Real estate investment trust (REIT) company, Uniti Group Inc, recently announced the multi-million-dollar sale of towers to an unnamed wireless infrastructure provider in a deal that represents 30 times the annual tower cash flows associated with those towers.
According to a March 12 Uniti press release, the company entered into a sales agreement for approximately 486 of its 672 U.S. towers for $190 million cash. Neither the press release nor the March 12 earnings call provided more specific detail about the buyer other than to say the buyer is someone they know and have worked with in the past.
“Although we are selling most of the towers we own today, we’re not exiting the tower business,” said CEO Kenny Gunderman. “This carefully structured transaction affords us the opportunity to continue building macro towers uninterrupted, but in a reduced CapEx manner at our choosing. We continue to view macro towers is an important part of Uniti’s unique full service 5G offering to our wireless carrier customers.”
Communications tower companies began converting to REITs in 2011, offering rapid growth potential. Companies such as American Tower, Crown Castle, and SBA typically reinvest a large portion of their cash flow in building and buying new infrastructure. Million Acres, a Motley Fool Company, reported in January 2020 that the acceleration of the deployment of 5G technology is the driver by which cell tower REITs can expect to continue growing their funds from operations and dividends at above-average rates over the long-term.
According to Stock Investor, investors should look to cell tower REITs for dividend growth and capital appreciation due to the solid outlook and expansion of 5G infrastructure. Crown Castle International (CCI) currently boasts the highest dividend yield of 3.20%.
New Street Research financial analysts also forecast increased spending in the tower sector with the auction of C-Band spectrum and expect ‘high multiples’ related to tower stocks.
Gunderman indicated the tower sale is an ‘opportunity to inject liquidity’ during a time when capital markets are volatile. “This is a good way to add liquidity versus issuing expensive securities,” he said.
In addition to the news of its tower sale, Gunderman also outlined further details about its recent agreement with Windstream. Uniti will acquire 450,000 fiber strand miles and will gain the rights to sell or lease to third parties 1.8 million fiber strand miles that are part of the Uniti owned Windstream lease network.
Uniti focuses on the acquisition and construction of mission-critical communications infrastructure such as fiber, wireless towers, and ground leases.As reported by Seeking Alpha, Uniti reported revenues of $268.5 million and a net loss of $11.4 million, and executives boasted “robust momentum in all of our businesses.”