Q2 2020 Landmark Infrastructure Partners LP Earnings Call
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Ladies and gentlemen, thank you for standing by and welcome to landmark infrastructure partners second quarter earnings call.
At this time, all participants Arnie listen only mode. After the speaker presentation, there will be a question and answer session to ask a question. During the session you will need to press star one on your telephone. Please be advised that todays conference maybe recorded if you require any further assistance. Please press star zero I would now like to hand the call.
Things over to your host VP of Investor Relations Marcelo Choi Sir Please go ahead.
Thank you and good morning.
Back to welcome you landmark infrastructure partners second quarter earnings call today, we'll share an operating financial overview of the business.
Also take your questions following our presentation.
Presenting on the call today are 10, Brady Chief Executive Officer, and George Doyle, Chief Financial Officer.
I'd like to mine all participants dot com today will include forward looking statements, which are subject to certain risks and uncertainties and number of factors and uncertainties could cause actual results in future periods to differ materially from our current expectations. We complete discussion of these risks we encouraged to read the partnership's pretty easily.
Documents on file with the FCC.
Additionally, we may refer to non-GAAP measures, such an FX, though after so EBITDA and adjusted EBITDA during the call.
Please refer to the earnings release in a public filings for definitions and reconciliations of these non-GAAP measures to their most comparable GAAP measures and with that I'll turn the call over time.
Well so thank you and good morning, everyone.
I hope, you're all doing well and managing and what are certainly challenging times.
Before we discuss this quarter's financial and operating results I'd like to provide you with a further update on the pandemics impact on our overall business as well as that of our sponsor.
As we discussed on the last earnings call our management team transition to a distributed remote workforce and implemented contingency plans that allowed us to pivot with minimal disruptions when the pandemic intensified in the first quarter.
Our sponsors headquarters in satellite offices are still closed.
And the 170 employees have been working from home since the middle of March.
At the appropriate time, we'll consider reopening offices with script protocols in place, but that decision and the pace of reopening will be determined by a number of different factors with the safety of our employees as our first priority.
Our sponsor has adapted to what is now the new normal and we're extremely proud of our team and what we've accomplished since the transition.
In terms of our tenants we continue to monitor their markets in performance and we're encouraged by what we're seeing.
We're confident that the kobin pandemic will not significantly impact our wireless communication or renewable power generation portfolio.
Although we have seen some permitting and project delays the fundamentals remain very favorable in both of these industries wireless communication and power generation are not just essential services, but are absolutely critical in today's world.
Like utilities these industries plane essential role in modern day life, providing critical kind of activity in power and they've generally performed well in past economic downturns.
Now before I turn to the broader outdoor advertising industry.
Right to take a moment to discuss the recent sale over a European outdoor advertising portfolio in mid June.
This sale was an opportunistic transaction, resulting from an attractive unsolicited bid.
Allowing us to de lever the balance sheet and providing us with significant capital to take advantage of the acquisition and development opportunities, we expect to see in the market.
While we continue to view outdoor advertising as a very attractive segment over the long term.
This disposition significantly improved our liquidity in an uncertain environment and further positions the partnership for growth.
Well outdoor advertising near term fundamentals remain challenging due to the pandemic, we are seeing some positive signs in the industry.
As a result of reopenings across the country in globally.
Outdoor traffic counts have improved significantly and are approaching pre pandemic levels in a number of markets.
Since the infrastructure of our tenants is typically the larger format Billboards along major highways the increase in traffic counts is an important metric for our tenants and outdoor advertisers.
Outdoor advertising companies have also taken measures to improve their balance sheets and rightsize their cost structures, which should help in their ability to navigate through these unprecedented times.
They've raised cash through dropdowns of their revolving credit facilities. Some have selectively sold assets and others have directly raised capital enhancing their balance sheets and financing flexibility.
Now as we outlined last quarter, we've received a number of requests for rent relief and rent reductions from our outdoor advertising tenants.
These tenants reacted quickly as the pandemic began but it is encouraging that the number of request has dropped as we ended the second quarter and entered the first part of Q3.
At this point, it's important to remind ourselves of the following.
First it's still too early to understand the full extent and impact of the pandemic.
On our outdoor advertising tenants and in turn our own business.
Second our long term outlook hasn't changed we're still confident that the outdoor advertising industry will fully rebound, but at this point, we just don't know the timing.
Third given the impact of the pandemic and the challenges in the economy in the second quarter results were strong.
We had minimal impact from the pandemics across our portfolio and our reported results demonstrating the high quality of our assets and their strong cash flow profile and we expect to benefit from the favorable long term trends driving our industries.
And finally, we're focusing on what we can control and believed that the measures we've taken including the recent exit from our European outdoor joint venture.
We will better position Elam arcade to withstand today's challenges and take further advantage of market opportunities.
Turning now to our second quarter results. Despite the challenges in the outdoor advertising segment, we had another strong quarter of operating and financial results with a AFFO comparable to last quarter and last year's second quarter.
These challenges in our outdoor sector were mitigated by the performance in our other business segments.
As far as the overall business strategy is concerned our focus has been on our higher return development projects and some select acquisitions.
But as the pandemic intensified, we significantly and deliberately slowed the pace of our direct acquisitions.
Year to date through June Thirtyth, we've acquired seven assets for total consideration of approximately $1.3 million.
Those assets are expected to contribute approximately 100000 annual rents were mainly comprised of wireless communication assets.
With the European outdoor advertising joint venture sale now completed we're managing our capital to preserve liquidity and flexibility advance our development initiatives and take advantage of attractive acquisition opportunities.
With regard to our development initiatives, we continue to make progress with landmark vertex, our self wireless infrastructure offering and dart our existing program with the Dallas area Rapid transit system.
Albeit at a slower pace due to some delays related to the pandemic.
This has resulted in some asset deployment shifting by a quarter or two but we're still encouraged by the progress that we've made so far.
We recently completed the initial phase of the Dark project with 70 digital kiosks now deployed.
We expect these kiosks will start generating rental revenue towards the latter part of the third quarter.
With regard to vertex we are seeing more progress.
The vertex projects are in various stages of deployment and leasing activity continues.
Even with the expected delays, we anticipate further progress with both dark and vertex throughout the second half of this year and we'll share more details with you as we move forward.
And with that I'll turn the call over George who will provide us with a more detailed financial review of the quarter George.
Thank you Tim.
As Tim mentioned in his remarks.
Yes, it's in our portfolio performed extremely well in the second quarter, considering the backdrop of dependent.
We experienced a small decline organic growth and the outdoor advertising portfolio.
But this was offset by growth across our other segments.
This is certainly at the better ended a spectrum of our expectations as we are entering into that endemic.
It is also reflected the high quality of our portfolio.
There are likely to see additional impacts to our portfolio in Q3.
We also expect that the overall portfolio will benefit from the contractual escalators and renewal rates on our existing leases.
Before we get into too much detail on the results for the second quarter I wanted to discuss the disposition of the European outdoor advertising joint venture debt.
That occurred in June.
This disposition provided us with an opportunity to raise capital de lever environment. When the capital markets are generally not accessible on attractive terms.
While the majority of the proceeds were used to pay down or line of credit.
Our debt to EBITDA level under the revolver.
Was reduced to slightly less than three times, which is well below the covenant threshold of eight times.
Turning to the accounting impact from this transaction.
For all periods presented.
The disposition is treated as discontinued operations.
With the related assets and liabilities reclassified to assets and liabilities held for sale on the consolidated balance sheets.
And then related operating results reported net income from discontinued operations.
On the consolidated statement of operations.
Turning to the rest of the portfolio in continuing operations.
The second quarter of 2020.
Rental revenue was 13.8 million.
Just 1% higher year over year.
The growth in revenue was driven from a number of lease amendments.
As well as the customary contractual lease escalators and the impact from accretive acquisitions completed within the last 12 months.
Partially offsetting these increases.
As lower rental revenue from the outdoor advertising assets.
The lower rental revenue from our outdoor advertising segment.
Was due primarily to rent reductions in abatements.
And lower percentage rent from leases with revenue sharing provisions.
Excluding rep, so revenue from our European outdoor advertising portfolio.
It is included in discontinued operations.
Outdoor advertising rental revenue declined by approximately 250000.
Were approximately 6%.
Compared to the first quarter 2020.
During the second quarter 2020.
Revenue from leases.
With revenue sharing provisions declined by approximately 200000 from the first quarter.
A 2020.
After the completion of the disposition of our European outdoor advertising joint venture.
Our outdoor advertising revenue concentration in continuing operations decreased to approximately 27% of total revenue for the quarter.
And while we expect further requests for rent reductions in abatements.
We are optimistic that the worse is behind us.
And that we will be able to navigate through these challenges.
Turning to SSL and at that though.
FFO per diluted unit was 19 cents this quarter.
Compared to seven cents in the second quarter of last year.
As we have discussed in prior calls.
SFL can fluctuate quarter to quarter.
Depending on the change in the fair value of our interest rate hedges.
As well as various other items, including foreign currency transaction gains and losses.
Asset bubble.
Which excludes these gains and losses on our interest rate hedges.
And other items.
33 cents per diluted unit this quarter compared to 33 cents in the second quarter of last year.
Now turning to our balance sheet.
We ended the second quarter with only 58 million about any borrowings under our revolving credit facility.
As we've paid down the significant.
Portion.
On the proceeds of the disposition of our European outdoor advertising joint venture in June.
[noise] nearly 100% of our outstanding debt, it's either fixed rate debt.
Our borrowings have been fixed or interest rate swaps.
Despite the recent turmoil in the debt markets, we continue to see very attractive financing rate, it's far asset classes.
And we have no scheduled maturities until November 2022.
In terms of liquidity.
We ended the quarter with approximately 6 million cash.
392 million of Undrawn borrowing capacity under our revolving credit facility.
Such compliance with certain covenants.
As I previously mentioned our debt to adjusted EBITDA ratio on a revolving credit facility.
Was less than three times at the end of the quarter.
Regarding our distribution policy.
As we discussed last quarter.
We are in an unprecedented in challenging market environment.
And have been focused on preserving liquidity and enhancing our financial flexibility.
While we are seeing indications at the outdoor sector is recovering.
Including rising outdoor traffic patterns.
We're still in a period of uncertainty.
Certain regions across the country have experienced a resurgence in the number of buyers cases.
Resulting in some additional restrictions on businesses and movement.
[noise] many individuals are still working from home.
Vaccine social business team.
Certain businesses remain pretty close to the public.
Well, we are encouraged by the improvements in operating conditions for the outdoor advertising sector, we're still waiting for more clarity.
As such aboard maintained the distribution of 20 cents per unit this quarter.
Based on this level of distribution.
Our distribution coverage ratio for the quarter was 1.66 times, which is a slight increase over the first quarter of 2020.
He will continue to monitor the impacted the pandemic.
In general economy on our portfolio.
Well look to reassess the distribution level as activity in the economy starts to normalize independent make is behind us.
In summary.
Despite the near term challenges within the outdoor advertising industry.
Our portfolio continues to perform well as seen in the solid results we posted in the quarter.
With lower leverage on the balance sheet, some dry powder close the disposition of the European outdoor advertising portfolio.
We believe we are positioned to navigate through this challenging environment.
I look forward to making some accretive acquisitions.
In addition, we continued to make progress with our development projects and.
We anticipate additional development assets to be placed into service in the second half 2020.
We will now take your question.
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Thank you as a reminder to ask a question you'll need to press Star then one on your Touchtone telephone to withdraw your question from the Q. Please press the pound key.
Please standby well, we compile the Q1 day roster.
Our first question comes a Ric Prentiss with Raymond James Your line is now open.
Thanks, Hi, guys glad to hear everything sounds like they're doing okay simply family owned business actually.
Yeah.
Hi, Rick.
Hey.
A couple of questions birds.
On the outdoor space.
You mentioned rent relief for classes abatements.
The $250000 down quarter over quarter over 6%.
Did that include the revenue share minus 200 as well.
[noise] no one is the a lot as the impact from some of the recent.
Amendments on the leases or reductions in rent are going to show up in.
Q3, so there's a little bit of the impact this quarter, but it takes a little bit time to process the amendments.
So most of the decline in outdoor advertising. This revenue this quarter was attributable to those percentage rent leases and a little bit was attributable to a [noise].
Okay. The other factors.
So so as we think through of what you've seen June into July how should we think about what that way.
Rent abatement, <unk> reduction magnitude might be quarter to quarter from twoq to threeq.
[noise] sure I wouldn't expect that.
Yeah.
The impact of the reductions that we given to our tenants on the outdoor side of things.
Would result in a declining about 50000 might be little bit more depending on how things proceed.
But portion of that will be offset by a escalators on the other portion of the leases that.
Our hitting their annual escalators during the third quarter.
Just so that's what you meant by the worst is behind you that third quarter that he has a little better dynamics than to you did this is one.
Yeah, we think so long as we don't enter into another severe locked you know period or the economy continues to substantially deteriorate.
We're starting to see yeah, we're starting to see if some of the announcements from the outdoor companies this quarter.
What.
They're generally saying Oh based on the limited their results. We've seen this that the middle of Q2 was the worse things are starting to rebound yeah. There are optimistic that as you look forward over the remainder of.
2020 that a their revenue is going to continue to grow.
We're also in an election year and ER, we should start to see more political spending here in the latter part of years a number of factors.
Kind of support.
You know better operating conditions for the outdoor companies, but again, it's all dependent upon.
What do we get into another severe locked down or the economy goes the other direction honest.
Okay.
Just to make sure I understand the accounting because I I just play when TV is going to be recovery.
When you think of the asset sale in to Q.
Well, it's a way to think of light at that though per unit would have been on a continuing basis in other words. When you reported very similar asset, though twoq you versus one Q, even though you sold the portfolio is that what we should be thinking about the AFFO.
Going forward and the same maybe with the adjusted EBITDA one.
Sure Yeah, there was a.
A lot of but certainly a lot of activity during the quarter, we obviously sold the the outdoor portfolio.
In Europe.
Yeah, we terminated up a number of hedging arrangements that for now were lower leopard you. When you kind of factor all those things then from a.
From an eight FFO standpoint.
Yeah that looks like it's going to be slightly dilutive.
So looking forward as a run rate results would be two different from what they were this quarter, but then again yet factor in the impact of the pandemic and certainly a any sort of capital that that we end up deploying. So this was a very attractive disposition from our standpoint, because similar to.
What we did in 2018.
It's not very dilutive and lowered our leverage substantially to be able to to redeploy yes, and turn the pandemic hunker down potentially here for a period of time.
On the.
That EBITDA side of things.
We do in the yet the Q break out what the operations from discontinued operations are so we have to detail on there, but you know roughly when you look at the.
Quarter the amount.
Right EBITDA impact.
It's in a 1.2.
1.3 million dollar impact per quarter.
Since the the a the sale.
The portfolio took place in the Middle June it really didn't have too much impact on this quarter, but that's roughly what the deepak would be onion.
As you look forward.
Okay.
And obviously your your coverage ratio is significant.
Nice to be above one, but you guys are well well above one.
You'd mentioned I think a couple of times in the prepared remarks about opportunities that might work looking forward acquisition, how should we thinking about the pacing of what you might be seeing out there and the ability to put that capital to work and what kind of cap rates.
[noise] sure, so where we're still seeing an active.
I would say acquisition or M&A type market deals are getting done and those are predominantly kind of being.
Telecom digital infrastructure side of things, we don't see quite as much going on in outdoor as you would expect since its you really impact at the moment.
And then renewals as well yeah that those assets have not been impacted by the pandemic, but development activity.
In a lot of areas just come to us screeching halt so.
Looking forward over the next year, we see visibility.
On the cash telecom developing digital infrastructure type segments.
[noise] deals can get done.
On the outdoor side of things, we expect opportunities will.
Come up, but we just haven't seen any and whatnot. So we're not really.
Interest is near term on.
Folksy focusing heavily on outdoor type activities, but it's going to as far as what we end up requiring is really going to depend on yeah.
What kind of what we find attractive relative to the overall backdrop of the environment. We're in.
From a cap rate perspective, depending on.
On the asset class I'm in a particular.
[laughter] assets are looking at cap rates anywhere in the five or.
Maybe eight range now the.
The five range is not particularly attractive for us.
That's more where the telecom type assets would trade large portfolio, but there, but there may be select opportunities that are.
Towards the middle to high rise into that range.
Okay.
Well there had been.
Reports out there that the parent level maybe is.
Exploring the opportunities, let's sale can you talk to that at all about is something going on does it.
And how it affects the landmark public stock.
Sure Yeah, I can't really a comment.
About anything going on.
Which are transaction at landmark dividend, but I can't say that so.
Yeah landmark dividend.
As it.
Has a ongoing.
Vision and operating.
Platform, it's kind of continuing as normal in this type of environment, we're seeing healthy.
Acquisition activity, where both on the buy side of things, we see lots of interest by a institutional.
Groups in the asset class on the.
The sell side side of things, but.
For the most part I would say, it's it's business as normal and there is.
Some sort of transaction at that lump landmark dividends it doesn't impact the.
The partnership itself that would be a separate.
Entity.
Okay, great. Thanks to continued savings healthy low rise.
Alright, Thanks, Rick you too.
Thank you and as a reminder to ask a question you will need to press Star then one on your touched on telephone. Our next question comes from Liam Burke with B. Riley FBR. Your line is now open.
Thank you and good morning on the projects Young you completed 70 kiosks on on dark.
Beginning a joke generate revenue would call a fourth quarter.
How does the build out look I understand into 2021, and you know how do you see that ramping understanding that you've had a pretty strong headwind here with a covert 19.
[noise] sure our ultimate goal for the Dark project is the end up somewhere and called 300 350.
Kiosk range. These are dual sided kiosk, so you're looking at advertising screens and a 600 to 700 range, that's pretty sizable relative to what we have deployed today.
Let's say, it's it's going to be.
Relatively.
Consistent deployment.
As you look out to the end of 2021, no certainly a different factors could impact that such as.
Yes delays in a shipment count equipment is coming from a lot of kiosks are coming from Asia. So.
Spending on Lockdowns.
Restrictions I can certainly creates challenges I'm certainly it we can't Mobilise teams have a creates challenges, but we think generally its can be pretty smooth deployment from now until you get to that end of 2021 timeframe.
Okay and ER vertex same question in terms of obviously you're behind on the appointment, but do you I mean have you had scope it created a much more of a headwind to into 2021 in terms of deployment there.
I would say that as far as you know mobilizing change to do.
The actual construction development work and Ah being able to travel to.
Due to the the development type work that said, that's certainly been a delayed the number of areas understand a little bit more challenging but as far as though.
Kinda interest were seen in.
The the product or the a solution that we're providing we're seeing strong interest in where we are progressing but yet has been a bit harder to.
Certainly.
Good things in the ground.
Its a.
It takes a lot of one of the effort and a lot of.
Work with different groups to be able to move these forward and Weve certainly seen restrictions on a physical movement, we seem to strict limitations with.
With governmental entities in their ability to process permit things like that but we are making good headway and hopefully.
You know restrictions continue left and that we can show more results here near term.
Okay. Now are you mentioned the cap rates on on acquisitions and then our understanding is the infrastructure build out on projects like dot vertex come with a much higher return potential understanding the payoff is extended due to the build out of time.
Is there any change in your view on returns vis-a-vis acquisitions.
And the build out [noise].
[noise] I'm not so much on vertex I would say on a darn near term the returns are probably going to be a little bit lower than we originally expected and that certainly is a function.
Pandemic I mean it is that.
[noise] outdoor advertising Huh type project.
But I think by the time, we have the.
All the kiosks in the ground hopefully we're in a much better environment now talking about the second half a 2021, where the economic rebound has occurred in solid footing and.
Advertising rates are.
Where we would expect him to be so near term, yeah, a little bit impact on dart, but long term.
No. The so the projects are coming in.
As we expected.
Great. Thank you George.
Absolutely.
Thank you. Our next question comes on board or leave with RBC capital markets. Your line is now.
Great. Thank you. So first question is probably for charge that was trapped and she and I and the second quarter I was wondering how much of that it's related to perhaps can affect and away after having from Actavis hand that next out he left where I see any expenses.
Travel expenses, that's where it or is that just some pick it up.
They trend that we should be looking ACA February.
Yeah from a g. they standpoint, we typically don't incur.
Travel related expenses.
The public companies since you employees or at the landmark dividend level DNA does tend to bounce around a little bit quarter to quarter, So I wouldn't which too much.
Focus on a particular quarter change I would say, though that the thing that is going to impact.
Gionee going forward is the disposition of the UK portfolio.
So with the UK portfolio, we're incurring higher.
Yeah tax costs or other kind of GE in a cost associated with having entity set up and a euro legal costs. So those type of things.
So for the quarter.
You had to probably about a.
Hundred thousand Gionee related to the UK year to date was about 200000. So when you look at the annual run rate that's more.
In the magnitude of or the numbers you would see so maybe two or 400000 on an annual basis might be a DNA savings from the disposition of the UK business for the European go.
Got it.
And in terms of that.
Got it doesn't klatsky.
Any increased them.
Competition for acquisitions or is it pretty much asked status quo and on the flip side are you seeing increased increase and testified landowners and are basically just interested and monetizing given the current environment.
Yeah, I would actually say Oh, yes to both of those.
Questions there is little bit more competition.
On the.
On the ground lease side of things certainly ground leases have performed extremely well and this type of environment. You know, obviously, we've seen a little bit of any impact.
In the.
Outdoor segment as far as the stability of those cash flows, but overall so far things have performed.
Fairly well and certainly when you look at our portfolio, how it's performed relative to a lot of other real estate asset classes or even infrastructure asset classes for that matter.
It's held up very.
Very well.
When you look at.
Oh I'm sorry for the second part of your question again was Oh.
No F and you're saying landowners naturally I kinda Timor right. So if there's just more supply because people are looking to monetize.
Yes. Thank you so yes, we actually do see more interest now in the.
The pandemic a property owners looking to dispose of what I would call for them would be kind of non core assets or assets that are not.
You know call it a key component of their business or a key component of her a investment strategy. So yeah. We are seeing more interest property owners disposing of assets.
Assets and that's across.
In the entire spectrum of what we invested.
So net net what does that did evaluation multiples that just doesn't that neutral became go outside increasing where.
Where do you see valuation multiples coming in.
I would say any polio.
Yeah portfolio wide, they're probably the same but what I would say as you probably seemed a little bit of expansion or multiples and outdoor and little bit tightening.
In the other segments the the cost of debt right now as well with a drop in whiteboard drop in.
Treasuries has certainly made it.
You know cheaper on the debt side of things and the overall returns you can get from the the assets [laughter] because it is comparable.
[noise] Ah it just.
No the cap rates have a decrease in multiple substandard a little bit what savings and on the debt side.
Okay, sorry last question, a internally that increased competition that you're saying that primer if that more from strategic struck financials for that incremental interest.
I would say it's more financial.
Got it thank you.
One other comment I'd make boras that sent him is that the you know the this is not the first financial crisis or economic crisis that we've been through remember that the management of the sponsor is been in this business you know almost 20 years. So we yeah, we do have at least a data point.
Relative to the financial crisis, and you know 2008 2009, the market so large and the number of potential transactions. So big and continues to grow year. After year. Yeah. We do not we don't have an issue with the deal flow that's not.
Even though that there is some increased competition at various points in time with the financial groups that George referred to.
There's just more they're more transactions for us to look at and you know then Oh, we've seen in the past you know the opportunity continues to grow and I think one during the crisis. The the landlords look for.
Alternative sources of liquidity. So a lot of discussions that we had 234 years ago at the sponsor level you know now come back to us and that's one of the one of the reasons. Why this is a difficult business for competition to come into because you really need to scale to a level where you can.
Cover the market in a comprehensive way to be in in a position to have those conversations.
Thank you Doug.
Thank you and we have a follow up from Rick Prentiss with Raymond James Your line is now.
Yeah, Hey, guys. Appreciate follow up noticed this quarter you broken out wireless communication versus digital infrastructure. What is your definition of digital infrastructure.
Would the.
With the vertex go in there with Dart go in there is dark go in outdoor advertisers is what is it doors, which are what goes in it whereas the new stuff going to go.
Sure. That's a good question break the the breakout or digital infrastructure is for the a handful of data centers that we own these are.
Howard shell.
Investments.
Triple net it's a very similar kind of risk return profile as our traditional ground lease type assets, but that we do technically on the ground and or the the shell at the building. So these are long generally longer term triple net lease to.
Enterprise or.
Co location.
Company.
And they are the digital infrastructure is that it's turned that.
I'd say different people on the industry will.
Define it.
The other way, but we use it for the Datacenters only the.
The I'd say the guard assets would go in outdoor advertising and vertex you would.
Putting telecom.
Okay, Good <unk> and then.
T mobile spread transaction is now closed a they've moved beyond and so boost from sprint to dish.
What have you had as far as any discussions with the new T mobile as far as what they're doing would be network integrations and what do you think impact could be and timing you guys.
Yeah. So they.
We certainly seeing activity on that the the integration side of things.
We know there there you know look selecting reviewing their.
No there at least into all the leases that they haven't.
Determining which sites is going to keep or are those that they're going to let go I'm not sure.
How much precise adults me kind of what we're going to get picked up by dish or somebody else. We don't have a lot of visibility on that but generally what we're seeing.
He is can kind of consistent with what we expected.
Theres going to be some impact to the portfolio it might be and the range of of our consolidated revenue you know and a 2% ish range, but the same time, there will be modifications on sites to accommodate the a younger the new set of equipment or the.
[music].
The changes to the existing.
Site Terry equipment so.
To incorporate the the sprint bandwidth or provide more coverage now that they have more Ah Ah demand on those sites.
But we haven't we have not seen yet the decommissioning come in.
You know they seem to be pretty proactive on it so I imagine they will start to show up and then the next year, but it will certainly take time in it it will.
It will vary as they take a different.
Markets, but imagine this is a very much a multiyear effort before a forward through with the the rationalization and Oh.
Elimination of the some some of that were done inside Sir.
[laughter], so 2% consolidated revenue potentially something like it picked up I guess or mitigated by modifications.
Nice got any decode letters, yet, but maybe comes in that 2% it might be over a multiyear maybe say three year period.
Yeah, I think that's right.
Great. Thanks for the fault.
Yep.
Thank you and I'm showing no further questions in the queue at this time I like to turn the call back to 10 Brady for any closing remark.
Thank you operator, and thank everyone for joining us. This morning I know this is a difficult time for everybody uncharted territory for sure but.
It was Georgia and I've said, we've taken what we think are the appropriate steps to position the company to withstand these challenges and take advantage of market opportunities as we as we move forward and the strategy really hasn't changed or near term focus.
Should be maintaining or flexibility to address the ongoing a effects of the health crisis and.
Any further market disruptions, but we do believe that the fundamentals of our business are strong and although it will take some time for you know aspects of the economy to recover and we shake off the the new normal.
We're confident in the future of or industries in the company so with that I want to wish you and your family's well please be careful and stay safe and we'll talk to you next quarter.
Ladies and gentlemen, thank you for your participation on today's conference. This does conclude your program you may now disconnect.
[noise].
[music].
[music].
Ladies and gentlemen, thank you for standing by and welcome to landmark infrastructure partners second quarter earnings call.
This time, all participants are they listen only mode. After the speaker presentation. There will be a question and answer session to ask the question. During this session you will need to press star one on your telephone please be advised that todays conference maybe recorded if you acquire any further assistance. Please press star zero I would now like to hand the call.
And so with your host VP of Investor Relations Marcelo Choi Sir Please go ahead.
Thank you and good morning.
I'd like to welcome to landmark infrastructure partners second quarter earnings call today, we'll share an operating financial overview of the business.
I will also take your questions following our presentation.
It's actually on the call today are 10, Brazy, Chief Executive Officer, and George Doyle, Chief Financial Officer.
Like you might all participants. So my comments today will include forward looking statements, which are subject to certain risks and uncertainties and number of factors and uncertainties could cause actual results in future periods to differ materially from our current expectations way complete discussion of these risks we encourage you to read the partnership's earnings release.
And documents on file with the FCC.
Additionally, we may refer to non-GAAP measures, such an FX, though.
So EBITDA and adjusted EBITDA during the call.
Please refer to the earnings release and public filings for definitions and reconciliations of these non-GAAP measures to their most comparable GAAP measures and with that I'll turn the call over time.
Well, thank you and good morning, everyone.
I hope, you're all doing well and managing and what are certainly challenging times.
Before we discuss this quarter's financial and operating results I'd like to provide you with a further update on the pandemics impact on our overall business as well as that of our sponsor.
As we discussed on the last earnings call our management team transition to a distributed remote workforce and implemented contingency plans that allowed us to pivot with minimal disruptions when the pandemic intensified in the first quarter.
Our sponsors headquarters in satellite offices are still closed.
And the 170 employees have been working from home since the middle of March.
At the appropriate time, well consider reopening offices with strict protocols in place, but that decision and the pace of reopening will be determined by a number of different factors with the safety of our employees as our first priority.
Our sponsor has adapted to what is now the new normal and we're extremely proud of our team and what we've accomplished says the transition.
In terms of our tenants, we continue to monitor their markets and performance and we're encouraged by what we're seeing.
We're confident that the kobin pandemic will not significantly impact our wireless communication or renewable power generation portfolio.
Although we have seen some permitting and project delays the fundamentals remain very favorable in both of these industries.
Wireless communication and power generation are not just essential services, but are absolutely critical in today's world.
Like utilities. These industry is playing essential role in modern day life, providing critical kind of activity in power and they've generally performed well in past economic downturns.
Now before I turn to the broader outdoor advertising industry I'd like to take a moment to discuss the recent sale of our European outdoor advertising portfolio in mid June.
This sale was an opportunistic transaction, resulting from an attractive unsolicited bid.
Allowing us to de lever the balance sheet and providing us with significant capital to take advantage of the acquisition and development opportunities, we expect to see in the market.
While we continue to view outdoor advertising as a very attractive segment over the long term.
This disposition significantly improved our liquidity in an uncertain environment and further positions the partnership for growth.
Well outdoor advertising near term fundamentals remain challenging due to the pandemic.
We are seeing some positive signs in the industry.
As a result of reopenings across the country and globally outdoor traffic counts have improved significantly and are approaching pre pandemic levels in a number of markets.
Since the infrastructure of our tenants is typically the larger format Billboards along major highways the increase in traffic counts isn't important metric for our tenants and their outdoor advertisers.
Outdoor advertising companies have also taken measures to improve their balance sheets and rightsize their cost structures, which should help in their ability to navigate through these unprecedented times.
They've raised cash through drawdowns of their revolving credit facilities. Some have selectively sold assets and others have directly raised capital enhancing their balance sheets and financing flexibility.
Now as we outlined last quarter, we've received a number of requests for rent relief and rent reductions from our outdoor advertising tenants.
These tenants reacted quickly as the pandemic began but it is encouraging that the number of request has dropped as we ended the second quarter and entered the first part of Q3.
At this point, it's important to remind ourselves of the following.
First it's still too early to understand the full extent and the impact of the pandemic.
On our outdoor advertising tenants and in turn our own business.
Second our long term outlook hasn't changed we're still confident that the outdoor advertising industry will fully rebound, but at this point, we just don't know the timing.
Third given the impact of the pandemic and the challenges in the economy in the second quarter.
Adults with strong.
We had minimal impact from the pandemic across our portfolio and our reported results demonstrating the high quality of our assets and their strong cash flow profile and we expect to benefit from the favorable long term trends driving our industries.
And finally, we're focusing on what we can control and believe that the measures we've taken including the recent exit from our European outdoor joint venture will better position Elam arcade to withstand today's challenges and take further advantage of market opportunities.
Turning now to our second quarter results. Despite the challenges in the outdoor advertising segment, we had another strong quarter of operating and financial results with AFFO comparable to last quarter and last year's second quarter.
These challenges in our outdoor sector were mitigated by the performance in our other business segments.
As far as our overall business strategy is concern our focus has been on our higher return development projects and some select acquisitions, but as the pandemic intensified we significantly and deliberately slowed the pace of our direct acquisitions.
Year to date through June Thirtyth, we've acquired seven assets for total consideration of approximately $1.3 million.
Those assets are expected to contribute approximately 100000 annual rents were mainly comprised of wireless communication assets.
With the European outdoor advertising joint venture sale now completed we're managing our capital to preserve liquidity and flexibility advance our development initiatives and take advantage of attractive acquisition opportunities.
With regard to our development initiatives, we continue to make progress with landmark vertex ourself wireless infrastructure offering and dart our existing program with the Dallas area of rapid transit system.
Albeit at a slower pace due to some delays related to the pandemics.
This has resulted in some asset deployments shifting by a quarter or two but we're still encouraged by the progress that we've made so far.
We recently completed the initial phase of the Dark project with 70 digital kiosks now deployed.
We expect these kiosks will start generating rental revenue towards the latter part of the third quarter.
With regard to vertex we are seeing more progress.
The vertex projects are in various stages of deployment and leasing activity continues.
Even with the expected delays, we anticipate further progress with both dart and vertex throughout the second half of this year and we'll share more details with you as we move forward.
And with that I'll turn the call over George who will provide us with a more detailed financial review of the quarter.
George.
Thank you Tim.
As Tim mentioned in his remarks, the assets in our portfolio performed extremely well in the second quarter, considering the backdrop of depend damage.
We experienced a small decline organic growth and the outdoor advertising portfolio.
But this was offset by growth across our other segments.
This is certainly at the better ended a spectrum of our expectations as we are entering into that endemic.
It's also reflective of high quality of our portfolio.
We are likely to see additional impacts to our portfolio in Q3.
We also expect that the overall portfolio will benefit from the contractual escalators.
Renewal rates on our existing leases.
Before we get into too much detail on results for the second quarter and why didn't discuss the disposition of the European outdoor advertising joint venture.
That occurred in June.
This disposition provided us with an opportunity to raise capital de lever environment, where the capital markets are generally not accessible on attractive terms.
While the majority of the proceeds were used to pay down our line of credit.
Our debt to EBITDA level under the revolver.
Was reduced to slightly less than three times, which is well below the covenant threshold of eight times.
Turning to the accounting impact from this transaction.
For all periods presented.
The disposition is treated as discontinued operations.
With the related assets and liabilities reclassified to assets and liabilities held for sale on the consolidated balance sheets.
And the related operating results reported as income from discontinued operations.
The consolidated statement of operations.
Turning to the rest of the portfolio in continuing operations.
The second quarter of 2020.
Rental revenue was 13.8 million.
Just 1% higher year over year.
The growth in revenue was driven from a number at least amendments.
Well as the customary contractual lease escalators and the impact from accretive acquisitions completed within the last 12 months.
Partially offsetting these increases.
As lower rental revenue from the outdoor advertising assets.
The lower rental revenue from our outdoor advertising segment.
Was due primarily to rent reductions and abatements.
And lower percentage rent from leases with revenue sharing provisions.
Excluding red total revenue from our European outdoor advertising portfolio.
It is included in discontinued operations.
Outdoor advertising rental revenue declined by approximately 250000.
Or approximately 6%.
Compared to the first quarter 2020.
During the second quarter 2020.
Revenue from leases.
With revenue sharing provisions declined by approximately 200000 from the first quarter.
2020.
After the completion of the disposition of our European outdoor advertising joint venture.
Our outdoor advertising revenue concentration in continuing operations decreased to approximately 27% of total revenue for the quarter.
And while we expect further requests for rent reductions in abatements.
We are optimistic that the worse is behind us.
And that we will be able to navigate through these challenges.
Turning to SSL and at that though.
FFO per diluted unit was 19 cents this quarter.
Compared to seven says in the second quarter of last year.
As we have discussed in prior calls.
FFO can fluctuate quarter to quarter.
Depending on the change in the fair value of our interest rate hedges.
As was various other items, including foreign currency transaction gains and losses.
After that well.
Which excludes these gains and losses on our interest rate hedges.
And other items.
33 cents per diluted unit this quarter compared to 33 cents and the second quarter of last year.
Now turning to our balance sheet.
We ended the second quarter with only 58 million about scanning borrowings under our revolving credit facility.
As we've paid down the significant.
Portion.
Proceed to the disposition of our European outdoor advertising joint venture in June.
Nearly 100% of our outstanding debt, it's either fixed rate debt.
Our borrowings have been fixed interest rate swaps.
Despite the recent turmoil in the debt markets, we continue to see very attractive financing rate, it's far asset classes.
And we have no scheduled maturities until November 2022.
In terms of liquidity.
We ended the quarter with approximately 6 million cash.
In $392 million Undrawn borrowing capacity under our revolving credit facility.
Such compliance with certain covenants.
As I previously mentioned our debt to adjusted EBIT ratio on a revolving credit facility.
Was less than three times at the end of the quarter.
Regarding our distribution policy.
As we discussed last quarter.
We are in an unprecedented in challenging market environment.
And have been focused on preserving liquidity and enhancing our financial flexibility.
While we have seen indications that the outdoor sector is recovering.
Including rising outdoor traffic patterns.
We are still in a period of uncertainty.
Certain regions across the country have experienced a resurgence and the number of buyers cases.
Resulting in some additional restrictions on businesses and movement.
Many individuals are still working from Paul.
Next in social business same.
Certain businesses remain pretty close to the public.
Well, we are encouraged by the improvements in operating conditions for the outdoor advertising sector, we're still waiting for more clarity.
Assets.
Lord maintained the distribution of 20 cents per unit this quarter.
Based on this level of distribution.
Our distribution coverage ratio for the quarter was 1.66 times.
Just a slight increase over the first quarter of 2020.
You will continue to monitor the impacted the pandemic.
In general economy on our portfolio.
Well look to reassess the distribution level as activity in the economy starts to normalize independent make is behind us.
In summary.
Despite the near term challenges within the outdoor advertising industry.
Our portfolio continues to perform well.
As seen in the solid results, we posted in the quarter.
With lower leverage on the balance sheet, some dry powder post the disposition of the European outdoor advertising portfolio.
We believe we are positioned to navigate through this challenging environment.
Towards making some accretive acquisitions.
In addition, we continue to make progress with our development projects.
And we anticipate additional development assets to be placed into service in the second half on each line.
We will now take your question.
Thank you as a reminder to ask a question you'll need to press Star then one on your Touchtone telephone to withdraw your question from the Q. Please press the pound key.
Please standby will be compiled the culinary roster.
Our first question comes a Ric Prentiss with Raymond James Your line is now open.
Thanks, Hi, guys glad to hear everything sounds like they're doing okay employees family owned business actually.
Yeah.
Hi, Rick.
Hey.
A couple of questions birds.
On the outdoor space.
You mentioned rent relief required payments.
The $250000 down quarter over quarter, 6%.
Does that include the revenue share minus 200 as well.
[noise] lot as the.
Why did the impact from some of the recent amendments on the leases or reductions in rent are going to show up in.
Q3, so theres a little bit of the impact this quarter, but it takes a little bit time to process the amendments.
So most of the decline in outdoor advertising. This revenue this quarter was attributable to those percentage rent leases in a little bit was attributable to.
Okay. The other factors.
So so as we think through of what you've seen June into July how should we think about what that way.
Rent abatement rent reduction magnitude might be quarter to quarter from twoq to threeq.
Sure I would expect that.
The impact.
Reductions that we given to our tenants on the outdoor side of things.
Would result in a decline of about 50000 might be little bit more depending on how things proceed.
But portion of that will be offset by escalators on the other.
Portion of the leases that.
Our hitting their annual escalator during the third quarter.
Got just Thats, what you meant by the worst as the idea that third quarter dig a little better dynamics than to be there versus one.
Yeah, we think so long as we don't enter into another severe locked in a period or the economy continues to substantially deteriorate.
Starting to see yeah, we're starting to see as some of the announcements from the outdoor companies this quarter.
What.
The generally saying.
Based on the limited results we've seen this that the middle of Q2 was the worse things are starting to rebound and they're optimistic that as you look forward over the remainder of.
2020 that their revenue is going to continue to grow.
We're also in an election year and.
We should start to see more political spending here in the latter part of the year So number of factors.
Kind of support.
Better operating conditions for the outdoor companies, but again, it's all dependent upon.
Whether we get into another severe locked down or the economy.
Because the other direction honest.
And just make sure I understand the accounting because I I just play when TV is going to be or.
When you think of the asset sale in to Q.
What is it related they have let eight AFFO per unit would have been on a continuing basis in other words. When you reported very similar AFFO Twoq you versus one to even though you sold the portfolio is that what we should be thinking about the AFFO.
Going forward and the same maybe with the adjusted EBITDA line.
Sure, Yes, there was.
A lot of certainly a lot of activity during the quarter.
We obviously sold the the outdoor portfolio.
In Europe, we we terminated a number hedging arrangements that for now were lower Levered. When you kind of factor all those things then from.
Okay.
From an FFO standpoint.
Yes that looks like it's going to be slightly dilutive.
Looking forward as a run rate results would be two different from what they were this quarter, but then again yet factor in the impact of the pandemic and certainly.
Any sort of capital that that.
We ended up deploying so this was a very attractive disposition from our standpoint, because similar to what we did in 2018.
It's not very dilutive.
And lowered our leverage substantially to be able to redeploy already.
Yes, and turn the pandemic hunker down potentially here for a period of time.
On the.
That EBITDA side of things.
We do in the yet the Q breakout what the operations from discontinued operations are so we have to detail on there, but roughly when you look at the.
The quarter at the amount.
EBITDA impact.
And 1.2.
One point.
3 million dollar impact per quarter essence.
The the sale.
The portfolio took place in the middle of June it really didn't have too much an impact on this quarter, but that's roughly what the big impact would be engine.
As you look forward.
Okay.
And obviously your your coverage ratio is significant.
Nice to be above one, but you guys are well well above one.
You mentioned I think a couple of times in the prepared remarks about opportunities that might work looking forward to acquisitions, how should we think about the pacing what you might be seeing out there and the ability to put that capital to work and what kind of cap rates.
Sure, So where we're still seeing an active.
I would say acquisition or M&A type market deals are getting done and those are predominantly going to be in the.
Telecom digital infrastructure side of things, we don't see quite as much going on in outdoor as you would expect since its really impact at the moment and then renewals as well.
Those assets have not been impacted by the pandemic, but development activity.
And a lot of areas just come to us screeching halt so.
Looking forward over the next year.
Visibility on the telecom Tivoli digital infrastructure type segments.
Deals can get done.
On the outdoor side of things, we expect opportunities will.
Come up, but we just havent seen any and we're not we're not really.
Interest is near term on.
Folksy focusing heavily on outdoor type activities, but it's going to as far as what we end up requiring is really going to spend.
<unk>.
Well, what we find attractive relative to the overall backdrop of the environment. We're in.
From a cap rate perspective.
Depending on.
On the asset class in particular.
Assets are looking at cap rates anywhere in the five or.
Maybe eight range now the.
The five range is not particularly attractive for us.
It's more where the telecom type assets would trade a large portfolio, but there there may be select opportunities at our.
Towards the middle to higher into that range.
Okay.
Well there had been.
Reports out there that the parent level maybe is.
Exploring the opportunities sale can you talk to that at all about something only on the.
And how it affects.
The landmark public stock.
Sure Yeah, I can't really comment.
About anything going on.
All such a transaction at landmark dividend, but I can say that so.
Yes, a landmark dividend.
As it.
Yes, it has a ongoing.
Acquisition and operating.
Platform, it's kind of continuing as normal in this type of environment, we're seeing healthy.
Acquisition activity, where both on the buy side of things, we see lots of interest by institutional.
Groups in the asset class on the.
The.
Sell side side of things, but.
For the most part I would say, it's it's business as normal and there is.
Some sort of transaction at that lump landmark dividends it doesn't impact the.
The partnership itself.
Would be a separate.
Entity.
Okay. Thanks to continued savings healthy low rise.
Alright, Thanks, Rick you 72.
Thank you and as a reminder to ask a question you will need to press Star then one on your touched on telephone. Our next question comes from Liam Burke with B. Riley FBR. Your line is now over it.
Thank you and good morning on the projects.
Completed 70 kiosks on on dark.
Beginning in June and generate revenue will call a fourth quarter.
How does the build out look I understand into 2021, and you know how do you see that ramping understanding that you've had a pretty strong headwind here with cobot 19.
Sure our ultimate goal for the Dark project is the end up somewhere and call. It 300 350.
Kiosk range. These are dual cited kiosk so you're looking at advertising screens and that the 600 to 700 range, that's pretty sizable relative to what we have deployed today.
Let's say, it's it's going to be.
Relatively.
Consistent deployment.
As you look out to the end.
2021.
Certainly a different factors could impact that such as.
Yes delays in.
Shipment.
Equipment is coming from a lot of kiosks are coming from Asia. So.
Spending on Lockdowns and.
Restrictions I can certainly creates some challenge is certainly it.
We can't Mobilise teams have attrition challenges, but we think generally its can be pretty submitted deployment from now until you get to that end of.
2021 timeframe.
Okay and vertex same question in terms of obviously, you're behind on deployment, but do you I mean have you.
Lets go of it created a much more of a headwind to a 2021 in terms of deployment there.
I would say that as far as mobilizing change to do.
The actual construction development work.
And.
Being able to travel to.
Due to the development type work that said, that's certainly been delayed the number of areas and spend a little bit more challenging but as far as the.
Kinda interest we're seeing in there.
The the product or the a solution that we're providing we're seeing strong interest and where we're progressing but yet has been a bit harder to.
Certainly.
Good things in the ground.
Its a.
It takes a lot of lot of effort and a lot of.
[noise] work with different groups to be able to move these forward and Weve certainly seen.
Restrictions on.
Physical movement, we seem to strict limitations with.
With governmental entities in their ability to process.
Permits things like that but we are making good headway and hopefully.
Restrictions continue to lift and that we can show more results here near term.
Okay. Now you mentioned your cap rates on on acquisitions and then my understanding is the infrastructure build out on projects like dot vertex come with a much higher return potential understanding the payoff is extended due to the buildout.
Is there any change in your view on returns views of the acquisitions.
And the build out [noise].
Not so much on vertex I would say on a darn near term the returns are probably going to be a little bit lower than we originally expected and that certainly is a function.
The pandemic I mean, it is that.
[noise] outdoor advertising.
Type project.
But I think by the time, we have the.
All the kiosks in the ground hopefully we're in a much better environmental trying but the second half 2021, where the economic rebound has occurred and solid footing and.
Advertising rates.
Our.
Where we would expect and to be so near term yeah, a little bit impact on chart, but long term.
Do you said the projects are coming in.
As we expected.
Great. Thank you George.
Absolutely.
Thank you. Our next question comes on board or leave with RBC capital markets. Your line is now.
Great. Thank you. So first question is probably front charge, there was trapped and she M&A and the second quarter I was wondering how much of that is related to perhaps benefits and away. After having from Actavis has done that got E la where I see any expenses.
Travel expenses, that's where it or is that just seems like it at that they trend that we should be the lucking ACA February.
Yeah from a gionee standpoint, we typically don't incur.
Travel related expenses.
The public companies since you employees or at the landmark dividend level DNA does tend to bounce around a little bit quarter to quarter. So I wasn't switch.
Too much.
Focus on a particular quarter change I would say, though that the thing that is going to impairment.
Gnh going forward is the disposition of the UK portfolio.
So with the UK portfolio, we're incurring higher.
Yes tax costs.
No other energy in a cost associated with having entity set up and a euro legal costs. So those type of things.
So for the quarter.
You had to probably about a.
Hundred thousand DNA related to the UK year to date was about 200000. So when you look at the annual run rate that's more.
In the magnitude of the numbers you would see so maybe two to 400000 on an annual basis might be.
Hey savings from the disposition of the UK business or the European gas.
Got it.
And in terms of that.
That's how dozens landscape.
Any increased.
Competition for acquisitions or is it pretty much a status quo and on the flip side are you seeing increased increase and test by landowners and are basically just interested and monetizing given the current environment.
Yeah, I would actually say.
Yes to both of those.
Questions there is little bit more competition.
On the.
And the ground lease side of things certainly ground leases have performed extremely well and this type of environment, obviously, we've seen a little bit of any impact.
And the outdoor segment as far as the stability of those cash flows, but overall so far things have.
Formed.
Fairly well and certainly when you look at our portfolio, how it's performed relative to a lot of other real estate asset classes or even infrastructure asset classes for that matter.
Held up.
Very well.
When you look at.
[music].
Im sorry for the second part of your question again was Oh.
Oh, yes, youre, saying landowners actually I kind of T anymore or is there is just more supply because people are looking to monetize.
Yes. Thank you so yes, we actually do see more interest now in the.
The pandemic a property owners looking to dispose what I would call for them would be kind of non core assets or assets that are not.
[music].
You know call it a key component of their business or a key component of our investment strategy. So yeah. We are seeing more interest property owners disposing of.
Assets and that's across.
In the entire spectrum or what we invest in.
So net net what does that did evaluation multiples as it just doesn't that neutral butane both sides.
Increasing where.
Where do you see valuation multiples coming in.
I would say I put any oil.
Yeah portfolio wide, they're probably the same but what I would say as you've probably seen a little bit of.
Expansion or multiples and outdoor and little bit tightening and the other signals the the cost of debt right now as well with the drop in whiteboard drop and.
Treasuries has certainly made it.
Cheaper on the debt side of things and the overall returns you can get from the assets [laughter] Susan is comparable.
It yes.
The cap rates have a decrease in multiples expanded a little bit what savings that on the debt side.
Okay, sorry last question.
No that increased competition that you're saying that that permit is that more from strategics, our financials for that incremental interest.
I would say is more financial.
Got it thank you.
One other comment I'd make boras that Jim is that the you know the this is not the first financial crisis or economic crisis that we've been through.
Over the the management of the sponsor is been in this business.
20 years. So we we do have at least a data point relative to the financial crisis and you know 2008 2009, the market so large and the number of potential transactions, So big and continues to grow year after year.
We do not we don't have an issue with the deal flow that's not.
Even though that there is some increased competition at various points in time with the financial groups that George referred to.
There's just more they're more transactions for us to look at and then.
We've seen in the past.
Between the continues to grow and I think one during the crisis.
The the landlords look for.
Alternative sources of liquidity. So a lot of discussions that we had 234 years ago. The sponsor level now come back to us and that's one of the one of the reasons why this is a difficult.
Business for competition to come into because you really need to scale to a level where you can.
Cover the market in a comprehensive way to be in in a position to have those conversations.
Thank you Doug.
Yes.
Thank you and we have a follow up from Rick Prentiss with Raymond James Your line is now.
Yeah, Hey, guys. Appreciate follow up noticed this quarter, you broken out wireless communication versus digital infrastructure.
What is your definition of digital infrastructure with the.
With the vertex go in there with Dart go in there is dark go in outdoor advertisers is what is digital infrastructure what goes in it whereas the new stuff going to go.
Sure. That's a good question break the the breakout digital infrastructure is for the a handful of Datacenters that we own these are.
Howard shell.
Investments.
From that.
Very similar kind of risk return profile as our traditional ground lease type assets, but that but we do technically on the ground and or the the shell at the building. So these are long generally longer term triple net lease to.
Enterprise or.
[noise] co location.
Company.
And the digital infrastructure is that it's turned that.
I'd say different people in the industry will.
Define it.
The other way, but we use it for the.
Datacenters only the.
The I would say guard assets would go in outdoor advertising and vertex you would.
Put in telecom.
Okay that helps and then.
T mobile spreads transaction is now closed.
Moving on and so we would spread to dish.
What have you had this was a discussions with the new T mobile as far as what they're doing with the network integrations and what do you think impact could be and timing you guys.
Yes, so they oh.
We certainly seeing activity on that the.
The integration side of things.
We know there there look selecting ERV reviewing there.
Their lease inch although leases that they haven't.
Determining which sites is going to keep or are those if they're going to let go I'm not sure.
How much the sites adults my kind of let go we're going to get picked up by fish or somebody else. We don't have a lot of visibility on that but generally what we're seeing.
Yes can kind of consistent with what we expected.
Theres going to be some impact to the portfolio it might be in the range of.
Of our consolidated revenue.
2% ish range, but the same time, there will be modifications on sites to accommodate the younger the new set of equipment or the.
The changes to the existing.
Site Terry equipment.
To incorporate the the sprint bandwidth or.
Provide more coverage now that they have more.
Demand on those sites.
But we haven't we have not seen yet the decommissioning come in.
They seem to be pretty proactive on it. So I mentioned they will start to show up in the next year, but it will certainly take time in it it will.
It will vary as the tax in different.
Markets, but I mentioned this is a very much a multiyear effort before or through with the the rationalization and Oh.
Elimination of this on some of the redundant side Sir.
So 2% consolidated revenue potentially some might get picked up by dish or mitigated by modifications.
Nice got any decode letters, yet, but maybe close to that 2% it might be over a multiyear maybe say three year period.
Yeah, I think thats right.
Okay, great. Thanks Walt.
Yep.
Thank you and I'm showing no further questions in the queue at this time I'd like to turn the call back to 10 Brady for any closing remark.
Thank you operator and.
Thank you everyone for joining us this morning, and I know this is a difficult time for everybody uncharted territory for sure but.
It was Georgia and I've said, we've taken what we think are the appropriate steps to position the company to withstand these challenges and take advantage of market opportunities as we as we move forward and the strategy really hasnt changed or near term focus.
Should be maintaining our flexibility to address the ongoing a effects of the health crisis and.
Any further market disruptions, but we do believe the fundamentals of our business are strong and although it will take some time for.
Aspects of the economy to recover and we shake off the the new normal.
We're confident in the future of or industries in the company so with that I want to wish you and your family as well please be careful and stay safe and we'll talk to you next quarter.
Ladies and gentlemen, thank you for your participation on today's conference. This does conclude your program you may now disconnect.