There’s close to $80 billion of LBO debt that’s rolling in the next 36 months. Some of that is in the fiber space. And so we’re looking forward to taking a look at some of those opportunities and being a helpful partner to companies that need capital.
Eric Luebchow: I appreciate that Marc. And just a follow up, I know it’s touched on data centers a lot, but maybe you can just give us an update on what you’re seeing in terms of where kind of market rents have gone in data centers. We talked a lot about the supply demand imbalance. Have they continued to move higher this year? And kind of where does that take unlevered returns today, just given where cost of construction and lean times are? And I guess, is there a breaking point at which we’re going to see pricing growth start to slow down, or a point at which the hyperscalers might try to bring more in-house if the industry keeps raising pricing? Thanks.
Marc Ganzi: That’s a dangerous question, right? Certainly, I don’t love to talk about pricing on our calls, but what I would tell you is broadly speaking, we continue to believe that there is a really good opportunity to continue to work with our partners and get paid for the risks that we take. And what I mean by that is that obviously there is a big opportunity and look, if our customers could self-perform, they would. And we never tell a customer that they can’t self-perform. I’d be the last person in the world to tell any of the hyperscalers that they cannot build their own data centers and can’t self-perform. I think the challenge today, if you’re looking and taking a step back, is there is that constraint of power. And there is that constraint of resources, of land and building permits.
And just it’s a question of focus at the end of the day. What is the best use of Microsoft’s time or Amazon’s time or Meta’s time or Google’s time? We think they will self-perform some of their workloads, 30% to 40%. And we continue to believe 70% to 60% percent of the time they’re going to work with folks like us that have the inventory, that have the land, that have the permits, and have the will-serve letters. So, as I said before, we’re lighting up 2 gigawatts right now. So we’re pretty busy. That’s on top of the, 1.8 gigawatts to 1.9 gigawatts we already have online today. So we think on an aggregate basis across all of our platforms, we’re one of the largest, we think, the largest data center operator in the world in terms of certainly power online, square footage, number of data centers, and certainly the ability to service private cloud, public cloud and edge, which is something quite unique to the DigitalBridge platform.
I would say that, without being specific or announced on pricing, we’ve had two really good years, right? The uptick from ‘21 to ‘22 is strong, rents were up over 21%, the uptick from ‘22 to ‘23, depending on which market you rent, sort of 13% to 16%. And so far through the first quarter, we are seeing that pricing power remains with the landlord. I never believe we have pricing power. And by the way, our CEOs that run our data center companies, they subscribe to my view and my logic, which is we need to work with customers. We don’t want to be the price setter. We want to have partnerships. And that comes from my 31 years of doing this and building towers and building fiber and small cells and data centers, is if you take every bit of flesh out of a customer, they don’t come back.
And so I think we’ve been very careful about how we price. We’re very focused on the return nature and the repeat nature of our customer relationships. And so we’re very sensitive to making sure that we create the right value for our customers. What I can tell you is, our leasing backlog has never been bigger across all of our data center companies. It’s the largest pipeline of opportunity we’ve ever seen. And so we got to balance that with pricing it correctly and also making sure, as you said, we get the right returns. Construction is expensive. We got to make sure we get the right anchor build, return on invested capital on a cash on cash basis. And remember, most of the things that we are building are campuses. So we are looking to bring that second, third or fourth customer into a campus setting from where we build a new facility.
There’s a lot going on. I think Severin said it earlier, we look forward to welcoming everyone to Investor Day. I think we’ll do a little bit of a deeper dive on this and certainly dive deeper into edge and private cloud and public cloud and what’s happening across those three customer sets and where we see workloads going and where we see yields going and ultimately how we see RTM and AUM growing over the next five to 10 years.
Eric Luebchow: All right, great. Look forward to it. Thanks, Marc.
Operator: Our next question comes from Jon Atkin of RBC Capital Markets. Please go ahead.
Jon Atkin: Thanks. I was interested in maybe drilling down on towers, thinking about US and maybe LatAm and opportunities that you might see for consolidation to increase your presence in that sector. And then I’ve got a follow-up.
Marc Ganzi: So your first question is just around tower M&A?
Jon Atkin: Yeah.
Marc Ganzi: I think, look, we continue to be very acquisitive on the tower front Jonathan. The four theaters that we operate in Asia, Europe, North America and Latin America all certainly active from an M&A perspective and we’ve been looking at tower transactions in all four theaters inside this quarter interestingly enough. The one theater that that I think did resonate the most in this quarter was the US. We continue to be really bullish about the US tower market. Maybe perhaps you can tell from the way the stocks traded today, maybe public investors weren’t, but I wouldn’t bet against the tower industry. So we did an acquisition at Vertical Bridge. We did a tuck-in, Shentel. We like that tower footprint. We like where the Shentel assets are.
Really difficult to zone towers and carry our own portfolio that now we’ve turned and we’re going to migrate onto our platform which creates a lot of good opportunity and a lot of good lease-up. We’ve continued to look at tuck-ins in Europe across our three different European platforms. We have FreshWave, we have Belgian Tower Partners, and we have GD Towers in our partnership with Deutsche Telekom. Again, there we’ve been very acquisitive. We’ve been looking at everything. But ultimately, in this quarter, the stuff that we saw trade in the quarter was too expensive for us. Ireland being a great comp, we just couldn’t get to a mid-20s multiple for towers that were fairly mature in Ireland. And also, when a sophisticated seller like Cellnex sells, we obviously, our antenna is up.
We really respect Marco. He’s a good friend of mine, and Cellnex is a great company. So when they’re selling assets, we tend to be pretty careful about where those assets are selling and at what price. At that price point, we were not a buyer. But that doesn’t prohibit us from keep looking. We own a lot of different tower platforms around the world. We remain excited about what we’re doing in Southeast Asia. EdgePoint has a lot of really good opportunity. We’re looking at other opportunities in the Asia theater. Some things are coming through investment committee right now. So towers remain top of mind, why? We think towers ultimately are the delivery mechanism for Generative edge — AI. And so ultimately as those applications Jonathan moved to mobile edge and they moved to the device.
You’re going to see absolutely more data consumed at the cell site level. You’re going to see more pressure on the handset, and you’re going to see these applications migrate from the enterprise, from the office, to the edge, to IoT networks, to mobility, to cars, and all things related to logistics and transports. The only way that you can make Generative AI work in a mobile framework is through towers. And so, whilst that’s maybe two, three years down the road, we’re very optimistic about the long-term implications for what that means for not only towers here in the US, but inevitably LatAm, Europe and Asia are the theaters that we’re focused on. So maybe this is the part of the call where I’m the cheerleader for the tower industry, but 31 years of doing this.
There’s a whole another investment cycle that’s going to have to happen, Jonathan, in towers, and you just literally cannot avoid data gravity. The data ends up on the handset, and ultimately those applications reside on the handset. And the ability to pull the enterprise to the edge and to consumer relies on the handset. We’ve seen this play out from 2G to 3G, 3G to 4G, 4G to 5G. Jonathan, you and I have known each other over 20 years. At every technology migration path, you know this happens. We know this happens. So I would not be shorting the tower sector. And again we’re very bullish in this third fund around towers and you’ll see us invest in towers and that’s part of our strategy.
Jon Atkin: Well, appreciate those comments And then maybe just turning to fiber and small cells. I know you talked about it earlier on the call, but any ways in which you could see maybe augmenting the ExteNet activities and then Zayo domestically, any kind of capital opportunities, whether it’s M&A or just increasing your development capital, how do you view those opportunities?
Marc Ganzi: Well, look, we have three small cell operators. FreshWave in the UK continues to deliver workloads for our customers indoors and outdoors. Boingo does a great job on the Wi-Fi side and indoor networks. ExteNet, largest private provider of outdoor small cell infrastructure. And look, we’re busy, right? We’re building, we’re taking on bookings. We are seeing momentum as obviously the overlay in 5G starts to move to densification. And we think that densification for 5G really exists kind of in ‘25, ‘26, ‘27, and ‘28. That follows a similar migration path to ultimately the 3G and what we did in LTE and LTE plus. Our customers are telling us they still need small cell infrastructure. They still need an outsourced solution.
And so again, we remain long term bullish about the fact that ultimately a lot of this infrastructure needs to support Generative AI, it needs to support those workloads. Macros get a lot of it done, but ultimately the proliferation to true Generative edge AI fits down at the handset. And so we really talk about data gravity a lot, Jonathan, and those workloads start in those learning models. They’re moving into training, they’re moving into inference, Then they move into really resonant in the public cloud. Then they move to edge. Then we move to mobile edge. And then we move to near edge, which is the handset. This is the direction of travel of data. This is how the cloud was built. Ultimately, AI will follow a similar architecture over the next, let’s call it the next three to 10 years.
So we’re excited about it and investors have to be a little patient, but we do believe in the long term nature of small cell infrastructure, Wi-Fi 6, private 5G networks and the opportunity to offload those networks.
Jon Atkin: Thanks very much.
Marc Ganzi: Thanks, Jonathan.
Operator: Thank you. Ladies and gentlemen, we have reached the end of our question-and-answer session. I will now hand back over to Marc Ganzi for closing remarks.
Marc Ganzi: Well, look, thank you, everyone, for tuning in to our Q1 call. We’ve laid out four simple tenets for you to think about as an owner of DigitalBridge or a prospective owner of DigitalBridge. There are four things that we’re focused on this year. One, we’re forming capital behind our best ideas. I think we’ve laid that case out today what our best ideas are and that we remain convicted in our ability to form that capital and then to deploy that capital. Second, we’re investing. We’re investing in the best secular ideas today that exist on the planet. Generative AI, mobile infrastructure, and ultimately the ecosystem and the power that supports that are all the key tenets and the foundation of our economy today. So investing in these tailwinds and investing in these secular thematics are critical and necessary.
