Q2 2025 DigitalBridge Group Inc Earnings Call
Speaker #3: Good day and welcome to the DigitalBridge Group, Inc. second quarter 2025 earnings conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero.
Speaker #3: After today's presentation, there will be an opportunity to ask questions. To ask a estion, you may press star, then one on a touch-tone phone.
Speaker #3: To withdraw your estion, please press star, then two. Please note this event is being recorded. I would now like to turn the conference over to Severin White, Managing Director, Head of Public Investor Relations.
Speaker #3: Please go head.
Speaker #4: Good morning, everyone, and welcome to DigitalBridge's second quarter 2025 earnings conference call. Speaking on the call today from the company is Marc Ganzi, our CEO, and Tom Mayrofer, our CFO.
Speaker #4: I'll ickly 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 #4: All information discussed is as of today, August 7th, 2025, and DigitalBridge does intend and undertakes no duty to update it for future events or circumstances.
Speaker #4: For more information, please refer to the risk factors discussed in our most recent Form 10-K, filed with the SEC. For the year-ending December 31st, 2024, and for the Form 10-Q to be filed with the SEC for the quarter-ending June 30, 2025.
Speaker #4: With that, let's get started. I'll turn the call over to Marc Ganzi, our CEO. Marc, thanks. Severin. Good morning, everyone, and welcome to our second quarter 2025 business update.
Speaker #4: We appreciate you joining us, and as always, we appreciate your interest in DigitalBridge. We had other strong quarter of execution across the board. Continuing the momentum from the start of the year, the key takeaways from here are simple.
Speaker #4: And they align with the three pillars of our strategy you see here: fundraise, invest, and scale. This makes three quarters back-to-back where we've essentially gone out and done exactly what we said we would do.
Speaker #4: We took care of business. First, let's start with the financial front. We delivered solid revenue and earnings growth, keeping us firmly on track to meet our full-year objectives.
Speaker #4: Fee revenue growth of 8% year-over-year drove strong fee-related earnings growth of 23%, as margins continue expand. This is the core of the DigitalBridge investment case.
Speaker #4: Scalable growth with expanding margins and we are delivering on that fundamental premise. Second, on fundraising. We continue to see exceptional demand from LPs to partner with us and invest in the digital economy.
Speaker #4: We raised another $1.3 billion in the quarter, bringing our year-to-date total of $2.5 billion and making great progress towards our $40 billion PM target for the year.
Speaker #4: And third, on the investment front, this was an important quarter. With a built and under-construction pipeline of over $5.4 gigawatts of 50% over the prior year, we're putting 50-plus billion dollars to work over the next few years on contracted data center projects.
Speaker #4: Tethered to our power bank, which we'll talk a little bit about later. We weren't just deploying capital. We were making decisive strategic moves to solve the biggest bottlenecks for our ustomers in the AI revolution.
Speaker #4: We established two new critical platforms in the quarter. Yonder and Hyperscale Data Centers. And Technoq, in the digital power strategy. While continuing to fuel the growth of our existing market leaders like Switch and Vantage, and the rest of the constellation of the DigitalBridge portfolio companies.
Speaker #4: We are building the power the next decade of innovation. Let's dig into capital formation momentum. As you can see, at the mid-year point, we are tracking right where we need to be to achieve our full-year objectives.
Speaker #4: Importantly, the fundraising mix is aligned with our budget, and as we get back into the second half of the year, new strategies will start to contribute alongside the final close of our third flagship fund.
Speaker #4: We're building a multi-strat fundraising platform, and you'll see that on display as the year progresses. Our flagship DB3 strategy continues to attract capital. And we've raised $6.9 billion year-to-date.
Speaker #4: We're the final close in the third quarter, that will take the total to over $7 billion plus which was our new target. This is the bedrock of our form.
Speaker #4: Providing diversified global exposure to the entire digital infrastructure ecosystem. But what's ally exciting and a key indicator of the value that we're ating is the maturation of our co-investment program.
Speaker #4: We talked about this last year, and we told you exactly where we were going this year. Our market-leading platforms like Vantage and Switch become more critical to the AI ecosystem, our partners want more direct exposure.
Speaker #4: You can see that in the fee rate in our co-investments. Which are 30% higher year-to-date averaging just about 60 basis points compared to our 45 basis point historical average.
Speaker #4: Again, this was a key component to our strategy and something we talked about last year that we thought we could do a better job at.
Speaker #4: This is high quality, high conviction capital, from LPs who know our ets, they know our leadership teams, and they see the performance firsthand. It's a powerful testament to the value we're creating at the portfolio company level.
Speaker #4: This is incredibly unique to the DigitalBridge story. This all flows ultimately straight into PM. The key metric that drives our arnings. The activation of new capital from the DigitalBridge partner series and high-quality co-investments puts us in a great position to exceed our $40 billion PM target for 2025.
Speaker #4: We are building predictable, reoccurring revenue, for our shareholders. Next slide, ase. So the next question is, we're raising all this capital, where is it going?
Speaker #4: Where are we putting it to work? Look, it's going directly to work in critical infrastructure that our customers need. This slide is a great snapshot of our investment thesis in action.
Speaker #4: Identifying key new secular trends and establishing platforms to capture them. While simultaneously fueling the growth of our established winners. Let's start with new platforms.
Speaker #4: The two biggest constraints in the AI build-out today are power and data center capacity. I'm the only one talking about this. I've been talking about, in fact, the last two years, and now everyone's talking about it.
Speaker #4: This quarter, we made moves to extend and establish our leadership position in both verticals. Digital power and continuing to light up data center capacity.
Speaker #4: Let's start with power. We committed up to $500 million alongside of our ners, Arclight, to launch Technoq. This isn't just an estment. It's a new strategy.
Speaker #4: We've been talking about it for the last few quarters, where are we going to put our capital to work and where are we going put our best ideas to work in powering the AI economy?
Speaker #4: Technoq fits that prototype. It develops powered land, solving the number one headache for Hyperscalers and accelerating their ability to deploy AI capacity. We'll talk more about this in a minute.
Speaker #4: Second, capacity. We're thrilled to close the multi-billion dollar acquisition of Yonder. A premier global Hyperscale developer. That is super focused on powered shell. With over 400 megawatts of leased capacity and a clear path to over a gigawatt, Yonder immediately becomes our eighth global data center platform and significantly expands our ability to serve the largest cloud and AI players.
Speaker #4: At the same time, we're not taking our eye the ball with our existing portfolio. You see significant financings at both Switch and Vantage. This isn't maintenance capital.
Speaker #4: This is growth capital. And that's a critical thing to acknowledge. It's funding massive expansions, including a new $3 billion AI campus in Nevada for Switch and continued build-outs across North America and Europe for Vantage, to meet record customer bookings.
Speaker #4: Next slide, ase. So now I want to spend a ew minutes on the underlying demand drivers that give us so much conviction in our strategy and our investment thesis at DigitalBridge today.
Speaker #4: If ou recall, the first quarter was characterized by some macro questions. Including, what's the ROI of AI? But in the second quarter, the signal broke through the noise.
Speaker #4: The narrative shifted decisively and AI's return on invested capital came in a sharp focus. And you 't have to take my word for it.
Speaker #4: Listen to the leaders of the world's largest technology and Hyperscale companies. Marc Zuckerberg describing the pace of AI innovation highlighted last week, then, "The more aggressive assumptions, where the fastest assumptions, have been the ones that have most accurately predicted what would happen." Microsoft CFO, Amy Hood, was confirming the same.
Speaker #4: The return on invested capital is real. Stating that their AI spend is correlated to basically contracted on the books business. Direct free cash flow conversion directly correlated to AI workloads.
Speaker #4: And most powerfully, Google CFO, NA Akhenazy, confirmed that their increasing their 2025 CapEx forecast by $10 billion. To $85 billion. And they expect a further increase in 2026 demand and that's not going to stop anytime soon.
Speaker #4: So we've seen this step function in CapEx. We talked about it in the fourth arter last year. We then reforecasted again in the first quarter of this year.
Speaker #4: And now we're again back at the table reforecasting CapEx for this year, which we're icipating going to over $380 billion. We're world's largest cloud providers are telling you.
Speaker #4: In no uncertain terms, demand is exceeding the most aggressive assumptions, and they're increasing spending by tens of billions of dollars to keep up.
Speaker #4: You listen. The debate is over. The race is on. Next slide, ase. So what's driving this historic capital deployment? It comes down to a fundamental unit AI work, the token.
Speaker #4: As tokens explode, so does the need for compute power. Look at the data from Google. A year ago, they were processing about $10 trillion tokens a month.
Speaker #4: At their I/O conference in May of this year, Sundar announced that the number had grown 50-fold. To $40080 trillion tokens. That is not a typo.
Speaker #4: That is a 50x increase in workloads. The number is staggering, but what's really the key subtext here is the acceleration. On their earnings call just two weeks ago, they updated that number again, saying it would now double since May, and are processing over 980 trillion tokens in a month.
Speaker #4: So this is really the conundrum for us. As an investor, as an owner, and an operator, we're at a key inflection point in compute demand.
Speaker #4: And it's on us to keep up. So let that sink in. A 50x increase year-over-year and then a 2x increase in just the last 90 days.
Speaker #4: Every single one of these nearly 1.1 quadrillion tokens processed each month requires a chip. A server. A rack. In a data center, that requires an immense amount of power and cooling that is the atomic level driver of the demand that we're seeing across our portfolio and it's growing at a rate our industry has never witnessed before.
Speaker #4: This is a seminal moment in digital infrastructure. Next page, please. This explosion in token volume is what's fueling the leasing demand you see on this slide.
Speaker #4: That record 5 gigawatt US Hyperscale leasing pipeline is a direct result of the token engine that we just discussed. It's being driven by the Hyperscalers and AI leaders who are in an arms race for capacity to process these workloads.
Speaker #4: And as we've said, this is still largely about training. The next wave of inference workloads is just beginning to ramp. Which will compound this growth exponentially.
Speaker #4: But taking a step back, all of this, training and inference runs into one ultimate constraint. Power. We've been talking about it for the last four quarters.
Speaker #4: The chart on the left shows the global data center electricity consumption is set to more than double by 2030. This isn't a distant problem.
Speaker #4: It's the single biggest challenge facing our customers and our industry today. This is the entire thesis in one slide. The token explosion is driving a leasing boom.
Speaker #4: Which is creating a power crunch. In our strategy, investing in Hyperscale capacity in Vantage, Switch, DataBank, and Yonder building scale at the edge, with DataBank, and creating new power solutions with Technoq is the direct integrated response to solving our customers' biggest problems.
Speaker #4: I'll talk more about this opportunity in the third section. But for now, I want to turn it over to Tom right now to talk through our financial performance for the quarter.
Speaker #4: Tom. Thanks, Marc. And good morning, everyone. As a quick reminder, the full earnings presentation is available within the shareholders' section of our website. As usual, I'll start with our financial highlights, which Marc touched briefly.
Speaker #4: In the second quarter, we recorded $85 million of fee revenue. Representing an increase of 8% over the second quarter of 2024. Our fee revenue this quarter benefited from the cumulative effect of organic growth in ur flagship fund series over the last 12 months, with a relatively modest $3 million contribution from catch-up fees this quarter.
Speaker #4: This growth in fee revenue resulted in $32 million of FRE in the quarter, an increase of 23% over Q2 of last year. Distributable earnings was negative $19 million for the quarter, principally driven by a $40 million realized loss from an infra bridge fund investment.
Speaker #4: This was previously reported as an unrealized loss and recognized this quarter as a realized loss. The flip from unrealized to realized resulted in this markdown running through DE this quarter, but had no impact on FRE or cash flow in the quarter.
Speaker #4: As of quarter end, our ailable corporate cash was $158 million. Providing material liquidity and flexibility for us, as we continue to evaluate both our capital structure and opportunities to invest in and grow the business.
Speaker #4: During the quarter, we strategically deployed $33 million into seed assets to support fund launches for a uple of our new products, including our initiative around energy that Marc has touched on.
Speaker #4: Moving to the next page, fee earning equity under management increased to $39.7 billion as of June 30th, representing a 21% increase from last year.
Speaker #4: This growth is primarily driven by capital formation in the DPP series and co-investments. As well as fee activation on certain previously raised capital, that earns management fees once deployed.
Speaker #4: While we expect to continue to raise new capital over the second half of the year, the increase in PM is likely to moderate over the next quarter or two, as distributions from the portfolio partially offset new capital raised.
Speaker #4: We close $1.3 billion in new fee earning commitments during the quarter. A 17% increase over the second quarter of 2024. Led by strong co-investment activity and new commitments to our latest DBP flagship fund.
Speaker #4: Turning to the next page, which summarizes our non-GAAP financial results. As mentioned earlier, we reported $85 million of fee revenue in the quarter. Representing growth of 8% over the same quarter in the prior year.
Speaker #4: Our LCM FRE margin was 36% in the second quarter. We expect margins to remain elevated through the final close of our flagship fund in the second half of 2025.
Speaker #4: Supported by the continued contribution from catch-up fees. Moving to the next page, which summarizes our carried interest and principal invested income. We reported a $12 million net reversal of carried interest during the quarter.
Speaker #4: As a reminder, the company accrues carried interest based on quarterly changes in the fair value of our funds investments. As discussed previously, many of our vehicles are in the early to middle stages of their life cycle.
Speaker #4: And have not fully worked their way through the J-curve to be clear of the preferred return. So at this point in their life cycle, small changes in the fair value of the fund's assets can have an outsized impact on the quarterly accrued carried interest that we record.
Speaker #4: Including causing reversals as we've seen this quarter, in periods when the appreciation in the portfolio does not exceed the preferred return hurdle for the arter.
Speaker #4: As we've discussed in prior quarters, carried interest compensation and expense tracks these changes and therefore there was a commensurate reversal of a portion of the unrealized carried interest compensation this quarter.
Speaker #4: Principal investment income which represents the mark-to-market on the company's GP investments in our various funds was $21 million. Turning to the next page, this chart continues to highlight the stability and consistency in growth both in revenues and margin that we've ienced over the last two years.
Speaker #4: LCM FRE margin has grown to 36% as of June 30th. Which is consistent with our target of increasing our FRE margin this year. And includes the impact of catch-up fees as previously discussed.
Speaker #4: Excluding catch-up fees, we were at an FRE margin of approximately 32% over the last 12 months. This quarter, we saw $3.4 billion of PM inflows.
Speaker #4: A significant portion of which was related to the activation of fees on co-investment capital that had been raised in prior periods. These inflows were partially offset by $900 million in outflows driven principally by various return of capital events across our liquid and credit strategies.
Speaker #4: Finally, the company continues to maintain a ong balance sheet with approximately $1.6 billion of corporate assets largely reflecting our material investments alongside our limited partners and available corporate cash.
Speaker #4: Additionally, during the quarter, based on our strong inclusion position, we elected to downsize our revolver from $300 million to $100 million to avoid unnecessary unused fees and that revolver remains fully undrawn.
Speaker #4: We're pleased with our results for the half of the year, and we're very excited about the opportunity set that we see ahead of us, both in our core business and some of the new initiatives we're working .
Speaker #4: With that, I'll turn the call back over to Marc.
Speaker #1: Thanks, Tom. So how do we attack the massive opportunities I talked about in the first section in a disciplined way? So many investment managers are running around and talking about power and data centers and their investment thesis and strategies.
Speaker #1: I would rather say the most important thing is you got to execute. This is a framework that we've ined over 30 years, of building and scaling digital infrastructure businesses.
Speaker #1: It's not a new trick for us. It's a three-phase process. We establish platforms. We transform them. We scale them. And ultimately, you've heard me say this over the last five years, we follow Willogos.
Speaker #1: We serve our customers. It's our blueprint for repeatable value creation. This quarter's activities are a perfect example of the playbook in action. Phase one, Technoq.
Speaker #1: We established the platform. We've identified the most critical bottleneck in the entire ecosystem: power. And we've backed a world-class team led by an ex-Google and Microsoft energy veteran to build definitive platforms to solve the problem for hyperscalers.
Speaker #1: With Yonder, we're at the beginning of our journey. We acquired a fantastic global platform that will now move into phase two, transform and scale.
Speaker #1: We're bringing in our capital, our operating expertise, and a sharpened business plan to accelerate the growth and align it with the most pressing AI cloud demand workloads.
Speaker #1: We've already proven this out with Vantage and with Switch. You've seen this playbook on display before. Well, back to Switch. We're deep into phase three at Switch, following Willogos.
Speaker #1: Switch is a technology-centric, market-leading tier five platform. Our role now is to provide the capital, the strategic support they need to serve customers, and funding their growth in new AI-driven opportunities and optimizing the capital structure as you've seen in their recent financings.
Speaker #1: This is not opportunistic. This is a disciplined, repeatable process for creating value for LPs. And our shareholders at every stage of the company's life cycle.
Speaker #1: Next slide, ase. So I want to double-click on the power opportunity because this is so fundamental to our entire strategy. It's the single biggest factor shaping the next decade of digital infrastructure.
Speaker #1: The convergence of the digital economy and energy sectors is here. And with Technoq, we're not just participating; we're leading. To tackle problems of scale, you really need to bring together experts with deep domain expertise.
Speaker #1: And that's exactly what we've done. This is a great example of our backing great team's playbook. But on an entirely different level in scale.
Speaker #1: On one side, you have DigitalBridge. We live and breathe this every day. We see the urgent demand from our customers across our portfolio. And now this is nearly a 21-gigawatt power bank that we've created.
Speaker #1: We know what Hyperscalers need. Where they need it. And the specifications that they require for high-power compute. On the other side, you have Arclight.
Speaker #1: A leader in building an operating power and electrification of infrastructure with a track record of managing over 65 gigawatts of power assets. I have to say, working with their team to stand up Technoq has been a phenomenal experience.
Speaker #1: We bring together the data center development capabilities. They bring together the power expertise. Together, we've created a platform in Technoq that is purpose-built to solve the number one constraint for our customers.
Speaker #1: Bridging two worlds to create one solution. That neither of us could have built effectively alone. It's been a real pleasure working alongside of an industry veteran and we spent the last two years diligently who we could go run this race with.
Speaker #1: And at the end of the day, the three-decade track record of Dan, Angelo, and Jake and the entire team at Arclight was super compelling.
Speaker #1: We found in Arclight a partner just like DigitalBridge. First and foremost, an industrialist and somebody that knows how to build infrastructure at the street level.
Speaker #1: This is entirely critical to the success of our digital power strategy. Next slide, please. So what does Technoq actually do? It's simple, but it's revolutionary.
Speaker #1: Technoq develops powered land. They acquire and entitle large sites in most power-constrained markets like Northern Virginia and Phoenix. And they develop on-site dispatchable power solutions.
Speaker #1: That's really critical. This solves the time-to-power problem. Instead of waiting years for a utility interconnection or a will-serve letter, our customers can get shovel-ready sites with power dramatically accelerating their AI deployments.
Speaker #1: Technoq provides prime power now and can transition to grid support role later, offering tremendous flexibility and ESG-aligned design. The team is led by Kenneth Davis, who built the energy strategies for Google and Microsoft.
Speaker #1: And is successfully developed data center-focused energy platforms throughout his career. Backing great teams is straight out of the DigitalBridge playbook. It's what know, it's what we .
Speaker #1: Ken and the team know exactly what these customers need, and they've already got a significant pipeline with over 1,600 acres under control. They potentially have nearly 3 gigawatts of IT capacity and over 5 gigawatts of generation capacity.
Speaker #1: This is massive. It's a scalable opportunity and we're in on the ground floor. Of the emerging category of digital infrastructure and partnership with the amazing team at Arclight.
Speaker #1: I could not be more excited about this initiative. Next slide, please. Turning to the second phase of major investments in the quarter, we're thrilled to welcome the Yonder team to the DigitalBridge family.
Speaker #1: As AI models grow, the demand for massive, purpose-built Hyperscale campuses is exploding. And Yonder is a pure play leader in this space. With a global footprint in key markets from Northern Virginia to Frankfurt to Tokyo, and a development pipeline of over 1 gigawatt, Yonder is a perfect strategic fit.
Speaker #1: This acquisition and partnership with our long-term investors at La Case CDPQ, immediately strengthens our global Hyperscale portfolio. Alongside Vantage and Switch, Yonder gives us another world-class platform to serve the gigascale training requirements of the largest cloud and AI players.
Speaker #1: This isn't just about adding assets. It's about adding capabilities. Customer relationships and the team that knows how to deliver for the most demanding clients in the world.
Speaker #1: As we see on the next slide, we're not wasting any time putting our playbook to work to transform and scale this incredible platform. Next page.
Speaker #1: So despite just closing the deal, we're already deep into executing phase two of our Yonder. Transform and scale. This is where our ep operating and financial expertise comes in drive a sharpened business plan focused on scalable growth.
Speaker #1: First, we appointed a new world-class senior leadership team. We brought in Aaron Waggenheim, formerly of T5, as CEO and Sandeep Manaj, a leveraged finance veteran and CFO.
Speaker #1: This is a team built to execute at the hyperscale speed. Finding and empowering the right leadership has always been a key differentiator for us at DigitalBridge.
Speaker #1: When you look across our portfolio, it's really comprised of industry pioneers and leaders with long, and proven track records. This is what works for us and our investors over time.
Speaker #1: We're rilled to add Aaron and Sandeep to team. And we look forward to working with them. Second, we immediately began optimizing the footprint to focus the highest return opportunities.
Speaker #1: So just last week, we announced the divestiture of Everyonder, our joint venture in India. This move streamlines Yonder's presence and allows us to redeploy capital to accelerate development in our priority AI cloud campuses, in North America and Europe.
Speaker #1: Where demand is to be very direct is most acute. And third, we're partnering with the leading investors in the world, like La Case. And Allianz.
Speaker #1: To ide the significant primary capital required to build out Yonder's 1 gigawatt plus pipeline. This is the DigitalBridge playbook in action. Speed, discipline, and a relentless focus on creating value from day one.
Speaker #1: Next slide, ase. So finally, let's look at Switch. We've talked a lot about Switch. It's been one of the great acquisitions that we did out of our second flagship fund, taking it private for just under $11 billion.
Speaker #1: This is a perfect example of phase three of our playbook. Follow the logos. Since that transaction in 2022, we partnered with the team to transform its capital structure and position it to win in the age of AI.
Speaker #1: This quarter, Switch expanded its credit facilities to an incredible $10 billion. This series of landmark financings achieved several key objectives. One, a significantly reduces their cost of capital.
Speaker #1: Two, it retires 100% of the original take-private bank debt ahead of schedule. And most importantly, it provides a massive war chest to fund the next phase of their growth.
Speaker #1: This is really an exciting and transformative moment for Switch. And look at the evolution here. We went from a fixed premium M&A deal structure to a sophisticated multi-instrument platform including revolvers, term loans, and ABS.
Speaker #1: This includes the first ever ABS-rated under S&P's new and more stringent data center methodology. A testament to the quality of the assets and the strength of the customer contracts.
Speaker #1: Also a testament to the uniqueness of the Switch platform. Tier five, highly secure. Very reliable. Fully redundant. And has never gone down one day or one minute in the history of the company.
Speaker #1: This is something that S&P understood, and it's something that investors now understand. Switch is differentiated. The bottom line is, in partnership with DigitalBridge and Rob and Thomas, Madonna, Jason, the entire Switch team, it now has the financial strength and the access to low cost of capital to et the incredible demand they're eing for their innovative AI-ready campuses.
Speaker #1: This is what follow the logos looks like in practice. Enabling our market leaders to scale. With their customers. Next slide, ase. So before we wrap it , I want to put all of this into a broader context.
Speaker #1: It's the one thing to talk individual deals and platforms, but look, it's another thing to take a step back and appreciate the sheer scale of DigitalBridge.
Speaker #1: And what we're building. I don't think investors have an appreciation for what we have done and where we're going. At the global Hyperscale level, for massive model training, you have Vantage.
Speaker #1: Scala. And now Yonder. These are gigascale campuses serving the public cloud giants and AI leaders. For private cloud and enterprise, inside of the AI ecosystem, you have Switch.
Speaker #1: Which also has a growing Hyperscale customer base. Along with data sovereignty and government customers. Their tier five campuses are the gold standard for enterprise and sovereigns who need secure, high-performance compute with their own proprietary AI applications.
Speaker #1: And critically, for the coming wave inference, energetic AI, you have DataBank. With 73 data center campuses, 73 data centers, and 26 markets, data center provides low-latency compute at the edge that will be essential for real-time action-oriented AI applications.
Speaker #1: We're the only platform that owns and operates best-in-class assets across from the core to the edge. We can meet our customers wherever they are, in their AI journey.
Speaker #1: With the right solution, for most importantly, the right workload. This is a very differentiated approach to investing and building in data centers. We understand AZs.
Speaker #1: We understand workloads. And we understand where our customers want to be. We have the platforms that pair up with those customer expectations. This is like any no other platform in the investment management world in terms of how we tailor our solution set.
Speaker #1: And what you see here are the AI factories of the future. $5.4 gigawatts data center compute capacity in flight, with roughly half of that currently built.
Speaker #1: And the other half under construction. If you look across the sector, even at some of our largest peers that are publicly traded, I think you'll find that pace and scale is at a very different level.
Speaker #1: And this is just what's funded and in construction today. The raw material for these factories is power. We're right back to where we started.
Speaker #1: Power again. And our total secured power bank across the portfolio now stands at nearly 21 gigawatts. This is our strategic land bank for the AI revolution, and it is industry-leading.
Speaker #1: Building these AI factories requires an immense amount of capital. Between now and the end of 2026, we anticipate deploying over $43 billion of CapEx across our portfolio.
Speaker #1: With DigitalBridge's share at just under $30 billion. To bring this capacity online and on time. We're not just participating in the AI build-out. We are leading it at a scale that few can match.
Speaker #1: We are building the critical infrastructure that will define the next decade of technological innovation. Next slide, please. So at the end of the day, why does this matter?
Speaker #1: What does it mean to you, our shareholders? It matters because this pipeline of AI factories represents a massive embedded value creation engine for DigitalBridge.
Speaker #1: This is how the math works. As you can see on this slide, to build 1 gigawatt of data center capacity, it requires roughly $10 billion.
Speaker #1: In total capital. About half of which is equity. If you're eraging those assets at the correct loan value ratio. When we successfully execute our playbook, build that gigawatt, lease it up, and ultimately harvest value for our Ps, it generates carried interest for DigitalBridge shareholders.
Speaker #1: So now, take that math to the $5.4 gigawatts that we have either lit today or under construction. That represents over $50 billion total investment, and more than $25 billion of equity being put to work.
Speaker #1: With DigitalBridge controlling approximately two-thirds of the ownership of those platforms. That represents roughly $1 billion of potential future carried interest. Being built, cultivated, and embedded in our folio right .
Speaker #1: Look, simply put, in distilling this for you as an estor, this is long-term value creation. And this is the core our strategy. And the proposition for why to own DigitalBridge shares.
Speaker #1: While we focus on delivering consistent fee-related earnings, growth quarter over quarter, we're simultaneously building enormous pipeline of future portfolio income and high-margin carry. This development pipeline is the clearest illustration of the immense embedded value that is accumulating for our shareholders at DigitalBridge.
Speaker #1: Next slide, please. So let's wrap it up. Let's bring it together. And look at the scorecard for 2025. The first half is in the books.
Speaker #1: We've delivered on our key priorities. Let's start with the most important one. We've ivered strong double-digit FRE growth. We are on track to beat our financial metrics.
Speaker #1: We successfully formed capital, and are making great progress towards our $40 billion PM goal for this year. Second, we developed and launched our new investment strategies.
Speaker #1: With Technoq being the first major step in our digital energy platform. And we had a major milestone with our portfolio AUM now exceeding $100 billion.
Speaker #1: This is up over 25% from last year. We did what we said we would do. And our focus for the second half now is very clear.
Speaker #1: We are reaffirming our guidance for the year. Priority one, deliver on our 2025 financial metrics. With fee-related earnings up 10 to 20% over last year, and we will continue to improve our margins.
Speaker #1: Priority two, successfully formed the capital to take our PM over the $40 billion mark. We have extreme high conviction around our ability to hit and exceed our fundraising targets for 2025.
Speaker #1: Priority three, successfully launched our new strategies. With initial commitments to digital energy, our stabilized data center strategy, and our next private wealth offering, all three of those strategies are in flight.
Speaker #1: And priorities four and five, maintain a strong balance sheet. And continue to evaluate strategic, but most importantly, accretive M&A opportunities. Look, we have a really clear path.
Speaker #1: We have momentum. And most importantly, we are executing. For you. We're in the very early stages of a historic multi-decade investment cycle driven by AI.
Speaker #1: DigitalBridge has the team, the platforms, the power bank, and the vision to lead the way. I want to thank you for your time. I look forward to your questions.
Speaker #1: So operator, please open the line to Q&A. Thank you y much.
Speaker #3: We will now begin the estion and answer session. To ask a question, you may press star then one on your touchtone phone. If you are using a speaker phone, please pick up your handset before pressing the keys.
Speaker #3: If at any time your question has been addressed and you would like to withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster.
Speaker #3: The first question today comes from Michael Elias with CG Cowen. Please go ahead.
Speaker #4: Great. Thanks for taking the estions. Two if I may. One of the themes this earnings season seems to be that inference is scaling. You know, Marc, just curious if you're seeing any evidence of the Hyperscalers scaling up their focus inference compute, or is it still early days?
Speaker #4: And then my second question is, as you think of your portfolio and the position to capture the inference demand, how do you expect the inference demand to drive financial results for DigitalBridge?
Speaker #4: And how does that compare to what you saw during the training etting at is, I'd phase? imagine I think specifically what I'm inference is more interconnection dense at the edge, which should have a return profile.
Speaker #4: Just curious how you think of it.
Speaker #1: So let's start with the first one and first of all, good morning, Michael. Thank ou. Look forward to seeing you next ek. You know, I would say we are very much at the early innings of inference.
Speaker #1: If you look across our footprint and you look at where some of our customers like Rock are installing, you know, we're seeing those workloads now manifest in data centers.
Speaker #1: They're ifesting, as you would expect, 're manifesting in places that aren't exactly where you know all of the Hyperscalers are going. But early, you know, early workloads favor highly interconnected portfolio companies like DataBank and like Switch.
Speaker #1: Where we have a ton of interconnection, but we also have something that's ite unique, which is we have high-power compute capacity. So you know, I was listening to a another publicly traded data center conference call recently, and they they really weren't talking a ton about inferencing.
Speaker #1: Because you not only have to have interconnection, but you have to have the ility to deliver a tier three, tier four solution that's got somewhere in order of magnitude of at least you know 25 to 100 megawatts.
Speaker #1: So these aren't your typical edge workloads where in public cloud, for the last you know five to seven years, we've seen those deployments in the you ow 250 kW all the ay up to 10 megawatts.
Speaker #1: That's been kind of the tier two, tier three market workloads for you know public cloud. AI is different. You and I have been talking about this, Michael, for a year.
Speaker #1: Yes, it will follow some of the architecture of public cloud. But in many respects, it won't. And so I think looking to for folks looking to see that that playbook is going to remanifest itself in the same way, it's not.
Speaker #1: Interconnection helps, as you know, you know Switch and DataBank have massive interconnection capabilities. But it's back to where we finished our presentation today, Michael.
Speaker #1: It's power. Having power on demand, having leading platforms that have that power ready today, not tomorrow, not some sort of solution in a press release, but actually going out and being able to deliver that inferencing workload in a very specific location with a ton of connectivity, is what's going to win.
Speaker #1: So it will be a little bit different from you know how we saw edge public cloud playing out in the last five years. By the way, edge cloud workloads are still playing out.
Speaker #1: We're probably if we were playing a you know a 9-inning baseball game you know in cloud edge, we're probably in the fourth or fifth inning.
Speaker #1: Inferencing is in you know probably bottom of the first inning. It's very early days for inferencing. So I hope that that answers you know both of your questions.
Speaker #1: If I didn't, you can refocus the second question.
Speaker #4: Yeah, just the second question was more you know look, if I think of the training Hyperscale training data center, I would think of like call it 10% returns.
Speaker #4: When I think of your traditional interconnection data center, you know I would think at least mid-teens type returns. And the thought there is that to the ent the returns are higher, when you land that demand, you know as we think of the accretion to DigitalBridge and analysis that you laid , I would think that it's more value creative for the DigitalBridge shareholders.
Speaker #4: So just trying to tease out how that essentially that math you provided at the end changes in an inference world.
Speaker #1: Well, I think the returns for you know public cloud edge and private cloud are a little bit different. I think we've that case pretty clearly between Vantage and DataBank and Switch and now of course Yonder.
Speaker #1: Joining that phrase as well. But let's focus on inferencing and edge workloads and ose returns for a second. We see that those returns are very differentiated.
Speaker #1: When we took ownership of DataBank over eight years ago, you know we bought that business for circa $235 million. It's been recapped a couple of times.
Speaker #1: We've created this really unique continuation vehicle structure. And that business is you know well, well north of you ow $11 to $12 billion. With a glide path that's going quite fast.
Speaker #1: The EBITDA growth at DataBank is you know low 20s. But the EBITDA growth at Switch and Vantage are also in that same ballpark as well.
Speaker #1: What you're trying to get to is the imputed returns or the cap rate on new builds. And what's interesting about you ow when you talk about inferencing workloads, you're not just going to go build a data center for one inferencing provider in a market like say Bluffdale, Utah, say Houston, Texas, say Cleveland, Ohio.
Speaker #1: You're going to build that edge inferencing workload to accommodate multiple customers. And I think that's the difference. When you're looking at a Vantage new build and it's a campus environment, you usually have one core anchor customer.
Speaker #1: Where an inferencing and edge, I don't have one customer, Michael. I have multiple customers. So for example, we had an investor day with a series of really sophisticated pension funds a couple of weeks go in Utah.
Speaker #1: And we were sitting in that data center and that wasn't you know that's six data centers in one campus. It's an edge facility that really supports you know one Hyperscale customer.
Speaker #1: But what we find out is when you get to the edge, Michael, you got to support the ecosystem of that Hyperscaler. So it's not just the Hyperscaler and edge.
Speaker #1: It's the folks that are involved in multiple facets of delivering that Hyperscale experience. So it wouldn't surprise you that there are more than 20 customers.
Speaker #1: In that campus. And that there were you know interconnection capabilities to over 35 are carriers. And we have over 482 pairs of dark fiber running between that and the NAP of you ow the network access point of Salt Lake City.
Speaker #1: Which is in downtown Salt Lake. Edge is very different, Michael. It's a very different architecture. This concept of tethering in tier two and tier three markets is something we created at DataBank.
Speaker #1: And so that's why DataBank's returns and that's y their growth is so high. So we don't see those types of returns in inferencing and edge below Hyperscale.
Speaker #1: We actually see it the other way, Michael. We see returns are actually much, much higher. And the other thing is, the places where we're building inferencing workloads again, we already have the power.
And at the end of the day, it creates an environment, a very safe and tier 5 environment. Where the most important Fortune 100 customers in government agencies and now, hyperscalers, they want to be at a switch facility because they know what they're getting, highly connected, highly secure. And again, back to that word power, we're going to keep talking about power till the end of this year. And hopefully today's presentation, Michael sort of shed some light on that and certainly when we get to Boulder next week to sit down with you, we can talk more about power. But this concept of having over 20, gigawatts of power ready today, for our customers, available is an asset and a weapon that did the
That nobody else has.
Not the publicly traded data center reads. Any other GPS in the world? We have it. They don't, they have it. They have it obviously at scale and they have a lot of power, but what we've assembled is very unique and very different and we've got to get investors included into that.
Great. Thanks for the call. Mark, team Boulder.
Thanks, Michael. See you at your conference.
The next question comes from Richard, Cho with JP Morgan, please go ahead.
Hi, I just wanted to follow up on the strength of invest. Um, it at another good quarter, how should we think about it, going forward? And are there any, um, portfolio companies? You'd like to highlight um, from the second quarter or something we should look forward to for the rest of the year.
um, look what I would say is,
You know.
A couple things.
You know, we we see co-invests as actually being really important right now.
If you look at the size and the scale of some of the projects that switch and Vantage and Yonder are taking on these are projects. Michael, I've never seen in my career. I've been doing this for 30 years. The capex is no longer measured in. Oh I'm going to go build a billion dollar data center. It's now, can I go build a 10, 20, 30 billion Data Center?
This year now we're up to 60 basis points. The Yonder transaction was was really successful for us.
Um, we absolutely believe that we are going to um not only beat our Capital formation number for this year, but if you look at the back half of what some of our big portfolio companies are doing like Vantage and switch. There will be more significant co-investment coming in Q3 and Q4
We're looking to hold the line at that. 60 bits, Kevin and Leslie and the team have done a great job working with our Co investors and the simple mantra today is look, we're not in the free ideas business. Maybe other GPS are. We're not
Our ideas are unique. They're differentiated. What we're doing at Yonder, what we're doing at Switch, what we're doing at Advantage, and DataBank are things that other portfolio companies owned by other folks are just not doing.
So um we will raise a lot more code vest between now and the end of the year I'll just give you the early the Early headline on that. Uh we've got some major you know gigas size projects coming uh across our data center footprint. We highlighted the power so you can understand how we can handle some of these bigger opportunities that are coming our leasing pipeline today. Across our 8 platforms is up, you know, over 50% versus last year. It's absolutely tremendous. What's happening down at the portfolio company level. So,
I would I would say that we're going to do 2 things really well between now and the end of the year 1. Um we're going to sign a lot of leases 2. We're going to raise a lot of co-invest. That co-invest will come at a higher margin. There's no expense associated with it and it's going to flow directly to FM and F and that's going to be really good news for digital Rich investors in the back half of this year. It's not that we're here to tell you we're not going to continue to raise on our Flagship product and our new strategies we're absolutely fundraising on those strategies as well and you'll see the results of that manifested in Q3 and Q4, like I said, I hopefully you're hearing from us, uh, a level of conviction and confidence in terms of what we're doing between now and the back at back half of this year, a lot like, last year, you know, Richard the fundraising will come strong, uh, it'll accelerate a bit in Q3 it'll really accelerate in Q4, uh, that seems to be the pattern of how we're fundraising. That's what happened in 2023 and 2024 and 2025 is playing out just like,
That.
And I just wanted to follow up, quickly, on technog, you know, power usually takes time and it seems like the opportunity, there's very big, but how should we think about the pacing and um, the ramping of the opportunity there?
well, look, I think um,
We see that product as being a really interesting product in the sense that you know having projects where hyperscaler can step in immediately and start construction and be live within 9 to 18 months is really unique.
So what we've done is we've created kind of a FastPass Lane for our customers to do built to suit and we're not at at that platform. What's really interesting? Richard, we don't need to build the data center.
So we can make, you know, High Teens low 20s returns by turning over the land and the power to a customer who wants to go sell perform.
And again, it's all about finding demand and swim Lanes where others are not finding that demand.
With Yonder, we're doing power shell. I think you understand pretty clearly what Vantage and switch and data Bank does
This platform in particular, doesn't need to own the data Hall and doesn't need to build the data Hall to create great returns.
I accept today that our customers are self-performing somewhere between 35 and 40% of the time.
And so I wanted to have a platform Richard that would respond to that opportunity. Nobody else was doing that. If you look across, you know, our competitors that are publicly traded or if you look at you know our GPS that we compete against that are now in the data center space. So this is again us trying to move in a direction of travel.
Creating a new swim Lane of investable opportunity that others really haven't paid attention to got a great management team. We have some amazing first few sites that we're talking to our customers particularly in Arizona. That's a really hot location for self-performance and we can make data center like returns, you know, in the powered land space with this solution.
And I think it's it's pretty unique and pretty differentiated I think in terms of the conversion, um, of that into a data center, you know, it's probably in the order magnitude of 12 to 36 months is the conversion. But once we sell the project to a customer, we get full return of capital.
That's what I like about it. I don't have to sit around 578 years like I had to wait on data bank and manage to get DPI and create the returns and techno, we can create the returns immediately.
I think we're up to almost 500. Megawatts of power. Now, attack knock, we have over 1,600 Acres. We're looking to double that footprint in the first year and it's a really great first investment in our partnership with Arc Light. Um, we're really excited about that as well.
Great, can't wait to hear about going forward. Thank you.
The next question comes from Randy binner with v Riley. Please go ahead.
Hey, thanks. Just a just a, um, on the Forty million dollar, um, realized loss. I I think it by stating that the, there is no cash flow impact. I, I think that was related to a an, an older issue that that's been written down before, but just just want to get a little bit of color on the, the kind of the, um, the Vintage of that. And, and where that that loss is, if, if that's the final loss for that item,
It is. Yeah, that's correct. It was a investment in 1 of the INF for bridge funds. That we also had a little bit on our balance sheet directly. Uh, had been made a couple years ago. Um, we had it valued at zero for the last couple of quarters but it was a final realization in this quarter so that causes it to flip and run through de. Um, so uh, you know, I don't want to say it's non-cash, um but it's not doesn't impact our, you know, kind of cash flow or anything like that this year.
Right. Got it understood and then I guess, speaking of cash, you know the you you you have a good cash balance. I think the revolver was reduced to say it cost.
You know, I for Mark and how does the board? How would you think about potential share buyback? I mean the the stock is I think you know, significantly undervalued relative to everything you've laid out on on the presentation here. You know, is is that a is that a use of cash that could compete with all these, you know, other projects?
it's certainly something we think about and look at, um, you know, in terms of capital allocation, um, I would say that uh,
Probably where we find the highest return on capital is seeding. New investment fund opportunities. You know, that the return on that can be, you know, really extraordinary. Um if we
Feeding an asset helps us raise Capital. Um, but share BuyBacks and I would say both the common and the preferred is something we look at. Um,
The.
Common, you know, from a return perspective preferred, um, more. So just because of the magnitude of the preferreds that we have. Um, but it is certainly something that we and the board talk about.
Okay, great. Thank you.
The next question comes from Jade, Romani with KBW.
Please go ahead.
Thank you very much. Um, what do you expect for funds outflows in 2026? Do you think it's reasonable to project them to grow in 2026 at mid to high single digits?
But look, I think it's a, it's sort of a 2, 2 question and I'll answer the first part. And Tom can backfill me if you wishes, you know, we talked today in the presentation, um, about deploying 43 billion, dollars of capex, into AI infrastructure. Um, that is up from 28 billion last year.
So we've added another Circuit of 15 billion of new opportunity. My sense is hopefully you were, um, paying attention to the doubling of the leasing backlog, across our portfolio companies. And then, of course, looking at the power bank, moving from 16 gigawatts to 20 gigawatts.
So I think you can, you know, it's hard for us to sit here today and say gee that 43 billion is going to 20 billion, are going to 60 billion. I don't think Tom and I have a ton of control over that because there's a lot of activity Jade happening down at the portfolio company level. That's real, and it's big, and it's bigger than I've ever seen. And so, we've been spending the last 90 days fundraising, um, equity and debt. And so, you know, some of the case studies that we put in front of you, like, Yonder and switch were not accidental.
We're showing you how much convex we raised at Yonder. We were showing how much debt Capital we raised at switch. Why? Because it's hard. It's not easy. These are the difficult things, and so raising billions and billions of dollars to go build out. This infrastructure is what we're focused on. I think the other thing that we we sort of put a couple of, you know, crumbs on the trail for you guys to extrapolate is we're really excited about what's happening in power.
Power power Jade is a 1.3 trillion dollar opportunity, just an AI.
Solutions if we're going to keep up with this, projection of 200, gigawatts to 300 gigawatts of power to make AI work. We identified that opportunity 2 years ago, we spent years picking the right partner. We were very careful. We were very selective. We found the right partner in our client.
Um, so we think that's a big new opportunity for us.
Um we have the right industrial partner, we have the right Capital formation team and we have a deep pipeline of projects in power now. Um, so we're you know, you're going to see a lot more from us on the digital power side in Q3 and Q4. And then also we've continued to advance our our our strategy on private wealth. And we've continued to advance our strategy on on a on a data center real estate fund as well. A strategy, not fund. So, we've got a lot going on and I think that we haven't decided to give guidance Tom for next year yet. We're going to be, you know, in our planning, in September, and October. In terms of, where we see 2026 playing out,
And then that'll give us Jade a couple of months to see what our portfolio companies are doing. As I said previously. Um with Richard we are really focused on co-investment. There's a lot of co-investment capital coming and Tom and I and Kevin Kevin who runs Capitol information we need to plan for that and we need you know probably the next 30 to 60 days to get a a good handle on that. Tom I don't know if you want any more color but sorry Jada for we're being slightly opaque but the numbers are getting bigger and
You know, we we feel pretty confident that our deployment schedule is going to continue to accelerate, not not de accelerate.
Yeah I mean I I would say similarly you know we haven't provided forecast specifically for for 26 at this point. Um and we you know we're growing business. We absolutely will raise more Capital over time than we you know sort of uh liquidate um as our portfolio matures, could there be a quarter here or there, where we sell more than we raise of course. But you know over time we we expect to continue growing fum and raising more new capital than we uh distribute the liquidity.
Thank you very much. Um, a follow-up just on carried interest, uh, which for Gap showed a reversal this quarter.
Um, I mean, it seems like there's a lot of value being built. So could you comment on what drove the reversal, uh, beyond the footnote which I read? And when do you expect, uh, potential realized carried interest to take place?
Um, I I'll address the Gap reversal first. Um,
You know, like we we spend a lot of time on the quarterly marks, I personally chair, the valuation committee. We spend a lot of time with the deal teams. We include third-party, um, Specialists. Um, but all that said, you know, I wouldn't read too much into the quarter to quarter marks, you know, the reality is with private assets. Like we have, um, you know, they'll often stay flat for a period of time until there's sort of an objective, um, event or or indicator of value either at the company or or a capital event or transaction. And so, um, as much time as we put into the quarterly marks, they they tend tend to move in Step functions um from time to time as opposed to you know, kind of smoothly, quarter to quarter. Um so you know I I guess I just wouldn't you know put too much stock into you know kind of either the the quarterly valuation marks each quarter or you know kind of the movement in a crude carry on a quarter to quarter basis. Um,
You know, and then the realization of Carrie is obviously dependent upon exit activity. So um that's a little more difficult to forecast. Although certainly you know, as our funds mature and uh move into sort of the Harvest stages of their life cycle, like you'd expect us to be, you know, exiting more assets over time.
Said, we made a decision as partners. That's what we're going to do. We're not going to sort of make up marks to to keep Mark's. I uh, so we can stay in top. Quartile, or mid-core tile or whatever. We've been really clear about that internally, is that something that we're going to do? And so when we do sell assets, what I would tell you is historically, when you look at full exits, like a wild Stoner Vantage, we have historically sold at a premium to nap and I think Tom's doing a great job of running that side of our business. He and I have agreed that he would run that side of the business without me being involved in it. I'll continue to do what I do which is raise capital and and go buy and build new platforms and it's a really good partnership and I'm really appreciative of what we're doing there. I think it's the right thing and if others don't want to do that that's not on us. We're going to run our business. We're going to run it with authenticity and we're going to be transparent and when we go to sell things, people will be pleased with how we do that. That's how we're. That's how we're building value in digital rich long term.
Thanks a lot.
The next question comes from Rick. Apprentice with Raymond James, please go ahead.
Thanks, good morning, everybody.
Couple questions. Hey Rick from me trying to be 3 places at once on this busy earnings day. Um, Mark I hear what you're saying about power, uh, and data centers. Obviously that's why we've got it as 1 of our topics.
Tuesday at our park city summer Summit with our energy team. Actually will be there with the the infrastructure team. Um so yeah, we're going to hit that pretty hard next week um where I'd like to take questions before I look forward to digging in with you, on that Rick. I'm looking forward to seeing you.
Key key topic. Um, want to follow up on Jay's question, though, on on carried interest. Um, as we think about carried interest events. Obviously, it's hard to Peg, but it does feel like 1 of the macro Market.
Uncertainty might have created some some pauses there but also maybe have you comment on Leverage levels. Um public markets versus private markets. There's definitely different.
Leverages that are acceptable is, is that causing any consternation out there, too. But just maybe some more high-level view of carried interest kind of what can drive timing of those events.
Yeah like I you know the carrier obviously is a function of the portfolio activity. Um you know, we
have to balance the opportunities that we see to continue growing the companies, um, with, you know, sort of a
An obligation to ultimately return Capital to our investors. Um, and so, it's something we balance and we, uh, you know, are always thinking about, you know, is it best to continue investing and continue letting an asset grow or is now the time to, you know, look for liquidity, look for an exit and return Capital to our shareholder limited partners. Um, and so we, you know, we try to balance those too. Um, and it it's a little bit unpredictable. Um, so yeah, I don't know if Mark could be that anything but it's a balancing act.
I think what we've done Tom um and Rick um is really been very disciplined. Um you know we've we've had some processes that have created the right outcomes for LPS and then we have processes that honestly have not created the right outcome. Tom for LPS um we run you know 11 to 13 year infrastructure funds.
Everyone needs to remember that. Our first fund was back in 2019. Our second fund was back in 2022. As infrastructure goes. These are relatively younger, vintage funds and we've had exits. So I'm not terribly fussed about the velocity of which we've returned Capital. Um we've returned over 9 billion dollars of DPI in the last 2 and a half years. We do have Rick some DPI coming in the back half of this year. We have some
And then the sleeper is 5. Um you know, business is like zo and beanfield and net Omni in the UK, all have record bookings and some of that, of course, Rick as, you know, Tethered to, you know, High strand, cow low, latency dark fiber routes that are really critical for AI. So we're in a really a golden moment in digital infrastructure. This is a really interesting point in time and so we are compounding and creating carry. I, I would say from a macro perspective, interest rates have not been helpful.
Um, I think that generally speaking private equity and infrastructure investors, you know, when they're buying assets, the difference between getting a financing package at 6% and 4% is night and day. And so you know, as we think about what the interest rate environment looks like, not that Tom and I are economists and neither of us are on the FED board. But I would tell you, I do see, you know, over the next 6 quarters. I do see rate gets red, red Cuts coming, I think inflation is kind of found a safe home between, you know, 2 and 2, and a half percent. And on that basis, I believe interest rates will moderate and I think we'll see a, you know, a more dubash policy coming out of the FED that will create um some momentum and m&a and certainly for some of the platforms. We have that that we think are are valuable it's going to create good outcomes so. Well, the beginning of this year hasn't produced a ton of you know, DPI and we've been pretty busy deploying Capital. Um it wouldn't surprise me Rick over the next 18 months if we, you know
You know, if we end up divesting of, you know, 2, 3, or 4, different companies, in the next 18 months, and that will create obviously DPI, and it should create carry, uh, for our shareholders.
Makes sense, makes sense.
Um, on uh on m&a. Um I think you mentioned that you're still considering looking at um, adding platforms. Um, how's that going? What's the competition look like out there and figure, I know the answer here, but obviously press reports that there might be m&a involving you and any comments or what the board and you are focused on.
So there's, there's 3 questions wrapped into 1 there. It's a classic Rick Brandis 341 special, so let me let me unpack that. Um, so the first 1's just, you know, m&a in terms of what we're doing, you know, at the fund level. Um, right now we're investing Rick out of our third fund. Um, we just closed Yonder. Um, we've got a deep pipeline, you know, well, in excess of the size of the fund, um, we're tracking over 20 different new ideas and m&a opportunities. Our team meets every week to track those different opportunities in Asia Europe. And the US um, the deal environment is coming back to your point Rick so you know our pipeline is up about 20% versus where it was the previous quarter. We are seeing a lot of opportunity in fiber. We're seeing a lot of opportunity in data centers and we're being a lot more Discerning, um, the Cadence at which we're investing fund. 3 is very different from the Cadence at which we invested fund, 1 and 2.
But again with a pipeline well in excess of 9 billion an opportunity and a ton of co-invest down at our portfolio companies. Um we've never been busier um the the the amount of opportunity and discussion happening in our IC. Level is double what it was last year. We're very active.
Um, second Point, um Tom and myself and and Parker in Severn and the team are working on a lot of interesting ideas in the GP space that involves deploying our balance sheet. We've seen some really interesting ideas on strategies Rick, that we can add to our platform that are, you know, I would use the term you. And I have been we've you and I coined this like 25 years ago, you know, small tuck-ins like in the tower space, we see small tuck-ins in the GP space. So whether it's enhancing our private credit business, whether it's thinking about an entry point into private, Equity or power, we've been talking a lot about power. We see some really interesting ideas on backing great teams that can join digital bridge and we can grow uh and widen the aperture of this platform.
Um, and so, on that basis, we're incredibly active. We have a number of discussions happening. Um, we'd love to find stuff that's a creative Day 1; that has to be the litmus test. And then, of course, we want to see something that has a 20% IRR on a 5- and 10-year basis. So those are the parameters of how we're thinking about deploying our balance sheet.
At rumor stuff, you know, my, my famous response to this question. Rick is digit bridges for sale every day, you can go buy our stock. Uh, that's the best way to own digital. Rich is by buying our shares. Um, the second best way is to, you know, put something in writing and provide a a sources and uses and pay all cash and great. You can own our business. Um, we've attracted a lot of interest, Rick over the last 2 years as you can imagine as the largest owner and operator of digital infrastructure other GPS or trying to get into that space. Some will try to build it organically like Blackstone is done and like Brookfield is done and others will try to go buy it like tpg and blue Ale, have done. Um, our phone rings, constantly, we have a lot of conversations, some of them are are more real than others, but for the time being, you know, our focus is building the best alternative asset manager, Tethered to the digital AI economy. And so that's what I'm doing my day-to-day job right now remains super focused on building.
The best alternative asset manager in the world. That's tethered to AI digital power and all things correlated to that ecosystem. We think that's a deep, deep swim lane. We can go long, we can go fast, we're going to run at it as hard as we can. And, um, we've continued to demonstrate that we're growing. So we can keep growing organically, we're comfortably, uh, uh, we're getting very comfortable in our own skin. In terms of the last three quarters, the guidance that Tom and I put out, we think is very conservative.
Um, we've gone out. We've hit those numbers 3, quarters in a row. We're building credibility with our investor base and more importantly, we're growing and we're growing organically. I think that's what you saw on display. This quarter is a very steady uh Cadence in terms of how we're building this platform.
Thanks Rick. We'll see you in uh Deer Valley. Thank you.
The next question comes from Anthony. How with truist, please go ahead.
Thanks. Good morning guys. Um, so effective.
Good good, uh, with respect to the 3.2 gigawatts under, uh, you know, under development. Can you offer an insight into when, uh, the expected delivery timeline and you know, at what point should we expect meaningful carry from these assets?
Well look I think you know with the best answer I can give you is you know when we when we did the original Data Bank transaction and we did the original Advantage transaction, those transactions were 7 and 8 years ago. Respectively. Now those were not to be clear Anthony those were not in our fund 1.
Those were the Legacy 6 Investments that predated our funds but to be direct with you we had a really material exit. As you know last year in date of bank we had a really material exit in Vantage North America last year and in the investors that were in those vehicles that joined us 78 years ago made a lot of money and there was a ton of carried interest that was generated and unfortunately at that point in time we were not public. So as you know, digital Bridge was Private many years ago, we did a merger with another public GP and now our public investors. Get to enjoy the the fruits of that labor
Again, 2019, vintage fund 1 2022, vintage fund 2. If you take the trajectory of the exits and data Bank Advantage which were 8 years and 7 years where we generated hundreds of millions of dollars of carried interest and profits for our LPS that were not in our P. You know, not in the public store yet that's really the proxy. So as you think about that vintage of a 2019 fund and an exit timeline somewhere between 7 and 8 years. We think it's logical that in 2026 and 2027, you're going to start to see realizations and you're going to start to see Carrie, that's not episodic.
Look, my career is 32 years of owning and building these businesses, my average hold throughout my career has been just about 7 years. So, if you go back to Apex, inspector, site you go back to GTP, you look at digital Ridge. Um, you look at some of the other businesses. We built our average hold is generally, been about 7 years. That's been the sort of normal, Cadence for us. So, on a 2019 vintage fund 2026, seems to be the really magical year plus 2027, and on a 2022, vintage fund you're looking at 2029 and 2030. So, that's when we really think we can deliver, you know, meaningful, carried interest and, and DPI for our shareholders. And also, as the Vintage of these funds has gotten older, um, the percentage of which the public shareholders participate has gotten bigger. So as we raise more funds, we're getting our our shareholders. You the public shareholders more aligned to the carry story. It's going to take a little more time. Um we're not sort of promising, a ton of carried interest between now and the end of the year.
7, it should manifest itself.
Gotcha. Uh, and just 1, more follow-up. Um, could you share any updates on the buildout or traction of the private wealth Channel?
Yeah, I can. So Andrew and his team, you know, coming off of the introduction of our first, you know, private wealth product last year, which raised about a billion 1, did a great job. Um, we've launched our second private wealth product by the way. Similar exact timeline is what we did with the first product. You know, designed the product in q1 going through compliance getting registered in Europe, in Q2, which was this quarter. And then Q3 Andrew, and I, which is now we're already in Q3 he and I have had an aggressive set of meetings and time schedule with our team, um, meeting with a lot of different, you know, investment channels and meeting with different banks that want to put this product on their platform. Um, as I said instead of going with 1 1 Bank, this time around, we'll use multiple banks for distribution in Asia Europe and North America. And um you know again the ambition is very similar to the first product. You know, we we had a 600 million dollar strategy last year. We ended up raising a billion 1 that kind of surprised us. And uh that was
Very data center Centric. This product is very much AI Centric and really focused on the AI ecosystem. It's a product that private wealth investors haven't seen yet. It's very new, it's very differentiated. And by the way, when we launched the data center sidecar vehicle last year, nobody had that product on their platform. So as you can imagine, when you introduced something that's proprietary and new and you put it on somebody's platform like Goldman and flies really fast. So we're looking to get, you know, this new strategy launched inside this quarter and we look forward to taking subscriptions in the fourth quarter. And again that's why Tom and I have a lot of optimism between co-investment private wealth. You know, our Flagship product wrapping up like we said in the earnings presentation and the initiation of digital power and our real estate fund. We're, we're pretty we're pretty busy in terms of fundraising right now.
Thank you.
You're welcome.
This concludes our question and answer session, I would like to turn the conference back over for any closing remarks.
But look, um I want to thank everyone for their interest in digital Bridge. Um,
It's been a really uh, outstanding quarter for us. Um, the results were exactly uh what we told the street we would do, I think, in fact, sort of beat some of the estimates. Um, I think as we look forward to the back half of this year, we've got sort of 4 key things that we are very focused on right now, 1 margin Improvement. Uh you saw the Improvement in margins that have occurred. In terms of co-investment, you've seen some of the margin Improvement in terms of our F margins and you're going to continue to see an improved margins. As time is doing a great job on the back side of the business in terms of cost number 2, fundraising, um, you saw the fundraising numbers coming out of the quarter. We're right. Exactly on plan. We're actually slightly ahead of where we were last year up about 8% year-over-year. Cm is up year-over-year FR is up year-over-year. We're in exactly the right place. We want to be so that we can go out in the third and fourth quarter, and and really outperformed.
The third thing I would say is just around power, hopefully, everyone got the memo this 20 gigawatt, you know, power bank is critical. Um, when you're building the AI economy and you're building the backbone of the a economy. Everyone now, accepts what I said, 2 years ago, which is Powers the bottleneck.
We've been working on power for well, over 2 years. We're building those grid. Independent solutions, that allows us to go fast and show up and perform for our customers. This is differentiation.
Whether you're a benchmarking owning digital shares against a GP or owning our shares against a, you know, Digital Data Center read. Um, we think this is the place to be as you look at the leasing backlog pickup and where we're going.
Our advantage is our power bank and people need to start pricing that in to ultimately, have you think about owning digital Bridge shares because as we lease out and build out new Data Center capacity, we are not constrained others. May be, but we are not. We have the power and we don't have just 1 platform. We have 8 platforms, we get to go attack Edge, we get to attack private Cloud, we get to attack public Cloud, tier 5, tier 4, tier 3. We have every solution for our customers and now we have powered land and techno. So really having this, you know, quiver, um, with a series of arrows to go ultimately fight the fight, in the AI War. Um, no 1 is better positioned than digital rich.
Sitting down at the portfolio company level. Everyone is talking about Ai and data centers. Um, there's actually a subtext below that which is ecosystem and the growth that we're seeing in Towers.
The re-emergence of small cells and fiber and these are really critical parts of the delivery of AI.
And 80% of AI traffic will happen on a wireless device. It's not an accident that Tower demand and Tower leasing has picked up in the last 90 days. Mobile infrastructure is going to be critical and investing in Mobile infrastructure requires fiber Towers, small cells and Edge facilities. These are all components of the ecosystem, that digital Bridge owns operates in this building?
Don't sleep on mobile infrastructure. It's a really important part of the delivery mechanism of AI, and people are not paying attention to that, you need to pay attention to that.
So those are the 4 things that we're focused on, we appreciate your interest, we appreciate your support and D bridge. If um you want to spend some time with us, reach out to our investment, uh, our, our team with SE and we'll be delighted to keep talking. You about it.
Thank you again and we wish you all a great weekend. Take care.
The conference is now concluded.
Thank you for attending today.