity.
Speaker Change: We've seen amazing performance in Hyperscale bookings and what's interesting about that is really strand count that sort of what stands out to me is that customers arent, taking you know two pairs theyre not taking four pairs theyre, taking 12 or theyre, taking 28, I mean, the amount of bandwidth that's required Richard to deliver these AI workloads is fantastic.
Speaker Change: So hey advantage digital rich.
Speaker Change: We've got some of the best dark fiber businesses out there, we do datacenter connectivity, it's kind of our lifeblood here I just got back yesterday from Denver I was at the Zale Board meetings Fantastic performance, Steve Smith, and Andreas Orlando are doing a great job and we're really excited about what's happening as a oh. It was a business that I think in the debt markets people thought it was.
Speaker Change: Yes.
Speaker Change: We kind of were pretty clear with people it was not distressed.
Speaker Change: And the bonds sort of indicated otherwise, but I was pretty clear with folks that the capital structure. There was really safe the securitization last week.
Speaker Change: It was the most oversubscribed securitization I've done since 2003, when I created the cell tower C and B S structure.
Speaker Change: It's amazing how investors are now starting to understand the infrastructure side of dark fiber and data center connectivity and zales delivering the results. So we're we're excited about what's happening there and again Richard its ecosystem right. It's not just about data centers and the small cell business is doing fine.
Speaker Change: You look across fresh wave or boingo or extranet. All those businesses are performing you know boingo, obviously really interesting and exciting given their relationship with the U S military bases and some of the interesting venues. They have fresh wave you know some of the stuff they're doing in transports and commercial buildings in London also did delivering double digit organic.
Marc Ganzi: Growth and I think you know that recognition that densification for five G is coming I've been always clear with investors Richard I thought it was a 'twenty 'twenty six to sort of 2029 event for small cells and we're starting to have really unique conversations with the U S carriers about a new economic model for small cells, where perhaps we put up a little less capex.
Marc Ganzi: We take a little less monthly recurring revenue, but a little more shared infrastructure with our with our carrier partners.
Marc Ganzi: I do think again 26 to 29 is going to be a huge boom for small cells.
Marc Ganzi: We kind of think today the small cell market. Richard is about just a little under a million nodes today, I think post five G and generative AI.
Speaker Change: In a world, where we go from 22 billion connected devices to 59 billion connected devices. We believe small cells double in the next five years, you get to 2 million nodes you know here in the U S. You know distinct locations. So it's coming it may not be coming at the velocity that everybody would like but again I've been really clear 2026 to 2020.
Speaker Change: <unk> nine is when we densify for five G and we bring generative AI to the mobile edge.
Speaker Change: Great. Thank you.
Speaker Change: Next question, Randy Binner with B Riley. Please go ahead.
Randy Binner: Hey, good morning, I'm, mostly covered a it's been a great color. So far just a couple a mark on the on the fund raising for 2025 are you laying out.
Randy Binner: Dollar billion expectation as you did in 'twenty four or is it just the the fee AUM at this point.
Randy Binner: Yeah, I think we're just going to stick to feed them and I think it's the metric that you know you judge Blackstone KKR in Apollo on so we think that that's the right metric is fee M. In F. R. E. And then obviously, if we do our job it leads to D right and we want to grow D. E. This year I think that the fear metric and the FRE metrics are important automaton.
Randy Binner: It's just sort of the adult nature of our business, we don't need to sit around and point to an artificial fundraising number what we need to do is deliver steady fee AUM and FRE.
Randy Binner: Growth for you guys and for our public investors. So that's kind of when I talked about the sort of maturation of our financials and the maturation of the finance team that Tom has built that's what we're doing is is really bringing adult financials to the to the street and I think the other thing that we don't talk about it as just margin. We had a 200 basis point increase in margin, Tom and I are very <unk>.
Randy Binner: Focused on costs again.
Randy Binner: We're digging deep into where we can deliver more cost synergies across the business. We think we can continue to grow at that double digit organic growth rate, but at the same time, Tom and I are very focused on picking up another 200 basis points of margin, we're doing that through what I would call. You know simple business decisions that are just common sense, you know elimination of G&A.
Randy Binner: <unk> elimination of redundant positions and just trying to be more efficient and Tom brings that discipline. You know from as you know two decades of doing that at Carlisle and I think both he and I have a lot of conviction around cost savings and in building margins.
Randy Binner: Yes.
Randy Binner: Well, it's actually too that the D or the admin expense line in the model.
Randy Binner: $37 million was higher than than we modeled for the quarter and I apologize if I missed it but was there was there a call out of anything kind of unusual in that in the fourth quarter.
There was a little bit of noise in the fourth corner, we had a little bit more expense related to some of our fundraising initiatives given the amount of capital that we raised and.
Randy Binner: And a few other you know sort of.
Randy Binner: Small things I think that you know kind of.
Randy Binner: Where we've been quarterly in the past.
Randy Binner: Somewhere between there and in the fourth quarter is probably a good number but the fourth quarter was a bit anomalously high.
Randy Binner: Like on an absolute basis, though going forward with the growth of the franchise with that wed like for the full year, that's going to be over $100 million going forward is that fair.
Speaker Change: Are you you're looking at the GAAP numbers or the FRE numbers.
Speaker Change: So just for administration.
Speaker Change: Yeah, I think sorry, I sort of tend to focus more on the cash flow part and that the numbers are going to have our a and so you know we we were running around 17 18 million.
Speaker Change: Maybe 19, and we were at like 21 million for the fourth quarter.
Speaker Change: So that was kind of a bit of a couple of million dollar a marriage I think that will sort of be.
Speaker Change: Within that range on a quarterly basis next year.
Speaker Change: Okay. That's helpful. Thank you.
Speaker Change: Go ahead.
Speaker Change: Okay.
Speaker Change: Anthony Your line is live.
Speaker Change: So I got go ahead guy. Thanks for taking my question, Hey, Mark just curious right I'm talking to your L. Piece do you think there's a preference for co investment over the flagship fund given that the current investment focus is on data center development over acquisition other digital infrastructure.
Speaker Change: It's a great question I think I'm just judging by our third fund people were really excited actually about J tower that was the one investment product that people got really excited about from a co investment perspective first tower company in Japan flagship investment we can.
Speaker Change: Timed the exchange dollar against the yen and a really good spot. So it's turned out to be a really great platform for us and so people gravitated to that yonder.
Speaker Change: Turned out to be great. Because we have this great relationship with C. D PQ, they're our partner in vertical bridge, but take for example client like CTV Q is not in our flagship fund, but continues to be an incredible partner across all of our platforms and that's just how that client likes to work.
Speaker Change: There were more subscriptions to the flagship fund in there was to co investment.
Speaker Change: So if there's any sort of notion that investors prefer co invest over the flagship that's just not true we took more subscriptions into the fund than we did in a co invest vehicles that being said the quantum of co invest sometimes episodic and quite large can can sort of stick out a little bit like a sore thumb.
Speaker Change: Like in Yonder, and Yonder will end up having probably eight to 12 co investors in that deal same thing with J tower or probably half a dozen to 14 co investors.
Speaker Change: But the flagship product works harmoniously with co investment so a lot of our clients will say, hey, I'm, putting X amount of dollars into flagship fund three I'm allocating X amount of dollars for co investment you Mark you and your team go figure out where youre going to put my co investment dollars to work. So I really like that that for me is our favorite product, where we take a commitment from.
The fund and then we have a bespoke SMA, that's at our discretion, where Tom and myself and the management team and our investment committee have the discretion to make that co investment and that's becoming actually a lot more popular where we have a stapled co invest vehicle attached to a flagship fund product. It's the same thing in credit we will get a commitment to the to the to the <unk>.
And in our credit fund too and then staple to that will be in SMA and that SMA is very similar to what areas in Apollo do all the time in fact, most of the commitments to areas in Apollo credit funds are in the form of SMA is today. So this is the state of the art right again it comes back to the client shaping the strategy for the client, making sure they're getting what they want and then.
Speaker Change: From our perspective, making sure that we get paid for that that's that's actually really important is that we've been a lot more stern on on fees.
Speaker Change: We don't work for free that's the new mantra around here and when we do co investments, we're getting paid for those opportunities and those ideas, whether it's a management fee of work fee administrative expense fee. We just don't work for free anymore.
Speaker Change: Makes sense and can you remind me what's the carry.
Speaker Change: Cary infrastructure for the co investment fund again.
Speaker Change: So every co investment vehicle is different.
Speaker Change: So it's not like the fund where it's a you know a 1.6 and 20% every vehicles a little bit different.
Speaker Change: I would say across all of the co investment vehicles, if you're sorted to to aggregate it and sort of land on a spot or where you think it might be I would say by and large we're getting you know kind of.
Speaker Change: Blended basis.
Speaker Change: The management fees on co invest or anywhere from as low as 30 basis points to as high as 60 basis points, depending if it's a continuation vehicle and then on carried interest that's kind of I'd say somewhere between 10% and 15% is kind of the norm. So not quite the same carried interest we get on flagship, but very competitive and I would say if I had to.
We prefer something I would take you know.
Speaker Change: I would take carried interests and co investment vehicles over management fees, just because our co invest vehicles historically over the last 11 years have performed really well.
Speaker Change: I don't know if that helps you, but I can't give more precision because we do have a lot of co investment vehicles.
Speaker Change: No. That's really helpful really appreciate it and one last question for me can.
Speaker Change: Can you tell us little bit more about the digital energy and stabilized data center strategy product.
Speaker Change: Yes, I'd be delighted to the first is really focused on on energy and it's not an energy transition fund per se, it's really about building power and dealing with the bottlenecks that exist in Europe, and the United States around transmission and distribution, we think that continues to be the problem.
Speaker Change: So we're super focused on building infrastructure adjacent to our Datacenters that enables all forms of energy to flow through our data centers and with also a sharp focus on battery storage micro grids and it can be renewable power. It certainly can be LNG, but the key to this is making sure that our data centers.
Speaker Change: Consistent power flow to them and that we're providing value to our customers. Those are kind of the two key tenants of what we're doing so we have a backlog of about a dozen projects that working on today.
Speaker Change: We've got an operating partner working with us on it and you know we've got a big team here. Your did your bridge working on it's been working on it for two years, we've already had some episodic forays into some of these ideas at scholar and switch where we've demonstrated we can be 100% renewable power and continue to grow at double digit CAGR growth and so.
Speaker Change: That's really the the applied learnings of what we've had in our portfolio companies and then taking those applied learnings and putting them into a fund structure.
Speaker Change: So more to come when we launch but.
Speaker Change: We've got a deep pipeline has got a great team investors are really excited about this we've kind of had a no names Whisper tour on this where we've talked about it to investors and you know, we think theres billions of dollars of capital parked on the sidelines for this idea again, it's an idea that nobody else has we've.
Speaker Change: We've seen other gp's talk about doing renewable power to Datacenters heads.
Speaker Change: Headlines lots of press releases.
Speaker Change: We're not into that we're into the execution phase of this now and about deploying power and making sure that we can grow our power bank from 16, Gigawatts and that we can add effectively four gigawatts per year to our power bank. So this enables that it helps it.
Speaker Change: Doesn't necessarily need to be tied to a desert ridge datacenter, we're actually working with some of our competitors in terms of bringing power and so stay tuned we're pretty excited about that on the stabilized side look there's about 90 billion of stranded assets out there.
Speaker Change: We already have two yield coast who've got vantage yieldco in the U S. We've got vantage Yieldco EMEA, we've already figured out how to crack the code and create that structure and raise the capital.
Speaker Change: Now what we've decided is we want to create a fund.
Speaker Change: To go out and buy stabilized data centers investment grade Datacenters in a real estate fund not a traditional digital rich fund per se and also not to buy our own product, but really go out and work with the other G piece that we partner with successfully in the past we've got a great relationship with Brookfield, We've got a great relationship with Blackstone sharing loans with them.
Speaker Change: We've worked with G I P and in Blackrock Blackrock is one of our great partners EQT has been a great partner in Z O stone peaks been a great partner vertical bridge and in a in an extranet and so I believe all of our Jeep all the all of the G P's out there our friends.
Speaker Change: We're putting our products together to go out and deal with this sort of $90 billion of stranded capital that exists in these big Hyperscale campuses. We've got a great team. That's doing this we're raising the capital and we're going to deploy it and we're excited it's a it's really a real estate product at the end of the day. So our fundraising team is not going after the same capital that we go after and flagship.
Speaker Change: Credit its actually really swimming in a new lane that we havent Swindon previously and.
Speaker Change: Remember you know real estate is a multi trillion dollar allocation.
Speaker Change: L PS around the planet today put about two trillion dollars to work in real estate.
Speaker Change: We think some of those real estate asset classes are broken and so providing a new avenue of digital real estate. We think is what Lps want was what real estate L. P. Real estate allocators want. So this is really addressing two things one the congestion of stranded capital for our friends that are other big G piece that have these big data center platforms, and then to really.
Speaker Change: <unk> are tapping into a pool of capital that we have an access before which is the real estate access real estate pool capital. So really excited about both the products again don't want. These these numbers won't manifest themselves in the first or second quarter. These are products that youll see come online in the third quarter and hopefully if the products take shape, we will have a strong fourth.
Speaker Change: And fundraising while we use the first quarter and second quarter of this year to finish up fund raising on our flagship fund and on credit too.
Speaker Change: Thank you.
Speaker Change: Thank you. Thank you I would like to turn the floor over to Mark <unk> for closing remarks.
Speaker Change: Well look thank you everyone. We really really appreciate everyone's time and attention. This was really a from our perspective a good quarter.
Speaker Change: You know disappointing second and third quarter.
Speaker Change: But really in the fourth quarter. We promised you that we would go out and work hard and deliver the results and I think we did that.
Speaker Change: We delivered record fund raising for the year 9 billion FRE delivery in the upper end of the revised guidance double digit earnings growth. So the business is performing well and most importantly, our portfolio companies are performing not just in data centers.
Speaker Change: Towers fiber associated small cell infrastructure in Wi Fi and Iot networks. All of these things are lining up at the same time and I think it's important to understand that our story is about the ecosystem. It's not a datacenter story, it's not an AI trade with digital bridge's is the leading alternative asset manager focused on product.
Speaker Change: For the digital economy and investing in the general economy for the long term not the short term.
Speaker Change: Our multi strat approach has now been on display you saw it manifests itself in the fourth quarter with strong performance from all of our products not just the flagship product and as we introduce new products and scale and deliver margin improvement. We think this is the stock you want to watch and one in 2020 five we're really excited about what we're doing.
Speaker Change: We're certainly disappointed in our results last year, particularly in the third quarter. We think we got a lot of that cleaned up that's on me I take ownership of that and going forward, Tom and I are working together to as Ric Prentiss says, we want to go out and be the group that under promises and over delivers we have a very sensible business plan for 2025, we believe we have all the ingredients to go out.
Speaker Change: And beat those expectations, we're going to work hard for you and we're going to work hard for our customers again, we want to thank you for your support your interest and your faith in our stock and our story.
Speaker Change: We're gonna go out there and work hard for you and we look forward to engaging with all of you should you want to have access to us and the team as we always say you're always welcome to come down of Boca Raton, Tom and I'll be delighted to host you. We should have a series of investor days with different analysts coming through here in the next six months I encourage all of you to come down and visit digital ridge spend time with us and I think you'll be.
Speaker Change: Pleased with what we're gonna do in 'twenty twenty-five again, thank you have a great day.
Speaker Change: Thank you this does conclude today's teleconference.
Speaker Change: Thank you for your participation you may now disconnect your lines.
Speaker Change: [music].