Landmark Infrastructure Partners (NASDAQ: LMRK) is a growth-oriented real estate and infrastructure company formed by Landmark Dividend LLC.
LMRK acquires, owns, and manages a portfolio of real property interests and infrastructure assets that are leased to companies in the wireless communication, digital infrastructure, outdoor advertising, and renewable power generation industries. The company generates revenue and cash flow from tenant leases with operators in these segments.
For 1Q21, LMRK reported rental revenues of $17.3 million, up 25 percent from $13.8 million in 1Q20. Adjusted funds from operations (AFFO) increased 11 percent on a year-over-year basis to $9.3 million.
Wireless Communications revenues grew to $6.7 million, up 5 percent YoY. The company counts AT&T, Verizon and T-Mobile as its biggest mobile network operator tenants, and American Tower and Crown Castle as its top tower company tenants. T-Mobile (NASDAQ: TMUS) is LMRK’s largest tenant accounting for over 12 percent of total rental revenues. With TMUS’ rapid 5G rollout, LMRK expects to add to that revenue stream and has not yet seen any negative impacts from legacy Sprint site decommissions.
The big boost in 1Q21 revenues came from the Digital Infrastructure segment which grew 211 percent YoY, on the strength of LMRK’s data center acquisitions in the latter half of 2020. Those data center assets were acquired using capital from the sale of its interest in a European outdoor advertising joint venture. Sungard is LMRK’s leading data center property tenant.
Outdoor Advertising revenues for the quarter declined 5 percent YOY to $3.8 million due to the reduced rentals. At the same time, this segment has been most affected by COVID-19. With the pandemic easing, the company expects a rebound in advertising for movies and entertainment, travel, retail, and fitness throughout 2021. Clear Channel is LMRK’s leading outdoor advertising tenant.
Renewable Energy Generation involving wind and solar farms grew two percent in the quarter with Southern California Edison as the biggest tenant. This segment is another area where LMRK anticipates steady growth.
LMRK’s portfolio primarily consists of real property interests (land and easements) and critical infrastructure leased to tower companies and wireless carriers, outdoor advertising operators, power companies and data centers.
Of the 2,062 sites that LMRK had available at the end of 1Q21, 1,962 or 95 percent were leased to tenants. With $896 million in total assets, 95 percent are in the U.S. with the 5 percent balance divided between Canada and Australia.
LMRK operates with triple-net leases. This means the tenant pays insurance, property taxes, and maintenance expenses. Organic growth comes from contractual rent escalators, lease modifications, lease-up and renewals. Under this leasing structure, LMRK claims it realizes roughly 97 percent property operating margins, with no maintenance capital expenditure.
LMRK says the terms of its tenant leases provide stable and predictable cash flow. At the end of 1Q21, 80 percent of its tenant leases had contractual fixed-rate escalators or consumer price index (CPI)-based rent escalators, with some tenant leases incorporating revenue-sharing provisions in addition to the base monthly or annual rental payments.
With historically high occupancy rates, LMRK believes it is well positioned to negotiate higher rents in advance of lease expirations as tenants request lease amendments to accommodate equipment upgrades or add tenants to increase co-location.
In LMRK’s 1Q21 earnings call, CEO Tim Brazy commented, “As far as our overall business strategy is concerned, our focus remains on our higher return development projects and some select acquisitions with an emphasis on data center assets.”
He added, “With regard to our development projects, while the pandemic has slowed the overall pace of our deployments, we made further progress this quarter with Landmark Vertex, our stealth wireless infrastructure offering and DART, our existing program with the Dallas Area Rapid Transit System.”
Brazy emphasized that the company is moving forward with various deployments of Vertex. On the DART project, LMRK placed 89 [Vertex] digital kiosks into service in 1Q21, bringing the total number of installed kiosks in service to 201 as of March 31.
“While DART rental revenues are not yet meaningful, we expect to see a ramp up in the following quarters as advertising spending on installed kiosks increases and more kiosks are placed into service,” Brazy said.
On May 17, Inside Towers reported that Digital Colony, a subsidiary of Colony Capital (NYSE: CLNY), will acquire for about $972 million, Landmark Dividend that owns 100 percent of the membership interests in the general partner of LMRK and 13.2 percent of the common shares representing limited partner interests in LMRK.
For that price, Digital Colony is paying just over the book value of LMRK’s infrastructure assets. The deal is expected to close in 2Q21.
By John Celentano, Inside Towers Business Editor
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