Blue Owl's Matt A'Hearn - a generational opportunity in financing digital infrastructure

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He's responsible for leaving the overall management of digital infrastructure, including strategy, investments and portfolio management. Prior to joining Blue Al, Matt was the managing director and a founder of IPI partners, the predecessor firm to Blue Al Digital Infrastructure. IPI was acquired by Blue Al in 2024. Prior to founding IPI, Matt led the global investment banking practice and communications infrastructure at Mobile Listen Company. Matt and I had a fascinating and wide-ranging discussion about the how and the why of digital infrastructure. Investing in data centers, the importance of power generation and how there are different ways to approach gaining exposure to AI as an investment theme. Thanks, Matt, for coming on the show to share your wisdom and expertise in private markets and digital infrastructure. Matt, welcome to the Ultcos mainstream podcast. Yeah, thank you so much for having me here. Pleasure to have you. Thanks for having me in the Blue Al office. I think we'll certainly get into the benefits of breadth and scale as a platform, given where we are. But first, I'd love to hear your background. I think your background is so fascinating relative to what's happened in the digital infrastructure space. Your background career director kind of mirror that of the space, too. So we'd love to hear your background and how you ended up here, Blue Al. Really kind of a winding path to some extent I'm getting into Blue Al digital infrastructure, where it started out as almost the TMT side of the business. Digital infrastructure can almost be a combination of technology, media, and telecom infrastructure and real estate. I started more back on the TMT side that really went from an evolution into towers in the fiber and then ultimately into digital infrastructure. And you've seen people come from each of those different groups. And when I started on the predecessor firm IPI, it was coming in from having a background in working in fiber, working in towers, working in data centers, really recognizing the opportunity there to create something different to some extent. I guess a great place to unpack because now people think about digital infrastructure, they think about AI in many respects and data centers. But there's also cloud. Before cloud, you had the infrastructure of the internet get built. What from working on the infrastructure of telecommunications? Did you find help you today in the job that you're doing now? We look back in history on digital infrastructure and what is the ecosystem? What is the value chain associated with it? I tried to just think back if you're streaming a video on your phone. Where is that data created? And then where ultimately is it transmitted? And where is it stored? So for digital infrastructure, you're streaming a video, you're pulling it up and you're consuming it over a wireless network. That wireless network had originally connected to a fiber network that had originally gone into a data center and back and forth. And that's where I think it was really fascinating to look at that value chain and say, okay, where are the biggest challenges within that? To be able to support infrastructure needed for growth. And that's really what got us started in business, what got me started in the businesses, trying to figure out what those problems were that people were having in scaling their business and what the opportunity set was. When you started IPI, what did the opportunity in data center investing look like? When we started back in 2016, we viewed the world, I think, through initially a cloud lens. It was through having conversations with a number of our partners, a number of our relationships in the technology world. Technology is really in the DNA of everything we do. And cloud was growing at a pretty significant pace at that time. But it was a $20 billion revenue business, seems like a big business at the time. Now it's a $300 billion revenue business. But cloud was growing in a pretty meaningful way. And so we were having discussions with hyper scale companies. What are the challenges you're having? What are the issues there? And look, if they said none, I wouldn't be sitting here today, but to a person, they were saying there weren't groups that understood their business, understood the challenges they were having. Going back to your point, when data centers, when cloud was really growing, data centers were somewhat viewed as competitive, almost against cloud at that time. It was more traditional co-location enterprise data center businesses, where their clients, their companies, their tenants might have been more like a blue owl or someplace else, where there was a view that they may eventually leave for the cloud. We were cloud native from the beginning. We said, no, we want a growth of a hyper scale business to be growth for our business, a tailwind for our business. You'll hear me continue to refer to MS Partners. We really do view hyper scale companies as partners, and it was always our goal to sport that growth. I want to unpack that a little bit more. What do you mean by viewing hyper scalers as a partner? And why do you view them as partners? So viewing them as a partner, it is, again, our thesis was just to solve problems for them. If you or any hyper scale company think the likes of Amazon, Microsoft, or others, their businesses are growing dramatically. And a lot of the challenges they have is how do we continue to have the infrastructure to support it? These infrastructure decisions are longer term decisions, and you're trying to plan for that capacity. So usually that's a challenge. We think when we're able to come in, when we started the businesses, hey, we'll help you figure out that part of the equation. We'll help bring in the infrastructure, invest in the infrastructure. So to some extent, you can take some of that concern, some of that challenge off the table and really support the growth of your core business, which is cloud, and then now AI. What were hyper scalers doing to finance their business? Obviously, there was a big shift to cloud called that platform shift, or kind of the early 2010s into today. And then now you've AI is the next platform shift. Cloud is not going away, let's be clear, and we should talk about that. But what were hyper scalers doing to finance their business? And when you think about the solutions you could provide to them to help them finance the growth of their business going forward, how did you think about that a little bit differently? What traditionally they were working with partners like us. They were building some data centers themselves, but they were typically doing it off of some of their balance sheet off of catbacks. And we talked about catbacks all the time now and what they spent at the time, what they're investing in. Back in 2016, 2017, they were investing $40, $50 billion in catbacks in totality across some of the largest hyper scale companies in the world. And we thought those were big numbers at that time. That's changed dramatically now. And so how we've thought about financing, how we've thought about being partners is, okay, well let's look at your capital needs. What the overall industry might need. And I said this year now, hyper scalers are projecting $350 billion or so in catbacks versus 30, 35, 40 back then. It's a different problem they're trying to solve when you're thinking about the capital side. The investment that goes into data centers now, it's about $78 trillion of capital that's going into data centers. So we're talking about just very large numbers. Well, we think we're able to do a say, okay, what is the highest and best use of your capital as you think about return profile? We look at what we're able to provide coming in from the equity side, coming in from a structure. We look at it as you're a great counterparty for us. And it allows us, we believe, to finance it an efficient way for them from what they're trying to solve. Where do you think the biggest opportunity is for them going forward? Is it in AI? Or is it in other parts of their business that they still need to finance, whether it's cloud or otherwise? Well, we talk about AI all the time, right? We talk about it every day. We see it in the market every day. It is a huge tailwind for the industry. But it wasn't that long ago that really AI became a thing for us. It was November of 2022 when it was really, to some extent, commercially launched to the industry. And so going back to when we started our business, we were cloud-native. What we focused on was cloud. If AI wasn't a thing today, we would still be here talking about great trajectory there is in cloud. It's growing 20 to 30 percent per year. The likes of Amazon, Microsoft, others, still very much a cloud growth business. AI, we view as a wave on top of that wave. So we already had a great wave for cloud now. AI is just going to be incremental growth associated with it. Massive growth, we view this as a generational opportunity in the market without a doubt. But this is not just an AI story when we think about data center and digital infrastructure. I want to get to that last aspect of what you said that it's not just an AI and data center's story because the reality is digital infrastructure impacts our lives in so many different ways. And there's a lot to finance in that respect. But I do want to touch on the AI boom and how the growth of AI is creating what you're calling a generational opportunity. I think it's first helpful to start with the supply-demand dynamics of the opportunity and how big that opportunity is. What is going on in that market that makes the supply-demand dynamics so interesting as you think about financing the hyper-scalers to help them build their business? Sure. So let's break it down into the supply-demand side. For demand, it is, again, everything we see AI cloud-related and all of it needs compute to be able to drive it. It is compute from GPUs, TPUs, CPUs, etc. All the cabling, all the storage that goes into it, those all sit in the data center. And I think what's important when we think about the data center side of it, it's really a fractional amount of the cost that actually is needed to go into data center. We think about for every dollar that we spend in a build, our tenants, our partners are typically putting three to five dollars in themselves. So our investment is large without a doubt, but the additional investment that is going in through all of their gear, all of their equipment, all of their servers is really meaningful. And that demand continues to go up. When we look at the overall industry for AI and cloud, we think that's about a $2 trillion revenue industry as we look five years out. Now you go back to what I said when we started the business. That cloud was a $20 billion revenue business and AI didn't exist at that time. So we're almost $20 billion going to $2 trillion here over the next five years. So without a doubt, the demand side, I think, we can all get comfortable about what's happening there. Switching to the supply side, it's got more supply constraint in the market. And there's a few things that factor into supply. You need sites. You need power. I'll circle back to that. You need skilled labor. You need other considerations with stakeholders, water, etc. But it's the power side of it that has been the biggest challenge of late. And you get and you hear quite a bit about this in the press where we've seen markets that have been more challenged around that because of not just data centers, but really electrification of our world, whether it's electric vehicles, whether it's additional chip fabs, there's just more power being utilized. Power usage in the US had been roughly stable for the last 10 to 15 years. Now we're seeing that swing more towards growth. And when you think about power, there's kind of two considerations. If there's a power constrained market, it's typically generation and transmission. And it could be both. Depending upon a market, it could be one or the other. If you're thinking about transmission, moving electrons from one place to the other. And that takes time. It takes time to build out grid. It takes time to upgrade the grid, but the other part being generation. In generation, you have to put new power capacity in place and solve for that over the long term. So there's a lot of considerations when you look at it. It's generational too, because the opportunity to finance all of the infrastructure required to build the digital world. But then I think the piece about power is really important, because I imagine that factors into how you think about underwriting these investments. You may not be responsible for the power generation itself, but there's so much that goes into the build out of the data centers where you build them, how you build them, the cost to build them that both you and the hyperscalers are providing to make that happen. How do you think about power and underwriting that as part of the deal? And what does that mean in terms of the number of actual available sites? Because imagine power generation. Also, you have to factor in cost certain places are going to cost less to produce and generate power than others where you can actually produce it. You mentioned things like water. There are certain places where getting access to water, cooling, I'd imagine, like certain sites are easier. Maybe certain sites you have to build roads. There are all sorts of things that go into this that I think probably make this really complex that I'm probably not even appreciating myself. But how do you think about all of that as it relates to the underwrite when it comes to digital infrastructure trying to build an finance? You have to have a really strong ground game. We view it ultimately as something that is pointing to our strengths because we've built a team over time. We have experts that are here. We have people that have done site selection. But we also have people that do power. They've done power investing. So your ground game needs to be overall level your skill set. But you need to have people literally on the ground who are engaging with local stakeholders, engaging with communities, engaging with the grid, power generation. It's important to really understand that dynamic. Gone are the days of going into a market and buying a nice rectangular piece of dirt and saying it's got power because it's what the utility does. They provide me power. Maybe, but it could be three years, five years, ten years out that you would get that power. So going into investment as we're looking at opportunities, we go in with all of that expertise. It's going in with people, again, who do site acquisition, who do power acquisition, and really understand not just the winners, but hopefully how we're avoiding the losers. And that's really been a big change. So there was no pun intended when you said you need a strong ground game. I think that also brings up an interesting point, though, which is there's probably only a finite amount of places and sites where you're able to actually build the required infrastructure. How does that factor into this whole industry? Because I imagine there's a select set of firms who have the capital and scale to work with the hyperscalers and go after these big deals and the right sites to build digital infrastructure. How does that factor into this category, both in terms of fighting over the right space and winning deals and partnering with hyperscalers making sure that they know that they have a partner who's money good and can do this and has the scale to do it. But also what it means in terms of the competitive nature of the deal and how you make sure you're underwriting properly. I think a word you'd use that we often use is scale. And I think that's critical when we're talking to, again, our partners is to be able to talk to them about the scale of our footprint, the fact that we're talking to them about global sites, US, Canada, Europe, Asia. That makes us really critical for them that goes back to that partner point, the size of sites that we have that we're able to bring them sites that are really interesting. Just our partnership to keep going back to that word. They view us as a partner. We are a group that they know when we come and we have a conversation that we're credible. I think using one of your words that we know what they're looking for. We know what sort of locations they're looking for. And so it's a very constructive conversation. And then having scale of capital really helps change that dynamic as well when we're doing site selection when we're looking at opportunities. Having that scale of capital is a meaningful differentiator for us. So really when you factor all of those things together, we view more rarefied air in terms of groups that can do that. But it helps us when we're doing an acquisition that we've checked all of those boxes to some extent. We've talked to our parties. They know that we're bringing something that is interesting to them and hopefully making better decisions. You mentioned scale. What's the size and scale of the capital required to be able to work with hyperscalers on some of these needs and related to that too is what's the set of hyperscalers who are doing this and how many are there that actually are the right financing partner or the right partners for you to help finance their projects. Well break that again down into a few pieces and I'll add one in that relates to scale. What we're talking about large sites. And this is evolved from when we started the business a few years ago. A large data center might have been 24 or 48 megawatts. And again, I'll use megawatts as an example when I say that. It's almost the size of a pipe that we're offering to our customers. That's how we think about what we're providing ultimately. It's a power capacity they could pull through. So going back to it, when we started investing, it was a data center. Then it became a couple data centers to them. Now it became very large campuses, large campuses that may have 15, 20 buildings associated with it. So going back to what I just said from a megawatts standpoint, now we're talking gigawatts. And you hear about that in some of the announcements that are coming out. Just to frame that, a gigawatts capacity is about the average amount of power the city of San Francisco is drawing at any moment. So think about when you hear about seven gigawatts, ten gigawatts, just multiply that by the number of San Francisco. And that'll give you a sense of the scale of the power associated with it. How does that change as more data capacity comes into the system? So as these hyperscalers, so take a Google, a Microsoft, even an open AI or an entropic that are using tons of data to try to effectuate requests from people who are asking chat GPT or cloud or whatever their AI system is, how much is that going to grow over time as AI becomes more prevalent in both consumer and business use cases in society? Well, I think anything AI or cloud related is using the latest generation of GPUs, etc. And all of them are requiring power to support it, but also power to support the cooling for those data centers itself. Well, we've historically used an analogy. And I think it's still relevant today when you think about data centers versus GPU storage, etc. Think about it like a TV on a wall, right? The TV on the wall is going to change every few years. It's going to get smaller, thinner, it's going to have more features, it's going to have higher clarity around the picture, but that TV is still going to need to plug into the wall. The outlet hasn't changed. It still needs to go into connect to a network. That's not going to change. We think about data centers, like we're the plug, we're the connectivity. What happens in the data center might change, so likely going to get more dense as more demand is there, but that is still going to need the power. It's still going to need the connectivity. That's some extent what a data center is. Do the big hyperscalers need more data centers than they have today, or can the existing data center capacity that they have support their growth as a business? Absolutely need more capacity. Yeah, and I think you see that in a number of the announcements recently of multiple data centers being built and the financing associated with them. They're looking at a trajectory of whether it's two gigawatts, 10 gigawatts, 20 gigawatts, there's just more capacity. Keep referencing power. It's the power side that's important. If you think about whether it is OpenAI or Microsoft or Amazon, Google, Meta, any of those, they're really looking for that additional capacity. It's foundational to their business. AI isn't going to grow at the same trajectory. Clouds are not going to grow at the same trajectory, circling all the way back around if they don't have the infrastructure to support it. That's a challenge that needs to be solved and continue to need to be solved. I'm trying to tie that to the investment opportunity in the capacity. I wanted to ask that question so I kind of understand the size and scope of the investment opportunity. As you think about your business, first IPI now, Blue Al's digital infrastructure business within the real assets business, how do you think about the capital required to be the right partner for these firms? You raised ODI3, that fund I think was almost 2X the size of what you had said on the cover. I think that speaks to as one example of that there's significant opportunity and capacity to invest in this space. How do you think about the investment opportunity in the capital required to do what you need to do to partner with these firms? What the size of the investment continues to go up? I mentioned the size of buildings getting larger and larger and one building to campuses, etc. That also just translate to the amount of capital that's necessary for it. Going back to our original thesis of wanting to be a problem solver, we also never wanted to get to a point where those partners, those hyperscalers said, "Hey, you're just not growing at the same pace I need you to. You're not relevant." Going back to it, the relevancy is having capital to support them. So it's always been foundational. We want to continue to grow with their businesses from the capital side as well. If you look at what we had invested historically if it was an individual project that might have been 20 to 50 million dollars and then it became 100 million dollars per project to 500 to even larger now. So the opportunity is very large and the total capital needs. We hear about a lot of people having interest in this sector and deploying capital, but if you hear about a billion-dollar fundraise or those sort of sizes and get not just as relevant if you're calling up a hyperscale company and say, "Hey, it's great. We raised a billion dollars. That's one or two projects maybe for them." So scale really becomes a moat as an investment business in this space because it sounds like you need enough capital to be able to work with a Amazon, Microsoft, Google, Meta, etc. and be able to finance their growth across a wide range of things. How much is that limited to what you're doing? There's also other strategies within just blue alzico system like triple net lease where the triple net lease on the real estate side. You're also partnering with many of these hyperscalers in different ways and speaking structure is a real estate deal. You might also do stuff on the infrastructure side with these firms. How does the vast array of solutions that you have help serve these firms that you're trying to work with as partners in a bunch of different ways and does that factor into the deals that you're doing with them and how you're thinking about partnering with them? It really was part of the reason we did the transaction earlier this year with blue owl, blue owl acquiring predecessor firm IPI partners where I was one of the founders that was there. As we saw the industry continue to grow and evolve capital needs from scale of capital as well as type of capital. We really picked our heads up during this time and said, well, let's look at the industry where it's going. Let's look at what makes sense from a platform standpoint, predecessor firm. We had some tools in our toolbox and our last fund was a very large tool. We added our toolbox but through our conversations with these hyperscalers, we were hearing more feedback from them just like we did when we originally started the business about, hey, can you help us on the side of the capital structure? Can you help us from a lending standpoint? Can you help us structuring wise? And that really caused us to say, okay, what's the right direction to go here? Is there a group that makes sense for us to join and be a part of? And blue owl was top of the list given relationships and their track record in the industry, just the culturally very much the right group. And blue owl already had a very strong thesis as it relates to digital infrastructure, as it relates to data center. So you reference having invested through other funds historically. So really coming together and already having that culture, I think was a big part of the transaction and again, helped really differentiate, we believe, with our partners. I think there's a few things to unpack there, which are interesting. And I think your evolution as a founder of building IPI is almost emblematic of where alternative asset management more broadly is headed that the evolution of many of these platforms having to continue to scale their own business to be able to serve the partner's clients they're working with on both the investment side also on the invest door side with whether it's institutional or wealth channel LPs now. So I want to get to both of those things. I think that's also another piece of the puzzle here is you're now able to build solutions for the wealth channel, which as a smaller firm and talked about this with Ivan Thadalaya with Mark Zee and Oak Street. Like those are both, I think, other good examples of how joining blue owls platform has enabled you to build for a broader set of investors. But first, I want to get to how you thought about evolving IPI as a firm. I think understanding how a founder builds a firm and evolves it is so instructive for just evolution of asset management more broadly. So you started in an interesting format. You started with iconic and iron street, I believe, right? Or iron point. Yeah. How did that come about? And why did you build the firm in that way? So you're right, really the three of us founded it together and we all came at this opportunity slightly different. Iconic, having a deep history and technology and founders saw the opportunity through the background with having discussions with those groups. Iron point being a group that had invested in the data center sector early on. And then for my background, really seeing this mismatch of capital that was coming into the industry of a focus in the wrong direction, at least from my standpoint. So we looked at other places to invest, other structures that are there, their platforms that already make sense and really saw an enormous amount of running room to create a differentiated platform. We started with a whiteboard. I was working out of a we were initially and literally had a whiteboard writing, what do we want this to be? How are we going to differentiate ourselves? And so to do that, it was going and bringing in the right team. People who also saw the opportunity and appreciated what was going to be able to be created and it was people who had invested in the data center sector had worked in the data center sector, raised capital, had done power investing for the sector. That from the very beginning created a culture that we thought were different than a lot of others in the industry and I think really resonated with investors. When you started IPI, what did you view as differentiated? And what did you view as being differentiated relative to others in the space? As you thought about building a firm from the start? Partner first. That was just critical for us. Partner first. Let's not go try to tell hyperscalers what we think they need. Let's have that conversation and have them tell us what are areas we can focus on? Again, what are challenges? What are markets that are important or challenging to you? Let's focus on having a conversation not to say here's what we can do. That was a huge difference here. The other interesting thing that comes to mind is and this has obviously been in the public domain, but Iconics footprint in Silicon Valley, obviously I think probably puts them ahead of the curve when it comes to things like cloud or AI, both from a wealth management client perspective as well as they have an investment business as well that invests in a lot of enterprise software companies, etc. You are early to seeing the evolution of AI and the needs of many of these hyperscalers. How much did having the right partners in the room in that context help you figure that out? It was helpful for sure when we were getting in the room sitting in the room asking the questions already having those relationships while also having a broader view on where we felt like the market was going. That was out of the gate, helpful. As we've evolved, as we've grown, as we built up the IPI team and now the Buell Digital Infrastructure team, all that has really carried over for us to be able to say, "Okay, what's the continued trajectory of the business?" We have been having a very active conversation with all of these groups. It was great out of the gate to be helpful on it and kind of point us in the right direction now we're off to the races. That's so interesting because when you think about it, and you mentioned this before, AI really became commercially viable in 2022. November. November, exactly. November, 2020. So it's happened pretty fast to the casual observer or consumer who's using AI, but the reality is tech companies understood their needs, the possible power of AI and what that would require in terms of the data center capacity, even as it related to your point, even as it related to cloud, they had massive needs and they knew that was going to scale when you think about the growth in cloud. But I have to imagine that having the right pieces of a puzzle put together probably makes a big difference in a category like this. It's helpful without a doubt to have that better understanding what's happening with technology early days, but even now it's far exceeded any of the expectations in 2022 when this happened. If you went back and pulled CEOs of all the hyperscalers and said how much capacity do you think you will need in five years for data centers? It would most likely be a fraction of what it is today. So it's really been the continued acceleration of AI over the last few years that's gotten us to where we are today. Do you think going forward people are underestimating or overestimating how much growth there will be in something like AI and cloud capacity? I think where we are now is people are unsure ultimately on who the winner or losers might be around AI. I think people have a pretty good sense for a cloud and who are going to be the winners and losers in their scaled businesses. I don't think people have a sense necessarily, hey, is it thropic or is it open AI or any of the others, but I think people do have a good appreciation of the power that's needed associated with it, the data center capacity, the digital infrastructure, and so that's why going back to it, we feel great to be in the spotlight because we don't have to pick that winner or loser. We can play more of that industry trend. I think you bring up a really interesting point because another place where my mind goes when thinking about digital infrastructure as an investment opportunity is where does this fit into an investor's portfolio? We can talk about that in two contexts. One is does this fit in an infrastructure bucket, a credit bucket, a real estate bucket, and I'd love to go through and unpack that, but the other side of it is something you just referenced, which is there are multiple ways to play a trend like AI. You can invest in anthropic or open AI. If you have the ability to invest in a fund or get direct access, you can invest in video or Microsoft and these hyperscalers and get exposure to AI to public markets in a certain way, but you could also invest in the infrastructure side of it as well. I'd love for you to talk a little bit about that and how that might be a different way for investors to think about it. I should also mention in a risk-adjusted way. It's a different type of risk profile to get exposure to a trend that many people are probably thinking about at least first blush through the equity side of the portfolio. It's exactly right and it's really a thematic investing. If you do the AI theme, if you do the cloud theme, I think this is one end of the spectrum or the risk spectrum to some extent that you can invest in to say, "Okay, if I like all of those tailwinds and I like the fact that I have large technology companies at the counterparty, but not just that. Typically, high-credit quality tenants, long-term weasers associated with them, strong cash flow. You brought up the credit side, spread to what their overall credit is of their companies. That's a great way to play that theme and not have to, again, pick a winner or loser around AI. You can say, "Hey, to some extent, rising tide is going to lift all boats." Again, not just an AI theme. This is cloud, this is AI, this is overall digital infrastructure, but be able to say, "If I think the world is going to need more digital infrastructure and I like these tenants, I like the counterparties. It's a great way to invest." On that point, what are you effectively underwriting? Are you underwriting the counterparty being Microsoft, Amazon, Nvidia, etc. ability to pay you or is there something else you're generally underwriting? Well, I think it starts with and you had the question about is an infrastructure or real estate. This is where the infrastructure word comes into play, because going back to it, for every dollar we invest, they're putting significant amount of capital and this is mission-critical infrastructure for their businesses. If they don't have digital infrastructure, if they don't have data centers, they don't have an AI business, they don't have a cloud business, so while we are underwriting the counterparty tenant, we almost view we're in the most senior position of the capital stack, because that's the first bill they're going to pay, because if they're not, then it really has an impact on their business. So it does start with, "Hey, I'm going to underwrite the tenant that's there. I'm going to underwrite the fact that it's long-term nature of the lease that might be there and the fact that this is really important for them. This is infrastructure." When you think about where they're getting the capital to pay you, is that generally coming from revenue, or if it's a slightly newer business, maybe AI is not as revenue generating of a business for them as cloud maybe today. Maybe that will change over time, but it's a newer business. So they generally thinking of financing the payment or growth of that business to make sure that they can finance something like build out of a data center, so they can do this mission with critical work, as you say. Is that coming from somewhere and you're underwriting that? There are obviously good quality credits, too. I'm sure they can go into the debt markets or otherwise they have a big balance sheet. But are they generally drawing capital from a certain place to then pay you effectively, if you're kind of, quote unquote, senior in the stack in terms of where you're underwriting? It's typically out of cash flow for them. They are generating a meaningful amount of cash flow, so they're typically paying it out of that. But I think we have approached the market right now and a dynamic where there is so much capital that's necessary to invest in this, and we think about a lot of these companies as well. They have unlimited amount of capital. They have capital, they could do this themselves. But when you're talking to any hyper scale company, really any technology company, they have a high rate of return on what they're expecting out of their capital. You or I as public equity investor in a technology company is expecting a certain amount of growth and rate of return. Investing in the digital infrastructure side, the real estate side, it's a different type of return. You bring up something interesting, which relates to something that was in the news recently, which was I think made a said that they're going to start doing their own energy trading effectively in house. Do you think they would ever do the work that you're doing with them? Would they ever bring that in-house, or does that just not make sense for them to finance the build-out and development of data centers in house themselves? All hyper scale companies have done some data center builds themselves. It's historically happened. I would say more recently they've been looking for partners to do it. And there's a couple reasons why. One, it's difficult. It's difficult to find sites. It's difficult to find power. It's difficult to build data centers. So they utilize us. We have those relationships where we can be helpful. They can't do it all themselves on a global basis. But going back to it's really a cost of capital dynamic as well of building your own data center and some respect. It's an opportunity cost of do I put capital in building my own data center? Do I go invest in another part of the business that is going to get a higher return, is going to get higher growth? Am I investing in the building, or am I putting more capital into GPUs? So to some extent, managing their own cost of capital and where they're allocating to get the highest return of themselves? That's maybe a crazy thought. But do you think that you'd ever see made a capital or Amazon infrastructure partners where they would either, I know they're obviously regulatory challenges. And some of these firms have thought about building banks and there's good reasons why they haven't themselves. But do you think that these firms would ever try to bring alternative asset management capabilities in this category in house either directly or through some sort of JV partnership? It's a really interesting idea and I would say never say never, it's possible. Just right now things are moving so quickly that they're really focused on speed and how to build the bridge while they're crossing it, how to fly the airplane, why they're building that versus structures that are a little bit more complicated and quite frankly, they don't have a history. And if you think at the core of each of these companies, their technology companies, that's what they do best. And oftentimes when you see them operating, they kind of go back to fundamentally what they do best. I think that brings me to another topic which I think is be remiss to not cover because I think it's so core to how alternative asset management as a business is evolving, which is investment cultures. You obviously had to over the past year bring the IPI investment culture and merge it with the blue out investment culture. You mentioned that for a hyperscaler that would be hard to do because their DNA is very different than your DNA is an investment firm. How have you managed to both adjudicate as you were thinking about partnering with the blue out? You mentioned a little bit of this but I'd love to unpack that a little more and then merge the two investment cultures together as you think about the shared DNA that you have which I think ultimately reflects itself in the investment culture that you have and how you actually invest as a firm. As we were really exploring what to do with the IPI business and having our mission being that partner to technology companies, we always had a view towards that as our guiding principle. And so anything we were going to do was going to have to be as a way to accelerate that as a way to continue to grow that and so there's a lot of different directions you can take that. Blue out will again be in a more entrepreneurial business one that's been built off of coming up with solutions, coming up with new products, new ideas different than what it might have been more of a legacy that really married well with how we worked with technology companies and more broadly how they worked with the investor community to come up with these more innovative structures. So I think we've been able to take those two parts of each of our DNA and really bring it together from an overall culture standpoint. What's been the hardest part of bringing the two firms together? Well look we're all moving fast. I think it's more of we're moving very quickly in terms of the opportunity going back to it. It's generational and so how do we continue to move fast to take advantage of that? Part of that is how do we have the right capital solutions? How do we have the right products that are available? Luckily again this part of the culture here is to move fast so we found that right out of the gate but we always want to move faster. Well I think that's a good segue to the wealth channel. Blue Al has built an incredible business within the wealth channel and has figured out how to really enable institutional investors and wealth investors to sit side by side. Historically we talked about this a bunch but this was really the domain of institutional LPs. I think even IPI's legacy business the majority of the LPs were institutional in nature. Now you're at a bigger platform. Blue Al you have the ability to work with the wealth channel. I'd love for you to talk a little bit about that and what that means for the evolution of your business now at the well. When we look at the market opportunity within data centers and going back to our founding it was really again more on the growth, more on the development side. Now as it's evolved and we think this is the next big opportunity within data centers. The industry has created a lot of now stabilized data centers. Data centers that have been built that have these long term customers, high-credit quality customers. We believe this type of investment for this type of stabilized data center asset is incredibly well positioned for the wealth side of it. This is an even larger market opportunity than what we view as the development data center side because data centers are getting built and they have to go someplace over the long term. That is a large market. We think private wealth with the investor who can see again a risk-adjusted part of their portfolio, the tailwind that's there for their portfolio, the theme. They're able to invest in some of these very large projects that you see and hear about on TV but actually have access to it to actually be able to invest into those types of products and those types of projects through this type of product. As we think about the wealth channel becoming a more prominent investor in private markets, my mind in part goes to theirs product innovation happening around things like evergreen structures, etc. It feels like something like digital infrastructure which these are long-term projects. There's long-term growth trends. These are huge companies that will probably require this type of financing in one way shape or form over long periods of time. Is this the type of strategy or asset class we can get into a little bit more? Where does this fit in? I'd love to unpack that even a little more than we did earlier whether it's real estate or credit or infrastructure, maybe some combination of all three of them. Is this the type of asset or investment that fits really well in something like an evergreen structure as an example? Just because of the long-dated nature of the partnerships that you have as well as the long-term trend that this whole industry is going through? That's exactly right. Again, what's part of the reason we did the BooL transaction BooL has been so innovative in these types of products and this more permanent capital. You build a data center for a hyperscale company and it's built and delivered. It has a 15-year lease on it. It has a 10-year, it has a 20-year lease with a strong stream of cash flows associated with it with mission critical infrastructure so it's going to be critical on a go-forward basis. An evergreen vehicle is just the right spot for it. We IPI, predecessor firm, didn't have that product, didn't have the capabilities, didn't have the infrastructure like BooL does. Again, it was part of the reason we did this transaction because you can see how BooL has been able to do that historically. There's two things that are really interesting there too. One is that you can grow in scale the number and quantum of your capital base to meet that need with the hyperscalers. But the other side of it too is you mentioned BooL being innovative on structuring like 87% or so of BooL's capital is permanent capital or in long-dated vehicles across the three categories, private credit real assets and GP solutions or GP stakes. The other side of this is that if you have permanent capital and you can go to the hyperscalers in a different way than other capital providers because you can probably sit there and say, "Hey, we have capital that's going to be with you for the long term." That's exactly right as well. They're looking for that partner from the beginning and to be a long-term partner was a key component of it and to have more of permanent capital that the assets can sit in and they don't need to worry about it. They don't need to say when is this getting it's old or how would that work but to have that long-term capital. I think they're really attractive and there's not really people doing that. I think that brings up another really interesting aspect of this too is that in certain categories of private markets scale really does matter and in some senses, perhaps, and you mentioned this before, that there's this kind of rarefied air. Do you find that the scale enables you to actually have less competition? Not more? Absolutely. Going back to it, the size of checks, the size of investments and projects have just continued to go up and again where somebody might say, "I'm raising a fund in great news. It's a billion dollars." That again, scale isn't really applicable as a differentiator but for us with our most recent fund, drawdown funds we've raised, what we think the opportunity is here that does start to limit the people who can do that and especially in a more permanent capital and especially as we think about this from the market standpoint, there aren't people doing scale in digital infrastructure in a specific, private, well-digital infrastructure vehicle that really gets to rarefied air. I'd love to unpack the anatomy of these types of deals. Is this generally you going to these firms, these hyper-scalers and saying, "Hey, we know you have a need to finance, build better data centers. Let's do this. Here's how we can structure it." Or is it often these firms coming to you saying, "Hey, we have a need. It's this size and scale. Help us figure it out." Is I'm sure they are thinking about what they need but they may not understand the different tools that they have in the toolkit like you do. So is this you often originating the concepts ideas and going to them? It's both and that's the power of the relationship we've built with them. There are certain situations where we might know generally what the demands look like and markets that are interesting. We're able to come to them and say, "This is a great opportunity. This is a great site. This is a story." And they say that hits the mark and that works very well. And other situations, because of what we've done, they'll come to us and say, "This is a market we're looking at. These are our demands. Can you help us figure out markets?" And we're able to put that together. There's another category of people who will come to us who are looking for capital, who may have a project on their own to say, "Hey, there's again not a lot of people who are able to do this, able to structure in the way you are, able to bring the amount of capital to bear." So there's a lot of different ways we're sourcing it, but it's really relationship-driven and making sure we're in those conversations. So you've been early in seeing trends like cloud AI. What excites you most about digital infrastructure going forward that people perhaps aren't thinking about as much today? Well, one of the changes that's happened, I think over the last few years, that has really been a great tailwind for the industry. And I think what will continue to happen is, the industry and use cases just much broader than it used to be. When we would have been talking in 2020 or 2021, you asked this question before, "Who are hyperscalers?" There was maybe a couple of them, and they were great, and they were great partners. But now, with what's happening with AI, what the next evolution of AI will mean, we're now just talking about a group of companies that are growing rapidly, $500 billion type valuations that are becoming more and more users that need capacity. So the list of hyperscalers have grown meaningfully, which I think is good for the industry as well. I think that brings up another really interesting question, which is, to some extent, it's the data that each of these firms have, the extent to which they can keep that data for themselves, maybe valuable, and maybe that smaller companies who, if they have in their ecosystem data with customers, they're able to keep, do you see them as emerging, maybe not hyperscalers, but firms that will require solutions for building out data centers, et cetera, so that they can grow and scale their business and actually have some competitive advantage as a business going forward. Do you see that as being a big part of this? Because when it comes to, at least from my perspective, it seems that data is so critical, but this, if you actually have the data or you're a relationship with a customer who they have their own data and you're helping them solve that problem, they become the beneficiary of them. Data is incredibly valuable. I'm sure if you look at your own iPhone or your own phone, you probably haven't deleted a picture in years or decades. So even going back to that having data, having that information is valuable, that's happening more and more with AI as you are referencing. Having additional information is just going to provide better outputs that are there. So whether it's hyperscale companies who are growing the infrastructure they need for large-scale AI businesses or ones that might be a little bit more nuanced for specific use cases, data is valuable for them as well. So that universe of groups is going to continue to grow. I think that's a great way to wrap this up because you threaded data throughout this from fiber. There's a fiber all the way through to AI today and the business you've built. Like we said earlier, evolution of your career really mirrors the evolution of infrastructure and technology as well. So congrats on the business you built at IPI, now Blue Allen. Thank you so much for letting us enjoy it. Thanks so much. Appreciate it. Thanks for listening to this episode of All Goes Mainstream. I hope you enjoyed it. You could read more about allts at mysubstachallgosmainstream.substach.com. Thanks a lot and have a great day.