Layout:
Recap
🔒 Interest Rate Impact
🔒 Adjustments for AFFO
🔒 American Tower
🔒 SBA Communications
🔒 Crown Castle International
🔒 Upcoming Guide
🔒 Crown Castle International Part 2
🔒 Target Updates
We’ve reviewed the results from each of the tower REITs:
American Tower (AMT) AMT 0.00%↑
SBA Communications (SBAC) SBAC 0.00%↑
Crown Castle International (CCI) CCI 0.00%↑
Welcome to the Tower REIT Update.
Recap
A tiny recap of our thoughts from the Q4 2023 earnings:
AMT: Pretty good. Foreign exchange rates create a bigger headwind. Still thinking 2025 will see headwinds also. Assets in India are under contract for sale. That deal should be dilutive to FFO and AFFO, but the impact of the deal is not included in guidance because the timing is uncertain (probably somewhere in the second half of 2024). The transaction will reduce leverage, but will also be dilutive to FFO and AFFO, which will make it more difficult to maintain or increase guidance throughout the year.
SBAC: Despite mostly fixed-rate debts and strong cash flows for paying down debts, part of maturing debt will need to be rolled over. That will carry higher rates and create a headwind. I’ve been expecting SBAC to beat their starting guidance for the year. Revenue growth is still challenged by the T-Mobile and Sprint merger. SBAC reduced their debt outstanding, but increased the amount available on their revolver. Could buy other assets if they see a motivated seller, but could also buy back shares with free cash flow or further reduce outstanding debt. Selling some assets in Argentina, but it’s under 1% of revenue and well under 1% of EBITDA. Not material.
CCI: Management precisely maintained guidance from Q3 2024, which was a bit strange. I attributed that to the recent change in management wanting more time to evaluate the business before announcing a change. My first impression was that the AFFO guidance looked pretty good after a few adjustments. However, I’m questioning one of the adjustments we used. We calculated recurring rent excluding prepaid rent amortization to get a feel for cash rents while treating the prepaid rent portion as a subsidy on development expenses. I’m debating whether that is actually the best method for modeling results, which can be a pretty complex topic. I was perturbed that the new CEO didn’t slash guidance for discretionary capital expenditures, which is one of the activist’s (Elliott Management) main areas of emphasis.