IPO Report: Landmark Infrastructure Partners LP (LMRK)

Landmark Infrastructure Partners LP (LMRK) is a growth-oriented master limited partnership formed by Landmark to acquire, own and manage a portfolio of real property interests that it leases (triple net leases) to companies in the wireless communication, outdoor advertising and renewable power generation industries. It is based in El Segundo, CA.

Nine other companies are scheduled for the week of Nov. 10, 2014. The full IPO calendar is available at IPOpremium.

SEC Documents

Manager, Joint-managers: Baird, Raymond James, and RBC Capital Markets

Co-managers: Janney Montgomery Scott

End of lockup (180 days): Wednesday, May 13, 2015

End of 25-day quiet period: Tuesday, December 9, 2014

LMRK scheduled a $60 million IPO with a market capitalization of $94 million at a price range midpoint of $20 for Friday, Nov. 14, 2014 on Nasdaq.

Landmark Infrastructure Partners IPO Report

Summary

LMRK is a growth-oriented master limited partnership formed by Landmark to acquire, own and manage a portfolio of real property interests that it leases (triple net leases) to companies in the wireless communication, outdoor advertising and renewable power generation industries.

Conclusion

Neutral, C+, 6.5

5.75% yield

Triple net leases for wireless, billboards, wind locations

Growth plan is to acquire more properties

High quality tenants

Price-to-book 1.5

Per share dilution of -28.40

Business

LMRK is a growth-oriented master limited partnership formed by Landmark to acquire, own and manage a portfolio of real property interests that it leases to companies in the wireless communication, outdoor advertising and renewable power generation industries.

LMRK’s real property interests underlie its tenants' infrastructure assets, which include cellular towers, rooftop wireless sites, billboards and wind turbines.

These assets are essential to the operations and profitability of LMRK’s tenants. LMRK seeks to acquire real property interests subject to tenant lease arrangements that are effectively triple net, containing contractual rent increase clauses, or "rent escalators," which LMRK believes provide it with stable, predictable and growing cash flow.

LMRK’s real property interests consist of a diversified portfolio of long-term and perpetual easements, tenant lease assignments and, to a lesser extent, fee simple properties located in 42 states and the District of Columbia.

These real property interests entitle LMRK to receive rental payments from leases on LMRK’s 701 tenant sites.

Good credit tenants

Approximately 88% of LMRK’s leased tenant sites are occupied by large, publicly traded companies (or their affiliates) that have a national footprint.

These tenants (and their affiliates), which LMRK refers to as its "Tier 1" tenants, are comprised of 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 CBS Outdoor, Clear Channel Outdoor and Lamar Advertising in the outdoor advertising industry.

Triple net leases

LMRK believes the terms of its tenant lease arrangements provides it with stable, predictable and growing cash flow that will support consistent, growing distributions to its unitholders.

Substantially all of LMRK’s tenant lease arrangements are effectively triple net, meaning that its tenants or the underlying property owners are contractually responsible for property-level operating expenses, including maintenance capital expenditures, property taxes and insurance.

Rent escalators

Substantially all of LMRK’s tenant leases have contractual rent escalators, and some of its tenant leases contain revenue-sharing provisions in addition to the base monthly or annual rental payments.

In addition, LMRK believes the infrastructure assets at its tenant sites are essential to the ongoing operations and profitability of its tenants.

When combined with the challenges and costs of relocating those assets and the key strategic locations of LMRK’s real property interests, LMRK expects continued high tenant retention and occupancy rates.

99% occupancy rate

As of October 13, 2014, LMRK had a 99% occupancy rate, with 695 of its 701 total available tenant sites leased.

Competition

LMRK faces competition in the acquisition and leasing of its real property interests in each of its target industries.

Some of the competitors are larger than LMRK and include public entities with greater access to capital and scale of operations than us.

In addition, Landmark and its affiliates will compete with LMRK  for acquisitions and the leasing of real property interests.

In the acquisition of real property interests underlying LMRK’s tenants' infrastructure, its principal competitors include its tenants and private independent acquirers focused on individual industries.

In the wireless communication industry, the principal competitors include tower companies such as American Tower, Crown Castle International and SBA Communications and private independent acquirers such as APWIP, Unison Site Management Corporation and Wireless Capital Partners.

In the outdoor advertising industry, the principal competitors include billboard companies such as CBS Outdoor, Clear Channel Outdoor and Lamar Advertising.

In the renewable power generation industry, the principal competitor is AWCC Capital.

LMRK believes the most significant factors affecting the competitive environment in the acquisition of real property interest underlying its tenant's infrastructure include the relationship with the property owner, price offered, structure and terms of the acquisition, time to closing and surety of closing.

5% shareholders post-IPO

Landmark Dividend LLC, 40%

Landmark Dividend LLC is indirectly owned and managed by Landmark Dividend Holdings LLC. Landmark Dividend Holdings LLC is managed by a board of managers. The board of managers of Landmark Dividend Holdings LLC is comprised of Matthew P. Carbone, Edmond G. Leung, Jonathan A. Contos, Fenton R. Talbott, Jeffrey J. Knyal, Arthur P. Brazy, Jr., James F. Brown, Trevor J. Brock and David L. Hollon.

AIM Landmark Holdings, LLC is the record holder of approximately 57% of the limited liability company interests of Landmark Dividend Holdings, LLC and is entitled to elect the majority of the members of the board of managers of Landmark Dividend Holdings LLC.

AIM Landmark Holdings, LLC is controlled by AIM Universal Holdings, LLC. AIM Universal Holdings, LLC is managed by Robert B. Hellman, Matthew P. Carbone and Judy N. Bornstein, and voting and investment determinations with respect to the securities held by Landmark Dividend LLC are ultimately controlled by the following AIM Universal Holdings, LLC persons: Robert B. Hellman, Jr., Matthew P. Carbone, Brian Barlow, Ryan Barnes, Judith Bornstein, Edward Diffendal, Jonathan A. Contos, Matthew Garibaldi, Nancy Katz and Edmond G. Leung. Each of the foregoing persons and each member of the board of managers of Landmark Dividend Holdings LLC, disclaims beneficial ownership of such securities. Each of AIM Universal Holdings, LLC, AIM Landmark Holdings, LLC and Landmark Dividend Holdings, LLC may be deemed to indirectly beneficially own the securities held by Landmark Dividend LLC, but disclaim beneficial ownership except to the extent of their respective pecuniary interest therein. The principal business address of AIM Universal Holdings, LLC is 950 Tower Lane, Suite 800, Foster City, California 94404.

Dividends

Upon the consummation of this offering, LMRK’s partnership agreement will provide for a minimum quarterly distribution of $0.287500 per unit for each whole quarter, or $1.15 per unit on an annualized basis, or 5.75% at the price range midpoint of $20.

Use of proceeds

LMRD expects to receive $51 million from its IPO and use it along with gross procees from the sale of subordinated units to Landmark for the following:

Repayment of amounts under new secured revolving credit facility $19,025,861  

Distribution to Fund A and Fund D                     $70,614,039