Buying and selling assets at the ‘grass roots’ level in LatAm and APAC

Wireless assets come in many shapes and sizes, from high profile sale and leaseback transactions between multi-national MNOs and towercos, to smaller, regionally focused deals when a couple of dozen to a few hundred towers, rooftops and billboards may change hands. TowerXchange wanted to understand how the market worked at this ‘grass roots’ level, particularly in Central America where the size of many markets is prohibitive to achieving conventional concepts of ‘scale’, so we spoke to Robert O’Shea of Green Ball Wireless Partners.

TowerXchange: Please introduce us to Green Ball Wireless Partners Partners.

Green Ball Wireless Partners specialise in wireless acquisitions, domestic and International; including towers, rooftops and billboards. We prefer billboards with wireless tenants, however, we have an interest in strong billboard assets as well as other leased assets.

We’ll review opportunities in Europe, North America, LatAm and Asia-Pacific.  Our focus for the last three years has been in Central and South America, with most success in Central America. With the US market saturated with investor activity and bidding wars, I felt it would be a path of lesser resistance in LatAm, and that seems to have proven itself.

We’re doing some acquisitions of some smaller portfolios, with an eye on some larger ones, and in that process, I’m either sourcing the opportunity or being referred to one from associate brokers on the ground in Costa Rica, Panama and Colombia – people whose roles are aligned with the wireless market, enabling them to source ‘grass roots’ opportunities.  I then present these opportunities to our investor group associations.  As we continue to do deals and grow, and move into new markets, we will acquire towers and other telecom sites, and ultimately fund the build-out of these assets.

Currently we are closing on a nice portfolio of outdoor billboards across Panama and Costa Rica.  These sites all have wireless tenants, and the deal has given us access to a portfolio of the same across Central America.  I’m presently looking at several options for it, including a lease-up to other carriers that may need added coverage in these other markets.  When I was in Panama this past year to finalise a deal, I had the opportunity to take several meetings, including one carrier, and other commercial groups to discuss their assets and the potential opportunities.  That trip proved to be a segue to opportunities in Colombia, which we are very excited about.

TowerXchange: How does the tower industry work at the ‘grass roots’ level of owners of individual and small portfolios of sites?

We tend to farm opportunities at the ‘grass roots’ end of the market, with an eye out and ear to the ground for higher-level deals.

Many people who own the land under multiple towers, or several buildings with rooftops, or a portfolio billboards, don’t really know the value of these assets from a telecom real estate perspective – they don’t understand the context and the opportunity. We help them explore and discover the opportunity to “cash out”, or “cash in”, whether we acquire the lease, help with lease-ups, or consolidate with other assets to form an investible portfolio.

TowerXchange: What is the structure of the tower industry at grass roots level in Central and South America? Are there a substantial number of small portfolios of assets in the hands of private owners and small firms? Are they generally ‘going concerns’ not looking to sell, or is there a lot of consolidation at the grass roots level?

The large publicly traded towercos have substantial portfolios in multiple countries. There are regional towercos with a presence in maybe one or two countries. Beyond the regional level or mid-market groups, we’ve only scratched the surface.  There seem to be few micro-market or small-shop companies.  We continue to work to connect with those at the grass roots, we want to engage them, and we want them to come to us so we can examine any and all opportunities to work with them.

Our path to connecting with groups in Central America began by identifying locations of some assets and then contacting the party directly, in some cases with boots on the ground introductions.  We found direct, or indirect party associations that got us where we needed to be.  The LatAm market does not have the easily accessible data as we have here in the U.S., therefore, resourcefulness and key contacts in-country do pay off both in sourcing and in due diligence.

I believe there are a number of great opportunities there, many waiting to be sourced.  I’ve had quite a few conversations, including a few in-person meetings down there.  Some that are on-going dialogs, and others in development.

It’s interesting, many people that I’ve spoke with down there have not necessarily been looking to sell, however, we’ve been able to dialog with them, to fully vet any opportunities, and found ourselves in many lengthy and ongoing discussions.  As is the case in many businesses, timing is crucial, or it may complicate an opportunity.  Some groups have been going through structural changes, acquisitions, et cetera, and so conversations can get put on hold. Some we are circling back to now.

TowerXchange: Talk to us about the different buyers and investors attracted to wireless infrastructure asset portfolios of different scales – are the same parties interested in a small portfolio of 25-50 ground leases, rooftops or billboards as in medium sized portfolios of 50-500 towers? At what scale does an opportunity become ‘investible’?

Well, we have the 1,000 pound gorillas as I mentioned, American Tower and SBA Communications, on down to the middle market / regional towercos, some various equity groups as well, all open to listen to a lot of opportunities.

The larger regionals may go into a deal of say 50-100 sites, then of course, the gorillas don’t want to touch anything less than several hundred.  If a group is already inside a country where there may be a deal on the table, yet it lacks their preferred scale, I may be able to talk them into entertaining it, or consolidating it with a second opportunity to get to scale.  Market entry is not an inexpensive proposition, so size-appropriate portfolios and/or the opportunity for subsequent transactions needs to exist.  There is a discriminating level of interest below a certain threshold, which is why we need to work with and develop the grass roots business, or individual shops.

Everyone will take a look but they all want the towers, and usually equally open to rooftops; however billboards are a developing taste.  Billboards are still unknown to many or they’ve just been overlooked.  So, yes, for the most part the key players are looking at buying the same assets, with the preference on buy and leaseback, or build-to-suit. The other side of this is acquiring the lease on the sites, which is quite common in the U.S., and a more difficult process internationally, compounded when factoring in remote locations.

In summary, a portfolio of perhaps 25-50 sites can attract investors, either a towerco or private equity. We will have a regional towerco buyer for a portfolio of 50-100 or so sites. Portfolios of 500+ sites tend to be sold by carriers and brokered by the big investment banks such as Citi, Deutsche and Morgan Stanley.

Auction deadlines can be tight in Central and South America, which means you may not have long to complete due diligence. Brokers help the investors to understand the current and potential future yield, and place the opportunity in a global and local context. We’ll work with buyers or sellers – transparently representing one, but I recently represented both parties in Panama, very transparently, albeit compensated by the seller only.

My job is to get the best front-side cash for the seller, but also find a win-win to complete the deal.  GBWP will do more than the big guys who stop at the best purchase price, for example, we’ll work on scenarios and negotiate revenue-sharing on any future upside.

TowerXchange: Does the pool of prospective buyers change considerably according to perceptions of country risk?

Absolutely! I’ve had excellent opportunities in the past in Asia-Pacific and LatAm, where portfolio asset fundamentals were very attractive for any investor, however, in the respective countries the “politics” didn’t pass muster.  Whether a country has any foreign investor restrictions or regulations, a decision to move forward can be halted quickly by the over-riding known, or perceived level of risk.  While there are some amazing growth opportunities at face value, the reality is that some areas will remain untouchable for the foreseeable future.

If you’re in the tower game or looking to be in the game, you’ve got to be in it to win it – you can’t afford to stay idle. From small private equity to institutional buyers, where the larger cash goes, others typically follow – figuring the big players have accurately diagnosed risk.

Chile is a good example. We see Chile as a great opportunity. There are auction blocks coming up, it’s an investible country in an attractive region with stable politics and a large and growing telecom industry. But how does the slowing of exports indirectly impact short term market growth? Chile has taken a big hit on falling sales to China, yet overall we still see Chile as a great opportunity.

TowerXchange: How do you sell a ‘grass roots’ level portfolio of ground leases, rooftops, billboards or towers? How do you call the opportunity to the attention of prospective towerco or investor buyers?

First, I have to know all there is to know about the assets and the individual seller or business entity.  Transparency at all levels and across all details is critical.  Some things are easily missed.  The more I know, the quicker I can determine where and how to present a deal.  Appetites and risk tolerances are all different.

I personally get on the phone and speak to a potential buyer.  We talk fundamentals first.  If the buyer or investor can get their arms around the fundamentals, whether it be tower or billboard, Panama or Peru, then we can drill down deep very quickly.

If we can’t sell certain assets today, we’ll go to work on a lease-up to increase cash flows, so that when I subsequently am able to bring those assets to market, it’s more equitable for all parties involved.

TowerXchange: I understand you’re working on a current opportunity in Colombia that you can’t say too much about, but can you give us your view of the investibility of telecom sites in Colombia, particularly in the context of the rollout of LTE, commencing in earnest in 2014?

Colombia is a another attractive market. An open trade market and a big trade partner with the US, and eyes wide open for investment, Colombia offers solid growth potential. Rollout of LTE will create amendment revenue opportunities in Colombia that affects almost every tower owner.

We’ve had some dialog with a group that gives us exposure to a very large portfolio in Colombia.  My thoughts are that the proposition could go several ways.  And because of who we are dealing with we could easily be out in front of others very quickly.

I’ve come across some individuals at work at the grass roots level in Colombia. They are setting the framework for a unique business model that we may explore in the near future.  This goes to the point; you can’t be a one-answer-only solutions provider.

TowerXchange: Let’s sum-up by asking you your view of Green Ball Wireless Partners’ role in the extension of the independent tower industry into new markets.

Our efforts are focused on bringing asset portfolios to the table that include tower and rooftop purchases, leasehold acquisitions, and potential build-to-suit. The paradigm shift of wireless providers divesting themselves of non-core business assets has more than caught hold, it’s a model that has gone global.  In that shake-out, savvy investors are coming to the market, and smaller entrepreneurs are throwing their hats into the towerco model.  We are going to be in the front, middle, and back side of this evolving industry.

Where the wireless growth is hot and while the market is good, roll-out will continue, increasingly driven by the investment of the towercos.  When the industry slows or the markets cool, we’ll drill down to more individual sites with the individual property owner who “needs” to tap capital.

TowerXchange: Finally, what makes a good broker of a tower deal?

A seller or buyer needs a team that has Confidence and Resourcefulness, and not a one-answer-only solutions provider. A good broker is driven by the needs of their client.

Your broker has got to know who to call, and be discerning about who to call.

And a good broker can’t be afraid to turn over new and old stones. There may still be opportunities with people who passed on previous opportunities because the market changes so quickly.