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Landmark in a Hole

With the MLP sector devastated by the energy slump, this week I want to highlight another unconventional partnership. It was a year ago in November that Landmark Infrastructure Partners (NASDAQ: LMRK) took its unique MLP public.

Landmark Infrastructure Partners was formed by Landmark Dividend to acquire, own and manage a portfolio of real estate leased to companies in the wireless communication, outdoor advertising and renewable power generation industries. Landmark provides land for cellular towers, rooftop wireless sites, billboards and wind turbines. These assets have a 98% occupancy rate and a 99% historical lease renewal rate; 94% of the leases contain rent escalators.

The partnership intends to grow with the aid of these automatic increases as well as lease modifications and renewals, drop-downs from the sponsor and acquisitions from third parties. Since its IPO, Landmark has acquired five drop-downs with a total of  512 tenant sites for approximately $170 million. Following these deals, it owns 1,207 tenant sites (an increase of 72% since the IPO) in 48 states and the District of Columbia.

Approximately 86% of Landmark’s leased sites are occupied by large, publicly traded companies (or their affiliates) with a national footprint. More than half of LMRK’s revenue in the most recent quarter came from wireless carriers. Tenants include AT&T Mobility, Sprint, T-Mobile and Verizon in the wireless carrier industry, American Tower, Crown Castle and SBA Communications in the cellular tower industry and Clear Channel Outdoor, Outfront Media and Lamar Advertising in the outdoor advertising industry.

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Source: partnership presentation

In the most recent quarter, the partnership generated adjusted EBITDA of approximately $5 million and distributable cash flow of $3.8 million. For the nine months ended Sept. 30 Landmark posted a net loss of $2.1 million, EBITDA of $4.9 million, adjusted EBITDA of $12.4 million and distributable cash flow of $9.3 million.

Following Q3 the partnership declared a quarterly cash distribution of $0.3175 per limited partner unit, or $1.27 per unit on an annualized basis, for a current yield of 9.5%.  The distribution represented a 10.4% increase over the minimum quarterly distribution and was up 3.3% from the second quarter.

Further drop-downs are expected by year end, and Landmark expects  to exceed the minimum quarterly distribution by 12% to 15% in the fourth quarter. This implies an expected annualized yield of 9.6% to 9.9% based on the current price.

Last year’s IPO raised $50 million from 2.65 million common units priced at $19 apiece. They opened for trading at $18.75. In May, a secondary offering of 3 million units at $16.75 raised another $50 million. Total return since the IPO stands at -30%, partly in a reflection of the general souring on MLPs and other yield plays. But for investors looking for the tax advantages of a master limited partnership while avoiding the energy sector, Landmark Infrastructure Partners may very well fit the bill.

(Follow Robert Rapier on Twitter, LinkedIn, or Facebook.)



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