Melody closes second digital infra fund on just under $2bn

About $1.1bn of the vehicle’s total size was raised following the onset of covid-19, as LPs became ‘more circumspect with traditional infrastructure’, says Melody’s founder Omar Jaffrey.

Melody Investment Advisors has closed its second digital infrastructure fund on $1.95 billion, exceeding its target of $1.5 billion.

Melody Communications Infrastructure Fund II was launched in 2019, raising just over half of the fund’s target with a first close of about $800 million towards the end of the year. Momentum paused as covid-19 struck, before investors came back with aplomb, Melody’s founder Omar Jaffrey tells Infrastructure Investor.

“They came back with two conclusions in the summer of 2020: that they wanted to lean into digital infrastructure and clean energy infrastructure. They were going to be a little more circumspect with traditional infrastructure,” he says.

Jaffrey says that covid highlighted a digital divide in the US and that the sector received further recognition from the bipartisan infrastructure framework passed last year, which provides $60 billion of federal funding towards the rollout of broadband infrastructure.

“Pre-covid, we were competing against all types of infrastructure. There were many investors who were new to digital infrastructure. We were fighting for mind share against other infrastructure platforms and opportunities,” Jaffrey explains. “There was a recognition [that] this is a powerful opportunity that is durable, and not correlated.”

The US-focused fund, which drew support from across the world, has made three investments to date, including CTI Towers and Harmoni Towers, both owners and operators of tower infrastructure in the US, as well as a cell sites platform.

The 10-year fund targets net returns of 12 percent, Jaffrey says, although it delivered a 16 percent return for its 2014-vintage Fund I, the entire portfolio of which was sold in May to Sculptor Capital Management and Diamond Communications for $1.6 billion.

Jaffrey says there were 110 interested parties when the portfolio was put up for sale, adding that he would have only expected five parties to come to the fore when it was launched eight years ago.

“Since 2014, a lot of folks are raising their hands saying they’d like to get into it. That’s really powerful, but not everyone can manage and drive businesses the way we can,” he notes.

Jaffrey adds that in an age of a wealth of digital infrastructure investors, he believes the background of the Melody team, which is steeped in the telecoms market, provides a significant advantage.

“Not every asset for sale is sold to a financial bidder per se, some need strategic and operational management involvement,” he reasons. “We’ve positioned ourselves as a party that can take on operating opportunities and add strategic value.

“We have been able to drive growth in our investments through unique strategic initiatives that other financial investors are not able to do because they are not industry insiders and would not have access or would not have seen these opportunities.”