June 29, 2017

This S&P 500 REIT Made $215m in Operating Revs from its Nigerian Assets in 2016

Dolapo Omidire

The American Tower Corporation (ATC), an independent owner, operator and developer of multi-tenant communications real estate (cell towers) generated over $215m in operating revenues during 2016 from its towers owned in Nigeria, according to their 2016 year-end financial statements.

The corporation, which is a member of the S&P 500 index, is one of the largest REITs in the United States, with a communications real estate portfolio of approximately 147,000 sites globally. In Nigeria, they presently own 4,742 sites, 4,716 of which were acquired from Airtel for $1.112 billion in 2015. The acquisition was initially announced in November 2014 when the ATC team noted that Nigeria was as a ‘tremendous growth opportunity’ citing the country’s relatively underdeveloped wireless infrastructure along with its large economy and population relative to the rest of Africa. Airtel was poised to be the anchor tenant on the portfolio under a lease with a ten-year initial term.

The size of the acquisition at $1.112bn and operating revenues of $215m in 2016, up 96% from $110m in 2015 are evidence that potential for deal flow in the Nigerian REIT industry or alternative real estate sector could be substantial if legislation is enabling and if there is enough room for flexibility/creativity.

As noted in the review of the major challenges facing the Nigerian REIT industry, it was outlined that Nigerian REITs are at odds with their supposed tax efficient nature as the corporate tax exemptions that should be available to these entities are currently very ambiguous. ATC commenced operations as a REIT in January 2012 to take advantage of the structure’s tax efficient advantages, predominantly a law that means they are not subject to U.S. federal income taxes on REIT generated income, including the income derived from leasing space on towers. The ambiguous status of Nigerian REITs however, leave many potential market participants on the sidelines. As the Nigerian Stock Exchange’s Inaugural REIT conference demonstrated, Nigerian regulators etc including SEC, FIRS and NSE are taking a few actions to ensure that the sector is well positioned for success.

By year-end 2016, the American Tower’s Corporations property revenues and consolidated adjusted funds from operations across board grew 22% and 16% respectively. ATC also has operations in India, Argentina, Mexico, South Africa, Uganda and many more.

Risks pertaining to their Nigerian operations include power and FX volatility. They responded to the former by developing power solutions to preserve the site up times for tenants and also reduce reliance on fossil fuels. In 2016, they were able to extend average generator lifespans by more than 30% from 18,000 hours to 24,500 hours across 4,700 deployed generators. On FX volatility, lease agreements that ATC enter with tenants ensure that a portion of the monthly rent received is escalated based on an index outside the lessor’s economic environment (U.S CPI).

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