A Peek at Crown Castle’s Balance Sheet
Leverage prerequisites for telecom REITs
Crown Castle’s (CCI) core strategy lies in the expansion and acquisition of properties, towers, and fiber cells. As these acquisitions and continuous redevelopment projects require a large amount of capital, REITs such as Crown Castle depend on funding expansion through debt.
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As indicated by the Fed, interest rates may not be as aggressive as in previous years. REITs can take advantage of these rates to add additional debt. Crown Castle expects interest expenses of $642 million–$687 million in fiscal 2018.
In 4Q17, the company increased its average debt maturity to 6.5 years, lowered its average interest rate to 4%, reduced its leverage, and maintained an investment-grade credit profile. It has $3 billion in available borrowing capacity under a revolving credit facility.
Crown Castle has the lowest debt-to-equity ratio among peers. Whereas Crown Castle has a ratio of 131.0%, peers American Tower (AMT), CenturyLink (CTL), and Verizon Communications (VZ) have ratios of 295.6%, 192.7%, and 271.7%, respectively.
At 4x, Crown Castle’s net-debt-to-EBITDA[1.earnings before interest, tax, depreciation, and amortization) ratio is also the lowest among infrastructure REITs, which makes it the least leveraged and gives it the flexibility to access low-cost capital. American Tower and SBA Communications (SBAC) have ratios of 4.9x and 8.1x, respectively. Together, American Tower and Crown Castle make up 14% of the PowerShares Active US Real Estate ETF (PSR).