Mike Harrington 2016-12-09 07:15:10
Ron Bizick said he’s never really done anything else. “I graduated from the University of Pittsburgh in the summer of 1989, worked briefly for an Iams pet food distributor as a sales manager” — overly qualified for wireless, he laughed — “and then I signed up with SBA Communications’ Steve Bernstein in November of that year,” Bizick said. “I’ve been in the cell tower and wireless business ever since. There are countless stories like mine, I would guess. What a great industry. Although I have had many mentors along the way, I can never thank (company founder) Steve Bernstein enough for the chance of a lifetime.” Ron Bizick, CEO of Tarpon Towers. Carrier Investments Since his days with SBA Communications, Bizick has seen all the ups and downs in the industry, but says the last five or six years have been terrific for private and public tower owners, as the carriers have made significant investments in their 4G and LTE networks. Today, Bizick and his partners at Tarpon Towers roll up their sleeves and use a hands-on approach to growing the company. Bizick serves as CEO and Bill Freeman is president. However, Bizick said that “titles at Tarpon mean very little to us. Bill and I have four other partners, all of whom are personally invested in Tarpon. By design, we have entrepreneurial, multitalented, experienced, hardworking partners with their own skin in the game. We all work together to advance Tarpon’s interests and, as a result, our own personal interests. It has really worked very well.” Tarpon’s other partners are Gail Buteau, Brett Buggeln, John Armour and Todd Bowman, all of whom previously held senior roles at various public tower companies and, in some cases, at carrier companies. In 2008, Bizick and Freeman cofounded Florida Tower Partners with their own capital. Subsequently, the Bradenton, Florida-based wireless communications tower company renamed itself Tarpon Towers and brought in two equity partners, ABS Capital Partners and Spire Capital. Before Tarpon Towers, both men were executives at Global Signal, previously named Pinnacle Towers. Bizick and Freeman joined the executive management team as the company was seeking experienced industry executives to manage its financial and operational turnaround — having just gone through a bankruptcy restructuring — and achieve future growth for the company. Global Signal Days “My role at Global Signal was initially chief development officer and, over time, I became COO and continued to manage the acquisitions group jointly with Bill, who was the CFO,” Bizick said. “With a team effort by a lot of people, the company grew from about 2,200 towers to more than 11,000 towers through various acquisitions with small and large independent sellers. We also bought the Sprint tower portfolio during that time.” Crown Castle bought Global Signal in 2007 for about $5.9 billion. In November 2014, Tarpon Towers sold the towers it had acquired and built since 2008, and ABS Capital Partners and Spire Capital exited the company. Bizick and Freeman, together with the four other partners, recapitalized Tarpon Towers (as Tarpon Towers II) with their own money. In early 2015, because of the company’s growth, the partners decided to bring in equity partner Redwood Capital, a family office based in Baltimore. “Redwood is perfect for us,” Bizick said. “We sought a long-term holder of assets with a cheaper cost of capital than traditional private equity. Additionally, Redwood’s ability to commit significant further capital, should it be needed, means we are well funded for the foreseeable future.” Bizick indicated that Redwood has already committed $50 million of equity capital to the company and, with debt and management capital, the company has $120 million of total capitalization. Today, Tarpon Towers has a portfolio of more than 200 towers, including towers under exclusive management agreements and new sites to build under contracts with the carriers. Tarpon also has a backlog of about 100 sites. Working with Carriers When Bizick signed on with Steve Bernstein in 1989, SBA was primarily a service business. 1997 marked the year of the first build-to-suit agreement with a carrier. “As far as I know, we were one of the first of two companies to do build-to-suit,” Bizick said. “It was exciting. I remember making our pitch to Bellsouth PCS. I went to the airport feeling OK, but not great. Before we boarded our plane, the phone rang and they asked us to come straight back. Jeff Stoops and I shared a high five and SBA was off and running. That was sort of a gamechanger for both the carriers and the tower industry.” Other tower companies, including American Tower and Crown Castle International, were acquiring assets. But Bizick said there wasn’t a truly programmatic build-to-suit arrangement, nor was there a tower company primarily focused on build-to-suit until 1997. “You can see what has happened since,” he said. Carriers seem to be keenly interested in reducing costs, and one cost that is in the crosshairs is cell tower rent. Bizick said he's not surprised. These days, Tarpon Towers works with all four major carriers and with regional carriers. “We build assets based on carriers’ needs,” Bizick said. “Sometimes that results in towers here and there, and sometimes it results in multiple towers in one certain area.” Bizick said the ideal way to identify tower locations is for a carrier to say: “This is where we’d like a tower.” He calls this approach the holy grail of tower siting, and he knows that guessing is not a good strategy. However, he also believes there are those places where, based on years of experiences or relationships in the field, or both, he is fairly certain that a tower is required. In those instances, Tarpon typically secures a ground lease option at one location or multiple locations in that area and markets the locations to the carriers. According to Bizick, the tower business, from an operational standpoint, is highly efficient. It has come to rely heavily on the specialized skills of an extensive subcontractor network. He points to each local market where there are site-acquisition companies and zoning experts, attorneys, construction crews and installation crews. “These are all of the various professions you require to acquire, zone, build and ultimately install antennas on a tower,” he said. Bizick maintains that Tarpon is extremely sensitive to what the carriers want and how they want the work to be done. “So, they may mandate — or ask politely [laughs] or maybe not so politely [laughs harder] — they may say they prefer a certain vendor over another and ask would we be willing to work with them,” he said. “And 99.9 percent of the time, we say ‘OK,’ because if they’re comfortable with a subcontractor, that makes our job a bit easier. Ultimately, our goal is to make the customer happy and own great assets.” Cost Reduction Carriers seem to be keenly interested in reducing costs, and one cost that is in the crosshairs is cell tower rent. Bizick said he’s not surprised. “I think it’s an obvious time for carriers to focus on costs, especially as the average revenue per user declines and they fight to keep their customers and steal those of their competitors,” he said. It’s pretty easy to take a look back at legacy leases that have been around for more than 20 years and find many that have seen six or seven technology-transition-driven amendments plus annual built-in contracted rent escalations.” Although Bizick said he believes the cell tower market has a bright future, he doesn't foresee dramatic growth for Tarpon Towers over the next few years. Meanwhile, Bizick said he believes the carriers are saying that they need a different kind of deal from now on and that the cell tower owners have benefitted disproportionately from the wireless industry’s growth. He said that although one could argue who has benefited and who has the leverage, the carriers or the tower companies, he believes the best outcome is to find a solution for the future. “Legacy sites and past deals between cell-tower companies and the carriers may be difficult to change, if at all or ever,” Bizick said. “My personal opinion is that we need a healthy partnership, which means working together and cutting deals that benefit both parties. The old cliché that pigs get fat and hogs get slaughtered is perhaps a way to look at it. We need each other to be successful.” Putting Capital to Work The biggest concern and challenge for Tarpon Towers involves putting capital to work at attractive returns. Bizick said the business has many people with an enormous amount of capital who are chasing limited opportunities. He said that carriers also are putting increasing downward pressure on rents, escalators, future additional equipment amendments and reserved space requirements on the assets. “When you put these two factors together, the combination is challenging,” Bizick said. “On the acquisitions side, you have an environment in which you have to price deals to perfection to win. And then, the carriers are looking for a great deal to be your second, third or fourth tenant. On the build side, the carriers are asking you to build towers at lower initial anchor tenant rates with financial and operational terms more attractive to the carriers. All the while, your cost capital probably has stayed the same.” Bizick said doing business this way is like a high-wire balancing act. “As a company, we aren’t pressured to invest money for the sake of investing money,” Bizick said. “The partners have a significant amount of their own capital invested, so naturally, we act every day like it’s our money because it really is, and that makes you approach things differently than if you’re working with other people’s money. The thought process and decision-making can be different in those two cases.” Tarpon Towers’ investor, Redwood Capital, thinks the same way. “If it takes a little longer to gain scale, so be it, but we don’t want to overpay or invest unwisely, and then if the market has some sort of correction, we’re left holding the bag,” Bizick said. “You can’t bet on the greater fool theory of when and if it’s time to exit. The industry has enjoyed a rising tide for almost 10 years now with strong carrier investment and a low interest rate environment. Multiples for private tower deals have increased by seven to, in some cases, 10 clicks during that time. Exiting at high multiples can hide a lot of investment sins.” Although Bizick said he believes the cell tower market has a bright future, he doesn’t foresee dramatic growth for Tarpon Towers over the next few years. “I believe business will be slow and steady,” he said. “We will be more like the tortoise than the hare for a little while.” But he said he also believes that several potential catalysts should spur cell tower growth, notably further investment in AWS 3, FirstNet, the current spectrum auction, the potential deployment of radio-frequency spectrum owned by Dish Network and the mysteries of fifth-generation cellular technology. Good for the Industry “Although consolidation tends to be a bad word in the tower world, certain consolidations could be quite good for our industry,” Bizick said. “Directionally, 2017 ought to be an interesting year for the industry. If the catalysts I mentioned happen and, even more so, if they happen in some fashion simultaneously, the tortoise will quickly become the hare. Let’s all hope for a great race.” Mike Harrington is a freelance writer in Prairie Village, Kansas.
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