lmrk-10q_20180331.htm

Table of Contents 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2018

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                    to                    

Commission File Number: 001-36735

 

Landmark Infrastructure Partners LP

(Exact name of registrant as specified in its charter)

 

 

Delaware

 

61-1742322

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

2141 Rosecrans Avenue, Suite 2100,

 

 

P.O. Box 3429

 

 

El Segundo, CA 90245

 

90245

(Address of principal executive offices)

 

(Zip Code)

(310) 598-3173

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer  

 

Accelerated filer  

 

Non-accelerated filer  

 

Smaller reporting company  

Emerging growth company  

 

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ◻    No  ☒

The registrant had 25,005,542  common units outstanding at April 27, 2018.

 

 

 

 


Table of Contents 

 

LANDMARK INFRASTRUCTURE PARTNERS LP

Table of Contents

 

 

 

 

 

Page

 

 

 

 

 

 

 

PART I. FINANCIAL INFORMATION

 

 

 

 

 

 

 

Item 1.

 

Financial Statements:

 

 

 

 

 

 

 

 

 

Consolidated Balance Sheets

 

3

 

 

 

 

 

 

 

Consolidated Statements of Operations

 

4

 

 

 

 

 

 

 

Consolidated Statements of Comprehensive Income

 

5

 

 

 

 

 

 

 

Consolidated Statements of Partners’ Capital

 

6

 

 

 

 

 

 

 

Consolidated Statements of Cash Flows

 

7

 

 

 

 

 

 

 

Notes to the Consolidated Financial Statements

 

8

 

 

 

 

 

Item 2.

 

Management's Discussion and Analysis of Financial Condition and Results of Operations

 

28

 

 

 

 

 

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

43

 

 

 

 

 

Item 4.

 

Controls and Procedures

 

44

 

 

 

 

 

 

 

PART II. OTHER INFORMATION

 

 

 

 

 

 

 

Item 1.

 

Legal Proceedings

 

44

 

 

 

 

 

Item 1A.

 

Risk Factors

 

44

 

 

 

 

 

Item 6.

 

Exhibits

 

45

 

 

 

 

 

Signatures

 

 

 

46

 

2


Table of Contents 

 

PART I. FINANCIAL INFORMATION 

Item 1. Financial Statements

Landmark Infrastructure Partners LP

Consolidated Balance Sheets

(in thousands, except unit data)

 

 

 

March 31, 2018

 

 

December 31, 2017

 

Assets

 

 

 

 

 

 

 

 

Land

 

$

122,141

 

 

$

114,385

 

Real property interests

 

 

649,673

 

 

 

596,422

 

Construction in progress

 

 

18,230

 

 

 

7,574

 

Total land and real property interests

 

 

790,044

 

 

 

718,381

 

Accumulated amortization real property interests

 

 

(41,310

)

 

 

(37,817

)

Land and net real property interests

 

 

748,734

 

 

 

680,564

 

Investments in receivables, net

 

 

20,608

 

 

 

20,782

 

Cash and cash equivalents

 

 

10,501

 

 

 

9,188

 

Restricted cash

 

 

3,621

 

 

 

18,672

 

Rent receivables, net

 

 

4,045

 

 

 

4,141

 

Due from Landmark and affiliates

 

 

 

 

 

629

 

Deferred loan costs, net

 

 

3,149

 

 

 

3,589

 

Deferred rent receivable

 

 

4,264

 

 

 

4,252

 

Derivative assets

 

 

6,307

 

 

 

3,159

 

Other intangible assets, net

 

 

22,709

 

 

 

17,984

 

Other assets

 

 

5,608

 

 

 

5,039

 

Total assets

 

$

829,546

 

 

$

767,999

 

Liabilities and equity

 

 

 

 

 

 

 

 

Revolving credit facility

 

$

344,000

 

 

$

304,000

 

Secured notes, net

 

 

186,522

 

 

 

187,249

 

Accounts payable and accrued liabilities

 

 

15,509

 

 

 

4,978

 

Due to Landmark and affiliates

 

 

282

 

 

 

 

Other intangible liabilities, net

 

 

13,741

 

 

 

12,833

 

Prepaid rent

 

 

6,309

 

 

 

4,581

 

Total liabilities

 

 

566,363

 

 

 

513,641

 

Commitments and contingencies (Note 14)

 

 

 

 

 

 

 

 

Equity

 

 

 

 

 

 

 

 

Series A cumulative redeemable preferred units, 1,593,149 and 1,568,402 units

   issued and outstanding at March 31, 2018 and December 31, 2017, respectively

 

 

37,207

 

 

 

36,604

 

Series B cumulative redeemable preferred units, 2,463,015 units

   issued and outstanding at March 31, 2018 and December 31, 2017, respectively

 

 

58,936

 

 

 

58,936

 

Common units, 25,005,542 and 20,146,458 units issued and outstanding at

   March 31, 2018 and December 31, 2017, respectively

 

 

334,651

 

 

 

288,527

 

Subordinated units, zero and 3,135,109 units issued and outstanding

   at March 31, 2018 and December 31, 2017, respectively

 

 

 

 

 

19,641

 

General Partner

 

 

(169,818

)

 

 

(150,519

)

Accumulated other comprehensive income

 

 

2,006

 

 

 

968

 

Total partners' equity

 

 

262,982

 

 

 

254,157

 

Noncontrolling interests

 

 

201

 

 

 

201

 

Total equity

 

 

263,183

 

 

 

254,358

 

Total liabilities and equity

 

$

829,546

 

 

$

767,999

 

 

See accompanying notes to consolidated financial statements.

3


Table of Contents 

 

Landmark Infrastructure Partners LP

Consolidated Statements of Operations

(In thousands, except per unit data)

 

 

 

Three Months Ended March 31,

 

 

 

2018

 

 

2017

 

Revenue

 

 

 

 

 

 

 

 

Rental revenue

 

$

15,695

 

 

$

11,841

 

Expenses

 

 

 

 

 

 

 

 

Property operating

 

 

286

 

 

 

87

 

General and administrative

 

 

1,699

 

 

 

1,408

 

Acquisition-related

 

 

185

 

 

 

467

 

Amortization

 

 

4,022

 

 

 

3,129

 

Impairments

 

 

 

 

 

156

 

Total expenses

 

 

6,192

 

 

 

5,247

 

Other income and expenses

 

 

 

 

 

 

 

 

Interest and other income

 

 

438

 

 

359

 

Interest expense

 

 

(6,272

)

 

 

(3,920

)

Unrealized gain on derivatives

 

 

3,148

 

 

 

494

 

Total other income and expenses

 

 

(2,686

)

 

 

(3,067

)

Income before income tax expense

 

 

6,817

 

 

 

3,527

 

Income tax expense

 

 

76

 

 

 

 

Net income

 

 

6,741

 

 

 

3,527

 

Less: Net income attributable to noncontrolling interest

 

 

4

 

 

 

3

 

Net income attributable to limited partners

 

 

6,737

 

 

 

3,524

 

Less: Distributions declared to preferred unitholders

 

 

(1,944

)

 

 

(1,344

)

Less: General partner's incentive distribution rights

 

 

(195

)

 

 

(88

)

Net income attributable to common and subordinated unitholders

 

$

4,598

 

 

$

2,092

 

Net income (loss) per common and subordinated unit

 

 

 

 

 

 

 

 

Common units – basic

 

$

0.21

 

 

$

0.09

 

Common units – diluted

 

$

0.19

 

 

$

0.09

 

Subordinated units – basic and diluted

 

$

(0.19

)

 

$

0.09

 

Weighted average common and subordinated units outstanding

 

 

 

 

 

 

 

 

Common units – basic

 

 

22,996

 

 

 

19,457

 

Common units – diluted

 

 

24,564

 

 

 

19,457

 

Subordinated units – basic and diluted

 

 

1,568

 

 

 

3,135

 

Cash distributions declared per common and subordinated unit

 

$

0.3675

 

 

$

0.3525

 

 

See accompanying notes to consolidated financial statements.

4


Table of Contents 

 

Landmark Infrastructure Partners LP

Consolidated Statements of Comprehensive Income

(in thousands)

 

 

 

Three Months Ended March 31,

 

 

 

2018

 

 

2017

 

Net income

 

$

6,741

 

 

$

3,527

 

Other comprehensive income:

 

 

 

 

 

 

 

 

Foreign currency translation adjustment

 

 

1,038

 

 

 

208

 

Other comprehensive income

 

 

1,038

 

 

 

208

 

Comprehensive income

 

 

7,779

 

 

 

3,735

 

Less: Comprehensive income attributable to noncontrolling interest

 

 

4

 

 

 

3

 

Comprehensive income attributable to limited partners

 

$

7,775

 

 

$

3,732

 

 

See accompanying notes to consolidated financial statements

 

 

 

5


Table of Contents 

 

Landmark Infrastructure Partners LP

Consolidated Statements of Partners’ Capital

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Preferred

 

 

Preferred

 

 

 

 

 

 

 

 

 

 

Preferred

 

 

Preferred

 

 

 

 

 

 

Other

 

 

 

 

 

 

 

 

 

 

 

Common

 

 

Subordinated

 

 

Units -

 

 

Units -

 

 

Common

 

 

Subordinated

 

 

Unitholders -

 

 

Unitholders -

 

 

General

 

 

Comprehensive

 

 

Noncontrolling

 

 

Total

 

 

 

Units

 

 

Units

 

 

Series A

 

 

Series B

 

 

Unitholders

 

 

Unitholder

 

 

Series A

 

 

Series B

 

 

Partner

 

 

Income

 

 

Interest

 

 

Equity

 

Balance as of December 31, 2016

 

 

19,451

 

 

 

3,135

 

 

 

864

 

 

 

1,840

 

 

$

294,296

 

 

$

22,524

 

 

$

19,393

 

 

$

44,256

 

 

$

(135,630

)

 

$

(509

)

 

$

 

 

$

244,330

 

Foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

208

 

 

 

 

 

 

208

 

Issuance of Common Units, net

 

 

8

 

 

 

 

 

 

 

 

 

 

 

 

128

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

128

 

Issuance of non-controlling interests, net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

103

 

 

 

103

 

Distributions

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(6,810

)

 

 

(1,097

)

 

 

(422

)

 

 

(922

)

 

 

(77

)

 

 

 

 

 

(3

)

 

 

(9,331

)

Capital contribution to fund general and administrative expense reimbursement

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

955

 

 

 

 

 

 

 

 

 

955

 

Unit-based compensation

 

 

7

 

 

 

 

 

 

 

 

 

 

 

 

105

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

105

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

1,812

 

 

 

280

 

 

 

422

 

 

 

922

 

 

 

88

 

 

 

 

 

 

3

 

 

 

3,527

 

Balance as of March 31, 2017

 

 

19,466

 

 

 

3,135

 

 

 

864

 

 

 

1,840

 

 

$

289,531

 

 

$

21,707

 

 

$

19,393

 

 

$

44,256

 

 

$

(134,664

)

 

$

(301

)

 

$

103

 

 

$

240,025

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of December 31, 2017

 

 

20,146

 

 

 

3,135

 

 

 

1,568

 

 

 

2,463

 

 

$

288,527

 

 

$

19,641

 

 

$

36,604

 

 

$

58,936

 

 

$

(150,519

)

 

$

968

 

 

$

201

 

 

$

254,358

 

Net investment of Drop-down Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(20,394

)

 

 

 

 

 

 

 

 

(20,394

)

Foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,038

 

 

 

 

 

 

1,038

 

Issuance of Preferred Units, net

 

 

 

 

 

 

 

 

25

 

 

 

 

 

 

 

 

 

 

 

 

603

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

603

 

Issuance of Common Units, net

 

 

1,721

 

 

 

 

 

 

 

 

 

 

 

 

30,926

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

30,926

 

Conversion of subordinated units

 

 

3,135

 

 

 

(3,135

)

 

 

 

 

 

 

 

 

18,186

 

 

 

(18,186

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Distributions

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(7,959

)

 

 

(1,152

)

 

 

(768

)

 

 

(1,176

)

 

 

(302

)

 

 

 

 

 

(4

)

 

 

(11,361

)

Capital contribution to fund general and administrative expense reimbursement

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,202

 

 

 

 

 

 

 

 

 

1,202

 

Unit-based compensation

 

 

4

 

 

 

 

 

 

 

 

 

 

 

 

70

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

70

 

Net income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,901

 

 

 

(303

)

 

 

768

 

 

 

1,176

 

 

 

195

 

 

 

 

 

 

4

 

 

 

6,741

 

Balance as of March 31, 2018

 

 

25,006

 

 

 

 

 

 

1,593

 

 

 

2,463

 

 

$

334,651

 

 

$

 

 

$

37,207

 

 

$

58,936

 

 

$

(169,818

)

 

$

2,006

 

 

$

201

 

 

$

263,183

 

 

See accompanying notes to consolidated financial statements

 

 

 

6


Table of Contents 

 

Landmark Infrastructure Partners LP

Consolidated Statements of Cash Flows

(in thousands)

 

 

 

Three Months Ended March 31,

 

 

 

2018

 

 

2017

 

Operating activities

 

 

 

 

 

 

 

 

Net income

 

$

6,741

 

 

$

3,527

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

 

 

Unit-based compensation

 

 

70

 

 

 

105

 

Unrealized gain on derivatives

 

 

(3,148

)

 

 

(494

)

Amortization expense

 

 

4,022

 

 

 

3,129

 

Amortization of above- and below- market lease

 

 

(328

)

 

 

(283

)

Amortization of deferred loan costs

 

 

798

 

 

 

437

 

Amortization of discount on secured notes

 

 

93

 

 

 

1

 

Receivables interest accretion

 

 

 

 

 

(9

)

Impairments

 

 

 

 

 

156

 

Allowance for doubtful accounts

 

 

(10

)

 

 

15

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Rent receivables, net

 

 

107

 

 

 

46

 

Accounts payable and accrued liabilities

 

 

743

 

 

 

(1,443

)

Deferred rent receivables

 

 

81

 

 

 

(244

)

Prepaid rent

 

 

1,728

 

 

 

1,306

 

Due from Landmark and affiliates

 

 

1,126

 

 

 

384

 

Other assets

 

 

(343

)

 

 

146

 

Net cash provided by operating activities

 

 

11,680

 

 

 

6,779

 

Investing activities

 

 

 

 

 

 

 

 

Acquisition of land

 

 

(6,931

)

 

 

 

Acquisition of real property interests and construction activities

 

 

(27,309

)

 

 

(12,437

)

Repayments of receivables

 

 

299

 

 

 

245

 

Net cash used in investing activities

 

 

(33,941

)

 

 

(12,192

)

Financing activities

 

 

 

 

 

 

 

 

Proceeds from the issuance of Common Units, net

 

 

437

 

 

 

 

Proceeds from the issuance of Preferred Units, net

 

 

603

 

 

 

 

Proceeds from the issuance of non-controlling interests, net

 

 

 

 

 

103

 

Proceeds from revolving credit facility

 

 

40,000

 

 

 

20,000

 

Principal payments on revolving credit facility

 

 

 

 

 

(291

)

Principal payments on Secured Notes

 

 

(969

)

 

 

 

Deferred loan costs

 

 

(253

)

 

 

 

Capital contribution to fund general and administrative expense reimbursement

 

 

491

 

 

 

544

 

Distributions to preferred unitholders

 

 

(1,996

)

 

 

(1,337

)

Distributions to common and subordinated unitholders

 

 

(9,413

)

 

 

(7,985

)

Distributions to non-controlling interests

 

 

(4

)

 

 

(3

)

Consideration paid to General Partner associated with Drop-down Acquisitions

 

 

(20,394

)

 

 

 

Net cash provided by financing activities

 

 

8,502

 

 

 

11,031

 

Effect of changes in foreign currency exchange rates on cash, cash equivalents and restricted cash

 

 

21

 

 

 

127

 

Net increase in cash, cash equivalents and restricted cash

 

 

(13,738

)

 

 

5,745

 

Cash, cash equivalents and restricted cash at beginning of the period

 

 

27,860

 

 

 

5,562

 

Cash, cash equivalents and restricted cash at end of the period

 

$

14,122

 

 

$

11,307

 

 

See accompanying notes to consolidated financial statements.

7


Table of Contents 

 

Landmark Infrastructure Partners LP

Notes to Consolidated Financial Statements

 

 

1. Business

Landmark Infrastructure Partners LP (the “Partnership”) was formed on July 28, 2014 by Landmark Dividend LLC (“Landmark” or “Sponsor”) to own and manage a portfolio of real property interest and infrastructure assets that are leased to companies in the wireless communication, outdoor advertising and renewable power generation industries. In addition, the Partnership owns certain interests in receivables associated with similar assets. The Partnership is a master limited partnership organized in the State of Delaware and has been publicly traded since its initial public offering on November 19, 2014 (the “IPO”). On July 31, 2017, the Partnership completed changes to its organizational structure by transferring substantially all of its assets to a wholly owned subsidiary, Landmark Infrastructure Inc., a Delaware corporation (“REIT Subsidiary”), which is intended to qualify as a real estate investment trust (“REIT”), under the Internal Revenue Code of 1986, as amended. References in this report to “Landmark Infrastructure Partners LP,” the “partnership,” “we,” “our,” “us,” or like terms refer to Landmark Infrastructure Partners LP.

Our operations are managed by the board of directors and executive officers of Landmark Infrastructure Partners GP LLC, our general partner (the “General Partner”). As of March 31, 2018, the Sponsor and affiliates own (a) our general partner; (b) 3,193,743 common units representing limited partnership interest in the Partnership (“Common Units”); and (c) all of our incentive distribution rights (“IDRs”).

2. Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidated Financial Statements

In accordance with the adoption of ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business (“ASU No. 2017-01”), drop-down acquisitions no longer meet the definition of a business and do not require to be retroactively adjusted. As such, drop-down acquisitions from the Sponsor and affiliates subsequent to March 31, 2017 are accounted for prospectively as transfers of net assets in the period in which the transfer occurs at the net carrying value. Any differences between the cash consideration and the net carrying value of the transfer of net assets is allocated to the General Partner.  

The unaudited interim consolidated financial statements have been prepared in conformity with GAAP as established by the Financial Accounting Standards Board (the “FASB”) in the Accounting Standards Codification (“ASC”) including modifications issued under the Accounting Standards Updates (“ASUs”) and with the instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The accompanying unaudited financial statements include, in our opinion, all adjustments, consisting of normal recurring adjustments, necessary to present fairly the unaudited financial information set forth therein. Financial information for the three months ended March 31, 2018 and 2017 included in these Notes to the Consolidated Financial Statements is derived from our unaudited financial statements. Certain notes and other information have been condensed or omitted from the interim financial statements included in this report. Operating results for the three months ended March 31, 2018 are not necessarily indicative of the results that may be expected for the year ending December 31, 2018. All references to tenant sites are unaudited.

Use of Estimates

The preparation of the consolidated financial statements, in conformity with GAAP, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

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Income Taxes

The Partnership is generally not subject to federal, state or local income taxes, except for our subsidiary Landmark Infrastructure Asset OpCo LLC (“Asset OpCo”). Asset OpCo conducts certain activities that may not generate qualifying income and will be treated as a corporation for U.S. federal income tax purposes. Each limited partner is responsible for the tax liability, if any, related to its proportionate share of the Partnerships’ taxable income or loss. Certain foreign wholly owned subsidiaries of the Partnership conduct certain activities in international locations that generate taxable income and will be treated as taxable entities. Additionally, our consolidated REIT subsidiary, Landmark Infrastructure Inc., a Delaware corporation, files as a corporation for U.S. federal income tax purposes. The REIT Subsidiary has elected to be treated as a REIT and we believe that it has operated in a manner that has allowed the REIT Subsidiary to qualify as a REIT for federal income tax purposes, and the REIT Subsidiary intends to continue operating in such manner. If the REIT Subsidiary fails to qualify as a REIT in any taxable year, and is unable to avail itself of certain savings provisions, all of its taxable income would be subject to federal income tax at regular corporate rates. The Partnership follows the requirements of ASC Topic 740, Income Taxes (“ASC 740”), relating to uncertain tax positions. Based on its evaluation under ASC 740, the Partnership has concluded that there are no significant uncertain tax positions requiring recognition in the consolidated and combined financial statements, nor has the Partnership been assessed interest or penalties by any major tax jurisdictions.

On December 22, 2017, the Tax Cuts and Jobs Act (“TCJA”) was signed into law, which makes significant changes to U.S. federal income tax laws applicable to businesses and their owners, including REITs and corporations. The Partnership continues to assess the impact of the TCJA, including qualification as a real estate business. Our tax expense is provisional and reflected in the consolidated financial statements as of March 31, 2018. The issuance of future administrative guidance may further clarify the interpretation of the new law and require adjustments to the provisional amount we recorded. Any adjustment required to this provisional amount is not expected to be material.

Recently Issued Accounting Standards

Changes to GAAP are established by the FASB in the form of ASUs to the FASB’s Accounting Standard Codification. The Partnership considers the applicability and impact of all ASUs. Newly issued ASUs not listed below are not expected to have a material impact on its combined financial position and results of operations because either the ASU is not applicable, or the impact is expected to be immaterial.

 

In November 2016, the FASB issued ASU No. 2016-18, Restricted Cash (Topic 230) (“ASU 2016-18”). The update provides guidance on the presentation of restricted cash and restricted cash equivalents in the statement of cash flows. Restricted cash and restricted cash equivalents should now be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period amounts shown on the statements of cash flows. The amendments of this ASU are effective for reporting periods beginning after December 15, 2017 and should be applied using a retrospective transition method to each period presented. The Partnership adopted ASU 2016-18 during the first quarter of fiscal 2018. The retrospective adoption increased the amount included in the reconciliation of cash and cash equivalents to include the amount of restricted cash on the balance sheet. Accordingly, the consolidated statement of cash flows for the period ending in March 31, 2017 has been reclassed to conform to the current presentation. The amount of restricted cash included in the beginning and ending cash balances within the consolidated statements of cash flows was $18.7 million and $3.6 million, respectively, for the three months ended March 31, 2018 and $2.9 million and $1.8 million, respectively, for the three months ended March 31, 2017. The adoption had no other material impacts to the consolidated statements of cash flows and had no impact on the results of operations or financial position.

 

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In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (“ASU No. 2016-02”), which establishes the principles for the recognition, measurement, presentation, and disclosure of leases for both parties to a contract (i.e., lessees and lessors). The updated guidance requires an entity to recognize assets and liabilities arising from a lease for both financing and operating leases, along with additional qualitative and quantitative disclosures. This classification will determine whether the lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Leases with a term of 12 months or less will be accounted for similar to existing guidance for operating leases today. The ASU requires us to identify lease and nonlease components of a lease agreement. Revenue related to nonlease components will be subject to the new revenue recognition standard, as described below, effective upon adoption of the new lease accounting standard. Tenant recoveries that qualify as lease components, which relate to the right to use the leased asset (e.g., property taxes, and insurance), would be accounted for under the new lease ASU. Tenant recoveries that qualify as nonlease components, which relate to payments for goods or services that are transferred separately from the right to use the underlying asset, including tenant recoveries related to payments for maintenance activities and common area expenses, would be accounted for under the new revenue recognition ASU upon adoption of the new lease ASU. Lessors will continue to account for leases using an approach that is substantially equivalent to existing guidance for sales-type leases, direct financing leases, and operating leases. However, in March 2018, the FASB approved an optional practical expedient that would allow lessors to elect, by class of underlying asset, to not separate nonlease components from the related lease components. The practical expedient would be limited to circumstances in which both (1) the timing and pattern of revenue recognition are the same for the nonlease component and related lease component and (2) the combined single lease component would be classified as an operating lease. The FASB has also clarified that the lease ASU will require an assessment of whether a land easement meets the definition of a lease under the new lease ASU. An entity with land easements that are not accounted for as leases under the current lease accounting standards, however, may elect a practical expedient to exclude those land easements from assessment under the new lease accounting standards (ASU No 2018-01, Leases (Topic 842): Land Easement Practical Expedient for Transition to Topic 842). The new lease ASU will be applied to all land easement arrangements entered into or modified on and after the ASU effective date. The Partnership’s land easements are primarily prepaid and included on the balance sheet in real property interest. The ASU is effective for reporting periods beginning after December 15, 2018, with early adoption permitted. The standard mandates the use of the modified retrospective transition method. The Partnership is currently evaluating the impact of the adoption of the new lease accounting standard on our consolidated financial statements including the method of transition. We expect to adopt the new lease accounting standard on January 1, 2019.

 

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU No. 2014-09”). ASU No. 2014-09 requires an entity to recognize the revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. The revenue recognition five-step model requires an entity to (i) identify the contract with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, including variable consideration to the extent that it is probable that a significant future reversal will not occur, (iv) allocate the transaction price to the respective performance obligations in the contract, and (v) recognize revenue when (or as) we satisfy the performance obligation. The Partnership completed its evaluation of its existing contracts during the fourth quarter of 2017 and adopted ASU No. 2014-09 on January 1, 2018. The Partnership concluded that the adoption of ASU No. 2014-09 does not have a material impact on its consolidated financial statements as the Partnership’s current revenue contracts are leases and not within the scope of the Revenue from Contracts with Customers (Topic 606).

 

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3. Acquisitions

Drop-down Acquisitions

During the three months ended March 31, 2018 and for the year ended December 31, 2017, the Partnership completed one and four drop-down acquisitions, respectively, from our Sponsor and affiliates (collectively referred to as the “Drop-down Acquisitions”). Certain real property interests and financing assets included in the Drop-down Acquisitions completed by the Partnership were part of the right of first offer assets acquired from Landmark Dividend Growth Fund-H LLC (“Fund H”) and Landmark Dividend Growth Fund-G LLC (“Fund G”). All other Drop-down Acquisitions have been made directly from our Sponsor or from a wholly-owned subsidiary of our Sponsor. The following table presents the Drop-down Acquisitions completed by the Partnership during 2018 and 2017:

 

 

 

 

 

Number of Tenant Sites

 

 

 

 

 

 

 

 

 

 

Consideration (in millions)

 

Acquisition Date

 

Source

 

Wireless

Communication

 

 

Outdoor

Advertising

 

 

Renewable

Power Generation

 

 

Total

 

 

Investments

in Receivables

 

 

Borrowings

and Available Cash

 

 

Common Units

 

 

Total

 

January 18, 2018

 

Fund H

 

 

30

 

 

 

90

 

 

 

7

 

 

 

127

 

 

 

 

 

$

32.6