Mar 30, 2021
Operator
Good morning, and welcome to Radius Global Infrastructure Fourth Quarter 2020 Financial Results Conference Call. During management's presentation, your lines will be in a listen-only mode.
At the conclusion of prepared remarks, there will be a question-and-answer session. I will provide you with instructions to join the question queue after management's comments.
Today's conference is being recorded. I will now turn the call over to Jay Birnbaum, Radius’ General Counsel.
Please go ahead, sir.
Jay Birnbaum
Thank you, operator, and welcome everyone to the Radius Global Infrastructure fourth quarter and full year 2020 earnings call. Before we begin, I would like to remind everyone that many of the comments made today are considered forward-looking statements under federal securities laws.
As described in our earnings release and filings with the SEC, these statements are subject to numerous risks and uncertainties that could cause future results to differ from those expressed. These statements speak as of today's date and we undertake no obligation publicly to update or revise these forward-looking statements.
Bill Berkman
Thanks, Jay. Thank you, and welcome everyone to Radius’ fourth quarter and year-end 2020 earnings conference call.
We hope everyone is doing well and preparing for a gradual return to a new normal. 2020 was a pivotal year for Radius.
As we completed our merger with Landscape Acquisition Holdings, we domicile to Delaware and listed on the NASDAQ in the third quarter. During this time, our team remained extremely focused on growth capital deployment in acquiring and managing real property interests underlying critical communication sites, including under wireless towers, rooftops, fiber interconnection sites, data antenna system networks, and related digital infrastructure assets.
In 2020, we've more than doubled year-over-year acquisition spend at $221 million. When taking into consideration, the cost of the origination platform, this represents a blended purchase yield of 7.2%.
After the application of leverage, we expect these investments will produce returns in the mid-teens over their asset lives. In addition, we expect this overall growth and scale will result in a proportional decline in acquisition SG&A as we realized benefits from incremental operating scale and leverage.
In coordination with our capital deployment efforts, our team has been actively exploring ways to enhance our liquidity and is continually – continuously focused on lowering our cost of capital to support our core asset origination growth as well as other growth initiatives. The significant growth achieved in the fourth quarter and the entire year resulted in our owning as of year end 5,427 sites and 7,189 lease streams.
These results represent 18% growth over sites and leases owned at the end of 2019. We deployed $118 million of new capital in the fourth quarter compared to $38 million in the fourth quarter of 2019, bringing our annual total in 2020 as I mentioned before to $221 million more than twice the amount deployed in 2019.
Our team swiftly and successfully adapted to the wide ranging impacts of the pandemic. The success of this underscores the effectiveness of our global origination platform.
With respect to our portfolio composition and attributes, we ended the year with 56% of our sites in Europe, 26% in North America and 18% in South America with 59% of our Annualized In Place Rents represented by Europe, 26% of these rents represented by North America and 15% in South America. U.S.
rental streams continue to be dominated by ground under tower assets at 73% with the balance primarily representing rooftop property interests.
Glenn Breisinger
Thanks Bill. We are pleased with our fourth quarter performance, which capped a year of strong growth.
Fourth quarter revenues were $20.1 million, which was up 36% compared to the prior year quarter and gross profit was $19.9 million, up 37% over the prior year. In terms of asset growth during the fourth quarter we deployed $118 million of new capital, compared to $38 million during the prior year fourth quarter a 210% increase.
This origination activity represented $9.5 million in rents across 286 lease streams. This brought our full year deployment to $220.8 million, up 123% from the comparable prior year period.
Our strong performance, both in the quarter and for the full year demonstrates the value of the origination platform that we have developed over the past 10 years. We have posted our earnings release, our 10-K in a supplemental financial reporting package on our website to provide additional details and assist you with the analysis of the company.
As you review our results, keep in mind that in the prior year period, AP Wireless had not yet been acquired. So our year-to-date financial statements for 2020 commenced with the completion of our acquisition of AP Wireless on February 10, 2020.
We provided our results for three time periods to assist you in billing comparable periods for the full year. Please refer to our supplemental reporting package for a pro forma 12-month presentation on our relative key performance metrics.
Turned into our full year results. The company delivered $69.8 million in combined revenues representing a 25% increase over the prior year period.
Reflecting the growth in our rental streams from both our in-place portfolio escalators, other revenue enhancements and acquired rental streams, our annualized based rents at year end increased 35% to $84.1 million from $62.1 million the year before. Our gross profit increased 25% year-over-year to $69.1 million as compared to $55.4 million a year ago in line with our revenue growth.
Our growth was fueled by $256.1 million of net growth spend for the full year of which $35.4 million was for selling, marketing, underwriting and related cost to acquire assets producing annualized in place rents of $18.5 million.
Bill Berkman
Thank you, Glenn. This concludes our prepared remarks.
We would now like to open the call for questions. Operator, please open the lines for any questions.
Thank you.
Operator
Thank you. Our first question is from Sami Badri with Credit Suisse.
Please proceed.
Sami Badri
Hi, thank you and congrats everyone right out the gate towards the end of the year 4Q 2020. I just have a couple of questions for you guys.
The first one is looking at your metrics, like the number of sites acquired and then the annualized in place rents average per site in 4Q 2020. So I'm just trying to take kind of some KPIs the prior quarters.
Was there a change in region or type or asset types that were acquired in 4Q 2020 that kind of may be throwing off the averages per site a little bit?
Bill Berkman
Yes. I think it's a good question, Sami, and good morning to you.
Yes, we've had in addition of incremental asset classes as I mentioned in my prepared remarks. Sometimes as asset classes produce different ramps and we'll see in certain countries for underneath towers, those asset class we began being in sort of fiber aggregation points and distributed antenna system typically indoors, such as a hospital as an example.
Sami Badri
Got it. Got it.
So just in 4Q 2020 you guys found yourselves more just acquiring that specific type of asset. And that was essentially like the predominant focus just because the averages were thrown off a little bit, and I just want to make sure I completely understand all those?
Bill Berkman
I wouldn't say that was predominant, but you're going to occasionally get this distribution that happens that can throw the average off because you have one or two larger deals. Let's say take a large hospital that we were successful in acquiring as an example.
Those are the types of things that can throw an average off, but on the whole, I guess the way we view is, our mission is defined the central critical assets with high credit crawling tenants that are driving great rents. And so we don't really distinguish in our mind the quality of the assets.
We just happen to have I guess look at the adjacencies and said, they're completely similarly situated as to what we've been doing before.
Sami Badri
Got it. Got it.
So I think I have one follow-up to just this whole topic for you. The next set of questions is would these kinds of assets that you guys are acquiring, these aggregation points or these – think of these as like well, aggregation points probably the best way to put it.
But are these considered higher value or stickier sites when you compare them to some of the other assets in the portfolio on a relative basis?
Bill Berkman
I guess the way we view it as our mission is to do a great job in underwriting. So every site is different, but the answer is, I think they're just equivalent.
We know they'll stand the test of time would be look at the overall network, which is just something that we've spent 30 years doing, which is building networks and recognizing what sites just are really incredibly difficult to replace or just uneconomic to replace. So I guess the simply said it's they're very sticky and they're very compelling at least to us.
Sami Badri
Got it. Got it.
So shifting over to SG&A and you guys have a Slide 15 in the supplemental that were in the presentation that was also published today. So you guys made a comment regarding the multiple – the origination SG&A as a multiple of rent acquired is then coming down to about two times in 2020.
What should be the investor expectation for this multiple as you guys continue to grow over time, should we be looking at similar type of multiple compression cadences? Or is this going to start normalizing over the next couple of years?
Bill Berkman
I think it's a good question. And I hate to give any forward guidance as to what will or won't be.
One of the things that will happen is as we enter into new jurisdiction's often takes an investment upfront. So I'm hesitant to tell you that this is just a trend, is always going to happen.
Now that being said, scale economics should lead to just further improvement as a quantifier what we think that would be it's just too difficult for us to say. And that's why we are determined not to give any more forward diamonds, but we're hopeful we get more efficient every year.
Sami Badri
Got it. Got it.
So along the lines of what you just said, you guys are not going to provide maybe quantitative 2021 or forward looking guidance, but maybe on the qualitative side, if you look at the macroeconomic industry trends that were essentially in play in 3Q and 4Q of 2020, would you say the same economic or macroeconomic drivers for your business are still there in 2021?
Bill Berkman
I'm not sure I know exactly what you refer to on the macro, but I think what we saw in 2020 should hopefully still exist for 2021, but you never know what's going to happen out there. Just like we never knew there was going to be a pandemic this last year.
Sami Badri
Got it. Got it.
Alright, thank you. I will let another – other analysts ask questions.
Thank you.
Bill Berkman
No, sure. Happy to answer any question.
Operator
Our next question is from Ric Prentiss with Raymond James. Please proceed.
Bill Berkman
Hey, good morning, Ric.
Ric Prentiss
Hey, good morning, guys. Glad you're doing well.
Couple of follow-up questions to Sami's there as well. As we think about acquisition CapEx, clearly that's where the governing factors to creating the growth over time.
How should we think about your targets and your aspirations of how much could be put to work as we think about the next one, three, five years maybe?
Bill Berkman
Look, it's a great question. I think the way we were always trained is to under promise and over deliver.
I think a lot of it comes down to how well we can identify, acquire some of adjacent assets. And then number two, our ability to enter into new jurisdictions, which of course we will expand what we're able to acquire.
And then third, our team just continuing to do their job in our local operating markets; I think those are the three core drivers at least for what we would consider the origination side of our business. And then on the other front, we like everybody else are seeing quite a lot of activity just from an M&A perspective and assets that are much larger than scale being portfolios that's going on, and at some point, I wouldn't be surprised that you see us selectively making the larger acquisition.
Ric Prentiss
Right. But if you think longer term yes, any thoughts that obviously origination can bounce around quarter-to-quarter, month-to-month.
Any thought about kind of the size of the checkbook that might be able to be put to work just to scale it as far as goalposts?
Bill Berkman
I think it's pretty substantial. When you think about it in the operating markets we're in today, there's roughly a million wireless sites and then you add-in some of these adjacent asset classes.
And then if you said yourself, the target jurisdictions where we think we can expand to, which have the sort of characteristics that we look for, probably easy in these sort of another 500,000 wireless sites that are there. And presently we're approaching 6,000 sites that we own.
So you can see the total addressable market is huge, it's just being efficient and buying of course the right assets and buying them what we would consider to be the right price. And so I know I'm not answering your question specifically would say that the runway is quite long and frankly wide for us.
We just have to keep our head down and execute.
Ric Prentiss
That makes sense. And you mentioned obviously pricing in the marketplace, how is that affecting you?
Because definitely a lot of people are excited by digital infrastructure, interest rates have been low, although maybe trending up a little bit, but it definitely has created maybe a tougher environment to get assets at the prices you want. Just maybe give us a sense of what you're seeing in the marketplace?
Bill Berkman
Yes. And I think that's a great point and candidly prices are up.
We've seen that predominantly from tower companies, essentially in Europe who are now out there also acquiring assets. That being said, the markets are quite large.
So that I think there's room for everybody, notwithstanding that as well. When we look back historically at the prices that we paid, I like to think about it as a spread to the local inflation when sovereign bond.
And so because interest rates have gone down, we're still sustaining roughly the same spread that we've had before, even as prices move up. And that's goes to Sami’s question about the macroeconomic factors.
Now that being said, we will have more increased competition with all the MNO shedding their assets to tower companies. And I also would add, I'm unimpressed in that.
And I was bit surprised at how fast the shedding has occurred I guess Cellnex has a lot of credit for how aggressive they've been. So that's happened I guess, faster than we think.
But our mission, of course, is to keep ahead of it, and to also expand other jurisdictions where typically there aren't as many dominant tower companies as well, which gives us sort of greenfield to acquire.
Ric Prentiss
Makes sense. Final one for me, as we think about growth rates, organic growth rates are kind of same site growth rates.
How should we think about the dynamics of what you guys can be producing in 2021 and beyond kind of on a CAGR basis then on revenue or adjusted EBITDA?
Bill Berkman
It's a good question. If you noticed in our supplemental around 70% of our rents are CPI linked.
So that's your first base growth that you've got. I think the second thing that comes is the larger we get the bigger, the – what we would call asset enhancement team that we actually put to work.
And that means doing a better job of taking whether it's our rooftops or ground and getting additional lease up that can come from a carrier and/or a tower company decided to put a generator and they need excess space. It can come on a roof, but from another tenant as an MNO, adding additional radio access network equipment.
And then lastly, the thing that drives us, and I think you'll notice this as well in our debt is lease renewal. Oftentimes when we buy sites, they are well below market.
And our goal is really to be constructive with our tenants. We just want to make sure we get paid a fair market based rent.
And if you'll notice, I forget which page it's on. I think our average lease expiration when rents – when leases expire and that we can actually enter into a lease renewal negotiation is roughly nine years longer in the U.S., but in Europe substantially shorter.
And so we didn't disclose the actual number, but that'll also give us, we believe pretty good lift on rents, just targeting market rent, not trying to be more aggressive than that. Our goal remains being a passive landlord first and foremost.
Ric Prentiss
Great. Thanks guys.
Good luck as you continue the process.
Bill Berkman
Thanks. Yes, appreciate it.
Operator
Our next question is from Walt Piecyk with LightShed Partners. Please proceed.
Bill Berkman
Hey, Walt.
Walt Piecyk
That’s Piecyk, as you guys know.
Operator
Sorry.
Walt Piecyk
Hey Bill. How was that going?
Bill Berkman
Yes, thanks.
Walt Piecyk
I have sympathy if there are any name to pronounce. Your weighted average property life jumped up in Europe.
Is that a result of renewals of a set of the assets or was that from, is that just a reflection of where the acquisition activity occurred this quarter?
Bill Berkman
I think it's the latter. It's also the fact that in some of the cases we get by what you would call fee simple, which is effectively perfect to with your 99 years so it skews the average up, and that's going to bounce around all over the place.
My perspective is anything, 40, 50 years, we always feel like we have an embedded option to get to 99, because if you ever wanted to go back to the landlord and say to them, hey, I'll buy years 60 through 99. Most of them won't be around and therefore they'll take the money.
So that's why we don't always shoot for getting 99 right off the bat.
Walt Piecyk
Got it. And then in Europe, obviously, area of opportunity for you, they're pretty significant Cellnex their activity, inquiring portfolios and Vodafone spinning out as towers.
How does that change the dynamics if at all, for the opportunity that you have or the prices that you have to pay to buy additional sites?
Bill Berkman
Well, I think certainly as we come across them in a competitive situation, it'll change the price that we pay. I mean, it will go up, sometimes we'll win, but if they want to win and beat and make it an economic offer to protect the property underneath their site, they're always going to win.
But that being said, it has long been our goal to establish partnerships with one or multiple tower companies, because we think we can do a better job given that we're laser focused on buying property and doing it in a constructive and productive way for everybody. So, stay tuned.
We'll see what happens.
Walt Piecyk
Got it. And then kind of, again, I know Europe's a big part of the story, but coming back to U.S., now that has done I mean, there's obviously some debate about how much densification is required.
Is new cell site construction an opportunity, do you think, or is it really just going to existing assets?
Bill Berkman
Hey, are you asking just in the U.S. only?
Walt Piecyk
Just, yes, sorry, just in the U.S.
Bill Berkman
I think it always depends on a given market as you well know. So there certainly will be places where cell site construction is going to be needed.
Will it increase in terms of the percentage year-to-year that we see towers that have been built over time. My personal opinion, and this is just my opinion is it'll stick to the regular trends.
I'm still with an enormous believer that when we think about densification and we think about the addition or the swap out a bag in a massive MIMO antenna array that has massive MIMO I guess equipment gets further cost reduced and further shrunken in size and weight. It's going to become a very powerful tool, whether for coverage work capacity, because as you know, the more antenna elements you put up, the more capacity you get, and it's rather linear.
And so I'm just a very big believer in its capability, which is a long-winded way of saying that at a given site, you're going to be able to add many, many, many antennas. And even if that means augmenting a tower, that's still cheaper most of the time than building a new macro tower and, or saying to yourself, I've got to get backhaul power and getting a small cell out there.
Now, Richard, who's our Chief Operating Officer, Richard Goldstein and I debate that this till the cows come home all the time, but it's about economics, just like, sorry, keep going on.
Walt Piecyk
Just the last question is I'm taking it from the prior questions that in terms of acquisition CapEx obviously you had a big quarter. And if you look at the year, much larger than you had in 2019, but you just don't want to give a range in terms of acquisition CapEx or growth capital that you would spend in a given year.
Because I think, what Rick was probably pressing on is when we look at this as what's going to continue to fuel that growth going forward, getting some sense of your belief that, hey, we're going to do, let's call it $150 million or $100 million of acquisition CapEx in 2021, that it doesn't necessarily have to be a promise that you deliver, whatever under promise over deliver, but it gives us kind of more confidence that the pipeline that you have confidence in the pipeline rather than just saying, like, hey, in a market there's 5,000 sites that we have in 5,000 sites are available. There's a big market opportunity.
I think putting a dollar amount in terms of what you think the amount of growth capital you can spend in a given year; it would probably be helpful in terms of understanding that market opportunity.
Bill Berkman
No, I appreciate that. I mean, I think we're really optimistic that what we achieved in 2020 can indeed be replicated.
And you would imagine, we always liked to show a nice straight line going up until the right on a graph. So like keep growing that on the thing I would mention is prior to being public, we were capital constrained.
And so we could buy what we could afford, now that we're public and have capital on our balance sheet, as well as access to capital, whether in the form of debt or equity, that'll frees us up to do a lot more things, both in our existing operating markets, as well as outside of. But, it gives you, say, I guess more succinctly, we feel very confident that we have the ability to replicate what we've done this year.
I just hate to say – I just hate to say that and get committed and that’s for our guidance.
Walt Piecyk
No. I understand.
But that statement in and of itself was helpful. So I appreciate that Bill.
Have a great day.
Bill Berkman
Sure. You're good in asking questions.
Operator
This concludes our question-and-answer session. I would like to turn the conference back over to Mr.
Berkman for closing comments.
Bill Berkman
Thanks very much operator and I appreciate everybody joining today. Look forward to our next earnings call.
And of course, if anybody should have any questions, feel free to reach out to myself personally or anybody at Radius. And we're happy to talk to any and all shareholders or the like.
Have a good day. Thanks very much.
Operator
Thank you. This does conclude today's conference.
You may disconnect your lines at this time and thank you for your participation.