Digital Colony Is Seeking to Raise $6 Billion for a Second Fund

Gillian Tan (Bloomberg) -- Digital Colony, an arm of Tom Barrack’s Colony Capital Inc., is seeking at least $6 billion for its second fund dedicated to communications-infrastructure bets, according to people with knowledge of the matter.

The firm has initiated discussions with prospective investors including pensions and sovereign-wealth funds, said the people, who requested anonymity because the talks are private. It’s seeking to hold a first close on the fund by November, one of the people said.

Digital Colony, led by managing partners Marc Ganzi and Ben Jenkins, closed on a $4.05 billion debut fund last June. Digital Colony Partners I has made 10 investments and is now more than 73% deployed, Ganzi said on a Colony earnings call last week. It’s doing due diligence and evaluating opportunities on which it may spend its remaining capital, he said.

Digital Colony teamed up with EQT Partners to purchase fiber-network owner Zayo Group Holdings Inc., and has agreed to buy data center assets from Brazil’s Grupo Folha. Earlier this month, it recapitalized Beanfield Metroconnect, a provider of telecom infrastructure in Canada. Digital Colony also reached a deal to inject new equity into Vantage Data Centers as part of that company’s purchase of Etix Everywhere earlier this year.

Related:Colony Capital’s CEO-Elect Marc Ganzi Explains Its Pivot to Digital

A spokesman for Colony Capital declined to comment on the second fund.

Ganzi is slated to take over from Barrack as chief executive officer of Colony Capital on July 1 amid a turnaround at the real estate investment trust to focus on digital investments.

Colony Capital shares have tumbled more than 60% this year, leaving it with a market value of roughly $850 million. The company suspended its second-quarter dividend, saying it was seeking clarity regarding a “new normal.”

“Covid-19 has only amplified the fundamental demand for digital infrastructure and the world’s reliance on the digital ecosystem,” Barrack said on the earnings call, describing the Digital Colony business as “resilient and vibrant.”