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Greetings, and welcome to Radius Global Infrastructure Fourth Quarter 2021 Results Conference Call. At this time all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions]. As a reminder, this conference is being recorded. I would now like to turn this conference over to your host, Jason Harbes, Head of Investor Relations. Please go ahead sir.
Thank you, operator and welcome everyone to the Radius Global Infrastructure fourth quarter 2021 earnings call. On this morning's call, Bill Berkman, our CEO and Co-Chairman, will provide an overview of our fourth quarter and fiscal year 2021 results, followed by a more detailed update from Glenn Breisinger, our Chief Financial Officer. After these comments, we will open up the call for your questions. Before we begin, I would like to remind everyone that many of the comments made today are considered forward-looking statements under Federal Securities Laws. As described in our earnings release and filings with the SEC, these statements are subject to numerous risks and uncertainties that could cause future results to differ from those expressed. These statements speak as of today's date, and we undertake no obligation publicly to update or revise these forward-looking statements. In addition, on today's call, we may discuss certain non-GAAP financial information. You can find this information, together with reconciliations to the most directly comparable GAAP financial measure in this morning's earnings release and the supplemental financial information available on our website at www.radiusglobal.com. And now I'd like to turn the call over to Bill.
Thanks Jason. Thank you all for joining us today for our fourth quarter 2021 earnings conference call. I am pleased to report that our strong growth continued in the fourth quarter and we achieved several noteworthy highlights. On October 5th we commemorated our first anniversary as a publicly listed U.S. company. We now own over 8100 lease streams on over 6200 digital infrastructure sites in over 20 countries with an average property right term of approximately 60 years as of the end of 2021. During the fourth quarter we increased revenue by 44% year-over-year to a record 29 million. We also deployed approximately 114 million of acquisition CAPEX continuing the trend of accelerated capital deployment that began in the fourth quarter of 2020. This capital investment results in the acquisition of 8 million in additional annualized rent in Q4 increasing our total year and 2021 annualized in place rents to a run rate of 118 million, a year-over-year increase of 40% for our diversified portfolio of high quality primarily triple net and inflation protected cash flow streams underlining our wireless and other communications and digital infrastructure related sites. Since the inception Radius’s AP wireless subsidiary in 2010 we have increased the pace of annual investment of acquisition CAPEX by 45% annualized which has allowed us to grow the portfolio of annualized in place rents by 54% annualized through the end of 2021. As we have shared with you previously, we are continuing to broaden the scope of properties we seek to acquire to a wider pool of digital infrastructure and related assets with similar attributes to real properties we presently own underlying wireless towers and rooftop cell sites to include rents generated from indoor wireless distributed antenna systems or what's referred to as DAS and fiber aggregation points. In addition, we are always seeking to identify other similarly situated potential assets to further widen our total addressable market of acquisition opportunities. The digital infrastructure assets that we seek to acquire are predominately long duration triple net rental streams where our primary tenants are the world's largest mobile network operators and other types of communication infrastructure companies including tower companies. These rental streams underlie strategically located properties and sites which are difficult and expensive to move or replicate and that are essential to the delivery of their network services that all of us depend upon and we struggle to live without. Including the capital raised from our January 2022 debt issuance, our financing activities for the year produced 1.2 billion and today we have approximately 880 million in cash and cash equivalents on our balance sheet. The vast majority of this cash is available to deploy for additional acquisitions that meet our disciplined underwriting criteria where we target attractive risk adjusted record [ph] returns for our shareholders. In addition, I would also like to point out that we reduced our weighted average cash cost of debt from a fixed rate of 4.02% to 3.5%. Note that all of our outstanding debt is fixed rate or cap which we believe adds a level of protection to the company from the impact of higher interest rates. With regard to the 2022 pace of originations, we remain optimistic about our ability to continue acquiring assets that I have described earlier for at least the next several quarters based on our current pipeline of acquisition opportunities. As mentioned on our last earnings call, we continue to target the deployment of 400 million -- of acquisition capital expenditures for 2022. This continues our pacing of approximately 100 million of capital to be deployed per quarter that we have accomplished and reported for the past five quarters. I would emphasize that this is an average and there may exist some variability of the actual dollar amount of active acquisitions in any one quarter resulting from the timing of closing of larger transactions. In June our stock was added to the Russell 2000 and the Russell 3000 indices. Since then we have expanded our equity research analyst coverage by 30%. We believe these developments combined with the cash settlement of all of our outstanding warrants over a year before their scheduled expiration date has raised our visibility in the investment community and enhanced the liquidity of our stock which in turn should help us to attract additional shareholders who believe in our long term value creation strategy through disciplined capital deployment in digital infrastructure assets. To sum up I am extremely proud of what we've achieved in 2021 thanks to the dedication of our more than 300 team members globally. We invested nearly $0.5 billion to acquire nearly 1000 lease streams from communication and digital infrastructure sites around the world which we continue to strongly believe will help us achieve greater economies of scale across our portfolio as we seek to generate attractive long-term returns for our shareholders. As many of you know most of the senior management team has worked together for over 30 years, wow. We believe our decades of experience building, operating, and investing in communications infrastructure along with the team and proprietary databases we have built over the past decade is an important source of our competitive advantage. As we surveyed the enormous addressable market of over 1 million sites just in our current market combined with our expectation to continue expand to new markets, we believe we've only scratched the surface of the digital infrastructure and related property aggregation opportunities. Lastly as a reminder [indiscernible] 20% of the equity of the company and the management team is incentivized to create shareholder value over the long term. Against the backdrop of the unfolding multiyear global 5G investment cycle and the increasing criticality of communications infrastructure in this digital age we believe these and other factors will continue to enhance the strategic value of our rapidly growing portfolio. Glenn Breisinger, our CFO and a member of our club of 30-year team members will now provide an overview of our current holdings and financial results in more detail. Glenn.
Thanks Bill. We continued to grow the portfolio at an elevated pace in the fourth quarter taking advantage of investment opportunities across our expanding global footprint to fully [ph] capital. As of the end of 2021 as Bill mentioned, we owned real property interests in over 6,200 sites with over 8,100 lease streams represented by a tenant base comprised of 37% tower companies and 63% mobile network operators, the vast majority of which are investment grade. With respect to our 117.9 million of annualized in-place rents as of December 31st, 45% are denominated in Euros, 18% in British Pounds, 17% in U.S. dollars, and the remaining 20% in other global currencies including Australian dollars and Canadian dollars. Approximately 85% of our rents are located in developed markets with the remainder predominantly based in Brazil, Chile, and Mexico. I would like to specifically highlight that nearly 80% of our portfolio has annual contractual rent escalators based on inflation or a similar mechanism which provides us with meaningful protection against the impact of rising inflation also muting the impact of rising interest rates. The other 20% of our portfolio has annual escalator accelerators that are generally 63%. Geographically these fixed escalator rents are primarily located in the U.S., Canada, and Australia. Revenues were up 44% to 29 million in the quarter and gross profit or what we refer to as ground cash flow was 40% to 27.9 million resulting in a gross profit margin of approximately 96%. We deployed 114.3 million for acquisition CAPEX in the fourth quarter compared to 118.4 million in the fourth quarter of 2020, representing a 3% decrease. This level of capital deployment added 8.2 million in annual rents across 232 new lease streams. We anticipate that these new lease streams will generate a fully burdened initial cash yield of approximately 6.5% on a net gross spend basis, which includes 12.8 million of origination SG&A that we spent in the quarter. Please note that this 6.5% when compared to previous years does not reflect same store sales. At each quarter we are acquiring assets in a different mix of countries that have different acquisition cap rates due to many factors that vary by jurisdiction. For the year we generated 3.4% revenue growth from a combination of our contractual escalators and the revenue enhancements which was partially offset by 1% of gross churn resulting in net organic revenue growth of approximately 2.4% on a year-over-year basis which compares with 3.7% net organic revenue growth in 2020 on a constant currency basis. This was due to more modest benefit from revenue enhancements such as uplift in rents resulting from lease renewal negotiations and lease explorations, lease-up of our vacant unleased space, and other factors. Turning to our balance sheet and liquidity, during the quarter financing activities produced approximately 343 million of capital to support our acquisition strategy through a combination of debt issuances and cash proceeds from warrant exercises. In December we received 189 million from the issuance of 16.4 million in Class A common shares resulting from a cumulative cash exercise and 49.2 million outstanding warrants. Our outstanding unexercised warrants were subsequently redeemed for penny as our share price met the $18 mandatory redemption trigger over a year before the warrants were scheduled to expire in February 2023. As a result, the company no longer has any outstanding warrants. Also in December we raised 154 million from a drawdown of €97.2 million and 33.7 million GBP from our international senior facility which has a fixed annual interest cost of approximately 2.84% for the euro denominated debt charge and 3.78% for the GBP denominated debt charge. In January 2022 Radius borrowed €225 million out of €750 million new financing facility that the company had entered into in December 2021. The initial borrowing of $257.5 million U.S. as of the funding date has a fixed annual interest cost of approximately 3.2%. This new borrowing matures in January 2030. Inclusive of this incremental drawdown as of December 31st, Radius had 1.6 billion total gross debt outstanding and net debt of 725.5 million. All of our outstanding debt is interest only fixed rate or cap and carries a weighted average cash coupon of 3.5% and a weighted average term of 6.3 years. As a result of the 1.2 billion of debt and equity financing that we completed in 2021 in January 22, the company had approximately 880 million of liquidity available for incremental investment as of January 2022 on a pro forma basis. Please refer to the supplemental materials posted to our website yesterday after the market closed for additional details. Bill.
Thank you Glenn. That concludes our prepared remarks. Operator please open the call for questions. Thank you.
Thank you very much. [Operator Instructions]. We have the first question from the line of Rick Prentiss with Raymond James. Please go ahead.
Hi, good morning.
Good morning Rick. How are you?
Great. Glad you guys are doing well. Couple of questions, you hit a couple but I want to dig down a little deeper. Obviously, rates versus spread as far as which you are able to borrow at versus which you are able to buy at, it seems like you are still able to tap the markets at attractive rates, how should we think about as you're tapping the market into the future, how you guys are thinking about that difference between what you're borrowing at and what you're buying at and the ability to continue to earn that spread?
Well I think that is really the core function of our business is be able to capture a terrific spread between what we are following at and what we can invest at. I would point out that often times when we are investing we have uncapped inflation -- revenue streams so the other thing we always watch is the spread to the local in country sovereign linked inflation and bond. As an example in the UK last I looked at it was like minus one and you would imagine we had the incredibly healthy spread there in what we are buying. So it is not just our cost to debt, it's also the actual spread from a risk perspective. And then on top of that of course, we do think about two critical things, our organic growth which gets driven by lease renewal negotiations when leases expire and then of course any additional lease-up on top of the inflation escalator.
As you think about seller expectations, has there been any change specifically sellers are slower to react to changes in the marketplace but what do you see as far as seller ask and also the pacing maybe of them coming to the table?
Well I think, you know, I think we've said this many times, seller seldom [ph] need money and as you know we can work on a seller or a contract with them over a couple years and sometimes they'll reach out to us and say hey, I need capital I am ready to sell. Other times they will be reached out to buy a tower company who typically doesn't want to buy them, they want to effectively pressure them into accepting a lower rent. Because when they can do that it's an infinite return to them because they put more capital out. In that situation, we try to come in as the white knight and say you know what, don't accept a lower rent, we're going to acquire you. So you have all the different forces in the market but I don't think anything's changed. Now look with what's going on in Ukraine and Russia and the fact of what Putin said about nuclear weapons, anything can happen I guess. But right now it's sort of been business as usual.
Yeah, here's hoping that things calm down for sure. Final question from my side is obviously you've got a large percent that are tied to CPI, it's a good place to be. I think Glenn you mentioned 80%. We've had reports from American tower last week SPAC last night that showed some pretty noticeable increases in their guidance for CPI escalator movements on their tower portfolios. Help us understand where we should be modeling thinking about 2022 and even 2023 maybe as far as what CPI might be able to do to your numbers?
Right, look it's a great question. I'm going to let Glenn take you through the detail but as you can imagine it is the high level. The escalators can be quarterly, it can happen twice a year, it can happen once a year every five years. So Glenn do you want to take Rick through sort of what the breakdown of that is and how you should be expecting it because there is a lag of when it comes in?
Sure. To the stability point there was a lag. Obviously all rents are paid in advance with the majority of the rents being monthly and quarterly. But however the way to think about it I think on a macro basis on go forward would be, if you look at our annualized in place rents and take 45% of the annualized in place rents and think about European inflation and then take 18% of the rents and think about inflation in the UK and the other 20% think about inflation in LatAm. And the U.S. to use the 17% that's pretty much fixed, that's the way I would think about it. However you want to handicap what you view inflation to be, it's how you should think about how our portfolio escalates.
It’s just a different Glenn perspective Rick. It can be six months to a year before we'll see it or in some cases a quarter. I don’t have the actual breakdown on the timing at my fingertips, maybe Glenn does. It’s okay if I don't.
Yeah, no that helps. Appreciate it guys. Stay well and -- I am sure we will talk you later.
Thank you. You have the next question from the line of Sami Badri with Credit Suisse. Please go ahead.
Hey Sami, how are you doing?
Hey, doing well, doing well. The first question I have is what drove the increase in origination SG&A as a multiple of rent acquired, it rose to 1.6 times from 1.1 time at the start of the year and is that mostly wage inflation or maybe you could just tell us what else is going on?
Do you know what, I always felt like we did ourselves this service and maybe I have said this before you need to include it, at the end of the day to me and Glenn it is always part and parcel of just our growth CAPEX, our acquisition CAPEX. And so we try to just look at the all in yield that's coming out. And just to remind you those yields are on a same store because our mix of what we buy always varies quarter-by-quarter. Sometimes the SG&A can vary because we're buying a larger portfolio and then the SG&A can be less. Sometimes we're buying many more individual assets where the SG&A can be higher, things of that nature. Glenn, would you add anything else to that.
Yeah I would say, as you think about the assets that we have and the markets that we have we tend to look ahead and we want to hire some folks in certain areas for growth. So you're seeing some of the SG&A spend a little bit ahead of the realization about acquisition CAPEX but year-over-year it's not been -- it's been year-over-year a benefit from a skill standpoint.
Remember, we always view it as a we are getting tax deduct 10% of your purchase price because we get to actually deduct that SG&A. So it is kind of bizarre but we love it.
Got it. I want to go back to the inflation escalator and Glenn, I think you actually mentioned the word inflation escalator or the word inflation in your prepared remarks a little bit more than you have historically and Bill just weaving in and nesting in kind of what you answer to the prior question which is you're not really sure if it is one quarter or six months or a year, I think when people [Multiple Speakers].
They are all different but they're all in caps Sami.
Yeah, so I guess when investors think about companies that are insulated from inflation, they want something a bit more tactical or surgical in nature. Can you just give us an idea on just how surgical and tactical you guys actually are about this just because we're -- the market is looking for companies that can really adjust fast, right to the fluid dynamics that are ongoing. Could you just give us an idea or characterization on how you guys can respond and the speed at which you can do it at?
Yes, I mean I think it's more about critical I guess PC, you can spend that way for a long time. The other thing I would add is that when you're buying an uncapped CPI linked escalator for the period of time we're buying forward, which in our mind is perpetuity we always believe that it's very difficult to value that, like valuing a call option on something for that long a duration of black shoals or [indiscernible] approach is really break down when you're talking about multiple decades. So it's a first basis. The second time, even though there is a lag implemented it always means we do get it, it just maybe lagged before you see it hit the numbers. Because it was getting measured and then it gets implemented and then it gets paid by our tenants. So to us the place where you don't get the CPI on CAPEX later would be the U.S. which you know very well because it is a system that's based on fixed percentage escalators. I think the other thing that gets us most excited is when we think about us in comparison to some of our tower brethren especially in Europe, the untapped, I can't stress enough how valuable that is because often times they do have inflation escalators but if you look closely their captives 3 to captive 2, they are captive 4. CellMax [ph] would be an example, Branches [ph] would be an example. So I hope that answers your question.
Yeah and I would say Sami, right just structurally within the business right, we get the escalator. It's a matter of how it comes through on the GAAP revenue which is basically a year lag because the way the accounts book to revenue is you get paid in advance and that's booking it and which I think is forward for the whole year. But the fact of matter is we do get the escalator, so there's going to be some variability on a quarter-by-quarter basis because of the fact the matter is 70% of our ranch escalate in lease, some of them escalate over term. So all that variability is going to mean that the revenue escalations and our GAAP financials are a little bit behind reality. But we do get the value of the inflation protection [Multiple Speakers].
Got it, great, thank you.
Thank you. We have next question from the line of Nate Crossett with Berenberg. Please go ahead.
Hey Nate.
Hey good morning. Well, I was curious to know, I mean, we are getting closer to the end of the first quarter. Wondering if you could provide a little color on maybe what you close so far this year? And then just the pricing assumptions I guess for that 400 million, should we be kind of modeling that 6.5 ish range?
Well I will answer two things, the first is it not, our General Counsel would kill me if I gave any color for the first quarter. But I think it's -- we said in our release 400 million plus, there can always be variability quarter-by-quarter based on when we close. But to us it is business as usual so I hope that gives you a little trends for how I am framing it. In terms of your second question which I'm thinking I am having a senior moment…
If the yield is on the 400 million that we should be kind of…
That is just, thank you, it's just about the mix of countries we are buying and so we have purposely moved away from emerging markets. But if you saw buy down there we typically try to buy shorter property durations and of course they have a much higher cash year. So that could influence the yields you are going to see on an aggregate basis. If you're buying more in Europe where risk is less and act as a premium to the U.S. equity risk premium which is how we think about our world, the yields would be less than of course Latin America. So if you think then about the mix, we have been very focused on more developed nations and I would say less for the moment. But other than that, again it's business as usual and we are hoping they would keep I guess hitting the targets that we established internally for each of these countries. Because really if you think about it and we said this before, it's a rules based business and we're always reviewing our rules, they are dynamic but they combine both what’s our threshold IRR for each country we buy in based typically on the spread to the U.S. We also, as I mentioned earlier always look at the spread to the world foreign [ph] country, sovereign inflation linked bond or debt. And then on top of that we're always reviewing do we want to buy a shorter property right term like in Latin America because we know we always have effectively an embedded ability to go back to that landlord and tack on extra years. In Europe while the rest places we rebate by much longer duration as you well now. I hope that answers your question.
Yeah, that's helpful. I had another question, just the renewal leasing spreads maybe in the quarter and the year, if you can give us what that…?
No that’s just, sorry keep going.
The other one was just on competition, if you guys are seeing anything new percolating some of the tower guys are starting to buy more of their own land underneath some of their assets. So, any update on just what you're seeing?
So on the renewal leasing spread, as you know there's no -- all of our leases there's no X% or expiring every quarter. It varies because every lease duration varies. So there is no, what’s the word, it is not always 5% or expiring every quarter. So, that’s just very mixed and has resulted in one quarter a ton of expiring and they happen to be below market rents we do seek to getting up with. Some quarters you will see a lower amount of what we would call organic growth driven by lease renewal because we get fewer leases expiring and in other quarters you'll see a lot more. I hope that makes sense, it's just hard to -- it's not a perfect linear line. In terms of competition, yes, tower companies are “our biggest” competitor. I know when I look at American towers 10K they acquired about 215 million of properties in 2020 and maybe did about 242 million in 2021. In CellMax’s [ph] case and this is just to give you an example, they always try to go first to reduce the rent. So they will reach out to 3000 people and say, hey, please reduce your rent and if you don't we'll consider moving the site. Whether they would move or not who knows, that's their decision. We, as I said earlier, love to come in as the white knight to save that person. When I looked at their numbers yesterday, if I'm not mistaken, they advanced about 60 million to landlords in 2021, I have my year, right. And that's different than buying that’s just for a period of time. And they bought about €80 million worth of property. So in total, actually 71 million in advance. They had about €151 million in total that they put out in their investment. And then of course they did, they were successful in reducing rent for some of the landlords. So I hope that gives you a sense of some of the competition out there, but we definitely see them and as Richard Goldstein, our COO always reminds me, we've been the only guy in the market for so long. Yes, no one wants to have competition but the counterintuitive fact is that when they come to the market, it also helped catalyze people who never would have thought about doing this, to think about it more, because you have more parties reaching out to them, meeting us and the tower company.
Okay, that's helpful. If I could just ask one more quick one.
You can ask as many as you want.
Yeah, last quarter, I think you did your first datacenters -- just curious if there's any more of those in the pipeline and maybe how should we then decide that piece of the TAM, for you guys?
I think there's definitely more in the pipeline. I can't comment, if and when we get to closing because you have a very big pipeline funnel. And of course, what falls out what you close on you don't know until you're close. I think it's one of the reasons we call this a social business because it's effectively many, many small M&A transactions. But it's absolutely an area we're focused on. We haven't actually done enough work to size the opportunity, not yet. We are definitely trying to triangulate and figure out the best way to do that. But, I think in a general sense, it's not small, it's just a lot easier, of course, for us decide how many cell sites and rooftops there are just from a real grabbing and getting the access to the data, if that makes sense.
Yeah, it makes sense. I'll leave it there. Thank you guys.
Thank you. We have the next question from the line of Walter Piecyk with Lightshed. Before we take Mr. Piecyk’s, a reminder to participants to ask question please press star one. Mr. Piecyk, please go and ask your question.
Okay Walter, we were a little long this time. Sorry about that.
I know you were, you went over by 60 seconds. I think you can cut a little bit out of Glenn's comments, I'll give you some. [Multiple Speakers]
Yeah Glenn, you spoke too long.
I was too slow.
So, one of the things the metrics we look at, and it's not obviously perfect, it is this kind of acquisition CAPEX per new site, and it looked better this quarter sequentially. So in the past, when it was going higher, you gave a thoughtful kind of response in terms of duration, right. And also, maybe there's some geographic mix that I don't think you report that on a quarterly basis anymore. But when I looked at the duration in the fourth quarter, it actually went up again, Europe went up, North America went up, so the durations are going up and your cost per acquisition are going down. So what is happening there in terms of the deals that you were doing this quarter that you were able to be, I think better in terms of price, and yet still seeing a lengthening of the duration?
You know, I mean, it's because not all assets are created the same. You have very good observation that pricing are different by country and of course, in Europe, as an example, we will buy longer duration. But most importantly, as an example, if we're buying an indoor DAS rent stream, or if we're buying a fiber aggregation point they're just larger size deals, right. So you may have done fewer deals and have a bunch that are larger, which then when you aggregate it all together, it can skew what the average asset prices per deal, which I think was like 150,000 if you were to just divide it by everything, it just doesn't tell you that much. And maybe at some point, we'll break out the alternative adjacent assets. I guess we haven't wanted to because what we haven't wanted to do is to say that they're any different than our wireless assets because half the time it's the same exact counterparty your tenant is paying us for something that's mission critical. And we want to try to keep things as simple as we can and we think our business is simple but there are of course nuances, and you know what happens, we're trying to, I guess, keep it simple for all the shareholders understand it. That's why we haven't broken it out.
Sorry, it's the mix, Walt.
Yeah. So you also mentioned in the comments, and obviously stating facts that the last five quarter is over 100 million. Obviously, when we're talking deals, any deals there can be variability, but is 100 million kind of like your bogey baseline at this point or could it dip, when we look at the variability from quarter-to-quarter over the course of 2022, could we have like an 80 million quarter and then like 130 million quarter, like how do you see that playing out?
Yeah, I think that's what I was trying to say, which is, that's about the timing of when we're closing deals. So anything is possible like that. I think our other thing that we're really focused on and you'll note it in our earnings releases, we did open two new countries. So when you open new countries that hopefully is going to help us grow, and it takes time for the flywheel in each country to get going. And even while we're opening those two that we just announced, you would imagine we're working on others, but they take time because you've got to know we find the right team to do it, you've got to build your proprietary database, and really get a business plan together for every new jurisdiction that we enter. Hope that makes sense. And then the last thing I would say that we haven't really reported, but I would like to just mention, we are in the nascent stages of building a build to suit tower development business. It is very nascent. We have won a bunch of small contracts and the only way I can say that I'm really hopeful that we can really grow that nicely, that we were in the business when we were a private equity partnership. I mean, like most of our companies, we love the business so long as we can win the right contracts upfront from counterparties that we think are terrific.
Got it. And then the last thing was a similar type of topic. I mean, when we started this with you guys you coming out like your acquisition CAPEX was what sub 50 and now you're doing over 100. So clearly, you delivered on the pipeline, yet at the same time again, going back to prepared comments, you're talking about looking at DAS and looking for other types of things. When I think originally the concept was, look, we've got these X number -- forget the exact number, X number of sales people doing the blocking, tackling, finding the guy who was going to sell at that time, because not everyone wants to sell, right. They'd like getting that revenue. Is there some change in that pipeline that you would go after DAS? And then similarly, when you look at a DAS deal, it just, maybe I'm wrong, and it feels like with DAS, there's other buyers out there, names that people…? Yeah, go ahead.
Yeah, so let me come back to DAS first if that's okay. It's a different type of structure in the European countries, where we're actually, let’s take a hospital, just to remind you we're not buying the DAS network. They get paid rent by multiple M&Os, network operators, to rent space to put a DAS in. It is either three DAS or they all share one, we're buying the rent stream that's paid to the hospital. So it's a little -- it's not like the U.S., that's not exactly the model that happens in the U.S. But we find it really attractive, right. So it's not really a different business, same tenant, still about wireless but it just happens to be indoors, which as you well know is where the bulk of most wireless traffic happens.
But do you think the competitiveness of going after those assets is different, when compared to ferreting out somebody that owns land under a tower?
You know, so far, I think we've done a really good job. We haven't really seen the competition, but it's not. If it comes it's really when and who. Who knows what's going to come but I think our goal is just to A) have a good reputation in the market; B) continue to open additional markets; and C) to make sure we have separate teams for pursuing indoor DAS because I think we can do things in parallel. It's not like things have changed for our wireless site business. When we were private, we were capital starved because we were at the end of the life of a private equity firm transitioning. Now that we're public, you're seeing us raise more capital for two reasons. One is the old adage you raise it when you can. The second is, we really think between our core business of the adjacent assets that we talked about, and then having extra capital for opportunistically larger acquisitions. We want to be well positioned because at the end of the day scale is everything. The greater the scale we have, we can drive our cost of capital lower, we are going to laugh, we see more deals from bankers and the like, because we become a bigger player in the market. And we're in a market where scale in terms of competitors is quite, quite large in American tower selling mix. I mean you know this better than I do. Hope that's helpful.
Got it. Okay, thank you.
Thank you. We have the next question from the line of Jon Petersen with Jefferies. Please go ahead.
Hey, Jon.
Hey, guys. How are you doing?
Doing well.
Great. You've kind of alluded to maybe some increased competition, maybe from tower companies or whatnot. I mean, if you just do a Google search and say you have a tower you want to sell, I mean, there's definitely companies out there that will buy it from you. And so I guess it is just against that backdrop, and you guys talking about your 30 years of experience, maybe if you could, shine some light on how many bidders there are on these transactions you're doing, how that competitive environment has changed, like? And also like, I don't know how often like third party brokers are involved, if that's like an emerging pocket that needs to be lined in these transactions. So anything you could say on that?
Look, it's a great question and the usual answer is, every country is different. And you know this as well as we do and Europe as an example we've seen over the last three years, a lot of shedding or selling of towers by the mobile network operators, Gamma Nose [ph] two tower companies. Prior to that most mobile network operators and I'm going to generalize here, they haven't taken the time and deployed their capital to go try to buy property underneath their towers that they owned. Once it gets in the hands of the tower company, then they either do what CellMax did, which is first focus on rent reduction, if they can do it because it's an infinite return and then if that's not available, then we'll try to either advance some capital or buy the actual property. So do we see them, of course. We now see them because they're now tower companies that own the towers instead of M&Os. I think the market is large, there are many times we don't see them and sometimes they don't see us. It's just, the law of numbers and averages. The place where there's other “aggregators” like us for the most part is the U.S. It's really, again, the tower companies who we view as our main competitors in almost all the other countries.
But I guess how often in negotiations is there maybe a couple of rounds of bidding, or is it mostly off market, for you guys everything's kind of sorted out between you and the counterparty and there isn't anybody else involved?
I can't give you the pattern or percentage, because it's not steady. You know what I am saying, every country is different, every opportunity we find is different, and when you have -- we own 6,200 sites globally. And as we said, there's likely about a million sites in our total addressable market growing at 1% or 2% a year and that doesn't include Greece as an example, which is one of our new markets. And so yes, you're going to come across them but sometimes you're not going to come across them. And remember one other thing, which is that in a market, one of the M&Os may have sold their towers, but some of the M&Os have not. So then those are some of the sites that we go after, because typically the tower company hasn't tried to target just buying properties underlying one of the M&Os, who still owns their own tower. So that's why there's just no rhyme or reason or no rules to imply, we're just doing as good a job as we can. Imagine that with your visualizing your arms are out trying to grab as many opportunities as we can actually execute on that meet our underwriting criteria.
Got you. I guess switching to the internal growth, so your net organic growth this year, you got on slide 6 here, 2021 was lower than 2020. That was mostly it looks like revenue enhancements being lower. I guess, any expectations into 2022 on where the revenue enhancements can go, what kind of opportunities maybe you could lay out there, and then how do we think about, I guess, specifically we talked about the escalators, but how do we think about the revenue enhancement in light of inflation, and whether or not you have more ability to ask for higher rents on renewals?
Right. And so you nailed it. The biggest piece of our revenue enhancement is when our lease is expiring, and each of these leases there's no rhyme or reason. They were set many years ago when they got initially done. Some quarters more are expiring in this quarter, less were expiring as you pointed out. But every time we go into that negotiation, the first thing you think about is, is it below market rent. And if it is, we of course know what market is, we try hard A) to be good landlord, but we also want to be paid market. So we will get an uplift from that. So I guess let me summarize it. It's how many leases are expiring, how many of those leases are very below market that would be a driver of revenue enhancement. Now on top of that, in some places we're finding they need extra space at a ground base tower or even on a rooftop to put a generator or a battery system and for backup. Or if you're at a ground based site that needs what they would call augmentation because they want to add another tenant and they want to extend the height of the tower if they're permitted by zoning, sometimes they won't do a lot of tower, they'll do a guidewire tower and you know the guide wires which go diagonally out from the tower may need to go on property they haven't leased which is outside the perimeter of what they have. So that would be an example of a lease up. And there many more nuances like that. But it is quarter-by-quarter and again, it's one of those where we can't necessarily always predict it. We do know, of course, when our leases are expiring. We know which ones are what we think are below market. But sometimes when you are negotiating, you don't get it done right away. It could take you a month or two months of haggling. It's like any other negotiation that you've been through, including renting an apartment in New York City. What a joy.
Yeah, tell me about it. So okay, last question. I guess considering your kind of stock performance and I guess how important your cost of capital is to acquisitions, one lever you guys might be able to pull at some point is a REIT conversion. We've seen multiple expansion post conversion for a lot of other companies. Any thoughts or have you guys been putting any thought into that as an option?
I think, we've said it every quarter and we just had our board meeting, we do talk about it all the time. The Board hasn't made a determination of whether we should be converting or when we should convert, but we definitely have -- we are requalified rents. So we can have that flexibility to convert. I think we have a bunch of other tools in our toolbox if and when we need to raise more equity capital, so to speak. In the meantime, with the 880 million cash on the balance sheet, we do have if you notice in our deck, the U.S. domestic senior debt, which is coming up in 2023. That's a place where we went to Target first for refinancing, probably you would look to that. And our hope would be refinance at a better rate and perhaps upsize a bit because, we naturally delever each year because of the escalators and everything else, right. So you always want -- in our mind, we want to keep a steady leverage, which after two or three years, if you've gone from an eight times lever down to seven, you want to get that one multiple point back up. So that'd be one of the things we'll seek to do with a U.S. refinancing, should we make the decision to do that. So that's the first place I think we look to for additional cash when we need it. But at the moment with 880 we feel comfortable that we can, of course, take care of any of our needs in 2022 on the usual basis, as well as have extra for should we exceed our expectations, or other things that may opportunistically come up.
Sounds good. Thank you very much. Appreciate it.
You bet. Call anytime.
Thank you. You have next question from the line of Simon Flannery with Morgan Stanley. Please go ahead.
Thank you very much. Good morning Bill. So on the public market valuations infrastructure obviously come in quite a bit on the rate fears and inflation. How does that translate to the private markets, sorry, you obviously had a tightening of spreads, are you seeing any more kind of opportunity perhaps to see some of the better value deals in the private markets or I think one of the tower companies said it's like a six month kind of adjustment process from public to private but any color there that this just might get a little bit less intense given the longer term financing requirements? And then on the organic growth that you talked about revenue enhancements, anything we should be aware of about potential churn in 2022 or is it going to be still staying at that sort of 1% level of the last couple of years?
I'll answer the second one first. I think our expectation is it'll stay at the same level, because that's historically what it's been. Now with the Ukraine and everything happening and nuclear weapons get used, A) we have bigger problems but B) that's I think the thing that does, which worries us, not in our business per se, just about the world. On the first one in terms of remind me again the first one.
Yeah, about the private multiples versus [Multiple Speakers].
I was speaking to a large private equity infra fun, really, really large. And he was making the point to me that he believes the private market values exceed the public market, and it's not going to change because there is just such substantial money that is looking for uncapped CPI returns. And as an example, I pushed back and said to him, but what about digital reality taking one of its portfolio is public in Singapore, where we've accessed incredibly low cost of capital. He said, yeah, I hear you but the private markets, the amount that's being raised and they've been calling it, I guess, like core real estate, there's now core infrastructure or super core infrastructure, which is maybe code word for they're willing to accept a lower return, so long as you have inflation protection. I hope that answers your question. So maybe there's a six-month lag, I'm not even sure. As long as the inflation protection is there and if uncapped that you will see much change to valuations.
Makes sense. And then we heard SBA last night talking about the Philippines, you've talked about the developed market focus. Is that sort of hard and fast or do you think there might, that's something that over the next few years you might look to some of those opportunities?
It's not hard and fast. I think if you're running a business, you always have to be flexible and willing to move as tectonic plate shift or if you notice something that you're revisiting one of your assumptions, because you have to be willing and flexible to constantly revisit it. I think the first and foremost thing we think about is just rule of law. Someone doesn’t pay us how do we enforce and make sure they do pay us and what do we do. And so I know KKR made an investment in the Philippines, and they must have gotten comfortable. So there are certain places that perhaps would be -- that would be worth our while to look at expanding to. I think for right now, you would imagine we're not the Nordics, we're not yet in Denmark, we're not in Czechoslovakia yet notwithstanding the Ukrainian situation. So we have some places that are just sort of low hanging fruit to go to, and we're not in Asia yet. We are in Australia. We're not New Zealand. So you can see that there's a lot of ground to cover, so to speak. No pun intended.
Okay, thank you.
Thank you. We take the last question from the line of Rick Prentiss with Raymond James. Please go ahead.
Thanks for taking the follow up question. Appreciate it, yeah, it seemed like you were going to be light on questions so I got back into queue. I wanted to follow-up on Simon's question a little bit there. Bill, we've seen American Tower tap the private equity space as far as bringing in capital for large deals in Europe in previous comments. Does it make any sense for you guys to look at a private equity sleeve coming in to support your balance sheet as well as you think about fundraising and earnings spreads?
You know, it's a terrific question. You would imagine and we talked to tons of people, our largest shareholder, actually is Centerbridge, which is a $30 billion asset manager. Our Board hasn't made any determinations to do that. But I think the option is certainly available to us if and when we think we need it. But look, it's an astute observation. I know that, besides American Tower doing it, CellMax recently announced that they were thinking about, I guess, a similar approach to American Tower. So it's definitely on our radar scope but at the end of the day, our Board has to make a determination that that is a powerful path, or an effective path for us to take.
Okay. And one other question to follow up on previous question as well, what is your visibility to closing a deal, I know it's going to vary but as you think about sitting right here on March 1st, how much visibility on closings do you have, is it 30 days, is it six months as far as you know, when they're going to close?
Now, you may get three different answers if Richard, our Chief Operating Officer is on the phone. Glenn, how would you answer that?
Yeah, I would say it depends, right. It depends on the asset, and it depends on the size of the asset. And, the core business with respect to ground under towers and routes is fairly predictable. And the other assets are much harder to predict, because they're larger, and the timing could move significantly, from quarter-to-quarter. [Multiple Speakers]
Go ahead, I was just saying that's how we say that here our expectations per quarter, but one quarter could be 80 to next to be 125 or 130 just because of the timing.
Right. And so as the ground stuff, the bread and butter stuff is that it is that literally like a 90 day, hey, we know it's in the pipeline. It's firm and the other stuff as well, just trying to gauge whether it is kind of the traditional on the ground side?
Yeah, I think that's a good way to think about it Rick.
Okay, thanks for the follow-up, guys.
You bet.
Thank you. Ladies, gentlemen, we have reached the end of the question-and-answer session. And I'd like to turn the call back to Bill Berkman for closing remarks. Over to you, sir.
Thanks everybody for joining us today. Of course, please know that if you have any questions, shareholders, any of the analysts we're always available and open to speaking to anybody trying to explain our business and what we're doing. And I wish everybody a good 2022 and let it be a year of post-COVID, at least that's my hope. And hopefully the Ukrainian situation gets better. Thanks again, everybody.
Thank you very much. Ladies and gentlemen, this concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.