Four strategic variants — municipal and school district partnerships, acquisitions of existing tower assets, carrier build-to-suit services and rooftop management — offer opportunities for property owners to generate additional income from underused real estate assets. Arcadia Towers Group applies its business expertise to capitalize on these variants and provide attractive locations for 5G wireless sites.
“We help our wireless communications carrier-customers bring their networks closer to where their customers are,” said Arcadia’s president and CEO, Sam Johnston, in an interview with AGL eDigest.
Municipalities and School Districts
“We are seeing more interest now from municipalities, not just from the monetization side — it’s great to get to receive monthly income; no one complains about that, typically — but also from the public safety side, particularly in schools, with active shooter and other extreme emergency situations which strain network coverage” Johnston said. “That is becoming a top-of-mind issue for schools.”
According to Johnston, schools also have a technology need. For example, he said, students often use multiple wireless devices.
“They’re coming in with laptops,” Johnston said. “They’re coming in with cell phones. Often, they have tablets that schools issue, as well. Thus, schools have bandwidth and coverage concerns, and they are interested in making sure that they have the bandwidth available to be able to meet their needs.”
When it comes to acquiring tower assets, Johnston said that Arcadia’s interest is not limited by a geographic boundary, and the company has an interest in acquiring towers in urban, suburban and rural areas.
“There are business cases across all geographic areas,” he said. There’s going to be a huge rural play, along with the urban and suburban growth that people understand more readily.”
Johnston described the marketplace for towers as frothy and competitive, saying that tower owners understand where valuations are.
“As a person who has a background as a regional developer, I understand the issues and challenges facing those tower owners,” Johnston said.
According to Johnston, confidentiality is a high priority with many owners considering selling their towers. “That’s often one of the top issues for them,” he said. “Also, they want expediency in a transaction, so they want someone who’s able to close a transaction quickly.”
A reason confidentiality might be important to a seller is because the timing might not be right for selling the towers. “They’re starting to think about it,” Johnston said. “They want to understand where they might fit in the current valuation scheme, and how selling at such high valuations today might allow them to realize better long-term returns versus holding out for incremental lease-up.
“We know a lot of regional developers are waiting to see what materializes with Dish Network and how to monetize that opportunity,” Johnston said. Dish Network is building the United States’ fourth national wireless network and has a need to collocate on existing tower assets. “Sellers don’t necessarily want to put up a shingle that says, ‘Hey, I’m for sale.’ But they’re interested in finding out their value, learning what the process is going to look like and understanding how they can get there.”
“Another important point for sellers is that — even if they’re selling a smaller portfolio of, say, one-to-five sites — they are going to receive senior management involvement and decision-making in the sale process,” Johnston said, speaking of advantages sellers have in dealing with Arcadia. “They want to feel like they’re getting the attention that they need in the process.”
Arcadia is lucky to be in a position to be patient about tower transactions, Johnston said, because sellers want partners who are ready when they are. “A sale might happen today, or it could be in a year from now,” he said.
“We’ve seen developers that want to take advantage of the market timing, with multiples that are all-time highs,” he said. The word multiple refers to a way of representing the price for a tower as a multiple of cash flow. “Developers ask how they can participate in that opportunity. They ask how they can get ahead of their preferred return hurdles they have with their current financing arrangements — which we see a lot of. At heart, I am a regional tower developer too. I understand where they’re coming from.”
As for tower build-to-suit activity for the coming year, Johnston said that it appears as though the carriers are focused in the near-term on the deployment of recently acquired mid-band radio-frequency spectrum needed for their 5G networks at existing sites. “That seems to be top of mind,” he said, “and in the case of Dish, a de novo network build-out. As a result, we see a lot of collocation activity on existing assets, versus other times when site expansion might have been top of mind for carriers. That’s going to skew opportunities toward collocation activity on existing assets for the near-term. However, once that portion of the network is overlaid, the densification that’s needed for 5G is going to drive new site builds from that point on.”
Commercial real estate owners understand the challenges associated with tenant leasing and build out, Johnston said, activity that is similar to the wireless infrastructure business. “They’re leasing space, and they’re building out office interiors and commercial properties,” he said. “Leasing and build-out issues are compounded with wireless, because it’s an area that they typically don’t understand, as they’re focused on their core business.”
Fortunately, for companies such as Arcadia that manage rooftops as antenna sites, commercial property owners have always seen a value in tenant and landlord representation, Johnston said. He said that Arcadia is in the tenant and landlord representation business.
“A lot of commercial property owners don’t rep their own property,” Johnston said. “They rely on tenant reps that bring customers and leasing agents to handle leasing. We just happen to offer those services on the wireless side. We give them another tool, circling back to the initial common thread among our four strategic variants, which is that we help them monetize underutilized real estate assets. They recognize that wireless-related companies such as Arcadia are experts at doing just that.”
Asked what has given him the most satisfaction from being in the wireless infrastructure business, Johnston said it has been the friends he has made over the past 25 years.
“We have some great people in this industry, and those whom we might have called competitors are folks who we get along with tremendously and share thoughts and ideas on how we can better ourselves as an industry,” Johnston said. “I would say, first and foremost, being able to have those personal relationships with carrier-customers, landowners and other asset owners within the industry has been really gratifying for me.”
Don Bishop is executive editor and associate publisher of AGL Magazine.