Out of Boca Raton, Florida, global digital infrastructure investment firm Digital Colony, has proven the debt market skeptics wrong. Having closed on average one debt deal every 18 days for 90 days, what’s the secret? João Marques Lima finds out speaking to the business’ top executives.
LONDON, U.K. – June 19, 2020 – Data Economy – Digital infrastructure is paramount and an increasingly significant global asset, so investors are comfortable betting on it – and the Covid-19 pandemic might just have accelerated this trend even more-, as Marc Ganzi, Chief Executive Officer of Digital Colony and soon to be Chief Executive Officer of Colony Capital, explains.
“We’ve heard a ton of market feedback that the debt markets are closed, but we did five debt deals in the last 90 days. We’re not going to run around telling everyone that the capital markets are wide open, but they are open for select opportunities,” he tells Data Economy out of the firm’s Florida HQ just a few weeks after it reopened for senior management as the state government deemed their business “essential” during the pandemic.
“Here’s the reality: capital will go to good credits and good opportunities. And so, logically, banks and lenders are gravitating towards digital infrastructure. Why? Our customers typically enter into leases with 10 to 25-years of tenor depending on the digital asset class.”
Ganzi goes on to explain that many of Digital Colony’s investors are focused on investment grade counter-party exposure and they want to invest in the future. As the world thinks about the functional obsolescence of traditional real estate business models that are facing challenges – like office buildings, retail, hotels, student housing, senior living homes, and others, it’s worth noting that digital infrastructure was booming prior to 2020, and even during the challenges of this year has witnessed increased interest from investors.
“We can then look at modern real estate models like Digital Colony – with its cell towers, data centres and fibre routes – and naturally, credit is very receptive to this asset class. It’s an interesting tale of two cities and obviously we get to experience that at Digital Colony every day.”
“As we look across the work we’ve done in the last 90 days, the $8.31 billion of debt that we raised at Zayo, Scala Data Centers, Vantage Europe with Next Generation Data (NGD), Beanfield Technologies financing of the Aptum fibre acquisition, and last but not the least, the $594 million wildly oversubscribed securitisation of Vertical Bridge in May, we’ve been able to get multiple deals financed through this cycle.”
Ganzi then briefly recounts the 2008-09 crisis, and just like today, the company was able to raise money to finance its strategy, which is due in part to Digital Colony’s reputation, the CEO believes.
He adds: “We have a 26-year reputation as an owner and operator of these digital infrastructure assets and all of the banks understand our prowess and how we manage and lease the assets. This is where we have a distinct edge. We have built and earned that credibility.”
“That credibility has afforded us to stay very open during this crisis. And it’s allowed us to continue to be acquisitive and to continue to finance assets at attractive prices and at the appropriate leverage levels. It’s an interesting time, but the credit and capital markets in general are very fickle at the moment; they are open for certain logos and certain opportunities, and others not. Our job is just to continue to put capital to work and do it in a disciplined manner, while continuing to deliver exceptional returns for our investors.”
Throughout its history, Digital Colony has built an enviable reputation and portfolio. The last five deals it has closed have strongly cemented its market leadership in the fibre and data centre arena across North and South America, and Europe.
In Brazil, the company established Scala Data Centers S/A, a hyperscale data centre platform headquartered in Sao Paulo through the acquisition of assets from UOL Diveo. Also, in Brazil, Digital Colony acquired Highline do Brasil II Infraestrutura de Telecomunicações S/A, an independent infrastructure solutions provider for the telecommunications industry, from Pátria Investments.
In Europe, Digital Colony’s Vantage Data Centers, a leading global provider of hyperscale data centre campuses, signed a definitive agreement with InfraVia Capital Partners, along with the two founders of the business, to acquire Next Generation Data (NGD).
Based in Wales, NGD will mark Vantage’s sixth strategic market in Europe following its entrance into Berlin, Frankfurt, Milan, Warsaw and Zurich, including the acquisition of Etix Everywhere.
Elsewhere, Digital Colony’s Beanfield Technologies acquired Openface Inc., a leading provider of fibre-based telecom services primarily to small and medium-sized businesses as well as enterprise customers, and more recently acquired the fiber business of Aptum Technologies, increasing its footprint tenfold.
And last but not the least, Digital Colony, in partnership with the EQT Infrastructure IV fund, also announced the completion of the $14.3 billion acquisition of Zayo Group Holdings, which provides mission-critical bandwidth to the world’s most impactful companies. The deal represents the largest syndicated private equity investment, the fifth largest media and communications LBO and the second largest LBO overall since 2008.
All this activity – together with previously acquired assets, including US enterprise data centres and managed services providers DataBank and Aptum Technologies, servicing clients in Canada, the US and UK – have made Digital Colony one of the world’s largest data centre operators. Today, it boasts nearly 100 properties and has one of the largest towers portfolios with approximately 350,000 wireless towers and small-cell sites, and more than 135,000 miles of fibre.
Jon Mauck, Managing Director of Digital Colony, says: “Large customers are looking to find preferred partners. Being able to grow with those customers; becoming one of their preferred providers and working closely with those customers at scale is a massive opportunity. Investing to support the growth of our customers as they expand and go into new markets is a big thesis that we are focused on.”
Speaking of customers, Mauck explains that for Digital Colony, the strategy of who the business is targeting as clients is “pretty wide” with Digital Colony’s different businesses providing solutions for enterprises, hyperscalers, governments and others.
Looking ahead and into potential further acquisitions, Ganzi summarises the current and future work for Digital Colony in simple words: “We’ve never been more active as a team. Jon and I have been partners for five years. I don’t think we’ve worked this hard in a long time. There are significant opportunities to put capital to work in today’s market if you are patient.”