Late last week there was an interesting transaction that slipped past my nets temporarily. As Uniti Group announced its earnings, it also unveiled details of a sale-leaseback transaction with TelePacific, which is going by the less geographically specific moniker TPx nowadays.
TelePacific has sold some 650 route miles of fiber network to Uniti, and it's not a few strands either but rather some 38,000 fiber miles in all. The assets are in TelePacific's home turf out in California and Nevada (which derives from the Mpower acquisition), it's more recent stomping grounds in Texas (from Tel West), and in the Massachusetts territory it just got into in the last two years -- which sounds like all of the company's actual fiber. TPx is leasing back those metro fiber miles over the next 15 years with options for another 25.
Most of that is in a triple net lease similar to what they have had going with Windstream since the company was spun off as the first fiber REIT a few years ago. It's interesting that this is the sort of deal we thought Uniti might do more of before they dove all the way into operating a fiber business with acquisitions like PEG Bandwidth, Tower Cloud, Hunt, and Southern Light. In this case, Uniti will also have non-exclusive rights to market some of those assets on behalf of TPx. Also part of the deal is 7,000 fiber miles in Texas that Uniti will be acquiring outright, adjacent to its existing footprint in the region.
The deal will cost Uniti some $95M in cash, while the rent will start out at $8.8M initially with a fixed annual growth of 1.5%.