Although many media aggregators picked up an analyst’s report that David J. Grain might have overpaid on the cattle car tower buy, many industry observers believe that the veteran tower consolidator knows the industry too well to purchase towers at an inflated price.
Although conversations at a Florida Wireless Association networking social of over 200 attendees last night ranged from carrier cap ex expenditures to planned business expansions of a number of key players, one frequent topic was Sarasota Fla.-based Grain Management’s purchase this week of 103 nTelos Wireless’ cell towers for $41 million.
However, opinions differed regarding whether the $398,000 per-tower-deal made financial sense.
“I’m not sure they got a good deal. It looks like they overpaid,” said one executive of a major tower consolidator. “It’s my understanding that some of those sites were just wood poles,” he said.
Another industry manager standing with a small conversation group alongside the Intracoastal Waterway in Ft. Lauderdale said he believed that they should have paid half that price, but did not offer how he arrived at that price point.
Nor did Wells Fargo analyst Jennifer Fritzsche, who wrote in a research note this week that, “The price per tower of $400K, however, is higher than we expected, as we previously had assumed $100K per site when estimating NTLS’s core asset value.”
But after FierceWireless published Fritzsche’s statement, media aggregators ran with her comments, not provided with any foundation, and they became fact in many conversations Thursday.
Did Grain overpay?
Established in 2007, private equity firm Grain Management owns and operates communications towers across the U.S. and largely through its founder and Managing Partner, David J. Grain, is well-connected with government agencies and wireless carriers and their tower and spectrum needs.
Bypassing his former employment roots, Wall Street, Grain raised over $100 million in capital by personally contacting investors, many of them from the academia investment community within a little over two years. In founding the company Grain had invested $6 million of his own money.
“David knows exactly what he’s doing and I can assure you that he didn’t overpay for the nTelos towers,” said another tower site developer. “She [Fritzsche] has no inkling about the deal. She didn’t see the book and she didn’t see the agreement. When these deals are made everybody has an opinion. I guess I fall in that category as well, but I’m immersed in this business and there is no way that someone is going to overpay for a tower by 300K, especially on a $40 million deal,” he said.
One more tower company executive also agreed that Grain would have employed considerable due diligence efforts before committing funds to the purchase.
“I worked with David and I can tell you, he is one of the brightest, most charismatic individuals in this business,” he said.
Grain’s business model also includes buying and leasing spectrum
In 2002, Grain was hired by private equity investors to lead Pinnacle Towers from bankruptcy through its successful operational turnaround. In June 2004, under Grain’s stewardship, Pinnacle Towers was renamed Global Signal and was later sold in 2006 to Crown Castle for $5.7 billion, a return for Global Signals’ private equity investors of 15 times their original investment.
It showed a clear track record of success that strains credibility of Fritzsche’s statement that the towers were only worth one quarter of what was paid for them.
Grain has also found what appears to be a successful niche that hasn’t been picked up by other tower owners, buying and leasing spectrum.
Last October, Cincinnati Bell closed its agreement to sell its spectrum licenses to Verizon Wireless for $194 million, but a part of the deal was an agreement that Verizon was assigning its rights to the licenses to Grain and is leasing spectrum back from Grain.
In 2013, Grain paid $189 million for Verizon Wireless spectrum and then leased it to AT&T.
Media Venture Partners represented Grain in both spectrum transactions. However, according to AGL Magazine, MVP served as exclusive financial advisor to nTelos on this week’s transaction.
To assist in maintaining and capturing additional government contracts, Grain has an office in Washington, D.C.
