Crown Castle International Corp. (CCI) to Follow American Tower Corp (AMT) with Tax-Efficient REIT Conversion

July 24, 2013

Crown Castle International Corp. (CCI) is likely to follow American Tower Corp (AMT) in converting to a tax-efficient REIT structure in 2015 or 2016 once the company’s net operating losses are exhausted, says Benjamin Lowe, Vice President at Stifel, Nicolaus & Co., Inc.

“I think the primary reason for AMT‘s conversion, and why Crown Castle will look to convert when their NOL position is exhausted in the 2015-2016 time frame, is because it is the most tax-efficient structure. As a REIT you avoid paying federal income tax in the U.S. The offset is you are required to pay out at least 90% of your taxable income and return that to shareholders, but that trade-off is a positive one in terms of being able to avoid a lot of the tax liability associated with being a C-Corp in a tax-paying position,” Lowe said.

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Currently CCI still has a meaningful amount of net operating losses, yet once those are finished, Lowe expects the company to convert to a REIT to optimize the tax structure of the company.

AMT looked to convert when they were getting close to a point where their net operating losses were exhausted, and therefore they would be a more meaningful cash taxpayer. Crown Castle is going to do the same thing. Right now they still have a meaningful amount of NOLs that are shielding their tax liability, but as they burn through those over the next couple of years, and they get to the point in 2015-2016 where they are going to be a more meaningful taxpayer in the U.S., they will work to convert to a REIT structure as well,” Lowe said.