December 3, 2014 — When Global Tower Partners sold all of its U.S. towers, it might have seemed like Marc Ganzi left the tower industry. Nothing could be further from the truth. In the past year, he has been busy rebuilding his wireless infrastructure empire, investing in wireless infrastructure companies, raising capital and aggregating towers.
The tower industry has many success stories among the small private firms and the giant public companies. But Ganzi’s new company, Digital Bridge Holdings, which he formed with former Blackstone telecom chief Ben Jenkins, bridges the divide between private and public, taking on the advantages of each. It is, indeed, in a league of its own.
In fact, in the last 90 days, Digital Bridge has amassed more than a billion dollars in the private markets. It may be the Ganzi halo-effect but investors continue to be enamored with the prospects of tower aggregation.
Digital Bridge Holdings announced last month that it had raised $750 million in equity for Vertical Bridge, its U.S. tower arm, through investments by leading institutions, foundations, family offices and individuals, as well as The Jordan Company and major new commitments from Goldman Sachs Infrastructure Partners and Stonepeak Infrastructure Partners.
In September, Vertical Bridge Holdings secured more than $500 million of incremental capital, including new commitments from The Jordan Company, The Edgewater Funds and additional capital from Digital Bridge Holdings. Vertical Bridge also announced that it has closed on a $270 million senior credit facility led by TD Securities, Deutsche Bank and CIT as part of this recent round of capital formation.
Ganzi credits the confidence in the robust nature of the wireless industry and the private status of Digital Bridge for their early successful investing.
“I believe we have proven that we can raise capital very fast and efficiently. I don’t know if we could have had the same type of success if we were public,” Ganzi said. “The formation of capital on this scale would not have been possible, unless we believed there was still an asset aggregation opportunity within the United States to buy and build sites and support our customers.”
Digital Bridge began in earnest in November of 2013, and a year later is managing three different investments. It has invested in the United States tower market through Vertical Bridge, the Mexican market through Mexico Tower Partners and in the Chinese tower market through a small local firm.
Vertical Bridge has been active in the U.S. market having closed 23 transactions for a total of 1,051 sites. It has plans to close another 22 acquisitions before the end of the year.
“Vertical Bridge has very quietly amassed the largest private tower portfolio in the United States,” Ganzi said. “We think there is an opportunity to acquire an additional thousand sites in the next six months. We are also building quite a few new tower sites now as well … I am thrilled that we have gotten our new tower build team up to speed and in full execution mode.”
Ganzi has built Vertical Bridge with many of his former operating partners from Global Tower Partners, which itself is known for becoming a tower aggregating giant. Vertical Bridge was founded by Alex Gellman, (the former president and COO of GTP), along with Bernard Borghei (former senior vice president of operations at GTP) and Michael Belski, (former senior vice president of leasing and marketing at GTP). Ganzi has also enlisted GTP alumnus Mark Serwinowski (the former vice president of IT for GTP) as the CIO at Digital Bridge Holdings.
Ganzi is engaged in the merger-and-acquisition activities at Vertical Bridge alongside the company’s senior vice president of mergers and acquisitions Robert Paige, who formerly ran the TMT banking practice at Brown Brothers Harriman in New York, which speaks volumes about his growth aspirations. “All the critical operational aspects that we had at GTP, we have recreated at Vertical Bridge,” he said. “We have rebuilt the M&A practice, as well as our new tower development capabilities at a very high gear.”
Developing a proven management team that has performed well across multiple markets is one of the keys to gaining the trust of investors, Ganzi said. The success of GTP with the sale of its portfolio to American Tower for $4.8 billion looms large in investors’ minds.
“Vertical Bridge is a great story for our new investors,” he said. “Alex [Gellman] and I have been together for 20 years as partners and there is a depth in the quality of leadership behind Alex. We had a great team at GTP and that was a unique group of professional managers that achieved great things together — I am eternally grateful to all them. Thankfully, many of them decided to continue to work with Alex and me again. Investors liked the GTP story and that outcome. Our hope is to deliver again.”
Don’t expect Ganzi to slow up anytime soon. One of the keys to the tower industry is scale, which allows access to the debt markets in beneficial ways, he said.
“That is something that we particularly excelled in at GTP. We were able to have a conversation with the rating agencies that was similar to the public companies. We had great success in raising CMBS [commercial mortgage-backed securities] and ABS [asset-backed securities] debt on terms that were comparable to the public companies,” he said.
While at GTP, Ganzi and Gellman learned that once a tower aggregator gets past 2,500 towers and more than $50 million in cash flow, it’s a different business.
“To really achieve the economies of scale in the tower business, you need to get to a size where you are generating a lot of free cash flow,” he said. “One of the secrets to GTP was we were able to access debt instruments and debt pricing akin to the public companies and not be public. That was part of the magic of GTP and we believe now Vertical Bridge as well, as being private allows us to aggregate capital quickly and efficiently.”
Comm Infrastructure Beyond Towers
As sold as Ganzi is on towers, he still sees opportunities in other related areas of wireless infrastructure, such as fiber, data centers and small cells.
“Investors really crave the safety and the yield that comes from long-term contracted cash flows from investment-grade carriers,” he said. “It is a story that transcends towers and is now permeating other asset classes, whether it is fiber, data centers or small cells.”
Ganzi and his partner Jenkins pay homage to the diversification that John Malone, chairman of Liberty Media and several other giants, achieved in media and cable as he discusses the importance of exploring the different facets that come together to make up the wireless infrastructure ecosystem. He sees opportunities in diversifying into long-haul fiber and cloud sourcing, as well.
“There are a lot of different ways to think about communications infrastructure. We are thinking through it carefully as to where they intersect,” he said. “Investor appetite is really strong for other facets of communications infrastructure. We think there is a lot to be done in the fiber space and in the small cell space.”
J. Sharpe Smith is the editor of AGL Link and AGL Small Cell Link newsletters.