May 17, 2016 — TV broadcast tower brokerage is in limbo right now waiting for the dust to settle from the broadcast incentive auction, but broadcast radio stations continue to sell off their towers and tower companies are more than willing to take the assets off their hands, according to according to Michael J. Bergner of Bergner & Co. Media Brokerage.
“Multiples are running two times, up to as much as three times what stations themselves are selling for,” Bergner said. “If you’re a broadcaster and you’ve got a tower to sell, the bell is ringing now. If the stick has a cell-company agreement, the multiple could reach 16-times or even higher. It helps that interest rates remain low and that some very large consolidators are competing for a finite number of built towers.” Industry insiders note that in most deals the multiple is much lower that 16X.
Involved in buying radio broadcast towers are CTI Towers, SBA Communications, American Tower, but the most aggressive is Vertical Bridge Holdings, according to Bergner, who brokered the sale of two Wilks Broadcast Group-owned towers in Reno, Nevada, to CTI Towers.
Vertical, which made its presence known hosting a cocktail party at the National Association of Broadcasters annual conference this year, has closed several deals in the last 12 months.
In March of this year, Vertical purchased 200 radio broadcast towers from Alpha Media, including 49 sites Alpha had purchased from Digity. In August 2015, Townsquare Media sold 43 towers to Vertical for $22.8 million. And before that, in April 2015, Vertical purchased a portfolio of towers from iHeartMedia for $369 million.
Last week, Bergner announced that he was the exclusive broker for the sale of two broadcast towers in Murray and in Bowling Green, Kentucky, from Forever Communications to Vertical Bridge Holdings for between $1 million and $2 million dollars. He expects more activity in radio towers for the remainder of the year.
“The radio business has been challenged lately by the Internet and satellites, so they are cashing in on these valuable assets. They can stay on the tower and continue their business. It’s a win-win,” he said.
Bergner said tower companies are not as interested in the radio station’s rent as much as they are cellular tenants’ rent.
“The tower companies are insistent on cash flow. If you have cellular carrier income, they are willing to pay very large multiples,” he said. “If the additional cash flow is just radio broadcasters, utilities or public safety, they will pay a lower multiple. If there is no additional income, they may not buy it at all.”
But there are likely some lease up opportunities and marketing and management needs that will increase the recurring revenue from the radio towers.
“Typically, these radio stations have not maximized these tower assets from the income standpoint, and the cellular companies have taken advantage of them by paying below market rent and sneaking equipment up on the towers. Some radio towers may be underperforming financially,” Bergner said. “Tower companies can maximize the revenue potential through marketing and adding tenants.”