With new funding, Arcadia Towers Group has a long-term capital commitment that allows it to focus on the business, instead of having to continually monetize assets, raise capital and take an off-and-on approach to tower ownership, according to Sam Johnston, the company’s president and CEO. He said traditional private equity financing typically has a fund life of about five years.
“The customer buildout timeframes in this business are typically not very linear,” Johnston said, commenting about the way antenna space leasing flows. “We see the growth come in peaks and valleys, and sometimes the carrier builds are over the course of a two- or three-year time period. Coming from where I did as a regional developer, it can be a challenge. You build up assets. You wait for collocations. You get to that five-year place fairly quickly.”
Arcadia has previously has built, bought, and then sold towers, more than once. When the last iteration of Arcadia ended with a sale of the assets, Johnston said, the question was: What did Arcadia want to create next?
“We started thinking about it about a year ago and had preliminary discussions with SDC Capital Partners,” Johnston said. “We developed a 10-year strategic plan based on having a long-term capital commitment, a national scope and a lower cost of capital. That’s going to allow us to scale our business and to work with our customers without having to go through capital-raising activity on a continuous basis.”
On June 29, Arcadia disclosed that SDC had committed as much as $50 million of equity capital to support Arcadia’s growth.
“SDC is a great partner for us,” Johnston said. “$50 million was a number that whetted their appetite. SDC raised $750 million in its second fund, has more than a billion dollars in assets under management, and is growing. We see a pathway for us to go even beyond the initial $50 million investment, whether it is through acquisitions or through continuing to build and grow our tower portfolio organically.”
Arcadia saw SDC as a potential partner, Johnston said, because of its solid record of accomplishment, not only on the investment side but also on the operations side of the digital infrastructure space. He said SDC has investments in fiber-optic networks, a storied history and investments in the data center business, and an investment in a wireless and fiber construction company. “They understand not just our investment needs, but also the operations side of the infrastructure business, which is unique to their position,” he said.
“We were looking for a strong balance sheet and a long-term commitment so we could continue to service our carrier-customers in the tower industry,” Johnston said. “That was important to us in being able to grow upon that initial $50 million commitment. When we pitched them on our four strategic variants, they were aligned. It all matched up nicely. In us, they saw an opportunity to have a tower platform company that they could invest in with confidence and continue to build and grow.”
The four strategic variants to which Johnston referred are municipal and school district partnerships, acquisitions of existing tower assets, carrier build-to-suit services and rooftop management — variants that offer opportunities for property owners to monetize underutilized real estate assets. Arcadia applies its business expertise to these strategic variants in order to provide its carrier customers attractive locations for their 5G wireless network sites.
Although Arcadia does not compete with other tower companies on a site-by-site basis, Johnston said, the business nevertheless is competitive.
“From our perspective, we see a lot of consolidation in the middle market,” he said. “We see the larger companies becoming larger. As they grow, it becomes a struggle for them to maintain the service levels important to customers. We are focused on putting the right platform in place to provide the customer service, the workflow management, and the asset management pieces — having all those components will allow us to scale while maintaining that smaller, regional developer flavor. It’s a tough task, but that’s where we will differentiate ourselves.”
Johnston said that Arcadia has a solid team.
“Scott Billups, a cofounder and our chief financial officer, brings with him a background in finance at the CFO level in Fortune 500 companies,” he said. “He’s also worked within the private equity space as a CFO, so he understands that aspect of the business as well. He brings to Arcadia the skill set needed to grow our platform.”
Another cofounder, John Rolander, serves as Arcadia’s chief development officer. “Rolander has been in the municipal bond space for a number of years,” Johnston said. “We’re approaching that business in a different way than we have in the past. He understands the language of the school boards, the treasurers, and municipal advisors.”
Johnston said Arcadia Towers Group considers itself what he called a mature startup, because although previous versions of Arcadia had been in the tower business before, the new Arcadia Towers Group with investment from SDC Capital Partners is starting out from scratch.
“We’re excited to get moving and getting everything set up, and seeing what we can do,” Johnston said.
Don Bishop is executive editor and associate publisher of AGL Magazine.