All right. All right, everybody, if we can get started for our lunchtime keynote. For those who don't know me, my name's Greg Williams at TD Cowen. I cover cable, telco, wireless, and towers. I am joined by Steve Smith, CEO of Zayo. Steve, thanks for joining us today for our lunchtime keynote. Appreciate it.
What do you think? Yeah, Yep, good to be here, Greg.
Yeah. We sat here last year at lunch, if I recall, and, you know, we spoke about a lot of the developments of Zayo. I'm curious, what's keeping you busy? Where are you spending most of your time these days at Zayo?
Well, we're, we're 3.5 years into the privatization journey, so we're, we're at the tail end of our transformation activities and starting to enter into profitable growth phase. We're busy doing a lot of big projects. We're automating the company at a high rate. We're, we're finishing out capacity upgrades across our Waves platform and our fiber business, integrating 3 acquisitions that we did last year. We actually brought part of Allstream back into the company that was split out before, before as we went private, to help us with our mid-market focus. There's just a, there's a lot going on. Then probably the biggest thing that we're doing now is we're finalizing the right-sizing of our cost structure.
You guys that know the business, know that after 49 acquisitions that created this thing, the amount of glue required to make all those things work is quite, quite heavy. The automation, the cost right-sizing, and the final integration is in, you know, full speed ahead middle. Some phases are in the middle of some phases we're towards the tail end, so it's been, it's been super busy, but a lot of good and at the... You know, underneath all that, we're, we're booking more than we've ever booked in the history of the company, and we're churning less than we've ever churned in the history of the company, and we're working really hard to deliver on time, and, and there's a lot of work going on there.
I heard a lot there, of duct taping 49 companies together, bookings, service delivery, network upgrades, so a lot to chew on and a huge transformation in the last 2 years. Maybe we'll start with the network upgrades. You spent $130 million in discretionary CapEx and upgrades. Help us understand, what was needed to be upgraded? Was it the fiber itself? Was it the electronics equipment? All the above?
Yeah, sort of all the above, and we're, we're certainly at the back end of that. A lot of fiber plant upgrading, a lot of upgrading of our points of presence in our ILAs. The space and power needed to be upgraded. You know, all the, all the foundational things, a lot of capacity. A lot of that money went into capacity upgrades. We're 75% of the way through upgrading our whole Waves platform to 400 gig. We've got 12 long-haul projects that are in full motion. 6 will be done this year, 6 will bleed into 2024, so a lot of the hardening capital went into finishing all those initiatives.
Right. That, I guess that was my next question, is what's still left? It sounds like, yeah, 25% more on capacity, which I guess assumes like 400 gig Waves, that sort of thing, and then, and then these, these long-haul projects. Anything else that's left to do, and maybe what's on your wish list for additional upgrades?
Well, both my investors are in the room here, they don't, they don't, they don't want that wish list to grow any faster than it's been the last three and a half years. We're, you know, we got to finish the 25% of the Waves platform that's not upgraded. We've got a handful of long-haul routes that are for very large customers that we're gonna, we're gonna wrap up as we go through the remainder of this year and the half, half of next year.
You know, on top of the big pipes to big customers, which is what Dan Caruso built here, we have layered in some managed services capability with an SD-WAN acquisition and with a, an acquisition of Education Networks of America, which makes us one of the largest independent E-rate providers in the country. We underpin roughly 20% of the K-12 schools in the United States, so we're a big player in that space. There's a little bit of work going on to finish the integration of the managed services that sits on top. It's roughly 8%-10% of the revenue. Most of our focus is still on the fiber and on the Waves build-out.
Most of the demand we see is long-haul, metro-related demand, backhaul demand, and that's where most of the focus is, remains.
Got it. Moving on to the service delivery that you alluded to, Zayo's made remarkable strides I've seen on the service deliveries. Your, your installs have gone from 6-month lead times, you've gotten that down to 60-70 days. You've got goals in some products, the 30-45 days. Maybe help us understand, you know, what were the problems at Zayo for the, you know, longer service delivery and what you did to fix it.
You know, to be very transparent, we're not through that knothole yet, but, you know, part of it starts with a table back there with all the great executives we brought into this company, that have kind of brought a new, fresh perspective of, of, of a transformation. You know, our biggest customers are the biggest carriers, the biggest hyperscalers, and some of the largest enterprises in the world, not unlike many of your companies. We're, you know, we're fighting that battle every day. As you all know, in this industry, service excellence in, in the telecommunications industry has not been a stellar part of the business to brag about. We're trying to create something that's a little different. Some of our folks on our team call us the un-telco telco.
We're doing a lot of work there to, to make delivery a, a differentiator for the company, but we're not there yet. There's a lot of investment still going into that. On-time performance and mean time to install, mean time to repair, and it's busy now because of all the government funds that have come into the market. You can imagine with the construction going on in the United States, we're having fiber cuts all over the place. As the fiber to the home goes in off these major metros, and we're... You know, we won some big biz that we can talk about there, but there's just a lot of activity right now that our, our company is, is facing on a daily basis.
Right. including that activity is your solid gross bookings. you know, you're really starting to turn that around. you know, you've spoken about last year, even the year before, you talked about your go-to-market strategy's changed. You've centralized your, your sales focus. help us, you know, what needs to be done within the sales organization still? just talk about the, the strength of your bookings and where you can see it going forward.
Well, when I showed up, when I talked to Jan and Mark, the, the initial mission was to come in and get the sales culture going, and first thing I did was go hire a rock star named Andres Orlando, who many of you know. He almost single-handedly, with a bunch of new people, kind of renovated the entire go-to-market. You know, after 14 years, the company had not had much platform for... We had no marketing function. We had no sales methodology. I mean, there was a lot of basic things you've got to have to run a $2.5 billion revenue business and a $1 billion EBITDA business. A lot of that got put in place in 2022. 2021, we reset the operating model. 2022, we build the foundation for the go-to-market.
The bookings, and as I said, the churn are the best in the history of the company right now. That's a testament while we're still finishing off the back office, and we're on our way to building quite a success story. I personally have not been part of a turnaround of this order of magnitude. I have to tell you, as you, as you can see the trees through the forest now, and it's taken a little bit longer than we all thought, but this is going to be one heck of a success story built here. Once you have the front engine built and the back office is, we've identified all the levers to pull, then it's just a matter of moving this thing to, you know, our aspirations have been mid to high single digit growth on the top line.
Yeah.
That's faster than almost every telco company on the planet. Once we get the guts of the back office kind of finally invested in, and we achieve that kind of top-line growth, this becomes a very unique story.
Great. another aspect of the unique story is this huge cost savings initiative that you alluded to. I think you're three quarters into a big initiative, one of which was rationalizing, I think, 15 products down to, like, I think 7 or 8. you know, maybe tell us, like, what products did you rationalize? just tell us about, you know, cutting the fat, or is this more of a business transformation? Like, where's the initiatives?
Well, this, this, this was always in the plan, and it was kind of the third stage of the, of the, of the transformation, which was we needed to right-size the cost structure to the size of the company. So we, we benchmarked ourselves with an outside partner, found out that we were behind in many categories, started the journey to fix that. We're moving work around the world, nearshore, offshore, to where it makes sense. We hadn't done a lot of that before then. On the product side, we stood up a whole business unit structure and put a contribution margin on each of the product lines, which we had not done before. The visibility we have now to the profitability of every product is there.
We hired a chief product officer, who's a rock star that I had worked with before, who's made a huge difference. His name is Bill Long. Many of you know him. Bill quickly came in and said, "Let's stop all the science projects. Let's slow down on the low margin return products, and let's go put our money and our mouth where the high return projects are." We got very, very focused on capital intensity ratios. We're, we're spending less capital than we ever have in the past and booking more than we ever have in the past. It just shows you, with process and systems and discipline and leadership, you can get more efficient. We're, we're maniacally focused on capital efficiency now.
Right. And what's left to be done in terms of, cost transformation services going forward?
Well, we're cost-optimizing now. Every company, and I'm sure every company in this room, every year, when they get their budgets built, they're looking for rationalization wherever they can. I don't think we're ever going to stop that. We're right-sizing the cost structure this year. As we go into 2024, we'll just optimize around where, where we still have opportunities, so it'll be an ongoing process for us.
The last subject on sort of this transformation, among many, is just data integrity. You spoke that, about that in the past, how, you know, you made almost 50 acquisitions, and I can imagine the amount of disparate data across all of these customers and platforms and companies. Just help us what that means, data integrity. Is it network data, billing data, customer data? You know, when did this start, and how long will this journey take?
Yeah, it's, it's one of the big projects that we haven't mentioned, but when you're running a telco of this size, I learned, it took me a while because data centers don't have this much data, and towers don't have this much data. We have 2.4 petabytes of data in this company between all the lit buildings and all the facilities and all the POPs and ILAs. So we hired a, a very good leader from a very large telco that had led them through a data cleanup, data cleansing, data foundation, data management project, brought him in, hired a team around him, and we're 6 months into that project now.
It'll probably bleed into half of 2024. We are going to cleanse and clean up, so we can hit 1 button and get the answer we need and not 25 spreadsheets and, and lots of handoffs. Big project. Both investors are excited about getting through this. Same time, we're upgrading all our financials to the cloud. We're upgrading... We ran this company on an instance of Salesforce that was the most overused instance of Salesforce I'd ever seen in their life. We're standing up a new instance of Salesforce to do what it's supposed to do, and then we're also implementing ServiceNow to get workflow simplified through the entire company.
Great.
A lot of big projects going on at once.
Nice. You mentioned earlier that, you know, you're now at that mid-single-digit growth rate, which is, you know, commendable over the last two years in terms of-
We're, we're aspiring to be there.
You're aspiring to be.
We're creeping up to the bottom end...
Okay. but you're, you're getting there?
Yes.
Which products are growing fastest for you? What, what's going to really be the pole in the tent, and, and maybe which products are lagging if...
Yeah, no surprise, Fiber and our Waves platform are at the top of the heap. Bill Long, our Chief Product Officer, is orienting all our packet services, which is all our mid-market and managed services business, to become more NaaS oriented.
Okay.
We have started that journey to software enable the packet part of our business to serve it as a service. There's quite a bit of work going on there. We have proof of concepts. We're partnering with people we have never partnered with before. I think that part of our business will pick up pace as we go forward, but Waves and fiber are just in hot demand. I'm sure we'll get to AI, and we'll get to the demand we're seeing with the data centers. We're a second-order effect to that, with the connectivity required, as data centers are growing at an incredible pace now.
Yeah. We'll, we'll definitely talk about AI. Maybe before we get to that one, maybe the other sources of demand that we think of beyond, like, an AI use case, which is, you know, data centers, XAI, 5G, you know, CRAN, Edge, Enterprise, you know, where do you see these particular sources of demand?
Well, we see all of those requirements. We're seeing the front edge of some of the biggest demand we've seen for fiber pairs, where we're getting requests now for 100 fiber pairs for major links between markets. We are helping both the big satellite companies build ground stations, both Kuiper and, and the other big one that we're working with. We're helping the five autonomous vehicles with EV initiatives, where we're moving information from those cars to the cloud because of the amount of download data. We're doing some very interesting things that are, you know, around the edges of the core of the business. The data center demand is at the top of the list because I'm sure you've all read about the data centers are now or the hyperscalers are now demanding capacity 24-36 months out.
Last year, it was 12 to 18 months. When you see that kind of change going on in the market, the, the network densification and the connectivity requirements follow very quickly.
Sure.
We're seeing those.
On the data center side, we can talk about AI and how that will contribute to Zayo's growth. Is it really tying a bunch of data centers together with, you know, waves? Is that sort of the, the idea to think about it, and, you know, what are AI contributions can help Zayo?
Yeah, listen, I know Mark, Mark is up next, and he's there's nobody probably well-versed on, better than him on. I think AI is gonna change our lives. Everything I've read and all the discussions we've had with hyperscalers and with the data centers that are in front of this now, is that it's gonna take 2-3 the times the compute that cloud took. It's gonna take, I don't know, I've heard numbers in the order of magnitude, $5 trillion to stand up the public cloud over the last decade. Could be $6 trillion-$8 trillion to stand up the AI use cases that are gonna happen in the next decade.
The, the amount of capacity I think I've just read an article last week where 2.1 GWs or 2.3 GWs of capacity just in the last 90 days.
That was.
publicly announced.
That was a report by Mike Elias, you're right.
Was it? Okay.
Yeah.
Once you start seeing that, that type of wave, we're definitely on the front edge of use cases. We, we are spending time with all of the big hyperscalers to understand the use cases they're seeing. All 4 of the big ones, Google, AWS, Microsoft, I put Meta in that category, NVIDIA is interesting to talk to. They've been working on this for 5 or 6 or 7 years. The amount of compute already stood up around the world in big markets is, is mind-boggling. Once you start to see the use cases they're seeing for customer care, for us, it's gonna help us to optimize our network. It's gonna help us, it's gonna help us predict maintenance on our network. It's gonna do things that we've never had the ability to do before.
Every company, every executive in this room, has IT in their company. I don't see a world where IT systems aren't heavily influenced by AI to manage the thousands of events per second that the manual mind just can't do.
Yeah.
I, I think we're in for a major shift over the coming years that's gonna drive demand for everybody in this industry that we've not seen in a long time.
Yeah, it's not just outward-looking, it's just AI internally for Zayo, network managing, monitoring, as you said.
Both. You gotta start with the use cases, and the people that know the use cases right now are the, are the folks providing service to the big enterprises that are... I think, like, m- AI has got to have a distribution platform to get it to the manufacturing floor, to get it to the offices, to get it to the airports. Once it starts getting distributed to every place, it requires network, and so we're really, really leaning in, to really understand the, the, the use cases with AI.
Right. Not to be a buzzkill on AI and the excitement, how about on the other side? In the enterprise markets, we're seeing, like, delayed decision-making. Is Zayo seeing that, or is that more on, you know, the, the telcos?
Little bit. I, I, I think I went to a CEO forum second quarter in New York with JP Morgan, with 150 public-private CEOs, and a bunch of people stood up and said, "We're facing a recession late Q3, sometime in Q4." I think that's waned a little bit from everything I've been reading. I think a lot of enterprises were delaying decisions, studying things longer. We've seen a little bit of that over the last quarter, but I'm hopeful that this concern, and I know Europe's been in a little bit of a recessionary behavior. I, I don't know the answer, obviously, but I don't think anybody in this room probably does.
It feels like the, the concern of the U.S. moving into recessionary behavior, late Q3, Q4, may, may get pushed out or may get delayed, and I think that could change buying behaviors.
Got it. You, and you're reaching, you know, mid-single-digit growth eventually. Where do you see the terminal growth, and, and what's the steady state for the industry? Do you, do you see yourselves outperforming the industry, or you're so big, you're kind of part of the industry?
I, I do. I mean, I don't know other plans for telecommunications infrastructure businesses, but if you can grow this kind of business model 6%, 7%, 8%, 9% top line a year, you're gonna take share. based on history. That's our goal, that's our aspiration. We're trying to build an engine that's gonna produce that.
Got it. And you mentioned the excitement about Waves. I'd be, be remiss to ask this, but Cogent, who's here today, they bought the Sprint GMG wireline business for $1, and a pretty robust network. You know, Dave Schaeffer, who's, you know, at Cogent, plans to enter the Waves business in a big way. It's about a $2 billion business. You know, he's said things like taking 25% of that business, and he's had success in other products in the past. Just hear your thoughts about a major competitor coming into that business for you.
Well, listen, Dave's a great partner and friend of the company. We know his team well. We do a fair amount of business with them. I personally think the Waves market is big enough for all of us that are in that game. I think Dave's business and our business are gonna win at a high rate. You know, we have a national network, so Waves rides on a fiber plant. It matters the age of that plant, it matters the upgrading of that plant, it matters where that plant is, and we're a big national platform. We'll win our fair share of that business, and I think Dave will do very well in that, in that business, too, and there's plenty of room for both of us.
Got it. Thanks. Then, flipping to the cloudification of networks, you know, I think we spoke about it last year, and since then, we've, you know, saw the, the wireless companies, AT&T sign Microsoft Azure for operators. You're seeing some of the, you know, the cloud or the network functions on the cloud. And Dish obviously is using AWS in their cloud core. What's, what's Zayo's stance on the cloud? You know, whether you use cloud for networking or you, you build a sort of in-house, running your core services. Letting cloud in your network, is, would it be kind of like letting the fox in the henhouse?
No, I don't... You know, having come from the data center space, you, you need all the clouds in there to, to provide all the on and off ramps to the internet and to the cloud. So, no, we're, we're gonna work with all the, all the hyperscalers on that front. No, we're, we're gonna stay in our lane. We're an infrastructure provider. We have some services with the, with the managed services portfolio that we've acquired and built on top of it. Small, it's 8%-10% of our business, and we'll play our role. We will work with them in whatever capacity. Dish is a great example. Dish, we've helped them meet their FCC requirements in 20-plus markets.
Sure.
We're a big provider to them and a big player, so we'll, we'll find the fit with all of these providers.
Right. An offshoot to cloud is maybe the, and you mentioned this, the, the software-based services. You mentioned pressing more on NaaS services or network as a service. Lumen came out with an offer.
Mm-hmm
- about a week and a half ago in a compelling NaaS solution. you know, just trying to see where you fit in there, where you're developing products, and, and, and who's your, who's your customers, and what's-
Yep
the opportunity there?
Oh, I think you're gonna see a lot more announcements around NaaS. It's... You know, listen, infrastructure as a service became real over the last decade, then SaaS became real, then PaaS, platform as a service. It's a very logical extension, the network's gonna get served up as a service. We know that. We're working hard to enable that. All the carriers are gonna get in that space. They have to. Software, softwarization of the network's happening, as it's been happening for years. So, you know, around the edges, we'll continue to serve up mostly our packet offerings in that, in that orientation.
Okay. And help us in the audience just to contextualize what NaaS means, like, 'cause it is a new sort of exciting thing. Enterprises could do dynamic capacity and ramp up, ramp down broad bandwidth and, and, and route things, and maybe help us out with what, what NaaS means.
Yeah. I mean, part of it is, I think we've, I think we've launched, Bill, I'm not sure, I think eight markets where we're, we're providing Waves on Demand, same-day service. You're moving towards that provisioning of, of faster service, on-demand service, self-service, and it's gonna be software-enabled. You know, the hardware is gonna be big parts of our, of our, of our offerings, but, the more softwarization we inject into the, the, the, the faster we're gonna be able to provide service. There's a bunch of players in the market, like Megaport and PacketFabric and Itential and DriveNets, that are all in that space of, of the NaaS space. Everybody's talking, and we've, we've sat down and spent days with all of them.
They're all gonna be helpful to this, to this game, and so we'll partner, we'll proof of concept with some of them and, you know, we're gonna partner in a big way with a couple of them.
Great. I, the last few minutes, I wanted to flip gears to, you know, the financing. One thing, you know, last year we were here on this very platform, and we talked about how interest rates were gonna go up. 2 weeks later, Jackson Hole and the Fed, interest rates went up. Now we're here, 400 basis points plus higher. How does that really impact Zayo? You know, you've got debt in the markets, but you also have a, a parent co in DigitalBridge, and understanding what, how that's changed the capital allocation policies and your philosophies going forward.
Yeah, what I would say about that is, we have two great partners that are very well positioned to help us, where we have accretive, very, you know, attractive deals. You haven't seen us be at least publicly announced on anything active, but don't, don't confuse that with it. We've been active, looking at all kinds of things. Yes, the markets are tight, and financing is, is, has changed dramatically. That's cyclical. We've, for those of us who've been around for a long time, that'll, that'll come and go. But we're keeping ourself very active to look for opportunities to densify the network where we can, do tuck-ins where we can, continue to build more girth in Europe. We're, we're super active, and, you know, I think you've seen the M&A pipeline dry up quite a bit.
Yeah. It's, it's very un-Zayo-like, it's the last two years, to not do M&A, but you did focus internally on a lot of great things.
Yeah.
you are saying-
Yeah, we're still very active in the market.
Okay. And how is that M&A environment looking since you're, you know, sort of... It seems like you're active behind the scenes, 'cause we're not seeing much hit the tape. You know, what are multiples looking like? What are the kind of opportunities? Is it fiber companies that have busted cap structures at this point, or is it, are there good assets out there?
You know, I, I, I think, I think we're gonna continue to see companies that are struggling with growth, companies that, looking for scale and reach, companies that are at the, the end of their life with their investor, and they need to make a change, for a new capital source. I, you know, there's still a lot of activity out there. I think the financing market has slowed things down, but it doesn't mean that we're not in a good position to capitalize if we find something that's accretive to what we're doing. To be very honest with you, the, all the initiatives we talked about today are consuming our leadership team quite a bit. The organic growth story here is gonna be great. We'll undoubtedly, before our two investors get out, probably be more active in the M&A space.
We don't need to do anything right now.
Right.
We can continue to build this machine on the back of the organic investments we're making, but we'll be eyes wide open.
Sure. And what is on your wish list? Is it, like, geography M&A, product M&A, acquihires? Like, what do you so-
Yeah. Listen, two of the acquisitions we did recently were capability acquisitions and SD-WAN capability in a, in a managed services, E-rate business. You know, there's, there's still gaps in our offering where a capability acquisition could make sense. NaaS is an interesting area that if, you know, we want to accelerate it, you can buy your way into it versus building it. I wouldn't count us out for anything where it's, where it's gonna extend the network and help us provide better service to our customers.
Right. This time last year, we also spoke about small cells. We were talking about when that activity could pick up. I feel like a year has gone by, and there's been some activity, but really, really not much. Just curious your thoughts about the opportunity for, for, for small cells and, you know, when do you expect, you know, that sort of maybe to materialize?
Listen, we're in that business. We've built a fairly sizable business there. It's not been as active as our fiber and our waves and our, our other offerings under Packet. As I mentioned, we're becoming super capital efficient. The returns on the other businesses are better than the returns we see on this business. We're gonna follow our, we're gonna follow our, our instincts on, on, on returns and just where the growth is.
Sure. Last question is on private networks, the opportunity there. You know, it seems like it's a when, not if story, but still yet to materialize. I'm just curious to hear your thoughts on private networks, and is it hype? Is it reality, and Zayo's role in it?
It's the exception rather than the rule for us.
Yeah.
We have taken on some private network work, but it's again, it's much, much of an exception. It's not a, it's not a big leading indicator for us.
Okay. Well, great, Steve. Thank you for your time.
Yep, you bet. Thanks.
How would you describe the current fundraising environment, and as part of that, the appetite of LPs to invest in digital infrastructure?
Well, look, I think the everyone in this room is heavily reliant upon raising capital, whether it's debt capital or equity capital. We've had a good, solid first half of the year in terms of raising equity capital. At the same time, we've raised close to over $5 billion of debt capital at the same time. The ability to, you know, raise over $8.5 billion of debt and equity at the same time in this environment, I think is pretty, pretty good.
I think what we're hearing on the road, just to go back to the equity side, is I think investors have an appreciation for quality businesses today, and we're going back in time to 2001, 2002, and people ask me what, what works right now, and I say: "Look, you gotta go back to fundamentals. You gotta go back to discounted cash flows. You gotta go back to underwriting. You gotta look at investment grade concentration versus non-investment grade concentration." Stuff that's getting financed right now is the stuff that is investment grade, has durability in contracts, or if you can demonstrate a strategic moat, if you've got a permitting advantage, if you've got a power advantage in data centers. We'll get to that in a second.
Investors are incredibly discerning right now because they know that there's a lot of really good opportunities out there. When we hit the road and we go and compete for capital, we're, we're running into other people that have good ideas, whether it's renewable energy, whether it's credit, which is very much in favor right now with private LPs. The market is definitely bifurcating between the haves and the have-nots, and stuff that's out of favor right now is, is private equity, real estate. Certain liquid security products aren't performing well. The global fundraising environment is challenging, but I think if you have good ideas and you've got good track record and you're not a first-time fund, you're gonna find that there's a good reception for what you're doing.
At the same time, I think also investors are very sophisticated now, that if you're running a company and you have a really good company, and you've got a good value proposition for co-investment, where you want to raise that primary capital to go build that next 500 towers or go build those, you know, next, that, that next hyperscale campus for $800 million, there's certain investors that will want to do that versus doing a fund structure. Markets are not closed. They're definitely open, but allocations are down. It's more discerning, and we think the fundraising environment will pick up in the second half of this year.... and we're actually pretty optimistic about private capital formation in 2024.
It's not by all means, it's not impossible, but I think it requires a really good story, a really good track record, and a really good team. I think, you know, what worked for us in the second quarter was we have a great team, and we have a very good track record, and our ideas are resonating with LPs right now.
Taking what you just said and putting it together, what it sounds like is you're winning on the fundraising fund as a result of the quality of the companies that you actually invest in. Then, as part of that, also being able to offer that co-investment to give LPs, additional access to the flavors of digital infrastructure that they want to be invested in.
Yeah, we have over 200 LPs worldwide. I think they're really sophisticated. I think investors have gotten more discerning and more sophisticated. I think by being in our products, whether it's core, whether it's credit, whether it's our flagship series, the ability to sit with an investor. We have a much bigger fundraising team now. We've got 30 people that go out and fundraise, and I think their ability and their education level is much higher than it was when we started DigitalBridge 10 years ago. I think now we have product specialists. We have people that cover certain LPs.
They can sit with an LP and say, "By the way, because you came into the credit fund, here's a really great co-invest idea that we have, which is CoreWeave." We did a, we did a debt deal with some friends yesterday that was really well received, and that was a good idea. Investors, our credit investors, lined up for that, and they said, "I want to co-invest," and so we were able to provide that. Same thing when there was a really good idea like Switch. It was a, a story that wasn't fully understood as a public company, but now as a private company, private cloud is working. A lot of big language models are gonna sit in private cloud, and so Switch's, you know, growth in the last year has been incredible.
Our ability to close on that business with our capital and then run it for a couple of quarters and have it be very successful now is giving us the tailwind to go to investors and say, "Do you want to be a part of Switch?" Everyone's saying, "Of course, I want to be in private cloud, and of course, I want to be in 100% renewable data centers." That's a twofer, right? That's digital and renewable energy. Certain things are hitting really well and, the ability for the team to go out and pair those ideas, pair those ideas correctly with the right LPs, that's a bit more art than it is science, and I think our team has done a really good job of that so far this year.
All right. I want to switch gears from here, no pun intended, and talk about how you're thinking about the, the investing environment. Mark, you were on this stage a few years ago, and I remember you were talking about the valuation environment. You were talking about how multiples had gone up, which made building much more attractive than buying. As we sit here today, how do you think about the buy versus build calculus across the verticals of, of digital infrastructure?
Well, let's just start with what Steve said. I think Zayo is in a great spot, and we've got a great partner in EQT, we've had a lot of different brownfield ideas come across our desk in the last 18 months. The attractiveness of new route development and building new routes that are returning capital inside of 4-5 years is way more attractive than paying 14, 18 times for something. That doesn't make any sense to me. When I build, you know, well, I don't build it.
When the Zayo team goes and builds it, and it's new routes, and it's, you know, low latency, high strand count routes that we control, and we control that quality of the strand count, and we know it's our network, and it's something we built, I like that a lot better at a 4-5x entry multiple than buying someone else's 20-year-old aging network at 14x, 18x. I, again, it comes back to those fundamentals of underwriting, right? I mean, this is an environment where every decision you make around capital allocation is under a microscope. We're deploying about $8 billion of Greenfield CapEx this year at DigitalBridge. We've already deployed almost $4 billion through the half turn, and, you know, a little under $6 billion will be put into data centers.
About $1.5 billion will be put into fiber. Another $1.5 billion will be put into towers. You know, what we're seeing in this environment is our customers need us more than ever, and I think when you have capital, and you have good execution down at the, at the street level, like a Zayo or like a Vertical Bridge or like a DataBank or a Vantage, those companies are getting a lot of at-bats. You know, we said it in our earnings call, DataBank beat their leasing budget by 490% in the second quarter. I, I've never had a portfolio company beat a budget by 490%. We already call Raul the, the, the sandbagger of all sandbaggers, but this was ridiculous. This was a whole different level.
It's a combination of having good ideas, having good product, having a good team, and having capital. So Raul's ultimately delivering great single-tenant yields on those, on those campuses. Same thing that Raul's doing, same thing that Alex is doing at Vertical Bridge, and same thing we're doing at Zayo. We like Greenfield right now. It's working. And it's not to suggest that M&A is dead. As Steve said, there's a lot of really good ideas in M&A, and we're prosecuting those new ideas out of our, out of our flagship fund, and we've got, you know, over 20 new ideas that we're working on in terms of brownfield. Today, that capital is a bit more precious, so we're, I think, a little bit more cautious. It's not to suggest that we won't deploy capital.
We will in the back half of this year in brownfield, but we're gonna continue on that cadence of deploying the second half of that $4 billion in the back half of the year.
Right. Over the course of the past year, we've seen a sharp rise in the cost of capital. This has negatively impacted valuations for public companies, but it seems as though private market valuations really haven't changed much to reflect the higher cost of capital environment. You know, have you seen any changes in those valuations in the private market recently? As part of that, where do you think valuations are a year from now?
Well, I, I, I, I do think valuations have changed in private markets. I don't, I don't think we could sit here today with a straight face and say- you know, private data center transactions are going to get done at 30 times. I don't think that exists. Now, will good data center deals get done in the mid-20s? I think they, that answer is yes. We saw Compass get done with Brookfield at a, at a really high price, and that was a good outcome for Chris and, and for his team, and, and I think it's a good outcome for, for what Brookfield wants to do. You know, Blackstone announced a couple of days ago they're going to deploy $8 billion into AI data centers. Capital is out there. Capital will be deployed.
In terms of other verticals in M&A, I think, you know, towers is, is still holding in on a private market basis. I think we here in the U.S., we look at M&A transactions all the time. Bob Page does a great job at Vertical Bridge, running our M&A team, and we haven't seen a degradation in M&A multiples in small ball. Small ball is sort of that, you know, kind of 5 towers to 50 towers. That stuff is still pricing in the mid-20s. Maybe it's not pricing out at 30 or 40 times for a, for a single build, but good quality digital infrastructure is still going to price at a premium, I think.
Maybe the M&A environment is a bit more tempered, and we have this sort of a standoff between buyers and sellers, because obviously, sellers want that premium multiple when interest rates were 0, when base rates were 0, and sellers obviously want to pay as little as possible. There's a bit of a, a bridge and disconnect in valuations, and I think that'll break, sometime more in the back half of this year, early next year. We definitely are in a moment where the deal environment has pumped the brakes, which is, again, is why we have pivoted to focusing on our portfolio companies and focusing on greenfield.
To that point on focusing on greenfield, you invest across the spectrum of, of digital infrastructure. Based on the opportunity set you see, how are you prioritizing each of the subsegments of digital infrastructure, towers, small cells, edge enterprise data centers, hyperscale data centers, fiber? Are you more inclined to put money to work in one area versus another? How are you thinking about it?
Well, I think, you know, we, we operate in four different geographies: you know, Asia, LatAm, North America, and Europe. Across those different regions, we're allocating specifically more capital in, in specific verticals than other places. We own 29 companies, I think playing digital infrastructure in an asset-light model like we do, gives public investors a chance to own what I call sort of the come bet in digital infrastructure. You don't have to sit there and say, "Okay, I want to bet on fiber in Europe. I want to go bet on hyperscale data centers in Asia." We have the ability to play the whole spectrum, we don't have to choose whether we're risk off on fiber and we're risk on on hyperscale, or whether we're risk on on small cells and risk off on towers.
Each geography presents, I think, a very different business case and a very different opportunity and a very different risk reward. For example, we did a edge data center play in Southeast Asia called AIMS, which is heavily focused on interconnection and building edge compute in Southeast Asia. It was a bit counterintuitive because edge really hasn't come to Southeast Asia yet, but we're preparing for the next 3-5 years. It was a long-term bet on edge computing in Southeast Asia because we think, we think Kuala Lumpur is going to be one of the great innovation centers in the world over time, and that was a bet on the sector, that was a bet on the geography, but also we have a great partner and a great CEO. I, I'm not overweight or underweight anything specifically.
I do think our attitudes change every 6-12 months about different geos that we like and different subsectors we like. There's no doubt right now, what is working, particularly strong right now, is edge computing in the United States is working. DataBank is putting up big wins and big numbers, and I think you heard that from Charles at Equinix in terms of his earnings. He's very optimistic about what he's doing. I think some of the things that we're doing in Europe on the hyperscale side are really unique. We made a long-term bet three years ago to invest in a lot of land, which was risky at the time, but we felt like the combination of the land and the permits and the will serve letters would be well-timed as we sort of continued to proliferate public cloud.
The thesis there was, yes, AI would come, but data sovereignty was much bigger than AI in Europe. That's sort of a trend that we looked at, and we focused very much on that. Now Vantage Europe is producing incredible results because they planned, they had land, and they had permits, and they had power. Power is the big commodity. I think as we, as we crystal ball ahead, I think you, you know, Steve was talking about small cells and, and private networks. You know, we are seeing a rise in private 5G networks. That's been something that our deal team at Boingo is really been taking advantage of.
That was another business that I think was a little misunderstood as a public company. We brought it private, we gave it capital, and we do think that private networking is a big opportunity. Having a management team that's solely focused on that is a real advantage for us. Some of the things that we're doing in private 5G networks, particularly in an enterprise setting or in a commercial public setting, like airports or convention centers, is really very fascinating. I'm excited about that. That's something that we've been spending a lot of time on. There's other Subverticals we've been looking at. We've been looking at terrestrial-based satellite stuff, more digital media infrastructure like we did in Europe.
There's, there's other Subverticals of digital infrastructure that don't get a lot of shine, but we're spending time on those ideas, and we're executing now in, you know, in our next strategy.
Yeah. I was going to ask you about the geographical focus, I think based on your answer, it's very much dependent on, 1, the subsector, and then, 2, the geography. We'll skip over that one. I do want to talk to you about offering a holistic solution. When you came, when you came and you had your Analyst Day, I think it was in 2021, 1 of the things you talked heavily about was the ability to offer a converged solution to your customers. I'm curious, as we stand here 2 years after that analyst day, is it working out the way that you thought it has? If you could give us examples of where DigitalBridge has won as a result of offering that converged solution.
Well, first of all, it, it hasn't played out like I would've liked to have it played out, and I always admit it. You know me, I'm pretty candid. If something doesn't play out the way I think it played out, I'll express my disappointment. I think we have more opportunity there, and we have more work to do. Some of our 29 CEOs collaborate better than others. I think the ones that do collaborate and have good organizations that have a lot of depth, that are more mature companies, in terms of their growth trajectory, are able to work together and win. I mean, Steve and Alex are a great example of that. They worked together on going after a particular initiative related to the Biden infrastructure bill, and they won.
They, they jointly bid on that together, and it was the combination of their, their resources and their team, and Dale Carey was a big part of that, and Jonathan Adelstein was, and we've just got a great team. When you've got professionals sitting in the right chair that know how to attack that situation, you are able to show up with a bigger force. We were able to show up with the largest private tower company and the largest private fiber company. That initiative, that particular award, was very specific to what it needed, and we were able to address the needs of that particular, you know, RFP to win. We see more examples of that.
There's, there's some stuff that, for example, Switch and Vantage are working on, to address some of the power issues in Santa Clara for customers. Historically, Switch has really stayed out of public cloud hyperscale campuses. Rob has really gravitated to private cloud. Rob has an enormous amount of power and space and land. You know, he can keep building in Reno. As our customers have outgrown Santa Clara, we've now opened up, you know, a whole new horizon of data center space in Reno. That's working really well. That was because Sureel and Rob worked together to help our customers. We do see common interest in this. There's more ways we're gonna work together.
I think everyone's busy right now, asking our CEOs to take 1 or 2 days out of their lives, and to all of us sit in a room together and think about ways we can work together, that is hard to do. We try to do it 1 a year, you know, the good news is there's more we can do. I think there's only upside to it. I think when we do show up, in the power of the portfolio, like we've done for Dish, where we had 4 portfolio companies show up, to serve Dish, we were able to compete head-to-head with Crown and have that same type of offering, except we had the edge data centers and Crown didn't. There's examples of it.
You know, we, we, we don't run out and put out press releases when, when our portfolio companies work together and win, 'cause that sometimes doesn't feel right, but they are out there working together, and they are collaborating.
All right. Let's talk about generative AI. On your earnings call, you dedicated quite a significant portion of the call to talking about that opportunity set. Could we dive a bit deeper into the demand that you're seeing associated with generative AI, and then, as part of that, how it's manifesting itself across your portfolio companies currently?
Well, I think it's, it's one of these big moments where we all will look back and say, "Yeah, this, this started at this time, and this is what I was doing." You have to make a decision as an executive or as a CEO, you know, how deep do you want to play in that vertical? I think, you know, my journey in the mid-nineties started with Alex, you know, when, when Alex actually explained to me how an analog cell phone was gonna transition to a digital phone, that was 1994, we both agreed that our lives were gonna change forever.
As we built 2G networks and digital PCS, and then we hooked up with Dale Carey at SpectraSite, and, and, you know, that was a, one of those moments where I look back and say, "That was a once-in-a-generational aha moment." The same thing happened in 2013 when we started building public cloud. As, as we built public cloud over the last 10 years, and we look backwards, we say, "Wow, look how far we've come." You know, somewhere between, you know, 11,000 MWs and 13,000 MWs lit by everyone in this room. You know, trillions of dollars, as Steve said, in CapEx, built not only in data center space, power, and cooling, but connectivity. Then all of the ecosystem that's fallen down from public cloud has just been prolific in terms of how it's changed our lives.
AI is going to have that same impact. Whether you're a believer or whether you don't believe it, you don't have to believe, but I will tell you right now, having been at this conference in 2013 and now sitting here in 2023, we're gonna look back in 10 years, and we're gonna say, "That was the moment." The key to this is, you know, I think of... I really think in 5 and 10-year increments. That's the way I've always built businesses.
You know, we made a decision, you know, 3.5 years ago to merge into a public entity and change the trajectory of our firm, and now AI is sort of changing our outlook on how we're going to raise capital, how we're going to invest capital, and ultimately, the rigor that we're gonna put our portfolio companies through on how to deploy that capital in a success-based way for customers. We think it's a decade build, just like we thought public cloud was a decade build, just like we think 5G is probably a 7-8-year build, and you have to take the long view in all of this. Everyone in this room is either an operator or an investor.
Whether you believe me or not, I really don't care, you have to form your own view, and you have to form your own strategy, and you have to make a decision where you're gonna play in the ecosystem. Here's the good news: For everyone in this room, you will play in the ecosystem. Whether you choose to believe it or not or like it or not, you will have a part in the ecosystem. Over that 10 years, there's kind of we're playing sort of a three-dimensional game of chess, which is latency, size of the power of compute, and then which is ultimately the number of MWs that we're pushing through that. Then you have to think about the applications that sit on top of it.
Right now, if, if we're playing that nine-inning baseball game, we're literally like top of the first. We're very early, because right now all we're doing is proliferating large language models that are in learning mode. That's gonna continue for the next two to three years. Ultimately, these networks become intuitive, right? Those learning models turn into intuition models, and they start making decisions. As it does that, what happens inevitably is you have what's called data gravity. Data gravity is ultimately, the data's gonna fall to where it's ultimately being used, which it has consumer-based applications, it's gonna have enterprise-based applications, it'll absolutely have machine-to-machine applications, which I think is actually the bigger part of this narrative.
As you work your way through time and through that baseball game, we start at the beginning, which is a lot of the big workloads are happening in private clouds, but they're happening in hyperscale campuses, which are usually been reserved for the hyperscalers, but also that's happening at Switch. A lot of these models need to be built in very secure environments, a lot of power, a lot of connectivity, and a lot of security, 'cause these the customers that we work with, they're very hyper to their security. These are big workloads, and we're talking 50-200 MW workloads at the beginning, and anyone who has 100 MWs of contiguous space in this room, you've been called, right? You Like, I'm seeing some hands go like this. Everyone's been called who's got a large space.
See Randy back there? Randy's going like this. He's like: "Yeah, I've been called." If Crosby was here, he'd be doing that. Where's Shilkret? He's in the room somewhere. We've all been called because it's an arms race for these guys to get the space, to get the power, and they can't do it themselves. You know, you go back seven years ago, the industry was self-performing 70/30, maybe 60/40, depending how you look at it. COVID changed all that. They dismantled their apparatus for building data centers. Now it's 70/30 the other way, where the industry is leasing from us and 30% self-performing. I would never sit in a meeting with any of the hyperscalers and tell them they can't build data centers. They 100% can build their own data centers. The second question is, is that capital efficient?
The answer is no. Is it an efficient use of their time? No. Are they in an arms race to see who will have the best generative AI work model? Yes. We enable that, right? DigitalBridge enables it. You know, at the end of the day, Compass will enable it, EdgeConnectX will enable it. We all are enabling that, and it's just a function of do we have the capital, do we have the speed, do we have the permits, and do we have the power? The second phase of that, we get 2-3 years down the road, and we start delivering these edge workloads. As the models start proliferating and data perforates out to the edge, you get different applications: IoT networks, smart cities, enterprises deploying their own AI, models inside a factory settings.
That gets exciting because now what's happening is the data is pushing closer to the enterprise. I was talking about this morning with Keri from Colt, she's right there. Hi, Keri. Came over from the U.K. Thank God, really cool CEOs like Keri come to this conference because that's what makes this conference unique. We were talking about this morning about where does data go, and some of that data will ultimately sit in the enterprise, and some of that data will be generated in the enterprise coming back to that language-based model, right? There's this flow of information that comes when models start talking to each other. She's excited because she owns the pipes, and ultimately, she owns the customers on the enterprise side. It's a big opportunity for Zayo, it's a big opportunity for Colt.
That gets me excited because that's kind of the 2 to 3, 4-year time frame. We see businesses like Ames and Databank and Atlas Edge being really busy as those workloads sort of look like 2 MWs to 20 MWs. By the way, for a company like Databank or Atlas Edge or Ames, 20 MWs is a lot of capacity. That's a big opportunity. As we move out to the near edge, the workloads go from sort of 2 MWs to 500 KW, and we're starting to look at applications that are more consumer-facing. Could be augmented reality, it could be virtualized shopping.
I mean, there's a whole set of consumer applications that happen on the near edge, the latency there is like, you know, less than 2 milliseconds, where the latency today, acceptable latency, you and I were talking about this morning, is sort of 10 milliseconds, 20 milliseconds. That works for right now. As you start migrating up and data gravity falls to the devices, and to the applications, and to the machines, you go from 5 milliseconds to 2 milliseconds to less than 1 millisecond. Then we arrive at the end of the, the journey from an infrastructure perspective, which is micro edge, and that's cell towers. That's kind of the next generation of 5G networks or 6G networks, which will ultimately power autonomous vehicles. It'll ultimately power, you know, autonomous airplanes and drones, delivering packages, delivering a Domino's pizza.
None of that... Every auto executive will tell you autonomous vehicles are still like 7, 8 years away. Why? Because we know to achieve micro edge, you need dense fiber, you need small cells, you need towers, you need edge data centers. I'll come back to where this conversation started, which is everyone in this room will have a part in what's happening. It just may, maybe your part may be 5 years down the road, or Alex's part may be 7 or 8 years down the road. Alex's business is fine. He's happy putting up 8%, 9% organic growth and leave him alone. He'll be fine. Trust me, you're gonna be okay. But I think it's, it's important to understand that there, you know, just like public cloud, there was a whole ecosystem, Michael, that got created out of that.
AI is doing the same thing. We just choose, everyone in this room is playing in the infrastructure piece. Remember, there's software, there's applications, and there's other business models that are now being written the same way stuff was being written in 13, 14, and 15 from a SaaS, from a SaaS perspective. It's, it's really exciting, and I, and I'm, I'm sorry we're drilling down on this, but I think this is, this is the journey we're all on together. You know, whether we choose to accept it or not, I've accepted it. I'm embracing it. I'm learning every day. It's really exciting. I learn mostly from my team and from our CEOs, we have a lot to work to do. You asked how it's impacting our businesses.
It's absolutely, you know, sort of table stakes right now is, is the data centers, the big data centers, the places where we have available power, space, and cooling, and we can deliver quickly. Those are the businesses that are working right now, and we have a lot of stuff that's on the drawing board to be built, but initially it's, it's really private and public cloud for us. That'll occupy a lot of our time over the next 2 to 3 years in AI. Certainly, the connectivity piece that Steve spoke about earlier, Zayo is gonna be really busy providing that AI connectivity. AI connectivity is not just data centers. If you think it's just data center connectivity, you, you're not understanding what's happening.
It's also enterprise connectivity, and it's also the virtualization of those networks at the same time. We've got another international CEO, Bevans here, who's a great, brilliant mind in the space, founder of Megaport, and that's a great business. Because the virtualization of cross connects is only gonna enable the proliferation of large language models to move quicker. These are important businesses in the future, and if you don't understand the virtualization of the network, you're probably gonna be left behind. Much like we talked about software-defined networks 3 years ago, if you don't understand that in mobile networks, you're not gonna be building towers 3-5 years from now. It's all, it's all changing, it's all quick, and it's impacting all of our businesses, not just one specific business.
Very detailed explanation. Thank you very much for that.
Sorry.
No worries. I would agree with you that I think this represents a generational shift akin to what we saw with the internet and then also with the advent of the cloud. As we think of, as an industry delivering on this opportunity set, what are the greatest challenges that you think we face?
I think at a, at a, at 50,000 feet, we face a liquidity challenge. I think every business today every CEO in this room is thinking about their treasury forecast, not only where they are today, but where are you in 2024 and 2025. Some of you are thinking about your debt maturities in 2025 and 2026. Some of you are thinking about doing a securitization right now. Liquidity is king. I said it on this stage last year, we were very focused on, on preserving cash down at our portfolio companies last year. That was one of the things we said we were focused on.
There was a reason we said that, was because we were looking at debt maturities, and we were saying: Look, most of our portfolio, ages out in 2026, 2027, and 2028 because of the work we did in 2021 and 2022. We, we started that planning in 2020 to get to this place where we delevered our portfolio, we built cash because we felt like a storm was coming. Now our companies are well positioned to take advantage of that, and fundraising has gone well for us. We've armed ourselves with a lot of dry powder and a lot of capital, but I'll continue to believe that the number one scarce commodity we have on this planet is capital. A very close second is power.
The great challenge that, that I will face in my career over the next 10 years is: How do I ultimately create the same amount of power on a renewable basis that I'm taking out of the planet? I've, you've heard me say this now a couple of times, and I think this is for me at least, I know as, as, as I chart the path of DigitalBridge, I have to solve the energy issue. If I don't solve the energy issue, I will be entirely irrelevant in 5 years. Because it's not because I'm an environmentalist, some of you know me, know me, I have a penchant for, for, for things that perhaps aren't ESG friendly. We all have a responsibility to think about this.
When we bought Switch, and we, we learned a lot from Rob and his team and Gabe, and those guys do a great job. Our other data center CEOs are now following that lead and are taking advantage of that past knowledge. I look at it in a very different way, which is that we absolutely have to be customer-focused. Everyone in this room wakes up every day, and we say, "How do we take care of our customers?" Our customers don't want to be in data centers that don't have renewable energy. you know, Scala is another great business we own in Brazil, 100% renewable energy, 90% of that hydro-sourced, and he's taking market share. He's taking market share 'cause he has a good product, and in fact, he's taken too much market share.
We've asked him to pump the brakes a little bit 'cause he's growing so fast. Customers want that solution. The hyperscalers want to know that you're solving their ESG score for them. We're spending, we made a bet in buying InfraBridge last year, which was an infrastructure play, because we knew we had to develop a renewable sleeve, ultimately to focus on how do we put back into the planet what we've taken out. There's a little bit of a moral layer to that, there's a customer essential layer to that, and I think there's a positive return on investment to that. Switch is showing us that. They're getting higher rates because they have a great product, it's a very secure environment, but also they provide 100% renewable energy.
I think any data center operator in the room knows what I'm talking about. If you can't provide that extra solution, you're not gonna win jump balls against the likes of Switch or Scala, you know, or Vantage. I think that's one of our big challenges. People ask me about interest rates and inflation and, and supply chain. All that stuff is cyclical, and it works itself out. Ultimately, in the planet we live in today, with the amount of power compute that's coming, if we can't solve the power issue, we're in a lot of trouble. It's not just here in the U.S. There's power grid issues in Singapore, there's power grid issues in Hong Kong, in Offenbach, in Dublin, which is shut down right now, in Amsterdam.
You can go all around the world, and we bump up into power grids that are completely stressed, and so we have to find new alternatives. New alternatives is we find adjacent markets, or we find alternative energy sources, and I think we're doing both at the same time. I do think the ability to bring renewable power to towers, to data centers, to small cells, even in some of the fiber plant, this will be a big catalyst for us. We're, we're spending a lot of time and energy on that.
You addressed my next question, which is: how do we find the, the power? But this is the last question that I'm gonna ask you, and then, you know, we'll break. From my conversations today, the magnitude of demand is absolutely astounding. We're still building out the internet at some parts of the world. We're still building out the cloud. Then all of a sudden, here comes a new technology that requires massive additional investment. As part of, as part of that, my question for you, bluntly, is: how are we going to finance all of this? And do you think the depth of the equity and debt markets are deep enough for us to finance all of this?
Well, it's, it's hard to put a perfect crystal ball on that. I think, you know, I, I wake up every day, and I worry about... Now I'm worrying about my 2024 plan. My 2023 plan is now behind me, and I have a pretty good line of sight that we're gonna hit all the metrics that we need to hit. I actually worry more about, you know, 25 and 26, you know, looking further down the road, because if you look at the amount of debt that has to get refinanced, from leveraged buyouts and from securitizations that hit their ARD date, there's a pretty significant wall of refinancings out there.
I think the world has to go through this digestion phase, which it's going through right now, which is why you don't see liquidity flowing as fast as it flew, you know, through COVID. As we sort of come out of the COVID hangover, and we start moving into the future, everything has to be repriced. Debts being repriced, returns are being repriced, and ultimately, it starts with an investor's portfolio, institutional investor portfolios. If you're paying attention, you should be looking at the annual reports of sovereign wealth funds or US pension systems or reassurance companies, and you should pay very careful attention to their asset allocation strategies. Where are they deploying capital? That asset allocation pie, as you know, Michael, 'cause you, you follow the sector, it's changed, and it's changed a lot in the last 3-5 years.
The good news is, we are still very under-allocated from a private markets perspective to, A, infrastructure, and then, B, the Subvertical digital infrastructure. If you look at some of the work that, for example, PEI does, or some of the consultants do, like Hamilton Lane, you read these fundraising reports, you start to get a feel for where capital inflows are and capital outflows are. Outflows are stuff that goes to funds and portfolio companies, and inflows go to returns. Part of what keeps this magical vehicle going is that you also have to have exits, which returns capital back to LPs, and then they book the returns, and then they bring it back to you. Last year, we exited three businesses at DigitalBridge.
We're gonna exit a few more businesses this year, and I know some of our private equity/infra GP brethren and sisters are exiting businesses as well. There has to be return of capital before you can expect to get more capital. That's a cycle, right? That's a cycle that's playing out right now. I think for everyone in this room, the good news is, there's two trends that weigh heavily in this conference's favor, which is digital infrastructure by most major institutional investors is under-allocated anywhere from 50 basis points to as high as 250-300 basis points.
If an asset allocation pie is, let's say, pick a U.S. pension system, and they're putting, you know, 25% into fixed income, 25% into public equities, and 20% into alts, and 30% into private equity, where do we all sit in this room? We sit in alts. Most of us do. Alternative asset management, which is infrastructure. In that infrastructure bucket, most folks have less than 3% dedicated to digital. Most consultants are telling them because it's a digital-based economy, you've got to be at least 5% in a digital infrastructure.
At the same time, that pie on renewables is less than 1% and 2%, those same consultants are telling them, "You've got to have 3%-5% allocation in renewable energy." I, I, I leave this conference the same way I enter it, which is optimistic, because we still have a lot more capital in this room that we have to go raise collectively, not just us, but other GPs and some of the CEOs here. There's room for us to grow, which is good news. Then the advent of private debt. The way that we've historically gotten debt was no indifference. You, you know, you call Dan and Cecile and say, "I need some debt." You get them on speed dial, and debt shows up 30-45 days later. Yes, TD will provide debt. Thank you to TD.
They're one of our biggest lenders. We appreciate their support. The senior bank market only carries you so far, and so we're gonna be in this environment of private credit for the next 2 - 3 years. Most of you not only will deal with TD, but you're gonna have to go deal with Ares, you're gonna have to go deal with Apollo, maybe you deal with DigitalBridge on our credit side. Private debt capital formation is here to stay. That's a big trend, and it's another area where asset allocators are under-allocated, which is why you see the likes of Ares and some other, some other debt shops doing really well. More capital to be formed. We're under-allocated both in debt and equity, and so I do think most of what we have to finance will get built. Just be patient.
Everything takes longer. Someone asked me the other day, an investor said, "Well, what's it like out there?" I said: Well, it's really simple. You gotta work four times as hard to get half the money. They were like, they stopped, and they were like: "Well, wait a second, you work 60 hours a week, so how can you work, how can you work 240 hours a week?" I say, "I'm not working 240 hours a week.
I'm just telling you, you gotta have more at-bats, and you're gonna get more noes, and you just gotta be patient. Ultimately, great businesses and great CEOs are built on one common characteristic, which is a combination of a little bit of fortitude, but the ability to get back up even when someone says no, you gotta go back at it again and again and again. What will happen over the next two years, if you're running any of these digital infrastructure businesses, just be prepared for some noes, be prepared to be patient, and just you're gonna have to turn over more rocks for capital. It's out there. It exists. You will get financed. It's just gonna take you longer, and you're gonna have to have more meetings, but I'm still optimistic.
Mark, it's always a pleasure to sit down with you.
Thanks, Michael. Appreciate it.