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Operator: Greetings, and welcome to the DigitalBridge Group Inc. Fourth Quarter 2022 Earnings Conference Call.  It is now my pleasure to introduce your host, Severin White, Managing Director, Head of Public Investor Relations. Thank you. You may begin.

Severin White: Good morning, everyone, and welcome to DigitalBridge’s Fourth Quarter 2022 Earnings Conference Call. Speaking on the call today from the company is Marc Ganzi, our CEO; and Jacky Wu, our CFO. I’ll quickly cover the safe harbor, and then we can get started. Some of the statements that we make today regarding our business operations and financial performance may be considered forward-looking and such statements involve a number of risks and uncertainties that could cause actual results to differ materially. All information discussed on this call is as of today, February 24, 2023, and DigitalBridge 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 recent 10-K to be filed with the SEC for the year ending December 31, 2022.

So we’re going to start with Marc summarizing the progress we’ve made in 2022, Jacky will outline our financial results and updated guidance and turn it back over to Marc to outline what we are focused on in 2023. With that, I’ll turn the call over to Marc Ganzi, our CEO. Marc?

Marc Ganzi: Thanks, Sev, and thank you, our investors, for your continued interest in DigitalBridge. Particularly as we enter 2023 and navigate the final stage of our transformation. I’d like to start today by putting 2022 and the progress we made this year in context. Most importantly, through a dynamic macro environment, we delivered growth this year, maintaining our position as the partner of choice to top operating management teams and institutional investors that are allocating capital to digital infrastructure, which has proven itself to be one of the most durable asset classes. First, on corporate strategy. We established our asset management platform as the strategic growth driver for our business going forward, successfully building out a full stack profile with new complementary strategies.

Next, capital formation. It’s our most relevant near-term KPI. When you look forward to revenue and earnings growth, this is where you’ll find our best opportunity. Here, we exceeded our fundraising targets for the year, building up significant embedded earnings, growth going forward into 2023 and beyond. Finally, and most importantly, our portfolio continued to perform with strong leasing, driving solid outcomes for our investors. The best way to deliver growth in today’s environment is to create free cash flow from organic leasing and escalators. Again, this is what matters, portfolio performance. And here is where we really excelled. We’ll talk a little bit about that today. Next slide, please. In 2022, DigitalBridge really established our asset management platform as the strategic growth driver for our business going forward.

The fundamental shift was about orienting our company around a scalable, asset-light, high-return business model. As we’ve detailed before in our corporate overview, the returns on capital associated with Investment Management are superior and allow us to establish a leading market position of a smaller capital without having to tap capital markets regularly to grow our business. This is an alternative. We believe a superior alternative way to own digital infrastructure. We achieved a number of key strategic objectives last year that allowed us to advance this road map. First, we scaled our full stack profile, both organically with the launch of our core and credit strategies and also through M&A as we telegraph to you, our investors, with the acquisition of AMP’s infrastructure equity business.

Now rebranded as InfraBridge. This gives us a compelling middle-market capability with a digital plus investment focus. Second, we consolidated the ownership of our Investment Management platform, buying back Wafra’s minority stake so that 100% of our Investment Management earnings flow back to you, DigitalBridge shareholders. Finally, we continue to simplify our business profile. Starting with the DataBank recap. This was the first step in deconsolidating our operating segment, which represents the last phase in our corporate transformation. Some very important strategic progress this year that sets us up to win in 2023 and beyond. Next slide, please. In addition to advancing our Investment Management road map, we allocated capital strategically across 4 accretive transactions while continuing to maintain strong liquidity at the corporate level.

As I’ve mentioned before, maintaining strong liquidity in this environment is a strategic imperative to DigitalBridge. In 2022, we allocated over $800 million in cash to accretive M&A in our investment in our Investment Management profile as well as continuing to optimize our capital structure. Let me elaborate a little bit on that. First, let’s start with the Wafra stake, for a little bit under $500 million in cash, including the earnout as well as the issuance of stock. We purchased AMP’s infrastructure equity franchise next, and bought back over $110 million of common and preferred stock taking advantage of market dislocation in the fourth quarter of last year. Those investments are set to generate over $85 million in incremental pro forma earnings, which translates to EPS of over $0.49 per share.

While we deployed significant capital in 2022, we also prioritized and have maintained strong liquidity. Today, that stands at almost $700 million. Further, we continue to delever our business, reducing both investment level and corporate debt on a pro-rata basis during the course of 2022. Again, in this environment, this is essential to my battle plan. The ability to allocate capital in line with our priorities while maintaining strong liquidity and deleveraging were significant achievements this year. Next slide, please. Next is capital formation. This is really the KPI that drives future revenue and earnings growth. Here we finished off the year with a solid fourth quarter. We raised $1.4 billion across four of our strategies. That took our cumulative fundraising to $8.5 billion for the year and fee-earning equity to $4.8 billion, exceeding our 2022 midpoint target of $3.8 billion by 26%.

As that capital kicks into high gear in the first quarter of this year and beyond, you’ll see the revenue growth follow in our financials. Next page, please. So where does that put us across the platform? As of today, we’re at approximately $28 billion in FEEUM. That’s 52% higher than last year with half the growth coming from organic fundraising and the other half via our acquisition of AMP, which we just closed at the beginning of February. We’re excited about that acquisition, and we’ve already commenced the full integration of the teams and back-office operations. We’re looking forward to the growth in InfraBridge, and we’re excited about the prospects that, that business has for DigitalBridge shareholders. The other really important thing here to note is the proliferation of colors you see on the slide.

We’ve talked about building the full stack and what you’re starting to see is the manifestation of those efforts. On top of our flagship DigitalBridge Partners Series funds, we’ve gotten significant growth in co-investment, permanent capital vehicles and liquid strategies. And now we’re laying in capital for our credit and core strategies. That significant embedded revenue and earnings growth that will manifest itself in 2023. This enables us to scale and execute our go-forward business plan. Next slide, please. So the third piece that’s relevant here as we look back in 2022 is the success we’ve had across our global portfolio. On the front end, that means actively investing in new platforms on a global basis. In particular, I want to highlight 2 signature transactions that we did in the back half of last year.

Number one, the $11 billion take-private of Switch. And secondly, the $18 billion GD Towers partnership with Deutsche Telekom. I also want to call out the growth we’re seeing in Asia, both with new platforms and tuck-in acquisitions, we’ve been able to execute across existing portfolio companies in that geography. We remain excited about that theater, and we’re looking forward to investing there in 2023 and beyond. And look, all of this is enabled by continued growth in AUM and FEEUM that we’ve experienced over the last 2 years. We’re now with investments in 5 continents. So again, let me put that in a proper perspective for you. In summary, one, we beat FEEUM by 26% in 2022 against our budget. 52% FEEUM growth since 2021 and 56% AUM growth over the last 3 years.

We continue to post some of the fastest growth metrics in all of the key areas that matter in the asset management sector. I couldn’t be more pleased with our execution. Next page. So why can we post this type of growth? Simple, our investments are outperforming in the most important metric of all, organic revenue growth at the asset level. Our performance continued to be strong this quarter. With growth on a year-over-year basis and monthly recurring revenue across all of our food groups. This is the foundation for the performance of our franchise over time, deliver organic growth. On the right side, you can see the conservative portfolio debt metrics that we put in place over a year ago and have been able to manage effectively through a dynamic macro environment.

42% loan-to-value, 74% of hedged debt fixed with an average full extended maturity of over 7 years. This is conservative management of the capital structures at our portfolio companies. This was not accidental. This is a plan we put in place at the beginning of COVID. We led multiple securitizations at the end of 2020, 2021 and 2022, setting up our portfolio companies to maximize their liquidity by having fixed debt with only 1 covenant, which is a DSCR ratio and no cash traps. This is a playbook that worked incredibly well for us in 2001 and 2002 and worked very well for us in 2008 and 2009, and it’s working again. When you deliver great performance on a portfolio company level that manifests itself in good outcomes for our investors, this is really the heart of the business.

Let’s talk about a few of those outcomes on the next slide, please. The reason we’re so focused on portfolio performance is because ultimately, strong performance drives great outcomes for our investors. When we say our investors, we mean our LPs and of course, you, our public shareholders at DigitalBridge. In 2022, despite a rising rate environment and inflation, we delivered, generating realizations at attractive valuations well in excess of our carrying values and generating carried interest for you, our shareholders. These are deals we closed in the third and fourth quarter of 2022 not 2 years ago at the peak when multiples were greater than mid-20s and low 30s First Vantage Towers. We cornerstone their IPO 1.5 years ago and generated a strong return for our investors that was otherwise a challenging market, reinforcing the durability of digital infrastructure and Towers in particular.

Second, Wildstone, which is our leading digital media platform that we sold to Antin. Again, strong returns on a net basis at a substantial premium to where we maintained it on our books. And then lastly — and we continue to bring in new investors as that fundraising period stays open to the end of Q2 this year. That’s a deal where we generated 2x MOIC for our balance sheet in just 3 years, and even better return for the original investors. Again, a significant premium to where we carried the asset on our balance sheet. This is what it’s all about, investing in great platforms, best-in-class management teams, driving growth and performance and then ultimately delivering great returns for our investors and shareholders. That’s been my track record over the last 25 years.

And now as we exit future investments, you, our public investors get to share in the profits with me and our team, create alignment with you, our public shareholders. So that’s the story in 2022. Significant progress on our corporate strategy, beating our capital formation targets and continued performance at the portfolio level, all of which sets the table for a very successful 2023 and beyond. So with that, I’ll turn it over to Jacky to walk through the financials. Jacky?

Jacky Wu: Thank you, Marc, and good morning, everyone. As a reminder, in addition to the release of our fourth quarter earnings, we filed a supplemental financial report this morning, which is available within the Shareholders section of our website. . Starting with our fourth quarter results on Page 14, the company saw strong year-over-year growth, driven by fundraising in our Investment Management business and realized performance fees. For the fourth quarter reported total consolidated revenues were $301 million, which represents an 18% increase from the same period last year. GAAP net loss attributable to common stockholders was $19 million or $0.12 per share. Total company adjusted EBITDA was $28 million, which grew by 32% from $21 million in the same period last year.

Total company distributable earnings was a loss of $11 million or $0.07 per share. It is important to note that our results this quarter were negatively impacted by a $53 million noncash valuation allowance. Although we expect to have the ability to use the value of our NOLs under GAAP standards we have conservatively applied this reserve now. And as the company continues to generate growth in its earnings, it will be reversed in future periods. Digital AUM was $53 million in the fourth quarter, which grew by 17% from $45 million in the same period last year, including the recently closed transaction of AMP Capital, Switch and GD Towers. We have reached over $65 billion AUM on a pro forma basis. Turning to Page 15. Our fourth quarter highlights have trended positively with fee revenues, fee-related earnings and distributable earnings all up year-over-year when excluding the previously mentioned noncash valuation allowance.

The company raised $22 billion in fee-earning equity under management, up 22% year-over-year, and we raised $4.8 billion of fee-paying capital during the year despite a very difficult fundraising environment. Furthermore, the company continues to prioritize the optimization of its capital structure. Our current corporate liquidity sits at approximately $680 million after closing the AMP Capital acquisition. During 2022, we executed a share repurchase program and initiated a regular quarterly dividend, which we believe we have the capacity to increase in the future. We will touch on this in more detail later in the presentation. Moving to Page 16. The company grew recurring Investment Management revenue and earnings, driven by fee-earning equity under management.

The company’s share of revenues and fee-related earnings increased by 49% and 33% year-over-year, respectively, led by our increased ownership of the business following the acquisition of Wafra’s minority stake. Moving to Page 17. Consolidated digital operating adjusted EBITDA was $99 million, which is a 17% increase from the same period last year, driven by continued data center acquisitions and organic leasing growth. The company’s share of digital operating revenues was down 14% year-over-year, while adjusted EBITDA was down 15%. These reductions are attributed to the previously announced DataBank recapitalization which reduced the company’s ownership from 22% at the beginning of the year to 11% in the fourth quarter. Turning to Page 18.

We have seen continued growth in our high-margin Investment Management business. Since the fourth quarter of 2021, our annualized fee revenues increased from $120 million to $233 million and fee-related earnings increased from $73 million to $120 million on a pro forma basis. This includes the recently closed acquisition of AMP Capital’s equity infrastructure platform, which was subsequently rebranded as InfraBridge. Looking at the right side of the page, our run rate fee revenues were $250 million. This provides an indication of expected revenues and is calculated simply by multiplying committed BUM at the end of the year by the average annual fee rates. Moving to Slide 19. I will now outline our earnings guidance for 2023 and 2025. We are updating our 2023 and 2025 targets for the Investment Management business, and are providing indicative guidance on run rate earnings.

We’ve laid out 2 scenarios for 2023 based on our intent to opportunistically recapitalize and deconsolidate the operating segments, which once accomplished, frees up additional capital to allocate towards new earnings. This will shift the earnings profile of the business towards asset-light, higher margin, lower capital intensity and a higher DE as a result. We are expecting an exceptionally strong fundraising year in 2023, driven by our successor flagship fund product. Note that this is intended to represent FRE at the end of 2023, excluding catch-up fees and onetime items. Nominal earnings for 2023 will be impacted by timing of fundraising. We have additionally introduced guidance on distributable earnings now that we have begun generating positive recurring earnings, and we’ll begin to focus heavily on the bottom line going forward.

Our strong liquidity position and near-term firepower allows for opportunistic deployment, which we expect to contribute significantly to run rate earnings in addition to the potential to generate realized gains and carried interest earned from further successful exits. Turning to Page 20. We wanted to look back at where we’ve been to highlight what has been accomplished to date and how that continues to drive into the future. Back in 2018 and 2019, the company’s legacy assets generated earnings on paper, but were overlevered and unsustainable. Over the next couple of years, we’ve shed over 99% of the legacy assets and moved the company from this low margin and unsustainable business model into a high-growth, high-margin, asset-light business with promising growth prospects led by our fundraising engine.

We continue to see meaningful upside to our core model as presented, led by further M&A and capital structure optimization, with compounding uplift from continued investment alongside our LPs in our funds, which target attractive IRRs and resulting carried interest as we begin harvesting exits like we successfully completed in the third and fourth quarter of 2022. No major transformation is easy, and we’d like to thank our shareholders for the continued support and patience. And I’m pleased to say that as we continue to execute this plan, DigitalBridge will be prime for long-term shareholder success. Turning to Page 21. The company has built significant balance sheet liquidity, driven by proceeds from both the DataBank recapitalization and return of warehouse investments due to successful fundraising.

Following our recent acquisition of the InfraBridge platform for $316 million, we are strongly positioned with approximately $700 million of balance sheet liquidity. Additionally, we have further potential sources of capital, including BrightSpire shares and remaining legacy asset sales, which can be utilized to offset medium-term obligations such as the upcoming 2023 convertible note repayment, which we expect to retire with readily available cash on hand. Throughout 2023, we expect to remain well positioned to deploy capital for accretive uses. Moving to Page 22. We have continued to make significant progress improving our debt profile with our debt-to-adjusted EBITDA ratio improving from 11x down to 10x. This reduction is driven by lower investment level debt in our operating segment as a result of the DataBank recapitalization and transfer warehouse investments into our newly raised core and credit funds, resulting in a $206 million total reduction in debt.

We will pay down the convertible notes due in April and target the reconsolidation of the operating segment, leaving only the $300 million of securitization as the company’s remaining debt. As we continue to execute upon our plan, we expect to achieve leverage ratios in the low single digits. In summary, and as I’ve continued to reiterate, our company is strong and healthy, driven by our sector-leading asset-light Investment Management business that generates high-quality, predictable and long-dated fee earnings. We expect to have a strong start to 2023 as our near-term fundraising and our growth prospects remain robust. And with that, I will turn it back to Marc. Thank you.

Marc Ganzi: Thanks, Jacky. I want to finish out by laying my top priorities for 2023. This is a section we’ve done in previous Q4 earnings calls where I’d like to lay out the 3 things that matter. This year, it’s pretty simple. Number one, we’ve got a fund raise. We will continue to form capital around new and existing platforms. Two, as our promise to all of you, simplification. Getting the operating segment deconsolidated while we maintain strong liquidity. Lastly, we need to continue to perform at our portfolio companies with strong asset management through the cycle and driving free cash flow growth by industry-leading organic revenue growth at the asset level. This is a seminal to our success going forward. It’s a tried and tested formula for me as a CEO and who has presided over the good and the bad times.

The key in a market fraught with crosswinds is you have to have a simple and focused battle plan. We have that here at DigitalBridge in 2023 and beyond. Next page, please. So let’s start with fund raising. This is really going to be our #1 KPI in 2023. This is the metric that I know all of you will have your eyes on quarter-to-quarter. Our plan is to raise more than $8-plus billion of net new capital across our platforms. That will break down essentially into 3 buckets of opportunity. First, we’re going to launch our next DigitalBridge Partner Series; two, we’re going to finish raising around our core and credit strategies that we started last year, where we have excellent momentum heading into the first part of this year; Three, we’re going to continue to grow our co-invest program, supporting the acquisition of new platforms as well as providing additional capital to existing portfolio companies to fuel their growth.

Our co-invest program over the last 4 years has been really one of the standout attributes of why institutional investors want to partner with us. That incremental FEEUM is going to drive a substantial amount of high-margin reoccurring fee revenues, as you can see on the right, with little to no incremental G&A. Now this is largely the fact that we invested heavily in 2022 in systems and in people. We invested in those people to seed and grow new products, and the fruits of that labor will pay off in 2023 with high-margin FRE. We’re confident that we can achieve these targets because we continue to see very strong interest in the digital infrastructure asset class by the world’s leading institutional investors, that naturally are attracted to its combination of persistent growth, durability and the recognition that DigitalBridge is the leading investor in the sector.

Next page, please. So next up, my priority continues to be advancing the simplification of our corporate profile, which will ultimately result in the deconsolidation of our operating segment into IM. There are 3 drivers here that I want you all to pay attention to. Number one, significantly reduced complexity. This is the number one thing we talk to public investors about today. The financial consolidation of businesses that we own, a combined 12% of, in my view, distorts true DigitalBridge shareholder revenues, cash flows and capital structure, which leads to unnecessary complexity that is a tangible cost burden and makes it challenging for investors to understand what is DigitalBridge own? We’re kind of getting sick hearing that question.

So we’re going to make things simple. The second key here is the acceleration of a pure-play corporate profile. What will ultimately emerge as a lean, profitable asset manager serving secular growth markets, devoid of the complexity of assembling and then pulling apart two business models, which makes it tough on you, our investors. Lastly, we expect this initiative to unlock incremental capital that we can redeploy in order to fuel the growth in the form of incremental digital M&A and our optimization of our capital structure. We’re essentially monetizing assets at attractive multiples and then redeploying them at lower levels into businesses that compound over time. We’ve demonstrated this already with the acquisition of AMP, taking over the full stick of our IM business from Wafra, and we will do that again in 2023.

Next slide, please. So what does this look like when we finalize our asset manager profile? Well, here’s just a quick illustration of what we look like today on the left, with 2 segments. 2/3 of our earnings coming from Investment Management and 1/3 coming from the operating segment, which is predominantly Vantage SDC and DataBank. So migrating to the right side of the page, going forward, our earnings will be driven by reoccurring revenues and earnings from our Investment Management platform, supplemented by income from retained principal investments, which is the residual amount that we’ll keep in Vantage SDC and DataBank in essence as the GP of those continuation vehicles. Strategically, one of the most attractive aspects of this transition is, we are more closely aligning our capital with that of our limited partners.

The ability to align the balance sheet in private LPs with our public investors is where we’re going, and we think that symmetry bodes well for all parties, and it creates the right outcomes for all investors. Next slide, please. So at the end, this is what that simpler profile looks like on a financial basis. As you can see, the transition will reveal a fast-growing asset manager, levered to the secular growth markets in digital infrastructure. The incredible 42% 3-year CAGR on FRE is growth that we’re anticipating over the next few years. This manifests itself in very strong financial performance. We have a simple algorithm with new FEEUM generating revenue at an average rate of 90 bps and very attractive incremental margins. As I stated before, my focus go forward is to grow our profitability.

This is an attractive high-growth profile that’s simple to understand and appreciate. Next page, please. So finally, I want to address where we’re going to put the money to work and what our priorities are going forward, so there’s no confusion. As you can see, over the past few years, we’ve allocated capital to a combination of uses. I think we as a management team have demonstrated we tend to be very pragmatic about these choices. One of our biggest allocations has been almost $400 million in GP commitments alongside of our LPs. Today, we structurally allocate about 2% to 3% of the equity in each of our fund vehicles. And in the long run, especially as we finalize our capital structure optimization, we expect to allocate more capital to this high-return use case.

We’re eating our own cooking, and we like to see our capital compound at attractive rates, and we think you’ll agree with that. The second primary use is accretive digital M&A, as I stated a few pages ago. Between the Wafra transaction AMP, last year, we deployed over $500 million in cash to continue to build our IM platform and increase our exposure in this high-quality earnings stream. We’ll continue to be active here with a focus on strategic and complementary platforms where we can accelerate growth. As I highlighted in my last quarterly earnings call, we’ve also been looking at the notion of entering the private equity space in digital infrastructure, which is a space that we do not occupy today. We think there are good opportunities here and a fertile ground, and we’ll continue to build that organically and also go out and look at accretive M&A.

The third piece is capital structure optimization. Look, here, we’ve been opportunistic. We bought back preferreds last year, which we expect to continue to be a use of free cash flow going forward. In the near term, as I promised, we’ll pay down our $200 million of 2023 converts when they come due on time in April with cash on hand. Finally, repurchases and dividends. We took advantage of what we see as an attractive price for our stock last quarter, buying back $55 million, and we also retained a $0.01 dividend last year in terms of making sure that we stayed committed to our promises. We intend to continue to maintain what we call a low but grow dividend policy, and we’re going to continue to execute share repurchases opportunistically over time, measuring it against the other 3 categories of where we can put capital to work.

The key here is, as we look at our capital allocation framework is a focus in the near term on successfully executing creative digital M&A the way we have last year, and continue to rationalize and optimize our capital structure as we did last year. Over time, we’ll have more free cash flow to invest alongside our LPs and compound shareholder capital. Next page, please. So in conclusion today, let’s bring it back to where we’re going and where we want to take you, our investors in 2023. What’s my scorecard for the year ahead? Pretty simple. Here’s my checklist. One, we’re going to fund raise. As most of you know, I’m laser-focused right now on forming $8 billion in new net capital around our DigitalBridge Partner core and credit strategy as well as co-invest.

Two, simplification. We’re going to finish our transformation with the deconsolidation of the operating segment and continue to delever our business. And lastly, portfolio performance. Continuing to invest in high-quality digital businesses, driving free cash flow through organic growth and investing in the best management teams in the digital infrastructure ecosystem. Taking a step back, I believe that these are really our control variables for 2023. These are the things that we can go out and execute. And my belief is, as we execute on these 3 initiatives, good things will happen at the company. And most importantly, good things will happen for you, our shareholders. With that, I want to thank you for listening to our earnings presentation this morning.

Now I’d like to turn the call back over to our operator to initiate our Q&A session. Operator?

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Operator: . Our first question is from the line of Ric Prentiss with Raymond James.

Brent Penter: This is Brent on for Ric this morning. First question, you talked about M&A in the IM segment. With AMP deal done, what new swim lanes might a target fit into to expand your offering? You mentioned private equity. What else should we be thinking about there?

Marc Ganzi: It’s Marc, and thanks for tuning in. So I think we’ve been pretty prescriptive about that. I’ve made it very clear that digital private equity is a high priority of us. There are many firms that are in middle market, digital private equity that you’re investing in digital infrastructure and TMT and also software and SaaS models. We think there’s a couple of really good teams out there that we have a lot of respect for. We’re out talking to all of them just like we would be in our traditional investment management space. We talked to all the management teams. And so we’ve been spending the last year getting to know a couple of those management teams. And we think there’s a good opportunity to add that part of our IM business through an acquisition.

And that’s why we’ve been harvesting the cash so that we can be opportunistic. What we’ve also said is, I think I’ve also been pretty prescriptive about the importance of renewable energy and the ability to power digital infrastructure with renewable energy. We’ve seen that case study, full force at Switch, where we’re outperforming our leasing projections, our full year of leasing in ’22 exceeded our 3-year guidance, and customers want to be in data centers and they want to be around digital infrastructure that has renewable energy. So we’re spending a lot of time around thinking about how we can grow the InfraBridge platform and continue to add strength in the renewable space. So those are really my 2 areas of focus today is really private equity — digital private equity middle market and renewable energy.

We’re very focused, got a number of targets, and obviously, we have a guide in terms of what we think we’re going to do in M&A. We did well last year with the Wafra and AMP deals. And I think this management team, those that follow me know that we’ve got a pretty rich history in doing M&A. So our confidence and conviction level around that is pretty strong.

Brent Penter: Got it. And then on the DE guidance, what kind of carried interest is assumed in that guide? And is that sort of the difference between the upper end and lower end of the guide?

Marc Ganzi: Yes, I’ll defer it to Jacky on that.

Jacky Wu: Great. The biggest difference in the guide really in the range is driven by the fundraising range, but we have not assumed carried interest in our guidance. So that would be incremental upside to our numbers.

Brent Penter: Okay. And then Marc, you’ll have a lot of funds to deploy if you hit this guide. And then you also have some portfolio codes that might be nearing time to exit. So could you just give us an update on how you’re viewing M&A multiples right now globally, what looks attractive? What looks less attractive?

Marc Ganzi: Yes. So look, it’s kind of the tale of 2 cities, right? I think the high-quality digital infrastructure assets are still hanging in and are holding their value. And I think what you’re seeing is — and when I say high-quality, businesses that have contracted cash flows greater than 5, 10, 15 years that are more than 80% exposed to investment-grade counterparties and businesses that have securitized debt, long-term capital structures that are portable. We proved that in the Wildstone transaction. We proved that out in the DataBank transaction. We had portable capital structures, and we had high-quality assets with long-durated cash flows. I think what you’re also seeing is the tale of the other side of the city, which I sort of telegraphed about 2, 3 years ago, which is you have a series of generalists infra funds that went in, bought a lot of fiber that was facing consumer that did not have long-term contracted cash flows, which we were very clear we were staying away from.

So the last 2 to 3 years, we’ve been focusing on quality, the Deutsche Telekom transaction, Switch, Landmark. These are businesses that have high exposure to investment-grade counterparties and long-term leases, and that’s where we deployed capital. We went left and we played risk off. The rest of the world went right and paid high multiples for residential fiber and other businesses that don’t have long-term cash flows. So we’ve always been very careful to stay away from businesses that have consumer-facing graphics and are built on hope dividends. We don’t invest on hope dividends. It’s just not what we do at DigitalBridge. And so it comes as no surprise in the third quarter and the fourth quarter that both of our funds, DigitalBridge Partners 1 and 2 moved up in value while we saw other counterparties and private equity and other forms of investing in the space, either at par or move down.

And I think that was largely because of our disciplined investment framework, which we continue to execute today. So the setup as we go forward, is really interesting. We think there are good opportunities to play in kind of 3 types of investment opportunities as we form all this new capital. One, we do think there is dislocation. And when there’s dislocation, you can invest, you can take advantage of a re-mark to market. And we’re certainly seeing that in the fiber-to-the-home space, and we think there’s going to be good opportunities to not play in that sector in the mid-20s, but play in that sector back down again in the low teens, if not even single digits. So — we’re looking very carefully at some of those businesses because we think they’re finally reflecting their value.

And maybe that’s the right time to enter fiber to the home or resi fiber. We’ll continue to look at Towers on a global basis. Towers have always held up very strong in these sort of turbulent macro environments on. Got a number of tower deals we’re working on. We still like data centers. We like private cloud. We like what we’re doing at Switch. We certainly like what we’re doing in public cloud or Vantage, and we have numerous data center opportunities to execute in this fund focusing on private and public cloud narratives. Another area that I think that we’re seeing a really good opportunity is in network infrastructure that is based on SaaS models. So software-defined networking businesses that were trading in the mid-30s are now trading back down in the low teens again.

That’s an interesting opportunity as we think about what makes networks tick in the future. And then, of course, we’ll also look at digital media assets. We had a great experience with the Wildstone acquisition. The Outdoor Media business is coming under some pressure right now like other sectors. So it’s a combination of value shopping high-quality shopping. And then the last of the 3 legs to the stool where we’ll invest is what we call backing management teams and new ideas. It’s something that we’ve done time and time again. We’ve stood up new businesses, new ideas, and we’re not afraid to do that with the right management team. It has to be sort of best-in-class. So a lot to do right now. We’ve got a very big pipeline of new ideas that we’re prosecuting for our new DigitalBridge Partners strategy.

And we’re pretty optimistic about the things that we’re doing right now.

Brent Penter: And last one for me. When should we expect the 2023 Investor Day?

Marc Ganzi: I’ll leave that to Severin White. Severin, do you want to answer that question?

Severin White: Yes. I think we’re looking potentially at June. So more to follow on that.

Operator: Our next question is from the line of Eric Luebchow with Wells Fargo.

Eric Luebchow: Just wanted to get an update on the deconsolidation of DataBank and Vantage SDC. Obviously, you’ve had a successful recap thus far of DataBank. Could you kind of remind us what you have left to do there? And maybe do you think you can continue to achieve the, I think, 30x multiple that you did on the initial stages of the recap? And then separately, with Vantage SDC, what type of appetite do you see out there today from investors for more stabilized data center assets like Vantage SDC versus more of a development platform like you have in the fund business?

Marc Ganzi: Yes. Thanks, Eric. Those are great questions. Let’s start with DataBank. I think that’s kind of the easier one. First of all, since we announced the transaction last June with Swiss Life and EDF, the headline multiple was close to 30x. What I’m pleased to tell you is that multiple today is not 30 times. The business, as you saw from Digital Operating results, which were very strong year-over-year. DataBank has massively outperformed its business plan. In fact, had its best quarter of leasing and company history in the fourth quarter. And today, the subscription period on that fund, remember, that’s a continuation fund, Eric. That stays open until June 30. So investors can subscribe all the way to June 30 at the initial share price.

So investors that have been patient and have continued to look at the company, have the chance to invest and clearly now have the chance to invest in the lower to mid-20s type multiple. So the business has managed to take that entry multiple down from 30 to 28, now closer to 25 to 24x. We’ve had spectacular execution at DataBank, I’m pleased to say. So what we did, Eric, is we had a number of different initiatives in flight with Switch and Deutsche Telekom. So we actually turned off the DataBank fundraising in fourth quarter. We’re reigniting that fundraising starting March 1, where we’ll take subscriptions again, and we’ll take subscriptions all the way until the end of June 30. We do have roughly about 22 investors in the data room doing the work.

We feel really good about our ability to raise another $600 million there. That gets us that $600 million, if I’m correct, Jacky, that takes us from about 12% down to 6% or 7%. You’ll have to give back me up on the numbers here on the fund raising.

Jacky Wu: Yes sure, no worries. We’re at around 11% right now, and that will take us a little under 8%.

Marc Ganzi: So really high conviction, Eric, around DataBank, largely because the business is just performing at an incredible pace. So we’re pretty optimistic that we’ll get that done here in short order. Vantage SDC, same story. It’s a business that continues to execute against its plan. Really hard to find at that entry price and at that cap rate, the quality of the cash flows of domestic U.S. close to 100% investment grade, 15-year leases with investment-grade cloud players. And as you can imagine, other parts of the world, maybe not U.S. pensions, but certainly Asian pensions, Australian pensions, Middle Eastern sovereign wealth funds between Asia and the Middle East and Australia, we’re finding that there’s a lot of appetite for high-quality yielding assets.

And again, the entry price would be the same as it was when we initiated that continuation fund, as you know, Vantage SDC sits in a continuation fund already. And so we’ve got very strong momentum there. Part of my team is in Australia this week, fundraising, and some of my team next week is in Asia and some of my teams in the Middle East. So we’re constantly fundraising, Eric. It’s really candidly our strength. And that’s why we feel really confident about the 2023 guidance that we’ve laid out. And once again, that guidance is $8-plus billion of new fundraising just to be entirely clear with everyone. We have an expectation that we’re going to beat that target. So that’s the update on 2 of those. And by the way, if we sell a stake in Vantage SDC again, call it, if we sell what Jacky was sort of telegraphing we might sell half that stake, which would take us from 12% to about 6%.

Do you want to give us the math on that?

Jacky Wu: Yes, sure. So we’re a little over 13% ownership of Vantage SDC now, and under GAAP considerations, we would get to below 9.5% to deconsolidate our position. Obviously, we’ll be opportunistic with any sort of recapitalization there.

Eric Luebchow: Got you. That’s helpful. And just one more for me. Marc, there’s been some debate in the fixed income community, so maybe you could help clear the air around the outlook for Zayo within your portfolio just based on where the bonds are traded earlier this year. So maybe you can just give us an update on the cash flow and growth outlook and the performance of that fairly large portfolio asset, that would be helpful.

Marc Ganzi: Yes, sure. We’re certainly under no obligation to talk about that asset, but I really like you, Eric. But anyway, we’re forecasting roughly 5.5% to 6.8% organic net growth this year at Zayo. We had a very, very strong fourth quarter, strongest revenue bookings in the company’s history in 2022 and the strongest quarter of net installs in the company’s history in Q4. We have spent the last 2 years rebooting the management team. Candidly, redoing the back-office systems, which needed a lot of work in repair. We put more CapEx into the physical plant, just renovating certain routes and building redundancy and strength over $120 million invested in the last 2 years that was at our election, it was discretionary CapEx to make sure the network is strong.

And then we’ve got a best-in-class sales team led by Andrés Irlando. So we’ve made all the right moves. We’re starting to see the results. And we’re very confident in that company. The routes that Zayo has and the customers it has are pretty indelible, really difficult to replicate what Zayo has on a nationwide basis. And so we know in time, the network wins and we know the quality of the cash flows and the quality of the customers win. I think the business had a set of headwinds. We knew that when we underwrote the deal. We had a battle plan to fix it, and that’s what I’ve been focused on for the last better part of 3 quarters since the second quarter of last year. It’s one of the Boards that I personally sit on and investors can go to sleep at night knowing that I’m very involved in that business day to day with Steve Smith, and I quite enjoy it, and I like the management team, and I know where we’re going, and it’s headed in the absolute right direction and the financial performance will show that this year.

So we have strong conviction in the bonds.

Operator: The next question is from the line of Jon Atkin with RBC Capital Markets.

Jonathan Atkin: So just two questions on capital formation. Can you talk a little bit about how your discussions with investors has changed just given what’s going on in kind of the macro economy and financing costs and just overall capital markets conditions? And are you expecting to get largely kind of repeat investors or folks that are new to the family or new to Digital? Just trying to get a sense of how you get to that target and how the discussions maybe this year might be different from what you’ve had in prior cycles? And then on the simplification of the capital structure. I think you kind of alluded to this earlier, but maybe you could just to repeat, what are the procedural milestones to keep in mind that might influence the time line around deconsolidation?

Marc Ganzi: Let me take the easier one, which is deconsolidation. I think we just laid that out. We’ve got teams in place right now that are talking to investors on both assets. I think DataBank sort of comes first. Vantage SDC comes second. We’ve committed to deconsolidating both of those assets this year. I’ve given you a June 30 time line on the DataBank fundraising. That’s when the subscription period ends in that continuation fund. And we’ve got 22 logos in there in the data room doing the work. $600 million is the target. Verbal commitments right now are almost quadruple that, just to give you a sense of our conviction level around the DataBank process. The Vantage SDC process sell down there just started. And there, it’s a combination, as I said, sovereign wealth funds, pension funds, particularly Japanese, Korean and Australian pension funds, roughly about 14 logos have been invited to look at that.

And what’s also interesting right now, if you follow fundraising, Jonathan, you’ll know that there are literally hundreds of billions of dollars sitting on the sidelines in secondary funds. So folks that do secondaries like Partners Group, Blackstone and Ardian, who are quite expert at that are also looking at the opportunity. It’s a really high-quality set of assets. And what I’ve always found in my line of work, Jonathan, is when there’s hundreds of billions of dollars sitting on the sidelines chasing very few deals that are of high quality, usually you win. So we’ve got secondary folks looking at it as well, not at a discount to be clear. And our conviction level around just the quality of the Vantage assets is quite strong. So I can’t give you a specific time line.

We haven’t put a time line on that process yet. But again, we have guided that we will get both of these assets deconsolidated. And look, at the end of the day, people need to understand the motivation of the deconsolidation. I think we’ve been hearing from investors that they want us to simplify the business and by deconsolidating and moving the 2 operating assets to IM is going to be met with a lot of support. I’m not doing it because investors are telling us we need to do it. I’m doing it because I know we have to delever our business. And I think some of the comments that Jacky made about leverage earlier today are absolutely seminal to what we’re doing, maintaining high liquidity and getting our target leverage sub-4x as fast as we can.

And by having low leverage and high liquidity, that’s how you play a market like this. That worked for me back in 2002 and 2003, and that worked for us in 2009 and 2010. It’s a playbook that works. So we want to be known as the digital infrastructure investor with low leverage, a lot of liquidity and firepower to go play offense, which we absolutely 100% intend to do. Let’s switch gears to your first question, fundraising and what’s going on there. We had about 80 investors, Jonathan, in our second fund, DigitalBridge Partners II. As we launch our new DigitalBridge Partners Strategy, we’ve already been out talking to those investors, our Fund II investors over the last 120 days. I’m pleased to say out of those 79 investors, not 1 of those investors had said no to our next strategy.

That’s pretty stunning. Now I don’t expect we’ll get 100% renewal on those investors, but we are anticipating about an 80% renewal rate on that $8.3 billion of capital, but also accepting that the denominator effect will make checks about 20% to 30% smaller. So where does that lead us? If you run that calculus at a 25% smaller check and an 80% take rate, you still have some fundraising to do. So we’ve been doing that. We’ve been out for the last 120 days, we’re in dialogue with 200 new logos. That’s not a typo, 200 new investors that we have outreach to that have verbally indicated they have interest of about $30 billion. Keep in mind, we’ve got 17 salespeople globally. Kevin Smithen and Leslie Golden are the best in the business. We fund raised 24/7.

We have very sophisticated back-office tools that enable us to predict what investors are doing? Where are they in the process? What the probability that they get through diligence? What’s the probability they get to IC? And what’s the probability they get to yes? So we put that all into the supercomputer, and we get a pretty good outcome for fundraising this year. Now a lot can happen. We accept that the environment is incredibly turbulent, it’s choppy, investors have choices. But we also know that investors are not walking away from digital infrastructure, Jonathan. They’re not walking away from renewable energy, and they’re not walking away from credit. So renewables, digital infrastructure and credit are the strategies that are working.

That is where investors are putting capital to work. We had successful fundraising in January. We’ve had successful fundraising in February. We’re obviously not at liberty to report those results until the next quarterly earnings. But again, I want to be clear with everyone on the phone today, we have very strong conviction around what we’re doing in fundraising. And we’ve got the data and the dialogue and the sales team to support that. So again, I think if you’re taking anything away from this call is you have somebody who has a lot of conviction in our fundraising now based on the various discussions we have going on. Does that help, Jonathan?

Jonathan Atkin: Yes, it does.

Operator: Our next question is from the line of Jade Rahmani with KBW.

Jade Rahmani: A question about fundraising. Does digital infrastructure fall within real estate or infrastructure and does that designation make any difference in terms of the outlook?

Marc Ganzi: It’s infrastructure, right? I mean you go back to DigitalBridge Partners Strategy 1 and Strategy 2, I’d say strategy 1, Jade, 25% of the capital was coming from real estate buckets. You pivot to Strategy 2, $8.3 billion, about 10% of that capital came from real estate allocators. And as we look forward and think about what we’re doing with the new strategy, I think it’s pretty much all infra at this point. I don’t think real estate investors are looking at our series of fund products as real estate. I think it’s — the conversations we have, Jade are with the head of infrastructure, the CIOs of real assets, I mean, our connectivity with investors now is pretty strong. And I think what we found is that our home for our capital is infrastructure, unless, of course, we’re out raising money for credit, we’re out raising money for our venture growth strategy or liquid securities products.

Those are different — those are obviously different conversations. But in our core DigitalBridge Partners flagship strategy, it’s real assets and underneath that, it’s infra.

Jade Rahmani: So does that create an opportunity to broaden the focus to overall infrastructure, there could be synergies and fundraising with respect to all the LPs you’re talking to? Or do you think that’s more of a risk to dilute your focus?

Marc Ganzi: No, I think — look, we obviously are very skilled at fundraising. We’ve almost tripled the size of our fundraising team. I mentioned on the call, we did invest a lot in SG&A last year because we’re building a growth engine, Jade to get to $150 billion of assets under management. I’m guiding to $275 million to $290 million of FRE in 2025. And the way we get there is by fundraising. And the way we get there is building scale in our credit product, building scale in our core product. Certainly, InfraBridge is a big part of our growth strategy as well. We like the Digital plus strategy. We like what we’re doing there. Certainly, like the team we have in place there in terms of digital logistics and renewable energy.

There’s a lot of room for us to grow there. We picked up 5 world-class fundraisers from InfraBridge, bringing our total team to 17 people globally, and they’ve got a bunch of logos that we didn’t have, and we’ve got a bunch of logos they didn’t have. So the synergies in the InfraBridge deal are yet to be entirely apparent to the street, Jade. But I can tell you, we’re fully integrated day 1, Jacky Wu and Ben Jenkins and Liam did a great job integrating that team into our operations. So the day we closed, everybody was on the same page for fundraising asset management and back office and accounting. And so we’re hitting the ground running on InfraBridge. It took a little longer than we would have liked to have closed the transaction, but it really just gave Jacky more time to integrate the back office side and it gave Liam and Ben more time to integrate the Investment Management team.

So clearly, strong synergies in fundraising now, a much bigger team. A lot of interest in what we’re doing, not just in DigitalBridge Partners in our flagship strategy, but also some of the other co-investment vehicles and other strategies that we have going on right now. We’re — we think we’re in the right place. We’ve got the right dialogue going and now it’s just time to close some capital, which I think we will, just albeit at slightly smaller check sizes this year.

Jade Rahmani: And just the last question on the overall environment. Does rationalization that’s playing out in the tech sector more broadly, create any flow-through impacts to the underlying businesses. Will that slow the growth rate and have any impact on LP appetite to invest in this space?

Marc Ganzi: So look, what we have is the results from the fourth quarter, which we shared from you today. Organic growth in 2022 is at record levels across fiber, towers, small cells and data centers. Certain data center verticals are growing faster than others. I think I highlighted this in my PTC conversation in Hawaii. We see private cloud being massively on the rise. And certainly, renewable powered private cloud is on the rise because of just cybersecurity attacks, people wanting that Tier 5 security that Switch has. And certainly, there’s been no abatement and leasing advantage. I mean it’s a real out-leased Equinix and the outleased Digital Realty last year on the public cloud side. So we’ve got the right CEOs. We’ve got the right management teams.

And certainly, they’ve got access to capital. We did a very good job securitizing most of our portfolio companies, as I highlighted in our earnings deck. By having only 1 covenant Jade, which is just a DSCR ratio and no cash traps at those securitizations, our companies are minting free cash flow. And so what we’re doing is harvesting cash down at those 27 digital infrastructure companies. We’re reinvesting back into the businesses, not pushing dividends out to LPs. We think this is the right moment to reinvest in new towers, new data centers. We’re seeing higher rents. Data center rents are up 12% in the public cloud. They’re up 6% globally. And so we’re seeing higher rents, and we’re seeing better returns on a single tenant basis. So we have fully funded business plans for 2023.

We do see CapEx being trimmed by the mobile carriers. We do see CapEx being trimmed in enterprise spend, and we do see CapEx being trimmed in cloud. But all that being said, all of our business plans are pointed to very strong high single-digit, low double-digit organic growth next year. So this is the narrative, Jade, that played out in ’09 and 2010 for us. We had strong liquidity. We lowered our leverage. We had fixed debt in the form of securitized debt and it enabled us to play offense. We’re running that same playbook, not just at one company like we did at Global Tower Partners, but we’re running that playbook at 27 companies. So you’re getting a force multiplier at DigitalBridge, you’re getting to global scale, as Severin said, 5 continents we’re operating today.

It’s a truly remarkable business, and we’re going to see the benefits of having scale, having strong liquidity and having great customer relationships. We anticipate a very strong 2023.

Operator: Our next question is from the line of Michael Elias with Cowen & Company.

Michael Elias: Two, if I may. First, just as we think about the incremental capital that you’re looking to deploy, I know you talked about the verticals that you’re looking to invest in. But maybe if you could just double click on the geographies that are of focus. I believe you flagged Asia earlier on the call, just thinking about how you’re prioritizing deploying capital across regions? And then my second question for you would be one of the key themes at least for the data center space has been a rise in pricing, Marc, which you just talked to, driven in par by supply chain and then also tighter occupancy. Any color on how you see pricing evolving across the verticals of com infra and if you think that could be a further tailwind for your businesses this year?

Marc Ganzi: As always, Michael, good question. It’s very thoughtful. Let’s try to take the second one first because it’s top of mind. Our business plans in 2023 are not predicated on higher pricing to customers. Let me repeat that. We are not predicating our growth results on just making our customers pay more. That’s a bad playbook. Had I run that playbook in ’02 and ’03 and ’09 and ’10, when the markets turn and get good, customers don’t come back to you. So we tend to be very pragmatic about how we price. We don’t want to gouge. We certainly don’t want to be someone who shapes the price and then the customer gets angry, and when their capital structure recovers and they’ve got more liquidity and their CapEx spending accelerates, we get left behind.

I’ve watched other publicly-traded digital infrastructure companies do that. and they’ll admit, they won’t admit it today. But back then, they would have admitted, they suffered for it. So we’ve learned from that past, right? And you’ve got to always look at the past and look at these down cycles, and this is where you pick customers up. You don’t step on them. And I’m very clear about this with all of our 27 CEOs. There’s a right way to behave. There’s a right way to treat your customers. And there’s a reason why we had incredible growth in the dot-com crash and the mortgage crisis because we knew how to play those cycles. We’re doing the same thing today. We’re putting customers first. We’re taking care of them and the growth rates will follow.

Yes, we have moved up pricing. I don’t want you to walk away from the conversation saying, we haven’t moved Towers rents up. We haven’t moved data center routes up. Fiber rents actually have stayed pretty static and small cell pricing has stayed pretty static. But in Towers and in data centers and select verticals and select markets where we have a unique permitting position or we have a unique power position, Michael, we are pricing that space accordingly as one would expect. So I do see good growth in ’23. It won’t be as good as the growth was in ’22. Looking at the January leasing results from all the portfolio companies, I’d say we’re on plan, mostly a little bit slightly ahead of plan, but you can’t read much, Michael, in the first quarter.

I think the fun conversation we’re going to have is over the summer, checking in with us at the sort of half pole, right, halfway through the race, where are we? I think when we’re out at your conference in Boulder or some of the other summer conferences, it will be interesting to check in then and figure out where are we against plan? How is leasing? Where are rates? Where is CapEx spending? Those are all things that we’re going to monitor pretty closely. And the good news is I get to talk to you 4 times in a year like this, and so I’m always pretty transparent with you, and I’ll share with you what I’m hearing. Does that make sense?

Michael Elias: Absolutely. Appreciate those comments. And then just any color on geographies where you’re focused on deploying the capital.

Marc Ganzi: Yes, yes. So look, I mean, we’re always shifting a little bit, right? There was — if you look at DigitalBridge Partners 1 and DigitalBridge Partners 2, DigitalBridge Partners 1, we put 20% of the fund in the LatAm. We put about 40% to 45% in Europe and about 30% to 35% in the U.S. Then that shifted in Fund II. We decided to go — we sort of took risk off in Europe, put about 30% to 35% there. We moved up in the U.S. and Canada to close to 42%, 43%. We did very little in Latin America, about 5%, then we did 20% in Asia. So Asia was a big part of our strategy in DigitalBridge Partners 2. I think for this year, from an allocation perspective, as I highlighted on the call today, I like what we’re seeing in Asia. There’s some technicals there that we like.

And so we’re going to continue on the same cadence in Asia. We’re seeing good opportunities. We’re seeing a lot of our customers are looking to sell infrastructure. And keep in mind, a lot of the carriers sold their infrastructure, Michael, 15 years ago in the U.S. In Europe, they started selling 5, 6 years ago. And Asia is kind of the last big theater where you’re going to see a lot of infrastructure to be sold. So I think that’s me telegraphing that a little bit. I’m still a little risk off on Europe. I think the way we play Europe is through dislocation. I think you’ve seen a couple of fiber-to-the-home bankruptcies in the last 2 to 3 weeks. We’ve been looking around some of those. So in Europe, we’re going to be a little more opportunistic.

I don’t think we pay up for high-quality platforms in Europe. I think in the U.S., it’s business as usual. I think we’ve been pretty consistent across the last 2 funds about what we’ve done in the U.S. and we like the U.S. We like the technicals. It’s our home market. We like some of the things we’re seeing in Canada. I wouldn’t give up on investing in Canada. And then I think in Latin America, as they start to emerge from some of the recessions they had 5, 6 years ago, we do like some of those markets. But again, a very limited amount of capital. I don’t see us going crazy in LatAm. But I think the big winners over the next 2 years for us will be here in our home market and in Asia are really the 2 standout areas for geography, Michael.

Operator: Our next question is from the line of Dan Day with B. Riley Securities.

Daniel Day: Thanks for all the color on the deconsolidation of DataBank and Vantage. I think the other piece of the simplification pie that we’ve spent less time on is some of the noncore assets you plan to divest, like the BrightSpire shares, some of the other kind of legacy Colony Capital stuff just kind of laying around still. Any update on the time line for divestiture of those? Is that going to be a 2023 event? And would that have any impact on the DE guidance that you gave?

Marc Ganzi: I think we’ve been pretty clear about that as well that this would be the year that we’d finished divesting of all the noncore assets. That time line remains unchanged. That cash can be put to good work on digital IM M&A, and that’s what we intend to do, rotate out of stuff that doesn’t have a high IRR, high yield. So we’ll focus on that. And then it also gives us the opportunity to put more capital into our new funds because that’s working. I mean that’s clearly the right strategy for us is to continue to invest in digital. So I think what you’ll see is, by the end of this year, an incredibly clean, low-levered, sector-focused asset manager that’s putting up incredibly strong FRE numbers. And our goal is, as usual, is to beat our guidance.

I think that something this management team has long had a rich history of doing is beating our guidance. So — but look, on BrightSpire, Jacky has been running with that. And I’m sure, Jacky, any incremental color you want to give on BrightSpire?

Jacky Wu: Yes, sure. So we’ve always said we’d be responsible sellers, but Marc really said it. It’s noncore and our focus this year is to be opportunistic with selling — to divesting those to the degree it makes sense for our shareholders and the price that we’re going to get for it. But — and then the other legacy Colony assets, really the principal 1 is a seller’s note associated with health care, which we will continue to work with Highgate to monetize that are appropriate. And the other investments are pretty much gone. So we’re really left with just those two.

Daniel Day: Awesome. And then I appreciate the color on the common stock repurchases in the fourth quarter. Just wondering if you could give an average purchase price on those for 4Q, maybe how active you’ve been after quarter end and if you have been active in ’23 so far, whether that’s been the common, the preferred, the mix and how much is on the authorization as of today?

Jacky Wu: Yes, sure. It was basically at around $13, and we will continue to work with our Board to see where it makes sense to be more opportunistic with taking the rest of it from a share buyback perspective.

Daniel Day: Okay. So just to be — you’re not commenting on any repurchase activity after quarter end. That’s fine if you are. I just wanted to make sure.

Jacky Wu: We will not comment on that at this point, but if we do have an authorization, I’ll have to do so.

Operator: Our next question is from the line of Richard Choe with JPMorgan.

Yong Choe: I wanted to follow up on the potential investments in Asia. Do you see more opportunity with Towers, data centers or Fiber? And would it be mainly carrier sales or investing in companies that are thinking about building? Just wanted to get a little more color there.

Marc Ganzi: Yes. Thanks, Richard. Look, you wouldn’t be surprised to hear this, but it’s a little bit of everything, right? Some of these are carrier partnerships like we have with Deutsche Telekom, like we have with Liberty in Europe. Some of these are straight acquisitions. Some of these are divested assets, potentially a carrier divesting of their long-haul suboceanic network. It could be edge data center’s we’re working with a specific customer. It could be — it’s a variety of things. I don’t want to get too specific because it’s obviously pretty strategic. We like to kind of run dark and silent. And then when we make our move we announce the deal. But — as I said before, Richard, the playground in Asia is very fertile.

It’s fertile from a customer perspective, from a carrier perspective. It’s extremely fertile from a fundraising perspective. We’re seeing incredible interest in what we’re doing because we did raise a lot of capital, Richard, in Fund I and Fund II out of Asia. And we’re seeing a lot of interest in what we do as Asian investors, as you know, Richard, tend to be pretty conservative. So they looked at our first strategy, they looked at our second strategy. They generally like to invest in later-generation strategies. So the big kind of ’23 surprise for us will be the fundraising in Asia and we now have 3 full-time sales people in Asia, which we had — literally a year ago, we had none. And they are 3 absolute rockstar fundraisers. So we went from having literally not a strong presence in that region to having a leading presence in that region from a fundraising perspective, and I’m pretty excited.

I’ve taken 2 trips Asia in the last 90 days. I’ll take 2 more trips to Asia in the next 120 days, and we’re pretty buoyant about what we’re seeing there from a pipeline perspective, from a fundraising perspective. Our Singapore office has 17 full-time investment professionals now. So we’re — we feel like we’ve got the right team on the street, right opportunity set and we’ve got the right capital information. And those are the ingredients you need to be successful.

Yong Choe: Great. And you’ve mentioned this in the bits and parts throughout the Q&A. But just to circle back, I think there’s some perception that you paid a very premium multiple for Switch. And it seems like given how it’s performed, maybe it’s not nearly as high as people assume. Any kind of update there that you can provide that you want to clarify on that?

Marc Ganzi: Yes. Look, I gave a pretty pointed speech in Hawaii about that, Richard, you should go check that out because it’s pretty detailed. But I’ll give you the highlights of that speech, which is we’re 3 years ahead of leasing where we thought we’d be. That’s kind of all you got to know. We thought we were going to do 16 megawatts, we did 77 megawatts. And the pipeline has quadrupled since we bought the company. And we just — it’s one of those stories, Richard, that is sometimes the company just performs better when it’s private versus being public. They were constrained of capital, as you know, being a public company. The management team had a tough time. It’s not a business you can run quarter-to-quarter. Just not built for public market cadence.

And bringing it private allowed the company to make the right investments, the right long-term decisions and it’s paid off really well for us. We just had a Board meeting this week, and the results are pretty outstanding. We’re in this business for nowhere near 30x anymore. Whoever is putting out that narrative, it just doesn’t have the right information, and I’ll leave it there. Business is performing well. Renewable energy for the major Fortune 100 enterprise companies for the U.S. government and for cloud players, it’s not a nice to have, it’s table stakes. These guys want to be in data centers where there’s 100% renewable energy. And the last thing I would just say is Switch is in places. We’re the alternative to markets that are now shut down and have no power.

So — for example, Grand Rapids has turned out to be a nice alternative to Northern Virginia. Reno is the alternative to Silicon Valley. Austin, Texas is the alternative to Dallas and Houston. And so we’re in really good high-growth markets. We own the land. We control our real estate. We’re fully permitted for the next 11 million square feet of data center space, and we have 1.5 gigawatts of unused power. So the combination of having a lot of land, a lot of rentable square feet and a lot of power and being unconstrained has put us in a huge advantage in some of these markets. And so that’s why the business is crushing it today. And so we’re going to continue to see outperformance in that asset. I’m really excited about what we’re doing at Switch.

And it’s a blueprint for epically what we do in private cloud in Europe and what we do in Asia. So we’re not stopping there. We think there’s — like we did with Vantage. We took Vantage to Europe, we took Vantage to Asia. The market for private Tier 5 renewable power data centers is a really interesting product. And so we’re looking at that into the future. Where do we take Switch next.

Operator: Our next question is from the line of Matt Niknam with Deutsche Bank.

Matthew Niknam: But just two quick ones, if I could. First, on InfraBridge, if you could just talk about some of the incremental infrastructure opportunities in the mid-market, the deal opens up for DigitalBridge and maybe some of the near-term synergy it provide to your IM business. And then just secondly, maybe for Jacky, the targets you put out imply corporate overhead goes from $50 million this year to about $40 million in 2025 at a time when we’re obviously seeing meaningful inflationary headwinds and the business is scaling. So I’m just wondering if you could talk about your confidence level and actually shrinking those corporate overhead costs.

Marc Ganzi: Well, look, I think Jacky and I are in the corporate overhead discussions together. The CEO and the CFO have put out a guide that we’re going to take $10 million of cost out of the business this year. We’ve already taken steps to do that. You’ll see it on a run rate impact by the fourth quarter, but it’s just taking prudent measures in a variety of directions. We’re trimming some of our investment team. We’re trimming some of the back office team. Jacky has done a great job. We’re getting really good synergies now in terms of the financial reporting on the fund accounting side. We had some duplication of efforts there when we did the merger a couple of years ago. And I give credit to Jacky and his team, they’re pulling a lot of cost out of the back side of the business, and we think we can continue to pull more cost out of the business.

Bonuses are down year-over-year. We didn’t get it done. So you’ll see compensation is going to be down year-over-year, and it starts with the CEO taking a much lower bonus than I took the year previous, and it’s just setting a tone with investors that, that’s the right thing to do. This management team is all about doing right by shareholders. Ever since Jacky and I took on this task of putting these 2 companies together and coming up with the new narrative, we’re dead serious about taking cost out of the business, and you’re going to see that this year from us. A very strong commitment to bring back the earnings potential of the business. I talked about profitability. We will be very profitable this year. As Jacky will tell you about catch-up billings and other fund products, taking the cost out of the business, the new fundraising comes on at an incredibly high margin.

We’re not adding people right now. That’s the important thing you need to know. We added all the people last year. And so that’s why you’re seeing a lot of confidence in the Matt — in the margin increase and certainly looking forward to talking to you next Monday at your conference and going even deeper on this. But I don’t think people are fully grasping what we’ve done here. You look at the $22.2 billion of FEEUM that we generated last year and you look at the sort of midpoint of our guide of $38 billion of FEEUM next year, we’re talking about growing FEEUM by 78% year-over-year. I don’t know of another asset manager on the planet that is telling investors, they’re going to put up 78% growth next year, we are. Can’t say that strong enough.

Like this team is dead serious about where we’re going. We put the right pieces in place in ’22. And once we’re deconsolidated, we’ll have leverage in the same zone as other alternative asset managers, and we’re going to keep taking leverage down. So we’re doing all the right things, and the results are going to follow this year. And I’m happy to go as — Jacky and I are happy to discuss guidance and we’re happy to go as deep as you wish on any of those numbers. Matt, I lost your first question because it was absorbed in the SG&A cuts and the taking $10 million of costs out of the corporate overhead. What was the first question?

Matthew Niknam: No worries. It was just around InfraBridge. Just wondering, incremental infrastructure opportunities in the mid-market, maybe some of the near-term synergy the deal provides.

Marc Ganzi: Well, look, the immediate synergies is in middle market infra, they have 3 people doing middle-market digital infra. And so they’ve got 6 investments, 60% of their latest fund is digital. And so when you’ve got businesses like Expedia and Everstream, and they go from a bench of having 30 to 130 people to help them. As you can imagine, that team is pretty excited to be with our team because we’re leaning in and we’re helping on their investments, and there’s a ton of value add to be delivered there. So immediate synergies around the investment team. We talked about fundraising. They had an excellent fundraising team. I can’t say enough about some of the fundraisers that we picked up. Alice and Brian Lee in Asia. I mean, we picked up some really world-class fundraisers, I had the chance a couple of weeks ago to be in Europe for 12 days, fundraising, saw 50 LPs of which half were InfraBridge LPs, half were DigitalBridge LPs, and it’s just fantastic to have a bigger sales team.

And be able to go and touch more clients, which is what we’re doing right now. So we’re seeing already the payback on the fundraising side. Jacky, do you want to talk about what you’re doing in the back office, Jacky, with InfraBridge and where you see some of the cost synergies there. You’re well ahead of your plan, and I think you’ve got a really targeted plan on how you get synergies there. And then we can come back and talk about other investable asset class in InfraBridge. Go ahead, Jacky.

Jacky Wu: Yes, sure. So I think when we first underwrote the deal, we had FRE overlays in the low to mid-20s millions, and we’re now looking closer towards 30, and that’s principally because of the fact that we’ve been able to plug and play and have those funds really plug right into our back office and our scalable processes. Market — I first took over at Colony now DigitalBridge, we had multiple ERP systems. It’s now consolidated into one, obviously. If you look at the website even just a couple of years back, everybody in their neighbor was an MD and now we’ve effectively prudent down that top echelon pretty sizably. So it’s just working smarter and trying to be much more efficient with both processes and systems, and also streamlining, titling and meritocracy and equity. So those things have allowed us to not miss a beat in terms of amount of work that needs to go on, but certainly, it allows for us to be much more efficient with doing it.

Operator: Thank you. As there are no further questions at this time, I would like to turn the floor back over to Marc Ganzi for closing comments.

Marc Ganzi: Well, thank you, and thank you all of you for your time today. I think this is a pivotal moment in the company’s history, and we’re at an inflection point. And I think that inflection point is advantage of our shareholders. We’ve laid out guidance for next year. It is the guidance level that Jacky and I are very confident that we’re going to hit next year. But most importantly, it’s a guidance level that we believe we can exceed. We prioritize taking down leverage. We do not want to risk the company’s balance sheet. There’s an easy temptation in these markets to take on more leverage, do more M&A, and for the sake of growth. That’s not what this management team is about. We have the building blocks in place to go out and execute the way you want us to execute, which is organic growth, which is where we achieved the highest returns.

Our $8-plus billion of capital formation this year for a company of our size and the CAGR growth that we’re going to deliver is industry-leading. We believe that $8 billion plus of capital will come on at incredibly high margins. And in addition to that, we believe we will also continue to realize great investments, which we have not underwritten in our guidance, as Jacky told you earlier. The 70-plus percent growth in FEEUM will be industry-leading, and we have supreme conviction around our ability to hit on those numbers. $22.2 billion to $38 billion is a realistic target for us. And my goal is to exceed and beat that as we’ve done with every metric we’ve put out in front of the street. So look, at the end of the day, it’s about execution.

I think you’ve heard from us today in a very granular fashion what we’re doing out there in terms of capital formation, how we’re running our portfolio of companies with prudence and at the same time, growing from strength and playing offense with key customers. And then last but not least, preserving liquidity and deleveraging the company. These are the things that matter. You want to be with a wartime CEO that’s been there and done that before, and with a trusted CFO that’s been there and done it before. Jacky and I are very confident in what we’re doing. Stay with us, we won’t disappoint, we’re going to have a good year, we’re going to go out and execute. We appreciate your time, and we appreciate your patience and your support in DigitalBridge.

Have a great weekend. And as always, Severin, myself and Jacky are available to all of you at any time if you want to have a conversation with us. Take care, and we’ll be in touch soon. Bye-bye.

Operator: Thank you. This concludes today’s teleconference. You may disconnect your lines at this time. Thank you for your participation.