When it was looking for its latest round of funding, Vertical Bridge Holdings decided to go long. The private tower owner and operator brought in a Canadian company that manages funds for public pensions and insurance plans, Caisse de dépôt et placement du Québec (CDPQ), to acquire a 30 percent stake.
In 2014, Vertical Bridge was founded with capital from its executives and long-term infrastructure funds, and now it is transitioning to even longer-term investors.
“People have suggested that we are selling. No. It is the opposite. We are doubling down. The business rationale here is really about longevity,” Alex Gellman, CEO and co-founder, Vertical Bridge, told eDigest. “Pension funds are more permanent capital. They will invest and stay in for literally decades. It gives us access to other deep pockets as we continue to grow.”
Vertical Bridge will use the investment from CDPQ to continue to expand its portfolio of broadband and broadcast towers, small cells, real estate and other wireless infrastructure assets ahead of 5G deployment.
“The investment gives us the ability to invest in assets and be creative for our customers, which are big and need a meaningful partner. With capital, and being private, we can be more flexible. We can move faster and be more creative than some of our public competitors,” Gelman said.
Since its inception, Vertical Bridge has completed more than 250 acquisitions and has grown its portfolio to more than 266,000 sites, including more than 16,000 owned and master-leased towers, as well as the nation’s largest and tallest private portfolio of broadcast towers.
Traditionally, the tower industry has grown through developers building portfolios of assets, which they would sell off and then start over. As long as the carriers award work locally, that model continue to work, Gellman said, but Vertical Bridge is betting that the maturation of the wireless industry will lead to a consolidation of the carriers, which will favor larger tower companies.
“The biggest indicator of the maturation of our business is the more that the carriers consolidate control centrally, the more important it is to be big. As a private company it is hard to get your investors to stay around long enough to get big,” Gellman said.
CDPQ joins a group of long-term investors that have supported Vertical Bridge since its founding. The group includes Digital Bridge, The Jordan Company, Goldman Sachs Infrastructure Partners, Stonepeak Infrastructure Partners, The Edgewater Funds, CalSTRS and Dock Square Capital. The Vertical Bridge executive team also holds a significant stake in the business.
A private equity fund invests three to seven years and an infrastructure fund invests for five to ten years, while a direct pension fund investment will last well past ten years. The reason for the difference is the expectations of the investors. Infrastructure funds generally have limited partners that are pension funds or sovereign wealth funds. However, pension funds, especially in Canada, have been developing direct investment programs into companies, as opposed to coming in through a fund, Gellman said.
“Pension funds are much longer investors because they don’t have the pressure from the end of the life of the fund,” Gellman said.