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  "docSlug": "10dc4f9f3e31",
  "documentTitle": "American Tower (AMT)",
  "authorId": "51_Muddy_Waters",
  "authorName": "Carson C. Block",
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  "sourceTypeSlug": "short_seller",
  "sourceTypeLabel": "Short seller",
  "presentationDate": "2013-07-17 00:00:00",
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  "pageNumber": 114,
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  "notes": "The slide critiques specific accounting treatments of depreciation, stock-based compensation, and CapEx, suggesting they should be deducted from AFFO.",
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      "text": "AMT is taking a double benefit. First, it wishes to increase its tenancy ratio, which leads to organic growth. However, a number of the towers, particularly in the emerging markets, were only built to handle one tenant and need redevelopment CapEx to handle additional tenants.",
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      "text": "AFFO: $125 million",
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      "text": "AMT is taking a double benefit. First, it wishes to increase its tenancy ratio, which leads to organic growth. However, a number of the towers, particularly in the emerging markets, were only built to handle one tenant and need redevelopment CapEx to handle additional tenants. Because the redevelopment CapEx is a recurring capital expenditure, and it is related to the organic growth, this should be deducted from the AFFO.",
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      "text": "Towers are assets with finite lives that will need replacing or renewing at a cash cost, and so should not be added back to the AFFO.",
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      "text": "AMT should not be adding back the full amount of its real estate depreciation into its AFFO calculation, however, if it does then it should at least deduct the cash cost of maintaining the value of these assets - namely the cost to purchase and extend ground leases and maintenance CapEx.",
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      "text": "NAREIT states that this should not be included in FFO, and because it is a non-cash item it seems reasonable for AMT to remove this from its AFFO; however, traditional REITs usually have limited non-real estate depreciation of 1.2% of total depreciation, whereas ATL's is much more significant, approximately 12%. Even though non-real estate depreciation is a non-cash item, if comparing to more traditional REITs that will not bear such an additional cost of replacement in the future, this add back overstates the value of AMT as a comparator.",
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      "text": "While this has no cash effect in the period it is expensed in the Income Statement, it is nevertheless a real cost to shareholders in the future. Additionally, adding this back and comparing the AFFO to many REITs, which pay salaries in cash with no future expense to shareholders, will overstate the value of AMT compared to its competitors. Not adding this back to AFFO would reduce it by US$65 million in 2013.",
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      "text": "Start-up CapEx was deducted from the AFFO in 2012, however, for Q1 2013, AMT was decided that this should no longer be deducted from AFFO. No reason was given for it no longer being deducted, because this is most likely additional maintenance work on towers in Emerging Markets, this is a recurring cash outflow and should be deducted from the AFFO.",
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      "text": "This would amount to a deduction from AFFO of US$125 million in 2013.",
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      "text": "The cost to extend or purchase a ground lease, while non-recurring for each individual lease, is nevertheless a recurring cost to ATL, which has thousands such leases on its books.",
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      "text": "Additionally, AMT is taking a doubt benefit in its AFFO. While it adds back the full depreciation cost to the AFFO, assuming the value of their property does not diminish, it fails to account for cash outflows that allow these assets to retain their value, such as cost of ground lease purchases, extensions, and maintenance capital expenditure.",
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      "text": "171 Per management guidance, 1Q 2013 financial press release p. 4. 172 AMT May 1, 2013 conference call.",
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