Cell Tower REIT Dials Up $4.8B Deal for Rival

BOSTON-Cell tower REIT American Tower Corp. said Friday it had entered into a definitive agreement to acquire 100% of the outstanding common membership interests of private REIT MIP Tower Holdings LLC, the parent company of rival Global Tower Partners, for $4.8 billion including the assumption of $1.5 billion in debt. The acquisition will add more than 15,000 communications sites under ownership or management to Boston-based American Tower's global portfolio of more than 56,000 such sites.

GTP is majority owned by Macquarie Infrastructure Partners, along with minority partners including Dutch pension fund manager PGGM. Its portfolio, which American Tower believes will add about $345 million in revenues and $270 million in gross margin during 2014, is concentrated mainly in the US, although GTP also owns 500 communications sites in Costa Rica.

American Tower's chairman, president and CEO, Jim Taiclet, says GTP has constructed and acquired “an outstanding US portfolio of tower, rooftop and land assets, which is highly complementary to that of American Tower.” He adds that the towers boast “a high quality customer base, a strong position with respect to ground ownership and lease terms, and additional structural capacity available to facilitate future leasing activity. With all four major domestic wireless carriers engaged in aggressive multi-year 4G LTE deployments, we believe our acquisition of GTP solidifies our path to achieving our strategic goals related to growing our AFFO over the next five years.”

Last month, American Tower said it would buy as many as 4,456 cell towers in Mexico and Brazil for a total of $811 million from NII Holdings. Both Nextel Brazil and Nextel Mexico have agreed to lease back the towers from American Tower for a minimum 12-year initial lease term with additional renewal options. The acquisitions from NII and the MIP Tower buy are both expected to close by the end of the fourth quarter.

Although its real estate doesn't fall into one of the conventional food groups, American Tower Corp. achieved REIT status by merging with wholly owned subsidiary American Tower REIT in the fall of 2011. It began operating as a REIT in January 2012.

The tax advantages offered by the REIT format, although considerable, aren't really the key factor in motivating companies with nontraditional real estate assets to consider going that route, whether via conversion or spinning off a subsidiary. Robert Lehman, global REIT leader at EY, told GlobeSt.com's sister publication, Real Estate Forum, this past spring that REITs are attractive to investors primarily because they create a yield-based investment option for shareholders and a potential “real asset” inflation hedge.

Lehman's colleague at EY, Americas real estate tax leader John Cullins, cautioned that although the idea is gaining more favor, it's not an easy switch to make. “This is a business and operational, and often transformational, analysis and decision,” Cullins told Forum. “So you've got to approach it from the standpoint of how this will impact all of your different stakeholders and how it affects the way you operate.” For more on nontraditional REITs, follow this link to the complete article.