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 September 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 9,706,567 common units and 3,135,109 subordinated units outstanding at October 30, 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

 

27

 

 

 

 

 

 

 

Item 3. 

 

Quantitative and Qualitative Disclosures About Market Risk

 

43

 

 

 

 

 

 

 

Item 4. 

 

Controls and Procedures

 

44

 

 

 

 

 

 

 

 

 

PART II. OTHER INFORMATION

 

 

 

 

 

 

 

 

 

Item 1. 

 

Legal Proceedings

 

45

 

 

 

 

 

 

 

Item 1A. 

 

Risk Factors 

 

45

 

 

 

 

 

 

 

Item 6. 

 

Exhibits

 

45

 

 

 

 

 

 

 

Signatures 

 

 

 

46

 

 

 

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Table of Contents 

PART I. FINANCIAL INFORMATION 

Item 1. Financial Statements

 

Landmark Infrastructure Partners LP

Consolidated and combined Balance Sheets

 

 

 

 

 

 

 

 

 

 

September 30, 2015

 

December 31, 2014*

Assets

    

 

    

    

 

    

Land

 

$

6,977,145

 

$

5,924,294

Real property interests

 

 

290,301,565

 

 

231,561,354

Total land and real property interests

 

 

297,278,710

 

 

237,485,648

Accumulated amortization of real property interests

 

 

(10,390,300)

 

 

(7,135,676)

Land and net real property interests

 

 

286,888,410

 

 

230,349,972

Investments in receivables, net

 

 

8,305,178

 

 

8,665,274

Cash and cash equivalents

 

 

273,090

 

 

311,108

Rent receivables, net

 

 

741,504

 

 

123,767

Due from Landmark and affiliates

 

 

2,111,822

 

 

659,722

Deferred loan costs, net

 

 

2,976,610

 

 

3,985,227

Deferred rent receivable

 

 

499,139

 

 

344,162

Other intangible assets, net

 

 

8,099,980

 

 

6,101,048

Other assets

 

 

150,433

 

 

399,222

Total assets

 

$

310,046,166

 

$

250,939,502

Liabilities and equity

 

 

 

 

 

 

Revolving credit facility

 

$

164,500,000

 

$

74,000,000

Secured debt facility

 

 

 —

 

 

29,707,558

Accounts payable and accrued liabilities

 

 

505,729

 

 

141,508

Other intangible liabilities, net

 

 

10,742,540

 

 

8,938,034

Prepaid rent

 

 

2,617,307

 

 

2,029,542

Derivative liabilities

 

 

2,218,717

 

 

308,899

Total liabilities

 

 

180,584,293

 

 

115,125,541

Commitments and contingencies (Note 14)

 

 

 

 

 

 

Equity

 

 

129,461,873

 

 

135,813,961

Total liabilities and equity

 

$

310,046,166

 

$

250,939,502

*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 September 30,

 

Nine months ended September 30,

 

 

2015

 

2014*

 

2015

 

2014*

Revenue

    

 

    

    

 

    

    

 

    

    

 

    

Rental revenue

 

$

6,044,317

 

$

4,399,714

 

$

16,300,304

 

$

12,860,421

Interest income on receivables

 

 

200,902

 

 

188,585

 

 

605,180

 

 

522,994

Total revenue

 

 

6,245,219

 

 

4,588,299

 

 

16,905,484

 

 

13,383,415

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

Management fees to affiliate

 

 

18,738

 

 

139,142

 

 

91,650

 

 

406,302

Property operating

 

 

7,678

 

 

 —

 

 

19,459

 

 

21,805

General and administrative

 

 

462,364

 

 

47,054

 

 

2,107,354

 

 

579,628

Acquisition-related

 

 

1,003,294

 

 

46,012

 

 

2,958,276

 

 

106,484

Amortization

 

 

1,423,702

 

 

1,116,602

 

 

4,176,426

 

 

3,294,849

Impairments

 

 

302,008

 

 

 —

 

 

3,578,744

 

 

8,450

Total expenses

 

 

3,217,784

 

 

1,348,810

 

 

12,931,909

 

 

4,417,518

Other income and expenses

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

(1,607,173)

 

 

(1,519,738)

 

 

(4,495,384)

 

 

(4,378,694)

Loss on early extinguishment of debt

 

 

(902,625)

 

 

 —

 

 

(902,625)

 

 

 —

Unrealized gain (loss) on derivatives

 

 

(1,532,995)

 

 

514,394

 

 

(1,909,817)

 

 

(6,393)

Gain on sale of real property interest

 

 

 —

 

 

 —

 

 

82,026

 

 

 —

Total other income and expenses

 

 

(4,042,793)

 

 

(1,005,344)

 

 

(7,225,800)

 

 

(4,385,087)

Net income (loss)

 

$

(1,015,358)

 

$

2,234,145

 

$

(3,252,225)

 

$

4,580,810

Less: Net income (loss) attributable to Predecessor

 

 

(744,912)

 

 

2,234,145

 

 

(1,198,734)

 

 

4,580,810

Net loss attributable to partners

 

$

(270,446)

 

$

 —

 

$

(2,053,491)

 

$

 —

Net loss per limited partner unit

 

 

 

 

 

 

 

 

 

 

 

 

Common units – basic and diluted

 

$

(0.01)

 

 

 

 

$

(0.13)

 

 

 

Subordinated units – basic and diluted

 

$

(0.06)

 

 

 

 

$

(0.38)

 

 

 

Weighted average limited partner units outstanding

 

 

 

 

 

 

 

 

 

 

 

 

Common units – basic and diluted

 

 

8,663,688

 

 

 

 

 

6,500,519

 

 

 

Subordinated units – basic and diluted

 

 

3,135,109

 

 

 

 

 

3,135,109

 

 

 

Cash distribution declared per unit

 

$

0.3175

 

 

 

 

$

0.9225

 

 

 

*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

 

 

 

 

 

$

 —

    

$

 —

    

$

 —

    

$

105,724,959

    

$

105,724,959

Contributions of real property interests to predecessor

 

 

 

 

 

 

 —

 

 

 —

 

 

 —

 

 

8,196,662

 

 

8,196,662

Distributions

 

 

 

 

 

 

 —

 

 

 —

 

 

 —

 

 

(8,426,264)

 

 

(8,426,264)

Net income

 

 

 

 

 

 

 —

 

 

 —

 

 

 —

 

 

4,580,810

 

 

4,580,810

Balance as of September 30, 2014

 

 

 

 

 

$

 —

 

$

 —

 

$

 —

 

$

110,076,167

 

$

110,076,167

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of December 31, 2014

 

4,702,665

 

3,135,109

 

$

74,683,957

 

$

29,745,957

 

$

12,349

 

$

31,371,698

 

$

135,813,961

Net loss from Acquired Assets attributable to Predecessor

 

 —

 

 —

 

 

 —

 

 

 —

 

 

(1,198,734)

 

 

 —

 

 

(1,198,734)

Net investment of Acquired Assets

 

 —

 

 —

 

 

 —

 

 

 —

 

 

(44,973,190)

 

 

(31,371,698)

 

 

(76,344,888)

Issuance of units in connection with the Fund E acquisition

 

1,998,852

 

 —

 

 

31,461,930

 

 

 —

 

 

 —

 

 

 —

 

 

31,461,930

Issuance of common units, net of offering costs of $3,308,455

 

3,000,000

 

 —

 

 

46,941,545

 

 

 —

 

 

 —

 

 

 —

 

 

46,941,545

Distributions

 

 —

 

 —

 

 

(4,401,640)

 

 

(2,318,100)

 

 

 —

 

 

 —

 

 

(6,719,740)

Capital contribution to fund general and administrative expense reimbursement

 

 —

 

 —

 

 

 —

 

 

 —

 

 

1,465,040

 

 

 —

 

 

1,465,040

Unit-based compensation

 

5,050

 

 —

 

 

96,250

 

 

 —

 

 

 —

 

 

 —

 

 

96,250

Net loss attributable to partners

 

 —

 

 —

 

 

(867,361)

 

 

(1,186,130)

 

 

 —

 

 

 —

 

 

(2,053,491)

Balance as of September 30, 2015

 

9,706,567

 

3,135,109

 

$

147,914,681

 

$

26,241,727

 

$

(44,694,535)

 

$

 —

 

$

129,461,873

*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

 

 

 

 

 

 

 

 

 

 

Nine months ended September 30,

 

 

2015

 

2014*

Operating activities

    

 

    

    

 

    

Net income (loss)

 

$

(3,252,225)

 

$

4,580,810

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

 

 

 

 

 

 

Unit-based compensation

 

 

96,250

 

 

 —

Unrealized loss on derivatives

 

 

1,909,817

 

 

6,393

Loss on early extinguishment of debt

 

 

902,625

 

 

 —

Amortization expense

 

 

4,176,426

 

 

3,294,849

Amortization of above- and below- market lease

 

 

(836,485)

 

 

(517,148)

Amortization of deferred loan costs

 

 

722,689

 

 

853,593

Receivables interest accretion

 

 

(21,450)

 

 

(49,356)

Impairments

 

 

3,578,744

 

 

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

 

 

(660,793)

 

 

(109,455)

Accounts payable and accrued liabilities

 

 

364,221

 

 

(300,075)

Deferred rent receivables

 

 

(154,977)

 

 

(115,674)

Prepaid rent

 

 

945,849

 

 

(88,497)

Due from Landmark and affiliates

 

 

(1,160,985)

 

 

(215,779)

Other assets

 

 

248,789

 

 

 —

Net cash provided by operating activities

 

 

6,776,469

 

 

7,352,576

Investing activities

 

 

 

 

 

 

Acquisition of land

 

 

(5,082,027)

 

 

 —

Acquisition of real property interests

 

 

(88,864,100)

 

 

(2,491,902)

Proceeds from sale of real property interest

 

 

223,487

 

 

 —

Acquisition of receivables

 

 

(142,062)

 

 

 —

Repayments of receivables

 

 

523,608

 

 

596,926

Net cash used in investing activities

 

 

(93,341,094)

 

 

(1,894,976)

Financing activities

 

 

 

 

 

 

Proceeds from public offering, net of offering costs of $3,308,455

 

 

46,941,545

 

 

 —

Proceeds from revolving credit facility

 

 

141,200,000

 

 

 —

Proceeds from secured debt facilities

 

 

 —

 

 

7,580,214

Principal payments on revolving credit facility

 

 

(50,700,000)

 

 

 —

Principal payments on secured debt facilities

 

 

(29,707,558)

 

 

(1,538,170)

Deferred loan costs

 

 

(616,697)

 

 

(614,434)

Capital contribution to fund general and administrative expense reimbursement

 

 

1,173,925

 

 

 —

Distributions to members of Contributing Landmark Funds

 

 

 —

 

 

(6,352,875)

Distributions to limited partners

 

 

(6,719,740)

 

 

 —

Consideration paid to general partner associated with Acquired Assets

 

 

(15,044,868)

 

 

(5,092,393)

Net cash provided by (used in) financing activities

 

 

86,526,607

 

 

(6,017,658)

Net decrease in cash and cash equivalents

 

 

(38,018)

 

 

(560,058)

Cash and cash equivalents at beginning of period

 

 

311,108

 

 

1,037,327

Cash and cash equivalents at end of period

 

$

273,090

 

$

477,269

*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 (the “General Partner”). Landmark and its affiliates own (a) our general partner; (b) 171,737 common units and 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 nine months ended September 30, 2015, the Partnership completed five drop-down acquisitions from our Sponsor and affiliates (the “Acquisitions” or “Acquired Assets”). The 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 between the cash consideration of each acquisition and the historical cost basis, were allocated to the General Partner.  All intercompany transactions and account balances have been eliminated.

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.  

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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.

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 as if the Acquisitions occurred on the earliest date during which the Acquired Assets were under common control. See further discussion in Note 3, Acquisitions for additional information.

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 nine months ended September 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 condensed or omitted from the interim financial statements included in this report. Operating results for the three and nine months ended September 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. 2015-01”). 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 has early adopted ASU No. 2015-01 and has applied the provisions prospectively 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

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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. In August 2015, the FASB issued ASU 2015-15, Interest – Imputation of Interest (Subtopic 835-30): Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements (“ASU 2015-15”). ASU 2015-15 provides additional guidance to ASU 2015-03, which did not address presentation or subsequent measurement of debt issuance costs related to line-of-credit arrangements. ASU 2015-15 noted that the SEC staff would not object to an entity deferring and presenting debt issuance costs as an asset and subsequently amortizing the deferred debt issuance costs ratably over the term of the line-of-credit arrangement, regardless of whether there are any outstanding borrowings on the line-of-credit arrangement. The Partnership is currently in the process of evaluating the impact of adoption of these standards on our consolidated balance sheets and footnote disclosures.

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 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.

In September 2015, the FASB issued ASU 2015-16, Simplifying the Accounting for Measurement Period Adjustments (“ASU 2015-16”). In a business combination, ASU 2015-16 requires an acquirer to recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. The acquirer is required to disclose, by financial statement line item, the nature and amount for the adjustments and the current period income statement impact related to prior periods. The amendments in this ASU are effective for fiscal years beginning December 15, 2016 and interim periods beginning after December 15, 2017. Early adoption is permitted. The Partnership has early adopted ASU No. 2015-16 and included required disclosure information within Note 4, Real Property Interests.  

 

3. Acquisitions

On March 4, 2015, Landmark Infrastructure Operating Company LLC (“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 one renewable power generation sites, from Landmark Infrastructure Holding Company LLC (“HoldCo”), a wholly-owned subsidiary of Landmark, in exchange for cash consideration of $25.2 million.  The purchase price was funded with $24.0 million 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 $22.1 million. The purchase price was funded with $21.5 million of borrowings under the Partnership’s existing credit facility and available cash.

On July 21, 2015, Opco completed an acquisition of 100 tenant sites and related real property interests, consisting of 81 wireless communication, 16 outdoor advertising and 3 renewable power generation sites, from HoldCo, in exchange for cash consideration of $35.7 million. The purchase price was funded with $35.5 million of borrowings under the Partnership’s existing credit facility and available cash. 

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On August 18, 2015, Opco completed an acquisition of an entity owning 193 tenant sites and related real property interests, consisting of 135 wireless communication, 57 outdoor advertising and one renewable power generation sites, from Landmark Dividend Growth Fund-E LLC (“Fund E”), an affiliate of Landmark, in exchange for (i) 1,998,852 common units representing limited partner interests in the Partnership, valued at approximately $31.5 million, and (ii) cash consideration of approximately $34.9 million, of which $29.2 million was used to repay Fund E’s secured indebtedness and was funded with borrowings under the Partnership’s revolving credit facility.

On September 21, 2015, Opco completed an acquisition of 65 tenant sites and related real property interests, consisting of 50 wireless communication, 13 outdoor advertising and 2 renewable power generation sites, from HoldCo, in exchange for cash consideration of $20.3 million. The purchase price was funded with $20.0 million of borrowings under the Partnership’s existing credit facility and available cash.

The acquisitions described above in this Note 3 are collectively referred to as the “Acquisitions,” and the acquired assets in the Acquisitions are collectively referred to as the “Acquired Assets.”

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 nine months ended September 30, 2015:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended September 30, 2015

 

Nine months ended September 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

 

$

5,326,821

 

$

717,496

 

$

6,044,317

 

$

13,148,536

 

$

3,151,768

 

$

16,300,304

Interest income on receivables

 

 

200,117

 

 

785

 

 

200,902

 

 

601,972

 

 

3,208

 

 

605,180

Total revenue

 

 

5,526,938

 

 

718,281

 

 

6,245,219

 

 

13,750,508

 

 

3,154,976

 

 

16,905,484

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Management fees to affiliate

 

 

 —

 

 

18,738

 

 

18,738

 

 

 —

 

 

91,650

 

 

91,650

Property operating

 

 

7,568

 

 

110

 

 

7,678

 

 

16,462

 

 

2,997

 

 

19,459

General and administrative

 

 

462,364

 

 

 —

 

 

462,364

 

 

2,097,421

 

 

9,933

 

 

2,107,354

Acquisition-related

 

 

817,099

 

 

186,195

 

 

1,003,294

 

 

1,290,451

 

 

1,667,825

 

 

2,958,276

Amortization

 

 

1,251,433

 

 

172,269

 

 

1,423,702

 

 

3,393,421

 

 

783,005

 

 

4,176,426

Impairments

 

 

302,008

 

 

 —

 

 

302,008

 

 

3,578,744

 

 

 —

 

 

3,578,744

Total expenses

 

 

2,840,472

 

 

377,312

 

 

3,217,784

 

 

10,376,499

 

 

2,555,410

 

 

12,931,909

Other income and expenses

 

 

(2,956,912)

 

 

(1,085,881)

 

 

(4,042,793)

 

 

(5,427,500)

 

 

(1,798,300)

 

 

(7,225,800)

Net loss

 

$

(270,446)

 

$

(744,912)

 

$

(1,015,358)

 

$

(2,053,491)

 

$

(1,198,734)

 

$

(3,252,225)

 

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Statement of operations for the three and nine months ended September 30, 2014:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended September 30, 2014

 

Nine months ended September 30, 2014

 

 

 

 

Pre-Acquisition

 

 

 

 

 

Pre-Acquisition

 

 

 

 

 

 

 

results of

 

Consolidated

 

 

 

 

results of

 

Consolidated

 

 

Predecessor

 

Acquired Assets

 

Results

 

Predecessor

 

Acquired Assets

 

Results

Revenue

    

 

    

    

 

    

    

 

    

    

 

    

    

 

    

    

 

    

Rental revenue

 

$

3,409,534

 

$

990,180

 

$

4,399,714

 

$

10,045,812

 

$

2,814,609

 

$

12,860,421

Interest income on receivables

 

 

188,585

 

 

 —

 

 

188,585

 

 

522,994

 

 

 —

 

 

522,994

Total revenue

 

 

3,598,119

 

 

990,180

 

 

4,588,299

 

 

10,568,806

 

 

2,814,609

 

 

13,383,415

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Management fees to affiliate

 

 

103,713

 

 

35,429

 

 

139,142

 

 

306,043

 

 

100,259

 

 

406,302

Property operating

 

 

 —

 

 

 —

 

 

 —

 

 

21,805

 

 

 —

 

 

21,805

General and administrative

 

 

47,054

 

 

 —

 

 

47,054

 

 

579,012

 

 

616

 

 

579,628

Acquisition-related

 

 

29,775

 

 

16,237

 

 

46,012

 

 

29,775

 

 

76,709

 

 

106,484

Amortization

 

 

880,161

 

 

236,441

 

 

1,116,602

 

 

2,608,770

 

 

686,079

 

 

3,294,849

Impairments

 

 

 —

 

 

 —

 

 

 —

 

 

8,450

 

 

 —

 

 

8,450

Total expenses

 

 

1,060,703

 

 

288,107

 

 

1,348,810

 

 

3,553,855

 

 

863,663

 

 

4,417,518

Other income and expenses

 

 

(697,585)

 

 

(307,759)

 

 

(1,005,344)

 

 

(3,489,304)

 

 

(895,783)

 

 

(4,385,087)

Net income

 

$

1,839,831

 

$

394,314

 

$

2,234,145

 

$

3,525,647

 

$

1,055,163

 

$

4,580,810

 

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Table of Contents 

Balance Sheet as of December 31, 2014:

 

 

 

 

 

 

 

 

 

 

 

 

 

Landmark Infrastructure

 

Pre-Acquisition

 

Consolidated

 

    

Partners LP

 

Acquired Assets

 

Results

Assets

 

 

 

 

 

 

 

 

 

Land

 

$

4,829,573

 

$

1,094,721

 

$

5,924,294

Real property interests

 

 

183,378,480

 

 

48,182,874

 

 

231,561,354

Total land and real property interests

 

 

188,208,053

 

 

49,277,595

 

 

237,485,648

Accumulated amortization of real property interest

 

 

(5,873,199)

 

 

(1,262,477)

 

 

(7,135,676)

Land and net real property interests

 

 

182,334,854

 

 

48,015,118

 

 

230,349,972

Investments in receivables, net

 

 

8,665,274

 

 

 —

 

 

8,665,274

Cash and cash equivalents

 

 

311,108

 

 

 —

 

 

311,108

Rent receivables, net

 

 

80,711

 

 

43,056

 

 

123,767

Due from Landmark and affiliates

 

 

659,722

 

 

 —

 

 

659,722

Deferred loan cost, net

 

 

2,838,879

 

 

1,146,348

 

 

3,985,227

Deferred rent receivable

 

 

285,790

 

 

58,372

 

 

344,162

Other intangible assets, net

 

 

4,677,499

 

 

1,423,549

 

 

6,101,048

Other assets

 

 

399,222

 

 

 —

 

 

399,222

Total assets

 

$

200,253,059

 

$

50,686,443

 

$

250,939,502

Liabilities and equity

 

 

 

 

 

 

 

 

 

Revolving credit facility

 

$

74,000,000

 

$

 —

 

$

74,000,000

Secured debt facility

 

 

 —

 

 

29,707,558

 

 

29,707,558

Accounts payable and accrued liabilities

 

 

141,508

 

 

 —

 

 

141,508

Other intangible liabilities, net

 

 

7,328,741

 

 

1,609,293

 

 

8,938,034

Prepaid rent

 

 

1,532,372

 

 

497,170

 

 

2,029,542

Derivative liabilities

 

 

289,808

 

 

19,091

 

 

308,899

Total liabilities

 

 

83,292,429

 

 

31,833,112

 

 

115,125,541

Commitments and contingencies

 

 

 

 

 

 

 

 

 

Equity

 

 

116,960,630

 

 

18,853,331

 

 

135,813,961

Total liabilities and equity

 

$

200,253,059

 

$

50,686,443

 

$

250,939,502

 

 

 

The following table summarizes the historical cash flow of the Acquired Assets for the nine months ended September 30, 2015 and 2014:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30, 2015

 

Nine Months Ended September 30, 2014

 

 

Landmark

 

Pre-Acquisition

 

 

 

Landmark

 

Pre-Acquisition

 

 

 

 

Infrastructure

 

results of

 

Consolidated

 

Infrastructure

 

results of

 

Consolidated

 

 

Partners LP

 

Acquired Assets

 

Results

 

Partners LP

 

Acquired Assets

 

Results

Net cash provided by operating activities

 

$

6,358,768

 

$

417,701

 

$

6,776,469

 

$

5,479,720

 

$

1,872,856

 

$

7,352,576

Net cash used in investing activities

 

 

(93,341,094)

 

 

 —

 

 

(93,341,094)

 

 

(1,894,976)

 

 

 —

 

 

(1,894,976)

Net cash provided by (used in) financing activities

 

 

86,944,314

 

 

(417,707)

 

 

86,526,607

 

 

(4,144,802)

 

 

(1,872,856)

 

 

(6,017,658)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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4. Real Property Interests

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

 

 

 

 

 

 

 

 

 

September 30, 2015

 

December 31, 2014

Land

    

$

6,977,145

    

$

5,924,294

Real property interests – perpetual

 

 

66,661,747

 

 

56,831,204

Real property interests – non-perpetual

 

 

223,639,818

 

 

174,730,150

Total land and real property interests

 

 

297,278,710

 

 

237,485,648

Accumulated amortization of real property interests

 

 

(10,390,300)

 

 

(7,135,676)

Land and net real property interests

 

$

286,888,410

 

$

230,349,972

 

 

During the nine months ended September 30, 2015, the Partnership completed the Acquisitions as described in Note 3, Acquisitions. The Partnership paid total consideration of $169.7 million. 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 differences totaling $44.1 million between the total consideration of $169.7 million and the historical cost basis of $125.6 million were allocated to the General Partner.  The Partnership finalized the purchase price allocations for the March 2015, April 2015, July 2015, and August 2015 acquisitions during the three months ended September 30, 2015. As a result of additional information about facts and circumstances that existed at the Sponsor acquisition date related to the March 2015 and April 2015 acquisitions, we recorded changes for the final purchase price allocation in current period in accordance with ASU 2015-16. For the three months ending September 30, 2015 the Predecessor recorded $30,183 of amortization of above- and below-market lease intangibles included as an increase to rental income related to the year ended December 31, 2014 for the March 2015 and April 2015 acquisitions.

 

Partnership applies the business combination method to all acquired investments of real property interests for transactions that meet the definition of a business combination. The fair value of the assets acquired and liabilities assumed is typically determined by using Level III valuation methods. The most sensitive assumption is the discount rate used to discount the estimated cash flows from the real estate rights. For purposes of the computation of fair value assigned to the various tangible and intangible assets, the Partnership assigned discount rates ranging between 6% and 20%.

The following table summarizes the preliminary allocation for the September 2015 acquisition and final allocations for the remaining acquisitions 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

 

$

1,618,308

 

$

19,741,470

 

$

556,496

 

$

622,201

 

$

(1,761,821)

 

$

20,776,654

 

April 2015

 

 

389,617

 

 

15,946,582

 

 

472,249

 

 

574,573

 

 

(743,825)

 

 

16,639,196

 

July 2015

 

 

 —

 

 

26,674,858

 

 

722,359

 

 

742,057

 

 

(1,618,280)

 

 

26,520,994

 

August 2015

 

 

2,517,128

 

 

44,216,217

 

 

1,330,273

 

 

56,222

 

 

(1,842,723)

 

 

46,277,117

 

September 2015

 

 

556,974

 

 

14,690,762

 

 

431,564

 

 

152,574

 

 

(637,779)

 

 

15,194,095

 

 

The following unaudited pro forma consolidated results of operations assume that the Acquisitions were completed as of January 1, 2014. These unaudited pro forma results have been prepared for comparative purposes only.