Q4 2021 Radius Global Infrastructure Inc Earnings Call
Great. Thanks, and what it comes to radius global infrastructure out fourth quarter 2021 results conference call.
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As a reminder, this conference is being recorded and now I'd like to turn the conference over to your host Jason Hawkes head of Investor Relations.
Please go ahead Sir.
Thank you operator, and welcome everyone to the radius global infrastructure fourth quarter 2021 earnings call.
On this morning's call El Brookman, our CEO and co chairman will provide an overview of our fourth quarter and fiscal year 2020 . One results followed by a more detailed update from Glen pricing or our Chief financial Officer.
After these comments, we will open up the call for your questions 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 in 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 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.
Find this information together with reconciliations to the most directly comparable GAAP financial measure in this morning's earnings release and the supplemental financial information available on our website at www dot radius global Dot com.
And now I'd like to turn the call over to Bill.
Thanks, Jason. Thank you all for joining us today for our fourth quarter 2021 earnings Conference call I am pleased to report that our strong growth continued in the fourth quarter and we achieved several noteworthy highlights on October 5th we commemorated our first anniversary as a publicly listed U S.
We now own over 8100 lease streams on over 6200 digital infrastructure sites in over 20 countries with an average property right term of approximately 60 years as of the end of 2021 .
During the fourth quarter, we increased revenue by 44% year over year to a record 29 million. We also deployed approximately $114 million of acquisition Capex continuing the trend of accelerating capital deployment that began in the fourth quarter of 2020.
This capital investment resulted in the acquisition of $8 million in additional annualized rent in Q4, increasing our total year and 2021 annualized in place rents to a run rate of about 118 million a year over year increase of 40% for our diversified.
Polio up high quality, primarily triple net and inflation protected cash flow streams underlying our wireless and other communications and digital infrastructure related sites.
Since the inception of radius is a P. Wireless subsidiary in 2010, we have increased the pace of annual investment or acquisition Capex by 45% annualized which has allowed us to grow the portfolio of annualized in place rents by 54% annualized through the end of 'twenty.
'twenty one.
As we've shared with you previously were continuing to broaden the scope of properties, we seek to acquire to a wider pool of digital infrastructure and related assets with similar attributes to REO properties, we presently own underlying wireless towers and rooftop cell sites to include rents generated from indoor wireless.
And kind of systems or what's referred to as gas and fiber aggregation points. In addition, we are always seeking to identify other similarly, situated potential assets to further widen our total addressable market of acquisition opportunities.
The digital infrastructure assets that we seek to acquire our predominant long duration triple net rental streams, where our primary tenants are the world's largest mobile network operators and other types of communication infrastructure companies, including tower companies.
These rental streams underlie strategically located properties and sites, which are difficult and expensive to move a replicate and that are essential to the delivery of their network services that all of us depend upon and we struggled to live without.
Including the capital raised from our January 2022 debt issuance, our financing activities for the year produced 1.2 billion and today, we have approximately $880 million in cash and cash equivalents on our balance sheet.
The vast majority of this cash is available to deploy for additional acquisitions that meet our disciplined underwriting criteria, where we target attractive risk adjusted returns for our shareholders.
In addition, I would also like to point out that we reduced our weighted average cash cost of debt from a fixed rate of 4.02% to three 5%.
Note that all of our outstanding debt is fixed rate or capped which we believe adds a level of protection to the company from the impact of higher interest rates.
With regard to be 2022 pace of originations, we remain optimistic about our ability to continue to acquire assets that I described earlier for at least the next several quarters based on our current pipeline of acquisition opportunities.
As mentioned on our last earnings call. We continue to target the deployment of $400 million box of acquisition capital expenditures for 2022.
This continues our pacing up approximately 100 million of capital to be deployed per quarter that we have accomplished and reported for the past five quarters.
I would emphasize that this is an average and there may exist some variability in the actual dollar amount of asset acquisitions in any one quarter, resulting from the timing of closing of larger transactions.
In June our stock was added to the Russell 2000, and the Russell 3000 indices. Since then we have expanded our equity research analyst coverage by 50%. We believe these developments combined with the cash settlement of all of our outstanding warrants over a year before their scheduled expiration date.
Has raised our visibility in the investment community and enhance the liquidity of our stock, which in turn should help us to attract additional shareholders, who believe in our long term value creation strategy through disciplined capital deployment and digital infrastructure assets.
To sum up I'm extremely proud of what we've achieved in 2021, thanks to the dedication of our more than 300 team members globally. We.
We invested nearly half a billion dollars to acquire nearly 1000 lease streams from communication and digital infrastructure sites around the world, which we continue to strongly believe will help us achieve greater economies of scale across our portfolio as we seek to generate attractive long term returns for our shareholders.
As many of you know most of the senior management team. That's worked together for over 30 years Wow, We believe our decades of experience building operating and investing in communications infrastructure, along with the team and proprietary databases. We have built over the past decade is an important source of our competitive advantage.
As we survey the enormous addressable market of over 8 million sites just in our current markets combined with our expectation to continue to expand to new markets. We believe we've only scratched the surface of the digital infrastructure and related real property aggregation opportunities.
Lastly, as a reminder.
Insiders own over 20% of the equity of the company and the management team is incentivized to create shareholder value over the long term against the backdrop of the <unk>.
Holding multiyear global five G investment cycle and the increase in critical power communications infrastructure in this digital age. We believe these and other factors will continue to enhance the strategic value of a rapidly growing portfolio.
Glamour Eisinger, our CFO and a member of our club 30 year team members will now provide an overview of our current holdings and financial results in more detail Brian .
Thanks Bill.
We continue to grow the portfolio at an elevated pace in the fourth quarter, taking advantage of investment opportunities across our expanding global footprint to deploy capital.
As of the end of 2021 as Bill mentioned, we own real property interests and over 6200 sites with over 8100 lease streams represented by a tenant base comprised of 37% tower companies and 63% mobile network operators.
The majority of which are investment grade.
With respect to our $117 9 million of annualized at in place rents as of December 31st.
45% are denominated in euros, 18% in British pounds.
17% in U S dollars.
And the remaining 20% and other global currencies, including Australian dollars and Canadian dollars.
Approximately 85% of our ranch located in developed markets.
With the remainder predominantly based in Brazil, Chile and Mexico.
Yeah.
I would like to specifically highlight that nearly 80% of our portfolio has annual contractual rent escalators that are based upon an inflation.
Or a similar mechanism, which provides us with meaningful protection against the impact of rising inflation, well also muting the impact of rising interest rates.
20% of our portfolio has annual escalators that are generally fixed at 3%.
Geographically these fixed escalator rents are primarily located in the U S, Canada and Australia.
Revenues were up 44% to $29 million in the quarter and gross profit for what we refer to as growing cash flow rose, 40% to 27.9 million, resulting in a gross profit margin of approximately 96%.
We deployed $114 3 million for acquisition Capex in the fourth quarter compared to $118 4 million in the fourth quarter of 2020, representing a 3% decrease.
This level of capital deployment added $8 2 million in annual rent across 232, new lease streams.
We anticipate that these new lease streams will generate fully burden initial cash yield of approximately six 5% on a net growth spend basis.
Which includes $12 $8 million of origination SG&A that we spent in the quarter.
Please note that this six 5% when compared to previous years does not reflect same store sales at each quarter. We are acquiring assets a different mix of countries that have different acquisition cap rates due to many factors that vary by jurisdiction.
For the year, we generated 3.4% revenue growth from a combination of our contractual escalators and the revenue enhancements.
Which was partially offset by 1% of gross churn.
Holding a net organic revenue growth of approximately two 4% on a year over year basis, which compares to three 7% net organic revenue growth in 2020 on a constant currency basis.
This is due to a more modest benefit from revenue enhancements such as uplifting wrench rezoning.
Lease renewal negotiations at lease expirations lease up of our vacant unleash space and other factors.
Turning to our balance sheet and liquidity during the quarter financing activities produced approximately $343 million of capital to support our acquisition strategy through a combination of debt issuances and cash proceeds from warrant exercises.
In December we received $189 million from the issuance of $16 4 million class a common shares resulting from the cumulative cash exercise.
$9 2 million outstanding warrants.
All outstanding Unexercised warrants were subsequently redeemed four penny as our share price meant $18 mandatory redemption trigger over a year before the warrants were scheduled to expire in February 2023.
As a result, the company no longer has any outstanding warrants.
Yeah.
Also in December we raised $154 million from a drawdown of $97 2 million euros, and $33 7 million GBP from our international senior facility, which has a fixed annual interest cost of approximately 2.84% for the euro denominated debt tranche and 3.78% for the GDP.
Denominated debt tranche.
In January 2022 radius borrowed 225 million euros out of 750 million Euro new financing facility. The company entered into in December 2021.
The initial borrowing of $257 5 million U S. D. As of the funding date has a fixed annual interest cost of approximately three 2%.
This new borrowing matures in January 2030.
Inclusive of this incremental drawdown as of December 31st radius had $1 6 billion in total gross debt outstanding and net debt of $725 5 million.
All of our outstanding debt is interest only fixed rate or capped and carries a weighted average cash coupon of three 5% and a weighted average term of six three years.
As a result of the $1 2 billion of debt and equity financing, we completed in 2021 and January 'twenty two.
Company had approximately $880 million of liquidity available for incremental investment as of January 22.
Pro forma basis. Please.
Please refer to the supplemental materials posted to our website yesterday after the market close for additional details.
Yes.
Thank you Glenn that concludes our prepared remarks, operator, please open the call for questions. Thank you.
Thank you very much.
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One moment, please while we poll for questions.
Yeah.
We have a first question from the line up Rick Prentiss with Raymond James. Please go ahead.
Thanks, Good morning, everyone.
Good morning, Rick how are you great.
Great that you guys are doing well couple questions you hit a couple of them, but it will take.
To go a little deeper obviously rates versus spread as far as what you are able to borrow that versus what you were able to buy at all it seems like youre still able to tap a market at attractive rates, how should we think about as you're tapping the market into the future. How you guys are thinking about that difference between what you're borrowing at.
What you're buying at and the ability to continue to earn that spread.
Well I think that's that is really the core function of our businesses to be able to capture.
Olympics spread between what we're borrowing at and what we can invest that I would point out that oftentimes when we're investing we have untapped inflation linked.
Revenue streams. So the other thing, we always watch as that spread to be local in country sovereign link infill.
Inflation linked bonds you know as an example in the U K last I looked it was like minus one and you would imagine we have an incredibly.
Incredibly healthy spread there and what we're buying so it's not just our cost of debt. It's also the actual spread from a risk perspective, and then on top of that of course.
Would you think about two critical things all organic growth, which gets driven by lease renewal negotiations when leases expire and then of course any additional lease up on top of the inflation escalator.
And as you think about seller expectations has there been any change typically.
Sellers are slower to reactively changes in the marketplace, but what have you seen as far as seller.
Ask and also the pacing maybe of them coming to the table.
Well I think yeah, I think we've said this many times sellers sell when they need money.
And as you know, we can work on a seller or contact with them over a couple years and sometimes they'll reach out to us and say, hey, I need capital I'm ready to sell.
Other times they'll be reached out to buy a tower company, who typically doesn't want to buy them. They want to effectively pressure then into accepting a lower rent because when they can do that it's an infinite return to them because they are putting the capital out in Massachusetts shouldn't we try to come in as a white Knight and say you know what don't accept a lower rent.
We're going to acquire you. So you have all these different forces in the market, but I don't think anything's changed now look with what's going on in the Ukraine and Russia.
The fact of what whose instead about nuclear weapons.
They can happen I guess, but right now it's sort of been business as usual.
Yeah, here's hoping that who's come down for sure.
And final question on my side is.
Obviously, you've got a large percent that are tied to CPI. That's a good place to be I think you mentioned, 80%. We've had reports from American tower last week S. P. A C last night that showed some pretty noticeable increases in their guidance for a CPI escalator movements on their tower.
Please help us understand where we should be modeling and thinking about 'twenty, two and even 'twenty three maybe as far as what C. P. I might be able to do two year numbers right look it's a great question I'm going to let Glenn take it to the detail, but as you can imagine just the high level.
The escalators can he clearly.
Can happen twice a year can happen once a year every five years you know so Glenn do you want to take Rick through sort of what the breakdown of that is and how we should be expecting that because there is a lag of when it comes in.
Sure.
Billy's point, there was a lag obviously all rents are paid in advance.
With the majority of the rents being monthly and quarterly but however, the way to think about it I think on a macro basis go forward would be.
If you look at our annualized in place rents and take 45% of the analyzer in place rents and think about European inflation, and then take 18% of the rents and think about.
Inflation.
In the U K and the other 20% think about inflation in Latam and the USD, 17%, that's pretty much fixed that's the way I would think about it. However, you want to handicap, what you view inflation to be is how you should think about how our portfolio escalates.
It's just a different timing perspective, it can be six months to a year before well see it or in some cases a quarter.
I don't have the actual breakdown on the timing at my fingertips, the Glen does okay I don't.
Okay, No that helps I appreciate it guys say well I'm sure we'll talk to you later.
Yeah.
Thank you we have next question from the lineup Sami Badri with credit Suisse. Please go ahead.
Hey, Sammy lately.
Hey, doing well doing well.
First question I have is what drove the increase in origination SG&A as a multiple of rent acquired it.
It rose to one six times from one one times, we started the year and is that mostly wage inflation or maybe you could just tell us what what else is going on.
Generally I always felt like we get ourselves into service and maybe I've said this before when we even included at the end of the day to me and Glenn It's always part and parcel just start growth Capex, our acquisition Capex and so we've tried to just look at an all in yield that's coming out and just to remind you.
Those yields on same store, because our mix of where we buy always varies quarter by quarter.
Sometimes the SG&A can vary because we're buying a larger portfolio and then the SG&A can be less sometimes we're buying many more individual assets, where the SG&A can be higher you know things of that nature language, you have anything else to that.
I would say you know as you think about the the assets we have in the markets that we have we tend to look ahead, and we want to hire some folks in certain areas for growth. So you're seeing some of the SG&A spend a little bit ahead of the realization of acquisition capex, but year over year.
It's been year over year, a benefit from a scale standpoint.
Remember, we all know.
Getting to tax deduct, 10% of your purchase price because we get actually deduct that SG&A. So it's kind of bizarre, but we love it.
Got it.
I wanted to go back to the inflation escalator and Glenn I think you actually mentioned the word inflation escalator or in the word inflation your prepared remarks, a little bit more than you have historically.
And bill just weaving in a nesting and kind of what you answered to a prior question, which is youre not really sure if its one quarter or six months or a year.
Think when people hear the word.
They're all different but they're all on cap Sami yeah.
Yeah. So I guess when investors think about companies that are insulated from inflation, they want something a bit more tactical or surgical in nature.
Could you just give us an idea on just how surgical and tactically you guys actually are about this just because.
The market is looking for companies that can really adjust fast right to the fluid dynamics that are that are ongoing can you just give us an idea of characterization and how you guys can respond and at the speed at which you can do it at.
Yes, I mean, I think it's one of our critical I guess these fees, it's been that way for a long time. The other thing I would add is that when you're buying an uncapped CPI linked.
Escalator for the period of time that we're buying for it which in our mind as perpetuity. We always believe that you know, it's very difficult to value that value in a call option something for that long a duration black shoals or Monte Carlo approaches really break down when you are talking about multiple decades. So that's the first piece.
This is the second time, as even though theres a lag to implement it it always it always means we do get it. It just may be lag before you see the numbers because it was getting measured and then it gets implemented and then it gets paid by our tenants so to us the place where you don't get the CPI uncapped escalator would be the.
You asked which you know very well because it's a system that's based on fixed.
Percentage escalators I think the other thing that gets US. Most excited is when we think about us in comparison to some of our tower brother and especially in Europe . The untapped I can't stress enough how valuable that is because oftentimes they do have inflation escalators, but if you look closely they're capped at 3% or tactic to their captive.
Or sell next would be an example, vantage would be an example, so I hope that answers your question.
I would say Sami right just structurally within the business right, we get the escalator. It's it's a matter of how it comes through on the GAAP revenue, which is basically a year lag right because the way the accounting book to revenue is it's you're getting paid in advance and it's booking it in and projecting it forward for the whole year.
In fact of the matter is we do get the escalator, so theres going to be some variability on a quarter by quarter basis.
So the fact of matter is you know.
70% of our rents escalate in at least some of them risk escalate over a term. So all of that variability is going to mean that the revenue escalations in our GAAP financials, a little bit behind reality, but we do get the value.
Of the inflation protection, yes.
Just when not if.
Just one.
Got it.
Alright, thank you.
Hmm.
Yes.
Thank you we have next question from the line up Nate Crossett with Bahrenburg. Please go ahead.
Right.
Hey, good morning.
Was curious to know I mean, we're getting closer to the end of the first quarter.
Wondering if you could provide a little color on maybe what you've closed so far this year.
And then just the pricing assumptions I guess for that 400 million should we be kind of modeling that six and a half ish range.
Well I'd answer two things the first one it's not our general counsel would kill me if I gave any color for the first quarter, but I think as we said in our release 400 million plus there can always be variability quarter by quarter based on when we close but even for US it's business as usual so I hope that gives you a little.
<unk> sense, and how it and framing it in terms of your second question, which I'm thinking of them, having a senior moment.
Just the yield on the 400 million that we should be kind of it. Yeah. That's just you think it's just about the mix of countries, where buying and so we had purposely moved away from emerging markets. You know, but if you saw us buy down there we typically try to buy shorter property durations and of course, they have a much higher cashier so back.
Could influence the yields youre going to see on an aggregate basis, if you're buying more in Europe , where risk is less than that is a premium to the U S equity risk premium, which is how we think about our world.
The yields would be less than of course Latin America. So if you think then about the mix. We have been very focused on more developed nations then I would say less for the moment.
But other than that again, it's business as usual and we're open to keep I guess hitting the targets that we establish internally for each of these countries cause really if you think about it.
<unk> said this before it's a rules based business and we're always.
Reviewing our rules they are dynamic they combine both what's our threshold IRR for each country, we bargain base typically on the spread to the U S. We also as I mentioned earlier always look at the spread to the local in country sovereign inflation linked bond or debt and then on top of it.
Always I'm reviewing do we want to buy.
Short of property right, Tom like Latin America, because we know we always have effectively an embedded oh, we need to go back to that landlord and tack on extra years in Europe and all the rest of the places we didn't buy much longer duration as you well know I hope that answers. Your your yeah. Yeah question book.
Yeah that's helpful.
I had another question just the renewal leasing spreads are maybe in the quarter and the year. If you can give us.
What that was better than no that's just.
Sorry keep going.
The other one was just on competition. If you guys are seeing.
Anything new percolating.
Tower, guys are starting to buy more of their own them you know the land underneath them that their asset so any update on just what you're seeing in the way of cost.
So in our renewal leasing spreads you know as you know there's no all of our leases Theres No X percent are expiring every quarter. It varies because every lease duration Terry so theres no.
What's the word.
It's not always 5% are expiring every quarter Sebastian Baird Nextgen has resolved in one quarter a ton over expiring and they happen to be below market rents, we do seek to get an uplift some quarters, you'll see a lower amount of what we would call organic growth driven by lease renewal because we get fewer leases expiring.
Other quarters, you'll see a lot more I hope that makes sense, it's just hard to.
It's not a whats called a perfect linear line in terms of competition, yes. The tower companies are quote unquote, our biggest competitor.
No when I looked at American Tower's 10-K, they acquired about 215 million of properties in 2020, and they did get about $242 million in 2021 and sound like just case and this is just to give you an example.
They always try to go first to reduce the ranch.
So they'll reach out to 3000 people and say Hey, Please you reduce your rent and if you don't we'll consider moving the site, whether they would move or not who knows that's their decision. We as I said earlier loved to come and there's a white knight to say that person when I looked at their numbers yesterday, if I'm not mistaken they advanced it.
That 60 million to landlords in 2021, I have my year, right and that's different than buying not just for a period of time and they bought about 80 million euros worth of property. So in total are actually 71 million in advance. So they had about 151 million euros in total that they put out.
In there.
Investment and then of course, they did they were successful in reducing rents for some of the landlords. So I hope that gives you a sense of some of the competition out there, but we definitely see them in as Richard Goldstein, Our CLO always reminds me.
We've been the only guy in the market for so long, yes, no one wants to have competition, but the counterintuitive. A fact is that when they come to the market. It also.
Helps catalyze people, who never would have thought about doing this to think about it more because you have more parties, reaching out to them, meaning ups and a tower company.
Okay. That's helpful. If I could just ask one more quick one.
Can I ask as long as you want.
Yeah last quarter I think you did a your first data center strategies.
Just curious if there's any more of those in the pipeline and maybe how should we kind of size that piece of the Tam for you guys.
I think there's definitely more in the pipeline I can't comment you know if and when we get to closing because you have a very big pipeline and funnel and of course, what falls out what you're close on you don't know until you close I think it's one of the reasons, we called was a social business because it's effectively you know many many.
Small M&A transactions, but it's absolutely an area. We're focused on we haven't actually done enough work to size the opportunity not yet we are definitely trying to triangulate and figure out the best way to do that but you know I think in a general sense.
It's not small it's just a lot easier of course for us to size, how many cell sites and rooftops. There are you know just from a real grabbing and getting the access to the data if that makes sense.
Yeah. It makes sense I'll leave it there. Thank you guys.
Yes of course.
Okay.
Thank you we have next question from the line of Walter Piecyk with <unk> before we take up Mr. Paychex.
Minder to participants to ask question. Please press star one to be sat please ask your question.
Okay, well, we were a little longest time, sorry about that I know you were you went on them or you went over my life.
I know.
Yeah, I think if you cut a little bit out out of of Glen's comments I'll give you. Some yeah glad you spoke.
I was too slow.
[laughter] so.
One of the things the metrics, we look at and it's not obviously perfect. In this kind of acquisition Capex per new site and it looked better this quarter or sequentially. So in the past when it was when it was growing higher.
Gave a thoughtful kind of response in terms of duration right and also maybe there's some geographic mix, but I don't think you report that on a quarterly basis anymore, but when I looked at the duration.
In the fourth quarter. It actually went up again Europe went up North America went up so the durations are going up but your cost per acquisition are going down based on what what is happening there in terms of.
The deals that you were doing this quarter that you were able to be.
I think better in terms of price and yet still seeing a lengthening of the duration.
You know I mean, its because not all assets are created the same you're very good observation up their pricing are different by country of course are in Europe . As an example will by longer duration, but most importantly, as an example, if we're buying an indoor das our rent stream or if we're buying a.
Our fiber aggregation point, they're just larger size deals right. So you may have done fewer deals and I have a bunch that are larger which then when you aggregate. It all together it can skew what the average asset prices per deal, which I think was like a hydrogen and 50000. If you were just to divide it by everything.
It just doesn't tell you that much and maybe at some point, we'll break out the alternative adjacent assets are.
I guess, we haven't wanted to because we haven't wanted to do is to say that they are any different.
Then our wireless assets because half the time, it's the same exact counterpart of your tenants paying us for something that's mission critical and we wanted to try to keep things as simple as we can and we think our business is simple, but there are of course nuances and you know what happens where.
Trying to.
I guess I'll keep it simple for all the shareholders I understand that's why we haven't broken it out.
Sorry, if it's a mixed bag.
Yeah. So you also mentioned in the comments.
Obviously, stating facts that the last five quarters over $100 million.
Obviously, when we're talking deals any deals there can be variability, but it is $100 million kind of like your bogey baseline at this point or could it dip when we look at the variability from quarter to quarter over the course of 'twenty two could we have like an $80 million quarter, and then like 130 million quarter like how do you see that.
That's what I was trying to say, which is thinking about the timing of when we're closing deals. So so anything is possible like that I think our other thing that we're really focused on and you'll notice in our earnings releases, we did open two new countries.
When you open new countries that hopefully is going to help us grow and it takes time for the flywheel in each country to get going and even while we're opening those two that we just announced you would imagine we're working on others, but they take time, because you've got to not only find the right team to do it you've got to build your proprietary database and really get them there.
Putting together for every new jurisdiction that we enter and I.
I hope that makes sense I remember the last thing I would say that we haven't reported but I would like to just mention we are in the nascent stages of building a build to suit tower development business. It is very nascent we have won a bunch of small contracts.
What I can say is I'm really hopeful that we can really grow that nicely because we were in the business. When we were a private equity partnership.
Like most of the power companies, we loved the business. So long as we can win the right contracts upfront from Counterparties that we think are terrific.
Got it and then the last thing was with similar type of topic I mean, when we started this you know looking at you guys are you coming out like your acquisition Capex was what sub 50 and now you're doing over 100. So clearly you delivered on the pipeline yet at the same time, you know again going back to the prepared comments youre talking about looking at das and looking for <unk>.
Other types of things when I think originally the concept was look we've got these X number I forget the exact number X number of salespeople doing the blocking tackling finding the guy who was going to sell at that time, because not everyone wants to sell right. They play like getting that revenue.
Is there some is there some change in that pipeline that you would go after that and then similarly, when you look at the Das deal it just and maybe I'm wrong and if it feels like like with that there's other buyers out there.
Names that people okay.
Rose.
Yeah, Yeah. So let me come back to that first if that's okay.
A different type of structure and all in the European countries, where we're actually let's take a hospital just to remind you we're not buying the das network. They get paid rent by multiple and my nose network operators to rent space to put a gassy and it's either three gas and they all share one we're buying there.
Stream, that's paid to the hospital.
So it's a little it's not like the U S. That's not exactly the model that happens in the U S. But we find it really attractive right. So it's not really a different business same tenant still about wireless it just happens to be indoors, which as you well know is where the bulk of most wireless traffic happens.
It had a massive going after those assets is different when compared to you know ferreting out somebody that owns land under a tower.
So far.
I think we've done a really good job and we haven't really seen the competition, but it's not if it comes it's really Wang who we know what's going to come but I think our goal is just to AA.
Have a good reputation in the market B continue to open additional markets and see to make sure. We have separate teams Purdue pursuing indoor das because I think we can do things in parallel it's not like things have changed for our wireless site business. You know when we were private we were capital starved because we were at the end of her life.
A private equity firm transitioning now that we're public you're seeing us raise more capital for two reasons. One is the old adage you raise it when you can the second is we really think between our core.
Business all the adjacent assets that we talked about and then having extra capital for opportunistic larger acquisitions, we want to be well positioned because at the end of the day scale is everything the greater the scale. We have we can drive our cost of capital lower you're going to lap we see.
More deals from bankers and the like because we become a bigger player in the market and you know we're in a market where scale in terms of competitors is quite quite large in American tower. So next I mean, you know this better than I.
Hope that's helpful got it.
Okay. Thank you.
You bet.
Okay.
Thank you we have next question from the line up Jon Petersen with Jefferies. Please go ahead.
Hey, John Hey.
Hey, guys how are you doing.
Well great.
You know you you've kind of alluded to maybe some increased competition, maybe from tower companies or whatnot. I mean, if you just do a Google search and say you have a tower you want us to call I mean, theres definitely companies out there that will that will buy it from you. So I guess it just against that backdrop and you guys talking about your 30 years of experience, maybe if you could.
Shine some light on how many bidders there are on these transactions youre doing how the competitive environment has changed like.
And also like I don't know, how often like third party brokers, they're involved if that's like an emerging.
Hum.
Hmm pocket that needs to be aligned in these transactions. So anything you can say on that.
Look it's a great question and.
The usual answer is every country is different and you know this as well as we do in Europe . As an example, we've seen over the last three years.
Lot of shedding or selling of towers by the mobile network operators Gamma knows two tower companies prior to that most mobile network operators and I'm Gonna generalize here. They haven't taken the time and deploy their capital to go try to buy property underneath their towers that they owned once it.
That's in the hands of the Tower Company then they either do what settle next year. It does which is first focus on rent reduction if they can do it because it's an infinite return and then if that's not available then they'll try it out either advanced some capital or by the actual property. So do we see them of course, we now see them because they're now tower company.
And on the towers instead of admin knows I think the market is large there are many times, we don't see them, sometimes they don't see US is just the law of numbers and averages.
The place where there's other quote unquote aggregators like us for the most parts of the U S. It's really again the tower companies, who we view as our main competitors in almost all the other countries.
But I guess, how often in negotiations is there.
Now maybe a couple of rounds of bidding or is it mostly off market you guys. All everything's kind of sorted out between you and the counterparty and there isn't anybody else involved.
I can't give you a pattern or a percentage because it's not steady Jerome saying every country is different every opportunity we find is different.
And when you have we own 6200 sites globally and as we've said, there's likely about a million sites in our total addressable market growing at one or 2% a year and that doesn't include Greece. As an example, which is one of our new markets and so yes, you are going to come across them, but sometimes we're not gonna come across.
Awesome and I remember one other thing which is that in the market.
One of the EMA knows may have sold their towers, but somebody Emma knows have not. So then those are some of the size that we can go after because typically the tower company hasn't tried to target just buying properties underlying one of the Emma knows who's still owns their own tower. So that's why there's just no rhyme or reason or no rules apply.
We're just doing as good a job as we can imagine that with your visualizing. Your arms are out trying to grab as many opportunities as we can actually execute on that meet our underwriting criteria.
Gotcha.
I guess switching to the internal growth net organic growth. This year you got on slide six years 2021 was lower than 2020 that was mostly it looks like revenue enhancements being lower you know I guess any expectations into 2022 on where the revenue enhancements can go in I don't know what.
What kind of opportunities maybe you could lay out there and then how do we think about I guess, specifically, we've talked about the escalators, but how do we think about the revenue enhancement and in light of inflation and whether or not you have more.
The ability to ask for higher rents on renewals.
And so you've nailed it the biggest piece of our revenue enhancement as one of the leases expiring and each of these when he says there's no rhyme or reason they were set.
Many years ago, when they got initially done some quarters more or expiring in this quarter last where expiring as you pointed out but every time, we go into that negotiation. The first thing to think about is is it below market rent and if it is we of course know what market is we try hard a it'll be a good landlord.
But we'd also want to be paid market. So we will get an uplift from that.
Hum.
So I guess, let me summarize it it's how many leases are expiring how many of those leases are very below market that would be a driver of revenue enhancement now on top of that in some places we're finding.
Extra space at a ground based tower or even on a rooftop to put a generator or a battery system and for backup or if you're out of ground based site that needs what they would call augmentation because they want to add another tenant and they wanted to extend the height of the tower, if they're permitted by zoning sometimes.
I won't do a lot of tolerable due a guidewire tower and you will know the guy wires, which go diagonally out from the tower.
They need to go on property, they havent lease which is outside the perimeter of what they have with so that would be an example of a lease up and there are many more nuances like that but it's it is quarter by quarter and again, it's one of those where we can't necessarily always predicted we do know of course, when our leases are expiring.
We know which ones are what we think are below market, but sometimes when you are negotiating you don't get it done right away. It could take you a month or two months Ive had when it's like any other negotiation them true, including renting an apartment in New York City.
Alright.
[laughter], Yeah tell me about it.
So okay last question I guess, considering your kind of stock performance and I guess, how important your cost of capital is to acquisitions. You know one lever you guys might be able to pull at some point as a REIT conversion, we've seen multiple expansion post conversion for a lot of other companies any thoughts or are you guys have been putting anything.
Got into into that is there as an option.
I think we've said that every quarter and we just had our board meeting we do talk about it all the time the board Hasnt made a determination of whether we should be converting or when we should convert but we definitely have we are REIT qualified brands. So we can have that flexibility to convert.
I think we have a bunch of other tools in our toolbox.
If and when we need to.
Raise more equity capital so to speak in the meantime, with the 880 million of cash in the balance sheet. We do have if you notice in our deck.
The U S domestic senior debt, which is coming up in 2023, that's a place where we were in a target first for a refinancing probably you would look to that and our hope would be refinanced at a better rate and perhaps upsize a bit because we naturally delever each year.
Because of the escalators and everything else right. So you all will you want in our mind and we want to keep it steady leverage which after two or three years, if you'd gone from an eight times levered down to seven and you want to get that one multiple point back up so that'll be one of the things we'll seek to do with a U S. Refinancing you know should we make the decision to do that so that's the first place.
I think we look to for additional cash when we need it but at the moment with 880, we feel comfortable that we can of course take care of any of our needs in 2022 on the usual basis.
As well as have extra four should we exceed our expectations or other things that may opportunistically come up.
Sounds good. Thank you very much appreciate it you bet call anytime.
Thank you.
We have.
The next question from the line of Simon salary with Morgan Stanley . Please go ahead.
Hey, Thank you very much.
Good morning, Bill so.
On the public market valuations have come infrastructure have obviously come in quite a bit on the rate fears and inflation.
How does that translate to the private market sorry.
You, obviously had a tightening of spreads are you seeing any more kind of opportunity perhaps to see some of the better value deals in the private markets or I think one of the tower company said, it's like a six month kind of adjustment process from public to private but any color there that it just might get a little bit less intense given the you know the.
Longer term financing requirements and then on the.
Organic growth that you talked about revenue enhancements anything we should be aware of about potential churn in 2022 or is it going to be still spending at that sort of 1% level. The last couple of years.
I'll answer the second one first I think our expectation is it'll stay at the same level because that's historically what its been.
Now with the Ukraine, and everything happening in nuclear weapons get US you know and we have bigger problems, but b.
That's I think the thing that does which is worries us but not in our business per se just about the world on the first one in terms of remind.
Remind me again, the first one yes.
Yes.
But multiples versus you know what's funny is correct.
<unk>.
I was speaking to a large private equity emperor on really really large.
And he was making the point to me that he believes the private market values exceed the public market and it's not going to change because there was such a substantial money.
Looking for uncapped CPI returns and as an example, you know.
I pushed back and said to him, but what about digital reality, taking one of its.
Portfolio is public in Singapore, where they accessed incredibly low cost of capital. He said, yeah, I hear you, but the private market the amount that's being raised and they've been calling it I guess like core real estate Theres now core infrastructure, we're super core infrastructure, which is may be code word for they're willing to accept a.
Lower return so long as you have inflation protection I hope that answers. Your question. So maybe theres, a six month lag I'm not even sure.
Long as inflation protection, there and it's uncapped that you will see much change evaluations.
Makes sense and then.
We heard SBA loss to dust.
Night talking about the Philippines.
Mhm market focus.
Is that sort of hard and fast or do you think there Mike.
Something that you know over the next few years you might go into some of those opportunities.
It's not hard and fast you know I think if you're running a business you always have to be.
Flexible and willing to move is tectonic plate shifting or if you have noticed something that.
Youre revisiting one of your assumptions, because you have to be willing and flexible to constantly revisit it.
I think the first and foremost thing we think about is just rule of law. If someone does it pay us how do we enforce them make sure they do pay us and what do we do and so I know KKR made an investment in the Philippines, and they must've gotten comfortable.
So there are certain places that perhaps would be.
That would be worth our while to look at expanding too I think for right. Now you would imagine we're not in the Nordics, we're not yet in Denmark, where not in Czechoslovakia yet.
Notwithstanding the Ukrainian situation. So we have some places that are just sort of low hanging fruit to go to and we're not in Asia. Yet we are in Australia. We're not in New Zealand. So you can see that there's a lot of ground to cover so to speak.
Pun intended.
Okay. Thank you.
Sure.
Thank you let me take the last question from the line of Ric Prentiss with Raymond James. Please go ahead.
So we're supposed to follow up question.
We said yeah. It seemed like you were going to be light on questions like that back into a little follow up on Simon's question, a little bit there bill.
We've seen American tower tap the private equity space as far as bringing in capital to large deals and in Europe .
The previous comments does it make any sense for you guys to look at private equity sleeve coming in to support you.
Our balance sheet as well as you think about fund raising in lending spreads.
You know it's a terrific question you would imagine and we talk to tons of people, our largest shareholder actually incentive bridge, which is a $30 billion of asset manager.
Our board hasn't made any determination to do that but I think the option is certainly available to us if and when we think we need it.
But looking at sort of stupid observation I know that besides American tower doing it sell next recently announced that they were thinking about I guess, a similar approach to American tower.
So it's definitely on our radar scope, but at the end of the day. Our board has to make the determination that that is a powerful path for it and effective path for us to take.
Okay and one other question to follow up on.
Previous question as well what is your visibility to closing a deal although it's going to vary but as you think about sitting right here on March 1st how much visibility on closings do you have is it 30 days is it six months as far as you know when they're going to close.
Okay.
Now you may get three different answers it Richard our Chief operating officer Who's on the phone Glenn how would you how would you answer that.
Yeah, I would say it depends right it depends on the asset it depends on the size of the asset.
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The core business with respect to ground grown grown under towers and roofs is fairly predictable.
The other assets are much harder to predictable cards, there are larger and the timing could move significantly from quarter to quarter.
And that's why we grow so does it.
So articulately.
Well I was just saying that's why we say that here.
Here's our expectations per quarter, but one quarter. It could be 80 to next to be 125, or 130, just because of the timing.
Right and if so is the ground stuff the bread and butter stuff is that is that literally like a Navy day, Hey, we know what's in the Bible of its firm and the other stuff is more I'm just trying to gauge what is kind of the traditional on the go on time.
Yeah, I think that's a good way to think about it okay.
Okay.
Thanks for the follow up guys.
You bet.
Thank you ladies and gentlemen, we have reached the end of the question and answer session and I'd like to turn the call back to build brookman for closing remarks over to you Sir.
Thanks, everybody for joining us today of.
Of course, you know please note that if you have any questions shareholders on any of the analysts were always available and open just speaking to anybody.
Trying to explain our business and what we're doing.
And I wish everybody, a good 2022, and let it be a year of post COVID-19 at least that's my hope and hopefully the Ukrainian situation gets better thanks again everybody.
Thank you very much.
Gentlemen. This concludes today's conference you may disconnect. Your lines at this time. Thank you for your participation.
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