High demand for tower space from wireless, broadband and data providers continues to drive up the value of communication towers across the United States.
Vertical Bridge, an acquisitive company formed by the former management team at wireless infrastructure company Global Tower Partners, continues to scoop up tower properties. Its purchase of Cumulus Media’s tower portfolio in the second half of 2020 aligned the telecommunication infrastructure company even more closely with broadcast radio.
Vertical Bridge has previously made headlines for its broadcast tower pursuits. iHeartMedia sold more than 400 of its broadcast towers to Vertical Bridge for $400 million in 2014. In recent years the tower consolidator has also announced notable broadcast structure deals to buy or manage tower properties for Townsquare Media, Cherry Creek Radio, Univision and Alpha Media.
Radio broadcasters continue to unlock value in their towers by selling off the assets and generating large amounts of cash. In most cases radio broadcasters lease back antenna space on the towers they sell, according to those familiar with the arrangements.
Selling off towers also means radio broadcasters are left without the worry of tower maintenance and the associated operational expenses. And in the case of Cumulus, the move brings in a large influx of needed cash.
The tower industry is booming with the fast spread of 5G and further TV repack work. Vertical Bridge has been quickly expanding its footprint. It already is the largest private owner and manager of communication tower infrastructure in the United States.
The company, founded in 2014, has approximately 2,000 broadcast towers in its portfolio. In total it says it has more than 290,000 owned and managed sites in the United States, which includes wireless and broadcast towers, rooftops and land parcels. It recently completed a merger with another tower company, Eco-Site, that brought in approximately 600 towers.
The Cumulus purchase was valued at $213 million and included 250 sites in 32 states, according to Cumulus filings with the U.S. Securities and Exchange Commission. The purchase has closed except for a few pending obtaining consent from landlords, according to Vertical Bridge. The remaining assignments are expected to be finalized in the first quarter of 2021.
Cumulus President/CEO Mary Berner said in a press release about the transaction last year that it was a way to “further add to our liquidity and contribute to significant incremental debt pay down.”
The leaseback period between Cumulus and Vertical Bridge is for 10 years, followed by five option periods of five years each, according to government filings by Cumulus.
“The annual lease payment obligation for the assets leased back in the initial closing is approximately $13.2 million, subject to customary escalators,” according to a Cumulus investor note in October.
Those properties were attractive for one very specific reason, said Bernard Borghei, co-founder and EVP of operations for Vertical Bridge — the same reason most tall broadcast sticks interest the company.
“These tower properties were built 40, 50 and 60 years ago. These properties now exist in core urban areas. With the restrictions you have on zoning and permitting towers, these towers exist in locations where no one else can zone to build a tower,” Borghei said.
“These are assets we refer to as zoning protected. Meaning our competition cannot come in and try to build a new tower.”
Some of the former Cumulus tower sites are in the middle of urban areas in Chicago, Philadelphia and Los Angeles, he said, and are attractive to non-broadcast tenants as well.
“And as a real estate company we love the great locations,” Borghei said.
Vertical Bridge, headquartered in Boca Raton, Fla., leases tower space to radio and TV broadcasters, telecommunication carriers and other users of wireless technology.
Borghei believes the terrestrial radio broadcast industry is healthy enough to support Vertical Bridge’s long-term growth.
“Certainly we intersect closely with radio. We think the broadcast industry is on its own healthy. We could see that iHeart, once they restructured, would come out healthy and strong. We have that same feeling about Cumulus. We believe in that market sector and secured what is now the largest broadcast towers portfolio in the country.”
Vertical Bridge is owned by private equity groups including Digital Colony, The Jordan Company and Stonepeak Infrastructure Partners, along with private investment groups like the California State Teachers’ Retirement System. It has lease agreements with many regional radio broadcasters, Borghei said.
“The leaseback agreements help us maintain occupancy, of course. The lease terms are in line with what the tower industry is experiencing on the broadband side as well.”
Borghei said there are obvious advantages for radio broadcasters who sell their tower sites to Vertical Bridge.
“Some of the broadcast companies needed to raise capital. And didn’t want the ongoing maintenance cost of looking after these really tall towers,” Borghei said. “Broadcast towers require time and money to maintain. I think many broadcast companies are optimizing their resources and their engineering teams. And they don’t have to worry about having cap ex allocations in their budgets to maintain these towers.”
The company handles the obstruction lighting, painting, structural inspections and ground maintenance of the towers they own and manage, he said. Vertical Bridge also maintains generators and HVAC systems while keeping abreast of all FAA and FCC regulatory requirements (see sidebar).
Borghei says the company’s pipeline for mergers and acquisitions of broadcast towers remains strong.
“(Vertical Bridge) is keenly interested in further broadcast tower projects to develop. Operating a broadcast tower is quite different than a broadband tower. We understand both. You have to have that understanding to be able to work with different tenants, and especially live broadcast companies.”
The integration of 5G remains a primary focus of Vertical Bridge’s infrastructure plans, Borghei said, including the plans of Dish Network now that that company has been confirmed as the fourth national 5G network. Dish has said it will begin its 5G network buildout in earnest in the second quarter.
“More 5G and CBRS [Citizens Broadband Radio Service] networks are beginning to take hold. It’ll also be interesting to see who comes out and owns what as a result of the C-band spectrum auction. That’s very valuable spectrum, and it looks like Verizon and AT&T are the top two,” Borghei said.
Borghei said the COVID-19 pandemic has done little to slow the growth of Vertical Bridge despite some challenges.
“For us 2020 was a heck of a year. From a business perspective it was a tremendous year from the Cumulus acquisition to closing the Eco-Site merger. And our new build program has been extremely successful. We continue to have a lot of new tower builds and we don’t expect that to slow down in 2021,” he said. “The majority of our new towers are 180 to 250 feet for 5G and 4G densification upgrading to 5G.”
In fact, 5G plays a critical role in Vertical Bridge’s pursuit of tall broadcast towers, Borghei said.
“Broadcasters are typically at the top of the towers but then you have the 400 to 500 feet beneath broadcast available for broadband carriers looking to deploy 5G. And again we own towers in locations where no one else can ever zone a new tower,” he said.
Other major ownership groups making notable deals to sell off communication towers in recent years include Townsquare Media, who sold 43 towers and property to Vertical Bridge for approximately $22.8 million in 2016, and Cox Enterprises, which sold all but one of its towers to InSite Wireless Group in 2015.
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