Vertical Bridge REIT, LLC, the fourth largest independent tower company in the United States, which is backed by DigitalBridge through its flagship private equity fund, DigitalBridge Partners II (DBP II), today announced that it has completed an asset-backed securitization, issuing $1.368bn of tower revenue notes via the entity VB-S1 Issuer, LLC. Specifically, the securitization, known as Vertical Bridge Series 2022-1, is collateralized by a portfolio of 3,526 tower sites across all 50 states.
Overall, Vertical Bridge owns and master leases 9.0k+ towers across the United States. Additionally, including all sites that support wireless network deployments, Vertical Bridge’s portfolio comprises 318k+ owned or master-leased sites, which include tower, rooftop, billboard, utility attachment, and convenience store sites, amongst others.
Vertical Bridge’s Tower Securitization – Series 2022-1
Vertical Bridge’s $1.368bn tower securitization is the company’s 7th and largest asset backed securities (ABS) financing. Particularly, this tower securitization includes the following three series and four classes of notes:
In aggregate, Vertical Bridge’s issuance achieved a blended all-in yield of 3.915% with an average tenor of 7 years. Notably, the senior A-rated class bonds were priced with a split between 5.5- and 10-year tenors.
Additionally, Vertical Bridge’s issuance included a class C-1 variable funding note (VFN) with a maximum commitment of $80m. However, at closing of the issuance, the VFN was undrawn, reflecting a zero balance. Finally, Vertical Bridge’s issuance also involved a class R, amounting to $51.9m in the form of a horizontal credit risk retention interest.
Collateral of the Securitized Notes – Vertical Bridge Towers
Vertical Bridge’s $1.368bn asset-backed securitization is collateralized by a portfolio of 3,526 tower sites in the United States. In aggregate, the portfolio has 5,772 tenant leases, implying a tenancy ratio of 1.64x.
Geographically, the portfolio’s largest concentration by state is Texas, which represents ~9.0% of annualized run rate net cash flow (ARRNCF) on the tower sites.
Of the 5,772 tenant leases within Vertical Bridge’s portfolio, revenue can be further decomposed as follows:
- Customer: 86.3% of annualized run rate revenue (ARRR) is from wireless carrier tenants. While 9.5% of ARRR is from broadcast tenants
- Credit: 72.3% of ARRR is from investment grade tenants
Additionally, these tenant leases have weighted average annual escalators of ~2.6%. Further, this portfolio offers a weighted average current remaining lease term of 4.8 years and final remaining lease term, including renewals, of 23.3 years. Finally, T-Mobile US, the portfolio’s largest tenant, represents 29.4% of ARRR and is rated investment grade.
Vertical Bridge’s portfolio generates annualized run rate net cash flow (ARRNCF) of $115.5m. Indeed, this implies a debt yield on Vertical Bridge’s $1.368bn of drawn financing of 8.4%.
Use of Proceeds
Proceeds from the asset-backed securitization will be used to repay Vertical Bridge’s existing debt, namely the Series 2018-1 and 2020-1 Notes. Additionally, securitization proceeds will support the growth of the Vertical Bridge’s tower infrastructure portfolio.
Vertical Bridge’s final order book had 43 investors, including 26 repeat investors and 17 new investors. As examples, current holders of Vertical Bridge’s prior tower revenue notes include various mutual funds from American Century Investments, Manning & Napier, PIMCO, USAA, and Victory Capital.
Vertical Bridge’s $1.368bn tower securitization involved the following financial institution:
- Structuring Agent: Barclays
Equity Recapitalization – Vertical Bridge
In October 2021, DigitalBridge, investing through DigitalBridge Partners II (DBP II), closed its equity recapitalization of Vertical Bridge, securing a controlling stake in the business. At this time, Goldman Sachs Asset Management’s infrastructure unit, the Jordan Company, as well as Stonepeak Infrastructure Partners, exited their shareholding in Vertical Bridge.