We often do not think about land as an important wireless infrastructure element. We focus mainly on the RF and fiber electronics and related support structures, and often overlook the real property on which these structures are situated.
Landmark Infrastructure Partners (NasdaqGS: LMRK), however, is one company that turns its real property holdings into real money. LMRK acquires, develops, and manages a portfolio of real property interests and infrastructure assets that it leases.
“Our real property interests underlie our tenants’ infrastructure assets which include freestanding cellular towers and rooftop wireless sites, data centers, billboards, wind turbines and solar arrays,” the company states in its recent 10Q. “These assets are essential to the operations and profitability of our tenants.”
LMRK reported 1Q20 revenues of $15.7 million, up 9 percent from $14.4 million in 1Q19. Wireless Communication accounted for 50 percent of the total with roughly 38 percent mainly from the four Tier 1 wireless carriers. Another 12 percent is derived from the Big 3 tower companies. LMRK also leases real property to companies in Outdoor Advertising such as Clear Channel and Renewable Power Generation utilities such as Southern California Edison.
Owning the land under their towers is economically and strategically important to tower companies. Yet even the leading tower companies such as American Tower own a small percentage of the land under their towers.
Nonetheless, the tower companies will acquire that land as opportunities arise. The Big 3 U.S tower companies – American Tower, Crown Castle and SBA Communications – collectively reported capital expenditures (capex) for ground lease and easement purchases totaling nearly $280 million in 2019.
LMRK acknowledges that its wireless infrastructure land holdings represent just one percent of the roughly 153,000 tower sites in the U.S. market. In 1Q20, Landmark reported that 90 percent of its lease revenues derived from the top 100 U.S. markets with about one-third of that total from three major metro areas – New York, Los Angeles and Chicago.
As the real property owner, LMRK’s tenant leases provide it with stable, predictable and growing cash flow. Tenant leases are triple net, or effectively triple net, meaning that tenants or the underlying property owners are contractually responsible for property-level operating expenses including maintenance capex, property taxes and insurance. LMRK itself incurs no capex.
In 2017, Landmark moved beyond real property leases into wireless infrastructure developing a self-contained, neutral-host smart pole designed for carrier and other wireless operator co-locations. Dubbed Vertex, the smart pole is designed for macrocell and small cell deployments for 5G, IoT, carrier densification, private LTE networks and other wireless solutions.
LMRK is positioning Vertex in three sectors: Enterprises, Municipalities and Transportation. These neutral-host deployments are expected to be anchored with one or more tenants and support co-location of additional tenants. So far, LMRK has an agreement with Dallas Area Rapid Transit (DART) to develop a smart media and communications platform utilizing content-rich kiosks and Vertex in strategic high-traffic DART locations. LMRK also has an exclusive agreement with the City of Lancaster, CA to deploy Vertex as part of the Lancaster’s smart city ecosystem.
By John Celentano, Inside Towers Business Editor