Fitch to Rate Landmark Infrastructure Series 2016-1; Presale Issued

CHICAGO--(BUSINESS WIRE)-- Fitch Ratings has issued a presale report for LMRK Issuer Co. LLC's Landmark Infrastructure Secured Tenant Site Contract Revenue Notes, Series 2016-1.

Fitch expects to rate the transaction and assign Rating Outlooks as follows:

--$103,900,000 series 2016-1, class A, 'A-sf'; Outlook Stable;

--$29,200,000 series 2016-1, class B, 'BB-sf'; Outlook Stable.

The expected ratings are based on information provided by the issuer as of May 5, 2016.

The transaction is an issuance of notes backed by mortgages representing not less than 95% of the annualized net cash flow (ANCF) and a pledge and a perfected first-priority security interest in 100% of the equity interest of the issuer and the asset entities and is guaranteed by the direct parent of LMRK Issuer Co. LLC (LMRK, or the issuer).

The ownership interest in the sites consists of perpetual easements, long-term easements, prepaid leases, and fee interests in land, rooftops, or other structures on which site space is allocated for placement and operation of wireless tower and wireless communication equipment and outdoor advertisements (billboards).

The ratings reflect a structured finance analysis of the cash flows from the ownership interest in site assets, not an assessment of the corporate default risk of the ultimate parent.

KEY RATING DRIVERS

Trust Leverage: Fitch's NCF on the pool is $14.4 million, implying a Fitch stressed debt service coverage ratio (DSCR) of 1.22x (inclusive of amortization credit). The debt multiple relative to Fitch's NCF is 9.2x, which equates to a debt yield of 10.9%.

Long-Term Easements: The ownership interests in the sites consist of 90.6% easements, 6.6% assignment of rents, and 2.9% fee. The weighted average remaining life of the ownership interest is 79.7 years (assumes 99 years for perpetual easements and fee sites).

Billboard Assets: The transaction includes 167 billboard site contracts (15.8% of revenue). The value of billboard assets is heavily dependent on permits and licenses, which are controlled by the billboard operator (not the owners of the ground/easement), and thus, the ultimate recoverability of these assets is strongly dependent on the billboard operator. Expenses associated with permitting and constructing billboards are relatively high, therefore the likelihood of renewing on ground leases is high.

Scheduled Amortization Paid Sequentially: The transaction is structured with scheduled monthly principal payments that will amortize down the principal balance 15% by the anticipated repayment date (ARD) in year five, reducing the refinance risk.

RATING SENSITIVITIES

Fitch performed several stress scenarios in which Fitch's NCF was stressed. Fitch determined that a 49% reduction in Fitch's NCF would cause the notes to break even at 1x DSCR on an interest-only basis.

Fitch evaluated the sensitivity of the ratings for series 2016-1 class A, and a 10% decline in NCF would result in a one-category downgrade, while a 14% decline would result in a downgrade to below investment grade. The Rating Sensitivity section in the presale report includes a detailed explanation of additional stresses and sensitivities.

Key Rating Drivers and Rating Sensitivities are further described in the accompanying presale report. The presale report is available to all investors on Fitch's web site 'www.fitchratings.com' or by clicking on the link.

There was one variation from the 'Criteria for Analyzing Large Loans in U.S. Commercial Mortgage Transactions' related to the leased fee collateral with billboard improvements, since the criteria does not include billboards as a defined property type. Fitch views the leased fee collateral with billboard improvements to have characteristics consistent with assets addressed in the 'Criteria for Analyzing Large Loans in U.S. Commercial Mortgage Transactions (August 2015)' including mortgaged real property with full title insurance, commercial real estate leases to third parties, durability of net cash flow, and structural features (servicer advancing, lockbox, cash traps, etc.). In a worst case scenario, the difference in ratings for the senior class would be three rating notches lower if the leased fee billboard collateral was excluded entirely, while the subordinate class would be non-rated.

DUE DILIGENCE USAGE

No third-party due diligence was provided or reviewed in relation to this rating action..

Additional information is available at www.fitchratings.com.

Landmark Infrastructure (Secured Tenant Site Contract Revenue Notes, Series 2016-1)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=879939

Applicable Criteria

Criteria for Analyzing Large Loans in U.S. Commercial Mortgage Transactions (pub. 27 Aug 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=870009

Criteria for Analyzing U.S. Wireless Tower Transactions (pub. 19 Nov 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=873961

Global Structured Finance Rating Criteria (pub. 06 Jul 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=867952

Related Research

Landmark Infrastructure Secured Tenant Site Contract Revenue Notes -- Appendix

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=881773

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=1004480

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1004480

Endorsement Policy

https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

View source version on businesswire.com: http://www.businesswire.com/news/home/20160513005762/en/

Fitch Ratings
Primary Analyst
Adam J Ott
Director
+1-312-368-2094
Fitch Ratings, Inc.
70 West Madison Street
Chicago, IL 60602
or
Secondary Analyst
David Ro
Director
+1-312-368-3132
or
Committee Chairperson
Robert Vrchota
Managing Director
+1-312-368-3336
or
Media Relations:
Hannah James, New York, + 1-646-582-4947
Email: [email protected]

Source: Fitch Ratings

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