Daniel Agresta, president and CEO of APC Towers, is among the private tower operators who credit experience gained while working for public towers companies for their ability to run privately held companies.
“Since about 2013, half of the private tower operators have come out of the public tower sector,” he said. “On top of that, the publics have had real estate investment trust (REIT) status for five years. As a result, you have all of this new opportunity – new limited partnerships, new general partnerships, all this new money out there, sitting on the sidelines, either looking for platform company to start from or to invest in a person or group that they think can grow a tower company.”A platform company typically is defined as the initial acquisition made by a private equity group.
Agresta estimated that the United States has about 170,000 macro towers, and that in the near future, the number will exceed 200,000. Small cells number about a quarter of a million, he said.
“In early 2020, the number of small cells will reach 900,000, so the growth is there,” Agresta said. “The influx of new companies is a result of a perfect storm. I have been doing mergers and acquisitions off and on since 2009, depending on my role at a tower company. Prior to cofounding APC Towers, I was in the public sector at Crown Communications with Bob Crown before Crown Castle, and then SpectraSite and American Tower.”
The tower owners of 10 and 15 years ago looked a lot different than today’s private tower owners, Agresta said. He said the tower owners back then were buying towers from two-way radio operators, radio stations and professional services. He said the companies that were doing some kind of entitlement work had a state or a region where they had good relationships with carriers, and then they started building and selling towers.
Today, money available from infrastructure investment funds and private equity sources has created an influx of new tower companies, according to Agresta.
“Do I think there are too many operators, currently?” he asked. “Yes. There are a lot of them. The thing that is dangerous is that when there are so many operators vying for three or four carriers, sometimes behavior changes. The challenge right now is trying to steer that in the right direction and create partnerships with carriers who will work with you and keep the result at fair market value.”
Agresta said that even though the availability of capital has changed, there have been new entrants, maybe the rent has changed and the rent escalation rate has changed, what has not changed is that time is of the essence.
“Time to market is still important to the carriers,” Agresta said. “The new companies that are operating and that are disruptive — they eventually will fail. When they fail, and the carriers don’t hit their time to market timelines, this too shall pass. It is just going to be painful for a little while.”
Agresta spoke at the Connectivity Expo session, “Investments, Partnerships and M&A in a Converged Edge/Tower Architecture.”