ON TOP OF THE WORLD AND UNDER YOUR FEET
Part of Marc Ganzi’s success has been built on the same approach that made Wayne Gretzky a hockey legend: go to where the puck is going, not where it has been. In other words, Ganzi has used the gift of foresight to build a multi-billion-dollar digital infrastructure empire and stay a step ahead when it comes to industry trends.
Ganzi is the co-founder and CEO of Digital Bridge Holdings, which owns and operates several communication infrastructure companies including Vertical Bridge, Vantage Data Centers and ExteNet Systems. Ganzi co-founded Digital Bridge in 2013 with former Dering Capital and The Blackstone Group executive Ben Jenkins, but it was about a decade and a half earlier when he started taking the steps towards building what this company would become.
When Ganzi was working for the private equity arm of Deutsche Bank in the early 2000s, he learned there were a lot of promising tower assets that were hidden inside of some overleveraged balance sheets. Having studied the asset class during his time at Apex Site Management and SpectraSite Communications, Ganzi left Deutsche Bank in 2002 and returned to his entrepreneurial roots. He wrote a business plan, raised $100 million—$50 million in debt from GE and $50 million from private equity firm Great Hill Partners—and took advantage of a time when carriers wanted to invest in 2G networks, there was high demand for E911 services, and mobile operators wanted to bolster their networks. Global Tower Partners (GTP) was born in 2003.
“We did about 50 acquisitions and built the business organically through leases and new builds,” Ganzi said. “We got the portfolio to about 1,200 towers.”
In 2005, Ganzi’s GTP had a transformative moment when they partnered with The Blackstone Group and converted the business to a real estate investment trust (REIT). It was a significant move at the time because the REIT industry had not yet viewed the tower business as a specialized real estate asset class, according to Ganzi.
“People were looking at the tower business as telecom and venture capital or private equity,” he said. “We successfully navigated the first private letter ruling from the IRS, and began to start thinking of ourselves as more real estate owners and less telecom tower operators.”
That year was also when GTP launched its first securitization. As a private tower operator and a REIT, leadership felt the best way to approach the balance sheet was to look at it as real estate. So, the company perfected the mortgages under all of its properties and shifted its narrative.
“People were looking at the tower business as telecom and venture capital or private equity,” he said. “We successfully navigated the first private letter ruling from the IRS, and began to start thinking of ourselves as more real estate owners and less telecom tower operators.” MARC GANZI, CEO – DIGITAL COLONY AND CEO – ELECT OF COLONY CAPITAL
“We took the different perspective that we were a finance real estate company, and even though our tenants were wireless companies, in essence, we were a landlord,” Ganzi said. “That’s how we positioned the company.”
After two years of strong growth while partnered with Blackstone, the company doubled in size and brought business to approximately 2,500 towers. Infrastructure investment company Macquarie Group eventually purchased the company.
“This was a critical moment because for the first time, infrastructure investors were looking at towers,” Ganzi said. “Infrastructure investors typically have low return thresholds and longer hold periods, and this was really the beginning of a whole new class of investor entering the tower space.”
GTP worked with Macquarie for six years and grew the business in Panama, Costa Rica and Mexico. The company’s portfolio and tower cash flow tripled and in 2013, American Tower purchased GTP. Following the sale, Ganzi retired for a few hours ‒ the day after the sale to American Tower closed, Ganzi and Jenkins signed a lease for office space across the street from GTP and Digital Bridge was born.
“The idea was to continue to invest in my favorite assets, which was digital infrastructure,” Ganzi said.
Ganzi admits Digital Bridge had a little luck on its side as the company got off the ground. Regulatory issues kept American Tower from closing on GTP’s Mexican assets, and Mexico Tower Partners ended up being Digital Bridge’s first investment. It’s since grown the company from 370 towers to over 2,400. Companies such as Vertical Bridge, ExteNet Systems and DataBank soon followed as additions to Digital Bridge’s portfolio.
“Very quickly, three years into the birth of Digital Bridge, we’d already done multiple tower deals, our first data center deal, first small cell platform and raised a significant amount of capital,” Ganzi said. “It was a great start to the business.”
How quickly Digital Bridge has grown and the amount of capital it has raised is an impressive feat on its own. What might be even more impressive however, is how the company has bridged the gap between the communications, wireless, digital infrastructure and commercial real estate worlds.
“We’re trying to be involved in businesses, first and foremost, where we can effectuate change ‒ where we can bring our three decades worth of experience to bear on an asset,” Ganzi said. “It’s an interesting thesis, to be at the intersection of all these sectors, but it starts with the leadership of this firm and its people. We have to have the right people and then we can build a strategy and platform that we can organize and bring our full experience to bear.”
Digital Bridge also seeks a particular setup of collateral that resonates from a real estate perspective, according to Ganzi. The company wants to be a customer’s landlord—that means there have to be leases and some sort of inflationary protection around escalators or some sort of escalation provision.
“The lease has to be a byproduct of us having an asset where we either own the land or we own the fee or have some interesting sort of barrier to entry from an entitlement perspective,” Ganzi said. “We want to be in good markets and good locations, and we want to be behind customers that are growing and that are investing in technology.
“That’s part of the go forward digital ecosystem. There’s a lot that goes on behind the scenes, but what people don’t know about us is that we put people first and we have a lot of discipline around the real estate attributes to these assets.”
“We create environments that aren’t just rack space and elevated floors and power and cooling, but are also a place where our customers can come to meet and collaborate with their vendors and application engineers.”
That means things like underwriting, the quality of the real estate and the quality of the collateral all matter to Digital Bridge’s business practices.
“I don’t think people have an appreciation for that—maybe because they’re infrastructure investors, but we’re not,” Ganzi said. “We’re a real estate investor. Yes, we have amazing tenant relationships with telecom players, but at the end of the day, there’s a massive amount of discipline that’s rooted in real estate principles.”
Ganzi also keeps his mind open to the fact that the real estate industry is always changing, and hopes that his counterparts are doing the same. There have never been more real estate verticals, and none are immune from disruption—including offices.
“When you think about the office world, people are taking flexible space, short-term space and people are working from home,” Ganzi said. “The quality of leases is deteriorating in the office space because of the disruption from (companies like) WeWork. The amount of depreciation of these older buildings is increasing every day. CapEx is required to modernize office space.”
Property technology, or proptech, is another real estate vertical Digital Bridge is involved in, but not in the way one might think. Rather than owning or investing in the apps, Digital Bridge wants to own the environment that enables proptech—mission critical power, cooling, connectivity, security, etc.—and it does.
“Proptech happens in our data centers every day,” Ganzi said. “For example, if you ever walk into a Databank data center or Vantage data center, there is a lot of creative space where engineers get together and discuss applications. We create environments that aren’t just rack space and elevated floors and power and cooling, but are also a place where our customers can come to meet and collaborate with their vendors and application engineers.
“So part of this business of having edge data centers, and of being on the cutting edge of where compute is going is making sure that we not only have the right location with the right connectivity, but we create the right space and environment for tenants as well.”
Since Ganzi is always looking at where the puck is going, rather than where it’s been, his sights are set on his next career trajectory—embarking on what he considers his most interesting and difficult challenge, Digital Bridge’s recent acquisition by Colony Capital, Inc. (NYSE: CLNY). The companies announced plans to merge in July and at the same time, Ganzi was named the next CEO of Colony. Ganzi has stated that Colony will transform from a diversified REIT into a digital-focused REIT.
“It’s exciting because I sit here today as a senior executive at a REIT and we’re in the process of transforming that REIT from being a business that’s been focused on traditional real estate assets, mortgages and investment management, and moving forward will be focusing on the digital realm.
“The mission is for Colony to become the first-ever diversified digital REIT of its kind. It will be a business that will own assets across all of the key subsectors in the digital real estate ecosystem, which is converging across towers, small cells, data centers and fiber networks. There is real synergy to taking these previously siloed assets and assembling them under one platform.”