Q1 2021 Radius Global Infrastructure Inc Earnings Call
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Yeah.
Good morning, and welcome to the radius global infrastructures and first quarter 2021 financial results Conference call.
During managements presentation your line will be and on listen only mode.
At the conclusion of prepared remarks, there will be a question and answer session.
I will price provide you with instructions to join the question queue. After managements comments.
Today's conference is being recorded.
I will now turn the call over to Jay Birnbaum radius as General Counsel. Please go ahead Sir.
Thank you operator, and welcome everyone to the radius global infrastructure first quarter 2021 earnings call.
Before we begin I would like to remind everyone that many of the comments made today are considered forward looking statements under federal Securities laws.
As described on our earnings release and filings with the SEC. These statements are subject to numerous risks and uncertainties that could cause future results to differ from those expressed these.
These statements speak as of today's date, and we undertake no obligation publicly to update or revise these forward looking statements.
In addition on today's call we may discuss certain non-GAAP financial information you can find this information together with reconciliations to the most directly comparable GAAP financial measure and this morning's earnings release and supplemental financial information available on our website at www dot radius global Dot com.
Ill.
Thanks, Jay thank.
Thank you all for joining us today for radius and <unk> first quarter 2021 earnings conference call. This.
And this quarter marks the one year anniversary of radius global establishment as a publicly traded company, having completing our founding UK London stock exchange listing transaction on February 2020, just prior to the onset of the pandemic.
Right and challenges faced by operating a global business during that time, we have significantly scaled up the size of the company, including another quarter of accelerating growth and capital deployment and acquired brands in the first reporting period of 2021.
Specifically during the first quarter, we invested approximately 108.
And Capex and acquired approximately 8 million and additional annual in place rents continuing to trend and accelerated capital deployment reported and the fourth quarter of 2020.
With these newly acquired ranks our total annualized in place rents have increased to a run rate of $96 million a year over year increase of 49%.
In addition, the scale and recurring rental revenue continues to drive operational leverage relating to our origination platform and related costs.
The scope of digital telecom infrastructure assets, which we are evaluating continues to expand not only by the amount of capital investment, but also by asset type and our extensive multinational origination network continues to uncover and capture accretive mission critical digital infrastructure assets ranging from our core leasehold in.
Underlying wireless cell sites and distributed antenna systems to fiber connection rich communications routing sites all of the assets. We acquire have similar attributes that meet our underwriting criteria, mainly they represent durable low risk triple net real property rental streams paid.
By the world's largest communication operators and infrastructure companies, representing underwrite underwritten equity risk adjusted Levered returns target and the low to high teens, depending on jurisdiction and and.
Okay and jurisdictions.
To support our growth plan in the quarter, we completed two incremental debt financings of $94 million and 75 million with the 94 million that was in euros, which was 77 million euros, respectively and last night, we completed a pipe equity offering of 200 million and common equity for a combined range.
For the quarter of 369 million, representing both debt and equity all of these stock bonds will be used to continue on pace of capital investment, which we are optimistic will continue throughout 2021.
Our investment funnel continues to benefit from the acceleration of global investment and digital infrastructure necessary to support the voracious demand for mobile data mobile video conferencing and other bandwidth intensive users. We are excited about putting interim incremental capital to work for our shareholders and we look forward to sharing our progress with.
And you in the coming quarters, Glenn breaks and here our CFO will now provide an overview of our current holding back and actual results and more detail okay. Glenn.
Thanks, Bill and the capital deployed and the first quarter added meaningful scale to our portfolio.
As of the end of the first quarter.
And we own and 5627 sites with 7000 and 435 lease streams.
Represented by a high credit quality tenant base comprised of 42% tower companies and 58% mobile network operators.
With respect to our annualized in place rents.
At the end of the first quarter, 62% are represented by Europe.
24 by North America, and 14% by South America.
And the first quarter, our platform generated three 8% growth from escalators and other organic growth offset by one 2% of gross churn.
Revenues were up 42% to $22 2 million over the first quarter of 2020 and.
And gross profit rose to $21 9 million up 41% over the prior year.
Okay.
As Bill mentioned earlier, we grew our asset base by $107 8 million in the quarter compared to $28 4 million last year, representing a 280% increase this level of deployment added $8 million and rent 216, new sites and 251 new lease stream.
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We anticipate that these new lease streams will generate a fully burdened initial cash yield of approximately six 9%, reflecting the acquisition of longer weighted average property right terms as well as more emphasis on acquisitions and non emerging market jurisdictions, where individual asset returns are high.
They're.
With the growth of our portfolio operating G&A is improving significantly from last year and beginning to reflect the benefits of increasing scale.
We anticipate that this trend will continue as we deploy incremental capital.
Turning to our balance sheet and liquidity at March 31, we had 814 million total gross debt outstanding and net debt of $673 million.
And the debt carried a weighted average cash coupon of 4%.
Overall, our debt has a weighted average term of six nine years and our first maturity of $102 million is in 2023.
In the quarter and subsequent to quarter and we completed two debt financing and 77 million euro denominated or 94 million U S. Dollar eight year floating and fixed rate interest note under an existing international credit facility and in April we issued $75 million and debt secured by U S.
Rental streams at 98, and a quarter with a 6% cash pay maturing in April 2023.
Both financing represent holding company level debt that accompanies the senior level of debt at the asset company level.
With regard to yesterday's pipe transaction, we agreed to issue 14.336 million 918 class a common shares at a price of $13 and 95 per share to various investors.
This price represents the five day volume weighted average price per share or <unk> of $14 68.
Les a 5% discount.
Such discounts on a customary and pipe transactions as the purchaser receives unregistered securities with a registration right obligated the company to file a registration statement with respect yourself shares at a later date.
This transaction is expected to close on May 14th 2021, and the company is obligated to file the registration statement for such shares no later than June 11 2021.
We pursued a pipe offering rather than a sale of registered shares because the company has not yet eligible for a shelf registration under the SEC's seasoning rules.
And that eligibility will occur in November of this year.
As Bill mentioned the equity will be used to continue funding our origination pipeline.
Please refer to the supplemental materials posted to our website. This morning for additional details.
As a reminder, the GAAP financials for the first quarter of 2020 only reflect the period after the acquisition of AP wireless and our supplemental materials, we provide full first quarter results for 2020.
For comparative purposes.
Bill.
Thanks, Brian that concludes our prepared remarks, operator can you. Please open the call for questions. Thank you.
Thank you we will now be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is and the question queue.
You May press star two and if he would like to remove your question from the queue.
Participants using speaker equipment and may be necessary to pick up your handset before pressing and Sarkies. One moment. Please while we poll for questions.
Thank you. Our first question comes from the line of Ric Prentiss with Raymond James. Please proceed with your question.
Thanks, Good morning, everyone.
Hey, Rick.
And obviously, a strong quarter on the acquisition front.
Can you help us understand a little bit about the asset types and locations.
Where are you able to put this capital to work here in the first quarter.
Sure.
And you can imagine.
Substantial amount of courses on our wireless.
Brown related assets. In addition, we've got both fiber and regeneration on this as well as fiber aggregation points as well as indoor distributed antenna system rents that we've also included and that has assisted us in and.
You can imagine and accelerating our origination and.
That's right.
And obviously the.
And I guess the 300 million dollar question is how is the pacing as we look going forward last quarter call. It doesn't seem that long ago, you talked about you know.
And of the Goalposts of what you could do but if we look at the at 118 million last quarter, or a hunter and $8 million and the first quarter, but you were for a long time doing just $50 million to $100 million and a year you guys are doing like $100 million a quarter, how should we think about the pacing and where you're going from here and what really changed since we get that question from investors what changed and let you kind of get up to this too.
Next level per quarter versus what had been annual levels.
And look it's a great question I think starting with the last part and what changed is the addition of and all.
And additional asset class, we came to the conclusion and both our underwriting and otherwise that distributed antenna systems and.
And the fiber related properties have exactly the same characteristics and our wireless property and SKU I'd say the only difference that we typically find is that we're buying fee simple and at least for the fiber properties, which is a fancy way of saying, it's sort of night on yours and life, rather than less than 60 years and that typically you're moving into June.
To put more money up for it get it and amount of rent that you're buying because we've got a longer duration, so and the other thing I'd say and that those rental streams on average are larger.
And what wireless rats were typically on so that and of course.
Related directly to increased origination amount and then the third one is we model and primarily focused on doing it in Europe.
But you would imagine we're open to expanding this additional asset class everywhere, where we have existing operations and we still are hopeful that and we will enter into new jurisdictions as well as to the Gulf Coast I think optimistic is the word because we still haven't.
Come up with a I guess a forward metric, that's making us comfortable to give real hard guidance.
We're still wrestling with it I think by the next quarter, we'd like to come up with a way, but we just did.
And didn't have a chance to do at this time I hope that's okay.
Yeah very good thanks, guys.
Thanks Ross.
Our next question comes from the line of Sami Badri with Credit Suisse. Please proceed with your question.
Hi, Thank you Hey, guys.
The first question I have is on the organic growth and how it.
Slowed down a little bit versus prior quarter can you just walk us through.
Hi.
Slowed down.
I'm going to turn it over to Glen and a second but I would just give you the macro observations it and you want.
Mind, you that every year, we don't buy the same on excuse me every year with those rents that are growing we have and FX impacts that happened.
And just as part of the macro Glenn do you want to address that.
Yes, I can I can I can address that.
So it's it's it's down a bit.
And its really related to the revenue enhancement component Sami.
On the day, the contracted escalators are pretty consistent and and I think our consistent conversation around this has been that we saw our revenue enhancement component generally would run from.
And from three quarters to one five percentage on a growth rate basis, and and debt and the 2020 growth rate of 2% was higher than we anticipated.
And we think we're in that.
And 1% on a net organic growth seems to be more consistent with what we've seen historically and what we expect.
Yeah.
Got it thank you.
Other question I had was on the SG&A as a multiple of rent acquired you guys had a slide in your deck last.
There's one this quarter and just walk us through that ratio did and this cycle.
Sure So specifically with respect to the slide on how to view radius.
We're seeing significant scale on the SG&A expenses and if we're looking at particularly on that slide that youre focused on the column B.
And that shows not only the acquisition Capex, but also shows the SG&A cost associated with acquiring those assets.
Net debt, we believe would be capitalized if we paid it to a third party the silver lining is and we get a tax deduction for it and year, However, having said that.
With respect to the 2021 $9 1 million that runs as a multiple of SG&A as a multiple of where and acquired just over one one turns and.
And we saw that multiple and the prior.
Quarter the prior year's quarter March 31, 2020 that wasn't a 2.8 X multiple range. So we're continuing to see significant scale year over year and quarter over quarter of our SG&A expense related to the origination platform.
Got it thank you.
Yeah.
Our next question comes from the line of Walter Piecyk with Lakehead Partners. Please proceed with your question.
Oh hi.
Hey, Bill.
If you look at like 2016 to 2019 your acquisition multiples under nine five times and I'm counting on that.
Just by doing the acquisition Capex over the acquired and rent obviously have climbed a little bit last year, and then it looks nice quarter it'd be like 13, and a half I think you were you had just mentioned to Ricks question about.
Pay more up for.
Fee simple and or doing fee simple rent.
Rent agreements for fiber and that meant you were paying more upfront is that the reason that the multiple the acquisition multiples are climbing or is there is there a geographic mix shift can you just talk a little bit about that and and kind of how you are thinking about acquisition multiples going forward. Thanks.
It's a good question and it's really I guess three buckets to think about number one you pointed out geographic mix shift is right on the money. If we had bought 100% in Brazil of course, you would all expect the yield to be much much higher given the risk reward nature. So you have to always keep that and consideration recognizing that we're not going on by the exact same amount of on.
Assets in each country average single quarter. So the mix is constantly on a shift.
I think the second thing that's happening within the duration as you pointed out if you were to buy an asset for 20 years and meeting the net present value of 20 years versus a net present value of 99 of course, the 99 will cost more money, but the rent is still the same. So you can take the rent divided by what and it cost you pay you have to you but of course when you're buying.
Andy and unusual or getting a longer duration or and more valuable assets.
Theoretically speaking if we all live that long.
I think the last bucket is.
And the reality that given the pace of mobile network operators shedding on towers and tower codes, we are and seeing increased competition.
On the Mark.
And as just so why did you know with the competition and he will see sometimes when asset prices will go up but we still feel very optimistic both on on what we can originate and at compelling yields.
And initially.
And how many how much of it is very go and how much of it is very going forward should we just kind of assume a 13 ballpark range I mentioned would be pleasantly surprised if he get cheaper assets going forward and.
Hate doing that because the mix could change right.
And that's always where it's hard to actually project and they give you a better sense and that and the mix can change by country. The mix can change by whether it's fiber related or wireless related whether it's 99 years or 30 years.
And we like to like on inside our shop, where both flying visually and flying by instruments and the instruments allow us to kind of think very carefully about sort of your overall mix when we do our underwriting and when we put in place on leverage got it and so so your argument is look if we're looking at the terminal value by 13, it's worth more because in your <unk> youre not going to put.
And some more money to extend that lease with that but underlying holder understood that that's true.
Correct and the 99 and the other thing I'd point out and if we only bought 20 you know typically we could go back and your five and extend that for not very much money to a landlord. So that's it's almost like and embedded option, even though it's not range do you report or do you report duration of the overall asset bundle somewhere in there and one of these.
Yeah, perfect, Yes, yes, we do.
Yes, we do and you can see from that slide it's.
It's going to show you two things, it's going to show you a bit of the geographic shift and it's going to show you. The lengthening of the term more so on it and you.
More so in Europe, which coincides with the geographic shift that we talked about.
And can I, just give you and one follow up on that geographic shifts you gave the 52% number in your prepared comments.
Is the UK still about 25% of that of the total amount of 62, but are they still kind of in all 25, and Mark I don't think we've broken it out or have we blend on the 10-K and I can't remember yeah, well, yeah. We we tend to do that do you. The U K on a percentage basis is a little less it's about 20% 21%.
Gotcha, Okay. Thank you.
Sure. Thanks, Paul.
Okay.
Our next question comes from the line of Jon Petersen with Jefferies. Please proceed with your question.
Hey, guys.
No.
Just looking at your where you.
Your rents are coming from your from the tower companies and increased to 42% and 30% last quarter I'm guessing that's American tower's acquisition of the Telefonica portfolio and correct me if I'm wrong, there, but my bigger question is as you're dealing with more tower codes I guess, how does the dynamic and the relationship shift and what are kind.
The revenue upside or downside.
Yeah impacts.
And from dealing with the tower company versus dealing with the carrier directly.
And that's really good question I think first and foremost we considered the tower companies are our partners because there are tenants, but you know we have to have a good symbiotic relationship.
I think that you know clearly the larger we're getting and their continued acquisition of towers means that we.
We are today and we will continue to be their largest landlord, whether it's American tower sale net vantage and alike.
I think you know one of the opportunities for US is to at some point come to some type of agreement, whether it's a master lease or otherwise where we both can.
Can partner and I guess and a more tightly tight manner and you would imagine we speak to all of those guys. All the time.
And.
I don't think there's much more to say other than we will just keep our head down and keep acquiring and.
Managing our sausage factory so to speak.
Does it increase the possibility that you might sell some of your land parcels to the tower companies down the road.
And if there is always the option to sell at any time.
Really sort of a board related question for us and of course relates to value that being said you know we're always tax sensitive and also we really believe that owning a long term inflation linked.
I guess a revenue stream with associated.
Organic upside whether it's from the rooftop or otherwise just has incredible value. So don't want to have to sell that and they're gonna have they'd have to really step up to make it worth our while and just outright sell.
And I think we like hanging on to it because where else in this environment, where do you want to put your money and you're respects.
Got it that makes sense and you said inflation linked and so that's a good.
Segue to my next question so the majority of your.
Rents are index to inflation are there caps on that you know, there's some people throwing out some pretty high inflation numbers would you.
<unk> been able to match that or are you capped.
I don't believe we have any caps and our leases, but just to remind you every single lease is different because we are buying and individually which is why the master lease concept, we have called on 1000 leases with tenants, they're all completely different.
Right Yeah, the only element on that I would say is as we do disclose the annual escalators on there are no caps.
But we do have some higher you know there's sort of some higher CPA on ROE and be some lower C. P. I O N V, but bought basically by and large they're all related to changes and market value.
The asset I guess more.
Just to clarify that for a second we don't have any caps OMB is a mechanics, and one or two countries and it's basically.
And just renewal negotiation, where everybody recognizes that you're gonna get inflation is part of and renewal it may not have on quarter to quarter ago on the cycle.
But just to be simple there are no gaps.
Got it okay alright, that's helpful. Thank you.
We have reached the end of the question and answer session I would now like to turn the floor back over to management for closing comments.
And so operator look we're extremely excited about the opportunities ahead, and we operate in an enormous and expanding addressable market and I previously mentioned and we believe we're well positioned to execute our growth plan.
And I want to thank everybody for joining us today, and we look forward to catching up with you over the coming weeks. Thanks again.
Ladies and gentlemen, this does conclude today's teleconference. You may disconnect. Your lines at this time. Thank you for your participation and have a wonderful day.
Okay.