Tower Time

REVIEW SUMMARY
Entrepreneur. David Grain
Industry. Cell phone towers, investments
Key. Grain works mostly with government clients in the cell phone tower industry.

In a business career packed with high achievements, David Grain recently accomplished a remarkable feat: He raised $109 million in equity capital for his business, which operates and leases cell phone towers.

Even more stunning, Grain raised the money on his own — without any assistance from a Wall Street firm. He met individually with each potential investor, mostly heads of college and university endowments and foundations, over 18 months from 2009 through this past January.

The risk was palpable. Grain met with at least 150 people in the academia investment community who had just been badly burned by the market.

“I was told not to do it, that this was a horrible time to raise money,” says Grain. “But I thought the opportunity was too great.”

The counterintuitive move paid off, says Grain, because now his firm, Sarasota-based Grain Management, is in a unique position. The company, through Grain Communications Group, also based in Sarasota, can now go on the offensive in the specialized area of leasing cell phone tower space to government entities.

“This is an asset management business,” says Grain, who previously ran Sarasota-based cell tower company Global Signal and held $34 million in shares of the firm when it was bought for $5.7 billion by Crown Castle Corp. in 2006. “It's not a communications business. We don't just do towers. We do all things wireless.”

The firm, founded in 2006, is basically a commercial real estate landlord on cell phone towers it owns and operates. Only instead of office or retail space, Grain leases space on cell phone towers to a variety of government entities and some private enterprises.

Just like any good landlord, Grain Communications seeks a mix of tenants with a high quotient of stability for each tower. With a certain percentage of reliable clients on board, Grain then targets some riskier prospects. That's when he can charge higher rents, too.

Government, however, from local municipalities to state agencies to the U.S. Coast Guard, is Grain's focus. Says Grain: “This is going to be the next largest customer in the wireless communications space.”

Grain, 48, backs up his confidence with a large chunk of money. The $109 million he raised is part of the $135 million Grain Infrastructure Fund, according to Securities and Exchange documents. About $20 million of the fund came from a 2008 capital raise, while $6 million came from Grain himself.

Grain's bold mission isn't a surprise to Ronald Blaylock, a Wall Street executive who has known Grain for 25 years. Blaylock, who has held senior management roles with PaineWebber and Citicorp, says Grain has always stood out, even in business settings with many other standouts.

“He has the ability to go for it when others would not,” says Blaylock. “He's a hell of a good businessman.”

Complex concepts

Grain counts several other advantages. For one, he has beat many would-be competitors to the so-far small marketplace. Cell tower industry veteran Ken Schmidt, who runs a consulting firm for landowners who want to get into the tower business, says Grain's approach is intriguing.

“It's a fairly small niche market,” says Schmidt, with Fort Myers-based Steel in the Air. “There aren't that many companies out there that focus on government services.”

Grain's business model is also built around prudence, another advantage. “We don't draw down on that capital,” says Grain, “until we see what we're looking for.”

Grain Communications currently owns towers in 25 states. The towers host an alphabet soup of government entities, from the FBI to the DEA. Grain declines to release annual revenues or total tower figures, although he says he plans to eventually buy several hundred towers through the Grain Infrastructure Fund. Operating out of an office in downtown Sarasota, the firm has 20 employees.

Meanwhile, Grain's strategy with raising money is a guide for other entrepreneurs who seek capital.

In sum: Be patient, be potent, and be above all else, be pragmatic. Nothing comes before data.

“I don't like to do things unless there is empirical evidence for it,” says Grain. “I don't want to make an investment unless I'm comfortable with it for 20-50 years. It's very different than a venture capitalist.”

The Grain Way, though, is more than a long-term approach to investing. Brett Couch, Florida regional president for Regions Bank, which has financed some deals for Grain Communications, says the system works especially because Grain “is as good in the boardroom as he is on the shop floor.”

That ease in explaining complex concepts is something Gateway Bank of Southwest Florida President and CEO Shaun Merriman has seen Grain do several times. Grain is a founding director of the Sarasota-based bank.

Merriman says in 2007, when Gateway was a startup, Grain presented a reasoned — and at the time lonely — argument that the recession would be deep and long. That advice led Merriman to structure some models and portfolios differently.

“David is very thought provoking,” says Merriman. “He's a man of few words, but he speaks so eloquently.”

Growing up

One rationale for Grain's subtle, yet meaningful approach could be sheer numbers: He's the youngest of seven ultra-successful children, kin that includes a neurosurgeon and a computer scientist, a teacher and a chemist and an architect and a music production company entrepreneur.

Grain was born in the Bedford-Stuyvesant neighborhood of Brooklyn. He grew up there and in Martha's Vineyard, where he moved with his family when he was 13.

Grain's entrepreneurial mentors were his father, Walter Grain, and his grandmother, Elizabeth Shaw. Walter Grain worked two jobs for most of his life. He was a U.S. postal worker and he ran a package delivery business in Manhattan. A young David Grain rode shotgun on many drops with his dad, stops that included delivering toasters to banks.

Shaw was a landlord in several sections of Bedford-Stuyvesant, some rougher than others. Grain says Shaw was always put together and always had a sharp tongue.

“This was the original entrepreneur,” says Grain. “She was compassionate, but she knew how to use her leverage.”

Grain followed his successful siblings to college. He graduated from Holy Cross in Worcester, Mass. in 1984 and earned an M.B.A. from the Tuck School of Business at Dartmouth in 1987.

Grain spent most of the next decade on Wall Street. He interned and later worked for Drexel Burnham Lambert. The firm was known in the 1980s for its big deals and later, for employee Michael Milken and its work with junk bonds.

Grain recalls Drexel Burnham as a gritty place with metal desks and rotary phones. “They were scrappy, tough Wall Street people,” Grain says. “You just had to get it done.”

The Wall Street experience was a constant learning ground for Grain. Milken, for example, taught Grain the value of thoroughly reading every business prospectus to find any details that can help make a decision.

More challenges

In 2000, Grain traded Wall Street for the consumer communications business.

His first job was a towering challenge: He was hired to run the New England region of AT&T Broadband, which had more than 2 million subscribers and 6,000 employees. Grain had 10 direct reports.

The division grew from $936 million in annual revenues to $1.6 billion under Grain. Still, there were several challenges, not the least of which was customers who called Grain at home to complain their cable was out. “I learned,” quips Grain, “that I didn't want to be in consumer retail.”

Grain also learned another valuable lesson at AT&T, to surround yourself with the right people. “Trust, loyalty and confidence,” says Grain, “are things I cannot live without.”

Grain moved to Sarasota in 2002 for another challenge. He took a job with Pinnacle Towers, a cell tower firm that had recently filed for bankruptcy because of some management and accounts receivables issues.

Grain rebuilt the company and by 2004, with a new executive team, had it in growth mode. The company went public under the name Global Signal. It grew its tower portfolio from 2,000 towers to 11,000 in all 50 states and abroad. The purchases included a $1.2 billion deal to buy 6,600 towers from Sprint.

Grain left Global Signal in late 2005, when the private equity firm that owned it decided to sell it. “I would have loved to continue to grow that company,” says Grain. “I think we could have done some spectacular things.”

Grain did spectacular, however, when Crown Castle bought Global Signal. The $5.7 billion deal was the largest ever for a company in Sarasota.

And while Grain doesn't intend to recreate Global Signal, the data-driven, empirical-first philosophy holds with Grain Communications.

“You'll be wrong about what the future holds a lot,” says Grain, “but if you use data to guess, you'll be less wrong over time.”

Good Fellow

A small but growing group of students at Booker High School in Sarasota has had two guardian angels since 2004 in David and Lisa Grain.

The couple moved from New England to Sarasota in 2002, when David Grain took a leadership job at a cell phone tower firm. They soon developed an affinity for Booker, which traditionally has a high number of students who excel in music and arts.

But the school, in an urban area near downtown Sarasota, also has a significant portion of students from low-income families. That presents a barrier to college preparation.

The Grain Fellows program is the Grains way of solving that problem, one student at a time. The Grains started by paying for SAT prep classes for a few minority students.

The program grew quickly. With the help of Booker college adviser Lem Andrews, the Grains have since set up what amounts to a college prep clearinghouse for more than 150 students. The program provides money for a variety of pre-college needs.

That list includes prep sessions, college tour trips, etiquette classes and assistance with application fees. In some cases, the Grains even bought students winter clothes to take up north.

“I've never seen anything like what David's done, especially from someone who wants so little credit,” says Andrews. “We need more David Grains in the world.”