Digital Colony Management has closed its debut infrastructure fund after collecting $3.75 billion from institutional investors and receiving a $300 million GP commitment, thereby surpassing its original $3 billion target.
Marc Ganzi, chief executive and co-founder of telecoms company Digital Bridge, which partnered with real estate firm Colony Capital on the vehicle, told Infrastructure Investor a sector-specific infrastructure strategy “resonated extremely well” with investors in Digital Colony Partners.
He said pension funds from the US and Europe made up the largest portion of its LPs, but that the vehicle had also collected capital from insurers and sovereign wealth funds around the world. He added that Digital Colony Partners, which he is managing, had tapped into Colony Capital’s base of investors for the fundraising.
Digital Colony Partners has already committed nearly $1 billion to four digital infrastructure companies. It invested $200 million in December 2017 in Andean Tower Partners, which operates wireless towers throughout South America. Last June, it acquired Finnish company Digita Oy from First State Investments for $275 million. It has also formed a partnership with with a UK platform, currently comprising StrattoOpencell and iWireless Solutions that Ganzi said would result in up to $400 million of investments.
In February, Digital Colony Partners announced an agreement alongside EQT Partners to acquire Zayo Group Holdings.
Ganzi said he expected to deploy around $1 billion of capital each year, though there was no set timeline for investments.
Digital Bridge, headquartered in Boca Raton, Florida teamed up with Los Angeles-based Colony Capital (at the time known as Colony NorthStar) came together last year to raise money for investments in digital infrastructure. The sector is seen as having high-growth potential as industries move to cloud-based data management and access to mobile networks continues to increase.
Assets including telecom towers and data centres are attracting interest from infrastructure and real estate investors. Although Ganzi said the sector has traditionally generated returns of around 20 percent, increasing interest in digital infrastructure may drive those down. “The best way to compress returns is to compete for assets,” he said.
Ganzi added that there was a window of opportunity of around a year in which to raise a sector-specific fund and grab a good market position. He noted that other marquee infrastructure fund managers, such as Stonepeak Infrastructure Partners, KKR and I Squared Capital, were fundraising and had a growing interest in digital assets.
“We really felt like the market was ready to digest a dedicated telecoms infrastructure fund,” Ganzi explained.