If you use the flow of capital as a barometer, 2014 will be another good year for small cell tower companies. Reporting a backlog of tower work, these firms are hungry for cash to build more towers. Small tower companies are also capitalizing so they can aggregate more towers.
In December, Bankers South provided $10 Million of debt capital to Bay Communications II, which develops, constructs and operates cell phone towers in the northeastern United States. Bay Communications II is also backed by equity partner Seaport Capital, which initially invested in the company in 2011.
“Closing a debt facility with Bankers South will help allow the company to execute on its strategic and tower development objectives. Jim Riley, CEO of Bay Communications, said. “The company has a significant pipeline of tower development opportunities and I am pleased that we identified a financing partner who is going to help it achieve its goals.”
In November, Central States Tower II (CSII) received $35 million in financing from CIT Corporate Finance, a provider of financing to small and medium sized businesses. The senior secured credit facility will be used to refinance existing debt and provide additional capital for the construction and development of towers nationwide.
To qualify for a loan in the range of $35 million to $50 million, it typically takes the cash flow generated by around 150 to 200 towers, according to Brian Meier, CST II COO.
Horvath Towers received a senior debt commitment of up to $20 million from The PrivateBank in November. In October, Peppertree Capital Management provided Horvath with an additional $30 million in equity, raising its total equity commitment to $68 million. Together with Horvath’s equity commitment from Peppertree Capital Management, Horvath now has $88 million of available capital to develop towers
Skyway Towers received an additional $75 million equity commitment from its investors, Tinicum and Permit Capital Private Equity Fund, in February of last year. Proceeds will be used to continue Skyway’s development of cell towers on a build-to-suit basis, according to Skyway’s chief development officer Eric Bondurant.
In August, InSite Wireless Group completed the sale of $177.5 million secured cellular site 2013-1 Rev Notes, which were backed by mortgages representing 72.7 percent of annualized run rate net cash flow. InSite owns or leases 512 cellular sites and owns the rights to operate 16 DAS networks.
Small Tower Companies Look to Grow Through Aggregation
CTI Towers secured up to $30 million in debt financing in October. But the firm, which was begun by Comcast, plans to use that money to aggregate towers, as opposed to building them. It was launched in 2011 with a management contract for 800 towers that were previously owned and operated by Comcast Cable subsidiaries. To date, CTI has acquired 230 of the 800 towers that it manages. Its long range goal is to be the fourth largest tower company.
Similar to CTI Towers, CiG is a tower aggregator. In August, CiG completed a $35 million preferred stock financing agreement with Fir Tree Partners, a New York-based private investment fund. Up to $25 million in additional investment from Fir Tree may be used for additional tower acquisitions. In September 2012, the towerco closed a credit facility with Macquarie Bank for up to $150 million.
Horvath Towers, a cell tower owner and developer, has added equity and debt financing that will help it double its tower portfolio by the end of next year.
Peppertree Capital Management provided an additional $30 million in equity, raising its total equity commitment to $68 million.
Horvath Towers was formed in partnership with Peppertree Capital in 2007 with an initial commitment of $8 million. Peppertree’s commitment grew to $18 million in 2008 and then to $38 million in 2010.
“We have teamed up with a great partner, Peppertree, because they allow us the opportunity to grow at the rate that we desire,” Jackie Horvath, president and CEO of Horvath Towers, told AGL Bulletin. “This new equity infusion is combined with a smaller debt commitment of $20 million.”
Horvath will have 89 new sites by the end of October and has several more under construction to be completed this year. The firm has several projects in the pipeline for next year, as well. Its plan is to double its portfolio by the end of 2014.
“Our business model is simple, our first priority is customer service, so we work with the carriers to determine areas throughout the country where there is a need for a cell tower,” Horvath said. “Because our sole focus is on owning cell towers, we are able to provide superior, focused customer service to our clients.”
Horvath’s growth, thus far, has depended on developing towers from the ground up, as opposed to purchasing towers from carriers.
“We have simply found that there is more advantage to us building and owning our own towers,” Horvath said. “We have control over the due diligence process, which ensures that sites are built to specific standards for future collocation and modifications. This is not to say that we wouldn’t consider purchasing some towers in the future, but it is not our primary focus.”