Greetings, and welcome to the DigitalBridge Group's First Quarter 2023 Earnings Call. At this time, all participants are in a listen only mode. A brief question-and-answer session will follow the formal presentation [Operator Instructions]. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Severin White, Managing Director, Head of Public, Investor Relations. Please go ahead.

Good morning, everyone. And welcome to DigitalBridge's first quarter 2023 earnings conference call. Speaking on the call today from the company is Marc Ganzi, our CEO; and Jacky Wu, our CFO. I'll quickly cover the safe harbor and then we can get started. Some of the statements that we make today regarding our business operations and financial performance maybe considered forward-looking and such statements involve a number of risks and uncertainties that could cause actual results to differ materially. All information discussed on this call is as of today, May 3, 2023, and DigitalBridge does not intend and undertakes no duty to update it for future events or circumstances. For more information, please refer to the risk factors discussed in our recent Form 10-K to be filed with the SEC for the year ending December 31, 2022 and our Form 10-Q to be filed with the SEC for the quarter ending March 31, 2023. Great. Let's get started with Marc providing 1Q update, Jacky will outline our financial results and turn it back over to Marc to discuss how we're executing the DigitalBridge playbook in today's market. With that, I'll turn the call over to Marc Ganzi, our CEO. Marc?

Thanks Severin. So today, let's start with an update on our key 2023 priorities. The three things that matter, which I outlined last quarter and I'll continue to do that throughout the course of this year. First, I'm pleased to report that DigitalBridge has made tangible progress on fundraising, on simplification and on portfolio level performance. Put simply, we are on track to deliver our 2023 targets. In the first quarter, we're back to generating strong year-over-year growth in our investment management platform with fee income up over 36% and FRE up 40%, driven by higher FEEUM on co-invest, the acquisition of InfraBridge and FEEUM activating across our new core and credit strategies, which we telegraphed last quarter. New capital formation was up substantially year-over-year. And on top of that, we're seeing our first commitments now in our flagship DigitalBridge Partners Series strategy. These developments give us higher confidence we will be able to deliver on our capital formation targets in 2023. To be clear, we're sticking with our guidance. With respect to simplification, we've made continued progress selling BrightSpire for $200 million, paying off our 2023 converts and advancing our alternative asset manager profile with enhanced reporting as we move closer to deconsolidation. I'll cover portfolio performance a bit later, but the headline is our portfolios continue to perform with growth across all of the verticals that we serve today in digital infrastructure. So let's detail fundraising and our simplification progress before we get into the financials. Next slide, please. As you know, scaling FEEUM is our number one KPI this year, it's the metric that will drive revenue, earnings cash flows and unlock substantial shareholder value. In the first quarter of 2023, our fee earning equity under management increased $8.9 billion or 47% year-over-year, driven by a combination…

Thank you, Mark and good morning, everyone. As a reminder, in addition to the release of our first quarter earnings, we filed a supplemental financial report this morning, which is available within the shareholders section of our Web site. Turning to Page 12. Our first quarter highlights have turned positively with fee revenues and fee related earnings up year-over-year. Total company distributable earnings was negative $3 million, excluding a non-cash write down of a Wellness Infrastructure business now, our distributable earnings would have been positive $4 million or $0.02 per share. Assets under management was $69 billion in the first quarter, which grew by 49% from $47 billion in the same period last year, driven by the acquisition of AMP Capital's infrastructure equity business, recently rebranded as InfraBridge, and significant new co-investment and new digital core and credit product AUM. Fee earning equity under management is up 47% year-over-year to $28 billion with approximately $700 million of fee paying capital raised year-to-date amidst the very difficult fundraising environment. Moving to Page 13. The company saw strong year-over-year growth, driven by the expansion of our Investment Management business and continued simplification of our corporate structure. For the first quarter, reported total consolidated revenues were $250 million, which represents a 7% increase from the same period last year. As previously noted, our reported revenues now include contributions from carried interest and principal investment income, which aligned our presentation more closely with our peers in the public alternative investment management space. GAAP net loss attributable to common stockholders was $212 million. Total company adjusted EBITDA was $26 million, which grew by 25% from $20 million in the same period last year. In March, we harvested our entire BrightSpire interest for total proceeds of $202 million, which eliminated $7 million of dividend income in…

Thanks, Jacky. Before I get into how we're executing in today's markets, I wanted to highlight what we see as the tale of two cities in digital infrastructure today. In both equity and credit markets, there's a significant dispersion in performance between high quality in favor companies that are trading largely in line with broader markets and out of favor companies that are exhibiting material underperformance. And while that gives both the bulls and bears something to talk about, for DigitalBridge, it both underscores the relevance of the investment decisions we've taken over the past few years and building some of the most high profile, high quality platforms in the digital infrastructure space, but it also creates some new opportunities for us as we deploy capital going forward. Next slide, please. So in the face of a dynamic macro environment and the dispersion we're seeing in digital infrastructure markets today, what's the playbook we're executing? Number one, we're forming fresh capital to fuel the next phase of our growth and support our portfolio companies. That's a sharp focus on raising $8 billion this year in new equity and also capitalizing our strong track record in credit markets where we've secured over $2.3 billion in new commitments just in the last few months. Here's a simple truth in this market today. Great companies continue to attract capital. Number two, we're investing in our customers and our best ideas, deploying capital with discipline into new opportunities the cycles creating for us, and continuing to invest through our existing platforms in greenfield CapEx to support our existing customers. Finally, driving great outcomes for our stakeholders with portfolio company performance that's underpinned by strong leasing results that catalyze solid returns and steady growth in discounted cash flows. Next slide, please. So to start, you…

[Operator Instructions] Your first question comes from Michael Elias with TD Cowen and Company.

Two if I may. First, as it relates to the data center space, there has been a lot of noise around tech layoffs and decelerating cloud growth on the hyperscale side and then also bell tightening on the enterprise side. I would love to get a sense for what you are seeing from a demand perspective with both verticals of customers? And then second, in the session you talked about high quality platforms. Just given the recent deal that you did with Vantage in Europe, I'm curious on how you are thinking about the long term ambitions for that business to the extent you are willing to share?

So first and foremost, let's just get right into demand. Coming out of the quarter, the metric that I look at and that we track every week in our Monday morning meeting is sales pipeline depth. And if you look, for example here domestically in the US at DataBank and Vantage, both of those domestic pipelines are up year-over-year significantly, not minorly, I want to emphasize the word significantly. So this notion of demand slowing down on hyperedge, which is what DataBank does and on hyperscale, which is what Vantage does and then of course private Tier 5 cloud environments, which is what Switch does. So all of those companies, Michael, are massively up year-over-year, okay? So this is Q1 we are talking about, Q1 2023. Just to give you an example, when we were in diligence looking at Switch a year ago back in Q1 of 2022, the entire leasing pipeline was 57 megawatts. Today, that leasing pipeline sits north of 500 megawatts, okay? Just to give you a sense of what's happening at Switch, which is very secure in workload environments, 100% renewable energy in great locations that are candidly perimeter markets that are alternatives to Santa Clara and Northern Virginia. So we are seeing that our customers want those highly secure workloads and they want to be in environments that have 100% renewable energy, that is no longer nice to have, that is a must have for customers. DataBank, same thing. Leasing pipeline up 2x year-over-year. If you go back a year ago, the leasing pipeline total contract value was at about $180 million of annualized revenue. Today, that leasing pipeline sits at $380 million in terms of backlog and interest coming from cloud players, mobile operators, C-RAN O-RAN deployments and now the initial deployments of AI.…

No worries. The question was about longer term ambitions for Vantage?

Look, I think, Vantage has three businesses, Asia, North America and Europe. Asia is producing really well, it's our youngest business, it's less than two years old. Vantage North America, I said earlier, a lot of leasing demand right now over 400 megawatts of new opportunities have come into the funnel in the last 90 days. Vantage Europe sits at over 400 megawatts of new opportunity. Both of those businesses, Vantage Europe, Vantage USA, are growing really fast and we're raising capital for both of those entities as you saw in the first quarter. I think long term, we've created two permanent capital vehicles. Vantage SDC, which a portion of that sits on our balance sheet, great set of stabilized assets. Now we've created our Vantage Europe stabilized platform. And so now we have the vehicles to continue to harvest these assets and put them in the right place but most importantly, pair it with the right capital. That's really that's where I think we are a little bit different. We have this ability in sifting through over a thousand LPs on a global basis and we know the insurance companies and the pensions that want yield, they want safety, they want 10 to 15 year contracts with investment grade logos and they're looking for a 12 through 13 IRR but they're looking for a 6%to 7% cash yield. Our stabilized permanent capital vehicles with Vantage North American and Vantage Europe are very misunderstood by the public investor community. What are they? It's a path to create liquidity for Vantage, it's a path to recycle capital but most importantly, it's the opportunity for us to bring to some of our LPs what they're looking for, which is the ability to buy on a direct basis a core product that has…

Next question, Dan Day with B. Riley Securities.

So first one, just I think we all understand the recap process, the timeline for DataBank fairly well at this point. But looking at Vantage SDC, maybe just talk through what you think your best options are to monetize that asset, would you consider a full sell of the stake rather than kind of leaving yourself with a stub like it seems like you plan to do with DataBank? And then if you could just remind us what the total cost basis is on Vantage SDC and now obviously, given that the moves in cap rates over the last year or two, just whether you think you can recoup that or not in sale?

Look, DataBank has been a fantastic investment for us. We've got $218 million into that deal today, we've created a tremendous amount of value in that business and obviously, the $6.2 billion headline valuation created an incredible uplift for our public shareholders. Today, we're holding that at about $480 million today. So it's a tremendous amount of value that's been created a DataBank. Vantage SDC, $218 million is where we're holding that today. And I think you know the two assets have different flight paths, so let's just talk about them for a second. One, on Vantage SDC, we are in the process of taking a new capital. We've been out looking to raise new capital for Vantage SDC, I would say, Jacky, in the last 45 days we started that process. A lot of investor appetite for stabilized US data centers that are producing effectively high 6, low 7 yield. And even with treasuries where they are today, that's still pretty attractive on a risk adjusted basis. So some insurance companies and some pension funds and some fund managers want exposure to that, because they don't have it and we have it. So that process is going well. Jacky is actually running the Vantage SDC process and we expect to have a good result very soon in terms of what we are doing from a deconsolidation perspective. DataBank, as I mentioned on the last call, we reopened our fundraising on April 1st. We shut that fundraising down for a period of six months. We had a great first closing with Swiss Life EDF and a few others. And now we are moving into the last phase of capital formation there and we are forming capital right now as we speak. And so to be clear, that is a continuation…

I'll just ask one more that hopefully will have a pretty quick answer. Any update on the timing to Investor Day in 2023?

So as soon as we have both of these assets deconsolidated, we will host the Investor Day. So if I was just looking -- I can't give you a specific time. Severin is looking at me with a big smile right now. But it will be on the back half of this year, second half of this year we will have an Investor Day. And we're looking forward to sharing with everyone the final results of the deconsolidation and of course, an update on fundraising, which we're happy to talk about today and then, of course, just our leverage profile, which we're very delighted about where we are, and Jacky and I as the progress on taking $10 million of cost out of the business this year. I mean we've got a very simple few things we got to do this year. And inside this quarter, we're making great, great, great progress on all those initiatives.

Next question, Ric Prentiss with Raymond James.

Couple of things. Obviously, I thikn we're all looking forward to moving pieces starting to slow down a little bit. But Jacky, I think in the quarter, you called out a couple of things. Just to make sure, distributable earnings took a hit because of the wellness but you've had a couple quarters in a row with some oddities there. Are we thinking that we're able to see positive distributable earnings as we look through the rest of year or are there some more of these moving pieces, onne timers that happen?

This is the last quarter in which we have some cleanups. And certainly with respect to the wellness note, what we've done is taken a $7 million impairment on our distributable earnings and that's just the interest income that we would have recognized from last year. So absent that, on a go forward basis, you'll see that even just normalizing for that we’re already at positive additional earnings.

And on carried interest, is a little bit odd there. Was there anything with the BrightSpire sale that was [affecting] that, or how should we think about what's the path on carriers, this is obviously an important area for valuation?

So on the carried interest side that is simply associated with the fact that we marked up our funds about 1%, but then relative to the pref of 8% that we book at noncash income impact associated with that differential. In terms of BrightSpire, we basically did a cleanup trade at a value that was close to where we already had it marked. So there was a little bit of an impairment about 10 million bucks worth for BrightSpire itself, but that didn't impact our carried interest while going through operating. But what we did do was, it does impact distributable earnings relative to the prior quarter since we would have recognized the BrightSpire dividends, about $7 million a quarter in prior quarters.

I think, Ric, the key is here, if you come up to 50,000 feet per second, this is really the last cleanup quarter. I hope that that's really clear to everybody. We had the last sales of some, what I call, one off real estate assets are now done, there was a hotel asset we sold in Paris. We did the BrightSpire cleanup trade and then we took the full mark on the wellness note. Now look, on the wellness note, we can't be more clear. We have strong rights, we have an inter creditor agreement, we believe we will be paid back. We don't know the amount of recovery on that note but we felt like this was the right quarter to put an end to the legacy assets. This was it. So we made the decision that this was the right time to do it. It's been already a fairly turbulent year in broader markets. So why not take this now, get the cleanup trade done with BrightSpire with a wellness note and the remaining assets. So that the rest of this year is a very easy and clean print for investors to understand. Now look, that's not popular. We could have said, okay, let's just wait and we'll not mark the wellness note, let's kick the can down the road, maybe we get full recovery, maybe we don't. But I think the reality is our investors are going to appreciate the next three quarters being clean, us having strong EPS and distributable earnings. And then obviously as the fundraising cadence kicks in to the back half of this year, EPS and term responds and we've got a very easy, simple algorithm for investors to understand. This is the setup quarter going into the back half of this year. And we feel, again, if you're not hearing the conviction in my voice, we feel very good about what we're doing on fundraising, we feel very good about how our portfolio companies are performing. Jacky and I have done a very good job on cost, we like our leverage profile and we like exactly where we are in deconsolidation. Everything that I've mapped for this year is coming to fruition. And so this really for us was the last of the, what I like to call, colony cleanup on all three. That's now done and it's behind us and so we feel convicted around that.

Good to have the cleanups done. Two more for me. One, I think we saw Form-D get filed last week about [DPP3] and some placement fees and agency fees. Any update you can do, knowing that we're mid-quarter there's not maybe a lot you can say, but seems to suggest to your point on fundraising that the [DPP3] is closer and closer.

So look, it's always fun when these filings come out, and we're not allowed to be incredibly transparent with you guys. So let me try to walk a very fine line with you, Ric. What I would tell you is we obviously have received our first commitments in the new strategy, it's going very well. I wish I could give you a lot more detail. But given compliance rules, I've got to have my hands kind of tied until next quarter. But what we can tell you is the first commitments are in. You are correct, there were some commitments that filing was related to some investors in Korea. And so I think the good news is we're attracting not only reups but most importantly, we're attracting new capital, Ric, this is really, the highlight of what you're going to see in our second quarter is the fundraising team that Kevin Smithen and Leslie Golden run has done an amazing job. We've got 27 people around the world raising money. I think you saw that slide in our deck today around just the top 1,000 accounts. And it's really incredible how much more depth our fundraising team has, particularly in a market in a theater like Asia, Ric, where we literally had no fundraising capabilities in Fund II. And now you go to this new strategy and we've got a sales team in place there in Asia now five people fundraising, and they're having tremendous success with new logos. And as we think about some of the first commitments that are rolling in, getting new logos in the first phase of a fundraising process, usually just get reps. So the fact that we're getting reps and we're getting new commitments to me is very exciting, because for us to achieve our objectives of what we want to do this year, the reups are important. And as we said, we think we're going to get 90% to 92%, 93% reups in this new strategy. But it's really the $30 billion of new capital, Ric, that we're talking to, the over 200 LPs that were not in Fund I and Fund II, that are working with us on the new strategy, that's where we think we have the momentum. Over 30 billion of new logos in the data room doing the work, that's what's moving the needle for us in this quarter here in Q2, and it's what's going to move the needle obviously in Q3 and Q4 this year. Again, I want to say it with total conviction. We believe we will hit our $8 billion fundraising goal for this year. My goal is to beat that and I haven't changed my tune on that. And that's because, we're sitting in this quarter and we're looking at the back half of this year and it looks very good from our perspective.

Last one from me, because I want to make sure I got the clean quarter fundraising with [DPP3]. Slide 20 is an interesting slide, that's where it was a lot of pain, right? Investors on this call are feeling that pain, the out of favor versus the in favor. What is causing that systemic difference in in-favor digital infrastructure versus out of favor, what will close the gap? And as there, if you were to do the similar chart with all asset managers, how do all asset managers compare that slide? And is there in favor and out of favor all asset managers? But just trying to think of what closes that gap, why is the gap there, what closes the gap and how is all the asset kind of look in that chart?

As always, Ric, you are asking the right question. So let's start out with digital infrastructure. The out of favor stuff is stuff that's just aging and its legacy assets. And I don't like to pick on certain companies and it's not my job to do that. But what I would tell you is in enterprise data centers and in legacy older fiber and resi fiber, it's all about the duration of the contracted cash flows and the quality of the assets. So for folks that own legacy colocation enterprise data centers that are now 20 years old, those assets, as you know Ric, they lack functionality, they lack power density, they lack connectivity, they lack the ability to scale. And so when you have a 40 megawatt opportunity with someone like a public cloud player that starts with an A and you have got a data center that only has 6 megawatts of power, you are not going to be able to force 40 megawatts into a 6 megawatt data center. Now if it's a beautiful brand new data center sitting in Bluffdale, Utah and there is 60 megawatts of power and it happens to be DataBank, and we are doing a jump all against the legacy colo data center that has 6 megawatts, we are winning that jump, Ric, 100% of the time, because we have the land, we have the power and we have the ability to deliver for the customer. So owning new data centers that were built literally in the last three to five years like what Raul has done at DataBank, like what Sureel has done at Vantage and what Rob Roy is doing at Switch, having new state of the art inventory with power density that can ultimately fulfill what the customer is…

Thanks, take care guys.

Ric, I didn't answer your second question. Now, tale of two cities in the alternative asset manager space. Look, I'll hit it straight on. There's no doubt we're trading at a discount to our peers. I'll just own that narrative straight up and right now. Why? We've been a confusing story, we've been a transition from a REIT into an alternative asset manager, we've had these legacy cleanup issues, we had high leverage and now we fixed all that. So once we get through deconsolidation, we're going to be levered at about 2.3 to 2.2 times, we'll have $300 million of securitized debt, that's the only debt we'll have. And so it makes it really easy for investors to look at our leverage profile and say, well, DigitalBridge has $300 million of securitized debt, it's a fixed costs, it's not floating. And oh, by the way, you have this incredible alternative asset management business that's growing north of 30%. So we think the rhythm for us and the cadence gets a lot easier as we deconsolidate, as we continue to fund raise, we continue to take cost out of the business, all of these things are working for us. And ultimately, what that means is cash flows, free cash flows, EPS and we become an EPS driven story, that's what investors want to see from us and that's what we're doing. So we'll close that gap. We traded at a discount to some of our peers, whether it's -- I won't pick names, but there are a couple of alternative asset managers that traded 18, 19 times and we think we can move up into that level on an FRE multiple. And if you look at where our guidance is for the end of this year and soon we'll have guidance going into next year, we do believe we trade at a discount but that's the opportunity for investors to jump in now and join DigitalBridge.

Next question, Eric Luebchow with Wells Fargo.

I wanted to ask about just your current liquidity situation, obviously, you'll bring in some additional cash once you complete the deconsolidation events with Vantage SDC and DataBank. Maybe you could talk about how you're thinking today about deploying that capital, whether it's M&A, whether IM platform, paying down preferreds, repurchasing stock, anything else that's high up on your list?

So look, this may sound a little boring. But we'll continue to opportunistically buy the preferreds when it makes sense. Jacky has been leading that program with Severin and they're doing a good job. And we bought some in the last quarter and hopefully, we'll get a chance to buy more in this quarter. And so we're being incredibly selective. We do have an internal rate of return that we're looking for on those preferred and there's an IRR where we're a buyer and there's an IRR where we’re candidly -- we're going to hold them. And so I can't be more prescriptive than that but that's what we're doing. I think in terms of other uses of the cash, we have continued to do diligence on a number of other alternative asset managers/GPs. We think there is a really good opportunity to buy adjacent GPs, whether it's in credit, whether it's in private equity, whether it's other forms of infrastructure, like renewable energy, we're out there talking to numerous folks and that’s [Indiscernible], and there's some folks that we like that fit our culture. And for us, look, at the end of the day, it is a culture fit, right, we are in the people business. So finding people that sort of have our drive and our motivation for building great companies and our passion, that's not easy. But there are some folks that we think are a lot like us that don't have that scale, and scale matters today. I think you hear that whether it's in digital infrastructure or whether it's in the alternative asset management world where you're talking to Jonathan Gray or you're talking to Mike from Aries, you're talking to Marc Rowan at Apollo, they'll all say the same thing. In this environment, the…

And just one more Marc, for me, just wanted to check in on your towers business, it looks like leasing was up 26%, which obviously seems pretty impressive, especially given a lot of tower businesses, at least in the US, are slightly more mature. So maybe you could kind of disaggregate how those are performing across the globe, are seeing that strength? And it certainly seems like in the US at least people are a little worried about we might start to see a downturn in leasing in the next six to 12 months and particularly with one carrier who's showing some signs of distress. So any kind of commentary on that would be great.

So look, I mean, this is, again, another benefit of being a global operator of towers. So having what we think is the premier tower platform in Europe in GD Towers, having a really good recovery up in the Nordics with Digita and having our FreshWave business in the UK, all those European businesses that performed actually quite well as 5G gets rolled out. The real surprise winners here were EdgePoint and Highline and ATP. So these are really, for most main street investors, they would say that's a little emerging market, Southeast Asia, Colombia, Chile, Peru and Brazil. We've had really [mediocre] growth in those tower assets, those tower assets are performing exceptionally well right now. So a lot of that growth is driven by 5G, it's driven by coverage and in those markets, we have the best platform. So those platforms being ATP and EdgePoint are really market leaders and they're taking outsized market share. Back here in the US, our biggest asset is Vertical Bridge. We actually just had a board meeting yesterday, business continues to perform, we think is on plan. Is there a weakness in the -- often the future? Look, I think CapEx is certainly going to be lower than it was last year. I don't think that's like a big state secret at this point. What I would say is the opportunities for Vertical Bridge have gotten stronger interestingly enough. Once again, it's back to that narrative of like going turning the clock back to 2009 and 2010 when you have capital, which Vertical Bridge does have its free cash flow positive, it takes all of its free cash flow as a private REIT, it reinvest into new builds, it reinvest into other projects that the carriers want in terms of RAN hubs…

That's right.

So towers is still our number one asset class, although, data centers has become a big part of what we do. Our heritage and our lineage tracks back to the tower business and we were really happy with the organic cash flow growth in this quarter, really strong print.

Next question, Jonathan Atkin with RBC Capital Markets.

So Slide 27 talks a little bit about growth rates by kind of asset category and small cells and edge, maybe drilling down on small cells and tagging on to the last question. What are you seeing there that might lead to be a change in the way to growth going forward, or are we going to kind of see these single digit sorts of percent growth rates for the foreseeable future for small cells?

So look, I think on the small cells side -- Jonathan, good to hear from you by the way. On the small cells side, we have continued to see, what I would say, sort of green shoots here in the quarter, in the second quarter. Good bookings from all three customers. We have seen a return of bookings from AT&T and Verizon, which has been good. I mean, it's not -- these aren't thousands and thousands of nodes, but we are seeing an increase in the backlog and certainly, in our indoor business when you have projects like MGM and some of the big football stadiums and airports we have. We are seeing incremental leasing that's being driven out of that. So we are pretty excited about that. On the indoor side, at ExteNet, in particular, all the carriers are going to have to invest in Wi-Fi 6 and 5G upgrades. And so we are seeing that upgrade cycle now happen. And I think one of the biggest projects, of course, is the MGM opportunity, which is the largest casino operator in the world, and we have got that long term exclusive with them. And so we're building out an infrastructure, and so we took in new commitments from all three of the carriers and inside those properties. And then obviously in the big venues, we're seeing an increase in lease up there. So having a really strong captive indoor business is very helpful. And also, I think the other area that we're seeing some silver linings here is just private 5G networks. This is an area where both Boingo, and ExteNet and FreshWave about a lot of success. Remember we own three small cell companies, FreshWave in the UK, Boingo here in the US and ExteNet here in the…

And then lastly, just any update on CFO transition and replacement?

Well, he's still here. Jacky is working with Ben Jenkins and one of our board members, they formed a committee, set a bunch of really strong candidates, we're into that process, the timeline remains unchanged. Jacky is slated to leave at the end of the year. And what I would tell you is, I think the final candidates that we're looking at are all very strong, strong emphasis on alternative asset manager. So Jacky's background was digital REITs. And now that we've made the transition to alternative asset manager, what you're going to see is a CFO that aligns with that future go forward. We'll miss Jacky, we've asked him to stick around on some boards, we've asked him to stick around and do karaoke with us. Whatever he wants to do, he's always welcome to hang out with us, we're going to miss him. But right now, he's squarely in the chair, very focused. And we know we got a job to do between now and the end of the year. And part of that job is obviously finding an adequate replacement for Jacky, which will be hard but we do have some really good candidates. And that process, I would say, is 50% complete. I'd say, we're sort of playing the back nine now in terms of who we're vetting and who we've got our focus on and just stay tuned, but we're on target. Like everything else we're doing, this is another situation where we're on target.

Next question, Richard Choe with JPMorgan.

I wanted to follow up on the $8 billion in capital raise. How much of that is not going to be, I guess, the digital partner series, how much over that should we expect to be in kind of from core and co-invest and others?

So I think I said this in the last quarterly call how the $8 billion sort of plays out. I'm on record publicly saying this. So I don't feel uncomfortable saying it. We believe that there's $2 billion related to core and credit, we believe there's $2 billion related to co-invest and then we believe there's $4 billion related to flagship. Now, Richard, there's no perfect science to that, right? So what I would tell you is in all three of those swimlanes, we're taking commitments in today. So for example, we were very clear with you, we're taking in commitments to DataBank, that'll be co-invest. We're continuing to take commitments in, in credit and core in this quarter, that's credit and core. And then as we said, now that it's sort of seeped out through this filing to be clear with everybody, we have taken in our first commitments on our new flagship product. And what we can tell you about that product is we were always very clear that the first close would be in the second quarter and we've also been very clear about the cadence at which big LPs are allocating right now. We mentioned a couple of big US pension systems that usually clear their allocations in March, have now set their release of their allocations to June just to make sure their liquidity was there. And all of those big US pensions have been very clear with us, that June, July is kind of their timeframe for leasing allocation. So this isn't something dissimilar that you've probably heard on the Ares call or that you heard on the Blackstone call, or that you heard it with other alternative asset managers. Fundraising, generally speaking, has kind of been a little bit slow rolled, some would tell you 60 day, some will tell you 90 days. The good news is we raise money in the first quarter, we're raising a lot of money here in the second quarter, we're going to continue to raise capital in the third and fourth quarter. And again, I want to be clear with everyone, we are very convicted in that $8 billion number. And our goal remains the same Richard, which is we have conviction that we're going to beat it. So that's what I'm focused on. And from the information we have sitting in this quarter, we feel really good about fundraising.

And then on the resi fiber side, would it be something that you would need a lot of scale, would this just the more kind of one-off that are trading potentially at attractive prices? Just any kind of color there, because it's something you didn't seem very interested in, just you especially at high valuation…

So look, I think, again, this has been a fairly longstanding debate between me and the resi fiber space. But my issue with the sector has been largely this notion of overbuilding, Richard. And I think what has plagued the sector in previous cycles, you got to go back to 2001 and take a look at the unraveling in the CLEC space and what went wrong there. What went wrong there is there was a lot of capital chasing the idea of putting fiber into the [MPO] of office buildings all across the US. Folks like Kleiner Perkins, folks like Sam Zell and many other folks that were extremely well funded raised to run fiber down the same street, penetrate the same buildings and next thing you knew you had four or five, six different carriers all lighting up the same building saying they were going to get 35% penetration. Well, if you take five carriers and everybody has 30% penetration, that's 150% penetration, that math doesn't work in an environment where we were 80% to 90% penetrated. The same thing is happening in residential fiber today, which is on some streets, not all, you have two, three and four providers. And if everyone is underwriting to a 30% penetration and you are fighting into an environment we have a strong RBOC that now is getting CAP funding and is getting funding from NTIA through the build back, better America bill, the RBOCs have never been positioned better to play defense against over builders and against cable companies. And so for example, Richard, your firm, JPM does great research on this. I really enjoy reading it, looking at the percentages of who is occupying and winning. Over builders are not succeeding, Richard, you know this. They have less than 3%…

Next question, Matthew Niknam with Deutsche Bank.

I'm just wondering, Marc, maybe if you can talk about the latest you are seeing across the key swimlanes in digital infrastructure, just around valuations and whether you are seeing that gap between public and private market multiples tighten at all? So that's question one. And then second question, you talked about expanding the team and footprint to target a broader set of institutional LPs. I'm just wondering if you can talk about some of the early progress here and whether this is embedded in the plan to trim corporate overhead from -- I guess, it was about $50 million this year to $40 million by 2025?

So in terms of private versus public multiples, look, we're still seeing that private multiples and private valuations have held up, especially as what Marc talked about good assets and great assets continue to trade very well, and continue to have be marked very well across the board. Certainly, bad assets as a different story. But I would say that what we're seeing in the public space, we are seeing the recovery in valuations across our sector. And I think it's because people are realizing that it is a very resilient sector, it has a ton of tailwinds and there continues to be strong demand across bookings and pipeline with the end customers and users.

Yes, I think that's right. I think that the -- again, it is back to that question we got a little bit earlier about the tale of two cities, too. I think, you know, what we're seeing is high quality digital assets, we're going to trade it at a premium. I mean, we saw, for example, EU networks deal get done, we saw Mubadala put some capital in fiber deal, both those valuations, Jacky, were really high, we don't have perfect color on the valuations. But we've been told that those values were for high quality assets held in. And so I think, look, Vantage Europe is a great example of that, right? We effectively got that done at a low 5 cap rate. And when we say that number, investors look at us and go, wow, that's an impressive outcome, in light of the fact that the world is in a turbulent place. But there's an appreciation, I think, for high quality assets. I think that's what you're seeing today, Matt, is that if you have an asset, it's 98% investment grade, 15-year contract, CPI escalators, utility pass-throughs and you've got great inflation protection. Some investors will say, hey, a 5% to 6% cash on cash yield is exactly what I want right now. But that actually has more certainty than treasuries in some respects. And I think the other part of that deal was, those data centers are roughly mid-80s occupied, there's incremental leasing that's coming in, so that drives returns as well. And so you've got the opportunity to generate a 12% to 14% IRR on an asset that literally has no risk. And I would offer that investing in cloud infrastructure is about a safe bet is you're going to make today in this environment. So…

And just on the -- we talked about the broader set of institutional LPs you were targeting. Just curious if that's embedded within the corporate and other overhead targets you'd referenced on the last call?

No.

Okay. We can maybe take that offline. But I appreciate that.

Next question, Jason Sabshon with KBW.

So a couple questions…

Sorry Matt, just one thing. I misunderstood the question. So the fundraising team, just so you know that that G&A is in IM, to be clear. So where we allocate those costs is related to our investment managements, because they're the ones raising all the capital. Sorry if we weren't clear about that. Apologies. Go ahead. Next question.

So are you guys seeing a broader audience for digital infrastructure given the correction that's playing out in the traditional commercial real estate sectors. CRE service companies like CBRE and JLL, they've made infrastructure and technology a focus area. So just wanted to hear your perspective on that.

Look, we do a lot of work with JLL and CBRE and Bob Sulentic is a partner of ours. We use them on our fund management services side. Their Seabury Calvin division puts capital into our funds and as a co-investor, and Vantage SDC and some other things. So I give CBRE a lot of credit, I give JLL the same credit. But both of them have been very focused on digital transformation and how it impacts commercial real estate. I think CBRE pushed into investing with us side by side is a great example of that, they recognize that digital is a big part of what they are going forward. Both CBRE and JLL have data center advisory services and they do a lot of really good work around the data center space. And so it's a recognition, to be honest, that commercial real estate is changing. And a big part of commercial real estate is the data center space. Why? Because those are commercial tenants, they're signing long term leases. And ultimately, data centers, particularly in the hyperscale and the Tier 5 private cloud environment, those are real estate businesses. We own the land, we own the building, we manage it, tenants sign leases. And at the end of the day, yes, it is mission critical infrastructure to the cloud, into the private cloud. But fundamentally, the tenants of that business model are real estate, land, permitting, entitlements, buildings, PP&E, leases. All the accounting related to data centers is real estate based, as Jacky knows. And so I think, with commercial real estate changing, you're going to see these advisory firms change and adapt, they have to, they have to continue to stay alive. So it's a thoughtful question, appreciate it.

And then secondly, what are your current thoughts about complementary opportunities in traditional infrastructure and clean energy?

Well, look, thank you. That's actually a big part of what we're doing iInfraBridge. I think one of the great things that we saw in the A&P acquisition was the ability to go attack the renewable energy space. I think I've outlined for investors over the last year how important it is, Switch. A lot of why we did Switch is we have really liked Rob's forward thinking approach to having 100% renewable data centers, that is really important to our customers. And so we are spending time around the renewable space, because we know that the future of the business is going to be embedded on the notion that we can create power that doesn't take out of the carbon footprint out of this planet. And this is really serious, I mean, this is something that ultimately is going to drive performance for us long term. We talked a little bit about AI at the beginning of this call today. And we think about the last 10 years in the data center space was building public cloud, probably $4 trillion to $5 trillion of infrastructure embedded in building the public cloud. What we know about AI going forward is that it takes up 3 times more compute. And so imagine we have spent the last 10 years building public cloud and we are still building it today. We are not finished building the public cloud. We have just started really building private cloud in the last three to four years, the work that Switch is doing. And now we have this opportunity to go build out AI infrastructure. And you have got four incredibly well capitalized companies all running at this hard, whether it's Microsoft through Chat, whether it's Amazon, whether it's OpenAI with Google and of course, the work that Meta is doing. So they are all racing to go build this infrastructure in an environment where interest rates are high and capital is more constrained. And then you put on top of that, that we need 3 times more of the compute, the lift is big. And so we we’ll continue to update investors on this over the next couple of quarters. But what we also know is that the power that is needed to drive AI and these new initiatives, there is not enough power sufficient in the United States’ grid to accommodate it. So we have to come up with alternative sources of energy. Same problem in Europe. So whether it's wind, whether it's solar, whether it's other alternative forms of energy creation, we are looking at everything right now, we have to. This is an absolute necessity for DigitalBridge going forward is having access to renewable energy to power the next generation of technology.

There are no further questions. I would like to turn the floor over to Marc Ganzi for closing remarks.

Well, look, thank you everyone. We really appreciate everyone's time and diligence on DigitalBridge. We recognize this quarter, it was an important quarter for us. As I said at the onset of this conversation, there are really three things that matter at this point in time. First and foremost, we have got to continue to raise capital. We are doing that, both in debt and equity and we've made tremendous progress there. Two, I've made it a key priority to maintain our liquidity and de-lever our balance sheet. We did that in this quarter paying off the converts. We have a strong liquid position and we are going to continue to preserve liquidity to be opportunistic go forward. And then three, we have got to perform. And performing is performing for customers, performing for LPs and performing for you, our public shareholders. And to do that, we have got to obviously continue to grow our portfolio companies, we have got to continue to show up for customers and we have got to continue to be responsible and prudent with the money that you give us and we are making that happen. We took cost out of the business in terms of our run rate G&A over $9 million of cost out of the business in the first quarter. And we're going to continue to be thoughtful about how we spend your money and ultimately drive this business towards an earnings based model, that's the key. Cash flows are what drives great businesses in these environments. And that's what we are doing at DigitalBridge. This was an important quarter. It was a foundational quarter. We are really excited to play the next three quarters out with a very clean narrative and a clean story and we're looking forward to having conversations with all of our shareholders over the coming weeks to talk about the things that we're doing. So it's an open invitation, please reach out to Severin and our team if you wish to have further conversations with us. I'd welcome every conversation with our public shareholders. And I want to thank you for your patience, I want to thank you for your support. And with that, we'll end the call today. Everyone, have a great day. Thank you.

This concludes today's teleconference. You may disconnect your lines at this time and thank you for your participation.