CS&L chief executive says company has number of ‘deals in the pipeline,’ hopes to make announcement by 1Q 2016

Communications Sales & Leasing Inc. President and CEO Kenny Gunderman said today (Nov. 13) following the company’s better-than-expected third quarter financial results that the Little Rock real estate investment trust (REIT) has “deals in the pipeline” that the company hopes to close by the end of the first quarter of next year.

In explaining the company’s strategy during a Friday the 13th conference call with Wall Street analysts, Gunderman said the Little Rock-based REIT is looking to acquire telecom assets that represent a critical part of the communications industry infrastructure, incumbent carriers would rather lease them than own, and would increase in value over time. He said Arkansas’ newest publicly traded company is also looking for opportunities to own or build existing telecom assets, and acquire those that meet income qualifying standards under the IRS’s complex tax rule regarding REITs.

“The quality and quantity of opportunities in our pipeline continues to grow and we are more than confident today of our ability to grow and diversify our business,” the CS&L CEO said. “There is a growing trend among communications operators of leasing physical infrastructure as opposed to owning it, or even selling owned infrastructure entirely.”

Gunderman said in talks CS&L’s executive team has engaged with telecom carriers and other industry players, those companies are open to selling or leasing any and all assets categories – from cell towers and fiber optic lines to data centers and other “hard assets.”

“We believe these circumstances create tremendous opportunities for CS&L to diversify across various asset classes and transaction structures,” he said. “In fact, of the deals in our active pipeline, 55% are related to fiber assets, 25% involve tower related assets, 10% are related to data centers and only 10% are related to consumer broadband.”

Gunderman added that since the second quarter, CS&L has moved “aggressively” to an execution mode of operation as opposed to focusing on building its deal pipeline. “At this stage, we have executed term sheets, are working with advisors and are in substantive negotiations on a number of transactions,” he said. “Based upon this and the overall quality of our pipeline and activity level, we expect to be in a position to announce the acquisition news assets and customers at the end of the first quarter of 2016 or earlier.”

Gunderman said given the strategic nature of the negotiations that the company is involved, CS&L would still remain disciplined and not work toward any artificial deadlines to get a deal done.

In an interview with Talk Business & Politics earlier this summer, Gunderman said the real estate trust would seek to grow and move beyond its current status as a single-tenant landowner following the company’s spin off from Windstream Holdings Inc. in April.

Following that deal, CS&L became the owner of 64,000 route miles of fiber, 235,000 route miles of copper and central office land and buildings across 29 states. CS&L now rents those assets back to Windstream through a 15-year, triple-net lease.

Last week, in announcing the company’s third quarter financial results, Windstream officials reiterated that it plans to “monetize” its 20% stake in CS&L, which is valued at $575 million.

Before Friday’s opening bell, Communications Sales & Leasing Inc. on Friday reported that its third quarter earnings came in slightly above Wall Street expectations as the Little Rock-based real estate investment trust (REIT) heightened expectations on possible future acquisitions.

For the period ended Sept. 30, CS&L reported funds from operations of $97 million, or 65 cents per share. Going forward, CS&L upgraded its fully year earnings by three cents to be in the range of $1.74 and $1.76 per diluted common share, which will not include the impact of future acquisitions.