DigitalBridge Group, Inc. Q2 FY2024 Earnings Call

Good day and welcome to DigitalBridge Group, Inc Second Quarter 2024 Earnings Call. All participants will be in a listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note this conference is being recorded. I would now like to turn the conference over to Severin White, Head of IR. Please go ahead.

Good afternoon, everyone, and welcome to DigitalBridge’s second quarter 2024 earnings conference call. Speaking on the call today from the company is Marc Ganzi, our CEO, and Tom Mayrhofer, our CFO. I'll quickly cover the safe harbor. Some of the statements that we make today regarding our business operations and financial performance may be considered forward-looking. And such statements involve a number of risks and uncertainties that could cause actual results to differ materially. All information discussed on this call is as of today, August 7th, 2024, 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 for the year ending December 31, 2021, and our Form 10-Q to be filed with the SEC for the quarter ending June 30, 2024. Great. With that, let's get started and I'll turn the call over to Marc Ganzi, our CEO. Mark?

Thanks, Severin, and welcome everyone to our second quarter of 2024 business update. I appreciate the chance to share some of the significant progress we've made this year in building and scaling DigitalBridge. As you will see today, we've achieved substantial advancements in many of our key priorities for 2024, especially concerning capital formation related to the AI infrastructure ecosystem. So let's begin. First, financial performance is paramount. Achieving leading revenue growth with increasing operating margins is crucial to the DigitalBridge investment strategy. This quarter, we've realized that growth, with management fee revenues rising 18% compared to last year, along with expanding margins. Tom will provide more details on the financials later in this call. Second, new capital formation is the primary driver of these management fees and fee-related earnings over time. Our AI-powered data center vertical is becoming a central focus for our global limited partners, supporting strong capital formation in both debt and equity markets for portfolio growth and sparking new investment solutions. Our position as the largest private manager of data centers globally is particularly significant in this context. Next, we are on track to meet our annual fundraising and financial targets for the year with $3.4 billion in new FEEUM raised, which aligns with where we were last year as we aim for $7 billion in new capital formation. We are entering a seasonally strong final quarter of the year, and I am confident we will meet and exceed our targets. Let's highlight the capital formation across our portfolio year-to-date and how it drives value creation at DigitalBridge. This slide shows how capital formation in 2024 is fueled by high demand from limited partners for AI-focused data center platforms. Out of the $14 billion in equity and credit we've raised this year, about 80% is designated for investment in our data center platform. This includes fresh FEEUM for investment in new platforms, anchor co-investments that enhance our capabilities and generate carried interest, as well as credit financings to support capital expenditures through long-term debt and ABS securitizations, which we've historically used to lower borrowing costs. Credit and equity markets are eager to collaborate with DigitalBridge to foster the growth of our ecosystem. Notable financings this year include Switch, Databank, and Vantage, which arranged a $3 billion green loan earlier this year to support our North American expansion. We have also been proactive in co-investments, meeting the increasing capital needs of our platforms with Scala, Vantage, and Switch all attracting new investors for their growth. Overall, we have a highly dynamic portfolio that continues to expand and attract capital. To understand why limited partners and broader capital markets are investing in DigitalBridge, it's vital to recognize our unique data center footprint and our distinct vision for AI infrastructure development. Firstly, we have the largest global private data center portfolio today, diversified across six platforms and serving the rapidly growing segments of the data center market. Currently, we offer 4 gigawatts of capacity across 173 data centers, spanning 84 markets globally across 75 campuses, totaling over 20 million square feet of capacity. Our platforms support substantial public cloud hyperscale workloads, private cloud applications—including significant AI training deployments—and edge computing, which will be increasingly essential as generative AI applications expand to the edge. This diverse, high-quality portfolio is prepared for significant growth, aiming to reach over 7.5 gigawatts within the next five years, nearly doubling our current capacity with another 93 data centers in development representing an estimated $35 billion in development capital expenditures that we plan to invest across these six leading platforms. These larger, highly densified data centers are designed to cater to the AI economy and workloads. Our portfolio and development pipeline uniquely position DigitalBridge to address AI's cloud-driven future. Investment in AI infrastructure is accelerating once again. After a decade of cloud investment that raised capital expenditures from $25 billion to over $150 billion and created an annual service revenue market exceeding $300 billion, generative AI has triggered a pivotal moment, leading to increased investments from major technology companies of up to $250 billion annually, which is nearly $100 billion more than last year. We assert that generative AI will drive the next decade-long capital expenditure cycle. While it's still early, we remain committed to our core thesis: follow the logos. It's the customers who possess deep insights into generative value breakthroughs and their implications, the demand trends they observe for new services and markets, and ultimately, the returns on their investments focused on AI infrastructure. We've gathered select quotes from various companies in their 2Q earnings reports discussing their commitment to invest and the initial results they are witnessing with generative AI. We've previously seen a similar cycle unfold in public cloud investments. Let's reflect on it—was it wise for Amazon, Google, and Microsoft to invest in public cloud a decade ago? The breadth of our platform is relevant to the evolving data center ecosystem, highlighting the necessity for a diversified portfolio that satisfies our customers' critical needs. Single-platform businesses often fall short in addressing diverse customer workloads. A broad range of solutions is necessary, from public cloud to private cloud for AI training to smaller workloads managed at the edge where AI inference occurs. An interesting trend within our portfolio is that some customers who typically operate at a massive scale or on a highly distributed basis are now seeking additional capacity throughout the ecosystem, whether it’s hyperscalers increasingly expanding their edge capacity or enterprises establishing large campuses for their generative workloads. Understanding how workflows and workloads transition from public cloud to connected edge is another critical part of following our customers' needs. We have the facilities, capacity, platforms, and management teams to meet demands globally. This gives us a distinct edge in investing in AI infrastructure and data centers. Additionally, when we talk about our vision for AI infrastructure, it extends beyond merely constructing a diversified portfolio of data center businesses. AI infrastructure encompasses fiber optics, mobile infrastructures like cell towers and small cells, as well as RAN hubs such as edge infrastructure. Increased focus will be placed on middle and last mile connectivity and computing as generative AI applications proliferate. As these trained LLMs and applications, integral to AI, are scaled across enterprise and consumer markets, the rest of the network surpasses its significance. Owning the middle and last mile will become increasingly valuable—this is already an area where we lead the market. We operate a top five independent global tower portfolio, which includes companies like Vertical Bridge, the largest private tower operator in the United States, along with various European companies like GD Towers and Belgian Tower Partners, and our network spans Latin America and Southeast Asia. In fiber, which serves as the connective tissue for AI, we work with firms like Zayo, a leading fiber provider in the U.S., to help hyperscalers optimize their campuses for AI training and prepare for inference as AI technology matures. Understanding how the AI ecosystem integrates and owning critical assets are vital for meeting our customers' needs. This perspective enhances the uniqueness and relevance of our portfolio and platforms. Being a specialist in digital infrastructure not only involves grasping current trends but also anticipating future developments. Now that I've provided context regarding our diversified global digital infrastructure portfolio, I would like to discuss how we drive growth through the formation of new capital, new FEEUM across our multi-strategy asset management platform. We've set ambitious targets for capital formation this year, and I am happy to report we are on track to achieve those goals, particularly as we approach the busy final four months of the year. To date, we've raised $3.4 billion, which matches where we stood last year when we ultimately reached $6.9 billion for the full calendar year. Our capital formation efforts have been well balanced across our flagship strategy, co-investment, and emerging strategies, especially in credit. We are optimistic about the remainder of the year, with a pipeline containing over 400 engaged LPs and strong insights regarding how we expect to achieve our target. Just over half of the contributions should come from DigitalBridge Partners 3, our flagship fund, supported by a structured capital formation process that I will detail in a later slide. Our emerging strategies, including credit, core, and liquid, will contribute around 20%, with credit currently experiencing momentum and our liquid strategies generating notable alpha. Co-investments are expected to account for about 25% of our remaining capital formation, driven by investor interest in supporting the expansion of our data center platforms. As we examine the strategies propelling our capital formation efforts, I'd like to highlight a new co-investment vehicle that aligns with two crucial pillars of our fundraising strategy: expanding our investor base and enhancing our investment solutions. During Investor Day, we discussed the importance of building a multi-strategy asset manager that forges new pathways for Limited Partners seeking exposure to digital infrastructure amid rising demand in our ecosystem. Many of you inquired about our plans for the private wealth channel, given the appeal of digital infrastructure for that investor demographic. Earlier this year, we designed a co-investment vehicle to engage the private wealth sector with a new investment solution. This sidecar focuses on data centers, deploying capital across multiple platforms managed by DigitalBridge to support the development of new data centers within our portfolio companies. For private wealth clients, this offers diversified data center exposure that caters to their preferences, while for DigitalBridge, it serves as a new source of FEEUM growth, and for our portfolio companies, it provides additional capital to accelerate their growth. We are encouraged by the positive momentum and engagement around this vehicle and see a lot more potential, both in private wealth and diversified data center investment solutions. Ultimately, we are crafting new investment solutions that offer investors direct exposure to AI-driven data center growth, aligning with current demand from our private clients and Limited Partners. Another crucial element supporting our confidence in surpassing our capital formation targets by year-end is our structured capital formation process. This slide details DigitalBridge Partners 3, where we have secured over $4 billion in capital commitments since launching the product. On the left, we see strong participation from existing Limited Partners, with re-ups making up about three-quarters of the total committed capital and over a quarter coming from new investors, reflecting our initial strategic plan. As we continue to raise capital, we anticipate that contributions from new logos will gradually increase as we approach our final targets. Our LP base is currently concentrated in North America and Middle Eastern capital, with European interest starting to strengthen and Asia-Pacific playing an increasingly important role in our future capital formation strategy. On the right side, we identify a select group of key Limited Partners that we expect to anchor our fundraising efforts as we move through the rest of this year and early next year. This structured capital formation process and the interest from Limited Partners in DigitalBridge and its thematic strategies underpin our confidence in achieving these targets. Ultimately, success in capital formation drives financial performance over time. As we advance toward our fundraising goals, our fee revenues and earnings scale accordingly. This slide illustrates how we plan to build on our year-to-date earnings through the second half of 2024, with increased fee income driven by a higher capital base and contributions from catch-up fees, which tend to increase throughout the year. Three factors are key to reaching our 2024 FRE guidance: first, we've generated $46 million of FRE year-to-date; second, if we exclude the catch-up fees from Q2, approximately $3 million, and annualize that over the next two quarters, that's an additional $46 million of FRE, which forms the second-half earnings base; and third, we will benefit from contributions driven by a larger fee base, resulting in higher revenues and higher FRE, in addition to earning catch-up fees on DigitalBridge Partners 3, which will increase significantly as the year progresses. The later the commitment, the larger the catch-up fee. It's a straightforward formula: new capital formation results in higher fees and earnings, and for 2024, this will be somewhat back-end loaded. For more financial details for the quarter, let me now turn it over to Tom. Tom?

Thanks, Mark. And good afternoon, everyone. As a reminder, this earnings presentation is available within the shareholders section of our website. Starting with the second quarter highlights, our key operating and financial metrics have seen significant year-over-year growth. Fee revenues, fee-related earnings, and distributed earnings have all increased meaningfully, as compared to the second quarter of 2023. We generated $26 million of fee-related earnings in the second quarter, which puts us at $46 million of FRE for the first half of the year. As Mark just walked through, the $1.2 billion of capital raised in the second quarter and continued fundraising success early in the third quarter provides us with a path to achieve $150 million of FRE for the full year, which would be within our guidance range, albeit at the low end of that range. We also generated approximately $20 million of distributable earnings in Q2, which largely was a result of recurring asset management operations with a contribution from principal investments, as well as the reduction in interest expense from the extinguishment of the 2025 senior notes. Turning to the next page, our fee-earning equity under management is $32.7 billion as of June 30, a 12% increase from the same period last year. This growth is driven by capital formation in the DBP series, co-investments and credit strategies. In the first half of 2024, we raised $2.3 billion of fee-paying commitments. And as Mark mentioned, we've already had a strong start to the third quarter and are confident in our near-term fundraising pipeline as we look forward to the rest of the year. Moving to the next page, which summarizes our non-GAAP financial results, the company reported $79 million of fee revenue in the second quarter, marking an 18% increase from the same period last year. As we look to the second half of 2024, we continue to anticipate additional fee revenue growth, including catch-up fees driven by fundraising for DBP 3, which had its initial closing on November 1 of last year. The $26 million of fee-related earnings in the second quarter represented consistent and positive growth any way that you measure it. It's a significant increase both year-over-year and sequentially over the first quarter of 2024. Additionally, this puts LTM fee-related earnings at $90 million, the highest that we've reported over any 12-month period. We also continue to see steady and consistent improvement in operating margins as growth and revenue exceeds compensation and administrative expense growth. Our margins increased from 32% to 33%, when compared to the second quarter of 2023, and from 24% to 31% on an LTM basis year-over-year. We expect this trend to continue as we raise additional capital over the next several quarters. Turning to the next page, which summarizes our carry interest and principal investment income, we reported a carried interest allocation of $288 million in the second quarter, which after associated compensation expense and non-controlling interest resulted in net carried interest revenue to DigitalBridge of $75 million for the quarter. As a reminder, the company accrues carry interest based on quarterly changes in the fair value on a mark-to-market basis of the investments held across our portfolio of funds. Principal investment income, which is primarily income earned on the capital invested alongside our limited partners was $14 million in the second quarter. Moving to the next page, fee revenue and fee-related earnings continue to grow, driven by new capital formation and deployment of the existing fee-paying capital under management. The chart I think highlights the stability and consistency in growth both in revenues and margin as we present those here on an LTM basis. While the LTM margin has been flat for a few quarters, with the current quarter coming in at 33% and our belief in expanding margins over the remainder of the year, I expect that this chart will show continued growth in LTM revenues and LTM margin over the coming quarters. We've also introduced a fee-earning equity under management roll forward this quarter, further aligning our disclosures with our peers. The second quarter saw $1.2 billion of inflows, primarily capital raised in DBP funds and co-investments, offset by $1 billion of outflows, principally related to additional closings on our Vantage data center transaction as we continue to transition ownership of this asset from our legacy separately capitalized vehicle structure into our latest flagship fund, DBP, and associated co-investors, which extends our exposure to Vantage data centers through its next phase of growth. Turning to the final page of the financial section, you'll see that the company continues to maintain a strong balance sheet with $1.3 billion of capital invested alongside our limited partners and ample liquidity, while continuing to deleverage the balance sheet. As discussed on our Q1 call, the company completed the exchange and redemption of 100% of the outstanding 2025 exchangeable notes during the first quarter and early part of the second quarter, leaving the securitized notes at an interest rate of 3.9% as the only outstanding corporate debt. We continue to evaluate the appropriate capital structure for the business, including the preferred stock obligations. Corporate cash, as of June 30 was $127 million, with total current liquidity at $427 million. With that, I'll wrap up the financial results section of our presentation and we'll turn it back to Marc for his final remarks.

Thanks, Tom. One of the items that Tom addressed on the Fee and Roll Forward was the DPI we generated by the Vantage transaction, which drove realizations up in the first half of this year. This is a very important part of our job, and to be direct, it's our fiduciary duty to our limited partners globally, returning capital and creating the right outcomes and great returns. In turn, this allows us to raise new capital around our best high conviction ideas, which are now materializing in our DigitalBridge Partners 3 flagship fund. The Vantage transaction not only created value for our pre-existing LPs in terms of DPI, but it created an opportunity for us to reinvest in Sureel and its best-in-class team side-by-side with our global limited partners and a seasoned investor in Silver Lake for the AI opportunity ahead, retaining the platform and focusing on long-term value creation. Starting with some background, as you can see here, over the past eight years, DigitalBridge has helped Vantage scale from three campuses on the West Coast of the United States with less than 100 megawatts to today with capacity over 1.5 gigawatts of in-place capacity across 30 plus campuses worldwide. This is an incredible growth story for a market leader in hyperscale data centers. To achieve this, we've leveraged our operating DNA, our business building heritage, to scale a global data center platform serving the world's largest technology companies. Next slide, please. As you can see here, the reality is we're just getting started. That was just Stage 1. There's a $30 billion growth opportunity in AI data center infrastructure. To support that, DigitalBridge led a $9.2 billion equity investment in partnership with Silver Lake and our Global LPs to support the company's next leg of AI-led growth. In fact, the transaction was upsized by 40% driven by strong investor interest and the need for customers to solve a persistent industry-wide supply-demand gap. In Stage 2, we're going to build and scale another 3 gigawatts of capacity by 2030. This represents something on the order of about 5% of the total global capacity expansion over that period. We believe this demand forecast will prove to be conservative based on the conversations that we and Vantage are having with our customers. Look, it's an incredible opportunity, catalyzed by the track record that Sureel and the Vantage team have built, delivering for the world's largest hyperscalers. And the key phrase there is delivering for our customers. There is massive growth ahead and we want Digital Bridge shareholders to continue to participate in the next phase of value creation advantage. And that we're going to drive together. Next page please. So in addition to supporting the next leg of Vantage's growth with fresh capital the transaction also has a number of strategic creation benefits for the DigitalBridge shareholders particularly those with a long-term view. If you take the short-term view the transaction resulted in a $1.2 million reduction in our FEEUM in the first half of this year as the asset moved from a separately capitalized portfolio company where we earn management fees into DB3, where we already are accruing management fees, so there was no corresponding increase in committed capital. For investors with a long-term view, consistent with the DigitalBridge focus on maximizing value, there are three key strategic benefits to this transaction. First, we extended our ownership and fee stream tied to the premier global hyperscale data center platform. Vantage is the global leader and the partner of choice to the world's largest global technology platforms. Second, this transaction supports capital formation in two ways. First, it generated DPI, returning capital to our LPs, freeing them to unlock new commitments. Second, new LPs that participated in the $2.2 billion of co-investment get to see the best AI-levered assets being populated into our new flagship fund. It's really a double win on this front. And lastly, carried interest. In the previous ownership structure of Vantage, our public shareholders did not participate in the carried interest. It was in a legacy DigitalBridge vehicle that predated our public format. Now DigitalBridge shareholders will participate in the carry as we scale Vantage 3 times from 1.5 gigawatts to over 4.5 gigawatts by 2030. If you share that long-term perspective that we take at DigitalBridge, you understand that this transaction results ultimately in executing a unique asset management trifecta. Happy legacy LPs, happy new LPs, and happy DigitalBridge shareholders as we accrue value from new management fees and carried interest contribution over time. Next slide, please. I'd like to finish today outlining some of the key priorities that we've delivered year-to-date and look forward to five key focus areas for us over the course of the rest of the year. First, in terms of what we've delivered, management fee revenue and fee related earnings are both up over 20% year-over-year with expanding margins. Delivering financial performance for shareholders is critical. Number two, we formed over $14 billion in capital to support AI infrastructure growth across our platforms, including $3.4 billion in new FEEUM. This was a tremendous achievement in the current environment. Number three, we launched a new private wealth product to invest directly in AI data centers. This is what LPs want, and we're delivering for our shareholders with new innovative ideas, new products, and FEEUM. Number four, corporate governance advances with a new board member in Ian Shapiro, who's got deep power sector and investment management experience that supports our focus on the data center alternative power opportunity. I want to continue to remind shareholders that we remain committed to rotating our governance. Fresh governance and ideas in the boardroom are critical to our plan and commitment to you our shareholders. Finally, we've reinforced our position as the leading global asset manager in AI and digital infrastructure with portfolio AUM up 17% year-over-year to $84.5 billion. So let's look ahead and what I'm committed to delivering for you, our shareholders, in the second half of 2024. First, we want to continue to deliver pure leading management fee revenue growth and operating margin expansion. This is what you'll hear from me first and foremost in the back half of this year. Next, we want to successfully meet or exceed our $7 billion in new FEEUM target across our multi-strategy asset management platform this year. We delivered a solid number in the first half. We're poised for success in the back half of 2024 with a deep pipeline of active accounts pursuing our investment management products from flagship to credit to new ideas to co-investments. The key here is the multi-strat approach to fundraising is working at DigitalBridge. Third, we want to accelerate FRE growth into the back half of 2024 as new equity commitments and investment solutions take effect. And number four, as always, we want to continue to maintain a strong balance sheet and liquidity position. This has always been a core focus of mine. And finally, we're continuing to evaluate strategic M&A opportunities centered around adjacent asset managers that would show immediate per share accretion to our platform. So that's what I'm focused on as we head into the back half of this year. We've accomplished a lot in 2024, but we have a lot in front of us, and it's all there for us to execute successfully. We remain confident as a team in executing these goals and targets for you, our shareholders. I look forward to sharing our progress next quarter as we maintain our market position as the global leader in this dynamic sector. With that, I'll turn over the call to the operator for Q&A. Thank you.

We will now begin the question-and-answer session. The first question comes from Ric Prentiss with Raymond James. Please go ahead.

Hey, how is everybody?

Hey, Ric, how are you?

Good, thanks. Hey, two quick ones on a very busy earnings day. On slide 22 it shows obviously the inflows, the outflows, and end-to-period balance. As we think about DPI and appreciate Vantage obviously has been a good opportunity to fulfill your commitment to the LPs on an important job of returning capital to them, but how do we think of where that the inflows, it sounds like we're headed towards $7 billion if we think of 24 column on that slide. Where are DPI's headed and where's the ending balance at year-end ‘24 do we think for that slide as we think about year-end?

So you had two questions I'll answer that one and I don't know if there's a one behind it Ric, but they're all smart. Good. Good. So we were delighted to get the Vantage transaction done. You know, it was a really seminal transaction for us. We're not at liberty to describe exactly which portfolio companies might be involved in a strategic transaction. But what I would say is, you know, we feel reasonably good about our fundraising. In fact, we feel very good about it and we do feel good about perhaps returning a little more capital back to investors this year, but DPI has been exactly where we'd like it to be. But I think if you look at the beginning period balance and, you know, end-of-period balance, I think where we're sort of guiding you to based on the $150 target is somewhere between, you know, $34 billion to $35 billion in that range in terms of an ending balance on FEEUM rolling forward. So perhaps a little bit more outflows but certainly Ric in the back end a lot more inflows would be my sort of conservative prediction to you.

Okay cool and then of course there was the follow-up on slide 12 where you hit home the kind of where the AI infrastructure is going and it's not just data centers fibers on there as well first data center second fiber, third tower small cells. There's been a lot of discussion this earnings season about convergence. Wireless with fiber. There's been a lot of private equity involvement between mobile carriers and fiber operators. A lot of discussion on fiber to the home. Update us Marc on your insightful wisdom on how's fiber going to play out here? Is fiber to the home important? Is it really enterprise fiber? And what is private equities kind of role in this space?

I would just say that our firm is convinced that fiber is a crucial component of the ecosystem, serving as the vital link that integrates everything. If you consider a tower, a small cell, or an in-house Wi-Fi 6 node as the primary method for delivering generative AI to the edge, then at the end of every antenna is a fiber connection. Whether it's for homes, enterprises, metro areas, or long-haul sub-oceanic transport, we are experiencing strong growth across all fiber sectors. We operate in all these areas, providing fiber to homes and supporting cable operators with transport for their fiber to home services. We're particularly strong in enterprise and transport, and data center connectivity is essential. As we've mentioned earlier in the call, we are very active in building data centers, and you can see how many we have in development. All these data centers require multiple redundant fiber paths, including dark fiber. This creates a convergence because owning six data center companies and multiple fiber companies allows us to engage in numerous discussions with our customers. This is where Switch, Data Bank, and Vantage have a competitive edge as they are expanding quickly and on a large scale. We have significant control over the fiber that enters and exits our data centers. As much as AI data centers are growing, the essential connections making it all work are also increasing. We are noticing a rise in fiber demand, which aligns with trends we've observed during this earnings season.

Great. Appreciate it, guys.

Thanks, Ric. The next question comes from Richard Choe with JP Morgan. Please go ahead.

Hi, thank you. Just wanted to ask, I mean there's a lot of demand for data centers and you're building a lot. I think there's some concerns that maybe the demand won't last as long as some people think. How far or how long do you see the demand cycle kind of going on and are you worried that there might be a level of overbuilding going on in the next few years?

So I think, hey Richard, it's Marc, how are you? I think what we did see inside of this particular quarter, Richard, and what we've seen through six months of activity is, and I think we highlighted this on page 10, CapEx is up, it's not down. So a leading indicator when, whether it's a data center development, tower development, fiber development, is when CapEx starts trending down at our core customers. Instead, we've seen actually the converse of that. We've seen CapEx accelerate. I think what's different about this data center cycle versus the last time the industry was overbuilt is, I know for just, you know, I can only speak for the six platforms that we own and the 93 data centers that I have in construction. I've got leases on the end of every one of those data centers. That was not the case when we had the last data center recession, Richard, if you recall back in 2009 and 2011 when people were speculatively building data centers and they got caught with inventory that wasn't leased. Everything we're building, Richard, has a customer. That's for DigitalBridge. That's the 90 plus data centers that we're building. And that's the $35 billion of AUM that we're adding. And the incremental 3.5 half gigawatts of power we're lighting. I would say one other factor, Richard, you've got to keep your eye on is, do you actually have the power attached to those data centers. That, to me, is actually a more interesting topic of discussion that you and I can explore when we spend some time together next is every one of the 90 plus data centers I'm building has a will serve letter and has power attached to it. Whether it's direct power into the grid, whether it's renewable power through the various partnerships we have, you know, everything that we're lighting has a lease and has power and has a building permit. And if you've got those three things going for you, a will serve letter, a customer lease, and a building permit, you're in pretty good shape. So that's what we're doing. Again, I can't speak to what QTS is doing and Blackstone is doing, I can't speak to what CyrusOne is doing with KKR and GIP. All I can worry about or DLR and Equinix is what we're doing. And you know, we're doing it at a very tremendous amount of scale. I think we've demonstrated that on this call today in terms of our market-leading position as the leader in global AI data centers. And I think the important thing is just learning from the lessons of the past. And having been in the sector for over 30 years, I think you see this company has taken a very disciplined approach to capital allocation, and most importantly, who we transact with and who we have counterparties with, and then the power companies that we've partnered with.

That's great, and I'd love to follow up with you later on the power side because it seems like that's a real potential strategic advantage that other players might not have. Just a final quick one for me, it seems like the M&A environment might be getting more conducive with rates kind of stabilizing, falling down and maybe asking prices kind of coming down. I know most of your investment has been on the greenfield kind of organic side. Are you seeing I guess a better potential in organic environment?

You know it's interesting, there are air pockets of situations where we've seen multiples retreat a little bit. But if you look at, you know, recent transaction comps, certainly, for example, if you look at the Cable One deal that was done with T-Mobile and KKR, that was done, you know, in a mid to low-20s multiple for fiber. That sort of raised some eyebrows around here. So that was a pretty good marker. Towers are continuing to hang in. We're still seeing domestic private M&A multiples between 28 and 40 times per tower. We've certainly seen some data centers trade recently. And those are still trading at effectively, you know, if it's a development platform, trading in the mid to high-5 cap rates, if it's more stabilized trading in the, you know, sort of 6 to 7 cap rate, or if it's an enterprise data center, trading at an 8 to 9 cap. But really we haven't seen a demonstrative degradation in multiples. In fact, I would offer to you that multiples have kind of hung up and held up, provided if it's a quality asset. Interest rates are still high. We haven't seen the cuts that we're looking for. As we mentioned in the quarter, we did raise a lot of debt, Richard, in the quarter, and we did raise them at pretty attractive prices, but those were securitizations where we built the book to 8 to 12 times oversubscribed. So whether it was, you know, Extratnet or, you know, a Vertical Bridge. We had some really successful securitizations at Switch. We had another successful securitization at Databank. And we had a really successful green securitization for Vantage and an ABS transaction in Europe for Vantage EMEA. So we've been able to access the debt markets, I would say those coupons have hung in pretty steady, but certainly, as you know, being a veteran of the sector, it'd be great if we'd have a couple of rate cuts. That certainly does help our ability to buy things and it certainly helps our ability to finance new construction as well.

Great, thank you.

Thanks, Richard.

The next question comes from Jade Rahmani with KBW. Please go ahead.

Thank you very much. The cumulative catch-up fee dynamic, I think we're beginning to understand that. Hopefully the market does as well. But does that become a headwind next year or will this phenomenon persist through DBRG's earnings so long as FEEUM growth picks up?

I mean, catch-up fees are always going to be a part of the fundraising process. They're a little bit larger this year, given we have a large fund in the market. But there will always be typically catch-up fees when you're doing, you know, kind of fundraising. And I would also say to that, Jade, you know, one of the things that we've really been emphasizing is that this firm is not a one-trick pony anymore. We have multiple teams, multiple products, and you know as evidence this year between our data center sidecar vehicle, our expansion of our credit strategy, DigitalBridge Partners 3, and Co-Investments, we actually have multiple products in the market at the same time. And as we look around the corner to next year, give you the spoiler alert, we're going to have more products in the market focused on AI infrastructure, focused on power, and focused on the things that really matter for what we're doing to power the digital economy. We see no slowing down. We see no abatement, Jade, in the opportunities set at DigitalBridge today. In fact, we're just coming out of our strategic summit with our senior leadership team, and we have more ideas to execute, more products to launch. And when you look at the amount of CapEx that's going into AI, AI-related infrastructure, AI-related adjacent power, our swim lane Jade has never been bigger. In fact, I'll be really clear with you, our swim lane is growing and growing really fast. So this is a good quarter because it's kind of a launch point for us. It's the first time we've had more than four products in the market at the same time from a fundraising perspective. And this is really the new cadence that Tom and myself and Liam and Ben and the entire team are on now. So this is a big inflection point for DigitalBridge this quarter.

And just on the catch-up fees, you know…

Go ahead.

You know, the longer a fund stays in the market, the sort of the bigger the catch-up fees accumulate. So we've got a little bit of that going on the second half of this year? On the July fundraising that looked to accelerate, was that a seasonal factor that you had expected all along, or is there something changing in the market in terms of gaining steam, gaining more traction, LPs being more willing to commit capital?

It's a really insightful question. Thank you, Jade, for asking it. It's actually all three of those things, and let me sort of unpack that for you. One, the second half of the year is always stronger for us, Q3 and Q4, and the reason for that is people set their investment calendar, usually, as I've told you before, in April and May, and allocations start moving, you know, in June, July, August, and September. So we're really beginning to see, or particularly our LPs are returning and they're allocating. And the back half of the year is always stronger than the front half of the year, and that's what you're beginning to see. And hence, why you hear the very strong conviction of my voice and Tom's voice around our fundraising for the rest of the year. The second thing I would say is that LPs are very excited to be allocating to AI and AI data centers where you've got incredible platforms, long-term leases with investment-grade counterparties, and you're building the data centers of the future. And so when we highlighted our data center sidecar vehicle, that's a product that really has gone incredibly well. It's what investors want, Jade. They want exposure to investment-grade digital AI infrastructure and DigitalBridge has that in space. In fact, again, I'll say it again, we are the largest owner and private operator of AI infrastructure in the world and that's really important. When you're the market leader and you have those opportunities, it's really exciting. The third thing I would say, Jade, that's really manifesting itself in the back half of this year is, again, our diverse set of products. We're more than just one platform now. And you're going to keep seeing this. You're going to see it in the numbers. You're going to see it whether it's in our credit strategy, our private wealth channel that we've now launched, our flagship product, our co-investment products, and other investment management products that we've been telegraphing to you that are coming. Everything revolving around the AI infrastructure economy, including power. So this is a really exciting moment for the company and we're starting to really hit our stride. And so hence why I think you hear a lot of enthusiasm in our voices.

Thanks very much.

Thanks, Jade.

This concludes our question and answer session. I would like to turn the conference back over to Marc Ganzi for any closing remarks.

Well, thank you. It's been a terrific quarter. I’d first and foremost want to thank my team. We've been working really hard to deliver these results and we're going to continue to work even harder through the back half of this year. As I told the team recently, we have a huge opportunity in front of us. And no one is better positioned to take advantage of the AI economy and AI infrastructure than DigitalBridge. Got the biggest team, got the best platforms, we've got the most assets under management, over $84 billion today and growing, and that opportunity sits at our feet and it's on us to execute it. What we promise to you, our shareholders, is we will do that. We will go forward through the back half of this year and into next year, executing against what we think is the most exciting secular opportunity that we've seen in our lives, which is the opportunity to build and be a trusted set of hands to the best logos, the best hyperscalers, and delivering AI infrastructure for the future. I want to thank you for your interest. I want to thank everyone for tuning in and we'll look forward to spending more time with you this year and as always we remain open to our investors and engaging with them. So thank you again and wishing everyone a great evening. Take care.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.