Peak Time Of The Tower Industry?
As we look back at 2015, we at Steel in the Air believe we may have observed the high point for tower company industry activity. In the first half of 2015, valuations for towers and related leases approached all-time highs. Companies interested in acquiring communication towers and leases were bidding at a frenzied pace for any asset made available on the market. However, in the second half of 2015 and continuing through the beginning of 2016, market activity began to return to a more typical pace.
3RD PARTY AGGREGATOR LEASE BUYOUTS
The pace of lease acquisition slowed as some lease buyout companies either shut down entirely (such as Wireless Capital Partners) or turned their focus overseas to leases in South America and Europe (as with APWIP). The companies that remained focused on US leases escalated their marketing efforts, but there was a slight reduction in the amount of offers made as they sensed the decrease in competition.
TOWER COMPANY LEASE BUYOUTS AND LEASE EXTENSIONS
In 2015, tower companies continued to work their way through their portfolios of newly acquired towers, targeting these leases for extensions or buyouts. American Tower started work on buying or extending its recently acquired Verizon portfolio, while Crown Castle continued its efforts to secure the ground rights under its T-Mobile and AT&T tower portfolios. SBA continued to focus on acquiring leases via buyout or extension. These three companies have approximately 70% of their leases tied up under long term lease extensions or have purchased the ground rights under the towers, leaving the remaining 30% of leases to be addressed. Fortunately, in late 2015, we saw some new, well-financed tower companies enter the picture who began to acquire ground leases under the public tower companies’ towers. As a result, the market for buying or extending leases hasn’t dropped significantly as it pertains to tower company-owned towers.
TOWER COMPANY TOWER ACQUISITIONS
The ”Big 3” public tower companies (American Tower, Crown Castle, and SBA) were active in acquiring large and mid-size portfolio towers, but we noticed a reduction in interest from Crown Castle and American Tower in their desire for smaller portfolios of towers. Fortunately, a number of private tower companies were still very much interested in acquiring towers to round out their portfolios, and continued to bid aggressively for tower assets. However, in early 2016, we did see public tower companies attempt to re-trade some of our clients’ deals involving the sale/purchase of towers by lowering their purchase amounts by 10-20%. The timing of these reductions correlates with a 10-20% drop in equity value that many of these public tower companies have experienced lately, which may explain some of the change in the tower companies’ behavior. We anticipate that the market will adjust back upwards, although we doubt that it will return to 2015 levels in the near future.
In 2015 we also observed an increased aggressiveness from tower companies regarding the extension or buyout of their ground leases, with tower company agents being much more willing to threaten the relocation of a tower than ever before. We anticipate that this aggressiveness will continue, as the tower companies have a dwindling number of leases eligible for extension or buyout and will consequently accelerate their efforts. Fortunately for landowners, the viability of moving a tower is no different than it was before. So while tower companies continue to increase their threats of removal, the number of towers actually being relocated is not growing at comparable levels.