Melody Investment Advisors LP, a digital infrastructure private equity firm, today announced the final close of Melody Communications Infrastructure Fund II with $1.95bn in equity capital commitments. Ultimately, the fund was oversubscribed and exceeded its initial $1.5bn target by nearly 30%, relative to when fundraising began in September 2019.

Melody Communications Infrastructure Fund II – Overview

Melody Investment Advisors LP, the external manager for Fund II, was founded in 2012 and has a team of 37 professionals. The firm is led by Omar Jaffrey, as sole Founder and Managing Partner of Melody.

Prior Investment Performance – as of 9/30/2020

Per filings from SBCERS, Melody’s previous Fund I vehicle was a 2014 vintage and reached a $755m fund size. As of September 30, 2020, Melody’s Fund I had drawn $744.2m of capital, through which it had produced a net IRR of 13.0% and a total value to paid-in (TVPI) capital of 1.7x.

Investment Approach

Melody invests in digital infrastructure, including the sub-sectors of towers, data centers, and fiber. Primarily, Melody targets control investments with a focus on land and rooftop easements, build-to-suit (BTS) tower assets, and wireless carrier partnerships.

Overall, Melody Communications Infrastructure Fund II plans to make 6 to 8 investments with equity commitments between $50m to $400m, per deal.

Portfolio

Presently, Melody Communications Infrastructure Fund II is ~40% invested, implying that the fund has made ~$780m of capital commitments to its existing portfolio companies. Below are Fund II’s three existing investments:

CTI Towers

CTI Towers owns and manages wireless towers, with a portfolio of 1.15k+ sites in the United States. The company leases its tower infrastructure to wireless carriers Verizon, AT&T, and T-Mobile, as well as broadcasters, utility companies, internet service providers (ISPs), and government entities.

In October 2020, Melody Communications Infrastructure Fund II acquired CTI Towers’ 1.15k wireless towers, from a shareholder group led by Comcast Ventures, Comcast Corporation’s venture capital division.

Harmoni Towers (formerly Uniti Towers)

Harmoni Towers owns and operates 500+ towers and is one of the largest tower builders in the United States. Also, in February 2021, DISH Network signed an agreement with Harmoni Towers for the use of its towers as part of its 5G network build-out.

In June 2020, Melody Communications Infrastructure Fund II acquired 90% of Uniti Group’s U.S. tower business for total cash consideration of $225.8m. Therefore, this transaction implied a 34.0x EV/TCF (tower cash flow) multiple. Subsequently, this business took the brand name Harmoni Towers.

READ MORE: Apollo Sells Parallel Infrastructure to Harmoni Towers

Symphony Wireless

Symphony Wireless acquires and manages a cell site and telecom easements portfolio. Overall, the company is led by Jorge Pedraza as President and Neil Notkin who runs the company’s origination effort.

Acquisition Pursuits

Beyond Melody’s three existing Fund II investments, the firm was also active in the public pursuit of Landmark Infrastructure Partners (NASDAQ: LMRK), a company that was ultimately sold to DigitalBridge’s private equity fund Digital Colony Partners II. Specifically, Melody submitted multiple offers for Landmark Infrastructure Partners’ common units, valuing the business at $1.1bn+:

Exits

Critical to fundraising, Melody has recently secured exits from select portfolio companies which it invested in, through prior funds. For example, in May 2021, Melody Capital Management agreed to sell Melody Wireless Infrastructure, an owner of 2.3k wireless sites, to Diamond Communications and Sculptor Capital Management (formerly Och-Ziff) for $1.625bn.

Limited Partners (LPs) – Melody Communications Infrastructure Fund II

Melody has secured prominent Limited Partners (LPs) for its second digital infrastructure fund. Particularly, these LPs include public and private pension funds, sovereign wealth funds, foundations & endowments, fund of funds, insurance companies, and charitable trusts.

Below we highlight four equity commitments, totaling $67.5m or 3.5% of total commitments, to Melody’s Fund II:

Santa Barbara County Employees’ Retirement System (SBCERS)

In October 2021, Santa Barbara County Employees’ Retirement System (SBCERS) closed on a commitment of $15m to Melody Communications Infrastructure Fund II. Particularly, this commitment was approved by investment consulting firm Hamilton Lane, on behalf of SBCERS.

San Antonio Fire and Police Pension Fund

In August 2021, San Antonio Fire and Police Pension Fund made a commitment of $20m to Melody Communications Infrastructure Fund II. Notably, this commitment came following a recommendation of Melody by investment consulting firm NEPC.

San Diego City Employees’ Retirement System (SDCERS)

In Q2 2021, San Diego City Employees’ Retirement System (SDCERS) made a commitment of $7.5m to Melody Communications Infrastructure Fund II. Specifically, private markets firm StepStone invested into Melody’s Fund II.

Tacoma Employees’ Retirement System (TERS) – Washington

In July 2020, Tacoma Employees’ Retirement System (TERS) made a commitment of $25m to Melody Communications Infrastructure Fund II.

Transaction Advisors – Melody

Melody’s placement agent was Atlantic-Pacific Capital. Additionally, Melody’s legal advisor was Kirkland & Ellis.

Adam Simmons covers Towers for Dgtl Infra, including American Tower (NYSE: AMT), Crown Castle (NYSE: CCI), SBA Communications (NASDAQ: SBAC), Cellnex Telecom (BME: CLNX), Vantage Towers (ETR: VTWR), IHS Holding (NYSE: IHS), and many more. Within Towers, Adam focuses on the sub-sectors of ground-based cell towers, rooftop sites, broadcast / radio towers, and 5G. Adam has over 7 years of experience in research and writing for Towers.

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