February 2020
Digital Infrastructure
Industry Primer
TABLE OF CONTENTS
#
Section
1
Digital Colony Overview
2
Tower Primer
3
Fiber and Small Cells Primer
4
Data Center Primer
5
Outdoor Digital Infrastructure Primer
6
Key Investment Risks
Q1 2020
Strictly Private and Confidential
2
OUR LEADING GLOBAL MARKET POSITION
FIBER ASSETS
TOWER ASSETS
> 135,000 Route Miles1,2
~350,000 Sites
Provide critical network
coverage and capacity
Managing and /
or operating across
all components of
the digital ecosystem
drives significant
synergies
Fueling global innovation. Providing
mission-critical connectivity
1
SMALL CELL ASSETS
>35,000 Nodes
ENTERPRISE AND
HYPERSCALE
DATA CENTER ASSETS
Enable additional network
densification in high demand areas
95 Data Centers
1, 3
Data centers will continue to play a
vital role in the ingestion,
computation, storage, and
management of information4
OUTDOOR DIGITAL
ASSETS
Outdoor digital billboards
EUROPE
PROJECT
1
Cyclone
_____________
Notes: All figures as of Q1 2020 except otherwise noted. With respect to ExteNet, MTP, Vertical Bridge and Vantage, Digital Colony provides investment advisory services to investment vehicles that have invested in mobile and internet infrastructure business and provides certain business services to
such businesses. In addition, certain employees of Digital Colony serve on the boards of directors (or similar governing bodies) of such companies or holding companies thereof. (1) Pro forma for the pending Zayo transaction, which remains subject to customary closing conditions and there is no
guarantee this transaction will be consummated. (2) Current route mile count of fiber is over 13,000 and 135,000 pro forma for the pending Zayo transaction; (3) Current data center count is of 38 and 95 pro forma for the pending Zayo transaction. (4) CB Insights, The Future of Data Centers.
Q1 2020
Strictly Private and Confidential
3
OUR DIVERSE GROUP OF COMPANIES
Our Group operates and manages ~350,000 sites, 135,000+ route miles of dense metro fiber, 35,000+
nodes and 95 data centers globally 1,2,3
Small Cell, Fiber Assets and Outdoor Digital
Infrastructure
Tower Assets
Data Center /
Fiber and
Hosting /
Data Centers
Fiber
PROJECT
~2,400
active sites
~5,000 total
sites4
2014
~5,000
active sites
~267,000
total sites4
2016
~2,800
active sites
~39,000
total sites4
2018
770 tower
sites
750+ total
sites4
2019
500+ total
sites4,5
2020
1,980
total sites
Enterprise
Data Centers
Hyperscale
Data Centers
1
Cyclone
2013
Enterprise
Fiber
EUROPE
2015
2018
2019
2020
2019
2016
2017
2020
~30,000
nodes6
~420
networks6
4,000+
route miles
fiber6
~5,000
nodes and
active sites6
~150
networks6
14 data
centers
~2,100
route miles
130,000+
route miles ,
~35,000 onnet buildings
and ~50
data centers
>740 on-net
locations
~300 route
miles
19 data
centers7
9 data
centers
5 hyper
scale
campuses
Leading digital infrastructure investment management firm
__________
Notes: All figures as of Q1 2020 except otherwise noted. With regard to ExteNet, MTP, Vertical Bridge and Vantage, Digital Colony provides investment advisory services to investment vehicles that have invested in such business and provides certain business services to such businesses. In addition, certain
employees of Digital Colony serve on the boards of directors (or similar governing bodies) of such companies or holding companies thereof. (1) Pro-forma for the pending Zayo transaction, which remains subject to customary closing conditions and there is no guarantee this transaction will be consummated. (2)
Current route mile count of fiber is over 13,000 and 135,000 proforma for the pending Zayo transaction; (3) Current data center count is of 38 and 95 proforma for the pending Zayo transaction. (4) “Active sites” represents owned and other revenue generating sites, while “total sites” includes other sites on which
the company has marketing/management rights; for Digita, “total sites” includes certain micro data centers and IoT sites; (5) Includes BBNB (contracted) sites and other active near-term pipeline opportunities; (6) Includes contracted and in construction (“CIC”) networks; (7)
Includes under construction sites and signed but not closed transactions.
Q1 2020
Strictly Private and Confidential
4
DIGITAL INFRASTRUCTURE BY SUB-SECTOR
Digital Colony balances risk factors and investment returns across digital infrastructure sub-sectors
Wireless
Towers
Hyperscale
Data Centers
Small Cell
Networks
Wholesale /
Dark Fiber
Digital
Billboards
LOW TEENS ORGREATER
TARGETED IRRS
Enterprise
Fiber
Enterprise
Data Centers
HIGH TEENS / LOW 20S
OR GREATER TARGETED IRRS
 Long duration leases (8-20 years)
 Higher operational complexity
 Typically investment grade tenants
 Service component to revenue
 Low or negative market correlation
 Higher market correlation
 Price escalators
 Shorter lease duration (2-7 years)
 Low maintenance capex
 Mixed tenant credits
 Typically leasing of space and power
 Can sometimes include leasing of active
infrastructure
Q1 2020
Strictly Private and Confidential
5
DIGITAL INFRASTRUCTURE BY GEOGRAPHY
Digital Colony has a global presence and balances investment returns with local risk factors
 Most towers in Canada and Europe are
still held by carriers
 Significant BTS and development
opportunities
 Data Center and fiber markets in Canada
and Europe are very immature
 Long runway of growth across all segments
 Forex, political and economic risks are
easier to forecast than in LatAm
 Forex, political and economic risks vary by
country
 Lease durations tend to be longer
 Lease durations tend to be shorter
LOW TEENS ORGREATER TARGETED IRRS
HIGH TEENS / LOW 20S OR GREATER TARGETED IRRS
Developed Asia
& Australasia
Europe
Q1 2020
Canada
Emerging
Asia
Latin
America
US
Strictly Private and Confidential
6
Enabling Mobile
& Internet
Connectivity
TOWER PRIMER
Q1 2020
2
WIRELESS TOWER OVERVIEW
WHAT IS A TOWER?
KEY COMPONENTS OF A TOWER
 A vertical structure built on a section of land designed to accommodate
multiple tenants
 Might involve a variety of different technologies including telephony, mobile
data, broadcast television, machine to machine and radio
 Wireless tower operators typically own the steel tower structure and either
own the ground space or rent it under a long-term lease
 Customers/tenants typically own their own equipment, which they place on
a tower site
1. Antenna Array
 Tenants deploy antennas that transmit the signal between the tower and the
mobile device
 Platform is typically three-sided with equipment to provide signal transmission and
reception to a specific area
 The number of antennas depend upon:




The number of active subscribers
The volume and type of network usage by subscribers (e.g., average minutes of use, voice
versus data)
The technology being used (e.g.: CDMA, GSM, LTE)
The type of spectrum currently utilized by the tenant
2. Microwave Antenna “Dish”
 A specific type of antenna used for point-to-point communications, including
wireless backhaul
Tenant Asset:
Tower Operator Asset:
TOWER STRUCTURE
(capacity for 4-5
tenants)
3. Coaxial Cabling
 Transmission lines that transport the signal between the antennas and the base
station
4. Shelter
Tenant Asset:
 Structures at the base of the tower used by tenants to house their wireless
communications equipment
5. Ground Space
Tenant Asset
 A secure area around the base of the tower where tenants deploy their shelters and
backup generators
Tenant Asset:
Tower Operator Asset:
Q1 2020
Strictly Private and Confidential
8
GLOBAL MARKET GROWTH AND OPPORTUNITIES
Initial 5G adoption expected to drive a significant portion of growth in more mature markets like the U.S.
while smartphone data usage projected to increase exponentially on a global basis
Example
Smartphone Growth
Germany
France
’16A-’24E
CAGR: 28%
’16A-’24E
CAGR: 36%
United States
’16A-’24E
CAGR: 33%
Average
Monthly
Smartphone
Data Usage
(GB)
40.3
India
’16A-’24E
CAGR: 11%
’16A-’24E
CAGR: 32%
Mexico
’16A-’24E
CAGR: 35%
18.0
44.7
15.5
Brazil
South Africa
’16A-’24E
CAGR: 27%
17.6
14.1
6.1
9.8
3.5
7.3
2018
2024
2018
7.1
2024
2018
2.9
2.6
2024
2018
2024
2018
2024
2018
1.4
2024
2018
2024
__________
Source: Ericsson Mobility Report June 2019, Cisco VNI February 2019
Q1 2020
Strictly Private and Confidential
9
LONG TERM GROWTH AND
STABILITY IN THE U.S. TOWER MARKET
LARGE AND GROWING MARKET
HIGH BARRIERS TO ENTRY
COMPELLING UNIT ECONOMICS
US Tower Locations (1)
(000s)
226
207
170
Illustrative US Tower Economics (2)
1.77%
5 Yr CAGR
2.02%
5 Yr CAGR
More TowerCo Friendly than international
markets
The US has no RAN sharing, no unlimited
bucket loading, no RF limitations
Complicated Permitting Processes
Regulations can make new tower builds
challenging  insulating incumbents
from new entrants
2018
2023
2028
Long-Term Growth and Stability in US Towers
 The US market provides significant economic and timeto-market incentives for carriers to chose colocation
over building their own site
 Higher frequency millimeter wave spectrum as well as
2.5 GHz, C-Band, and CBRS spectrum will require
further lease-up on existing towers
Low Customer Churn
Long term contracts + difficulty and cost
for carriers to relocate equipment = 1%
to 2% annual churn
Predictable Cash Flows
5 to 10-year length of contracts and
multiple built-in renewals and escalators
($ in 000s)
1
Tenant
2
Tenants
3
Tenants
Construction Cost
$275,000
-
-
Total Revenue
$20,000
$50,000
$80,000
Operating
Expenses
$12,000
$13,000
$14,000
Tower Cash Flow
(TCF)
$8,000
$37,000
$66,000
TCF Margin
40%
74%
83%
Levered Cash
Yield (4)
3%
13%
24%
Majority of tower operating costs are fixed  incremental
customers can generate as much as 100% gross margin
__________
1) SNL Kagan, June 2018.
2) Internal average estimates, includes cost of ground lease buyout and assumes 60% leverage at 4% interest rate.
Q1 2020
Strictly Private and Confidential
10
5G DEPLOYMENT WILL
IMPACT GLOBAL TOWER MARKET
AVERAGE ROUND TRIP LATENCY
AVERAGE DOWNLOAD SPEED
~50x
increase
500
100
~5x decrease
20
10
4G
5G
4G
Canada
U.K.
Italy
France
China
Key Requirements
4G
5G
HD Video Streaming
Download: 5 Mbps
√
√
4K Video Streaming
Download: 20 Mbps
×
√
Online Console Gaming
Latency: < 50 ms
Reliability: > 99.9%
×
√
Connected Vehicles
Download: 20 Mbps
×
√
Cloud Gaming
Latency: < 50 ms
×
√
Remote Surgery
Latency: < 50 ms
Reliability: > 99.999%
×
√
Self Driving Cars
Latency: < 50 ms
×
√
Virtual or Augmented Reality
Latency: < 10 ms
×
√
Industry Control/ Automation
Latency: < 1 ms
×
√
5G
GLOBAL 5G READINESS
U.S.
Today’s Applications
(Milliseconds)
South
Korea
Japan
Future Applications
(Mbps)
Applications
 Assessment of industry commitment and progress towards 5G launch representing
significant opportunity for Tower Cos
 The U.S. and South Korea have already launched (limited) commercial 5G services
in certain locations
Each self-driving car on the road is expected to generate about as much data as
3,000 people… …one million self-driving cars could generate 3 billion people’s
worth of data
__________
1) Analysys Mason April 2019
2) CTIA September 2019
Q1 2020
Strictly Private and Confidential
11
TOWERS KEY INVESTMENT CRITERIA
WHAT WE’RE LOOKING FOR...
1
3
Sufficient scale to establish
dialogue with carriers
Track record of growth and
execution
2
4
…HOW DIGITAL COLONY CAN ADD VALUE
Located with dense population
with growing data traffic
demand
Best-in-class and irreplaceable
assets with strong structural
capacity
6
7
Competitive wireless carriers
with strong investment grades
8
Good relationships with major
wireless carriers
9
Strong, experienced
management team
10
Clear opportunity for our team
to add value
5
Q1 2020
Accelerate Core
Market Growth
Ability to roll-up and transition
to 4G/ 5G networks
Customer
Solution
Focused
Strategy
Potential for colocation and
amendment revenue streams
New Market
Expansion
 Expand into underserved markets and
growing markets
5G Strategy
 Invest in global 5G expansion
 Leverage our global relationships &
experience
Balance Sheet
Optimization
Leverage Our
Best in Class
Expertise &
Practices
Strictly Private and Confidential
 Take a long-term perspective on investment,
capitalizing on 5G/ CBRS demand
Cost Savings
M&A
 Apply expertise to accommodate meaningful
leverage at low cost of capital
 Leverage fixed cost of operations and
scalability of overhead
 Execute proprietary M&A pipeline
12
SELECTED TOWER PRECEDENT TRANSACTIONS
U.S. TRANSACTIONS
Carrier Transactions Median: 22.5x
EV/ RR TCF
40.0x
28.6x (1)
24.5x
21.8x
Non-Carrier Transactions Median: 22.3x
17.5x (1)
20.0x
30.0x
22.5x (2)
(3)
30.5x
25.4x
18.2x (4)
18.1x (5)
19.2x (6)
$3,195
$4,800
$1,450
$1,093
19-Apr
Sep-13
Jun-12
Feb-12
0.0x
Foreign Investment
Fund
Acquirer
(Minority Stake)
Target
EV ($mm)
$5,053 / $5,576(1) $4,850 / $5,268(1) $2,486 / $2,769(1)
Date Ann.
Feb-15
Oct-13
Sept-12
$196
$3,300
Nov-09
Jul-08
$1,000
$1,000
19-Aug
19-May
EUROPE TRANSACTIONS
EV/LTM
EBITDA
40.0x
Median: 14.7x
21.7x
20.0x
18.5x
10.9x
13.4x
13.0x
11.4x
15.0x
19.1x
16.4x
13.8x
13.6x
16.3x
17.4x
15.0x
14.3x
9.5x
0.0x
Acquirer
Infrastructure
Partners
And Consortium
(11)
(11)
Target
(Germany)
(Netherlands)
(Spain)
EV (€mm)
€3,792(7)
€760(8)
€3,700
€430
€3,678(10)
€854
€795
€67
€393
€80
€109
€369
€587
€1,180
€770
€3,550
Date Ann.
Jul18
Jun-18
Jun-18
May-17
Feb-17
Feb-17
Dec-16
Dec-16
Sep-16
Jul-16
May-16
Apr-16
Apr-16
Apr-16
Feb-15
Nov-14
Note: Selected transactions included are based on major transactions that have been publicly
disclosed by U.S. and European tower companies
Source: Company press releases, equity research, SEC filings
(1) Includes NPV of purchase option assuming 8.5% discount rate
(2) 17-18x TCF multiple based on analyst research
Q1 2020
(3)
(4)
(5)
(6)
(7)
Industry research estimate
Multiple per transaction documentation
Pro forma for iDEN churn of $14mm
Assumed TCF decrease of 20% due to iDEN churn
Acquisition of 9.99% stake
Strictly Private and Confidential
(8)
(9)
(10)
(11)
€660mm upfront purchase price + €100mm earn out
Based on NTM EBITDA
Acquisition of 40% equity stake
Inter-company transfer of towers
13
SUMMARY OF TOWER BUSINESS MODEL
Towers have very stable business models that generate steady free cash flows and are poised for longterm growth
BUSINESS PROFILE
DESCRIPTION
Revenue Model
Monthly Recurring
Length of Contract
10 -15 years + Renewals
Direct Expenses
Mostly Fixed
Probability of Renewal
Very High
Price Escalators
2-3%
CapEx Profile
Very Low (maintenance CapEx is success based)
Anchor Tenant Yields(1) on Capital Deployed
4-5%
Barriers to Entry
High (Local Zoning + Permitting, Ground Lease)
Lease-Up Potential
Limited to 4 wireless tenants per tower
Long Term Revenue Growth Outlook
Mid-Single Digits
__________
Source: (1) Internal analysis
Q1 2020
Strictly Private and Confidential
14
TOWER TERMINOLOGY
KEY TERMS
4G
 4G (also known as Beyond 3G), an abbreviation for Fourth-Generation Communications System, is a term used to describe the next
complete evolution in wireless communications. A 4G system will be able to provide a comprehensive IP solution where voice, data and
streamed multimedia can be given to users on an "Anytime, Anywhere" basis, and at higher data rates than previous generations
5G
 5G is an abbreviation for Fifth-Generation Communications System. A 5G system is a platform for innovations that will both enhance
today’s mobile broadband services, and expand mobile networks to support a vast diversity of devices and services, connecting new
industries with improved performance, efficiency, and cost
Churn
 Free Cash Flow: cancels or does not renew its lease or, in limited circumstances, when the lease rates on existing leases are reduced
Macro cell
Citizens Broadband Radio
Service (CBRS)
Free Cash Flow
 A conventional cell tower structure that supports antennas and other equipment designed by carriers to give coverage over a large area
 150 MHz wide broadcast band of the 3.5 GHz band (3550 MHz to 3700 MHz)
 Cash provided by operating activities minus total cash capital expenditures, including payments on finance leases and perpetual land
easements. For periods prior to the first quarter of 2019, total capital expenditures includes payments on capital leases of property and
equipment. The Company believes that Free Cash Flow is useful to investors as the basis for comparing our performance and coverage
ratios with other companies in its industry, although this measure of Free Cash Flow may not be directly comparable to similar measures
used by other companies
__________
Source: Internal analysis
Q1 2020
Strictly Private and Confidential
15
Enabling Mobile
& Internet
Connectivity
FIBER AND SMALL CELLS PRIMER
Q1 2020
3
FIBER AND SMALL CELLS OVERVIEW
WHAT IS FIBER?
WHAT ARE SMALL CELLS?
Overview
 Fiber optics transmit data, voice and images by the passage of light through thin, transparent
fibers. Optical equipment is used to transform data into light that will travel along the fiber
thread and be reconverted at the other end of the fiber strand. Fiber provides the core
connectivity for internet traffic globally and connects cellular sites, data centers and last-mile
customers into that broader global network
 Fiber benefits from data demand growth as further data transmissions will require additional
capacity on existing fiber tracks. In addition, there are homes, government offices, schools
and businesses that still rely on legacy copper to provide internet and voice services, which
cannot compete from a quality of service standpoint
FIBER OPTICS
COAXIAL CABLES
Overview
 Small cells are small, low-powered antennas connected to fiber strands that are typically
deployed in dense configurations and closer to wireless customers
 Located closer to where mobile customers need to connect to the network. The small cells
bring wireless signals into areas that need better coverage or more capacity
 The fiber laterals on which the small cells sit are connected to metro fiber networks
 Outdoor small cells are typically deployed on utility poles or on streetlights in dense urban areas
where macro towers are insufficient to support higher levels of data traffic
 Indoor small cells are often built into arenas and large office towers to ease the wireless
spectrum propagation issues with concrete or steel frames
Fiber
Greater than 1GB Bandwidth
Up to 1GB Bandwidth
Expensive, but not effected by radio
magnetic frequency interference
Inexpensive, but effected by radio magnetic
frequency interference
 Fiber serves as the nervous system to the mobile network, connecting data to cellular antennas
such as small cells or cell towers
Small Cell
 Existing footprint is incredibly important to drive cost efficiencies and quick activations
 Major customers include domestic and international carriers (wireless and wireline), government
entities (connectivity to municipal facilities and school systems), healthcare organizations and
data center and technology firms
Tower
 Small cells are the proven solution of choice for carriers; they offer carriers an efficient solution to
multiply network capacity, and the flexibility to do so on a market by market basis
__________
Source: CB Insights, January 2019, Britannica, April 2019, Internal Research
Q1 2020
Strictly Private and Confidential
17
FIBER AND SMALL CELLS OVERVIEW
OUTDOOR SMALL CELL NETWORKS
KEY BENEFITS
 Outdoor small cells enable mobile connectivity and wireless service in urban, suburban and
rural settings
 Installed anchor fiber is built for future lease-up. High fiber strand count maintains capacity
for future wireless customers on existing fiber
Anchor
New Leases
Anchor
Coverage
 Provide coverage in areas that cannot be effectively addressed with
traditional macro towers, particularly in higher growth urban and
suburban markets
Capacity
 Better management of available radio resources given the ability
to closely align capacity to actual market requirements
Spectrum
 More efficient use of available frequency spectrum by having
an increased number of transmission points
INDOOR SMALL CELL NETWORKS
 Indoor small cells enable mobile connectivity and advanced wireless service in buildings and
venues across a variety of market segments because radio waves used in wireless often have
difficulty penetrating buildings
 Mobile network operators strive to ensure quality indoor voice service and to address the
demand for data services and bandwidth-intensive applications for their customers
 Small cells typically consist of antennas hidden in drop ceilings and other overhead
infrastructure connected via fiber to a multi-carrier head end room located within or near the
building
Fiber Distribution Unit
Building
Q1 2020
Host
Fiber
Hub
Interference
 Reduces interference given lower radiation centers and lower output
power
Backhaul
 Better utilization of transmission infrastructure given
aggregation from a central hub location
Scalability
 Scalable to meet future capacity needs through node
densification and addition of equipment at central hub
Adaptability
Strictly Private and Confidential
 Ability to quickly respond to market dynamics and changes
in technology
18
GROWTH DRIVERS FOR FIBER
AND SMALL CELL INFRASTRUCTURE
ATTRACTIVE GROWTH DRIVERS
5G REQUIREMENTS WILL DRIVE CELL DEMAND AND INCREASE SMALL CELL DENSITY
 Mobile data traffic expected to grow 34% annually from 2018 through 2024
 Growth in data traffic coupled with finite spectrum requires cell splitting /
densification with means that cannot be met by adding incremental macro
towers
Cell Site Throughput
(Gbps / km2)
(Number of cells needed to reach coverage)
~100x
increase
 Higher frequency millimeter wave spectrum as well as 2.5 GHz, C-Band, and
CBRS spectrum require small cells to overcome propagation limitations
~5x increase
1,000
25
5
10
 Enabling the full spectrum of 5G applications require fiber and small cells to
scale the network density, expected at several times current levels
4G
5G
 5G requires high capacity fiber in proximity to the user to drive high download
speeds and low latency
 5G to drive an explosion in connected devices known as the Internet of
Things (IoT)
Small Cell Density
4G
5G
ATTRACTIVE GROWTH DRIVERS
% YoY
Growth
140%
115%
49%
40%
 Wireless carriers and new wireless market entrants (cable MVNOs, DISH
Networks, Enterprises) are driving small cell demand and are ramping up
infrastructure investment in advance of 5G wave
35%
30%
18%
16%
14%
14%
14%
14%
'26E-'28E CAGR: 14%
'19E-'26E CAGR: 23%
'16E-'19E CAGR: 97%
25
60
129
192
268
362
470
554
643
732
835
951
1,084
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028
__________
Source: Ericsson Mobility Report, June 2019, SNL Kagan, July 2018.
Q1 2020
Strictly Private and Confidential
19
FIBER AND SMALL CELLS KEY
INVESTMENT CRITERIA
WHAT WE’RE LOOKING FOR...
1
3
5
Scaled existing platform with
distributed footprint
Track record of growth and
execution
Best-in-class asset quality
7
High quality, and long-standing
customer base
9
Strong, experienced
management team
Q1 2020
2
4
6
…HOW DIGITAL COLONY CAN ADD VALUE
Accelerate Core
Market Growth
Potential for expansion through
capacity and coverage solutions
Synergistic locations to existing
fiber network
Customer
Solution
Focused
Strategy
Ability to capitalize off market
dynamics
8
Good relationships with major
wireless carriers
10
Clear opportunity for our team
to add value
New Market
Expansion
 Expand into underserved markets and
expand coverage
5G Strategy
 Invest in global 5G expansion
 Leverage our global relationships &
experience
Balance Sheet
Optimization
Leverage Our
Best in Class
Expertise &
Practices
Strictly Private and Confidential
 Take a long-term perspective on investment,
capitalizing on 5G/ CBRS demand
Cost Savings
M&A
 Apply expertise to accommodate meaningful
leverage at low cost of capital
 Leverage fixed cost of operations and
scalability of overhead
 Execute proprietary M&A pipeline
20
DARK vs. LIT FIBER
DARK FIBER
Description
LIT FIBER
 Dark fiber is fiber optic infrastructure that is sold to service carriers or
providers who then light the fiber using their own optical gear
 It is an installation of cables currently lying dormant, but ready to be
connected in the future. Dark fiber is physical infrastructure, not a service
 Lower margins than dark fiber
 Higher margins than lit fiber
Profitability
 Smaller sales teams are required because the customers are typically a small
group of carrier providers
 Fiber operators have EBITDA margins ranging from 60-70% depending on the
maturity/scale of the business and product
Customers
 Fiber operators have EBITDA margins ranging from 50-60% depending on
the maturity/scale of the business and product
 Typical customers are retail such as individual businesses
 Dark fiber customers light up their own infrastructure
 Lit fiber customers require greater customer support and add-on services
 Smaller upfront capital expense
 Small incremental cost for additional bandwidth
 Higher incremental cost to add bandwidth
 Sell IRU (Irrevocable Right of Use) or lease at specific level of capacity with
escalators
 Monthly lease charge often with annual price escalators
 Typically 5-7-year leases
 Long lease or IRU duration (typically 7+ years)
Q1 2020
 Lit fiber providers need larger operations teams for customer support and
initial provisioning and much larger sales teams with a focus on selling to
a greater number of smaller customers
 Typical customers are wholesale such as wireless carriers
 Large upfront capital expense
Investment Economics
to FiberCo
 Lit fiber is actively used fiber optic cable. It is typically sold as a service
with pricing based on the capacity provided and the type of service
Strictly Private and Confidential
21
FIBER AND SMALL CELL TERMINOLOGY
FIBER AND SMALL CELL TERMINOLOGY
4G
 4G (also known as Beyond 3G), an abbreviation for Fourth-Generation Communications System, is a term used to describe the next complete
evolution in wireless communications. A 4G system will be able to provide a comprehensive IP solution where voice, data and streamed multimedia
can be given to users on an "Anytime, Anywhere" basis, and at higher data rates than previous generations
5G
 5G is an abbreviation for Fifth-Generation Communications System. A 5G system is a platform for innovations that will both enhance today’s mobile
broadband services, and expand mobile networks to support a vast diversity of devices and services, connecting new industries with improved
performance, efficiency, and cost
Small Cell
 Low-powered radio access nodes that operate in licensed and unlicensed spectrum that have a range of ten meters to one or two kilometers
Macro cell
 A conventional cell tower structure that supports antennas and other equipment designed by carriers to give coverage over a large area
Citizens Broadband Radio
Service (CBRS)
Distributed Network
Systems (DNS)
Q1 2020
 150 MHz wide broadcast band of the 3.5 GHz band (3550 MHz to 3700 MHz)
 Engineered systems that act as a critical component within the wireless infrastructure ecosystem to help enhance coverage and capacity for
superior wireless services (in both outdoor and indoor spaces). DNS are technology agnostic networks with respect to the various frequency bands
and communications technologies used by wireless carriers today. These networks consist of antennas, fiber optic cable infrastructure and various
RF transmission technologies (small cells, remote radio heads, DNS nodes, WiFi, etc.) through which wireless subscribers are connected to the
switched telephony network or the internet for data applications
Strictly Private and Confidential
22
SELECTED FIBER PRECEDENT TRANSACTIONS
Fiber sector has largely consolidated with more investors pursuing opportunities leading to a scarcity of
assets. Strong industry demand for fiber connectivity further drives favorable multiples
Selected Transactions Median:
12.1x
17.1x
18.0x
16.9x
16.2x
EV / LQA EBITDA
16.0x
14.0x
12.0x
11.7x
12.4x
9.8x
10.0x
7.9x
8.0x
6.6x
(1)
6.0x
4.0x
2.0x
–
Acquirer
Uniti
Uniti
Zayo
EQT
Uniti
Zayo
3i
Segra
Target
PEG Bandwidth
Tower Cloud
Manitoba Telecom
Services
Lumos
Southern light
Spread
Tampnet
NorthState
EV ($mm)
$409
$230
$1,420
$650
$700
$127
$220
$240
Date Ann.
Jan-16
Jun-16
Nov-16
Feb-17
Apr-17
Nov-17
Jul-18
Dec-19
__________
Source: Company releases, CapitalIQ, Bloomberg, RBC Capital Markets Research, Segra Press Release
(1) Based off Q3 2019 Annualized EBITDA
Q1 2020
Strictly Private and Confidential
23
Enabling Mobile
& Internet
Connectivity
DATA CENTER PRIMER
Q1 2020
4
WHAT DATA CENTER SEGMENTS ARE ATTRACTIVE?
Data center operators are differentiated by breadth of service offerings and targeted customer segment
Data Center Types
Q1 2020
WHOLESALE
RETAIL
Provide space, power and cooling in large blocks to tenants for their own operations
or to be able to re-sell space to other customers
Provide space, power and cooling to customers that require a smaller scale data
center footprint and/or the ability to connect their businesses with other customers
ENTERPRISE FOCUS
HYPERSCALE / DEDICATED FOCUS
INTERCONNECTION FOCUS
LOW-CONNECTIVITY
Cater to larger data center tenants
that lease entire suites or buildings as
opposed to racks or cabinets in a
multi-tenant suite
Develop dedicated build-to-suit
facilities for hyperscale cloud and large
Internet companies (e.g. Amazon,
Google, Microsoft, Alibaba, Tencent,
Facebook)
House many network operators within
a facility that offer latency-sensitive
customers direct access to major
global networks and ISPs
Limited number of carriers present in
the data center and targeted towards
price sensitive customers and
workloads that are not latencysensitive
Representative Companies
Representative Companies
Representative Companies
Representative Companies
Hyperscale
Hyperscale
Hyperscale
Hyperscale
Strictly Private and Confidential
25
DATA CENTER KEY INVESTMENT CRITERIA
WHAT WE’RE LOOKING FOR...
1
3
5
Scaled existing platform with
distributed footprint
Track record of growth and
execution
Best-in-class asset quality
2
4
6
…HOW DIGITAL COLONY CAN ADD VALUE
Accelerate Core
Market Growth
Highly interconnected
Opportunities to further grow
existing business
Customer
Solution
Focused
Strategy
New Market
Expansion
 Expand into underserved markets,
capitalizing on edge demand
5G Strategy
 Invest in hyperscale solutions
 Leverage our global relationships &
experience
High power efficiency
Balance Sheet
Optimization
7
Diversified, high quality and
long-standing customer base
9
Strong, experienced
management team
8
10
 Take a long-term perspective on investment
and accelerate core market expansion
Exposure to large cloud
customers
Clear opportunity for our team
to add value
Leverage Our
Best in Class
Expertise &
Practices
Cost Savings
M&A
 Apply expertise to accommodate meaningful
leverage at low cost of debt
 Leverage fixed cost of operations and
scalability of overhead
 Potentially improve tax structure
 Execute proprietary M&A pipeline
26
WORLDWIDE MARKET GROWTH
The Data Center industry is responsible for building, managing and growing the IT compute infrastructure
serving 3.5+ billion users
Number of Internet Hosts Worldwide
Historical Global Internet Users (in
3,578
3,385
millions)
1,200,000,000
3,150
2,880
2,631
2,424
2,184
1,991
1,729
1,547
1,367
1,147
1,024
1,000,000,000
800,000,000
600,000,000
400,000,000
200,000,000
United States
’16A-’24E
CAGR: 6.2%
15,16
9
South America
’16A-’24E
CAGR: 18.2%
21,86
9
1,123
408
2018
2024
2018
2024
Europe
MEA
’16A-’24E
CAGR: 10.8%
’16A-’24E
CAGR: 12.5%
14,31
5
7,683
2018
2,113
1,044
2024
2018
2024
2017
2015
2013
2011
2009
2007
2005
2003
2001
1999
1997
Asia
’16A-’24E
CAGR: 13.3%
’16A-’24E
CAGR: 13.9%
782
367
2018
1995
1993
0
10,949
2018
2024
’16A-’24E
CAGR: 11.3%
14,461
2,525
7,601
1,289
4,975
2024
’16A-’24E
CAGR: 11.6%
2018
2024
2018
2024
__________
Source: Statista October 2018, Internet Systems Consortium January 2019, Internet Domain Survey January 2019
Q1 2020
Strictly Private and Confidential
27
HYPERSCALER DEMAND GROWTH OUTLOOK
Hyperscale Cloud providers increasing reliance on third-party providers, rapidly driving demand growth for
outsourced data center infrastructure
AWS, GOOGLE, & MSFT CUMULATIVE INCREMENTAL DEMAND (MW)
OUTSOURCED INFRASTRUCTURE GLOBAL FORECAST
2017-2022E CAGR
($ in Billions)
Hyperscale
Retail
$307
Wholesale
$24
$224
$20
$51
$165
$70
$92
$10
$29
$31
$12
$33
$47
2017
2018E
$122
$17
$44
$14
$38
2019E
15%
2020E
49%
2021E
118
33
78
65
79
154
171
2019E
2020E
AWS
11%
YoY Growth in # of
Data Centers
17
Germany
5%
Total Global
Hyperscale Data
Centers
~430
Others
57%
Total Global
Hyperscale Data
Centers
Australia
5%
UK
6% China
8%
234
2021E
2022E
GCP
323
117
269
2023E
MSFT
Leaders of Cloud Demand
US
40%
~390
484MWs
59
19
53
2022E
2018 Hyperscale Data Center Locations
US
43%
422MWs
204
GLOBAL HYPERSCALE GROWTH BREAKDOWN
2017 Hyperscale Data Center Locations
710MWs
228MWs
131MWs
$224
$153
$104
$70
20%
$58
710MWs
Outsourced hyperscale demand over
the next 5 years
Others
36%
Countries that
opened new Data
Centers in 2018
132
Hyperscale Data
Centers in Development
U.S.
Hyperscalers
International
SaaS & Cloud
Chinese
Platforms
__________
Source: Structure Research January 2019, Synergy Research 2Q 2017
Q1 2020
Strictly Private and Confidential
28
INTERCONNECTION IS A KEY DIFFERENTIATOR
Operators of high interconnected data centers benefit from a valuable competitive moat and physical
network effects
 Interconnection helps to drive increased revenue per user, stickier customers, and improved operating leverage for the data center operator
versus lower connectivity retail colocation
 Stickier customer base  Steady “tariff like” prices and higher ARPU  High margin and de minimis CapEx needs for incremental growth
TRAFFIC WITHIN DCS IS RAPIDLY EXPANDING…
GROWING THE IMPORTANCE OF DIRECT CROSS CONNECTS…
…AND INCREASING THE VALUE OF INTERCONNECTED DCS
77% of all DC Traffic Occurs Within the Same DC
 Interconnected DCs offer multiple benefits to
customers including:
Interconnected Data Center Environment
9%
Within Data Center
14%
Data Center to User
Data Center to Data
Center
77%
Traffic within DCs is expected to Grow Significantly
1
Direct Access to Customer Ecosystems
2
Reduced Latency and Operating Expenses
3
Optimized Cloud Experience
4
Removal of Business Barriers
5
Enhanced Security and Compliance
16,000
14,000
12,000
Large, Growing
Client Base
Increased
Availability of
Interconnections
Difficult to Replicate Ecosystem
Defensible Competitive Moat
Physical Network Effects
10,000
8,000
6,000
4,000
2,000
More Valuable
Ecosystem
Incremental
Cross-Connects
0
2016
Within Data Centre
2017E
2018E
Data Centre to User
2019E
2020E
Data Center to Data Centre
__________
Source: Structure Research January 2019
Q1 2020
Strictly Private and Confidential
29
DATA CENTER TERMINOLOGY
Data centers are highly specialized buildings that house the mission-critical IT infrastructure that powers
the Internet and corporate world.
From the outside, many data centers resemble a typical office / industrial building. On the inside, data centers offer access to
redundant power, cooling and internet connectivity that stays on even if the electrical grid fails or the data center infrastructure fails.
KEY TERMS
Megawatt (MW)

A spot measure of power (1 MW = 1 million watts). Data center lease structures are typically based on power rather than space (sq. ft.). Large-scale data center power needs can amount
to 40MW, the equivalent of powering 40,000 homes
Retail Colocation

The business of catering to smaller data center tenants. Leases tend to be shorter (<5 years) and are usually for less than half a megawatt. Tenants lease individual racks or cabinets in a
multi-tenant suite, rather than an entire suite, and often from wholesale providers.
Wholesale

The business of catering to larger data center tenants. Leases tend to be longer (5-20 years) and are usually greater than half a megawatt. Tenants lease entire suites or buildings as
opposed to racks or cabinets in a multi-tenant suite.
Carrier Hotels

Data centers that act as key hubs for the Internet and connectivity. Network-dense data centers are rare, hard-to-replicate, and exhibit strong pricing power. These facilities have access to
many fiber optic networks and carriers.
Enterprise Data Center

Data centers that serve the needs of corporate IT departments and large-scale Internet enterprises. These facilities are more exposed to new competition than "network-dense" data
centers.
Powered-Base, or PoweredShell

A data center in which the tenant, rather than the landlord, is responsible for building out the data center infrastructure. From the landlord's perspective, powered-base building
development costs run a few hundred dollars per sq. ft., compared to $1,000-3,000 per sq. ft. for a fully built-out data center. Powered-base space/buildings are commonly leased on a
triple-net basis.
Turn-Key

Data center space that is highly built out and ready for use by tenants. Improvements to the building's shell, such as costly electrical and cooling infrastructure, can push total development
costs up to $3,000 per sq. ft. Turn-key space is typically leased on a gross basis (DuPont is a notable exception), with tenants paying electricity costs.
Interconnection

The act of multiple tenants at network-dense data centers that serve as key Internet hubs "connecting" to exchange Internet traffic. The operator of these facilities (e.g., Equinix, Interxion,
Digital Realty, CoreSite) is typically able to charge recurring interconnection fees for this activity.
Cross-Connects

Physical cross-connects are a means of physically patching (connecting) two customers together via a fiber-optic or copper cable at a patch panel. Virtual cross-connects are a service that
allows a customer to connect to a single port to gain access to multiple other parties via a common switch.
Q1 2020
Strictly Private and Confidential
30
WHOLESALE vs. RETAIL DATA CENTERS
WHOLESALE
Type
HYPERSCALE / DEDICATED

Description

RETAIL
ENTERPRISE
Develop dedicated build-to-suit facilities
for hyperscale cloud and large Internet
companies (e.g. Amazon, Google,
Microsoft, Alibaba, Tencent, Facebook)
Hyperscale cloud providers both lease
capacity from wholesale providers and
develop their own facilities


Cater to larger data center tenants that lease
entire suites or buildings as opposed to racks
or cabinets in a multi-tenant suite
Customers who have large IT critical load
power requirements and need to control and
access their own server infrastructure
typically reside in wholesale data centers
INTERCONNECTION

Highly strategic, differentiated
interconnection services enable latencysensitive customers within the same facility to
connect with themselves and with metro,
regional, national and global fibre networks
and ISPs
LOW-CONNECTIVITY

Limited number of carriers present in the data
center and targeted towards price sensitive
customers and workloads that are not
latency-sensitive
Average # Of Customers

1

1 - 10

50+

50+
Avg. Contract Term

5 to 20 years

5 to 10 years

2 to 5 years

2 to 5 years

Target
Customers

Hyperscale cloud providers (i.e. Microsoft,
Amazon, and Google) and large Internet
companies (i.e. Facebook)
Large and sophisticated enterprises that
prefer to manage the equipment within the
data center themselves, only outsourcing
management of the data center
infrastructure


Content and media players (OTTs)
Latency sensitive workloads (e.g. SaaS)


Price-sensitive enterprises
Non-latency-sensitive workloads (e.g. storage)
Size Of
Sales Force

Smallest

Small

Medium

Medium
Power Required Per
Tenant

10+ MW

300kW to 5+ MW

Less than 500 KW

Less than 500 KW
Mechanical
Infrastructure Owned

Turn-Key = Yes / Powered Shell = No

Turn-Key = Yes / Powered Shell = No

Yes

Yes


Rental revenue – priced on SF consumed and power provisioned to the tenant
Cost savings from unused power flow directly to the data center owner’s bottom line (60-85% of
total revenue)
Interconnection revenue – Recurring cross-connect revenue (0-20% of total revenue)
Managed Services & Other – Performing outsourced IT functions including data security and back
up (2-25% of total revenue)
Revenue Segments
Q1 2020


Rental revenue – priced based on KW of available power per month (70-80% of total revenue)
Electricity reimbursements – power is metered and is billed on a consumption basis (20-30%
of total revenue)


Strictly Private and Confidential
31
DATA CENTER
PRECEDENT TRANSACTION MULTIPLES
PRECEDENT TRANSACTIONS (EV / EBITDA)
NORTH AMERICA
BRAZIL
EUROPE
OTHER
31.7x
27.2x
22.3x
22.2x
19.2x
18.8x
18.2x
22.0x
22.5x
24.7x
22.3x
23.1x
18.8x
18.0x
16.0x
13.0x
Mar-17
Jun-17
Dec-17
Feb-18
Mar-18
Jul-18
Dec-18
Dec-18
Jul-14
Sep-18
May-16
Dec-16
Dec-17
May-19
Dec-17
Jan-19
Ent. Val.
$1,275
$7,594
$1,315
$800
$4851
$800
$200
$267
$479
$2,252
$874
$4,8983
$525
$6164
$792
$950
Target
Vantage
DuPont
Fabros
IO
Infomart
(Dallas)
Infomart
T5
4 Degrees
Colocation
COLO-D
Alog
Ascenty
Equinix
Global
Switch
Zenium
TEF DCs
Metronode
Teraco
EBITDA
$70.2
$341.0
$70.0
$29.4
$17.2
$36.9
$10.4
$14.8
$21.8
$100 110.02
$67.2
$212.2
$22.3
$27.6
$49.4
$38.5
Geography
US
US
US
US
US
US
Canada
Canada
Brazil
Brazil
Europe
Europe,
Asia-Pacific
Europe
Spain /
LatAm
Australia
South
Africa
Acquirer
Digital
Bridge
DLR
Iron
Mountain
Equinix
IPI
Macquarie
Vantage
DCs
Cologix
Equinix
DLR
DLR
Elegant
Jubilee
CyrusOne
Asterion
Industrial
Equinix
Berkshire
Partners
US$m
__________
Source: Proprietary information, Citi, RBC. Note: Data4 / AXA is excluded as it never came to market.
1. Adjusted to exclude Ashburn cost (zero NOI); 2. EBITDA likely increased to $110m by close (initial bid based off of $100m); 3. Valuation for 100% of target; EBITDA multiple range of 20.5x – 22.5x; 4. Converted at 1.1202 EUR/USD.
Q1 2020
Strictly Private and Confidential
32
Enabling Mobile
& Internet
Connectivity
OUTDOOR DIGITAL INFRASTRUCTURE
INDUSTRY OVERVIEW
Q1 2020
5
OUTDOOR DIGITAL INFRASTRUCUTRE OVERVIEW
In the Outdoor Digital Infrastructure industry, billboards operators typically own the billboard face and structure and
either own the ground space or rent it under a long-term lease. The face is typically leased by media tenants such as
JC Decaux under long-term contracts and rented to media / outdoor agencies
Key Components of Digital Billboards
1
Owned by Billboard
Operator; Leased by Tenant
1 Digital Face

 Leased by Tenant (OOA) under 15-20-year contract
 Tenants rent out space to Media / Outdoor Agencies
Ownership of
All 3
Components
CRITICAL to
Achieving
Infrastructure
Economics
2
 Digital face owned by billboard owner
Owned by
Billboard
Operator
2 Billboard Structure

 Billboard owner asset – may be owned by OOA
3
 Connected to power and fiber
3 Land

Owned by Billboard
Operator OR
Separate
Landowner
 May be a distinct owner from billboard owner (e.g.
Landmark Infrastructure) but leases are generally long term
(~40 years) if not owned by billboard owner
 If land is not owned, access right limitations can inhibit
access to incremental power for digitalization or fiber for
additional lease-up
Q1 2020
Strictly Private and Confidential
34
SIMILAR TO TOWERS
As with towers, billboards are a hard asset infrastructure investment with similar qualities but have several
advantages over towers, including:
 Hard asset, with land often owned rather than leased
 Upside to rental rates driven by digitalization (i.e. converting traditional “paper” billboards to digital)
 Potential for telecom lease-up under certain conditions – owned real estate, access to power, fiber connectivity, bandwidth demand
Q1 2020
Strictly Private and Confidential
35
THIS IS INFRASTRUCTURE
Out of Home / Digital Out of Home
Billboards
Customer Decision Factors
Tenants
Rental Rates
Macro Cell Towers
• Site location
• Operator reliability
• Targeted advertising capabilities
• Site location / network need
• Operator reliability and credibility
• Large media tenants (e.g. JC Decaux) who own their own
panels or rent from owners like Cyclone 1
• Major wireless carriers (e.g. AT&T)
• Radio and television broadcasters
• Wireless data providers
• $13K - $650K / year
• Ability to “lease up” on digital billboards, but traditional
billboards are single-tenant
• $18,000 - $120,000 / year per tenant
• Typically able to “lease up” to several tenants (up to 4-5)
• 15-20+ years
• 10+ Years
• Linked to retail price index (RPI) – averages 2-3%
• Typically 3% in the US and CPI-linked in non-US markets
• Range from low double-digit IRRs for third-party financed site
acquisitions to 20%+ IRR for a large build-to-suit
digitalization project ($91K up-front investment)
• Range from low-single digit IRRs for single-tenant to mid-20s
IRRs under higher tenancy (e.g. 24% in a three-tenant
scenario)
Lease Term
Rent Escalator
Unit Economics / Returns
__________
Note: 1.30 Exchange Rate (£ to $)
Q1 2020
Digital billboards are fiber-connected and have access to power
(potential for lease-up through small cell deployments)
Strictly Private and Confidential
36
Enabling Mobile
& Internet
Connectivity
KEY INVESTMENT RISKS
Q1 2020
6
WIRELESS TOWERS – KEY INVESTMENT RISKS
Strong demand, limited competition, high barriers to entry, and significant operating leverage should drive
compelling returns for wireless towers
Key Investment Risks
 Wireless carrier consolidation or network sharing agreements between
existing wireless carriers
 Disruption of 24x7 non-stop wireless tower operation
Mitigants
 Lease contracts are generally long-term and non-cancellable
 Carrier capex required because of general growth in data is a huge
 tailwind
 Tenants are responsible for equipment maintenance and operations, not tower owners
 Technological substitutes such as small cells
 Small cell networks will likely augment rather than replace macro tower networks due to
limited coverage effectiveness of most mid- and high-band spectrum
 Macroeconomic condition and financing availability
 Contracts are generally non-cancellable and long-term (10+ years)
 Only a minor portion of overall rental stream renews each year
 Tailwind from growth in mobile data leads to demand for tower services even in tough
macroeconomic environments. As a result, financing is generally available to tower
companies during financial downturns
 In the US, tower operating costs are largely fixed (i.e. ground rent payment). Variable
costs make up only a small portion of monthly total operating expense. With annual
lease escalators, margin (with no additional tenants) is relatively stable even in an
inflationary environment
 In international markets contracts are typically CPI-linked, removing the risk of inflation
 Inflation
Source: Digital Bridge
Q1 2020
Strictly Private and Confidential
38
WIRELESS TOWERS – KEY INVESTMENT RISKS
Strong demand, limited competition, high barriers to entry, and significant operating leverage should drive
compelling returns for wireless towers
Key Investment Risks
Mitigants
 Threat of new entrants / competition from other towercos
 While this risk may appear to exist at a market / country level, it is often much more muted
at an individual site level.
 In most jurisdictions, zoning & permitting regulation limits the number of towers within a
radius of existing towers.
 Additionally, switching costs for a carrier to relocate cell sites are very high, making it
uneconomic in almost all situations. Thus, while a portfolio might compete with other
towercos for new build-to-suit opportunities or more broadly on a market basis, the existing
sites are generally protected.
 Customer concentration risk (only 3-4 customers in most markets), which may
result in limited lease-up growth in certain years
 Tower contracts typically have fixed or inflation-linked escalators that guarantee a
certain degree of growth. Additionally, upgrade / amendment revenue (deploying new
spectrum, adding MIMO, etc.) offer the same lease-up economics within the existing
tenants on a tower.
 Near impossible (from an administrative and RF engineering standpoint) for a carrier to
churn a large portion of a sale-leaseback portfolio – at most a few sites may be groomed.
 Additionally, even in bankruptcy scenarios, MSA/MLA’s tend to hold up as a priority given
the mission critical nature of the towers to the underlying business.
 Recent surge of carrier sale-leaseback transactions has resulted in single
counterparty credit risk and large exposure to a single MSA/MLA
Q1 2020
Strictly Private and Confidential
39
FIBER– KEY INVESTMENT RISKS
Fiber is the crucial link that allows data to move globally between data centers, wireless towers and end
users
Key Investment Risks
Mitigants
 Price degradation on lit fiber services ($/mb decreasing)
 Price degradation is more than offset by data demand increases in the U.S. Most analysts
estimate that data usage is growing 30-40% annually while $/mb is declining 10-20%
annually; the net result is lit services revenues growing at c. 10-20% annually.
 Threat of regional newcomers / overbuild risk
 Due to exploding data demand globally, there is generally enough greenfield
opportunity so it doesn’t make economic sense for a newcomer to be overbuilding
existing network, except in extreme scenarios of supply-constrained markets or markets
with rapid peak in demand.
 Additionally, conduit availability / municipal permitting provide additional barriers to
entry as these result in new fiber construction to be very difficult in many markets.
 Infrastructure demands of these players increasing so quickly each year; must use third
party providers to meet their needs.
 While self-perform may become more prevalent in incumbent markets / highly strategic
routes, the broader opportunity remains robust to capture enough market share from
these players to justify most business cases.
 Well designed/provisioned networks can run significant amount of lit traffic before hitting
capacity constraints; will become more efficient in the future as optical technology
becomes more advanced.
 Dark fiber sales consume strand capacity of fiber routes – however, in most
circumstances, owning existing infrastructure significantly decreases incremental capex
required to overpull routes i.e. add strand capacity.
 Customer self-perform activity, such as carriers and hyperscalers, choosing to
construct, own and operate their own fiber infrastructure
 Aging fiber infrastructure and lower capacity network may result in significant
capital expenditure in the future
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SMALL CELLS– KEY INVESTMENT RISKS
Small cells are a crucial growing technology that will allow for densification of wireless networks and will
enable the widespread adoption of next- generation 5G wireless
Key Investment Risks
Mitigants
 Technology upgrade risk, such as
upgrading from 4G to 5G antennas
 In most scenarios, small cell provider primarily responsible for the passive infrastructure so limited exposure to technology
upgrade risk
 Where there are incremental capex dollars associated with accommodating carrier equipment upgrades or additional
technology deployments, small cell provider will typically charge additional rent via negotiating upgrade deal on success
basis
 New market entrants (such as regional
fibercos that are moving into small cells) may
erode pricing
 Small cell deployment requires significant expertise beyond just fiber component – RF engineering, node attachment
agreements and trusted carrier relationships are critical barriers to entry that will prevent most of the new market
entrants from being long term competitors in the industry
 These sort of competitors will have difficulty achieving scale on nationwide basis, limiting impact on broader small cell
market pricing dynamics
 Carrier self-perform may eat into independent /
neutral host market share
 Small cell demands of carriers growing exponentially, and while self-perform may address their needs in certain
incumbent markets, they simple do not have resource bandwidth to deploy nodes at scale to keep up with their network
requirements
 Independent providers often provide time to market advantage (by having existing fiber and/or pole attachments)
and/or economic benefit (by distributing network costs amongst several carrier customers)
 Significant capex required to deploy anchor
networks while lease-up is not always free
(capex often required to deploy fiber laterals)
 While unit economics of small cell lease-up may not be as attractive as towers or hyperscale datacenters, the growth
opportunity remains significantly more robust representing a potential to deploy much more capital at still attractive
returns. While true that small cell lease-up typically requires incremental capex to deploy a small amount of fiber, this
results in a never-ending “sprawl” of the fiber backbone that opens up additional lease-up opportunities as you edge-out
the network
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DATA CENTERS – KEY INVESTMENT RISKS
Cloud applications, growing enterprise outsourcing and the accelerating pace of data creation are creating
substantial storage and computing demand that cannot be met by today’s global infrastructure
Key Investment Risks
Mitigants
 General economic conditions and the cost and availability of capital
 Data centers are mission critical infrastructure – even during the financial crisis, data
center companies grew by double digits
 Disruption of 24x7 non-stop data center service can lead to a loss of revenue
and customers
 Only existing revenue is at risk, there is no concept of liquidated damages, also most
contracts require several outages before a customer can leave
 Business depends upon demand for technology-related real estate
 Fundamentally, the growth in data demand requires additional data centers
 Long sales cycle as leasing space in data centers involves a significant
commitment of resources and due diligence on the part of customers
 Continue to have a strong sales force and inventory in your markets such that the sales
cycle is always going
 Many wholesale data centers are exposed to single-tenant risk
 Focus on diversifying customers and do not give all of your capacity to a single tenant
 Tenants may choose to develop new data centers or expand their own existing
data centers
 Data center infrastructure is not the core competency of most customers, and a
specialized provider can provide it much cheaper and without failure of infrastructure
 Data center capacity is built out over time as tenant signs new leases. Any
development delay or cost overrun may harm on time delivery
 Shift the risk to contractors by having significant retention and signing guarantee
maximum price contracts
Source: 451 Market Research, Digital Bridge
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DATA CENTERS – KEY INVESTMENT RISKS
Key Investment Risks
Mitigants
 Tenant Lease / Renewal Risk: Increased rise of spec builders may lead to
customer churn (price or full churn)

Typically the cost of leaving a provider is prohibitively expensive that any competing operator
must price potential contracts at levels that are essentially dilutive to their yield/returns
 Churn - Increased Customer Migration to Public Cloud: Smaller customers
recognize the benefits of public cloud (lower costs)

Data center providers that offer a diversified set of products and services may increase
stickiness through cross connects, remote hands and other managed services
 Increased Competition: Potential for increased competition in markets. Attractive
returns are attracting new developers and competitors.

Having a world class management team with a track record in leasing as well as building will
enable an operator to compete
 Valuation Compression: Potential that cap rates increase – given that valuations
for data centers are at historic highs, they may tighten back to previous levels

Entry of Core+ real estate and infrastructure investors have thereby increased demand and
supporting values in the data center space. High quality assets with long-term, investment
grade customer lease profiles should capture premium valuations
 Shrinking IT Footprints: Risk that as IT stacks get smaller, they will require less
square footage in datacenters. Data centers are measured on both access to
power (primary) and square footage (secondary)

Power requirements have historically been inversely correlated with smaller IT footprints (i.e.
small devices tend to be less power efficient and require as much or more data center power
allocation). Historically, as the per-unit IT equipment footprint has gotten smaller, the overall
demand for IT in aggregate has greatly exceeded any space savings
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OUTDOOR DIGITAL INFRASTRUCTURE– KEY
INVESTMENT RISKS
Premium (digital) panels are growing in popularity and support multiple media owner tenants while
commanding premium fees from advertisers
Key Investment Risks
Mitigant
 Do advertisers see OOH as a core tenet of their advertising
strategy?
 Advertisers are bullish about out-of-home advertising in general due to its ability to reach audiences effectively
 The outlook for this market is positive as other advertising channels such as television and print experience major
upheaval
 The heaviest users of OOH are large, multinational corporations including McDonald’s, Coca Cola, Tesco, Unilever,
and Google, among others. These customers see OOH as a critical component of their advertising campaigns
 Will media tenants such as Clear Channel and JC Decaux
decide to insource the function of owning and managing
sites?
 Less than 10% of sites or property on which advertising sites are located are owned outright by media owners.
Most are leased or licensed rights
 As the market became more competitive with new entrants in the 80s and 90s, media owners struggling for cash
to develop their portfolios engaged in wholesale disposal of their freehold estate elements
 Is there enough opportunity for site aggregators to capitalize
on the OOH market through organic site acquisitions?
 Aggregators find supply from a fragmented group of small landlords, providing aggregators with significant
opportunity to bring together attractive individual sites into a single inventory
 Media owners like Clear Channel are very open to working with aggregators as they look to expand their digital
footprint
 Do media owners really see value in converting traditional
billboards to digital?
 Media owners are eager to bring digital billboards to market because the financial case is very strong from a
revenue and cost perspective
 Digital billboards yield fees for media owners that are three to four times higher than those of digital billboards for
a single advertisers; furthermore, media owners can host 5-6 advertisers simultaneously on a digital billboard
 Advertisers have accepted the premium they pay for digital and generally expect their digital spending to grow over
time
 Are long-term (10-15+ years) contracts with media owners
sustainable?
 Media owners typically enter into shorter-term (3-4 year) agreements with unsophisticated landlords, but have
shown a willingness to sign long-term (15+ year) agreements with established aggregators who have a large base
of attractive billboard inventory
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