Although equipment distributors have been known to finance the construction of distributed antenna systems and other in-building wireless systems in medium-sized buildings, providing financing doesn’t make good use of their capital and brings with it a risk that distributors would rather not incur, according to Richard Grimes, cofounder and chief operating officer of Strategic Venue Partners (SVP). The company provides the initial and future capital necessary to design, install, manage and upgrade wireless infrastructure systems
Grimes said that sometimes original equipment manufacturers have provided financing, too. Such financing often covers only half of the money needed to construct the system because although it pays for active and passive elements of the wireless infrastructure, it doesn’t pay for work performed to install a system, operate it, maintain it and refresh it as needed, Grimes said. “The lion’s share of the investment of capital needed is in the implementation, and then on an ongoing basis, the refresh and the upgrading,” he said.
The lion’s share of the investment of capital needed is in the implementation, and then on an ongoing basis, the refresh and the upgrading.
— Richard Grimes, cofounder and chief operating officer at Strategic Venue Partners
Photo by Don Bishop
Wireless communications carriers and building owners and managers alike have been showing reluctance to pay for in-building wireless systems, as indicated by what their representatives say at conferences such as the DAS & Small Cell Congress, where spoke with Grimes.
“When building owners and managers want to have an in-building wireless system designed, deployed and made operational, they have to make a decision,” Grimes said. “As the business shifted away from carrier financing, there wasn’t a player that had substantial capital behind them and wireless infrastructure and finance experience to be able to be that solution — to invest that initial capital. That is where we saw opportunity to provide financing for a 20-year technology solution that includes end reserves for upgrades and refreshes. We assume the risk and move it away from the venue ownership.”
Technology Road Map
SVP provides investment capital to enable the wireless infrastructure to be deployed to carry radio signals from wireless local area networks (LANs), public safety radio communications and commercial cellular networks, Grimes said. Together with its business partners, he said, SVP brings cost efficiency and a road map of what the technology solution would be. The managed services to be provided relate to that capital investment and the reserves SVP puts in place. Selecting the technology to be deployed plays a critical role because it affects the metrics that measure the managed services fee.
“We make sure that we support, in conjunction with the building ownership, a road map, a platform that is going to be cost-effective for them, but also smart, that gives flexibility and sustainability for the evolution of wireless infrastructure and connectivity,” Grimes said.
Grimes said SVP underwrites the investment based upon the credit of the venue and its ownership. In taking a security interest, SVP has ownership in the wireless infrastructure, amortized over 20 years to make it cost-effective for the building owner, which Grimes said is a key point. He said the venue has the ability to buy SVP out of the underwriting criteria, but for SVP to invest the money, it has to have the underwriting.
“There are certain underwriting criteria as far as recapture of the money is concerned in the event that there is an early or a default termination or otherwise,” he said. “Essentially, we don’t find that being an issue for the building owner, because many times, the building owner doesn’t want to own the in-building wireless system because then it has the risk of being able to support it. On the other hand, the building owner may want to own the in-building wireless system when the time comes to sell the building.”
When Ownership Is an Advantage
The building owning the wireless system may be an advantage when factored into the value of the building at the time of sale, Grimes said. He said it may be better for the owner to exercise the buyout of the wireless system and obtain a multiple on it for the future. With SVP’s low cost of capital, it obtains a satisfactory return on its investment in in-building wireless systems. “If we get those returns, we’re fine with a buyout provision, one-time, after a certain period of time,” Grimes said.
SVP has such a low cost of capital thanks to its financial partner, Tiger Infrastructure, Grimes said. “They are long-term players,” he said. “Short-term players want a high return, which involves high risk, because they want to get out. Our philosophy with our financial partner is long term. That provides a benefit to everyone involved.”
Many customers come to SVP through systems integrators or other technology players that have opportunities to construct in-building wireless systems, but they find that venue owners and managers tell them they cannot afford wireless infrastructure. “Ironically, a lot of those opportunities may be dead on a Salesforce spreadsheet, but there’s an opportunity for us. The owners need it. They want it. And even though they can get 50 percent of it financed through distributors or manufacturers, that much financing doesn’t help them with implementation, the technology risk, supporting the system into the future and evolving it on a sustainable platform.”
SVP has its headquarters in Madison, Connecticut. In addition deploying to DAS, wireless LAN, fiber, Internet Protocol television and public safety communications technologies, the company generates revenue for hosts through small cell and macro site development.
The next DAS & Small Cells Congress is set for June 10–12, 2019, in Las Vegas. Visit www.dascongress.com.