DigitalBridge Group, Inc.

Greetings and welcome to the Digital Bridge Group, Inc. second quarter 2022 earnings call. At this time, all participants are in the listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to send the conference over to your host, Severin White, Managing Director, Head of Public Investor Relations for Digital Bridge Group, Thank you. You may begin.

Good morning, everyone, and welcome to DigitalBridge's second quarter 2022 earnings conference call. Speaking on the call today from the company is Mark Gansey, our CEO, and Jackie 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 the financial performance may be considered forward-looking. and such statements may 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, August 4th, 2022, 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 most recent Form 10-K filed with the SEC and in our Form 10-Q for the quarter ended June 30, 2022. Great. So we're going to start by covering our quarterly agenda. Mark will outline some of the key drivers of our upgraded roadmap in the first section, and then get into our 2Q business update in Section 2. Jackie will cover our financial results in Section 3, and then Mark will wrap up with some interesting case studies on how DBRG is executing the digital playbook, followed by Q&A. We made some great progress towards our 2022 goals, from generating initial commitments to our new strategies, to leading some of the most important digital infrastructure transactions this year. So let's get started. With that, I'll turn the call over to Mark Gansey, our CEO. Mark? Thanks, Severn.

Before we get into the Q2 quarter business update and financials, I wanted to take investors through our upgraded strategic roadmap and explain how it's going to create and drive strong value creation for them over the next few years and beyond. It's a roadmap that, as you can see in the middle of this slide, was unlocked earlier this year with the repurchase of a minority stake in our investment management platform and our related transition to a traditional C-Corp. Those were seminal decisions that allowed us to leverage our comparative advantage, which is centered around our long history of operating and successfully investing institutional capital across the digital infrastructure ecosystem. These are decisions that will enable us to achieve accelerated growth in our highly scalable investment management platform. As you can see on the right, this is our growth engine, doubling our AUM over the next few years by extending new and existing investment offerings. When you complement that with the steady growth that we're seeing in our digital operating assets, it's a unique profile. that's built on giving you, our investors, access to what we think are the most compelling investment platform and opportunities at scale in the digital infrastructure sector today. Let's explore our growth profile in greater detail on the next slide, please. When investors ask me, where are you going to create the most shareholder value over the next few years? With total conviction, I can say, this is it. Doubling Fiam and our IM platform in deploying that capital intelligently and prudently into the kind of high-quality signature investments you've seen us make already this year. That is what generates returns for our investors. We invest, own, and operate in platforms that are growing and that have long-dated revenue and earning streams. Digital Rich participates in the business-building economics as a seasoned investor, operator, in the digital infrastructure sector. The combination of growing secular demand for digital and the full stack capability that we have built to capitalize on positions us to take FIEM from just under $25 billion to over $50 billion in the next three years. As the partner of choice in a resilient, growing asset class, we have high confidence in our ability to execute on this strategy through the good times and the challenging ones. Through the first two quarters of 2022, we have demonstrated our ability to execute on this plan against the backdrop of a challenging macro. That's it. We believe this is not hard to understand. It's not complex. We double our fee in three years. This drives long-term predictable earnings and cash flows that we believe shareholders will increasingly appreciate. Next page, please. Great. So we're going to double-fee them. What does that mean for you, our investors? It's really simple. We've got an easy algorithm that translates into incremental fee-paying AUM into higher revenue. At an average fee rate of 90 basis points across our portfolio with very attractive incremental margins, this drives strong earnings accretion. The earnings margins should remind you of other great digital infrastructure businesses many of you own today. The growth rate at Digital Ridge, on the other hand, is unlike anyone else in our peer set, as we will continue to deliver double-digit organic growth through 2025. This is incredibly unique in our sector. I'll let you apply your own multiples to the incremental FRE to understand the value creation opportunity over the next few years, just on management fee streams alone. Next slide, please. Doubling FIEM over the next three years is the business plan our team is focused on delivering for you today. Many of you ask me, is this possible? And how does that compare to our track record? Well, what I can share with you is it compares very well. In fact, we're on track to more than triple FIEM since 2019 by the end of this year, to greater than $25 billion. The key here is, since Jackie and I took over the firm, we have delivered on our fundraising commitments to you, our shareholders. We believe we have earned your trust in this regard with actual outperformance results. And when you factor in our expanded new full-stack capabilities with the fact that we're likely to be in a position to refresh our flagship strategy sooner than later, given that Fund 2 is now fully deployed, we think this roadmap makes a ton of sense and is very easy for investors to understand. Next slide, please. So as a part of our upgraded roadmap, I want to refresh our sources and uses with respect to the balance sheet capital we've crystallized as part of our digital transformation. Today, following the WAFRA and AMP transactions, which will boost future revenue and cash flows to DigitalRidge, at the same time setting aside $300 million for future GP commitments in our own funds, we're looking at about around $900 million of total digital firepower set to redeploy over the next year or so and look it's really easy we've got three different buckets that we can deploy that capital first strategic digital M&A with our flexibility our corporate transition has afforded us that means we can buy a complementary strategic investment platforms like AMP which increase earnings and extend our investment management capabilities or alternatively We can buy more digital operating assets that meet our quality and return parameters. Both of these are incredibly good uses of the capital. Second, capital structure optimization, which is really a fancy way of saying we intend to buy back our preferred stock over time. We've telegraphed this to all of you. This shouldn't be something new. Expect this to be a use of capital as current liquidity increases with the data bank recap and warehouse investments returning to the balance sheet later this year. Lastly, share purchases and dividends. As you know, our board recently approved a $200 million stock repurchase authorization that allows us to be opportunistic and take advantage of our stock trading below what we believe is the intrinsic value. Additionally, we've committed to reinitiating the dividend in the third quarter, which we'll detail further in the coming months. I remain steadfast to this commitment and unwavering. We've described that as a low but grow dividend since we expect the vast majority of our free cash flow to be reinvested back in our business, given the accretive opportunities we see to compound value for you, our shareholders. Next slide, please. So let's take a step back before we wrap up this section and put the roadmap into proper context. understand how realigning our business to an asset-light model manifests itself in the numbers, and most importantly, our earnings growth. Today, when we look forward to 2023, we see a business that's going from roughly one-third investment management, two-thirds operating, to really flipping that around, with most of our earnings coming from our IM platform. That starts with the incremental cash flow from Wafra and AMP Transactions, and it's boosted by increasing guidance around capital formation that I've referenced, and Jackie will share with you in greater detail later. This roadmap has important structural implications, too. It's the past our balance sheet was perceived as a potential competitor to our IM business. That is no longer the case. Now it's our partner, helping to accelerate the investment management platform's growth with GP commitments, warehousing capabilities, and position to co-invest alongside our LPs in great digital infrastructure opportunities, not competing with them. Importantly, we're still targeting over $300 million in segment-level EBITDA next year. With $900 million in dry powder, we believe we are in a very good position to fill the remaining $60 million in digital earnings. We will get this done, organically and inorganically. Finally, This roadmap positions us not only to reach our near-term financial goals, but our investment management platform fundamentally grows faster. It's less capital intensive, and it's highly scalable against our other publicly traded digital infrastructure peer set. These are incredibly attractive attributes in our view. We could not be more excited about executing on this next stage of our growth strategy.

Next slide, please.

So let's get a bit more granular on the second quarter and cover some of the highlights. I want to start by revisiting some of the macro factors we outlined earlier this year on our Q4 earnings call. As you can see on the right, many of these have continued to present challenges, with interest rates and inflation in particular continuing to climb. But look, let's not dwell on the headwinds. I want to talk about opportunities that adversity presents. Because that's the perspective that DigiBridge brings to changing conditions. First, this is an amazing opportunity for us to really step up and deliver for customers and our clients. Whether it's showing LPs how we can continue to deliver strong returns through the tough times, or whether it's helping our portfolio companies cut through the supply chain issues before anyone else. We've been doing this for three decades and two other downturns. And one thing we've learned in delivering for customers and clients in challenging periods is this is the basis for deep relationships. And through that, you gain more trust. And that trust, in turn, builds over time. Second point, when capital becomes more scarce, the logic of outsourcing improves. And the neutral host model that we operate in digital infrastructure actually makes more sense as our customers' balance sheets are constrained. By the way, we're already seeing this across our data center platforms with strong bookings growth, which I'm going to share with you later. Number three, lower M&A prices are a good thing. If like us, you're net a buyer. In the shorter term, it's allowed us to buy some top tier assets when pure financial buyers are less competitive. Lacking the operational expertise, we are able to create an incremental value. Ideally, We'll see more rational pricing in the future, which will only improve returns on long-dated investments that we're making today. Finally, this is crucial to the roadmap I laid out earlier around our capital formation targets. As the partner of choice to institutional capital in digital infrastructure, we expect to benefit as investors are going to focus their capital on scaled go-to names in specific asset classes. I'm already hearing this. as we talk to our LP base around the world, who've been very impressed by our portfolio resilience, which I'll cover on the next slide. Look, the bottom line is simple. We've been doing this for three decades through many market cycles and economic conditions. Periods like this are actually when our experience and expertise are even more relevant than when the sun is shining. So we are prepared, we are vigilant, and we're positioned to reinforce our standing as the leader in the digital infrastructure ecosystem. Next slide, please. Another question we've got in the summer is, how are your portfolio companies performing through this period? Well, the short answer is quite well. I've told investors we'd give them some insight into our four key verticals of digital infrastructure in this earnings season, so let's get into the details. Here on this page, you have some forward-looking stats across the 25-plus digital infrastructure portfolio companies that we own and operate today around the world. All of our core verticals are showing positive growth, and in some cases, really impressive increases relative to last year. So this is driven by factors that I described on the last slide, like our ability to deliver and our increased focus on outsourcing by our customers. Bookings across our global tower portfolios are up 5% year over year. and they're up over 28% in our fiber businesses. These stats are even more impressive when you take a look at the data center space, with a 6x growth factor in bookings and a 2.7 factor increase in our small-cell vertical. On the right-hand side, you can see some of the stats from our digital operating businesses, where EBITDA is up 23% year-over-year, and bookings are almost up 2.5x over the prior year. This is the kind of performance that investors are looking for in periods of distress. Who is growing?

Who is resilient? Digital Ridges.

The credit, honestly, goes to all of the management teams across the globe that are executing day-to-day for customers at our portfolio companies. The takeaway here is simple. Digital Ridges operating businesses continue to perform well despite the macro environment.

Next slide, please.

Next, capital formation. Here, I'm very pleased to report that we're two-thirds of the way to our 2022 target at the halfway point. This, of course, was led by the $1.2 billion recap at DataBank that we announced in June. That transaction created a permanent capital vehicle, giving new investors access to DataBank as it enters the next phase of growth as the leading edge-focused data center platform in the U.S. In fact, we're very optimistic about our ability to bring in new additional investors into that transaction during the third quarter. We expect to raise more capital for DataBank. Even more importantly, we've closed on initial commitments from early anchor investors in our new credit and core strategies. This is just the first proof of concept that we are set to form significant capital around both of these strategies as we enter the second half of this year. In both cases, we've catalyzed investor interest by seeding investments on our balance sheet to give LPs a very clear picture of the assets and the strategies that we're focused on. This is the power of utilizing the balance sheet. Uncertain macro conditions have elevated the investment rationale behind credit and core strategies, which sit lower on the risk-return premium spectrum, so we're optimistic about our ability to meet and exceed our initial fundraising targets in these strategies. When I look forward to the second half of 22, the other area we expect to have further success is in co-investment, where some of the new signature transactions we've announced create opportunities for existing and prospective investors to partner alongside of us in some of the highest quality global infrastructure businesses. Expect to hear more from us on co-investment as the year progresses. In fact, the switch in GD Tower's transactions we'll take our flagship Digital Bridge Partner II fund up to around 90% of committed capital. This creates conditions for us to begin evaluating future flagship strategies. This is one of the key catalysts for the updated guidance that Jackie will share with you shortly. In summary, we've built incredible momentum into a busy second half of the year. As we get early validation on our new strategies, we experience strong investor interest in CoInvest, which positions us well to exceed our 2022 targets. Next page. Establishing new platforms was the headline story at DigitalBridge in Q2 of 2022. Capital deployment is an essential part of our investment process and success this quarter was very successful on this measure. Our investors look to us to identify, acquire, and grow highest quality digital infrastructure businesses globally. And I think this quarter typifies our ability to serve not only as the partner of choice to institutional investors, but to act in the same capacity to some of the leading corporates and management teams in our industry. I was incredibly impressed by the entire DigiBridge team and their ability to execute these two signature transactions during turbulent market conditions. This is where our deep domain expertise combines with our determination to create the desired outcomes. form the right capital, and execute when others could not. Look, there's a lot more work to do on Switch and DD Towers, but we believe these are incredibly compelling new platforms with a lot of room for continued investment and growth. Next slide, please. Before I wrap up the second quarter update and hand it over to Jackie, I would like to touch on just two examples where DigitalBridge is continuing to create value for our shareholders. First, DataBank. not only does this recap and permanent capital vehicle create a long-term fund that brings in new investors with fee and carry it's really an opportunity to harvest and highlight the digital playbook at work in just two and a half years we've turned a 500 million dollar investment off our balance sheet almost into a billion dollars of value for our shareholders in the first part of the transaction we'll be harvesting 230 million dollars And that may rise over to over $400 million through subsequent closings, allowing us to both recycle capital into new digital M&A, as well as maintain a significant participation in the continued growth of databank. During the second quarter, we also closed on a 745 million euro Telenet TowerCo transaction, which we've now renamed Belgian Tower Partners. This was the deal we did to seed our new core strategy. deploying $290 million in equity from our balance sheet. And what's really interesting is that during that, we expect to be about a six-month hold. Not only do we generate the underlying earnings for the business, but we also earn a warehousing and a ticking fee. This is a great way for us to generate returns for our shareholders with your capital as we evaluate long-term capital allocation opportunities in a disciplined manner. So, Those are just two great examples of how we've executed the Digital Rich Playbook to build value for you, our shareholder. With that, I'm going to wrap up our Q2 update. In summary, our businesses are performing really well despite the challenging macroeconomic conditions. We're seeing strong momentum in our capital formation activities with early validation of our new core and credit strategies. And we're executing on exciting new investments that we believe will be the foundation of future returns. So I'll hand it over to Jackie to walk you through the financials. Jackie.

Thank you, Mark, and good morning, everyone. As a reminder, in addition to the release of our second quarter earnings, we filed a supplemental financial report this morning, which is available within the shareholder section of our website. Starting with our second quarter results on page 18, the company continues to see strong year-over-year growth, driven by successful IM fundraising. For the second quarter, reported total consolidated revenues were $289 million, which represents a 22% increase from the same period last year, driven by our continued expansion in AUM and VUM. Gap net income attributable to common stockholders was a $37 million loss, or six cents per share, representing a $104 million increase compared to the same quarter last year. Total company adjusted EBITDA was $31 million, which grew from $15 million in the same period last year, as we continue to see growth in our high-margin digital IM business. Distributable earnings was $8 million, as recurring cash flows continue to be positive in the second quarter, accelerated by the Wofford transaction, which closed in May. and significantly reduce corporate debt servicing as we rotate out of our legacy capital structure. We expect this measure to grow as we fundraise and close on our recently announced AMP capital transaction. Digital AUM was $48 billion in the second quarter, which grew by 37% from $35 billion in the same period last year. As Mark mentioned, we have continued our strong growth trajectory and will be over $65 billion AUM on a pro forma basis, including the recently announced pending transactions. Moving to page 19, the company continued to grow IM revenue and earnings, driven by higher levels of fee earning equity under management. The year-over-year comparison was impacted by one-time catch-up fees received during DBP2 fundraising last year. which when excluded, consolidated revenues increased by approximately 18% and FRE by 28% year-over-year. On a pro-rata basis, we saw improved flow-through following the closing of the WAFA transaction, with fee revenues increasing by 35% and FRE by 47%. Moving to page 20, our digital operating segment has continued its growth in the second quarter. Consolidated adjusted EBITDA was $101 million during the second quarter, which is a 24% increase from the same period last year, driven by lease up at Vantage SDC and the acquisition of Houston area data centers at DataBank. Turning to page 21, we have seen continued growth in our digital reporting segments, particularly in our high margin investment management business. We should note that the proforma amounts shown on this page include the pending AMP transaction. We now own 100% of the IAM revenues and FRE following the acquisition of Wafra's share in the business. Both transactions are highly accretive and generate strong recurring cash flows. Since last year, our annualized fee revenues increased from $94 million to $240 million, and FRE increased from $53 million to $125 million. We are excited to have increased exposure to this high-growth IM business, which has materially improved the company's cash flow profile since it is an asset light and anchored by long-dated fee streams. Looking at the right side of the page, our digital operating segment has continued its growth with annualized revenues, increasing from $131 million last year to $160 million, and annualized EBITDA increasing from $55 million last year to $68 million, driven primarily by successful acquisitions at Vantage SDC and DataBank. Moving to slide 22, I will now outline our updated corporate guidance forecast. Starting with the digital investment management, our recent fundraising success has demonstrated that DigitalBridge is the partner of choice to investors deploying capital in the high-growth digital infrastructure sector. We have a unique investor-operator model with a talented and experienced team that has been the key to our growth. And this model has enabled us to expand into key digital infrastructure adjacent verticals, including core, credit, and ventures, which we expect will further accelerate our growth. As a result of recent successes in our near-term fundraising pipeline, we are increasing our 2023 and 2025 investment management frameworks. Our 2023 digital and management fee revenues guidance target range has been updated to $300 million to $360 million. And our digital fee-related earnings target range is now $175 million to $195 million. Moving to 2025, our digital investment management fee revenue guidance target range has been updated to $460 million to $520 million. and our digital fee-related earnings target range is now $270 million to $310 million. Next, our digital operating targets have been adjusted to separate out organic growth on our existing investments from anticipated future digital M&A, driven by utilizing dry powder that we will receive following monetizations of the remaining legacy investments and the return of warehouse investments that Mark outlined earlier. We used a portion of our dry powder for the WAPRA and AMP transactions, and our remaining capital will be allocated based on a strong pipeline of both organic and inorganic opportunities. Turning to page 23, we've laid out a framework primarily based on an earnings-driven model, including fee-related earnings and adjusted EBITDA. At the core of our business is the recurring earnings from our digital IM business, which is based on a simple formula. We project how much capital we will raise in the future, which becomes fee earning equity under management, or FIUM. The FIUM is multiplied by an applicable fee rate to give us our fee revenues. We then analyze how we can use our operational leverage to improve margins or invest in developing new strategies to derive the projected FRE. turning next to our digital operating segment, which constitutes the value of our pro rata ownership and data bank and Vantage SDC. These businesses are very much in line with some of the most common names with digital REITs, which are anchored by long-term tenant leases, high-quality counterparty customers, fixed annual escalation rates, and high AFFO flow-through. A third but often overlooked value driver is our performance fees on our investment management business. If our funds perform well and we deliver outsized investment returns to our limited partners, we will generate performance fees, which a portion will be returned to our common shareholders. And lastly, we look at the net asset value of our current balance sheet to arrive at the company's total enterprise value, which we will walk through on the next page. Page 24 summarizes the remaining net value of our balance sheet. First is our digital principal investments, which include our GP interests in our digital IM funds. Second is our remaining legacy investments, which consists primarily of our remaining shares in Brightspire. We expect to monetize these remaining investments in the near to medium term. Third is our corporate capital structure, which includes our preferred equity, fund fee securitization, and remaining convertible notes that we expect to repay at maturity next year. The sum of all three, together with corporate cash, equates to our total corporate and other net asset value. In summary, and as I'll continue 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 continue to be excited for the rest of 2022 as our fundraising and our growth prospects remain robust. And with that, I'd like to turn it back to Mark.

Thanks, Jackie. One question we've got in this quarter, particularly in light of the new signature transactions we've signed, is how do you create value and generate differentiated returns? The simple answer is we are specialists. We are business builders in digital infrastructure. And while our business model is investment management focused, we are not your traditional financial buyer, splitting an unlevered return into debt and equity components. What we do have is a platform strategy, proven playbooks that we've developed and refined over the past three decades. And I want to walk you through a few recent examples so you have context for how we approach value creation. I'll cover our framework briefly. starting with establishing the right platform. This is critical. In my experience, if you get the assets and the team right from the start, the degree of difficulty goes way down. We spend a lot of time upfront making sure we have the right setup from the start. That means buying high quality assets that can handle our second stage, transform and scale. This is where we buy and build. You've heard me say it before. You have to pair capital with the right business plan, almost always investing in both Greenfield projects and Bolton M&A. Finally, stage three. You've heard me say it before. Follow the logos. We follow logos to support the continued growth with our customers. As they build networks to meet increasing demand, we follow them and we build facilities for them. So let's cover a few case studies where you can see the strategy in action. Next slide, please. First, Vantage data centers. Most of you know Vantage, which today is one of the leading global hyperscale data center companies operating state-of-the-art facilities on behalf of the world's largest technology and cloud companies. And it starts with one key tenet. Find the right leader. Find the right CEO. And we have that. When we partnered with Cyril Chosky and his team at Vantage five years ago, they were in two markets. with three campuses on the west coast of the United States. They literally had 66 megawatts of installed capacity. Our view at that time was Vantage was the right platform. It was capable of scaling to meet the demand for public cloud compute that we had anticipated would continue to grow exponentially. Look, it's also worth noting a few people felt that the original acquisition looked a bit sporty at the time. I took a little bit of heat for the acquisition price in that multiple. Fast forward to five years, nobody's talking about the multiple. Vantage is now on five continents with 25 campuses online or under development. EBITDA across the platform is now 7x what it was five years ago. That's an incredible growth trajectory. That qualifies as a successful completion of stage two. As it moves out of transform and scale phase of the plan, now today Vantage is in the third phase of the DigitalBridge platform strategy of following the logos. As Surreal's key customers extend their global footprints into new markets, Advantage is going there with them in Asia, Africa, and Europe. We're thrilled to support Surreal and his team as they deliver for customers on a global basis. Next slide, please. Next up, DataBank. Look, this is another great example. Six years ago, we partnered with Raoul Martinac, who I've known and worked with for 25 years to build a nationwide edge data center platform, starting with a regional Midwest operator serving free markets. Again, it's really critical to understand we partnered with the right management team. We acquired the right core assets and then we built from there. Today, we're in 26 markets around the United States, more markets than any of our competitors that purport to be in the edge compute space. with a network of data centers optimized to serve not just enterprise customers, but increasing demand from cloud providers as they look to grow their footprints in Tier 2 and Tier 3 markets. Data gravity and latency are becoming increasingly relevant, and Databank's robust interconnection profile makes them the ideal partner to meet that demand. So, six facilities to 64, eight times EBITDA growth. another successful transform and scale case study. Buying and building selectively. The ability to do both is critical. Data Bank Now is also in the third phase of our platform strategy, growing their business in partnership with key customers who value their low latency, multi-market nationwide footprint. There's plenty of room for continued growth here in phase three, which is one of the reasons we're so pleased to welcome Swiss Life, EDF Invest, other new investors to the platform alongside of our significant commitment from our balance sheet to continue to grow DataBank. Next slide, please. Last case study, Edgepoint. This was launched a year and a half ago to build and scale a Southeast Asian tower platform. This is our eighth tower platform in the portfolio on a global basis. By the way, did we mention we love towers? Here, we partnered with a team led by Suresh Sidhu. execute a buy and build strategy that capitalizes on strong regional demand and healthy carrier dynamics in the markets we serve, Malaysia, Indonesia, and we've just recently added the Philippines. This investment is now in phase two, transform and scale. We're making incredible progress here in year two. We've already hit our five-year underwriting model in terms of scale, with almost triple the number of sites since we started. It's truly incredible what Suresh and the team have done here. On top of that, we've built a robust regional built-to-sue program with key regional carriers and have already delivered 800 BTS sites since inception and recently have built our first group of 5G small cells and RAN hubs to support the next phase of network growth in Southeast Asia for our customers. This has been a terrific example of our ability to leverage successful playbooks, and experience in other geographies, partnering with strong, proven local teams to build and create value for our investors. I look forward to keeping you updated on the progress we make here. We're very excited about Edgepoint, Southeast Asia, and its future prospects. So, this brings us to our conclusion today, which is the results and the key outputs of the execution piece of the Digital Bridge story. It's been exactly two years since Jackie and I took the helm here, with the faith and support of our board, our employees, and you, our shareholders. We laid out a plan over this time period that was brave as it was bold, and we've executed against that plan at every road marker that we have placed for you. In fact, we've exceeded those markers in guidance. This quarter is no exception. Let me again summarize a series of key and successful outcomes for DigiBridge and you. We transitioned our data bank investment into a continuation fund to help the company get permanent capital. Proof that we can use the balance sheet intelligently and tactically to create a fantastic IRR of 37% for you, our public shareholders. We sold our European-based digital infrastructure media business, Wildstone, booking our first full exit from DBP1. Proof that Cary will accrue to you, our shareholders. We had formal first closes in our credit and SaaS strategies, proof again that we could enter new verticals in our digital infrastructure investment management ecosystem. Next, we acquired Switch and DT Towers, two very valuable and highly sought after platforms growing at scale. We have deployed and committed over 90% of DigitalBridge Partners Fund 2. Lastly, we've already achieved two thirds of our fundraising goals and we're only halfway through 2022. This is critical proof that even in a challenging macro, Digital Bridge continues to successfully form capital around what we believe are best-in-class ideas in digital infrastructure investing. The key in this quarter is simple. Execution matters. And let's be honest with each other. Winning matters. I love to win. Our team loves to win. And you win with us in the digital infrastructure business model that DigitalBridge is executing today. We've aligned our ideas, people, and capital to create long-term value for you, our shareholders. I want to end in thanking my team for their tireless dedication to our business plan, and I want to thank you, our shareholders, for your trust and continued interest in DigitalBridge. Thank you.

Thank you. At this time, we'll be conducting a question and answer session. If you'd like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. Our first question comes from the line of Michael Ellis with Cowan & Company. Please proceed with your question.

Hey, guys. Thanks for taking the questions. I have two. Just to start, you know, you talked about the challenging macro environment, but you had really strong bookings within the data center business. I'd love to get a sense for what you're seeing in your pipeline across the verticals of digital infrastructure that you operate in, just given what's happening with the macro. And then I have a follow-up.

Yeah, thanks, Michael. Good morning. How are you? So, yeah, look, it was a tremendous second quarter in terms of new bookings. But what's also quite interesting is that the backlogs of our data center businesses have continued to climb year over year. So second quarter backlogs in terms of pipeline growth, which is leases that have not been yet executed but are in what I would call diligence or discussions, those pipelines are up over 128% year over year. So there's not only just profound movement in bookings, but there's also been a profound movement in the pipelines. So that's obviously quite strong. We've had similar growth in our pipelines in fiber and in towers as well. You know, BTS backlogs are up, you know, close to almost 30% globally. That's, you know, we've got eight tower companies around the world. So, you know, some of that is stronger in certain regions versus others, but very strong demand here in the U.S. for BTS. very strong demand for BTS as we discussed in Southeast Asia. And so those two markets are really sort of our leading indicator markets for built-to-suit. And then on the fiber side, we've just seen a return of, you know, the hyperscalers needing more data center connectivity. That's been one of the fastest growing verticals in terms of new bookings, but also pipeline and enterprise customers have returned back in 2022. So positive, you know, net bookings, but also positive returns uh, forecasts and pipelines in, uh, in the fiber business, mostly in beanfield and in Zayo. So it's been an incredible quarter and it's hard, right? Because you've got this macro that's difficult to understand. You've got some, some businesses declining, you've got some businesses talking about job layoffs. We're trying to hire people. We're trying to keep people digging ditches. We're trying to keep people stacking towers and, and turning on data center capacity. So it's, um, it's really interesting that, uh, that our business, the digital infrastructure world, continues. And we saw that in, you know, the dot-com crash. We saw that in the mortgage crisis. You know, people continue to need digital infrastructure, irrespective of the macro setup and thesis.

Awesome. Thanks for that. And then just my second question would be, you know, it looks like in your guidance, you're still expecting a contribution to the operating business on the EBIT aside from to-be-determined M&As. Could you just give us an update on what you're looking to add on that side of the business? And as part of that, you know, earlier this year you had mentioned that you were seeing hairline cracks form in valuations, which was presenting a window of opportunity. Just love to get an update on what you've seen on the private market valuation front since you made those comments.

Thanks. Yeah, look, so we're beginning to see valuations come down. That shouldn't surprise, I think, anybody. I think, you know, Deals that we saw that were, you know, bankers were expecting 30 times have now come into the mid-20s range. Fiber deals that people thought were going to trade at 22 to 24 have moved down into the, you know, low to middle teens. And so we're seeing, you know, a remark to market, and we're seeing a correction in private M&A multiples, largely because there's less liquidity and less people hunting. I mentioned in my commentary our ability to land switch and GD towers. was a function that our lenders showed up for us, we had the capital, we had the conviction, and we could act quickly. And I think those results speak to why we're the leaders in what we do. And to be honest, the public guys were kind of on the sidelines. They couldn't get Switch done, and they couldn't get the DT Tower portfolio done. So we got that done. And in fact, I would offer it to you if you look at recently what American Tower did with Corsate, they had to go out and find private capital. to go finance CoreSite. We don't have to do that. We have that capital at our discretion. So we can move quicker. Look, the balance sheet light model, people are going to have to get used to it, right? It takes time. It's a different form of how you can own digital infrastructure. And we think this is a smarter way to own it. As my CFO reminded me yesterday, we actually don't have maintenance CapEx in our numbers. When you're running an investment management business where your weighted average fund is 11 to 12 years, That's actually longer than a data center lease or a Fiverr lease that's five to ten years long. So we think the durability of the cash flows in this asset-like model are really strong. The resilience of our business model was proven out this quarter, and now we're in a mode where we're raising capital, we're playing offense, and our underlying portfolio companies are performing. This is a really good setup. We have room for optimism, and we believe that we can execute strongly through this macro setup. This is, I think, where investors need and want to be.

Thanks for the call, guys, and looking forward to seeing you guys in Boulder next week.

Yeah, see you next week. Likewise. Thank you.

Thank you. Our next question comes from the line of Richard Cho with J.P. Morgan. Please proceed with your question.

I just wanted to follow up and see, given the inflationary environment and a lot of talk on pricing, What segments or digital infrastructure assets do you think have the most pricing power going forward?

Well, look, right now I think the data center sector has experienced, Richard, the highest increase in price per megawatts and then price per rack. We've seen that globally across Vantage, DataBank, Atlas Edge, and Scala. All those businesses have reported not only positive up net bookings, but they've also seen increase in price. per metric. And I think that's been, to be honest with you, it's been as low as 10% and it's been as high as 20%. And that is a function of, I think, obviously not only a lack of supply in terms of where hyperscalers can go. I think this notion of outsourcing has been more amplified in the last two quarters. I believe, Richard, over the next four quarters, that'll continue to be amplified. I think we see the scarcity in will serve letters, the scarcity in permits, the scarcity in land. We see that more pronounced in Europe than in North America and Asia. But we have a very strong footprint in Europe. We have a massive pipeline of opportunity in Europe that we're executing on. And we got there early. We got the power. We got the will serve letters. We got the permits. A lot of that foundational groundwork we did three, four years ago is now coming home to bear fruit for us. And the same thing in the U.S., And the same thing in Canada and the same thing in Asia and certainly what we're seeing in Latin America as well. And recently lighting up Johannesburg where we lighted up 100 megawatts for a couple of hyperscale tenants there. So really feel very strong about our pricing power in the data center business. I would say towers, you know, I just interestingly came out of a conference with one of our portfolio companies last week. And we talked about pricing a lot, Richard. There clearly is a window to move pricing up in towers up significantly, not 5%, but 10% or 15%. We've opted not to do that at Vertical Bridge. We've been a partner to Verizon and AT&T and T-Mobile for almost three decades now, over three decades. What I've learned is that in these moments where you have the opportunity to move higher on price, we've taken the You know, the high road, and yes, we've moved up prices, but certainly my attitude is I don't want to gouge customers because inflation will be tamed eventually. These customers will be there. They'll need us. These are multi-decade relationships. And so whilst pricing in towers has moved up, it hasn't moved up as precipitously as it has in data centers. I'd say fiber pricing has also moved up. That's largely due to the fact that, you know, we're putting on new capacity. We're building new routes, building new laterals. We built some interesting new web-scale routes, long-haul routes that have performed really well for us. Construction costs haven't really been the problem there, Richard. It's really been the sourcing of materials and crews, just getting the right construction crews to get out there and do either full trenching or micro-trenching or sub-oceanic cable laying. These are really high-in-demand jobs. And the most important thing that you've got to do in the fiber space right now is continue to retain and hire, you know, great people and understand how to work in the field. That's been, I think, probably the biggest thing. Small cell pricing has moved up a little bit as well. We've seen a tremendous amount of 5G overlays across, you know, the FreshWave network and the XNet network. There clearly is some room for more pricing, but we also have to be sensitive to the fact that carriers can self-perform in small cells. So we haven't seen a demonstrative move in rental prices like we've seen perhaps in the data center space.

Great. Thank you. Thanks, Richard.

Thank you. Our next question comes from the line of Dan Day with B-Reilly Securities. Please proceed with your question.

Yeah. Morning, guys. Appreciate you taking my questions, and thanks for the update on the longer-term guidance. It's very helpful. So clearly, you know, a focus here on scaling the IAM platform, and I think You know, there's an ongoing debate right now, you know, among the public asset managers out there around the best way to divvy up the carried interest between shareholders and employees. A lot of them have started to, you know, give more carry to employees, you know, to goose up RE margins that way. A lot of times the stocks just don't get the credit from the carry. So just if you could remind us what the corporate share of carried interest right now is in your funds and then whether you think that might change over time.

Yeah, look, I think we've demonstrated that we feel very comfortable about the split between where the carried interest goes to our investment team and where it goes to you, our public shareholders. I mean, historically, we've kind of been in this, you know, either 60-40, 65-35, 70-30 split depending on the product and the team. We feel very comfortable with our splits. We think it's in range with where the market is. And obviously, the street has not given us credit for carried interest yet. We do have a lot of capital at work. As I mentioned earlier, you know, our funds are performing, and they're performing exceptionally well. So, we do believe that, you know, at one point in time, the analyst community will give us credit for carry. Heretofore, they have not. We did reference an exit inside the quarter. That will trigger carried interest for Fund 1. We're not at liberty to give specific details on that today. But I would say it was a very, very positive result for the company. And most importantly, it demonstrates our ability to return carry back to public shareholders, which is sort of us portending what's coming in the future. We have other assets where we've got a lot of interest in. We're going to continue to raise capital. We're going to continue to sell assets. This is part of the business model that we're in. And we're really pleased with what happened in this quarter, proving out the concept that we could return carry back to public shareholders.

Yeah. And Dan, no matter what split, and obviously Mark gave the range of it, but we love the alignment between the balance sheet, the GP and our employees, right? So as we do well, as we build up our track record, as we make money for our limited partners, the GP with its share of the carried interest obviously wins out and you as a common shareholder will win out. So we love that alignment and we're sticking to it.

Awesome. Thanks, guys, for all that. Just one more for me. You've talked about taking the preferred shares out. I guess, should we be thinking about that being like a use of balance sheet capital or should that be like you layering on more debt to the securitizations you did to effectively replace that in the capital structure? And then I guess just related, how do you think about the total debt that this business, corporate level debt, I should say, that this business can hold? Is it something multiple of that, like 23 digital operating EBITDA plus FRE, or is there some other way you're thinking about the debt level?

Yeah, sure, Dan.

I would break it out into a couple different ways to look at it. So if you look at an asset-light investment management, principally an asset-light investment management model, you back out the preferred equity as well as the non-recourse debt that sits at the data bank advantage books and records. We're at sub three times net debt to EBITDA leverage level. And I would say that that leveling is short of or on par with other alternative asset managers. So we're really right on par with that. And I would say that 3X, 3 to 4X type of leverage is optimal for us as an asset line alternative asset manager, the highest growth alternative asset manager out there. And so, yes, we will look at a mix principally off of just pure retirement of those preferred equity stakes to be able to delever our balance sheet. But at the end of the day, we're always going to look at what the best return for our shareholders is. And we do believe that digital acquisitions, digital M&A continues to be the best use of capital because of the fact that it's going to give us not just long-term fee streams for a long period of time, but the secular tailwinds in the industry itself is borne on the best use of our cash. So to the degree there's opportunities there, we'll do that. If not, then we will be very opportunistic with optimizing our capital structure.

I think also, Jackie, another – yeah, just one add-on to that is I think we've given you pretty strong guidance about where we're going in the next three years. This tripling of our ability to raise capital is a really important moment in time for the company. We have a lot of confidence and conviction around that. I think we've always been clear. We've put out fundraising targets. We've always, candidly, we beat them. We've given a very clear guide on where the investment management platform is going over the next three years. What's interesting is Jackie and I created the first securitization related to an investment management business last year. That was a really successful securitization. Like other securitizations, we have an accordion feature, and we have the ability to tack onto that existing trust. So as you think about the trajectory of the capital that we're forming, and as you look at the total fium growth over the next three years, and you look at the multiple where we did that first securitization, one can logically assume we could take on a more securitized debt. Now, certainly as we retire prefers, A good opportunity there could certainly be to take on more securitized debt, which has a lower cost, and most importantly, has no covenants, except maybe one, which is a DSCR ratio. The simplicity of the capital structure gets easier. I actually think, as Jackie does, we can de-lever. At the same time, we can tack on our existing trust, because as we continue to grow long-term revenue streams in the investment management platform, you also have the ability to take on additional leverage in that trust. But at the same time, we're paying down preps, which are typically costing us 7%, 8%, but mark-to-market more like all-in yield 9% to 10%. There's an awesome accretion trade here, which creates more free cash flow, which is something that Jackie and I are both focused on, which is continue to grow free cash flow and to grow the earnings potential of this business.

Awesome. Appreciate your time and best of luck. Thank you.

Thank you. Our next question comes from the line of John Atkin with RBC Capital Markets. Please proceed with your question.

Thanks. You talked about data center pricing. Just interested in any commentary you have around targeted development yields and has that kind of moved in line with pricing or held steady? And then secondly, on towers, given Germany and an earlier, you know, telemet and an edge point, it's kind of shifted the geographic mix that you have. How does that affect your thinking on geographic focus for channel transactions going forward? Thanks.

Well, look, I think on the single-tenant development yields for data centers, they really haven't moved that much, Jonathan. I think whilst we've been able to get higher pricing, construction costs have moved up. So what we've tried to do is align that cost and increase in the facilities. And then to align that with the right rental rate so that we're getting to all in about the same yield. So single tenant yields based on certain geographies can be as low as 7%. They can be as high as, you know, 9 to 11%, like in Latin America. It's just very geographic dependent. It's customer dependent. And it's also whether it's an edge facility or whether it's a hyperscale facility, we're seeing, you know, slightly different yields as well. So. I like the yields. I like where we're at in the data center space. Our construction pipeline has moved up over 136% year over year. So we've got more shovels in the ground and we're lighting up more capacity this year versus last year. So we're seeing no demonstrative change there. I tell you, it's been net net an increase and yields have moved up slightly. I'd say on the tower side, you know, we're very happy with the partnership with Deutsche Telekom. You know, we look at that on an adjusted scale. you know, Q4 run rate, TCF multiple, or Q1 run rate, TCF multiple when we're going to close, it's effectively a 22 to 23 times TCF deal, given the amount of towers and the amendments that are going on and the lease up that's happening there. So I feel like that's a really good price for arguably, sorry, not arguably, the most high quality tower portfolio in Europe. This is, you know, for us, the sort of diamond asset in Europe. And I think when you hear about private U.S. multiples still for small tuck-in deals, SBA talking about mid-30s or almost as high as 40 times TCF for developer portfolios, boy, I really feel good about what we did in Germany. I think also what's interesting about the GD Tower deal, Jonathan, is that We had the right long-term capital to go chase this, and we had the capital ready so we could play and we could play effectively. Partnering up with Brookfield was certainly smart, but we had a great new core fund that could play in that asset, and these are exactly the types of assets we want to put into our core fund. Long-term lease is a 30-year lease with Deutsche Telekom. a stabilized yield of about 3.5 to 4% that grows over time as we add more lease up and we get more amendments and we bring on new towers into the inventory. This is exactly what institutional investors want in this market, in this environment. They want safety. They want to know they've got a long-term lease with an investment-grade customer, and they want to know they have a great management team that can go execute the asset. We're really excited about that deal. We think we bought it at the right price. And certainly, you know, a year or two ago, it would have traded probably at a higher price, and there probably would have been more strategics around that could have had capital to do it. So timing worked out, I think, pretty well for us on the GD deal. And once again, can't thank Tim Hodges and Torsten Langheim enough. They were great partners in getting this deal done, and they're going to be great partners going forward as we grow that platform and consolidate the European tower space.

Just while we're on Towers and LATAM and that latest, you know, tranche with the Grupo Tour story, any sort of comment given the valuation was a little lower than the ranges that you pointed out. And you obviously know that market extremely well, you know, going back to some of your prior stints. But thoughts on Brazil and why that may or may not have made sense for your strategy?

Yeah. Look, we looked at it. That tower portfolio got looked at about three or four times, and each time it didn't work for us. And it certainly probably won't work for Jeff. Jeff has a different set of underwriting requirements, and Jeff's a friend, and I think a lot of SBA and think they'd run a world-class organization. I think for what we're doing at Highline, we've made different decisions, and it's not to suggest that our decisions are more correct than his decisions. I think they just felt like that particular portfolio was right for them. And we've done some other things in the market that were candidly in the same price range, if not even lower. So we're finding value in Brazil right now. I think there's obviously a pretty material disconnect with what's happening in Brazil today. And so we still think that that wireless at the most important social media market on the planet in terms of adaptation to social media applications and how much time that economy spends on their phone. Brazilians spend more time on their phone than almost any other country. So that mobile economy and that migration of 5G is going to happen. While there certainly is a lot of inflation happening in Brazil, there's a disconnect with the REI, there's a very important political election campaign coming that's currently priced into the currency. That dislocation creates a window of opportunity. We see it as opportunity. I think Jeff and the management team at SBA also feel the same way. They think that Brazil represents a very strong opportunity today, and we would agree with SBA on that.

Got it.

And then maybe just on the venture side, You know, the venture fund, it's a relatively newer vehicle, but the types of things that you've been looking at and, you know, maybe just double-clicking on that a little bit to provide a little bit of context as to where you may be headed there.

Yeah, thanks. Well, look, Alex Salola and the team are doing a great job. We made a really important play into private enterprise 5G networks by taking a leadership stake in Salona Networks. We then took a stake in Leading Edge, which we think will be the preeminent edge data center platform in Tier 2 and Tier 3 markets in Australia. And we've looked at a few other things, and we've kind of liked, you know, the resetting of pricing in Silicon Valley has been good for us. We haven't pulled the trigger on anything, but there is definitely a mark to market in what I would call later stage growth venture capital type money. So we look at it as, you know, mid to late stage growth capital. It's pretty exciting. Our pipeline is pretty full. We're obviously out forming capital around that strategy right now, much like we did with credit and core. And those strategies are now realizing, you know, a lot of success. And I think I just put a pin in this by saying, look, we understand the physical layer of digital infrastructure. I think better than any other, you know, management team on the planet where we're really focused on adventures, Jonathan. is what I call the metaphysical level of infrastructure, which is that software-defined layer between ultimately the user and the hard infrastructure. That's a massive, massive amount of white space. And so we're out looking at different ideas, different business models in that space. We recognize the importance of software-defined networks and how the cloud interfaces with actually hard infrastructure into that virtualized ability to dial up capacity quickly and efficiently. There's a lot of different business models around that. That is where the investment team is focused right now, is in the software-defined layer of infrastructure. And so almost think of it as like SaaS, digital SaaS is infrastructure. We're looking at that heavily, and we think there's a lot of opportunity sitting there. And look, at the end of the day, any investment we make in ventures has to tie back to our physical infrastructure. The company has to either touch our infrastructure or they have to use our infrastructure. That's one of the core guiding principles in investment committees. And when we sit in an investment committee and we look at new deals, I say, look, are they using our infrastructure? It's got to be pretty simple. It's got to work within our ecosystem. And the good news is most startups are using our infrastructure, whether it's fiber from Zayo, it's data center services from DataBank, whether it's somehow touching an Extinet or Boingo indoor system. Our infrastructure goes a lot of places. And a lot of people use it, and a lot of startups use it, and certainly a lot of software-defined companies are using our infrastructure. So, so far it's working really well, and it makes a lot of sense in our ecosystem.

Thanks very much. Thanks, Jonathan.

Thank you. Our next question comes from the line of Rick Prentice with Raymond James. Please proceed with your question.

Nice morning, everyone.

Morning, Rick. Hey, Rick. Thanks.

Thanks for the deck and the upgraded roadmap. I'm looking at slide 23. I think it's an important slide. I agree. I don't think the market's giving you credit yet for the performance fees, but probably a large part of that when we consider that comp group of the alternative asset managers is they obviously have a lot longer history of the exits showing folks the performance fees. You've got your first exit event coming up. You said you can't provide anything yet. When do you expect and what do you expect you could provide us with the Wildstone transaction to start putting the dots on the scatter diagram of demonstrating performance?

Yes. Well, Rick, what I would just turn you to is the base of our financials. You know, since we've announced the transaction on Wildstone, we did fair value that onto our book. So you'll see that markup in carried interest. in the face of our financials, which obviously we pause with. So I think that that will be helpful.

Can you envision providing... Jackie, what he's trying to do is give you the breadcrumbs, Rick, on the trail. So you'll figure that out sometime today, and then you'll email us later and say, oh, I found it. Look, this is simple, Rick. I've been investing other people's capital for 28 years. We have an enormous track record in great returns over those three decades, generating a lot of profits interest for other LPs and other GPs, and of course for ourselves along that road. As I mentioned before, both of our funds are performing incredibly well. We do mark our funds quarter to quarter, both fund one and fund two in our flagship series both had outstanding quarters. and net-net, you know, the portfolio continued to move up. It didn't move down. So, you know, when you're managing, you know, close to pro forma for GD Towers and Switch, over 70 billion of assets, there's a lot of carry embedded in there. Folks will have to extrapolate, you know, what they think is reasonable in terms of the multiple that we can achieve, but we know we're sitting on eventually an arsenal of carry, and public investors are going to get the benefit of that over the next five to seven years. So, not baked into our guidance, not in our numbers. Maybe after three or four carry events, we'll start maybe perhaps forecasting carry more frequently. But if people can't walk away from this quarter and understand that this business is performing well, our portfolio companies are performing well, we've demonstrated our ability to actually return capital to investors in Wildstone and trigger a carry event for public investors. I mean, we're laying it all out there. This should be, we hope it should be easy for investors to understand If it's not, call us. Schedule time with us. We'll make it easy for you. We know we're now on the right roadmap, and this was an incredibly successful quarter from our perspective, proving out key concepts that we knew were really important. The performance of balance sheet capital, the performance of our fund capital, our ability to do big deals, and most importantly, our ability to be ahead of fundraising in an environment where not everyone's going to have those kind of results. We feel like we did everything that was asked of us in the quarter and then some. And I think that will continue throughout the rest of this year.

Yeah, and even the wild stones, the first, you know, like you said, the first monetization out of one of our funds today. But, you know, Mark and Ben have had a long history of monetizations and making money for investors. So that's the foundation of this company and people matter.

Follow up on a previous question as well. on the debt level. Appreciate that color and where you think that should go. It does seem like there's a lot of kind of wacky numbers or different numbers out there in other data collection sets that suggest a much higher level of leverage for you guys compared to the alternative asset managers. Any thoughts about helping people clean that up or understand exactly the asset-light model and how it is being deployed and what the levels truly are?

Yeah, sure, Rick.

Look, the reality is if you look at There's three parts of that leverage. One part is the preferred equity. So some folks don't include that, but some folks do. It's kind of quasi-debt. That's one element of it. The second element is the non-recourse debt that's sitting at data bank advantage. And so if we are focusing purely on the investment management business and you back those two elements out, which we've already highlighted that our emphasis going forward is a bit more towards investment management, that's asset-light. does not require incremental debt or CapEx to achieve that plan, as well as the fact that we've said we want to optimize our capital structure and pay off and or retire or trade down our preferred equity, then you'll see that our alternative asset management business itself, along with corporate, implies a sub-four times leverage, and that would be right in line with other alternative asset managers.

Makes sense. All right, appreciate it. Everyone stay well. We'll see you in a couple weeks.

No problem, Rick. Thanks, Rick.

Thank you. Ladies and gentlemen, our next question comes from the line of Eric Lubchow with Wells Fargo. Please proceed with your question.

Thanks. Appreciate it. So just curious, you mentioned the $60 million of digital M&A. Just wanted to confirm that that was specific to the balance sheet, or there are opportunities maybe to add some additional IM platforms, either to expand the new geographies or maybe you know, new product sets. You mentioned, I think, growth equity or traditional private equity in the past.

Yeah. Thanks, Eric. Yeah. So, look, we look at that $900 million of firepower without any leverage, right? Assuming you could put, you know, 50-50, you know, debt-to-equity leverage against that $900, you actually kind of amplify that to almost a billionate of purchasing power. Now, we do have two areas that we're refining our M&A plans. First and foremost, we do believe there are other investment managers out there that fit very nicely with what we're doing, whether they're doing middle market digital infrastructure, whether they're doing growth private equity, where they touch telecom and infrastructure or media. There's a bunch of those targets out there, and I would tell you that those discussions continue to happen, and we've got a lot of really good targets. that have really great people and have great, great ideas and are candidly not swimming in our swim lanes. So that's important. Finding other organizations that have great talent and that share kind of our view of how to invest, but don't invest in the places we invest, that's really interesting to us. And that's where Jackie and I have been spending our time over the summers looking at those opportunities. And we think there is a you know, nice pipeline of ideas around that. And we're moving down the path of executing on some of those things. At the same time, we've continued on digital operating to think about ways that we can obviously grow our Vantage portfolio. We've got a number of campuses that are maturing. We can certainly add more campuses this year and next year to the Vantage SDC portfolio. So we're looking at that very carefully. They've had a tremendous, tremendous year. Vantage SDC has performed, I think, above our expectations. So we're looking at that to the extent that we can increase our exposure to hyperscale data centers in the U.S. and Canada, and perhaps even look at some of our European assets. That's very interesting to us. So there's a lot happening there. At the same time, you know, it doesn't preclude us from looking at other things in the ground lease buyout space, the tower space, wholesale fiber space, other data center businesses. There's a lot that we can do off the balance sheet. So we're happy with our firepower. The return of capital from data bank, the return of capital from warehousing transactions and credit in our core strategy, all that money is now coming back in the third quarter. So we're really happy about that. Jackie's now got strong liquidity, which allows us in this economic uncertain environment to play offense. And both he and I have a rich history of playing offense in previous downturns. So we're excited. We're working hard. It's been a really long summer. We've got more work ahead of us. And I would say, you know, strong expectation for us to announce something inside of this year where we will put that, you know, $900 million of cash to work in strategic M&A.

Okay. Thanks for that update. And then just one last one, if I could. Just wondering what you're seeing in data center development around power procurement and availability. It seems like it's been an increasing challenge in Europe and even in Northern Virginia where There appears to be a pretty significant transmission issue that Dominion Energy is trying to work through. So just wondering if you're seeing any material delays and bringing new capacity online from delays in power availability and whether that's having any impact on your ability to kind of deliver on your pipeline. Thanks.

Sure. So let's hit the Northern Virginia issue on the head. We don't see any delays in delivery of space this year. We have gone all the way out into 2023 to see what workloads will be compromised or delayed. We don't see any compromise in our bookings in terms of who will get deployed. We do see delays. I think that's one of the key things that is coming out of it. 23 should have some delays. 24 should have some delays. But we do see, you know, things normalizing in 25 and 26. Someone had reported, you know, 2028. That's just false. They haven't done their homework. So, look, Dominion's on it. The state of Virginia's on it. Loudoun County's on it. The sector's on it. Yes, it was a bit of a wake-up call for the region, but what I can tell you is I do believe the sector has come together. I think the state's very focused on it. Certainly, the Utility Commission is focused on it. We're focused on it, and we don't see any compromise in deliveries this year, and perhaps there's some compromise in deliveries next year in 24, but Net net, it's still a great market, and it's a place I think all of our peers want to be. Other areas that concern us, look, we've told you for the better part of two years that the power grid in California is somewhat compromised. Pacific Gas and Electric really can't supply any material. Amount of new megawatts in the Santa Clara area or San Jose. Silicon Valley Power. currently is constrained in terms of what they can deliver. The next upgrade to that grid is 2025. So Santa Clara has become a very capacity tight market. Our renewal rates are holding in very strong there. All of our new capacity is pre-leased that we brought online last year. And so I just mentioned, this is kind of actually where we saw a lot of value Eric and switch. You know, Switch has over, you know, 1.5 gigawatts of power capacity that they draw from three different sources of green energy. And particularly in a market like Reno where they have land, they have renewable power, and they control their destiny where they can light up almost 800 megawatts of capacity. That's less than, you know, two-tenths of a millisecond from Santa Clara. So we're really excited about the prospects for Switch. They've got a lot of land. They have the power and the capability to grow, and Reno has become one of the great, you know, what I would call tethered markets to Santa Clara. Same thing in Las Vegas. Same thing in Austin. Same in Grand Rapids and Atlanta. Switch has a significant amount of excess power that they've reserved through renewable sources. And look, our customers like that narrative too. They want to be in data centers where it's sourced by green energy, and it's not woke speak, right? This is like hardcore reality. This is a company that planned for this. Great management team, great CEO. And being able to control your destiny in terms of controlling the land, controlling your will serve letters, and controlling your power capacity, that's good for customers. And that's what we see in Switch. Much the way we saw when we acquired Vantage. We saw a long roadmap of opportunity to develop new campuses. Rob and the team at Switch have done a great job developing, you know, the world's most highly protected private cloud campuses at a Tier 4 and Tier 5 level, once again, controlling the energy narrative. And I think that's going to be the differentiator going into the future. Do the strong data center companies know how to source green energy? Can they do it in a way where they can control that capacity and they can plan over the next decade, not over the next two quarters? And so this is what we saw in Switch. And this is actually what Raul and Surreal are doing at DataBank. and are doing advantage. They're planning for the future and trying not to be entirely reliant on the existing grid. And I think most data center operators are thinking through that conundrum as well. So we're well positioned, our management teams are ready, and we're really excited about closing on Switch because they've actually got more ready-lit capacity than anybody else in the market.

All right. Thanks for the call there, Mark. Thanks, Eric. See you soon.

Thank you. Ladies and gentlemen, this concludes our Q&A session and thus concludes our call today. We thank you for your interest and participation. You may now disconnect your lines.