When Uniti Group was spun out of Windstream as a telecom real estate investment trust in 2015, there was a lot of speculation about whether other telcos also would sell their fiber and copper assets to the telecom REIT and lease them back as Windstream did. For now, although Uniti Group has made some other acquisitions, Windstream remains the only Uniti Group sale leaseback deal. But that could be set to change, Uniti Group Chief Financial Officer, Treasurer and Executive Vice President Mark Wallace said yesterday.

“We feel very confident” that our “M&A pipeline is very robust,” said Wallace. In addition to sale leaseback deals, Uniti Group — originally known as Communications Sales & Leasing — also expects to complete some acquisitions of fiber assets that apparently would not be subject to leaseback, according to Wallace.

Wallace doesn’t see much competition for the deals it has in the works, particularly the sale leaseback deals, because Uniti Group is the only telecom REIT and is likely to remain so.

Wallace also discussed ways that Uniti Group might work with Windstream to monetize Windstream assets – an important goal for Windstream, which has seen investor confidence eroded in recent months over concerns about the company’s future.  Windstream’s stock value took a drop in late summer, when the company cut its dividend and because Uniti Group gets a large percentage of its revenue from Windstream, its stock value also has suffered.

Uniti Group Sale Leaseback
Fiber and copper assets held by a real estate investment trust gain tax benefits. For the seller, a sale leaseback deal can free up cash for investment while enabling the seller to retain control of network assets.

According to Wallace, some of the sale leaseback deals that Uniti Group has in the works are “programmatic,” meaning Uniti Group might purchase assets in a series of smaller deals.

Deals may be taking longer to complete as a result of the hit to Uniti Group’s stock price, but the company has not lost any deals as a result, Wallace said. He reiterated that diversification away from Windstream is a key goal for Uniti Group and said the company is on track to meet previously established timelines.

As for how Uniti Group might help Windstream regain investor confidence, Wallace offered some additional details about some ideas that Uniti Group CEO Kenny Gunderman floated several weeks ago.

Uniti Group would consider purchasing additional assets from Windstream that Windstream leases to a third party, which would avoid subjecting Uniti Group to “additional exposure” to Windstream problems, Wallace said. In addition, he said Uniti Group might help find third parties to lease Windstream assets, including some that Uniti Group already holds, and share revenues with Windstream.

Wallace made his comments in a question and answer session at the Bank of America Merrill Lynch Leveraged Finance Conference today, which was also webcast.

At the same conference, Windstream CFO Bob Gunderman also participated in a question and answer session, where he noted that Windstream has $750 million to $1 billion in assets that are not in Uniti Group, of which $300 to $400 million is “dormant or almost dormant.”

“We remain encouraged that we have real value locked up in our business in terms of assets that could be monetized,” he said.

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