From 4G Trends - Nov 25, 2014

Vertical Bridge Holdings, LLC, a privately owned real estate investment trust (REIT) focused on the ownership of wireless communications towers in the US, has secured over $470 million of incremental equity commitments to support its acquisitions, new tower build programs, and growth strategy. Vertical Bridge has closed 23 cell site acquisitions so far this year, including 4 deals completed since October 1. Vertical Bridge Holdings was founded in 2014 by Marc Ganzi and other executives from Global Tower Partners after American Tower bought that company in 2013. The company focuses on owning, operating, and managing telecommunications towers, rooftops, and site locations across the country.

Goldman Sachs Infrastructure Partners and Stonepeak Infrastructure Partners are the new investors in this second round capital raise, joining existing investors The Jordan Group and Digital Bridge Holdings. With the closing of these commitments, Vertical Bridge has secured equity capital commitments of $750 million alongside an existing $270 million senior credit facility, resulting in over $1 billion of immediately investable capital to fund growth. These investors remain very bullish on the U.S. tower space, and are pleased to provide the Vertical Bridge team with the capital necessary to assist wireless carrier partners in the deployment of their ongoing and future network needs.

Edward Pallesen, Head of Americas for GS Infrastructure Partners at Goldman Sachs emphasized that “as global infrastructure investors, we look for opportunities to partner with best-in-class management teams in industries that can provide stability and attractive prospects. We believe Vertical Bridge stands out in the wireless tower sector and we are excited to work with management on their next phase of growth.” Trent Vichie, Senior Managing Director & Co-Founder of Stonepeak Infrastructure Partners views the tower sector as the critical infrastructure enabling connectivity in the US wireless industry. “We are thrilled to have the opportunity to be involved in this space through our partnership with Vertical Bridge, Digital Bridge, and their other financial partners.”

Tower giant Crown Castle also announced it is moving forward with its plan to merge the entire company into its real estate investment trust, Crown Castle REIT. Shareholders approved the deal this week and the company expects it to be completed this year. REITs can avoid taxes by distributing 90% of its earnings to shareholders, and Crown Castle has been operating as a REIT since the beginning of this year. Unlike its biggest competitors in the tower industry, Crown Castle has not invested in foreign markets, so almost all of its operations are subject to U.S. tax laws. The decision to merge the entire company into the REIT is an indication that Crown Castle is content to invest primarily in the US market going forward. CEO Ben Moreland has said repeatedly that he believes the US offers the best risk-adjusted returns.

American Tower has agreed to buy 4,800 wireless towers in Nigeria from Bharti Airtel for about $1.05 billion and 6,480 transmission sites in Brazil for about $1.2 billion, furthering the US company’s plans to expand internationally. Based in Boston, American Tower has been trying to increase its international revenue, which made up about a third of the company’s $1 billion in sales last quarter. “With the largest population and economy in Africa and relatively underdeveloped wireless infrastructure, American Tower’s chairman and chief executive officer Jim Taiclet views Nigeria as a tremendous growth opportunity.”

As previously reported, Verizon has hired investment bank TAP Advisors to plan a sale of its network’s assets including about 12,000 cell towers by year-end 2014. Crown Castle CFO Jay Brown said earlier this month that his company would be interested in the Verizon towers. Verizon would be open to divesting its cell tower assets in a similar manner to how AT&T sold exclusive rights to lease its 9,700 towers to Crown Castle. AT&T received $4.85 billion as a large capital inflow, but also preserved its right to lease and operate the towers for 28 years. Crown Castle CFO Jay Brown has stated that his company might be interested in such a tower transaction and Verizon hopes to use the resulting new cash to cover the cost of spectrum it acquires in the FCC’s AWS auctions.