Lendlease has identified US telecommunications infrastructure as a new strategic market and will seek investors to help grow its presence in the sector.
The Sydney-based global development group in May acquired US company Parallel Infrastructure, which owns and operates 450 towers nationally for major carriers and regional wireless providers.
Dennis Hickey, CEO of Lendlease America, told analysts at a market briefing today that the Parallel acquisition gives Lendlease a platform in the US, as it delivers 135 completed towers with 288 in development.
Lendlease listed the value of its telecom towers investment at AUD83.3m (€55.6m) at 30 June 2017.
Given rapid growth of data usage in the US, and with rollout of the 5G network, Hickey said the sector offers a natural opportunity to grow an investment management platform alongside it.
Lendlease has been instrumental in delivering thousands of towers and network solutions to the Japanese telecom company, Softbank, in Japan, he said. “We pioneered these solutions in the Japanese market.”
Softbank merged with US company Sprint, and Lendlease continues to work with Softbank to integrate its US business.
“We have been working with them for the past two years,” Hickey said.
“Over this time we have [also] seen an opportunity for Lendlease to play more of a development solution for the whole sector – and for other carriers in the US.”
Hickey said telecom towers were economically viable investments. There is no speculative developmet and all have at least one tenant from inception to provide an initial yield, he said.
Bringing in further tenants can produce yields on costs of “somewhere north of 10%”, he said. Operators have 25-year ground leases while carriers have five to 10-year leases, both with rolling options.
“The strategy is to work with the major carriers,” he said, adding that, increasingly, tech companies such as Google and Apple, as well as governments, are looking to broaden their network infrastructure.
Currently, 75% of telecom towers in the US are owned by three listed real estate investment trusts: Communications, Crown Castle, and American Towers.
Hickey said carriers are looking for new players in the market to break the concentration of existing key players.
As Lendlease rolls out its own development pipeline of towers, it will start to look at bringing in capital from partners to enable growth. Lendlease has a “strategic intent” to co-invest in long-term ownership vehicles, he said.