Landmark Infrastructure Partners (NASDAQ: LMRK) today released its amended Preliminary Proxy Statement (PRER14A) related to its $1.1bn or $16.50 per common share take-private by Landmark Dividend, which is owned by Digital Colony Partners II, the second flagship private equity fund of DigitalBridge Group.

Relevant updates from Dgtl Infra’s prior coverage of the Landmark Infrastructure ‘bidding war’ are as follows:

  • DigitalBridge Increases Ownership: Landmark Dividend (DigitalBridge) purchased an additional 158k common units of Landmark Infrastructure Partners for $2.6m. In turn, DigitalBridge increased its ownership in Landmark Infrastructure Partners from 13.2% to 13.8% (i.e., 3.5 million shares)
  • Transaction Completion: Landmark Dividend (DigitalBridge) targets closing the Landmark Infrastructure Partners take-private transaction in Q4 2021
  • Conflicts Committee: Landmark has disclosed the members of its “Conflicts Committee” which evaluates, negotiates, and recommends takeover proposals received for Landmark Infrastructure Partners. Specifically, the Conflicts Committee consists of directors Keith Benson, Thomas Carey White III, and Gerald Tywoniuk

Melody Investment Advisors – Revised Proposal

On September 3, 2021, Melody Investment Advisors submitted a revised offer of $22.00 per common unit for Landmark Infrastructure Partners. Indeed, this represents a 33% premium to DigitalBridge’s latest offer of $16.50 per common unit, announced on August 23rd.

Subsequently, on September 17, 2021, Melody Investment Advisors sent a letter to the Conflicts Committee that its revised proposal would no longer be time limited. As a result, Melody’s revised proposal continues to remain outstanding.

Nevertheless, Landmark Dividend is not considering third-party offers for Landmark Infrastructure Partners. Therefore, if a vote of Landmark Infrastructure Partners’ unitholders on DigitalBridge’s $16.50 per common unit proposal is not successful, then Landmark Dividend intends for Landmark Infrastructure Partners to remain as a publicly-traded company.

Landmark Infrastructure Partners – Overview

Landmark Infrastructure Partners acquires, owns, and manages a portfolio of real property interests and digital infrastructure assets that it leases to wireless communication, information technology, outdoor advertising, and renewable power companies. As of June 30, 2021, Landmark’s portfolio consisted of 2.0k assets across 1.5k locations in the U.S., Australia, and Canada.

Landmark Infrastructure Partners Revenue and Tenants
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Business Segments

Landmark Infrastructure Partners leases cellular tower infrastructure and underlying property interests to wireless carriers and tower companies, comprising 43% of its total revenue. Additionally, the company leases property interests for data center infrastructure to information technology companies; outdoor billboards and interactive digital kiosks to advertising companies; and renewable energy infrastructure to power companies.

Overall, Landmark Infrastructure Partners benefits from triple-net lease arrangements on long-term lease contracts with annual escalators.

Landmark Infrastructure Partners – DigitalBridge’s Take-Private Drivers

Below are 5-year financial projections prepared by Landmark Infrastructure Partners which were used by DigitalBridge (Landmark Dividend) to form its proposal for the take-private of the company. Additionally, we highlight one significant opportunity and risk for Landmark’s business which could impact these financial projections positively or negatively.

Summary Financials 5-Year Forecast

Financial Projections202120222023202420252026
Rental Revenue – Cash$66.9m$71.8m$74.4m$76.6m$78.1m$79.7m
Rental Revenue – Non-Cash$1.75m$1.71m$1.68m$1.64m$1.61m$1.57m
Total Revenue$68.6m$73.5m$76.1m$78.2m$79.7m$81.3m
Adjusted EBITDA$68.7m$66.8m$68.7m$70.4m$72.5m$73.8m
Distributable Cash Flow$36.4m$34.5m$37.3m$38.3m$40.9m$42.4m

Opportunity – Vertex Project

Landmark Infrastructure Partners’ Vertex / FlexGrid project represents the deployment of self-contained, carrier-neutral smart poles connected via fiber. Specifically, these smart poles transmit 4G/LTE and 5G broadband for multiple wireless carriers, as well as provide LED lighting, security cameras, public Wi-Fi, utility radio access, electric vehicle (EV) charging, and power grid back-up solutions.

As of June 2021, Landmark Infrastructure Partners had only 1 installation of this smart pole. However, the company expects 17 installations by year-end 2022 and 82 installations by year-end 2023. In order to deploy these smart poles, Landmark expects capital expenditures of $2.9m during 2022 and $4.4m between January and May 2023.

Risk – Churn from T-Mobile / Sprint Merger

Landmark Infrastructure Partners highlights churn from T-Mobile and Sprint’s merger as a potential headwind to its future financial performance. Particularly, post-merger, T-Mobile and Sprint plan to consolidate their tower sites to ~85k, potentially increasing Landmark’s future churn rate.

Sprint Future Churn Rate

The future churn rate for Sprint impacts Landmark Infrastructure Partners and is driven by a non-historical assumption. Specifically, T-Mobile and Sprint are anticipated to decommission 35k tower sites in the U.S., or ~70% of Sprint cell sites, and at a minimum, 20k sites, as per a Department of Justice mandate.

For Landmark, T-Mobile and Sprint represent 12.4% of its next 12-months telecom revenue. Overall, Landmark projects churn equivalent to a net 30% of Sprint revenue over the course of 2 years and 25 bps of annual telecom churn. Below is the company’s historical and projected telecom churn, which shows that average annual forecasted churn is 1% lower than annual historical churn.

Landmark Infrastructure Partners Historical vs Projected Telecom Churn
DISH Re-Leasing Assumptions

Offsetting churn from Sprint is the notion that DISH Network is expected to retain some of the former T-Mobile / Sprint sites. Indeed, DISH Network is anticipated to re-lease a subset of the Sprint churn sites, which is captured in Landmark’s net 30% churn assumption for Sprint. Finally, this assumption implies that DISH re-leases all of their allocated sites, which is likely an optimistic outlook.

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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