October 29, 2015 — Crown Castle International reported strong leasing activity in the third quarter with 10 percent growth year over year from new leasing activity and cash escalations. Organic site rental revenue growth was $43 million, or six percent, less 4 percent attributed to tenant non-renewals. The tower company expects the growth to continue in the four quarter and throughout 2016.
“Based on our increased 2015 outlook, we expect to finish 2015 on a strong note and we look to continue this momentum moving into 2016,” said Ben Moreland, Crown Castle president and CEO.
In 2016, Crown anticipates new leasing activity of $170 million, which is similar to 2015 levels. That number is shared by tower leasing ($115 million) and small cell leasing ($55 million). Organic site rental revenue growth next year is expected to be 5.5 percent or $160 million, which consists of 9 percent new leasing activity and escalations on tenant leases, less 4 percent from non-renewals.
The $115 million new leasing figure is consistent with Crown Castle’s long-term expectation of adding one tenant-equivalent per tower over 10 years across its portfolio of 40,000 towers. During the last six years, the tower company’s annual leasing activity has ranged between 0.09 and 0.13 tenants per tower.
“Our organic growth is also supported by annual contracted tenant escalators on our towers and small cell leases of 3 percent, which we expect will contribute $95 million in growth during 2016,” said Jay Brown, Crown Castle CFO.
Small Cells Adding to Bottom Line
During the third quarter, Crown Castle closed on the acquisition of Sunesys, which owns or has the rights to nearly 10,000 miles of fiber in major metro markets across the United States where Crown Castle has a small cell presence.
The contribution of the Sunesys acquisition, in addition to the strong leasing and improved operating leverage, will drive Crown Castle’s projection of 8 percent in AFFO (adjusted funds from operations) per share growth in 2016.
Small cells are already making a difference. Excluding Sunesys, small cell leasing revenue has grown 30 percent so far this year.
“While towers will continue to be the most efficient and cost-effective way for carriers to deploy their networks, we expect carriers to make investments in small cells to enhance their macro networks by bringing cell sites closer to mobile subscribers,” Brown said. “We believe small cells represent the natural progression of network densification and cell splitting by the carriers as they contend with consumer demand for mobile data.”
(Quotes for this article courtesy seeingalpha.com)