Landmark Infrastructure Partners Q3 2021 Earnings Call Transcript

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November 4, 2021

There are 4 speakers on the call.

Operator

Good day, and welcome to the Third Quarter 2021 Landmark Infrastructure Partners LP Earnings Conference Call. Today's call will be limited to prepared remarks. I would now like to turn the call over to Marcel Choi, Investor Relations. You may begin.

Speaker 1

Thank you, and good morning. We'd like to welcome you Landmark Infrastructure Partners' 3rd quarter earnings call. Today, we'll share an operating and financial overview of the business. Presenting on the call today are Tim Brazy, Chief Executive Officer and George Doyle, Chief Financial Officer. I would like to remind all participants that our comments today will include forward looking statements, which are subject to certain risks and uncertainties.

Speaker 1

A number of factors and uncertainties could cause actual results in future periods to differ materially from our current expectations. For a complete discussion of these risks, we encourage you to read the partnership's earnings release and documents on file with the SEC. Additionally, we may refer to non GAAP measures such as FFO, AFFO, EBITDA and adjusted EBITDA during the call. Please refer to the earnings release and our public filings for definitions and reconciliations of these non GAAP measures to their most comparable GAAP measures. And with that, I'll turn the call over to Tim.

Speaker 1

Thank you,

Speaker 2

Marcelo, and thank you all for joining us today. As you saw from our press release this morning, we had another solid quarter of operating and financial results As the partnership's portfolio continues to produce stable and consistent cash flows. Rental revenues and AFFO We're both higher year over year, primarily due to the redeployment of capital from the sale of our interest in the European Outdoor Advertising joint venture last year. We saw some improvement within our outdoor advertising segment, which has been the segment most affected by the pandemic, As rental revenues increased slightly in the Q3 compared to the Q2 and we expect the outdoor advertising industry will fully rebound over the long run. We're optimistic that the worst is behind us for the outdoor advertising segment with the industry well positioned for recovery.

Speaker 2

In the near term, our focus remains on our development projects and select acquisitions. As expected, Acquisition volume has been light year to date with a total of 10 acquisitions through September 30 for total consideration of approximately $2,200,000 The assets acquired are expected to contribute about $200,000 in annual rents. 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. We placed additional kiosks into service in the Q3, which brought the total number of installed kiosks in service to 269 as of September 30. Dark rental revenues are not yet meaningful and have not ramped up as quickly as anticipated.

Speaker 2

While mass transit ridership has been recovering across the country, Including DART's ridership numbers, it continues to lag overall outdoor traffic activity, which has rebounded to pre pandemic levels in many parts of the country. The mass transit ridership numbers are actually still well below pre pandemic levels. At DART, total ridership in the Q3 of 21 increased by approximately 20% year over year. But at these levels, total ridership is still down approximately 43% compared to the Q3 of 2019. The lower than anticipated transit ridership at dark Our ability to drive meaningful advertising rental revenues on the digital kiosks that have been placed within DART's footprint.

Speaker 2

While we believe these trends are temporary and that ridership will continue to normalize as the pandemic subsides, This has led to lower than expected rental revenues for our DART kiosks. Before I turn it over to George, I'd like to briefly touch on the proposed acquisition of LMRK by its sponsor Landmark Dividend. The definitive proxy has been filed with the SEC and sent out to unitholders. A record date of October 25 has been set and the partnership unitholder meeting is scheduled for December 9, 2021. LORK unitholders as of the record date are currently able to vote online, by phone or by mail with voting information displayed on their proxy card.

Speaker 2

The LMRK take private transaction is subject to a majority approval by LMRK's unitholders and so we encourage all of our unitholders to vote. The Board after considering various factors, Including the unanimous recommendation of the conflicts committee has approved the transaction and determined that it's in the best interest of the partnership and is therefore recommending that unitholders vote in favor of the transaction proposal. And with that, I'll turn the call over to George, who will provide us with a more detailed financial review of the quarter. George?

Speaker 3

Thank you, Tim. As Tim mentioned, The assets in our portfolio continue to generate stable and rising cash flows as we had another solid quarter of operating results. Rental revenue for the 3rd quarter was $17,400,000 which was 22% higher year over year. The year over year growth in rental revenue was primarily driven by the redeployment of capital from the disposition of the European Outdoor Advertising Joint Venture in the second half of twenty twenty as well as organic growth generated across the portfolio. Year to date, as of September 30, 7 Sprint sites have decommissioned, including 2 in the 3rd quarter And another 18 sites are expected to decommission in the 4th quarter.

Speaker 3

We expect the annualized rent impact from decommissioned Sprint T Mobile sites in 2021 to be approximately $700,000 which includes the annualized rents from the 18 sites that are expected to terminate in the 4th quarter. The pace of Sprint T Mobile termination notices have slowed recently. And as we have discussed in past calls, In the longer term, we expect some offsetting revenues as wireless carriers continue to deploy 5 gs equipment And expiring leases are renewed at higher rates. Moving on to FFO and AFFO. FFO per diluted unit was $0.19 this quarter compared to $0.29 in the Q3 of last year.

Speaker 3

As we have discussed on prior calls, FFO can fluctuate quarter to quarter depending on the change in the fair value of our interest rate hedges as well as various other items, including foreign currency transaction gains and losses. The decline in FFO in the 3rd quarter Compared to the Q2, it was primarily driven by the transaction related costs associated with the LMRK take private transaction, which are included in the transaction related expense line item. AFFO, which excludes these gains and losses on our Interest rate hedges and other items was $0.37 per diluted unit this quarter compared to $0.31 in the Q3 of last year, representing 19% growth year over year. As we discussed last quarter, our sponsor has informed us that it intends to let the cap on G and A reimbursement expire in November 2021 and it will seek reimbursement for expenses that it incurs for services provided to the partnership. The expiration of the G and A cap is expected to negatively impact AFFO for the partnership beginning in the Q4 of 2021.

Speaker 3

During the year ended December 31, 2020 In the 9 months ended September 30, 2021, the expense reimbursement from the sponsor totaled $3,300,000 $2,500,000 respectively. In addition, we expect the Sponsored to seek reimbursement for G and A related costs it incurs to manage the partnership with additional Expenses expected to be around $3,000,000 per year. Now turning to our balance sheet, We ended the quarter with approximately $223,000,000 of outstanding borrowings under our revolving credit facility. We continue to see attractive financing rates for our asset classes and we have no scheduled maturities until November 2022. In terms of liquidity, we ended the quarter with approximately $11,000,000 in cash and $227,000,000 of undrawn borrowing capacity under our revolving credit facility subject to compliance with certain covenants.

Speaker 3

In October, We completed our data center securitization transaction, issuing approximately $173,000,000 in secured notes with a fixed coupon rate of 3.72 percent in a term of 7 years. Net proceeds from the securitization We're primarily used to repay borrowings from the revolving credit facility. We also terminated 1 of our interest rate swaps with the notional value of $50,000,000 With the completion of our data center finance in October, our debt maturities have been pushed out And all of our debt is now fixed or hedged through interest rate swaps. Regarding our distribution, the Board declared distribution of $0.20 per unit. Based on this level of distribution, our distribution coverage ratio for the Q3 was 1.84 times.

Speaker 3

In summary, our financial results were strong again this quarter due to the performance of our portfolio. Headwinds from the expiration of the G and A cap, additional G and A expenses and additional Sprint churn are expected to negatively impact AFFO in the 4th quarter, but we remain confident in the longer term as our portfolio continues to generate stable and growing cash flows. And with that, I'll turn it over to Tim for closing remarks.

Speaker 1

Thank you,

Speaker 2

George, and thank you all. I'd just like to take this moment to acknowledge everyone for their commitment to Landmark. We're proud to have been the 1st public ground lease real estate company focused in our particular industries. And while the markets didn't always cooperate, the portfolio of assets that we've accumulated over the years have proven stable and continued to perform. We truly appreciate all the support from our investors, Board of Directors and working partners and wish you all the best.

Speaker 2

Thank

Operator

you. This does conclude the conference. You may now disconnect. Everyone, have a great day.

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Earnings Conference Call
Landmark Infrastructure Partners Q3 2021
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