Leases

12 Months Ended

Dec. 31, 2023

Leases [Abstract]

Leases

Leases

Lessor Accounting

We lease communications towers, ground, colocation, other communication equipment and dark fiber to tenants under operating leases. Our leases have initial lease terms ranging from less than one year to 35 years, most of which include options to extend or renew the leases for less than one year to 20 years (based on the satisfaction of certain conditions as defined in the lease agreements), and some of which may include options to terminate the leases within one to six months. Certain lease agreements contain provisions for future rent increases. Payments due under the lease contracts include fixed payments plus, for some of our leases, variable payments.

The components of lease income for the years ended December 31, 2023 and 2022 are as follows:

(Thousands)	Year Ended December 31, 2023		Year Ended December 31, 2022
Lease income - operating leases	$	911,828	$	892,414

Lease payments to be received under non-cancellable operating leases where we are the lessor for the remainder of the lease terms as of December 31, 2023 are as follows:

(Thousands)	December 31, 2023 (1)
2024	$	806,483
2025	816,771
2026	818,196
2027	819,134
2028	819,813
Thereafter	1,556,217
Total lease receivables	$	5,636,614
(1) Total future minimum lease payments to be received include $4.7 billion relating to the Windstream Leases.

The underlying assets under operating leases where we are the lessor as of December 31, 2023 and 2022 are summarized as follows:

(Thousands)	December 31, 2023		December 31, 2022
Land	$	26,533	$	26,549
Building and improvements	347,700		346,093
Poles	314,488		296,941
Fiber	3,862,635		3,529,835
Equipment	436		437
Copper	3,974,410		3,964,439
Conduit	90,087		89,963
Tower assets	58		1,397
Finance lease assets	1,890		28,126
Other assets	10,434		10,434
	8,628,671		8,294,214
Less: accumulated depreciation	(5,690,066)		(5,542,726)
Underlying assets under operating leases, net	$	2,938,605	$	2,751,488

Depreciation expense for the underlying assets under operating leases where we are the lessor for the years ended December 31, 2023 and 2022 is summarized as follows:

(Thousands)	Year Ended December 31, 2023		Year Ended December 31, 2022
Depreciation expense for underlying assets under operating leases	$	182,906	$	176,160

Lessee Accounting

We have commitments under operating leases for communications towers, ground, colocation, other communication equipment, dark fiber lease arrangements and buildings. We also have finance leases for automobiles and dark fiber lease arrangements. Our leases have initial lease terms ranging from less than one year to 30 years, most of which include options to extend or renew the leases for less than one year to 20 years, and some of which may include options to terminate the leases within one to six months. Certain lease agreements contain provisions for future rent increases. Payments due under the lease contracts include fixed payments plus, for some of our leases, variable payments.

As of December 31, 2023, we have short term lease commitments amounting to approximately $3.5 million.

The components of lease cost are presented within general and administrative expense and operating expense, while sublease income is presented within revenues in our Consolidated Statements of (Loss) Income for the years ended December 31, 2023 and 2022 are as follows:

(Thousands)	Year Ended December 31, 2023		Year Ended December 31, 2022
Finance lease cost
Amortization of ROU assets	$	4,066	$	3,793
Interest on lease liabilities	1,575		1,437
Total finance lease cost	5,641		5,230
Operating lease cost	22,999		19,946
Short-term lease cost	3,525		3,109
Variable lease cost	938		547
Less sublease income	(14,590)		(13,683)
Total lease cost	$	18,513	$	15,149

Amounts reported in the Consolidated Balance Sheets for leases where we are the lessee as of December 31, 2023 and 2022 were as follows:

(Thousands)	Location on Consolidated Balance Sheets	December 31, 2023			December 31, 2022
Operating leases
ROU asset, net	Operating lease right-of-use assets, net	$	125,105		$	88,545
Lease liability	Operating lease liabilities	84,404			66,356
Finance leases
ROU asset, gross	Property, plant and equipment, net	$	52,589		$	73,487
Lease liability	Finance lease obligations	18,110			15,520
Weighted-average remaining lease term
Operating leases		13.4 years			10.1 years
Finance leases		8.7 years			11.5 years
Weighted-average discount rate
Operating leases		10.3		%	8.6		%
Finance leases		9.9		%	10.1		%

Other information related to leases as of December 31, 2023 and 2022 are as follows:

(Thousands)	Year Ended December 31, 2023		Year Ended December 31, 2022
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows for finance leases	$	1,575	$	1,437
Operating cash flows for operating leases	22,326		19,874
Financing cash flows for finance leases	2,262		1,193
Non-cash items:
New operating leases and remeasurements, net	$	32,490	$	23,173
New finance leases	5,687		1,314

Future lease payments under non-cancellable leases as of December 31, 2023 are as follows:

(Thousands)	Operating Leases		Finance Leases
2024	$	19,220	$	3,709
2025	16,442		3,656
2026	12,980		3,530
2027	10,317		3,166
2028	8,672		2,467
Thereafter	96,881		9,583
Total undiscounted lease payments	$	164,512	$	26,111
Less: imputed interest	(80,108)		(8,001)
Total lease liabilities	$	84,404	$	18,110

Future sublease rentals as of December 31, 2023 are as follows:

(Thousands)	Sublease Rentals
2024	$	10,837
2025	10,961
2026	11,082
2027	11,166
2028	11,002
Thereafter	128,810
Total	$	183,858

Windstream Leases

Pursuant to the Spin-Off, Uniti entered into a long-term exclusive triple-net lease (the “Master Lease”) with Windstream, pursuant to which a substantial portion of our real property is leased to Windstream and from which a substantial portion of our leasing revenues are currently derived. In connection with Windstream’s emergence from bankruptcy, Uniti and Windstream bifurcated the Master Lease and entered into two structurally similar master leases that each expire on April 30, 2030 (collectively, the “Windstream Leases”), which Windstream Leases amended and restated the Master Lease in its entirety. The Windstream Leases consist of two leases: (a) a master lease (the “ILEC MLA”) that governs Uniti owned assets used for Windstream’s incumbent local exchange carrier (“ILEC”) operations and (b) a master lease (the “CLEC MLA”) that governs Uniti owned assets used for Windstream’s competitive local exchange carrier (“CLEC”) operations. The aggregate initial annual rent under the Windstream Leases is $663.0 million. The tenants under the ILEC MLA are Windstream Holdings II, LLC (“Windstream Holdings II,” successor in interest to Windstream Holdings, Inc.), Windstream Services II, LLC (“Windstream Services II,” successor in interest to Windstream Services LLC), and certain

subsidiaries and/or newly formed affiliated entities operating the ILECs, and the landlords under the ILEC MLA are the Uniti entities that own the applicable ILEC assets. Similarly, the tenants under the CLEC MLA are Windstream Holdings II, Windstream Services II, and certain subsidiaries and/or newly formed affiliated entities operating CLECs, and the landlords under the CLEC MLA are the Uniti entities that own the CLEC assets. The Windstream Leases contain cross-guarantees and cross-default provisions, which will remain effective as long as Windstream or an affiliate is the tenant under both of the Windstream Leases and unless and until the landlords under the ILEC MLA are different from the landlords under the CLEC MLA. The Windstream Leases permit Uniti to transfer its rights and obligations and otherwise monetize or encumber the Windstream Leases, together or separately, so long as Uniti does not transfer interests in either Windstream Lease to a Windstream competitor.

In addition, the Windstream Leases impose certain financial restrictions on Windstream if Windstream fails to maintain certain financial covenants. Windstream covenants not to incur certain indebtedness (other than certain refinancing in a principal amount that does not exceed the sum of the principal amount of the indebtedness refinanced, the accrued and unpaid interest on such indebtedness refinanced and any other amounts owing thereon and any customary costs incurred in connection with such refinancing or drawings under its third party syndicated revolving credit facility, in an amount not to exceed $750 million) if its total leverage ratio, pro forma for the incurrence of such indebtedness, would exceed 3.00:1.00. Further, Windstream covenants not to incur certain additional indebtedness, pay dividends, repurchase stock or prepay unsecured debt, or enter into a transaction with an entity controlled by a member of the board without Uniti’s consent if Windstream’s total leverage ratio exceeds 3.50:1.00. Notwithstanding the foregoing, the financial covenants described herein shall not apply at any time in which Windstream maintains a corporate family rating of not less than “B2” by Moody’s and either “B” by Standard & Poor’s or “B” by Fitch Ratings.

Pursuant to the Windstream Leases, Windstream (or any successor tenant under a Windstream Lease) has the right to cause Uniti to reimburse up to an aggregate $1.75 billion for certain growth capital improvements in long-term value accretive fiber and related assets made by Windstream (or the applicable tenant under the Windstream Lease) to certain ILEC and CLEC properties (the “Growth Capital Improvements”). Uniti’s reimbursement commitment for Growth Capital Improvements does not require Uniti to reimburse Windstream for maintenance or repair expenditures (except for costs incurred for fiber replacements to the CLEC MLA leased property, up to $70 million during the term), and each such reimbursement is subject to underwriting standards. Uniti’s total annual reimbursement commitments for the Growth Capital Improvements under both Windstream Leases (and under separate equipment loan facilities) were limited to $125 million in 2020 and $225 million per year in 2021, 2022 and 2023 and are limited to $225 million in 2024; $175 million per year in 2025 and 2026; and $125 million per year in 2027 through 2029.

If the cost incurred by Windstream (or the successor tenant under a Windstream Lease) for Growth Capital Improvements in any calendar year exceeds the annual limit for such calendar year, Windstream (or such tenant, as the case may be) may submit such excess costs for reimbursement in any subsequent year and such excess costs shall be funded from the annual commitment amounts in such subsequent period. In addition, to the extent that reimbursements for Growth Capital Improvements funded in any calendar year during the term is less than the annual limit for such calendar year, the unfunded amount in any calendar year will carry-over and may be added to the annual limits for subsequent calendar years, subject to an annual limit of $250 million in any calendar year, except that, during calendar year 2021, Uniti’s combined total obligation to fund Growth Capital Improvements may exceed $250 million to the extent of any unfunded excess amounts from calendar year 2020. Starting on the first anniversary of each installment of reimbursement for a Growth Capital Improvement, the rent payable by Windstream under the applicable Windstream Lease will increase by an amount equal to 8.0% (the “Rent Rate”) of such installment of reimbursement. The Rent Rate will thereafter increase to 100.5% of the prior Rent Rate on each anniversary of each reimbursement. In the event that the tenant’s interest in either Windstream Lease is transferred by Windstream under the terms thereof (unless transferred to the same transferee), or if Uniti transfers its interests as landlord under either Windstream Lease (unless to the same transferee), the reimbursement rights and obligations will be allocated between the ILEC MLA and the CLEC MLA by Windstream, provided that the maximum that may be allocated to the CLEC MLA following such transfer is $20 million per year. If Uniti fails to reimburse any Growth Capital Improvement payment or equipment loan funding request as and when it is required to do so under the terms of the Windstream Leases, and such failure continues for thirty (30) days, then such unreimbursed amounts may be applied as an offset against the rent owed by Windstream under the Windstream Leases (and such amounts will thereafter be treated as if Uniti had reimbursed them).

Uniti and Windstream have entered into separate ILEC and CLEC Equipment Loan and Security Agreements (collectively “Equipment Loan Agreement”) in which Uniti will provide up to $125 million (limited to $25 million in any calendar year) of the $1.75 billion of Growth Capital Improvement commitments discussed above in the form of loans for Windstream to purchase equipment related to network upgrades or to be used in connection with the Windstream Leases. Interest on these

loans will accrue at 8% from the date of the borrowing. All equipment financed through the Equipment Loan Agreement is the sole property of Windstream; however, Uniti will receive a first-lien security interest in the equipment purchased with the loans. No such loans have been made to Windstream as of December 31, 2023.

The Windstream Leases provide that TCIs, defined as maintenance, repair, overbuild, upgrade or replacement to the Distribution Systems, including without limitation, the replacement of copper distribution systems with fiber distribution systems, automatically become property of Uniti upon their construction by Windstream. We receive non-monetary consideration related to TCIs as they automatically become our property, and we recognize the cost basis of TCIs that are capital in nature as real estate investments and deferred revenue. We depreciate the real estate investments over their estimated useful lives and amortize the deferred revenue as additional leasing revenues over the same depreciable life of the TCI assets. TCIs exclude Growth Capital Improvements as and when reimbursed by Uniti.

During the year ended December 31, 2023, Uniti reimbursed $250.0 million of Growth Capital Improvements, of which $35.1 million, as allowed for under the Settlement, represented the reimbursement of capital improvements completed in 2022 that were previously classified as TCIs. Subsequent to December 31, 2023, Windstream requested and we reimbursed $79.6 million of qualifying Growth Capital Improvements that were reported as TCIs as of December 31, 2023. As of the date of this Annual Report on Form 10-K, we have reimbursed a total of $873.8 million of Growth Capital Improvements.

Leases

Leases

Lessor Accounting

We lease communications towers, ground, colocation, other communication equipment and dark fiber to tenants under operating leases. Our leases have initial lease terms ranging from less than one year to 35 years, most of which include options to extend or renew the leases for less than one year to 20 years (based on the satisfaction of certain conditions as defined in the lease agreements), and some of which may include options to terminate the leases within one to six months. Certain lease agreements contain provisions for future rent increases. Payments due under the lease contracts include fixed payments plus, for some of our leases, variable payments.

The components of lease income for the years ended December 31, 2023 and 2022 are as follows:

(Thousands)	Year Ended December 31, 2023		Year Ended December 31, 2022
Lease income - operating leases	$	911,828	$	892,414

Lease payments to be received under non-cancellable operating leases where we are the lessor for the remainder of the lease terms as of December 31, 2023 are as follows:

(Thousands)	December 31, 2023 (1)
2024	$	806,483
2025	816,771
2026	818,196
2027	819,134
2028	819,813
Thereafter	1,556,217
Total lease receivables	$	5,636,614
(1) Total future minimum lease payments to be received include $4.7 billion relating to the Windstream Leases.

The underlying assets under operating leases where we are the lessor as of December 31, 2023 and 2022 are summarized as follows:

(Thousands)	December 31, 2023		December 31, 2022
Land	$	26,533	$	26,549
Building and improvements	347,700		346,093
Poles	314,488		296,941
Fiber	3,862,635		3,529,835
Equipment	436		437
Copper	3,974,410		3,964,439
Conduit	90,087		89,963
Tower assets	58		1,397
Finance lease assets	1,890		28,126
Other assets	10,434		10,434
	8,628,671		8,294,214
Less: accumulated depreciation	(5,690,066)		(5,542,726)
Underlying assets under operating leases, net	$	2,938,605	$	2,751,488

Depreciation expense for the underlying assets under operating leases where we are the lessor for the years ended December 31, 2023 and 2022 is summarized as follows:

(Thousands)	Year Ended December 31, 2023		Year Ended December 31, 2022
Depreciation expense for underlying assets under operating leases	$	182,906	$	176,160

Lessee Accounting

We have commitments under operating leases for communications towers, ground, colocation, other communication equipment, dark fiber lease arrangements and buildings. We also have finance leases for automobiles and dark fiber lease arrangements. Our leases have initial lease terms ranging from less than one year to 30 years, most of which include options to extend or renew the leases for less than one year to 20 years, and some of which may include options to terminate the leases within one to six months. Certain lease agreements contain provisions for future rent increases. Payments due under the lease contracts include fixed payments plus, for some of our leases, variable payments.

As of December 31, 2023, we have short term lease commitments amounting to approximately $3.5 million.

The components of lease cost are presented within general and administrative expense and operating expense, while sublease income is presented within revenues in our Consolidated Statements of (Loss) Income for the years ended December 31, 2023 and 2022 are as follows:

(Thousands)	Year Ended December 31, 2023		Year Ended December 31, 2022
Finance lease cost
Amortization of ROU assets	$	4,066	$	3,793
Interest on lease liabilities	1,575		1,437
Total finance lease cost	5,641		5,230
Operating lease cost	22,999		19,946
Short-term lease cost	3,525		3,109
Variable lease cost	938		547
Less sublease income	(14,590)		(13,683)
Total lease cost	$	18,513	$	15,149

Amounts reported in the Consolidated Balance Sheets for leases where we are the lessee as of December 31, 2023 and 2022 were as follows:

(Thousands)	Location on Consolidated Balance Sheets	December 31, 2023			December 31, 2022
Operating leases
ROU asset, net	Operating lease right-of-use assets, net	$	125,105		$	88,545
Lease liability	Operating lease liabilities	84,404			66,356
Finance leases
ROU asset, gross	Property, plant and equipment, net	$	52,589		$	73,487
Lease liability	Finance lease obligations	18,110			15,520
Weighted-average remaining lease term
Operating leases		13.4 years			10.1 years
Finance leases		8.7 years			11.5 years
Weighted-average discount rate
Operating leases		10.3		%	8.6		%
Finance leases		9.9		%	10.1		%

Other information related to leases as of December 31, 2023 and 2022 are as follows:

(Thousands)	Year Ended December 31, 2023		Year Ended December 31, 2022
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows for finance leases	$	1,575	$	1,437
Operating cash flows for operating leases	22,326		19,874
Financing cash flows for finance leases	2,262		1,193
Non-cash items:
New operating leases and remeasurements, net	$	32,490	$	23,173
New finance leases	5,687		1,314

Future lease payments under non-cancellable leases as of December 31, 2023 are as follows:

(Thousands)	Operating Leases		Finance Leases
2024	$	19,220	$	3,709
2025	16,442		3,656
2026	12,980		3,530
2027	10,317		3,166
2028	8,672		2,467
Thereafter	96,881		9,583
Total undiscounted lease payments	$	164,512	$	26,111
Less: imputed interest	(80,108)		(8,001)
Total lease liabilities	$	84,404	$	18,110

Future sublease rentals as of December 31, 2023 are as follows:

(Thousands)	Sublease Rentals
2024	$	10,837
2025	10,961
2026	11,082
2027	11,166
2028	11,002
Thereafter	128,810
Total	$	183,858

Windstream Leases

Pursuant to the Spin-Off, Uniti entered into a long-term exclusive triple-net lease (the “Master Lease”) with Windstream, pursuant to which a substantial portion of our real property is leased to Windstream and from which a substantial portion of our leasing revenues are currently derived. In connection with Windstream’s emergence from bankruptcy, Uniti and Windstream bifurcated the Master Lease and entered into two structurally similar master leases that each expire on April 30, 2030 (collectively, the “Windstream Leases”), which Windstream Leases amended and restated the Master Lease in its entirety. The Windstream Leases consist of two leases: (a) a master lease (the “ILEC MLA”) that governs Uniti owned assets used for Windstream’s incumbent local exchange carrier (“ILEC”) operations and (b) a master lease (the “CLEC MLA”) that governs Uniti owned assets used for Windstream’s competitive local exchange carrier (“CLEC”) operations. The aggregate initial annual rent under the Windstream Leases is $663.0 million. The tenants under the ILEC MLA are Windstream Holdings II, LLC (“Windstream Holdings II,” successor in interest to Windstream Holdings, Inc.), Windstream Services II, LLC (“Windstream Services II,” successor in interest to Windstream Services LLC), and certain

subsidiaries and/or newly formed affiliated entities operating the ILECs, and the landlords under the ILEC MLA are the Uniti entities that own the applicable ILEC assets. Similarly, the tenants under the CLEC MLA are Windstream Holdings II, Windstream Services II, and certain subsidiaries and/or newly formed affiliated entities operating CLECs, and the landlords under the CLEC MLA are the Uniti entities that own the CLEC assets. The Windstream Leases contain cross-guarantees and cross-default provisions, which will remain effective as long as Windstream or an affiliate is the tenant under both of the Windstream Leases and unless and until the landlords under the ILEC MLA are different from the landlords under the CLEC MLA. The Windstream Leases permit Uniti to transfer its rights and obligations and otherwise monetize or encumber the Windstream Leases, together or separately, so long as Uniti does not transfer interests in either Windstream Lease to a Windstream competitor.

In addition, the Windstream Leases impose certain financial restrictions on Windstream if Windstream fails to maintain certain financial covenants. Windstream covenants not to incur certain indebtedness (other than certain refinancing in a principal amount that does not exceed the sum of the principal amount of the indebtedness refinanced, the accrued and unpaid interest on such indebtedness refinanced and any other amounts owing thereon and any customary costs incurred in connection with such refinancing or drawings under its third party syndicated revolving credit facility, in an amount not to exceed $750 million) if its total leverage ratio, pro forma for the incurrence of such indebtedness, would exceed 3.00:1.00. Further, Windstream covenants not to incur certain additional indebtedness, pay dividends, repurchase stock or prepay unsecured debt, or enter into a transaction with an entity controlled by a member of the board without Uniti’s consent if Windstream’s total leverage ratio exceeds 3.50:1.00. Notwithstanding the foregoing, the financial covenants described herein shall not apply at any time in which Windstream maintains a corporate family rating of not less than “B2” by Moody’s and either “B” by Standard & Poor’s or “B” by Fitch Ratings.

Pursuant to the Windstream Leases, Windstream (or any successor tenant under a Windstream Lease) has the right to cause Uniti to reimburse up to an aggregate $1.75 billion for certain growth capital improvements in long-term value accretive fiber and related assets made by Windstream (or the applicable tenant under the Windstream Lease) to certain ILEC and CLEC properties (the “Growth Capital Improvements”). Uniti’s reimbursement commitment for Growth Capital Improvements does not require Uniti to reimburse Windstream for maintenance or repair expenditures (except for costs incurred for fiber replacements to the CLEC MLA leased property, up to $70 million during the term), and each such reimbursement is subject to underwriting standards. Uniti’s total annual reimbursement commitments for the Growth Capital Improvements under both Windstream Leases (and under separate equipment loan facilities) were limited to $125 million in 2020 and $225 million per year in 2021, 2022 and 2023 and are limited to $225 million in 2024; $175 million per year in 2025 and 2026; and $125 million per year in 2027 through 2029.

If the cost incurred by Windstream (or the successor tenant under a Windstream Lease) for Growth Capital Improvements in any calendar year exceeds the annual limit for such calendar year, Windstream (or such tenant, as the case may be) may submit such excess costs for reimbursement in any subsequent year and such excess costs shall be funded from the annual commitment amounts in such subsequent period. In addition, to the extent that reimbursements for Growth Capital Improvements funded in any calendar year during the term is less than the annual limit for such calendar year, the unfunded amount in any calendar year will carry-over and may be added to the annual limits for subsequent calendar years, subject to an annual limit of $250 million in any calendar year, except that, during calendar year 2021, Uniti’s combined total obligation to fund Growth Capital Improvements may exceed $250 million to the extent of any unfunded excess amounts from calendar year 2020. Starting on the first anniversary of each installment of reimbursement for a Growth Capital Improvement, the rent payable by Windstream under the applicable Windstream Lease will increase by an amount equal to 8.0% (the “Rent Rate”) of such installment of reimbursement. The Rent Rate will thereafter increase to 100.5% of the prior Rent Rate on each anniversary of each reimbursement. In the event that the tenant’s interest in either Windstream Lease is transferred by Windstream under the terms thereof (unless transferred to the same transferee), or if Uniti transfers its interests as landlord under either Windstream Lease (unless to the same transferee), the reimbursement rights and obligations will be allocated between the ILEC MLA and the CLEC MLA by Windstream, provided that the maximum that may be allocated to the CLEC MLA following such transfer is $20 million per year. If Uniti fails to reimburse any Growth Capital Improvement payment or equipment loan funding request as and when it is required to do so under the terms of the Windstream Leases, and such failure continues for thirty (30) days, then such unreimbursed amounts may be applied as an offset against the rent owed by Windstream under the Windstream Leases (and such amounts will thereafter be treated as if Uniti had reimbursed them).

Uniti and Windstream have entered into separate ILEC and CLEC Equipment Loan and Security Agreements (collectively “Equipment Loan Agreement”) in which Uniti will provide up to $125 million (limited to $25 million in any calendar year) of the $1.75 billion of Growth Capital Improvement commitments discussed above in the form of loans for Windstream to purchase equipment related to network upgrades or to be used in connection with the Windstream Leases. Interest on these

loans will accrue at 8% from the date of the borrowing. All equipment financed through the Equipment Loan Agreement is the sole property of Windstream; however, Uniti will receive a first-lien security interest in the equipment purchased with the loans. No such loans have been made to Windstream as of December 31, 2023.

The Windstream Leases provide that TCIs, defined as maintenance, repair, overbuild, upgrade or replacement to the Distribution Systems, including without limitation, the replacement of copper distribution systems with fiber distribution systems, automatically become property of Uniti upon their construction by Windstream. We receive non-monetary consideration related to TCIs as they automatically become our property, and we recognize the cost basis of TCIs that are capital in nature as real estate investments and deferred revenue. We depreciate the real estate investments over their estimated useful lives and amortize the deferred revenue as additional leasing revenues over the same depreciable life of the TCI assets. TCIs exclude Growth Capital Improvements as and when reimbursed by Uniti.

During the year ended December 31, 2023, Uniti reimbursed $250.0 million of Growth Capital Improvements, of which $35.1 million, as allowed for under the Settlement, represented the reimbursement of capital improvements completed in 2022 that were previously classified as TCIs. Subsequent to December 31, 2023, Windstream requested and we reimbursed $79.6 million of qualifying Growth Capital Improvements that were reported as TCIs as of December 31, 2023. As of the date of this Annual Report on Form 10-K, we have reimbursed a total of $873.8 million of Growth Capital Improvements.

Leases

Leases

Lessor Accounting

We lease communications towers, ground, colocation, other communication equipment and dark fiber to tenants under operating leases. Our leases have initial lease terms ranging from less than one year to 35 years, most of which include options to extend or renew the leases for less than one year to 20 years (based on the satisfaction of certain conditions as defined in the lease agreements), and some of which may include options to terminate the leases within one to six months. Certain lease agreements contain provisions for future rent increases. Payments due under the lease contracts include fixed payments plus, for some of our leases, variable payments.

The components of lease income for the years ended December 31, 2023 and 2022 are as follows:

(Thousands)	Year Ended December 31, 2023		Year Ended December 31, 2022
Lease income - operating leases	$	911,828	$	892,414

Lease payments to be received under non-cancellable operating leases where we are the lessor for the remainder of the lease terms as of December 31, 2023 are as follows:

(Thousands)	December 31, 2023 (1)
2024	$	806,483
2025	816,771
2026	818,196
2027	819,134
2028	819,813
Thereafter	1,556,217
Total lease receivables	$	5,636,614
(1) Total future minimum lease payments to be received include $4.7 billion relating to the Windstream Leases.

The underlying assets under operating leases where we are the lessor as of December 31, 2023 and 2022 are summarized as follows:

(Thousands)	December 31, 2023		December 31, 2022
Land	$	26,533	$	26,549
Building and improvements	347,700		346,093
Poles	314,488		296,941
Fiber	3,862,635		3,529,835
Equipment	436		437
Copper	3,974,410		3,964,439
Conduit	90,087		89,963
Tower assets	58		1,397
Finance lease assets	1,890		28,126
Other assets	10,434		10,434
	8,628,671		8,294,214
Less: accumulated depreciation	(5,690,066)		(5,542,726)
Underlying assets under operating leases, net	$	2,938,605	$	2,751,488

Depreciation expense for the underlying assets under operating leases where we are the lessor for the years ended December 31, 2023 and 2022 is summarized as follows:

(Thousands)	Year Ended December 31, 2023		Year Ended December 31, 2022
Depreciation expense for underlying assets under operating leases	$	182,906	$	176,160

Lessee Accounting

We have commitments under operating leases for communications towers, ground, colocation, other communication equipment, dark fiber lease arrangements and buildings. We also have finance leases for automobiles and dark fiber lease arrangements. Our leases have initial lease terms ranging from less than one year to 30 years, most of which include options to extend or renew the leases for less than one year to 20 years, and some of which may include options to terminate the leases within one to six months. Certain lease agreements contain provisions for future rent increases. Payments due under the lease contracts include fixed payments plus, for some of our leases, variable payments.

As of December 31, 2023, we have short term lease commitments amounting to approximately $3.5 million.

The components of lease cost are presented within general and administrative expense and operating expense, while sublease income is presented within revenues in our Consolidated Statements of (Loss) Income for the years ended December 31, 2023 and 2022 are as follows:

(Thousands)	Year Ended December 31, 2023		Year Ended December 31, 2022
Finance lease cost
Amortization of ROU assets	$	4,066	$	3,793
Interest on lease liabilities	1,575		1,437
Total finance lease cost	5,641		5,230
Operating lease cost	22,999		19,946
Short-term lease cost	3,525		3,109
Variable lease cost	938		547
Less sublease income	(14,590)		(13,683)
Total lease cost	$	18,513	$	15,149

Amounts reported in the Consolidated Balance Sheets for leases where we are the lessee as of December 31, 2023 and 2022 were as follows:

(Thousands)	Location on Consolidated Balance Sheets	December 31, 2023			December 31, 2022
Operating leases
ROU asset, net	Operating lease right-of-use assets, net	$	125,105		$	88,545
Lease liability	Operating lease liabilities	84,404			66,356
Finance leases
ROU asset, gross	Property, plant and equipment, net	$	52,589		$	73,487
Lease liability	Finance lease obligations	18,110			15,520
Weighted-average remaining lease term
Operating leases		13.4 years			10.1 years
Finance leases		8.7 years			11.5 years
Weighted-average discount rate
Operating leases		10.3		%	8.6		%
Finance leases		9.9		%	10.1		%

Other information related to leases as of December 31, 2023 and 2022 are as follows:

(Thousands)	Year Ended December 31, 2023		Year Ended December 31, 2022
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows for finance leases	$	1,575	$	1,437
Operating cash flows for operating leases	22,326		19,874
Financing cash flows for finance leases	2,262		1,193
Non-cash items:
New operating leases and remeasurements, net	$	32,490	$	23,173
New finance leases	5,687		1,314

Future lease payments under non-cancellable leases as of December 31, 2023 are as follows:

(Thousands)	Operating Leases		Finance Leases
2024	$	19,220	$	3,709
2025	16,442		3,656
2026	12,980		3,530
2027	10,317		3,166
2028	8,672		2,467
Thereafter	96,881		9,583
Total undiscounted lease payments	$	164,512	$	26,111
Less: imputed interest	(80,108)		(8,001)
Total lease liabilities	$	84,404	$	18,110

Future sublease rentals as of December 31, 2023 are as follows:

(Thousands)	Sublease Rentals
2024	$	10,837
2025	10,961
2026	11,082
2027	11,166
2028	11,002
Thereafter	128,810
Total	$	183,858

Windstream Leases

Pursuant to the Spin-Off, Uniti entered into a long-term exclusive triple-net lease (the “Master Lease”) with Windstream, pursuant to which a substantial portion of our real property is leased to Windstream and from which a substantial portion of our leasing revenues are currently derived. In connection with Windstream’s emergence from bankruptcy, Uniti and Windstream bifurcated the Master Lease and entered into two structurally similar master leases that each expire on April 30, 2030 (collectively, the “Windstream Leases”), which Windstream Leases amended and restated the Master Lease in its entirety. The Windstream Leases consist of two leases: (a) a master lease (the “ILEC MLA”) that governs Uniti owned assets used for Windstream’s incumbent local exchange carrier (“ILEC”) operations and (b) a master lease (the “CLEC MLA”) that governs Uniti owned assets used for Windstream’s competitive local exchange carrier (“CLEC”) operations. The aggregate initial annual rent under the Windstream Leases is $663.0 million. The tenants under the ILEC MLA are Windstream Holdings II, LLC (“Windstream Holdings II,” successor in interest to Windstream Holdings, Inc.), Windstream Services II, LLC (“Windstream Services II,” successor in interest to Windstream Services LLC), and certain

subsidiaries and/or newly formed affiliated entities operating the ILECs, and the landlords under the ILEC MLA are the Uniti entities that own the applicable ILEC assets. Similarly, the tenants under the CLEC MLA are Windstream Holdings II, Windstream Services II, and certain subsidiaries and/or newly formed affiliated entities operating CLECs, and the landlords under the CLEC MLA are the Uniti entities that own the CLEC assets. The Windstream Leases contain cross-guarantees and cross-default provisions, which will remain effective as long as Windstream or an affiliate is the tenant under both of the Windstream Leases and unless and until the landlords under the ILEC MLA are different from the landlords under the CLEC MLA. The Windstream Leases permit Uniti to transfer its rights and obligations and otherwise monetize or encumber the Windstream Leases, together or separately, so long as Uniti does not transfer interests in either Windstream Lease to a Windstream competitor.

In addition, the Windstream Leases impose certain financial restrictions on Windstream if Windstream fails to maintain certain financial covenants. Windstream covenants not to incur certain indebtedness (other than certain refinancing in a principal amount that does not exceed the sum of the principal amount of the indebtedness refinanced, the accrued and unpaid interest on such indebtedness refinanced and any other amounts owing thereon and any customary costs incurred in connection with such refinancing or drawings under its third party syndicated revolving credit facility, in an amount not to exceed $750 million) if its total leverage ratio, pro forma for the incurrence of such indebtedness, would exceed 3.00:1.00. Further, Windstream covenants not to incur certain additional indebtedness, pay dividends, repurchase stock or prepay unsecured debt, or enter into a transaction with an entity controlled by a member of the board without Uniti’s consent if Windstream’s total leverage ratio exceeds 3.50:1.00. Notwithstanding the foregoing, the financial covenants described herein shall not apply at any time in which Windstream maintains a corporate family rating of not less than “B2” by Moody’s and either “B” by Standard & Poor’s or “B” by Fitch Ratings.

Pursuant to the Windstream Leases, Windstream (or any successor tenant under a Windstream Lease) has the right to cause Uniti to reimburse up to an aggregate $1.75 billion for certain growth capital improvements in long-term value accretive fiber and related assets made by Windstream (or the applicable tenant under the Windstream Lease) to certain ILEC and CLEC properties (the “Growth Capital Improvements”). Uniti’s reimbursement commitment for Growth Capital Improvements does not require Uniti to reimburse Windstream for maintenance or repair expenditures (except for costs incurred for fiber replacements to the CLEC MLA leased property, up to $70 million during the term), and each such reimbursement is subject to underwriting standards. Uniti’s total annual reimbursement commitments for the Growth Capital Improvements under both Windstream Leases (and under separate equipment loan facilities) were limited to $125 million in 2020 and $225 million per year in 2021, 2022 and 2023 and are limited to $225 million in 2024; $175 million per year in 2025 and 2026; and $125 million per year in 2027 through 2029.

If the cost incurred by Windstream (or the successor tenant under a Windstream Lease) for Growth Capital Improvements in any calendar year exceeds the annual limit for such calendar year, Windstream (or such tenant, as the case may be) may submit such excess costs for reimbursement in any subsequent year and such excess costs shall be funded from the annual commitment amounts in such subsequent period. In addition, to the extent that reimbursements for Growth Capital Improvements funded in any calendar year during the term is less than the annual limit for such calendar year, the unfunded amount in any calendar year will carry-over and may be added to the annual limits for subsequent calendar years, subject to an annual limit of $250 million in any calendar year, except that, during calendar year 2021, Uniti’s combined total obligation to fund Growth Capital Improvements may exceed $250 million to the extent of any unfunded excess amounts from calendar year 2020. Starting on the first anniversary of each installment of reimbursement for a Growth Capital Improvement, the rent payable by Windstream under the applicable Windstream Lease will increase by an amount equal to 8.0% (the “Rent Rate”) of such installment of reimbursement. The Rent Rate will thereafter increase to 100.5% of the prior Rent Rate on each anniversary of each reimbursement. In the event that the tenant’s interest in either Windstream Lease is transferred by Windstream under the terms thereof (unless transferred to the same transferee), or if Uniti transfers its interests as landlord under either Windstream Lease (unless to the same transferee), the reimbursement rights and obligations will be allocated between the ILEC MLA and the CLEC MLA by Windstream, provided that the maximum that may be allocated to the CLEC MLA following such transfer is $20 million per year. If Uniti fails to reimburse any Growth Capital Improvement payment or equipment loan funding request as and when it is required to do so under the terms of the Windstream Leases, and such failure continues for thirty (30) days, then such unreimbursed amounts may be applied as an offset against the rent owed by Windstream under the Windstream Leases (and such amounts will thereafter be treated as if Uniti had reimbursed them).

Uniti and Windstream have entered into separate ILEC and CLEC Equipment Loan and Security Agreements (collectively “Equipment Loan Agreement”) in which Uniti will provide up to $125 million (limited to $25 million in any calendar year) of the $1.75 billion of Growth Capital Improvement commitments discussed above in the form of loans for Windstream to purchase equipment related to network upgrades or to be used in connection with the Windstream Leases. Interest on these

loans will accrue at 8% from the date of the borrowing. All equipment financed through the Equipment Loan Agreement is the sole property of Windstream; however, Uniti will receive a first-lien security interest in the equipment purchased with the loans. No such loans have been made to Windstream as of December 31, 2023.

The Windstream Leases provide that TCIs, defined as maintenance, repair, overbuild, upgrade or replacement to the Distribution Systems, including without limitation, the replacement of copper distribution systems with fiber distribution systems, automatically become property of Uniti upon their construction by Windstream. We receive non-monetary consideration related to TCIs as they automatically become our property, and we recognize the cost basis of TCIs that are capital in nature as real estate investments and deferred revenue. We depreciate the real estate investments over their estimated useful lives and amortize the deferred revenue as additional leasing revenues over the same depreciable life of the TCI assets. TCIs exclude Growth Capital Improvements as and when reimbursed by Uniti.

During the year ended December 31, 2023, Uniti reimbursed $250.0 million of Growth Capital Improvements, of which $35.1 million, as allowed for under the Settlement, represented the reimbursement of capital improvements completed in 2022 that were previously classified as TCIs. Subsequent to December 31, 2023, Windstream requested and we reimbursed $79.6 million of qualifying Growth Capital Improvements that were reported as TCIs as of December 31, 2023. As of the date of this Annual Report on Form 10-K, we have reimbursed a total of $873.8 million of Growth Capital Improvements.