American Tower Lands Blockbuster Portfolio; Buys Verizon Towers

February 5, 2015

Already one of the largest tower companies, American Tower is set to become even larger, with a $5 billion deal to lease space on and operate Verizon Communications’11,324 wireless cell towers for 28 years and to purchase 165 additional towers. As a result of the sale, American will have a wireless communications real estate portfolio in the United States sized at more than 40,000 tower sites.

American Tower will have the option to acquire the towers based on fair market value at the end of the lease terms.

American Tower has obtained committed financing for the transaction from Goldman Sachs, who also acted as financial advisor. The transaction is expected to close during the first half of 2015.

The portfolio features average tower heights of 200 feet, ample structural capacity and ground space, attractive transmission locations with relatively few competing sites, a solid ground lease profile, and is well documented with technical information, according to Jim Taiclet, American Tower’s CEO.

“By acquiring access to this high quality asset base, American Tower will be well positioned to capture incremental leasing activity and extend our ability to drive strong annual organic core growth and solid AFFO per share growth, well into the future,” he said.

Verizon has contracted to sublease space on the towers for a minimum of 10 years with monthly rent of $1,900 per site and fixed annual rent escalators of 2 percent. Verizon will have the option to extend the full term of its sublease to 50 years. Verizon will also have access to certain additional space on the towers for its future use, and American Tower will have the right to sublease other available capacity on the towers to additional tenants.

Additionally, Verizon announced that it is selling wireline assets for $10.54 billion and buying back $5 billion of its stock. All told, the carrier raised more than $15 billion, because it did not have the free cash flow to cover the cost of the frequencies it bought at the AWS-3 spectrum auction, according to AH Research.

“The company could not take additional debt because its total debt has reached $113.3 billion, which has elevated its net debt to adjusted EBITDA multiple to 2.4x,” the firm wrote on Seeking Alpha.