lmrk_Current folio_10Q

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 June 30, 2015

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, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

 

 

 

 

 

 

 

Large accelerated filer  

 

Accelerated filer  

 

Non-accelerated filer  

 

Smaller reporting company  

 

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 7,707,715 common units and 3,135,109 subordinated units outstanding at July 31, 2015.

 

 


 

Table of Contents 

LANDMARK INFRASTRUCTURE PARTNERS LP

Table of Contents

 

 

 

 

 

 

 

    

 

 

Page

 

 

 

PART I. FINANCIAL INFORMATION

 

 

 

 

 

 

 

 

 

Item 1. 

 

Financial Statements:

 

 

 

 

 

 

 

 

 

 

 

Consolidated and Combined Balance Sheets

 

3

 

 

 

 

 

 

 

 

 

Consolidated and Combined Statements of Operations

 

4

 

 

 

 

 

 

 

 

 

Consolidated and Combined Statements of Partners’ Capital

 

5

 

 

 

 

 

 

 

 

 

Consolidated and Combined Statements of Cash Flows

 

6

 

 

 

 

 

 

 

 

 

Notes to the Consolidated and Combined Financial Statements

 

7

 

 

 

 

 

 

 

Item 2. 

 

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

 

24

 

 

 

 

 

 

 

Item 3. 

 

Quantitative and Qualitative Disclosures About Market Risk

 

38

 

 

 

 

 

 

 

Item 4. 

 

Controls and Procedures

 

39

 

 

 

 

 

 

 

 

 

PART II. OTHER INFORMATION

 

 

 

 

 

 

 

 

 

Item 1. 

 

Legal Proceedings

 

40

 

 

 

 

 

 

 

Item 1A. 

 

Risk Factors 

 

40

 

 

 

 

 

 

 

Item 6. 

 

Exhibits

 

40

 

 

 

 

 

 

 

Signatures 

 

 

 

41

 

 

 

2


 

Table of Contents 

PART I. FINANCIAL INFORMATION 

Item 1. Financial Statements

 

Landmark Infrastructure Partners LP

Consolidated and Combined Balance Sheets

 

 

 

 

 

 

 

 

 

 

June 30, 2015

 

December 31, 2014*

Assets

    

 

    

    

 

    

Land

 

$

5,219,666

 

$

5,219,666

Real property interests

 

 

204,248,244

 

 

186,926,669

Total land and real property interests

 

 

209,467,910

 

 

192,146,335

Accumulated amortization of real property interests

 

 

(7,557,458)

 

 

(5,916,820)

Land and net real property interests

 

 

201,910,452

 

 

186,229,515

Investments in receivables, net

 

 

8,357,381

 

 

8,665,274

Cash and cash equivalents

 

 

401,892

 

 

311,108

Rent receivables, net

 

 

355,652

 

 

80,711

Due from Landmark and affiliates

 

 

1,313,408

 

 

659,722

Deferred loan costs, net

 

 

3,120,334

 

 

2,838,879

Deferred rent receivable

 

 

366,892

 

 

288,453

Derivative assets

 

 

19,038

 

 

 —

Other intangible assets, net

 

 

5,352,392

 

 

5,003,655

Other assets

 

 

215,606

 

 

399,222

Total assets

 

$

221,413,047

 

$

204,476,539

Liabilities and equity

 

 

 

 

 

 

Revolving credit facility

 

$

72,200,000

 

$

74,000,000

Accounts payable and accrued liabilities

 

 

1,235,052

 

 

141,508

Other intangible liabilities, net

 

 

8,197,871

 

 

7,396,318

Prepaid rent

 

 

1,779,627

 

 

1,532,372

Derivative liabilities

 

 

685,570

 

 

289,808

Total liabilities

 

 

84,098,120

 

 

83,360,006

Commitments and contingencies (Note 13)

 

 

 

 

 

 

Equity

 

 

137,314,927

 

 

121,116,533

Total liabilities and equity

 

$

221,413,047

 

$

204,476,539

*Prior-period financial information has been retroactively adjusted for certain assets acquired. See Note 3 for additional information.

See accompanying notes to consolidated and combined financial statements.

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Landmark Infrastructure Partners LP

Consolidated and Combined Statements of Operations

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended  June 30,

 

Six months ended June 30,

 

 

2015

 

2014*

 

2015

 

2014*

Revenue

    

 

    

    

 

    

    

 

    

    

 

    

Rental revenue

 

$

4,229,771

 

$

3,390,459

 

$

8,191,863

 

$

6,724,005

Interest income on receivables

 

 

194,544

 

 

158,858

 

 

401,854

 

 

334,409

Total revenue

 

 

4,424,315

 

 

3,549,317

 

 

8,593,717

 

 

7,058,414

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

Management fees to affiliate

 

 

 —

 

 

100,825

 

 

 —

 

 

202,330

Property operating

 

 

8,894

 

 

21,805

 

 

8,894

 

 

21,805

General and administrative

 

 

651,071

 

 

514,411

 

 

1,635,056

 

 

531,958

Acquisition-related

 

 

173,755

 

 

 —

 

 

1,367,072

 

 

1,800

Amortization

 

 

1,194,775

 

 

886,573

 

 

2,261,750

 

 

1,758,385

Impairments

 

 

514,300

 

 

8,450

 

 

3,276,736

 

 

8,450

Total expenses

 

 

2,542,795

 

 

1,532,064

 

 

8,549,508

 

 

2,524,728

Other income and expenses

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

(1,164,235)

 

 

(1,171,275)

 

 

(2,175,891)

 

 

(2,303,929)

Unrealized gain (loss) on derivatives

 

 

397,162

 

 

(435,530)

 

 

(376,724)

 

 

(487,790)

Gain on sale of real property interest

 

 

9,524

 

 

 —

 

 

82,026

 

 

 —

Total other income and expenses

 

 

(757,549)

 

 

(1,606,805)

 

 

(2,470,589)

 

 

(2,791,719)

Net income (loss)

 

$

1,123,971

 

$

410,448

 

$

(2,426,380)

 

$

1,741,967

Less: Net income (loss) attributable to Predecessor

 

 

15,355

 

 

410,448

 

 

(643,333)

 

 

1,741,967

Net income (loss) attributable to partners

 

$

1,108,616

 

$

 —

 

$

(1,783,047)

 

$

 —

Net income (loss) per limited partners unit

 

 

 

 

 

 

 

 

 

 

 

 

Common units – basic and diluted

 

$

0.16

 

 

 

 

$

(0.16)

 

 

 

Subordinated units – basic and diluted

 

$

0.05

 

 

 

 

$

(0.30)

 

 

 

Weighted average limited partner units outstanding

 

 

 

 

 

 

 

 

 

 

 

 

Common units – basic and diluted

 

 

6,090,688

 

 

 

 

 

5,401,007

 

 

 

Subordinated units – basic and diluted

 

 

3,135,109

 

 

 

 

 

3,135,109

 

 

 

Cash distribution declared per unit

 

$

0.3075

 

 

 

 

$

0.6050

 

 

 

*Prior-period financial information has been retroactively adjusted for certain assets acquired. See Note 3 for additional information.

See accompanying notes to consolidated and combined financial statements.

 

 

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Landmark Infrastructure Partners LP

Consolidated and Combined Statements of Partners’ Capital

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Landmark Infrastructure Partners LP*

 

 

 

 

 

 

 

 

Common

 

Subordinated

 

Common

 

Subordinated

 

General

 

Landmark Infrastructure

 

 

 

 

 

Units

 

Units

 

Unitholders

 

Unitholder

 

Partner

 

Partners LP Predecessor*

 

Total Equity*

Balance as of December 31, 2013

 

 

 

 

 

$

 —

    

$

 —

    

$

 —

    

$

89,336,056

    

$

89,336,056

Contributions of real property interests to predecessor

 

 

 

 

 

 

 —

 

 

 —

 

 

 —

 

 

679,399

 

 

679,399

Distributions

 

 

 

 

 

 

 —

 

 

 —

 

 

 —

 

 

(3,724,146)

 

 

(3,724,146)

Net income

 

 

 

 

 

 

 —

 

 

 —

 

 

 —

 

 

1,741,967

 

 

1,741,967

Balance as of June 30, 2014

 

 

 

 

 

$

 —

 

$

 —

 

$

 —

 

$

88,033,276

 

$

88,033,276

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of December 31, 2014

 

4,702,665

 

3,135,109

 

$

74,683,957

 

$

29,745,957

 

$

12,349

 

$

16,674,270

 

$

121,116,533

Net loss from Acquired Assets attributable to Predecessor

 

 —

 

 —

 

 

 —

 

 

 —

 

 

(643,333)

 

 

 —

 

 

(643,333)

Net investment of Acquired Assets

 

 —

 

 —

 

 

 —

 

 

 —

 

 

(9,519,686)

 

 

(16,674,270)

 

 

(26,193,956)

Issuance of common units, net of offering costs of $3,307,124

 

3,000,000

 

 —

 

 

46,942,876

 

 

 —

 

 

 —

 

 

 —

 

 

46,942,876

Distributions

 

 —

 

 —

 

 

(2,031,518)

 

 

(1,354,053)

 

 

 —

 

 

 —

 

 

(3,385,571)

Capital contribution to fund general and administrative expense reimbursement

 

 —

 

 —

 

 

 —

 

 

 —

 

 

1,173,925

 

 

 —

 

 

1,173,925

Unit-based compensation

 

5,050

 

 —

 

 

87,500

 

 

 —

 

 

 —

 

 

 —

 

 

87,500

Net loss attributable to partners

 

 —

 

 —

 

 

(837,979)

 

 

(945,068)

 

 

 —

 

 

 —

 

 

(1,783,047)

Balance as of June 30, 2015

 

7,707,715

 

3,135,109

 

$

118,844,836

 

$

27,446,836

 

$

(8,976,745)

 

$

 —

 

$

137,314,927

*Prior-period financial information has been retroactively adjusted for certain assets acquired. See Note 3 for additional information.

See accompanying notes to consolidated and combined financial statements

 

 

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Landmark Infrastructure Partners LP

Consolidated and Combined Statements of Cash Flows

 

 

 

 

 

 

 

 

 

 

Six months ended June 30,

 

 

2015

 

2014*

Operating activities

    

 

    

    

 

    

Net income (loss)

 

$

(2,426,380)

 

$

1,741,967

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

 

 

 

 

 

 

Unit-based compensation

 

 

87,500

 

 

 —

Unrealized loss on derivatives

 

 

376,724

 

 

487,790

Amortization expense

 

 

2,261,750

 

 

1,758,385

Amortization of above- and below- market lease

 

 

(397,400)

 

 

(248,856)

Amortization of deferred loan costs

 

 

298,138

 

 

429,031

Receivables interest accretion

 

 

(19,166)

 

 

(44,442)

Impairments

 

 

3,276,736

 

 

8,450

Gain on the sale of real property interest

 

 

(82,026)

 

 

 —

Allowance for investments in receivables

 

 

 —

 

 

4,465

Changes in operating assets and liabilities:

 

 

 

 

 

 

Rent receivables, net

 

 

(274,941)

 

 

(102,946)

Accounts payable and accrued liabilities

 

 

1,093,544

 

 

(222,130)

Deferred rent receivables

 

 

(78,439)

 

 

(56,361)

Prepaid rent

 

 

247,255

 

 

(276,753)

Due from Landmark and affiliates

 

 

(172,633)

 

 

(307,208)

Other assets

 

 

183,616

 

 

 —

Net cash provided by operating activities

 

 

4,374,278

 

 

3,171,392

Investing activities

 

 

 

 

 

 

Acquisition of land

 

 

(3,324,549)

 

 

 —

Acquisition of real property interests

 

 

(33,994,051)

 

 

 —

Net proceeds from sale of real property interest

 

 

223,487

 

 

 —

Repayment of receivables

 

 

327,059

 

 

382,958

Net cash provided by (used in) investing activities

 

 

(36,768,054)

 

 

382,958

Financing activities

 

 

 

 

 

 

Proceeds from public offering, net of offering costs of $3,307,124

 

 

46,942,876

 

 

 —

Proceeds from revolving credit facility

 

 

47,400,000

 

 

 —

Principal payments on revolving credit facility

 

 

(49,200,000)

 

 

 —

Principal payments on secured debt facilities

 

 

 —

 

 

(583,706)

Deferred loan costs

 

 

(579,593)

 

 

(46,607)

Capital contribution to fund general and administrative expense reimbursement

 

 

692,872

 

 

 —

Distributions to members of Contributing Landmark Funds

 

 

 —

 

 

(3,626,123)

Distributions to limited partners

 

 

(3,385,571)

 

 

 —

Consideration paid to general partner associated with Acquired Assets

 

 

(9,386,024)

 

 

(98,023)

Net cash provided by (used in) financing activities

 

 

32,484,560

 

 

(4,354,459)

Net increase (decrease) in cash and cash equivalents

 

 

90,784

 

 

(800,109)

Cash and cash equivalents at beginning of period

 

 

311,108

 

 

1,037,327

Cash and cash equivalents at end of period

 

$

401,892

 

$

237,218

*Prior-period financial information has been retroactively adjusted for certain assets acquired. See Note 3 for additional information.

See accompanying notes to consolidated and combined financial statements.

 

 

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Landmark Infrastructure Partners LP

Notes to the Consolidated and Combined Financial Statements

1. Business

Landmark Infrastructure Partners LP (the “Partnership”) was formed on July 28, 2014 by Landmark Dividend LLC (“Landmark” or “Sponsor”) as a master limited partnership organized in the State of Delaware. On November 19, 2014, the Partnership completed its initial public offering (the “IPO”) of 2,750,000 common units representing limited partner interests (including 100,000 common units issued pursuant to the partial exercise of the underwriters’ option to purchase additional common units). In addition, Landmark purchased from the Partnership an additional 2,066,995 subordinated units for cash at the IPO price of our common units. On May 20, 2015 the Partnership closed a public offering of an additional 3,000,000 common units representing limited partner interests. References in this report to “Landmark Infrastructure Partners LP,” the “partnership, we, our, us, or like terms for time periods prior to our IPO, refer to our predecessor for accounting purposes (our “Predecessor”). For time periods subsequent to the IPO, references in this report to “Landmark Infrastructure Partners LP, our partnership, we, our, us, or like terms refer to Landmark Infrastructure Partners LP. 

The Partnership was formed to own a portfolio of real property interests that are leased to companies in the wireless communication, outdoor advertising and renewable power generation industries. In addition, the Partnership also owns certain interests in receivables associated with similar assets. Concurrently with the IPO, the Partnership completed its formation transactions, pursuant to which it acquired, through a series of transactions, substantially all of the assets and liabilities of the Contributing Landmark Funds (as defined below).   

Our operations are managed by the board of directors and executive officers of Landmark Infrastructure Partners GP LLC, our general partner. Landmark and its affiliates own (a) our general partner; (b) 3,135,109 subordinated units in us and; (c) all of our incentive distribution rights.

2. Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidated and Combined Financial Statements

For periods presented prior to the IPO, these consolidated and combined financial statements were derived from the historical financial statements and the combined results of operations of Landmark Dividend Growth Fund-A LLC (“Fund A”) and Landmark Dividend Growth Fund-D LLC (“Fund D” and together with Fund A, the “Contributing Landmark Funds”), our Predecessor. Our Predecessor includes the results of such assets during any period they were previously owned by Landmark or any of its affiliates. The IPO and formation transactions were treated as a reorganization of entities under common control pursuant to Accounting Standards Codification (“ASC”) 805, Business Combinations (ASC 805).

During the six months ended June 30, 2015 the Partnership completed two drop-down acquisitions that closed on March 4, 2015  (the “First Quarter Acquisition”) and on April 8, 2015 (the “Second Quarter Acquisition” and, together with the First Quarter Acquisition, the “Acquisitions” or “Acquired Assets”). In connection with the First Quarter Acquisition, Landmark Infrastructure Operating Company LLC (“OpCo”), a wholly owned subsidiary of the Partnership, acquired 81 tenant sites and related real property interests from Landmark Infrastructure Holding Company LLC (“HoldCo”), a wholly owned subsidiary of Landmark, in exchange for cash consideration of $25,205,000.  In connection with the Second Quarter Acquisition, OpCo acquired 73 tenant sites from HoldCo in exchange for total consideration of $22,050,000. The consideration for both acquisitions was funded with borrowings under the Partnership’s existing credit facility and cash on handThe Acquisitions were deemed to be transactions between entities under common control, which requires the assets and liabilities transferred at the historical cost of the parent of the entities, with prior periods retroactively adjusted to furnish comparative information. Accordingly, the accompanying financial statements and related notes have been retroactively adjusted to include the historical results and financial position of the Acquired Assets prior to the acquisition dates as part of the Predecessor. The differences totaling

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$4,465,748 and $5,470,652 between the cash consideration of each acquisition of $25,205,000 and $22,050,000 and the historical cost basis of $20,739,252 and $16,579,348, respectively,  were allocated to Landmark Infrastructure Partners GP LLC, the Partnership’s general partner (the “General Partner”).  All intercompany transactions and account balances have been eliminated. See Note 3 for additional information.

For periods subsequent to the IPO, our results of operations, cash flows, assets and liabilities consist of the consolidated Landmark Infrastructure Partners LP activities and balances with retroactive adjustments of the combined results of operations, cash flows, assets and liabilities of the Acquired Assets.  

The consolidated and combined balance sheets of our Predecessor include assets and liabilities that are specifically identifiable or otherwise attributable to the real property interests prior to the period they were owned by our Predecessor.  If a real property interest was owned by Landmark before it was owned by our Predecessor, all revenue and expenses associated with such real property interest, for the period such real property interest was owned by Landmark, are included in the consolidated and combined statements of operations. See further discussion in Note 11,  Related‑Party Transactions.  

All financial information presented for the periods after the IPO represent the consolidated results of operations, financial position and cash flows of the Partnership with retroactive adjustments of the combined results of operations, financial position and cash flows of the Acquired Assets. Accordingly:

·

Our consolidated and combined statement of operations for the three months ended June 30, 2015, consists of the consolidated results of the Second Quarter Acquisition and the consolidated results of the Partnership from April 1, 2015 through April 7, 2015 and the consolidated results of the Partnership for the remainder of the period. Our consolidated and combined statement of operations for the three months ended June 30, 2014, consists entirely of the combined results of our Predecessor with retroactive adjustments for the Acquired Assets.

·

Our consolidated and combined statement of operations and cash flows for the six months ended June 30, 2015, consists of the consolidated results of the First Quarter Acquisition from January 1, 2015 through March 3, 2015, the consolidated results of the Second Quarter Acquisition from January 1, 2015 through April 7, 2015 and the consolidated results of the Partnership for the six months ended June 30, 2015. Our consolidated and combined statement of operations and combined statement of cash flows for the six months ended June 30, 2014, consists entirely of the combined results of our Predecessor with retroactive adjustments for the Acquired Assets.

·

Our consolidated and combined balance sheet at June 30, 2015, consists of the consolidated balances of the Partnership, while at December 31, 2014, it consists of the consolidated balances of the Partnership and the combined balances of certain Acquired Assets.

·

Our consolidated statement of changes in equity for the six months ended June 30, 2015, consists of both the combined activity of the Acquired Assets from January 1, 2015 through March 3, 2015 for the First Quarter Acquisition and from January 1, 2015 through April 7, 2015 for the Second Quarter Acquisition and the consolidated activity of the Partnership for the six month period. Our consolidated statement of changes in equity for the six months ended June 30, 2014, consists entirely of the combined activity of our Predecessor and the Acquired Assets.

The unaudited interim consolidated and combined financial statements have been prepared in conformity with GAAP as established by the Financial Accounting Standards Board (“FASB”) in the 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 and six months ended June 30, 2015 and 2014 included in these Notes to the Consolidated and Combined Financial Statements is derived from our unaudited financial statements. Certain notes and other information have been

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condensed or omitted from the interim financial statements included in this report. Operating results for the three and six months ended June 30, 2015 are not necessarily indicative of the results that may be expected for the year ending December 31, 2015. All references to tenant sites are unaudited.

Use of Estimates

The preparation of the consolidated and combined 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 and combined financial statements and reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

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 any 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 January 2015, the FASB issued final guidance on its initiative of simplifying income statement presentation by eliminating the concept of extraordinary items (“ASU No. 2015-02”). Under the guidance, an entity will no longer be able to segregate an extraordinary item from the results of operations, separately present an extraordinary item on the income statement, or disclose income taxes or earnings-per-share data applicable to an extraordinary item.  The ASU is effective for all entities for reporting periods (including interim periods) beginning after December 15, 2015, and early adoption is permitted. The Partnership does not expect the adoption of ASU No. 2015-01 to have a material impact on its financial statements.

In February 2015, the FASB issued amendments to accounting for consolidation of certain legal entities (“ASU No. 2015-02”). ASU No. 2015-02 changes the analysis that a reporting entity must perform to determine whether it should consolidate certain types of legal entities. Specifically, ASU 2015-02 modifies the evaluation of whether limited partnerships and similar legal entities are VIEs or voting interest entities, eliminates the presumption that a general partner should consolidate a limited partnership, and affects the evaluation of fee arrangements in the primary beneficiary determination.  ASU 2015-02 is effective for public business entities for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted, including adoption in an interim period. The Partnership does not expect the adoption of ASU No. 2015-02 to have a material impact on its financial statements.

In April 2015, the FASB issued ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs (“ASU 2015-03”). ASU 2015-03 requires debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying value of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by ASU 2015-03. The amendments in this ASU are effective retrospectively for fiscal years, and interim periods within those years, beginning after December 15, 2015. Early adoption is permitted. We are currently in the process of evaluating the impact of adoption of the ASU on our consolidated balance sheets. 

In April 2015, the FASB issued ASU 2015-06, Earnings Per Share (Topic - 260)—Effects on Historical Earnings per Unit of Master Limited Partnership Dropdown Transactions (“ASU 2015-06”). ASU 2015-06 provides guidance on the presentation of historical earnings per unit for master limited partnerships that apply the two-class method of calculating earnings per unit. When a general partner transfers or “drops-down” net assets to a master limited partnership and the transaction is accounted for as a transaction between entities under common control, the statements of operations of the master limited partnership are adjusted retroactively to reflect the transaction as if it occurred on the earliest date during which the entities were under common control. ASU 2015-06 specifies that the historical income (losses) of a transferred business before the date of a drop-down transaction should be allocated entirely to the general partner and the previously reported earnings per unit of the limited partners should not change as a result of the drop-down transaction. The amendments in this update are effective for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years, and are required to be applied retroactively for all financial statements

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presented. Early adoption is permitted. Although we believe we are currently in compliance with this ASU, we will continue to evaluate the impact of the adoption of the ASU on our consolidated financial statements.

3. Acquisitions

On March 4, 2015, OpCo, a wholly-owned subsidiary of the Partnership, completed its acquisition of 81 tenant sites and related real property interests, consisting of 41 wireless communication, 39 outdoor advertising and 1 renewable power sites, from HoldCo, a wholly-owned subsidiary of Landmark, in exchange for cash consideration of $25,205,000. The purchase price was funded with $24,000,000 of borrowings under the Partnership’s existing credit facility and available cash.

On April 8, 2015, OpCo completed an acquisition of 73 tenant sites and related real property interests, consisting of 45 wireless communication and 28 outdoor advertising sites, from HoldCo in exchange for cash consideration of $22,050,000. The purchase price was funded with $21,500,000 of borrowings under the Partnership’s existing credit facility and available cash.

The assets and liabilities acquired are recorded at the historical cost of Landmark, as the Acquisitions from Landmark are deemed to be transactions between entities under common control with the statements of operations of the Partnership adjusted retroactively as if the Acquisitions occurred on the earliest date during which the Acquired Assets were under common control. Our historical financial statements have been retroactively adjusted to reflect the results of operations, financial position, and cash flows of the Acquired Assets as if we owned the Acquired Assets as of the date acquired by Landmark for all periods presented. The following tables present our results of operations and financial position reflecting the effect of the Acquisitions on pre-acquisition periods.

Statement of operations for the three and six months ended June 30, 2015:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended  June 30, 2015

 

Six months ended June 30, 2015

 

 

Landmark

 

Pre-Acquisition

 

 

 

Landmark

 

Pre-Acquisition

 

 

 

 

Infrastructure

 

results of

 

Consolidated

 

Infrastructure

 

results of

 

Consolidated

 

 

Partners LP

 

Acquired Assets

 

Results

 

Partners LP

 

Acquired Assets

 

Results

Revenue

    

 

    

    

 

    

    

 

    

    

 

    

    

 

    

    

 

    

Rental revenue

 

$

4,205,286

 

$

24,485

 

$

4,229,771

 

$

7,821,715

 

$

370,148

 

$

8,191,863

Interest income on receivables

 

 

194,544

 

 

 —

 

 

194,544

 

 

401,854

 

 

 —

 

 

401,854

Total revenue

 

 

4,399,830

 

 

24,485

 

 

4,424,315

 

 

8,223,569

 

 

370,148

 

 

8,593,717

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Property operating

 

 

8,894

 

 

 —

 

 

8,894

 

 

8,894

 

 

 —

 

 

8,894

General and administrative

 

 

651,071

 

 

 —

 

 

651,071

 

 

1,635,056

 

 

 —

 

 

1,635,056

Acquisition-related

 

 

173,755

 

 

 —

 

 

173,755

 

 

473,353

 

 

893,719

 

 

1,367,072

Amortization

 

 

1,185,645

 

 

9,130

 

 

1,194,775

 

 

2,141,988

 

 

119,762

 

 

2,261,750

Impairments

 

 

514,300

 

 

 —

 

 

514,300

 

 

3,276,736

 

 

 —

 

 

3,276,736

Total expenses

 

 

2,533,665

 

 

9,130

 

 

2,542,795

 

 

7,536,027

 

 

1,013,481

 

 

8,549,508

Other income and expenses

 

 

(757,549)

 

 

 —

 

 

(757,549)

 

 

(2,470,589)

 

 

 —

 

 

(2,470,589)

Net income (loss)

 

$

1,108,616

 

$

15,355

 

$

1,123,971

 

$

(1,783,047)

 

$

(643,333)

 

$

(2,426,380)

 

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Statement of operations for the three and six months ended June 30, 2014:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended  June 30, 2014

 

Six months ended June 30, 2014

 

 

 

 

Pre-Acquisition

 

 

 

 

 

Pre-Acquisition

 

 

 

 

 

 

 

results of

 

Consolidated

 

 

 

 

results of

 

Consolidated

 

 

Predecessor

 

Acquired Assets

 

Results

 

Predecessor

 

Acquired Assets

 

Results

Revenue

    

 

    

    

 

    

    

 

    

    

 

    

    

 

    

    

 

    

Rental revenue

 

$

3,340,188

 

$

50,271

 

$

3,390,459

 

$

6,636,278

 

$

87,727

 

$

6,724,005

Interest income on receivables

 

 

158,858

 

 

 —

 

 

158,858

 

 

334,409

 

 

 —

 

 

334,409

Total revenue

 

 

3,499,046

 

 

50,271

 

 

3,549,317

 

 

6,970,687

 

 

87,727

 

 

7,058,414

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Management fees to affiliate

 

 

100,825

 

 

 —

 

 

100,825

 

 

202,330

 

 

 —

 

 

202,330

Property operating

 

 

21,805

 

 

 —

 

 

21,805

 

 

21,805

 

 

 —

 

 

21,805

General and administrative

 

 

514,411

 

 

 —

 

 

514,411

 

 

531,958

 

 

 —

 

 

531,958

Acquisition-related

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

1,800

 

 

1,800

Amortization

 

 

870,483

 

 

16,090

 

 

886,573

 

 

1,728,609

 

 

29,776

 

 

1,758,385

Impairments

 

 

8,450

 

 

 —

 

 

8,450

 

 

8,450

 

 

 —

 

 

8,450

Total expenses

 

 

1,515,974

 

 

16,090

 

 

1,532,064

 

 

2,493,152

 

 

31,576

 

 

2,524,728

Other income and expenses

 

 

(1,606,805)

 

 

 —

 

 

(1,606,805)

 

 

(2,791,719)

 

 

 —

 

 

(2,791,719)

Net income

 

$

376,267

 

$

34,181

 

$

410,448

 

$

1,685,816

 

$

56,151

 

$

1,741,967

 

Balance Sheet as of December 31, 2014:

 

 

 

 

 

 

 

 

 

 

 

 

 

Landmark Infrastructure

 

Pre-Acquisition

 

Consolidated

 

    

Partners LP

 

Acquired Assets

 

Results

Assets

 

 

 

 

 

 

 

 

 

Land

 

$

1,895,117

 

$

3,324,549

 

$

5,219,666

Real property interests

 

 

173,009,873

 

 

13,916,796

 

 

186,926,669

Total land and real property interests

 

 

174,904,990

 

 

17,241,345

 

 

192,146,335

Accumulated amortization of real property interest

 

 

(5,831,342)

 

 

(85,478)

 

 

(5,916,820)

Land and net real property interests

 

 

169,073,648

 

 

17,155,867

 

 

186,229,515

Investments in receivables, net

 

 

8,665,274

 

 

 —

 

 

8,665,274

Cash and cash equivalents

 

 

311,108

 

 

 —

 

 

311,108

Rent receivables, net

 

 

80,711

 

 

 —

 

 

80,711

Due from Landmark and affiliates

 

 

659,722

 

 

 —

 

 

659,722

Deferred loan cost, net

 

 

2,838,879

 

 

 —

 

 

2,838,879

Deferred rent receivable

 

 

279,324

 

 

9,129

 

 

288,453

Other intangible assets, net

 

 

3,783,653

 

 

1,220,002

 

 

5,003,655

Other assets

 

 

399,222

 

 

 —

 

 

399,222

Total assets

 

$

186,091,541

 

$

18,384,998

 

$

204,476,539

Liabilities and equity

 

 

 

 

 

 

 

 

 

Revolving credit facility

 

$

74,000,000

 

$

 —

 

$

74,000,000

Accounts payable and accrued liabilities

 

 

141,508

 

 

 —

 

 

141,508

Other intangible liabilities, net

 

 

5,685,590

 

 

1,710,728

 

 

7,396,318

Prepaid rent

 

 

1,532,372

 

 

 —

 

 

1,532,372

Derivative liabilities

 

 

289,808

 

 

 —

 

 

289,808

Total liabilities

 

 

81,649,278

 

 

1,710,728

 

 

83,360,006

Commitments and contingencies

 

 

 

 

 

 

 

 

 

Equity

 

 

104,442,263

 

 

16,674,270

 

 

121,116,533

Total liabilities and equity

 

$

186,091,541

 

$

18,384,998

 

$

204,476,539

 

 

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Table of Contents 

 

 

 

 

4. Real Property Interests

The following table summarizes the Partnership’s real property interests:

 

 

 

 

 

 

 

 

 

June 30, 2015

 

December 31, 2014

Land

    

$

5,219,666

    

$

5,219,666

Real property interests – perpetual

 

 

48,079,266

 

 

46,565,584

Real property interests – non-perpetual

 

 

156,168,978

 

 

140,361,085

Total land and real property interests

 

 

209,467,910

 

 

192,146,335

Accumulated amortization of real property interests

 

 

(7,557,458)

 

 

(5,916,820)

Land and net real property interests

 

$

201,910,452

 

$

186,229,515

 

On March 4, 2015 and on April 8, 2015, the Partnership completed the Acquisitions as described in Note 3 above. The Partnership paid total consideration of $25,205,000 and $22,050,000, respectively. The Acquisitions are deemed to be transactions between entities under common control, which requires the assets and liabilities to be transferred at the historical cost of the parent of the entities, with prior periods retroactively adjusted to furnish comparative information. The following table summarizes the preliminary allocations of estimated fair values of the assets acquired and liabilities assumed at the date of acquisition of Landmark.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

 

    

Investments in real

    

In-place lease

    

Above-market

    

Below-market

    

 

 

Date

 

Land

 

property interests

 

intangibles

 

lease intangibles

 

lease intangibles

 

Total

 

March 2015

 

$

2,934,456

 

$

18,913,599

 

$

517,625

 

$

789,739

 

$

(2,416,167)

 

$

20,739,252

 

April 2015

 

 

390,093

 

 

15,946,979

 

 

472,248

 

 

548,924

 

 

(778,896)

 

 

16,579,348

 

 

The weighted average remaining amortization period for non‑perpetual real property interests is 56 years at June 30, 2015.

Future estimated aggregate amortization of real property interests for each of the five succeeding fiscal years and thereafter as of June 30, 2015, are as follows:

 

 

 

 

2015 (six months)

    

$

1,761,264

2016

 

 

3,522,528

2017

 

 

3,522,528

2018

 

 

3,522,528

2019

 

 

3,522,528

Thereafter

 

 

132,760,144

Total

 

$

148,611,520

 

During the three and six months ended June 30, 2015, two and thirteen of the Partnership’s real property interests were impaired as a result of termination notices received and one property interest foreclosure. During the three and six months ended June 30, 2014, one of the Partnership’s real property interest was impaired as a result of a termination notice received. As a result of T‑Mobile’s acquisition of MetroPCS (completed in 2013), we have received termination notices related to 23 MetroPCS tenant sites. As of June 30, 2015, 12 tenant sites have been vacated with the majority of the remaining sites vacating over the next three months.  As a result of these termination notices we determined that eight real property interests were impaired during the six months ending June 30, 2015 and recognized impairment charges totaling $2.1 million related to MetroPCS tenant sites during the first quarter of 2015. Impairment of $0.7 million related to a foreclosure notice received effective March 26, 2015. During the three months ended June 30, 2015 impairment charges of $0.5 million were due to two termination notices received during the period. During the three and six months ended June 30, 2015 we recognized impairment charges totaling $514,300 and $3,276,736. The carrying value of each real property interest were determined to have a fair value of zero with the remaining lease intangibles amortization adjusted to the remaining lease life.

 

 

 

 

 

 

 

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5. Other Intangible Assets and Liabilities

The following table summarizes our identifiable intangible assets, including above/below‑market lease intangibles:

 

 

 

 

 

 

 

 

 

June 30, 2015

 

December 31, 2014

Acquired in-place lease

    

 

    

    

 

    

Gross amount

 

$

5,436,547

 

$

4,936,570

Accumulated amortization

 

 

(1,418,392)

 

 

(981,364)

Net amount

 

$

4,018,155

 

$

3,955,206

Acquired above-market leases

 

 

 

 

 

 

Gross amount

 

$

2,055,127

 

$

1,579,647

Accumulated amortization

 

 

(720,890)

 

 

(531,198)

Net amount

 

$

1,334,237

 

$

1,048,449

Total other intangible assets, net

 

$

5,352,392

 

$

5,003,655

Acquired below-market leases

 

 

 

 

 

 

Gross amount

 

$

(10,262,079)

 

$

(8,895,960)

Accumulated amortization

 

 

2,064,208

 

 

1,499,642

Total other intangible liabilities, net

 

$

(8,197,871)

 

$

(7,396,318)

We recorded net amortization of above‑ and below‑market lease intangibles of $198,424 and $397,400 as an increase to rental revenue for the three and six months ended June 30, 2015, respectively, and $130,077 and $248,856 as an increase to rental revenue for the three and six months ended June 30, 2014, respectively. We recorded amortization of in‑place lease intangibles of $229,625 and $450,777 as amortization expense for the three and six months ended June 30, 2015, respectively, and $129,923 and $254,301 as amortization expense for the three and six months ended June 30, 2014, respectively.

Future aggregate amortization of intangibles for each of the five succeeding fiscal years and thereafter as of June 30, 2015 follows:

 

 

 

 

 

 

 

 

 

 

 

 

    

Acquired

    

Acquired

    

Acquired

 

 

 

in-place

 

above-market

 

below-market

 

 

 

leases

 

leases

 

leases

 

2015 (six months)

 

$

318,749

 

$

173,401

 

$

(570,649)

 

2016

 

 

542,574

 

 

273,546

 

 

(1,011,271)

 

2017

 

 

512,876

 

 

187,132

 

 

(982,706)

 

2018

 

 

479,395

 

 

118,059

 

 

(955,268)

 

2019

 

 

462,276

 

 

85,456

 

 

(936,535)

 

Thereafter

 

 

1,702,285

 

 

496,643

 

 

(3,741,442)

 

Total

 

$

4,018,155

 

$

1,334,237

 

$