DigitalBridge has closed its second flagship fund in less than two years on $8.3 billion, more than a third above its initial target of $6 billion and more than double its predecessor.
“I think it’s exciting not only for us, but for the sector in general,” the firm’s president and chief executive Marc Ganzi tells affiliate title Infrastructure Investor. “It shows that for specialist funds, whether for renewables or digital infrastructure, LPs want to have an industry expert. I think that is a big area of differentiation for us.”
Aside from achieving a 70 percent re-up rate from existing LPs, the Florida-based firm also secured commitments from several prominent US public and private pensions, as well as from Asian LPs. According to its Q3 earnings report, “four of the five largest global infra investors” are LPs in the new fund.
“We had very good interest from the European insurance and pension community with some of the larger LPs there relative to our first fund,” says Kevin Smithen, the firm’s chief commercial and strategy officer. “And then in Asia, despite covid and without any physical meetings, we were still able to add some prominent new logos there.”
The latest fund has already invested in nine portfolio companies across towers, easements, hyperscale data centers, edge infrastructure, indoor DAS infrastructure and fiber in the Americas, Europe and Asia. As of December 31, it had deployed roughly 60 percent of capital raised. It will continue the strategy of its predecessor, but while the $4.05 billion Digital Colony Partners I fund was evenly split between the US and Europe with the remaining 20 percent invested in Latin America, Fund II will also target investments in Asia.
This latest vehicle has been rebranded to DigitalBridge Partners II, reflecting the rebranding of the firm itself this past June.
Out with the old…
“It was really a logical progression for us,” Ganzi comments. “Once we had announced the intent to sell our wellness portfolio and the legacy real estate GPs to Fortress, my job was complete in terms of pivoting the company to digital,” he added, referring to Colony Capital, the real estate firm that in July 2019 acquired the original Digital Bridge that Ganzi had founded in 2013.
“For me, it represented rotating $75 billion-worth of assets in two years. It was a good time to sort of bury the old name and move into the new. It’s an entirely new team, top to bottom. It’s an entirely new set of assets. It’s an entirely different strategy.”
… In with the new
Speaking of new teams, DigitalBridge has established several as it considers adding new strategies to its product offering.
“We formed a team about a year-and-a-half ago to help us start assessing whether or not we felt like digital credit could be its own vertical,” Ganzi explains. “And in the third quarter of last year, we started making loans in the digital infrastructure space, predominantly in the second-lien Term Loan B marketplace, and are currently holding these loans on our balance sheet.”
According to the firm’s Q3 earnings report, those loans amount to roughly $120 million.
“We think there’s a real void in the marketplace in terms of having a credit specialist that really understands the sector, understands the leadership teams and can move quickly because I think in a challenging interest rate environment, with inflation creeping up, spreads widening and a pretty hawkish Fed, private credit is going to be increasingly very important to middle-market digital infrastructure companies,” Ganzi says.
Smithen adds: “We also hired a team to review investment opportunities in what we call strategic assets. These are long-duration, core-plus-type infrastructure assets in the digital space. So, we’ve added that team, as well as a team to review growth equity and venture capital opportunities.”
The firm, headquartered in Boca Raton, also has key offices in Los Angeles, New York, London and Singapore. Its AUM currently stands at $42 billion.