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DigitalBridge Completes Acquisition of Controlling Stake in Vertical Bridge

DigitalBridge Group said today that funding from DigitalBridge Investment Management, the company’s investment management platform, has been used to complete the acquisition of a controlling stake in Vertical Bridge Holdings. According to DigitalBridge Group, Vertical Bridge Holdings is the largest private owner and operator of wireless communication infrastructure in the United States.

Since its founding in 2014, Vertical Bridge has rapidly expanded its portfolio to include more than 308,000 owned or master-leased sites, including over 8,000 towers in the United States. DigitalBridge said it will continue this trend as it addresses the growing need for 5G services created by the continued popularity of next-generation digital devices in the U.S. telecom infrastructure market.

J.P. Morgan Securities served as financial advisor to DigitalBridge Investment Management in connection with the transaction, and Vinson & Elkins served as legal counsel. Goldman Sachs & Co. acted as financial advisor to Vertical Bridge, and Greenberg Traurig served as legal advisor.

Steven Sonnenstein, senior managing director of DigitalBridge Investment Management.

“We are pleased to extend our longstanding relationship with Vertical Bridge, the industry’s leading independent tower platform led by the preeminent tower management team,” said Steven Sonnenstein, senior managing director of DigitalBridge Investment Management. “The rapidly increasing demand for telecommunications infrastructure in the United States has created exciting and meaningful opportunities for long-term growth. Our ownership position in Vertical Bridge is representative of our conviction in its future.”

With a heritage of more than 25 years investing in and operating businesses across the digital ecosystem including towers, data centers, fiber, small cells and edge infrastructure, DigitalBridge Group, formerly named Colony Capital, has had a complicated — albeit lucrative — financial history.

In July 2019, Colony Capital purchased for $325 million a company Marc Ganzi, DigitalBridge president and CEO, founded and led as CEO, a company called Digital Bridge, with a space between the two words in the company name. Digital Bridge owned a broad range of communications infrastructure including Vertical Bridge and ExteNet Systems, and Colony Capital was primarily a global real-estate investment firm. At the time, Colony Capital reported that during the next two years, Ganzi would transition into the role of CEO of Colony Capital, succeeding Thomas J. Barrack Jr.  Ganzi also was a managing partner at Digital Colony, which Colony Capital acquired in 2019.

Prior to being purchased by Colony Capital, Digital Bridge was a holding company that invested in telecommunications infrastructure. Founded in 2013 by Ganzi and Ben Jenkins, the holding company initially focused on cellular infrastructure, but later expanded to data centers, fiber networks, and other areas. In 2017, it bought data center company Vantage Data Centers Management for more than $1 billion.

Marc Ganzi Talks 5G Phases, Touts DigitalBridge’s Flywheel of Capital

By Mike Harrington

Marc Ganzi, president and CEO of DigitalBridge

Speaking at the RBC Capital Markets’ Global Towers and Wireless Infrastructure Summit on Sept. 28, Marc Ganzi, president and chief executive officer of DigitalBridge Group, discussed macro tower installations, 800,000 outdoor small-cell nodes that need to be built, the three phases of 5G wireless communications deployment and what he called DigitalBridge’s incredible flywheel that allows unrestricted digital infrastructure investments.

“We’ve created this incredible flywheel at DigitalBridge where we’re not restricted in our ability to invest in digital infrastructure,” Ganzi said. “The key is having a great team: We have 100 investors who wake up every day with a singular focus of investing in the digital future. There’s not another investment team on the planet that has that amount of experience, capability and geographic reach. That’s the story we take to investors: We have a unique capability to invest; we have a unique capability to operate. Some are operators, some are investors, we can do both — so that gives us a lot of latitude. … We now manage over $40 billion in digital assets on a global basis.”

On Oct. 1, three days after Ganzi’s presentation at the RBC summit, DigitalBridge announced the expansion of the Vantage SDC (Stabilized Data Centers) platform with the acquisition of CA22, a 24-megawatt hyperscale data center serving the Santa Clara, California, market. That transaction, valued at $539 million, marks a milestone for Vantage SDC, representing its first hyperscale data center acquisition since its formation in July 2020 through a $3.5 billion strategic partnership between Vantage Data Centers and a DigitalBridge-led investor group.

“DigitalBridge’s commitment to supporting the growth of its portfolio companies while serving the growing need for hyperscale data centers remains strong,” Ganzi said on Oct. 1. “This transaction not only advances Vantage SDC’s strategic plan to grow its portfolio of stabilized data centers, but also increases DigitalBridge’s exposure to world-class digital infrastructure assets that deliver consistent returns for investors.”

At the RBC summit, Ganzi mentioned DigitalBridge’s agreement last month to sell Wellness Infrastructure business — including a portfolio of more than 300 facilities across senior housing, skilled nursing, medical office buildings and hospitals — in a transaction valued at $3.2 billion. “It’s a great transaction for us, Ganzi said. “We expect to close the transaction by the end of the year, put the money on our balance sheet, pay off some debt and focus on being a purely digital business. A lot liquidity is rotating back to our balance sheet.”

Ganzi also revealed that he previously told his investors that he wanted DigitalBridge to be at about $2 billion liquidity by the end of 2021. “It looks like we’ll come in at the top end of that range — so we’ll be well-armed to play offense in 2022. Digital infrastructure has been a hot space for everyone to invest in the last 7 or 8 years — but even hot sectors have some challenges when you have global macro headwinds in front of you. My job was to get us through the other side, get these assets sold, build our cash position and play some classic Ganzi offense,” he said with a wink in his voice.

The DigitalBridge CEO said that about 800,000 outdoor small-cell nodes probably would need to be built. “So, if we’re playing a nine-inning baseball game in terms of 5G, we’re probably in the bottom of the first inning or top of the second inning in terms of that build plan.”

He said he looks at 5G in terms of three segments: “Phase 1 is all about macros. Jay Brown, Alex Gellman, Jeff Stoops and Tom Bartlett [Crown Castle, Vertical Bridge, SBA Communications and American Tower CEOs, respectively] are all saying the same thing: That macro demand is strong, but the initial phase of 5G is over on top of macro. And further to that, densification on top of macro. The second phase will obviously be overlaying on small-cell infrastructure in the initial phase of densification, and the third phase will be pure densification and edge out. That will probably be the most interesting phase.”

Ganzi said that he believes that 2021, 2022 and 2023 will all be about the macros; and that toward the tail-end of 2022, it starts to turn for small cells, and that 2023, 2024 and 2025 will be big years for small cells. “I think the final phase of that infrastructure — 2025, 2026 and 2027 — will be further densification and more of what I like to call virtualized edge RAN, which will be more focused on fiber and data center traffic. 5G is a really complicated build — probably the most complicated build in what I’ve seen in my three decades of doing this.”

With a heritage of more than 25 years investing in and operating businesses across the digital ecosystem including towers, data centers, fiber, small cells and edge infrastructure, DigitalBridge Group, formerly named Colony Capital, has had a complicated — albeit lucrative — financial history.

In July 2019, Colony Capital purchased for $325 million a company Ganzi founded and led as CEO, a company called Digital Bridge, with a space between the two words in the company name. Digital Bridge owned a broad range of communications infrastructure including Vertical Bridge and ExteNet Systems, and Colony Capital was primarily a global real-estate investment firm. At the time, Colony Capital reported that during the next two years, Ganzi would transition into the role of CEO of Colony Capital, succeeding Thomas J. Barrack Jr.  Ganzi also was a managing partner at Digital Colony, which Colony Capital acquired in 2019.

The Digital Bridge acquisition followed the May 2019 closing of a $4.05 billion fund sponsored by Digital Colony and Colony Capital. Digital Bridge managed nearly $20 billion of digital infrastructure globally, directly and through Digital Colony Partners.

Prior to being purchased by Colony Capital, Digital Bridge was a holding company that invested in telecommunications infrastructure. Founded in 2013 by Ganzi and Ben Jenkins, the holding company initially focused on cellular infrastructure, but later expanded to data centers, fiber networks, and other areas. In 2017, it bought data center company Vantage Data Centers Management for more than $1 billion.

The DigitalBridge Group team now manages a $40 billion portfolio of digital infrastructure assets on behalf of its limited partners and shareholders. Ganzi said that having the best CEOs in the right swim lanes is the secret of the company’s success. “We really have a great family of 23 CEOs who are best in class,” he said. “And, once again, that’s advantage us. And that’s advantage to DigitalBridge Group shareholders. We want to keep doing that and we want to keep our heads down and keep delivering for customers.”

Ganzi pointed to the success of DataBank, a Dallas-based data center provider under the DigitalBridge Group umbrella, which has grown exponentially from six data centers to 66 data centers in five years, quadrupling its EBITDA. “You just don’t see that, and that’s a function of the people.”

Mike Harrington is a contributing editor.

Infrastructure Giants Turn to Greener Towers

By Mike Harrington

While reaping the benefits of 5G telecom boom, three large real estate investment trusts (REITs) that are wireless communications infrastructure owners — American Tower, Crown Castle and SBA Communications — are also working to reduce their carbon footprints.

Although tower owners consume just a small fraction of the power telecom carriers and tech manufacturers do (see Sept. 9 and Sept. 14  eDigest stories), the three REITs have stepped up their green energy initiatives to help alleviate the power-hungry demands of 5G base stations, which can consume as much as three times more power than 4G and LTE equipment.

The REITs capitalized on this year’s 5G building boom, turning in stellar second-quarter 2021 results: American Tower, one of the world’s largest owners of wireless infrastructure, reported second quarter results that included revenue increasing 20.2 percent to $2.299 billion and net income increasing 66.8 percent to $748 million.

According to Crown Castle, the company owns, operates and leases more than 40,000 cell towers and 80,000 route miles of fiber-optic cable supporting small cells and other facilities. The REIT said it increased its expected 2021 growth 12 percent, with reported income from operations of $333 million in the second quarter — compared with $200 million for the second quarter of 2020.

SBA Communications reported a net income of $152.7 million or $1.37 per share, average funds from operations (AFFO) per share growth of 15.3 percent for the second quarter and revenue of $575.5 million for its second quarter.

The three REITs are as quick to boast of their environmental successes as their financial success. However, it is yet another large cell tower owner that claims to be the first wireless infrastructure company to become 100 percent carbon-neutral. According to Vertical Bridge, the company owns and master-leases more than 8,000 towers, which it said makes the company the largest private owner of towers in the United States.In June 2020, the Boca Raton, Florida-based Vertical company said that it was officially certified as carbon-neutral in accordance with The CarbonNeutral Protocol.

Last month, Vertical Bridge became part of DigitalBridge Group (for background, Digital Bridge was a company Colony Capital purchased in 2019, but now both Vertical Bridge and Colony Capital are part of DigitalBridge Group) — but the “bridged” company’s carbon-neutral green initiatives remain intact.

As part of Vertical Bridge’s carbon-lowering efforts, it is opting for more energy-efficient and environmentally safer technologies as it upgrades HVACs, aviation lighting systems (to LED lighting) and generators. It’s also guided field operations teams to be more efficient with travel route planning by completing multiple visits and inspections in a single trip rather than several.

Meanwhile, Houston-based Crown Castle, despite having the highest percentage among its peers of suburban and urban cellular towers and small cells — which tend to consume more energy — has a relatively limited carbon footprint. About 62 percent of Crown Castle’s towers are in the top 100 cities in the United States. Although its cell tower business is booming this year, Crown Castle said it believes its small-cell market will flourish. Typically, cell towers consume less energy than small cells, which consume little power individually but have a cumulative power consumption in urban areas.

According to Crown Castle’s environmental sustainability statement, “Our infrastructure and related assets, such as ground shelters, are primarily used to host our tenants’ assets and support their operations. While Crown Castle frequently contracts with utility companies to deliver electricity to our sites, the power is predominantly consumed by our tenants to operate their equipment, such as radios. Given that our assets are primarily U.S.-based, our operations are generally supported by a reliable power grid.”

The statement continues, “Where lighting beacons are mandated by law, we have transitioned 6,119, or nearly 50 percent, to efficient LED lighting to reduce energy consumption. In addition, all new vehicles in our service fleet are assessed for fuel efficiency, and our data center teams routinely evaluate the energy use of their equipment and make updates to improve efficiency. We also seek energy efficiency in our owned and leased offices, with 18 Energy Star-certified and seven LEED (Leadership in Energy and Environmental Design)-certified. For new office spaces, we make efficiency improvements a standard practice.”

Meanwhile, American Tower owns the most U.S. cell towers — about 42,000 — and also owns about 500 distributed antenna system (DAS) networks and 1,774 DAS nodes; 407 of these DAS nodes are in the United States.

According to American Tower’s environment statement, “Managing our environmental impact is an essential element of our value proposition to our tenants and our commitment to sustainability. By deploying the latest renewable energy technologies and advanced battery storage systems and reducing energy usage as much as practicable, we can offer our tenants a more stable, resilient and efficient platform for their equipment’s power requirements. In addition, with more than 214,000 sites worldwide, we are committed to expanding connectivity in a sustainable manner by working with our local communities to ensure protection of our surrounding land and ecosystems.”

American Tower also points to its more than 1,700 solar panels on the roof of its U.S. Tower division headquarters in Woburn, Massachusetts, offsetting approximately 16 percent of the building’s usage annually, adding “While our targeted diesel reduction program is our most impactful use of resources and efforts in sustainable operations, we also sponsor other programs focused on reducing, reusing and recycling under our companywide Green @American Tower initiative. We believe that weaving sustainability into our culture is essential to our success and this starts where employees work every day. We do this by investing in renewables and other energy efficiencies in our offices around the world.”

In 2018, American Tower announced its commitment to planting a million trees across the United States over the next decade. “Our Million Trees initiative is a new and creative approach to philanthropic giving that helps support our mission to connect to the communities where our teams live and work,” a statement from American Tower reads. “To implement this program, we are partnering with American Forests, the nation’s oldest conservation organization. Thus far, American Tower and American Forests have planted 200,000 trees.”

Ranked third among the large U.S. wireless infrastructure REITs with more than 17,000 towers in service, SBA Communications stated that one of its core corporate goals is to “mitigate the environmental impact and carbon footprint.” However, SBA is one of many S&P 500 companies that do not disclose their carbon data to the Carbon Disclosure Project (CDP).

Nevertheless, SBA has implemented various initiatives to reduce its carbon footprint and provide green solutions for its business, including stringent energy efficiency and recycling programs.

According to the Environment chapter of SBA Communications’ 2019 Sustainability Report, “As a leader in wireless communications infrastructure, SBA also strives to be a leader in corporate sustainability. We continuously look at ways to maximize the sustainability of our operations and reduce our environmental footprint across the markets in which we operate. Our neutral-host infrastructure assets have a relatively small geographic footprint, ranging from 2,000 to 10,000 square feet per tower site. They are built to host equipment from multiple tenants, thereby reducing the overlap and duplication of towers in our communities. We have developed sustainable energy solutions that reduce carbon emissions for our customers. We support post-disaster recovery efforts following hurricanes, such as the re-building of critical telecom networks and provisioning of emergency power.”

SBA said that its environmental measures include screening tower site locations that might be located in a wilderness or wildlife preserve, mitigating any potential effect on migratory birds and their habitats, and accelerating the replacement of all lighting systems on its towers from traditional incandescent and xenon models to new energy efficient LED lighting systems.


Mike Harrington is a contributing editor.

DigitalBridge to Sell Wellness Infrastructure Business

DigitalBridge Group said it has reached an agreement to sell its Wellness Infrastructure business to an investment group composed of two real estate investment firms, Highgate Capital Investments and Aurora Health Network, in a transaction valued at $3.2 billion.

The Wellness Infrastructure business includes a portfolio of more than 300 facilities across senior housing, skilled nursing, medical office buildings and hospitals. Additionally, the Wellness Infrastructure business includes DigitalBridge’s equity interest in and management of its sponsored non-traded REIT (real estate investment trust), NorthStar Healthcare Income.

The consideration includes $316 million of net value to DigitalBridge, composed of $226 million in cash and a $90 million five-year seller note, and the assumption of $2.6 billion in consolidated investment-level debt and $294 million of subsidiary-level debt.

A global digital infrastructure REIT, DigitalBridge said the Wellness Sale, upon completion, advances several of its stated strategic goals.

For one, the Wellness sale represents the final step in the company’s digital transformation, which has seen six non-digital, legacy segments sold in the past two years, in line with net carrying values and ahead of schedule by over a year, according to DigitalBridge.

The sale reflects a second goal, DigitalBridge said, that of simplification. “The sale of the final legacy segment reduces organizational complexity, generates overhead savings and allows for a sole focus on digital,” a statement from the company reads.

Additionally, the Wellness sale increases DigitalBridge’s corporate liquidity to more than $1.5 billion on a pro forma basis, the statement reads, while at the same time reducing consolidated investment-level debt by $2.6 billion and subsidiary-level debt by an additional $294 million.

“Having completed our digital transformation in less than two years, this final step will allow us to emerge as the pure-play, fast-growing digital infrastructure REIT we envisioned from day one,” said Marc Ganzi, president and CEO of DigitalBridge.

Mahmood Khimji, co-founder and managing principal of Highgate, said that, in partnership with Aurora, his company looks forward to continuing to operate and effectively steward the Wellness healthcare facilities, serving patients and communities in the United States and the United Kingdom.

Joel Landau, co-founder and managing director of Aurora, said that his company looks forward to what he called a productive and value-enhancing partnership with Highgate in accordance with Aurora’s principles, which he said combine a focus on clinical excellence and quality of care alongside Aurora’s knowledge of the market.

In connection with the Wellness sale, Highgate and Aurora will assume $2.6 billion in consolidated investment-level debt collateralized by the Wellness Infrastructure portfolio, as well as $294 million in subsidiary-level debt, including the DigitalBridges’s trust preferred securities (TruPS) and 5.375 percent exchangeable senior notes, which are obligations of NRF Holdco, the holding company for the Wellness Infrastructure business. The Wellness sale net value of $316 million is in line with the net equity carrying value of the underlying assets as of June 30, when accounting for the transfer of the $294 million in subsidiary-level debt included in the Wellness sale.

Digital Bridge expects the Wellness sale to be completed in early 2022, the statement from the company reads, subject to closing conditions and third-party approvals.

 

Landmark Infrastructure Partners Agrees to Be Acquired by Landmark Dividend

By Mike Harrington

In a complicated financial deal, Landmark Infrastructure Partners LP has agreed to be acquired by its parent company, Landmark Dividend LLC, for $16.50 a share.

The transaction marks the end of an elaborate, byzantine acquisition process. Landmark Dividend, Landmark Infrastructure’s parent company, was purchased by Digital Colony – since renamed DigitalBridge – in May. As part of that deal, Digital Colony planned to purchase the Landmark Infrastructure Partners subsidiary in a transaction that would have valued the company at around $972 million.

Meanwhile, both Melody Investment Advisors and Verde Investments tried to outbid Digital Colony with higher offers. Melody said its proposal was “financially superior,” offering $16.25 per Landmark common unit compared to Digital Colony’s $13.

The Landmark companies reached a definitive agreement on August 23, after lengthy negotiations between the Conflicts Committee of the Board of Directors of Landmark Infrastructure Partners GP (general partner) and the Landmark Infrastructure’s sponsor, Landmark Dividend.

Under the terms of the agreement, Landmark public unitholders will receive $16.50 in cash for each common unit owned, representing a premium of 38 percent to the Landmark Infrastructure’s unaffected unit price on May 14, 2021, the last business day prior to the announcement of Landmark Dividend’s proposed acquisition of Landmark Infrastructure for $13.00 per common unit.

The transaction is expected to close sometime in 2021, subject to customary closing conditions and approval by the holders of a majority of Landmark’s outstanding common units. Landmark Dividend reported that it is only considering the acquisition of Landmark Infrastructure.

In a prepared statement released on Monday, Landmark Dividend said that if “the proposed transaction is not consummated as expected, it will continue operating Landmark Infrastructure in its role as the General Partner.” Alluding to the Melody and Verde bids, Landmark Dividend also said in the statement that it is “not considering third-party offers for Landmark Infrastructure or its assets.”

Landmark Infrastructure Partners LP owns and manages a portfolio of real property interests and infrastructure assets that it leases to companies in the wireless communication, digital infrastructure, outdoor advertising and renewable power generation industries. Its assets include cellular towers, rooftop wireless sites, billboards and wind turbines.

Landmark Dividend LLC is a real estate and infrastructure acquisition and development company focusing on the digital infrastructure, wireless communications, outdoor advertising and renewable power generation industries. Landmark Dividend owns, among other things, 100 percent of the membership interests in Landmark Infrastructure Partners GP (the General Partner) and 13.2 percent of the common units representing limited partner interests in Landmark Infrastructure LP.

According to Landmark’s prepared statement, “The organization currently manages over 5,000 assets originated on behalf of Landmark, its active private investment vehicles and Landmark Infrastructure Partners LP (NASDAQ: LMRK). Landmark is a publicly-traded subsidiary of Landmark Dividend LLC established to acquire, own and manage a diversified, growing portfolio of real property interests and infrastructure assets.”

Mike Harrington is a contributing editor