A new real estate recipe?
25% NVIDIA + 25% data center REIT + 50% Blackstone
---- Background ----
DigitalBridge recently hosted a 3+ hour investor day, where its leaders discussed the firm's progress/outlook and the broader forces affecting data centers, towers, and fiber.
Most real estate investor days are pretty boring, but this one was packed with interesting information.
We don't know what to make of it in terms of a prediction, but here's what we thought was most interesting...
---- Our 10 takeaways -----
1. The AI boom is legit
$400B+ in annual capex spend is needed to deliver the infrastructure required to meet AI-related demand. ...a significantly steeper curve vs. the drivers that created the data center space. i.e., cloud, mobility, and internet.
2. A power traffic jam
The existing transmission structure cannot deliver enough power to fuel AI's growth. Problem: inadequate lines and substations (not necessarily a general lack of power.)
3. Massive increase in infrastructure investment
Consequently, the number of data center projects in 2024-25 is increasing 3-4x and the dollar investments related to these projects are up 10x over recent years.
4. Alts and infrastructure investment demand
From an investment perspective, interest in alternatives has increased 4x over the last ten years (from $4 trillion to $16 trillion). And infrastructure AUM grew 13% per year since 2013. Investors like the story.
5. "Specialists are winning in new, strategic allocations..."
Outside of the traditional buckets of private equity, fixed income, and insurance, LPs reportedly want specialists with unique perspectives on alpha-generating opportunities.
6. A pure-play investment manager in digital infrastructure
DigitalBridge has transitioned from a cyclical, heavy capital-using REIT to a pure-play investment manager, focused solely on digital infrastructure.
7. Anatomy of a fundraise
DigitalBridge has huge fundraising goals. Its flagship platform targets $3.5B in 2024 commitments ($600M raised so far in 2024), with another $3.5B split between syndicated co-investments and new strategies. They've engaged more than 400+ investors and are in active diligence with 160+.
8. "Investment solutions across the Digital infra ecosystem"
The firm's $80B AUM is concentrated in portfolio companies and sponsored comingled funds, but it is focused on developing a range of investment options from core to VC capital.
9. "Layer cake" fees
The firm wants to stack investment vehicles, which--once developed--could generate significant ongoing fees. e.g., $75M a year from a $4B raise.
10. Explosive profits
AUM has grown 3x since 2020, and fees have increased from $72M to $280M. DigitalBridge's plan is to double AUM (to $60-70B) by 2028, targeting $1.3B in carried interest payouts.
PS - The magnitude of shifts outlined by DigitalBridge is hard to overstate. This is worth keeping an eye on.
Think DigitalBridge will hit its goals?
Check out the full investor report here.
COMMENTS