Landmark Infrastructure: Small Cap, High Yield
The partnership’s business model of owning leases on the land under cell phone towers, renewable energy facilities and billboards is immune from commodity price risk.
Landmark, with a market cap of just $341 million, yields more than 9 percent after increasing its distribution by 7.7 percent over the past 12 months. Management guidance this year is for four quarterly boosts totaling an annualized increase of 10 percent.
Size isn’t the only reason for Landmark’s discount. Landmark’s current distribution coverage is tight. It has no credit rating and depends on drop downs of assets on favorable terms from its general partner for growth.
Cash flow is also protected from economic cycles with 97 percent occupancy, an average remaining tenant lease of 25.9 years and rights to land averaging 78 years.
Also, average monthly rent is only a fraction of a company’s cost of operating facilities on Landmark’s land. So it would almost certainly be the last item on which a tenant would default.
The path to additional growth is clearly defined with a ROFO (right of first offer) drop-down asset pipeline in place. And, despite a tripling of partnership assets since the November 2014 IPO, the drop down will double Landmark’s size when executed.
To be sure, Landmark has a lot of growing to do and challenges to meet. But as it executes its growth plan, Landmark’s asset size and market capitalization will expand. As it does so, it’ll become easier for large institutions to buy and drive share prices higher in coming years.
Basically flat since our purchase in January, Landmark — an Aggressive Holding in our portfolio — remains a buy for more risk tolerant investors so long as it trades under $17.