Chris Stark, President of Stark Capital Solutions, has an eye for smaller companies in niche markets. He pays attention to the financing needs of companies in billboard and cell tower development that historically banks overlook.
Beginning in banking and finance in 1991, Stark became interested in cell tower financing in the late 1990s when third parties began building cell towers. He founded Stark Capital in 2003 as a national investment banking firm, and set about understanding each cell tower developer’s specific needs and matching it with the best funding option possible.
“In the 1990s and early 2000s, very few people — especially not the sophisticated investment community — understood the tower development niche at all,” Stark said.
Today, there is a greater awareness of wireless infrastructure, but not necessarily on the small-scale tower developer side. Stark Capital lends capital primarily focused around senior debt loans to developing tower companies with good growth opportunities. Typically, it funds transactions for tower operators with new tower development and acquisition opportunities. The firm also provides brokerage and financing services to billboard developers.
“By taking the time to understand this unique industry better than traditional commercial lenders, we have successfully completed numerous transactions across the U.S. ranging from $250,000 to over $4,000,000,” Stark said.
The link below describes how Stark Capital assisted one Tower operator with the funds to organically develop 11 highly valued macro towers in California, Arizona, and Nevada:
More Equitable than Equity
Stark Capital provides tower developers with an alternative to bringing in an equity partner, which typically requires giving up significant ownership in exchange for their capital. “We want small tower developers to know that they can build towers without giving up ownership,” Stark said.
The numbers tell the story. If a tower costs $200,000 to build and sells for $600,000, say, with a 30X tower cash flow multiple, then it will yield $400,000 in capital gain profit. If the investment arrangement called for a 50/50 split, the equity partner and the owner will both receive somewhere around $200,000. On the other hand, with a $200,000 senior debt loan at 8 percent interest that costs around $15,000-20,000, the tower owner gets to keep the whole $400,000 capital gain profit, less the interest, or about $380,000-385,000.
“If you compare debt versus equity, it’s just a quantum difference in what you walk away with at the end of the day,” Stark said. “Most of our clients want to go as far as they can alone by using debt, versus partnering up with private equity. If you have a good anchor tenant and you know what you’re doing, we can get you that money, and you don’t have to give up all that equity.”
Better Than a Bank
On the other hand, it can be problematic to qualify for money directly from a bank, which may not understand the tower industry, according to Craig Berry, Vice-President of Stark Capital, who serves as a loan originator. The process of getting a bank loan can be complicated and time-consuming as well.
“We understand the market value of the assets that we’re lending against,” Berry said. “So, we can provide a much more efficient financing package than going the traditional route, because we can do our own due diligence and act in a very timely manner.”
“We provide lending options to tower operators who are in the early stages of their business and really haven’t found a traditional bank or traditional lender to help them maximize their growth opportunities,” Berry said.
It’s difficult for a tower developer to get from zero to its first 10 towers, because they typically only have one tenant, according to Berry. Stark Capital understands tower cash flows, and, as the towers get their second tenants, Stark is then able to provide them with more funding.
The Capital Pipeline
To further its business growth, Stark Capital must maintain ongoing conversations with new banks and new investors. “A big part of what we do all the time is educating our banks or investors so that we have the capital available. We always want to be in a position to turn funding requests around quickly,” Stark said.
Years of industry-specific knowledge assisting cell tower operators with New Site Development, Acquisition Opportunities, and Recapitalizations give Stark Capital Solutions the experience and financial capabilities to be a primary finance solution for cell tower funding needs.
In the future, Stark Capital plans to expand the number of tower companies they work with. Stark is also looking into funding data center development as well, which is becoming another niche application for small developers.
“We’ve noticed several of our tower companies and tower investors are investigating the data center space,” Berry said. “Towers and data centers go hand in hand. We’re just now looking at our first deals.”
It’s never easy being a small company looking for funding. As always, Stark Capital will use its knowledge of the industry and its relationship with the developer and apply the appropriate financial instrument – the one that will allow the client to grow and thrive.
For more information, call (317) 546-6028, email firstname.lastname@example.org.
By J. Sharpe Smith, Inside Towers Technology Editor