The founder of a 6-year-old Newport Beach-based company that’s set to reap $1.1 billion from the sale of 2,300 cell-phone towers will be shopping for more traditional real estate investments once his windfall arrives.
Gary Jabara’s Mobilitie LLC is expected to complete a sale of the towers in the U.S. and Central America, along with some other assets of the company, to Boca Raton, Fla.-based competitor SBA Communications Corp. in April.
The sale represents only “a portion” of Mobilitie’s assets, according to Jabara, who said he considers the company as much a real estate venture as a technology company even with the high-tech aspect of its cell phone towers. He said he’s looking to buy apartments, hotels and other commercial properties as investments with some of the proceeds from the sale.
It’s unclear how much Jabara and other investors in privately held Mobilitie will clear on the deal once the company’s debt is paid off.
SBA will pay $850 million in cash plus more than 5.2 million shares of its stock for the assets, placing the total value of the deal at about $1.1 billion as of late last week.
The sale marks the rapid ascent of Mobilitie (pronounced “mobility”) under Jabara, a resident of Shady Canyon in Irvine and a veteran of Deloitte.
He was a partner at the accounting and consulting firm’s telecommunications infrastructure practice in Los Angeles before putting up his own money to start Mobilitie.
“I was dumb enough to leave Deloitte—my parents weren’t sure what I was doing,” Jabara joked last week.
“We happened to stumble on a great business,” which allowed Mobilitie to prosper even through the recent recession, he said.
The company had built itself into the country’s fourth-largest owner of cell towers at the time of last week’s deal, competing with the likes of SBA, American Tower Corp. in Boston, and Houston-based Crown Castle International Corp., which late last year paid $1 billion for NextG Networks Inc., a provider of outdoor antenna systems.
Customer List
Mobilitie’s roster of cell-tower customers has included Deutsche Telekom AG’s T-Mobile USA Inc., Verizon Wireless, a unit of Verizon Communications Inc., Sprint Nextel Corp., AT&T Inc. and Clearwire Corp.
Each carrier pays on average about $2,000 per month per tower, the company said in a 2009 Business Journal profile.
SBA estimates the assets it is acquiring from Mobilitie will generate about $75 million in cash flow this year.
The deal is said to be SBA’s largest-ever transaction on a dollar basis, topping its $1 billion purchase of AAT Communications Corp. in 2006. AAT owned 1,850 towers at the time that deal was struck.
SBA counted a market value of about $5.2 billion at the time the Mobilitie buy was announced.
Mobilitie grew its business with telecoms using a model typically used by traditional real estate owners looking to lure in big tenants. Wireless carriers act as tenants and pay monthly rent to occupy a particular spot on a tower. Mobilitie gives a break to the so-called “anchor” tenant—typically one of the big four cell phone carriers. That helps draw in other carriers that essentially subsidize the rent breaks for anchor tenants.
No “Big Deal-itis”
The company’s willingness to work on thousands of relatively small deals to establish its far-flung network of cell towers gave Mobilitie an edge on other real estate investors over the past few years, according to Jabara.
“Not a lot of guys want to waste their time with a $100,000 tower,” he said. “Traditional real estate companies have big deal-itis.”
Along with commercial real estate buys, Jabara is also planning to invest money from the sale back into Mobilitie, which currently employs about 100 workers in Newport Beach and other locations.
That includes plans to focus on business lines besides cell towers, including Wi-Fi offerings and distributed antenna systems (or DAS) that provide wireless service within specific areas, such as sports stadiums, a market where the company already has sizeable presence.
“We’re more nuts and bolts than bits and bytes, but we will be migrating to the bits and bytes space,” Jabara said.
The deal with SBA last week includes indoor and outdoor DAS assets that Mobilitie had in Chicago, Las Vegas, New York City and Auburn, Ala. Those assets bring in about $16 million in cash flow right now, according to SBA.
Other Investors
Mobilitie announced last summer it had secured $415 million in financing with Toronto-based TD Securities to help build out its network.
Those debts will be paid off with the proceeds from the sale, and one unnamed equity partner also is cashing out its stake in the company, according to Jabara.
Los Angeles-based private equity firm Oaktree Capital Management LP also has been a financial backer of Mobilitie and had a stake in the company.
The deal with SBA came about six months after Mobilitie began exploring a sale of some assets, according to Jabara.
New York-based Moelis & Co. and Bank of America Merrill Lynch acted as financial advisers for the company in the sale, with Boston-based Goodwin Procter LLP serving as legal adviser.
