DigitalBridge Group Inc

NYSE:DBRG

Earnings Call Analysis

DigitalBridge Q3 2023: Strong Performance, Simplification Progress

DigitalBridge's Q3 2023 showcased a robust financial performance with significant year-over-year growth. Fee income surged 57%, and segment level FRE climbed 36% due to increased FEEUM from core, credit, and co-investment, alongside a full quarter contribution from InfraBridge. The company confirmed they are on track to meet their fundraising goals, having raised $2 billion in the quarter, contributing to a $5.4 billion total year-to-date. The DataBank recapitalization finalized in September, yielding DigitalBridge $50 million more and amassing total proceeds of $471 million—this translated into a 32% IRR for shareholders and a notable balance sheet simplification through deconsolidating $2.3 billion of debt. Portfolio performance remained sturdy, particularly in the datacenter sector with a 20% increase in monthly recurring revenue, and other sectors showed mid to high single-digit growth.

Growth in Data Center Market and Strategic Positioning

DigitalBridge is actively capitalizing on the significant opportunities present in the data center space, driven by public and private cloud demands and AI workloads. Having a diverse portfolio with over 60 loans in the pipeline, DigitalBridge is positioning itself to capture a large portion of the market, as evidenced by an increase in cash yields and rising rental rates, up 20-30% and 21% year-over-year respectively.

Capital Formation and Fundraising Strength

The company also demonstrates robust capital formation, having raised $2 billion in new capital in the reported quarter. This includes a $2.3 billion first close for their third fund, indicating strong confidence from investors. They reaffirmed guidance for 2023, with optimism based on meetings with investors from various regions, who are intrigued by DigitalBridge's leading position as an asset manager in digital infrastructure.

Outlook on Investments and Potential Acquisitions

DigitalBridge is well-capitalized with approximately $590 million in cash and equivalents and intends to leverage this alongside its investment in the third fund strategically. The management is also considering stock buybacks after the blackout period concludes and is exploring potential acquisitions to enhance scale and synergies within the company's areas of specialization.

Execution of a Growth Vehicle and Future Plans

Regarding Vantage SDC, the company sees this as a growth vehicle and will make a strategic decision on its future in the reported quarter. Their positive outlook is supported by solid customer relationships and attractive yields.

CFO Search Update and Management Team Appraisal

DigitalBridge is in the process of searching for a CFO candidate who aligns with the company's culture and ambition while expressing contentment with the work of the interim CFO. This highlights the organizational stability and supports its ongoing momentum.

Guidance and Strategy for Future Fundraising

The guidance for next year is optimistic, and the strategy for the third fund is set to be an $8 billion strategy. This significant target underscores DigitalBridge's confidence in their ability to further grow and manage assets, positioning the fund for potential success in a competitive market.

Earnings Call Transcript 2023-Q3

[Operator]

Greetings, and welcome to the DigitalBridge Group Third Quarter 2023 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded.It is now my pleasure to introduce your host, Severin White. Please go ahead.

[Severin White, executive]

Good morning, everyone, and welcome to DigitalBridge's Third 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 may be 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, November 1, 2023, and DigitalBridge did 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 most recent Form-10K filed with the SEC for the year ending December 31, 2022 and our Form-10Q to be filed with the SEC for the quarter ending September 30, 2023.Great. Let's get started with Marc providing an update on our key objectives for 2023. Jacky will outline our financial results and turn it back over to Marc to talk about the opportunities we're capitalizing on at DigitalBridge Credit.With that, I'll turn the call over to Marc Ganzi, our CEO. Marc?

[Marc Ganzi, executive]

Thanks, Severin. I'm pleased to share our results for 3Q 2023 as we posted some very strong financial performance that was a function of both the steady progress we've made building a predictable fee income earnings stream and the one time benefits we realize from our simplification initiatives.So first, let's start by covering our top 3 priorities for 2023. Beginning with fundraising. In Q3, we generated strong year-over-year growth in our Investment Management platform, with fee income up 57% and segment level FRE up 36%, both slightly higher than last quarter's already strong growth, powered by higher FEEUM from core, credit and co-investment along with our second full quarter of contribution from InfraBridge. New capital formation came in up $2 billion with our flagship DigitalBridge Partner Series leading the way and the balance from new strategies, including credit, which I'll cover in Section 3 today.LP interest in digital infrastructure is robust on the back of AI-driven demand, so I'm pleased to confirm we are on track to achieve our fundraising goals for the year. On the simplification front, we completed the DataBank recap in September, which resulted in another $50 million back to you, to the DigitalBridge shareholders, bringing our total proceeds to $471 million and generating a 32% internal rate of return to DigitalBridge shareholders.Our balance sheet also got a lot simpler, with $2.3 billion of debt deconsolidated in connection with the DataBank closing as we brought our ownership in that asset under 10%. We're also advancing our simplification objective by rolling out additional disclosures on fund performance. Consistent with our alternative asset management peers, investors have consistently asked for this and we're delivering.On that point, portfolio performance, our third key priority. We demonstrated strong results, particularly in the data center vertical, with monthly reoccurring revenue up 20% and the other 3 verticals all delivering mid- to high-single digit growth. Let's detail fundraising and our simplification progress before we get into the financials.Next slide, please. On new capital formation, I'm pleased to report we raised $2 billion since last quarter's earnings, bringing us to a total of $5.4 billion year-to-date. The majority of that, around $1 billion, came from continuing commitments to our flagship DigitalBridge Partner Series, which will start generating fee income today triggered by the strategies first closing. We've also completed additional co-invest indications and brought in more capital in our liquid and credit strategies during Q3.We believe this progress puts us on track to hit our fundraising targets as we come into the fourth quarter, which has been seasonally very strong for us given our fundraising cadence. Look, it's been a tough year for capital formation. It's been one of the toughest that I can remember. But the key here is perseverance. Perseverance of the team and persistent interest in data center infrastructure, spurred by advances in generative AI has put us in a good position to deliver on our goals. Again, I want to reaffirm our guidance and our belief that we'll hit our fundraising goals for 2023.Next page, please. So as you can see here, we continue to generate solid year-over-year growth in both FEEUM and AUM. We ended last quarter with about $30 billion in FEEUM, up almost $10 billion over the prior year. That's 46% annual growth driven by equal measures of organic capital formation and contribution from the InfraBridge acquisition we closed earlier this year. On the right, assets center management, which tracks the NAV of the assets that we manage, was up to $75 billion last quarter, again 48% higher over the prior year.Next slide, please. So on the simplification front, it's quite simple. We deconsolidated DataBank. I can't tell you how thrilled I am to use the past tense here for a couple of reasons. One, the recap was a huge success for DigitalBridge. We doubled our money in only a few years, generating a 32% IRR for DigitalBridge shareholders. Just this last quarter, we added another $50 million in proceeds, including $28 million in carried interest, bringing the total monetized value to DigitalBridge to $471 million. This was a smart use of our balance sheet.And look, we're retaining a stake in the business. The stake is worth $434 million of the price we just transacted. DataBank, as most of you know, is experiencing explosive strong growth led by edge AI leasing. So we're excited to be retaining a meaningful stake in the business. We don't anticipate any additional sell down here in the near term as we're excited about the future prospects and we're delighted to continue to support Raul and the DataBank team. The other reason I'm pleased to finalize the process is the closing resulted in the deconsolidation of DatBank from our financial statements, most notably, the transformation of our balance sheet.As of September 14, 2023, $2.3 billion of consolidated debt comes off the books, a reduction of 42%. While most of this debt at share was not really attributable to DigitalBridge, it did create a lot of unnecessary complexity for investors that were new to evaluating our business. So it's a big milestone in our drive to simplify the DigitalBridge story. One to go. Manage SEC is next, and I remain confident the next time we report earnings there'll be some more good news, if not sooner.Next slide, please. As we complete our transition to a pure-play alternative asset manager, a second facet of our simplification initiative has been to improve and amplify our financial reporting. This quarter, I'm pleased to announce we're introducing fund performance metrics into our quarterly 10-K and Q reporting, further aligning with our peer set. This has probably been the most requested data set in recent quarters. So we're pleased to provide shareholders with insights into the performance of our platforms.A couple of important notes here. First, these include solely the comingled funds we've managed for over 1 year for our core and credit platforms to be incorporated in 2024 as these are new products on our platform. And because it just includes commingled funds, it does not incorporate returns from the SPVs or continuation funds that were formed in the original DB Holdings investments or from GTP, the tower company that I built and sold to American Tower. These returns will always be out of the perimeter.Second, as you know, our long-dated funds are early in their life cycle, and in some cases, the multiple on invested capital calculations, or MOICs, include recent investments that have not benefited from the compounding effects of our value-add investment strategy.Third, we've incorporated the InfraBridge funds which we acquired earlier this year into our reporting framework. With the investment and asset management teams now fully integrated, we expect this to further strengthen the GIF fund performance over time as we overlay our asset management framework and our value-add cookbook to enhance the performance of those assets. So stepping back, these fund performance metrics highlight how we're delivering for LPs, generating steady, risk-adjusted returns, consistent with their expectations and with the broader infrastructure sector.Next slide, please. Finally, I want to highlight the portfolio company performance that ultimately underpins and drives those investment returns over time, specifically our discounted cash flows. Monthly recurring revenue across the portfolio is up again in all 4 of our verticals. This is driven by organic and investment-led growth. I want to highlight data centers inside the quarter. They were really the standout, with monthly recurring revenue up over 20% and the rest of our verticals performing well. Towers, up 6.6%, fueled principally by 5G overlays and 5G amendment traffic.As we then calibrate in the next 3 to 7 years into densification across the 4 geographies we serve, we expect towers to be a consistent performer in organic growth. Fiber is up 10%. This is really driven by the fact that folks are returning back to office and we're seeing steady contributions in enterprise fiber, long-haul fiber and data center connectivity, including recent performance at Zayo. And small cells up 5.5% as we've seen a nice turn in leasing activity driven by mobile carriers moving from 5G overlays and amendments into 5G densification.We're really excited about what's happening in small cells because it's not just the mobile carriers that are driving traffic. It's private enterprises, it's IoT networks and even cable companies. So we remain really optimistic about what's going to happen in the small cell segment in the coming years.Look, take a step back to still the -- at 50,000 feet, it's really simple. The demand for compute and connectivity continues to grow steadily and our ability to deliver for customers continues to expand along with our portfolio. DigitalBridge's unique ability to show up anywhere at any time for a customer across the planet is true differentiation.With that, I'd like to turn it over to Jacky to cover the financials. Jacky?

[Jacky Wu, executive]

Thank you, Marc, and good morning, everyone. As a reminder, in addition to the release of our third quarter earnings, we filed a supplemental financial report this morning, which is available within the Shareholders section of our website.Starting on Page 15. All of our quarterly key operating and financial metrics increased significantly year-over-year, driven by our robust fundraising efforts and acquisition of InfraBridge platform. We anticipate the strong momentum to continue as we progress in the fourth quarter.Turning to Page 16. Total company distributable earnings was $35 million or $0.20 per share, including $28 million of carried interest realized from the final closing of DataBank's recapitalization. Assets under management increased to $75 billion in the third quarter, which grew by 48% from the same period last year, and fee-earning equity under management increased to $30 billion, a 46% increase from the same period last year.AUM and FEEUM growth were primarily driven by the InfraBridge acquisition and capital raised in our new strategies and fee-paying co-investments. Our fundraising pipeline remains robust, and we look forward to closing out the year with a strong fourth quarter, principally from commitments to our latest flagship fund, DigitalBridge Partners III or DBP III. I would also like to highlight that effective today, we will begin generating management fees coinciding with the first closing in DBP III.Moving to Page 17. The company achieved healthy year-over-year growth propelled by the expansion of the Investment Management business and further enhanced by our streamlined corporate structure. For the third quarter, consolidated revenues were $477 million, which represents an 11% increase from the same period last year. As a reminder, consolidated revenues include realized and unrealized carried interest. Total company adjusted EBITDA was $34 million, up 15% from the same period last year. This growth is primarily attributable to an increase in investment management fee revenues, offset partially by the reduced ownership in operating assets, which we will cover in more detail on the following pages.Moving to Page 18. The company continues to grow its investment management earnings and fee-earning equity under management generated by additional fundraising and deployments in our flagship funds, new strategies, fee-paying co-investments and contribution from InFraBridge funds. Fee income, excluding incentive fees was $66 million and fee-related earnings was $29 million, representing 57% and 36% increases from the same period last year, respectively.Investment Management segment distributable earnings increased by 51% to $53 million from the same period last year, benefiting primarily from carried interest recognized as part of the recapitalization of DataBank, which closed on September 14th. It is also important to note that as a result of the deconsolidation of DataBank, the company's leverage profile and balance sheet continue to improve and become materially simpler and more asset light, as Marc and I had previewed was our corporate strategy and mission going forward.Turning to Page 19. Last quarter, we began including new disclosures designed to provide additional detail on carried interest allocations and expenses. For the third quarter, net carried interest income before non-controlling interest was $96 million due to the fair value of our managed funds increasing at a rate that exceeds the preferred return hurdles in our investment vehicles, which generates carried interest to DigitalBridge as the manager.Moving to Page 20. The company's share of digital operating revenues and earnings have continued to decline due to lower ownership interest. On September 14th, we announced the completion of the recapitalization of our interest in DataBank, reducing our ownership to 9.9%. This transaction generated nearly $50 million in proceeds, inclusive of $28 million in carried interest for DigitalBridge.Going forward, our remaining interest in the DataBank platform will be treated as an equity method investment, and we expect to sell a portion of our ownership interest in Vantage SDC in the near future, which would complete our planned deconsolidation of the operating segment.Turning to Page 21. Fee revenues and our high-margin Investment Management segment continued to grow, partially offset by the realization of 2 assets within the InfraBridge platform. Since the third quarter of 2022, our annualized fee revenues increased from $182 million to $264 million and fee-related earnings increased from $100 million to $125 million. We expect fee-related earnings to grow materially as we continue to raise capital for DBP III, and as mentioned earlier, effective today the commencement of DBP III management fee billings. Looking at the right side of the page, run rate annual fee revenues are $276 million. We are on track to meet our previously provided fee revenue and FRE guidance ranges.Turning to Page 22. Our balance sheet has significantly changed following the deconsolidation of DataBank, highlighted by the substantial reduction in investment level debt. And upon the deconsolidation of Vantage SDC in the near future, our debt profile will be similar to those of our peers in the alternative investment management space, especially as we continue to monitor the capital markets and consider further opportunistic optimization of our leverage profile through both preferred and common equity redemptions and distributions.Turning to Page 23. As we have completed another milestone in our progress to simplify our capital structure, we have almost reached our target corporate debt level with no near-term debt maturities. And with approximately $530 million of liquidity, including the full $300 million available from our securitization revolver, our balance sheet and liquidity remain strong and poised for our creative uses.In summary, Marc and I are proud of the substantial strides we've taken this year to simplify the business and solidify DigitalBridge's position as a preferred partner of choice in the digital infrastructure space.Our financial performance continues to show marked improvement despite a difficult fundraising environment, and we remain committed to generating long-term shareholder success by scaling new products in our dynamic Investment Management platform led by our robust fundraising abilities. We look forward to closing out the year strong, already highlighted by the completion of a first close in our flagship fund DBP III and continued progress in deconsolidating our balance sheet interest in Vantage SDC.And with that, I will turn it back to Marc. Thank you.

[Marc Ganzi, executive]

Thanks, Jacky. So this quarter, in Section 3, where we always talk about executing the digital playbook, I want to talk about DigitalBridge Credit and how we've extended our platform organically into the private credit asset class. Let's start with some context for the strong growth the asset class is experiencing, before I walk you through a case study that highlights how we're bringing skill capital to the game here.It's clear to most of you that private credit is a growing force in global capital markets. Since 2010, over $1.8 trillion in capital has been formed by alternative asset managers to fill a growing demand for credit that traditional lenders hampered by tightening restrictions and regulations have not been able to keep up with.On the right, you can see in just the last 5 years that private credit is taking share, filling the gap left by traditional lenders to meet growing demand from borrowers that need liquidity and growth capital. At the same time, institutional LPs are increasingly being drawn to the sector, attracted by better risk-adjusted returns on the back of higher interest rates and the reliability of credit products in an uncertain macro.Next slide, please. As you can see here, credit's attractive risk-adjusted profile is driving increasing institutional interest in private credit. On the right side, over $1 trillion has been raised in private credit in the past 5 years alone. This is doubling AUM over that time period. The average fund size continues to increase and it's expected that 2023 will generate another $200 billion plus of capital formation, the fourth year in a row exceeding that level. As you can see, this is not just a fact, it's sustainable.The best part is, as you can see on the left, DigitalBridge is at the intersection of the 2 asset classes, with the highest intent to increase allocation among institutional investors. Private credit, one, infrastructure, two, are the only 2 asset classes where that intent is greater than 50%. The intention here is everything. We're talking to LPs on a global basis and they want to be exposed to digital infrastructure and they want great exposure to private credit. So why not give them both in the same product set, and this is where we've landed. This puts us in a real sweet spot in an already fast-growing market.Next slide, please. So what have we built so far? Over the past couple of years, we have organically grown a private credit business led by Dean Criares, dedicated to supporting the growth of companies across the digital infrastructure sector and ecosystem. We finished Q3 2023 with $1 billion in fee-paying capital, delivering private credit investment solutions to other financial sponsors. And in essence, we're providing the key skill capital that leverages our ecosystem. Those investment solutions span the whole spectrum from first lien senior secured debt all the way to preferred equity.Most of the lending is floating rate securities with check sizes in the $20 million to $300 million range across all of the verticals inside of digital infrastructure, fiber, towers, data centers and emerging infrastructure such as small cells and other parts of the ecosystem. It's important to note digital infrastructure is an incredibly capital-intensive sector. So we're just getting started and servicing a really big and growing TAM. As I mentioned in previous years on our earnings calls, that TAM grows approximately about $500 billion per year in terms of the total wallet size. So on a reasonable loan-to-value equation, one could assume about $250 billion of new credit could be written every year.This is a sleeve that can become an evergreen source of growth for DigitalBridge. We are really excited about the future prospects of this business. Let's cover a case study on the next couple of slides to give you a sense for how DigitBridge Credit is financing the growth of the digital economy.Next slide, please. This summer, DigitalBridge Credit participated in the financing for CoreWeave, a company many of you are familiar with. CoreWeave is a leading next-generation specialized cloud provider focused on servicing AI workloads at scale with the latest technology. They fit alongside the large cloud service providers within the infrastructure layer of the AI tech stack you see on the left, but with a business purpose built for artificial intelligence. That means access to thousands of the latest-generation GPUs, a specialized networking fabric built to reduce latency and boost chip utilization and value-add software and technical resources. To distill it, simply put this is GPU-as-a-service serving rapidly growing AI workloads.CoreWeave represents an incredibly compelling customer value prop, focused on delivering, first, the best pound-for-pound AI compute; second, a very fast and flexible and cost-effective service; three, it's incredibly scalable; and then four, they're targeting a large and growing market estimated to reach $160 billion by 2027. Just recently, CoreWeave unveiled the world's fastest AI supercomputer built in partnership with one of their equity investors, Nvidia. This is a terrific company with a terrific CEO that was seeking capital to finance the incredible growth they're experiencing.So let's turn to the next slide to cover the financing and how we leverage our DigitalBridge ecosystem. As you can see on the left, in July of 2023, DigitalBridge Credit participated in a $2.3 billion financing for CoreWeave alongside Blackstone, Magnetar and Coatue. CoreWeave was looking to fund a significant amount of growth CapEx ramp to be contracted AI compute demand, including the purchase of thousands of the latest-generation GPUs, securing significant new data center capacity as well as continued working capital investment in their platform. Its financing backed ultimately by CoreWeave's high-quality investment-grade counterparties and supported by a durable asset-backed collateral.This, at the end of the day, really is in parallel with how we underwrite our investments at DigitalBridge. We're always focused on long-term contracts, investment-grade counterparties and asset-backed collateral. This is seminal to our investment thesis in DigitalBridge Credit. Over the course of the financing, DigitalBridge levered its ecosystem in unique ways to source debt and accelerate the transaction, highlighting the strategic value of our platform.So let's start with the source. Here, our significant market intelligence and tangible value prop attracted CoreWeave to working with DigitalBridge. Given the breadth of our data center assets and industry expertise, CoreWeave actively sought to work with DigitalBridge.Next, vet. In terms of vetting, the ability to derisk transactions is always really important to us in the underwriting process. In this case, our credit underwriting process was enhanced by access to DigitalBridge's data center portfolio of companies and the long-term relationships we maintain with leading global technology companies. Basically, in a nutshell, we talk to the logos.Finally, accelerate. Here, we already actively were supporting CoreWeave's time to market advantage, leveraging DigitalBridge's global data center footprint, including Switch, Vantage, DataBank, Scala, Aims and AtlasEdge.The CoreWeave transaction is a great example of the next-gen digital infrastructure we're financing at DigitalBridge Credit, and our team and portfolio of companies can both benefit from what we call the power of the platform.With that, I'll turn now to the CEO checklist for the quarter before we wrap it up and open it up the line for Q&A.Next slide, please. Great. As always, let's wrap it up with a review from the CEO's checklist. First, on fundraising, our #1 KPI, $5.4 billion year-to-date, and we remain, again, on target to hit our fundraising targets for the year. The last quarter will be busy I can promise you that, and I'm confident we're going to get the job done. Also, the DigitalBridge Partners Series FEEUM kicks in this quarter. So we'll start to see the flow through from our fundraising efforts, which is really important.Next up, on simplification, we closed DataBank, generating a great return for our shareholders while reducing complexity in our financial statements and delevering our balance sheet. Vantage SDC is up next, and we'll get it done. We've also introduced fund performance metrics, further aligning our profile with other alternative asset management peers. This is an important step. It's delivering on something that you, our investors, have been asking for, and now we're presenting it to you. We're pleased with our performance, and we're excited about the future of our funds in our flagship series.Finally, and most importantly, down in the trenches at the portfolio level. We have continued to support the growing compute and connectivity needs for the most powerful investment-grade logos in the world, including through our growing credit franchise that benefits from the power of the DigitalBridge platform.Thank you for your support as we continue to execute on the final stage of our transition to a fast-growing alternative asset management, levered towards the powerful tailwinds in digital infrastructure. I look forward to updating you next quarter on our continued progress.With that, I'll hand it over to the operator to begin the Q&A section. Thank you.

[Operator]

[Operator Instructions] And our first question comes from Michael Elias with Cowen & Company.

[Michael Elias, analyst]

Great. To start with the booming data center leasing that we've seen, it also appears that there's been a boom in demand for data -- for debt capital to build new data centers. Marc, I'm just curious if you could share any observations related to the depth of the debt capital markets for data centers relative to the demand for debt. And as part of that, any observations around where spreads are going for data center debt. And then I have a follow-up.

[Marc Ganzi, executive]

Yes. Thanks, Mike. Appreciate it. So we think the data center marketplace over the next, call it, next 7 years is somewhere around 35 gigawatts of new leasing capacity that needs to be delivered. As you know, Michael, most of that will be greenfield. So when we contextualize that, it's literally hundreds of billions of dollars of new construction activity into the data center industry. It depends on what your metric is on the price per megawatt. And then obviously, you can compute that to a price per gigawatt. So we think that the market is literally shaping up from a CapEx perspective, somewhere in the $1.5 billion range just for us just this year in terms of the stuff that we're financing.So if you contextualize that and there's probably $1 trillion of data center spend and you assume a reasonable capital structure of a 50% loan-to-value, you can assume that there's $500 billion of data center financings coming up here in the next 7 years. We think that most of that as new construction loans will go will be financed by private credit. Banks, obviously, given bank regulations are somewhat hand tied in terms of financing greenfield construction, as you know. And traditional real estate lenders are going through a significant amount of digestion and what to do with office space and other forms of commercial real estate that are distress.So we are seeing a surge in interest, particularly in our credit side in financing new data center builds. And keep in mind, our credit team finances for portfolio companies that don't belong to us. So there's a huge universe of potential folks that we're working with in terms of developers that we know well, that we don't have the equity in, but certainly have the debt in. So contextually $500 billion TAM and pretty expensive.On the pricing side, it really depends, Michael, on structure, whether it's a Holdco note to help finance a data center operator, whether it's actually a construction loan. But what we're seeing is, obviously, with base rates in the near 5% and new construction loans certainly being riskier, which is where we're playing in Holdco notes, which are above the senior, as you take the capital structure north of a 50% loan to value, you can obviously begin to see spreads with credit enhancements in those loans entry fees, exit fees, you could see total yields on those loans in the 12% to 14% range.With coupons somewhere on the low side for the high-quality assets in the 7s and the mediocre to perhaps less quality assets in the 8.5% to 9.5% range. So we're seeing all kinds of opportunities in the data center space. And obviously, it is driven by public cloud and private cloud and those AI workloads that you and I have talked about over the summer. So it's a big marketplace. We're very active. We've got a pipeline of over 60 loans that we're working on right now. We can't stress enough how big the private credit opportunity is in data centers, but also in fiber and towers as well, Michael.

[Michael Elias, analyst]

I appreciate the color there. And then just as a follow-up. You're talking about the 35 gigawatt incremental opportunity here. Two-part of question. First is, can you talk about how DigitalBridge is positioning itself to win more than its fair share of that opportunity? And then as part of that, perhaps at the portfolio company level, if you could just talk about the unlevered return targets across the data center platforms as you think about these large-scale AI workloads.

[Marc Ganzi, executive]

Yes. Thanks. So we do think we're taking within our market share. I mean we've had a tremendous year of leasing and not quite sure where it all lands, but it's measured in the hundreds of across Switch, Vantage, DataBank and Scala and Aims and AtlasEdge. So as you know, we play the sector in multiple different ways. We play it from a private cloud perspective, but Switch, we play it from a public cloud perspective at Vantage, Europe and Vantage North America, Vantage Asia and Scala. And then we're playing the edge compute business at Aims and DataBank and AtlastEdge.So we've got multiple platforms to go attack the different verticals and the different workloads. And I think you have to understand that AZ's availability zones, which are essentially the search rings of the data center sector, having localized teams from Sao Paulo to Europe to North America to Asia is really helpful. And it allows us to obviously think globally with our big customers, but indeed act locally in terms of securing power and the ability to execute and deliver for customers.So I think that we don't love to give out yields. It's somewhat of a competitive advantage. But here's what I can share with you, Michael. I can tell you that cash-on-cash yields are up year-over-year significantly, somewhere between 20% and 30% on average in terms of the CAGR growth of the yields. What I can also share with you is that rents are up. Rents are up 21% year-over-year on a global basis when you distill the 6 portfolio companies that we own and operate and you look at their results year-over-year, we've seen rental rates come up significantly. This is really a function of supply and demand, and there's more demand in their supply and to our existing locations where we have land, where we have power, where we have entitlements, those are renting at a premium.So I think, look, the punch line is, rents are up, development yields are up. We've got the biggest platform in the world to go attack this. Today, we have just a little under 300 data centers and we have over 1.7 gigawatts of some few power to offer to our customers. So we do think on a global basis, we are one of the largest, if not the largest operators of edge, cloud, public cloud and private cloud data centers in the world. And just looking at absorption, if we end up leasing somewhere between 700 and 70 megawatts and 1.2 gigawatts this year, I think that's going to lead the league in leasing, certainly far bigger than DLR and far bigger than Equinix. So we think we're definitely taking more than our fair share of the market.

[Operator]

Our next question comes from Jade Rahmani with KBW.

[Jade Rahmani, analyst]

From your Vantage point today, and I understand the lumpiness of fundraising and that these things have long cycle times given the complexity. Is there anything today that would give you a read through to 2024 as to whether fundraising is on pace or even could potentially accelerate? The second question would be, if we get past some of the macro uncertainties that are weighing on so many sectors, will that accelerate and provide more tailwinds to your fundraising efforts?

[Marc Ganzi, executive]

Thanks, Jay. Appreciate it. Well, look, let's first start with the quarter, right? I mean we raised -- we formed $2 billion of new capital in the quarter. Really delighted with the $2.3 billion first close for our third fund. I think as you peer-set that against other alternative asset managers, we definitely believe we've outkicked our coverage. We're having a very strong fourth quarter in fundraising. Historically, we've always performed well in the fourth quarter. I think one of the dynamics that's happened here, Jade, is that a lot of LPs have sat on their hands in Q2 and Q3. We got investors motivated and into our new flagship series. And that's why we're pretty happy to have the first closing yesterday.And we do have optimism around the fourth quarter, and we have even further optimism for next year. Asset allocators have already given us a sense of where they're allocating capital for next year. I just finished a 3-week tour, where I saw 80 of our LPs. Someone told me they thought I went on the world twice. I don't think that was exactly true, but definitely it was in Asia and the Gulf and North America and pulsing all of our key accounts.And look, I think there's 3 takeaways from that trip Jade over the last 3 weeks. One, investors want to be with the best of the best. They're generally shrinking their GP list. They want to be with less GPs and they want to be with the best GP in credit. They want to be the best GPs in private equity and infrastructure. And then most importantly, they want to be allocated to the best manager in digital and renewables. So we think we sit in a pretty protected place there as we are the largest alternative asset manager and digital infrastructure. And that's why we had a good print in Q3, and while we'll have a very strong print in Q4, and I reaffirmed our guidance for 2023 this year.I think next year will be very constructive. We have over 200 investors still working in our flagship fund. We've had -- today, we've had 23 investors come into the first close. We believe this fund will attract anywhere from the low side of 80 investors to the high side of over 120 investors given our market intelligence. And we've had so far 100% re-up from Fund II to Fund III. There hasn't been a Fund II investor that's told us they're not committing to Fund III and many of those investors haven't closed with us yet.So our calculus may be a little different than other folks. We have a lot of precision. I study the data every week coming out of Salesforce. And I'm -- as most of you know I'm somebody who really like data and I study the data and we're hitting our points. And that's the key. But I am optimistic, Jade, about next year. And I think our guidance for next year will demonstrate that but we're very pleased with the performance inside this quarter. And look, the key here is we just activated $25 million in fees. We literally started building those fees as of yesterday.And all of those fees will get caught up in the fourth quarter and there'll be more catch-up in Q1 and Q2 next year. And so there'll be a profound impact to our earnings in fourth quarter as now that they're closing this occurred, we finally get to start building on Fund III. That is absolutely important as investors think about what to look at these numbers and how to think about DigitalBridge. The expenses always come in front of the revenues, unfortunately, when you're fundraising. So that's a little bit about what's happening today.

[Jade Rahmani, analyst]

And the follow-up would just be as it relates to macro, do you believe that, that is one of the reasons why fundraising cycle times are a little extended.

[Marc Ganzi, executive]

Yes, no doubt. I think the macro has forced investors to move with a little more what I would call patients. And I think investors are being incredibly thoughtful about how to deploy capital. And certainly, certain pension systems want to cover their liabilities. So it's easier for them not to commit to funds and to make sure that they can cover their liabilities as pensioners take money out of the pension. So these are called outflows and inflows. And so in a market like this, where investors get nervous, pensioners get nervous, they may elect to take money out of their pension shade.And so on that, you get more outflows than you get inflows, which is taxes and the percentage that gets taken from someone's paycheck that gets put into a pension system like in places like Canada or places like Europe and even here in the U.S., where certain US state pensions are definitely watching very carefully and taking a risk of fatality. That being said, there's pockets of great optimism. We've done incredibly well in Asia. That's been a really good market for us. We had a brand-new fundraising team we put in place last year. We're seeing terrific results out of that region. We've seen very good results out of the GCC region.And Europe has been a little slow. The U.S. is coming on right now, Canada is coming back on. So as I said, the macro certainly makes people slow down a little bit and have some pause. But one thing we are seeing is the pension systems are being very cautious, Jade, just given that outflow inflow dynamic, and that should stabilize next year is what our belief is. That's what we see, and that's what fundraising consultants are telling us as well.

[Operator]

Our next question comes from Ric Prentiss with Raymond James.

[Richard Prentiss, analyst]

A couple of questions. First, timing in life is everything. Obviously, you're working on the Vantage deconsolidation. Help us understand what are you trying to achieve? How much are you trying to sell down to? How many people are involved in the discussions? What's kind of the process as you think about either by next time you report earnings, if not sooner, I think you said that we could get this one done. So just help us understand the process to get to this next final deconsolidation simplification story?

[Marc Ganzi, executive]

Yes. Thanks, Ric. So look, we're having good conversations with some of our biggest investors. I can't give you the exact color of who it is for confidentiality reasons. But rest assured, they're long-term core type investors. They are pension systems generally that value these U.S. assets that are 97% investment grade, close to 6% yield and offers investors incredible safety even in light of today's interest rate conditions. These are some of the best data centers in the world.I think our process is, obviously, we want to sell down $60 million of our position. We've made that perfectly clear to the investors we're talking to. We do have interest, and we do have ongoing negotiations with a couple of investors. And the key is also not just to sell down the 60, but also to continue, Ric, to introduce new capital into Vantage SDC, new third-party capital as Vantage North America now has other data centers that they want to push into this long-term REIT that we own. We like the REIT. We want to own literally 9.9% of it. It's a good -- it's the best of the best. And I think you cannot find a better set of U.S. data center assets in the world. And just the credit quality and the duration of the lease has been greater than 11 years, it's a really unique set of assets.So as you can imagine, it's not been for lack of interest. We have multiple parties looking at the position. We're looking at ultimately who can provide us with the most capital. Who can join us in fundraising of some primary capital as we're going to grow that sleeve of assets, Ric. I want to be clear about that. Vantage SDC is a growth vehicle. As we continue to develop some of the best public cloud campuses in the U.S. We want Vantage SDC to keep growing. It's attracting capital. Obviously, interest rate narrative has been a bit of a headwind. But the counter to that is we've got great customers, great leases, and we've got a great yield on this portfolio.So it pays a nice dividend, and there's a lot of interest from various pension fund clients of ours, and we will make a decision this quarter on what to do with it. So that's about as much granular detail as I can give you. And, by the way, Vantage SDC had great results this quarter. Revenue, NOI and EBITDA and same-store sales growth, all 4 metrics beat our budget. So we're really happy with what's going on at Vantage SDC and we do anticipate that, that sleep of assets Ric, will grow next year as we look to go acquire more assets in that vehicle.

[Richard Prentiss, analyst]

Okay. Second question, I think your stock buyback program maybe expired as far as the authorization program. Jacky, you alluded to looking at preferred stock, some other items out there. Stocks been under some the public stock, common stock has been under pressure. Help us understand how you think about as you are monetizing some of these interests? How do you look at taking a look at the preferred, the common stock, et cetera?

[Marc Ganzi, executive]

Well, look, we're always looking to buy back our preferred. I think we've made that no secret. We have a formula for how we use our cash. As you know, we've got close to $590 million of cash and cash equivalents coming out of this quarter. We're well capitalized. We're putting some money into our third fund that capital won't be called until reasonably as we do new investments in the third fund until third or fourth quarter next year. But we do see an opportunity. When we do see an opportunity, Ric, we make those purchases.On the stock buybacks, we've been in a blackout period. We're hopeful to in that blackout period soon so that we can go back to buying some of our stock back when it makes sense. And then certainly, we, as a leadership of the team want to buy back our stock, too. So we love our stock. We think it's a good value once that blackout period ends, and we're unrestricted, we can go back to having that conversation. So that's really it, I think.In addition to that, Ric, we've always cited that there's 4 sources of cash, right? Share buybacks, debt pay down and then certainly, GP commitments into our new fund products. We really like where credit is going. We're really looking to build that credit strategy. I think that was really clear. From my commentary earlier today, we like credit. We're growing our credit team. We want to grow credit assets under management, and we're in flight in doing that. So we think that's a huge opportunity for us in terms of the TAM and our market positioning.The last thing I would say, Ric, is we do see other GPs from time to time that are adjacent to what we do, whether it's adjacencies in digital infrastructure, whether it's adjacencies and other verticals like infrastructure or private equity or renewable energy, we're constantly evaluating like we did with AMP over a year ago, whether or not we put our balance sheet to work to acquire other folks of our ilk that are subscale, that when you integrate them with us, like we do with AMP, you can see incredible margin enhancement, and you can see obviously, revenue growth, FEEUM growth and FRE growth. So we're measuring all of that it, Ric, right? It's a box, right? There's 4 quadrants to that box. And we're carefully evaluating that literally every day as a management team.

[Richard Prentiss, analyst]

And then the update, I know, I think originally, Jacky might have been leaving at the end of the calendar year. Any update on all that hard work he's been putting in. Is there a replacement coming? Or what's the process of CFO?

[Marc Ganzi, executive]

Yes. That process is ongoing. We've had really good success and some great conversations. I mean I'd first tell you that Jacky is in place, and he's extended with us through -- I think, through the second quarter of next year, we'd like him to say. He's happy here. He's -- I won't put words in his mouth. I'll let him tell you if he's happy or not. We're having a good time. He's worked really hard to get this company to where it is. So a lot of the effort and a lot of the success we're having is a function of Jacky's hard work.So I for one would like to see him stick around a little longer. He's got personal goals that he wants to achieve that I support fully as does the board. And I'm not in a rush to hire the wrong CFO. I've got the right CFO in the chair right now. And so we do feel confident we're going to announce the right candidate here inside this quarter, hopefully. But in the meantime, I'm very happy with my partnership with Jacky as is Severin. We work well together. We're getting the results we're delivering for shareholders, and I think he's pretty happy to be extended through and needed if we need them to the end of June next year.

[Operator]

Our next question comes from Richard Choe with JPMorgan.

[Richard Choe, analyst]

Great. I just wanted to follow up on the capital formation that's been strong through the year, but the flow-through to FEEUM has been a little bit volatile. How much of the $5.4 billion or target $8 billion should we expect to hit FEEUM in this year?

[Marc Ganzi, executive]

Well, as I said, we're activating $25 million of FEEUM of fees officially yesterday. So that's going to flow through into the fourth quarter.

[Jacky Wu, executive]

All of that 5.4 will now flow through because before, we did not turn on the DBP III fee is Closing.

[Marc Ganzi, executive]

Yes. And so the other key to that, Richard, is there's no expenses associated with that $5.4 billion of fees that we're turning on. So that is 100% pure profit. And the challenge in our business, Richard, as you know, is you spend 6 months raising the capital, you spend a lot of money, a lot of T&E, you've got a lot of people, got sales, you got a sales team and you have no revenue to show for that. And now we're through that period and the fundraising has now got good escape velocity. And as I said, we're having a strong fourth quarter, and we anticipate having a very strong first and second quarter next year.So as we go forward, this now starts to move into pure profit. And as we've told you our strategy for a third fund is an $8 billion strategy. We have every clear belief in conviction, we'll hit that $8 billion, and we actually have some conviction that we're going to push through that and exceed the $8 billion target for this fund. So that's what the data suggests, but we're excited to turn on the $25 million of fees. As I said, 100% profit associated with that and the fourth quarter, you'll see a pure flow-through on that revenue and we should anticipate the financial results in the fourth quarter to be incredibly strong. Big on revenue lower on expenses.

[Jacky Wu, executive]

And candidly, some of that volatility is associated with just a geography flip between corporate expenses being now allocated to IM. So you'll see almost dollar for dollar flip between those 2 segments. But obviously, our additional earnings is way off because that obviously gets neutralized that geography.

[Richard Choe, analyst]

Great. And then thank you for the fund performance reporting slide that is very helpful. The performance has been good so far. But can you give us a sense of how they're tracking granted there's still a lot of time in the second one, but just overall, how your current projections are standing out?

[Marc Ganzi, executive]

I'm not sure I -- repeat the first part of that question, Richard, sorry.

[Richard Choe, analyst]

Sorry. Just how the gross MOIC is tracking for DBP I and DBP II, DBP I and II?

[Marc Ganzi, executive]

Yes. So this is our first quarter of reporting fund level performance, I think, is what you're indicating to Richard. But what I would tell you is gross MOIC have been up quarter-over-quarter on Fund I and Fund II. Fund II, as you can tell from the Vantage is going through the J-curve phase. And so those MOIC will catch up, and we actually think Fund II, where since today vis-a-vis Fund I is performing better than Fund 1. So we're pretty optimistic. I know other firms and not that we stand around watching other firms, but we know from Q1 to Q2 and Q2 to 3 and 3 to 4 other financial sponsors, other GPs have had some challenges, and there's been markdowns. So, we've not suffered from that at all, actually, our marks have moved up through Q1 through Q2 and Q3.We anticipate both Fund I and Fund II at DigitalBridge to continue to perform as the discounted cash flows across all of our portfolios are up quarter-over-quarter and year-over-year. And then I think also with respect to GIF I and GIF II, we've had very good solid performance in the InfraBridge 1 fund, as you can see from the table. That's performing at our expectations, and we're continuing to deliver DPI. We made it very clear that we are in the process of unwinding and exiting out of GIF I, some of those assets. We've also had tremendous DPI across our first fund and some of the continuation vehicles.So returning capital right now is super important to LPs, Richard. If you want to go out and raise money right now, you've got to produce DPI. And we've done a very good job there. We've produced over cumulatively about $4.2 billion in DPI this year in the last 14 months for our LPs. So returning capital and raising capital. That's the cycle.

[Operator]

Our next question comes from Eric Luebchow with Wells Fargo.

[Eric Luebchow, analyst]

Great. Appreciate the question. Just wanted to touch on kind of the M&A landscape across the different digital infrastructure verticals you operate in. Are you seeing any traction on higher interest rates recently moving down multiples for private infrastructure? Or are they kind of still remaining in pretty elevated ranges? And does that shift at all your desire to just accelerate greenfield development versus M&A as you look at ways to deploy capital going forward?

[Marc Ganzi, executive]

Yes. It's super interesting you should ask that question because I'm actually giving a speech later today where I'm going to talk exactly about this. It's -- so fiber has come down significantly, Eric, we've seen private market multiples move from the mid-20s into the low teens. We even think there's further compression in fiber multiples, particularly in residential fiber where the investor is exposed exactly to the household, where the cash flows are month-to-month, 30 days. And then certain aspects of fiber, enterprise fiber, wholesale transport fiber down a little bit, but not quite as heavily hit as fiber-to-the-home. Data centers actually, you could make the argument, Eric, that multiples have gone up and the good assets. And you know what the good assets are. Those are the hyperscale public cloud focused campuses where there's a lot of growth and there's a lot of opportunity and we've got a wallet that's growing.On the enterprise side, you've seen the flip of that coin, which is older legacy data centers that are 20-plus years old like Fixer have suffered and really don't have a growth story, so there's really not even a bid for those kinds of data centers. They're just so impaired. So whether it's enterprise, and then you've got DataBank, which is doing edge and they're performing really well, and there's been no degradation in the valuation of that equity. So data centers are tricky. I always tell investors that.There's 6 different ways that you can in data centers. There's 6 different sub industries in the data center sector. Where are valuations holding? They're holding in hyperscale and they're holding an edge. Where are they going down, managed services, hybrid cloud, enterprise, those are the areas that are suffering. And then I would say private cloud, which is what Switch does is performing quite well. So 3 good verticals, 3 probably less good verticals. And so there's a wide range of valuation there. You could see as high as 30x EBITDA, and you can see all the way down to enterprise and managed services like 6 to 7x EBITDA because in some instances, there's just no bid because of the debt.Towers have actually held in pretty well. On the private side, we've seen private transactions in Europe recently trade in the mid-20s, 24 to 25x. There hasn't been a material degradation in tower valuations. Maybe they've lost 3 to 4 turns in Europe. In the U.S., there just hasn't been any material M&A. And while the public multiples are down 20% to 30%, private multiples actually hung in and the smaller transactions that Vertical Bridge is chasing, they're still losing deals at 25 to 26x. Now those were the deals that were losing at 32 to 36x a year ago. So there's probably been a 6 to 8 turn compression in what I would call small ball M&A.But there hasn't been a material big M&A trade in the space to really see where those multiples are. And I think you could basically push private market small cell multiples into the same bucket as U.S. towers. And then in Southeast Asia and Latin America, we've seen terms trade in the high teens. And in some parts of Asia, Jacky, we've seen towers hang in at 20 to 21x. The market is still one that's really attractive from a tower multiple perspective. But again, digital infrastructure sort of painting it with one pain fresh isn't fair. I think you've got to sort of lay out the canvas and bring 12 paint brushes to the canvas because you're going to have to paint it a lot of different ways right now, Eric.

[Eric Luebchow, analyst]

Yes. Yes, that makes sense. And just to follow up, your comments on residential fiber, fiber-to-the-home. There's obviously been some speculation about a big consolidation wave coming in that market. You kind of touched on this a little bit. But I guess, given where cost of capital have gone for a lot of those over builders, is that an area that traditionally, I know you've shied away from, but if we see an appropriate discount in evaluations here, is that an area we could see you potentially play in further going forward?

[Marc Ganzi, executive]

I think, look, right now, we're very focused from a credit perspective, and we're providing credit to some of those companies. So certainly up at the investment committee level, we're very supportive of residential fiber. And there are certain management teams we really like, and we're backing them and we're giving them capital in the form of credit. And the equity investment committees, we're not constructive on residential fiber right now. We haven't been, and I think we've been pretty vocal about that. We've had our reasons.Now that the valuations are moving in line, if we do find the right geography, the right management team and the right set of competitive dynamics, we're happy to write an equity check behind a great management team in the residential fiber space. I mean we're doing that now in Europe with Netomnia. We're rolling out the Tier 2, Tier 3 markets in the U.K. with a lot of success. We've got great -- we've got a great management team. He's building at 20% to 30% cheaper than its competitors, and his penetration is 20% to 30% higher his ARPU is about the same. So that's the situation where we saw a very specific set of skills and a management team that had comparative advantage and they weren't just chasing homes in London. They were focused on the Tier 2 and Tier 3 markets where there's less competition. So the investment thesis stood up.Same thing in Chile. We have a wholesale residential fiber business, but we also have a business -- that same business also sells directly to home, where we've seen underpenetrated homes, a lot of streets where we're going down the street and we're the only fiber carrier. And so we will play in residential fiber, Eric. We're just doing it through Mundo and through Netomnia, and doing it very carefully and very surgically. I think there's probably a little more pain left in residential fiber in Europe and the U.S., and we're going to watch it carefully and we'll play. I mean Beanfield is our Canadian residential and enterprise fiber plays. It's mostly focused on Toronto, Montreal, and it's done really well.We sold 1/3 of that to OMERS for an incredible multiple. They've been a great partner. They're providing a ton of primary capital. And we're going into Toronto and Montreal, and we're facing Rogers and Bell are very formidable and we're taking market share. But it's hard. It's a tougher business, Eric. It's not like signing a 15-year lease on Microsoft or a 25 or 30-year lease with Deutsche Telekom. You got to wake up every day getting the trenches, you got to fight. And that's a fight for, but it's got to be priced correctly. The equity has to be priced correctly.

[Operator]

Our next question comes from John Atkin with RBC.

[Jonathan Atkin, analyst]

I wanted to ask you about the comments you made about small cells and the scripts and maybe focusing on outdoor small cells. You sound a little bit more positive than you have in the past. What's driving that in terms of U.S. demand and how capital intensive is that for ExteNet and maybe any of your other platforms? In other words, are you seeing sort of same-store lease-up on existing plants? Or are you having to kind of build to meet the demand?

[Marc Ganzi, executive]

Well, look, I think the reason we see optimism is because we're watching our pipelines at Boingo and ExteNet and FreshWave. And also our Latin tower business is like high Line and ATP, EdgePoint in Asia, all these businesses have small cell divisions, and we're not only seeing green shoots, we're seeing bookings. And we've seen a turn in the bookings at ExteNet. We've seen a really big turn in bookings in Boingo. Look, there as close to as you know, Jonathan, there's a little under 0.5 million small cells stay in the U.S. depends on whose numbers you believe. And Jonathan, what do you count as a note or what's not a note, right?What I can tell you is we believe the reforecast on small cell growth between now and 2030 is about 1.1 million to 1.2 million notes. So we think there's about another 600,000 to 700,000 notes that will be built, and we're talking to our customers and, look, yes, some of it will be self-perform. But even now in this market where the cost of capital has gone up, our conversations with all 4 of the U.S. carriers have picked up significantly. I know at ExteNet, for example, they just signed a new M&A with DISH and DISH now has capital and they're going to put some work -- put some money to work in small cells. But all 3 of the major carriers are also putting money into small cells.Now while CapEx has been curtailed, if we can come in and provide a good solution, the carriers are willing to listen and provide they don't fund the CapEx. So we're seeing more opportunity. We've seen our pipelines grow. I think you saw a little bit of that color from Crown. I think there was a competitor research paper out today. I think one of your competitors had a non-deal road show with Crown and they were talking about the same thing. They've seen an increase in pipeline. So I see a market that's growing. This is exactly what happened with 4G. We spent the first 3 years in LTE, basically doing macro overlays one for one. And then when LTE moved into --- 2015, 2016 and moved into densification, it was all small cells, and it was a little tougher on towers.We're probably another 6 to 9 months away from hard core densification ramping on 5G, but we're starting to see it. It's starting to happen. So I'm very optimistic around small cell growth, and we're looking forward to putting more capital work, raising more capital at these platforms and investors understand it. We've been out there and talking to them about it, and it's not just small cells for the carriers, but you have to think in other dimensions. You have to think about IoT networks, private 5G networks and then, of course, as generative AI starts to penetrate towards the edge and moves towards mobile edge. We've always talked about how generative AI ultimately is going to be dispersed in low latency environments that are less than 1/10 of a millisecond.The only way you get there is through small cells. That's the only way that you're going to have through autonomous vehicles, through machine-to-machine learning and through public safety that has true early responders getting in front of the threats is by having essentially a no-latency environment and small cells take you there. We're very constructive on how AI is going to change the small cell space in the next 5 to 6 years.

[Jonathan Atkin, analyst]

Great. And then maybe just pivoting briefly, but anything you could elaborate on in terms of updating us on your venture strategy and things you're looking at?

[Marc Ganzi, executive]

Well, look, I mean, now that we've announced the closing of the third fund, the first closing, it's -- we can start to pull back the curtain on, on what we're doing. What I would tell you is we built a really good diversified Fund I and diversified Fund II. We did 10 investments, 13 investments. in this fund, same thing, we're targeting 12 to 16 investments. Probably check size is a little smaller is what I would tell you. We're very constructive on Asia. We're a little less constructive on Europe. We're certainly constructive on the U.S. and Canada and Latin America.So what I would tell you is our strategy is much of the same. But if we're thinking about that strategy, we're seeing a lot of positive things in Asia. We're seeing a lot of positive things here in our home market in North America. And there's a couple of interesting things in Latin America and Europe is just going to be a tough road out. Those guys have a much tougher road. So as we're thinking strategically about where to deploy capital, Europe is probably third or fourth online list right now. The U.S. and Asia stand to be 1 and 2. And then in terms of sectors, we like -- of course, we like data centers that face AI. We do like wholesale fiber that again faces AI. We do like private 5G networking. We do like small cells that's systematic that we like in our new strategy.And then if there's a right tower opportunity, if it's EM or if it's in the primary world, we'll look at towers. We think we've got some great companies, but there's always room to further invest. And then the last thing I would say is we have spent some time thinking about how to grow the private cloud. We've got so much success at Switch. The question is, can we translate that success to Europe and Asia. So we're working on that really hard right now.Private cloud networking and owning private cloud infrastructure that's highly secure, there's a huge market for that, and no one is doing it. No one is doing it the way Switch does it. So we've -- now that we've owned that company for almost a year, we feel like we have the DNA to take that strategy forward. There's some other things we're working on that are proprietary. But now that we've got the third fund -- the next strategy close, we can deploy capital from that strategy. So you'll start to see some new deals announced here in this quarter.As I said, we've got a big pipeline. We're tracking over $30 billion of new ideas in our pipeline. Our pipeline has never been bigger in terms of new platform formation. So we're excited. This is a big call today. It was important for us to get the first close done. It was important for us to turn on the billing and activate those fees. Everyone loves those fees and then, of course, go execute. And so what you'll see from us going forward is now new deals, new execution and continued thinking around DPI and how we return capital back to our investors. So it will be a busy fourth quarter for us Jonathan, and we look forward to hosting you hopefully soon down in Florida.

[Operator]

There are no further questions. At this time, I would like to turn the floor back over to Marc Ganzi for closing comments. Please go ahead.

[Marc Ganzi, executive]

Yes. Thank you, operator. Well, first, I want to thank everyone for showing up on the call today. As I think you're hearing my tone and my tenure, we're very optimistic. This was exciting to get to the first close of our new strategy. And we're again reaffirming our guide for fundraising this year. It's been a tough market out there, but we seem to be defying gravity in terms of fundraising. We've done a great job returning capital to LPs. We've done a very good job managing our assets and our portfolio companies and the state of DigitalBridge is quite strong as we sit here today.As we move into the fourth quarter, and you can expect more of the same. As I said before, we're pretty excited about the fact that now we convert into fees on our new strategy. You'll see a strong financial performance here in the fourth quarter, and that will persist into next year. We remain incredibly optimistic around the fundraising environment and exactly where we are in terms of our key accounts and where our fundraising is. And then in terms of capital deployment, as I said just a few moments ago, we're sitting on a $33 billion pipeline of new opportunity in terms of where to invest capital, and we will start deploying that capital in short order.So to sum it up, it's really about hitting the marks on capital formation, maintaining our portfolio, maintaining our competitive advantage and of course, raising more capital and deploying that capital in what we think are some of the best strategies in the world in digital infrastructure. It's a privilege to represent your capital. We appreciate your support, and we look forward to talking to most of you soon. Thank you. Have a great weekend, and have a great rest of your week. Take care.

[Operator]

This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation, and have a great day.