Good day, ladies and gentlemen and welcome to the Third Quarter 2018 Fortress Transportation and Infrastructure Investors LLC Earnings Conference Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to introduce your host for today’s conference, Alan Andreini. Sir, you may begin.

Thank you. I would like to welcome you to the Fortress Transportation and Infrastructure third quarter 2018 earnings call. Joining me here today are Joe Adams, our Chief Executive Officer and Scott Christopher, our Chief Financial Officer. We have posted an investor presentation and our press release on our website, which we encourage you to download if you have not already done so. Also, please note that this call is open to the public in listen-only mode and is being webcast. In addition, we will be discussing some non-GAAP financial measures during the call today, including FAD. The reconciliations of those measures to the most directly comparable GAAP measures can be found in the earnings supplement. Before I turn the call over to Joe, I would like to point out that certain statements made today will be forward-looking statements, including regarding future earnings. These statements by their nature are uncertain, and may differ materially from actual results. We encourage you to review the disclaimers in our press release and investor presentation regarding non-GAAP financial measures and forward-looking statements, and to review the risk factors contained in our quarterly report filed with the SEC. Now, I would like to turn the call over to Joe.

Thank you, Alan. To start the call, I'm pleased to announce our 14th dividend as a public company and our 29th consecutive dividend since inception. The dividend of $0.33 per share will be paid on November 27, based on a shareholder record date of November 16. Now let's discuss the numbers. The key metrics for us are adjusted EBITDA and FAD or funds available for distribution. Adjusted EBITDA for Q3 2018 was $58.8 million compared to Q2 of 2018 of $52.2 million and Q3 of 2017 of $37.8 million. FAD was $43.6 million in Q3 versus $44.8 million in Q2 of 2018, and $73.6 million in Q3 of 2017. Normalized FAD without sale proceeds were $39.6 million in Q3 versus $24.4 million in Q2 and $16.7 million in Q3 of last year. During the third quarter, the $43.6 million FAD number was comprised of $71.6 million from our equipment leasing portfolio, negative $10 million from our infrastructure business and negative $18 million from corporate. The overall infrastructure number improved from the prior quarter by $1.2 million, primarily due to improved results at ports and terminals. Corporate FAD was slightly higher than Q2, primarily due to an increase in interest expense, resulting from the new $300 million bond issuance we did in September, and offset by lower corporate expenses. Now, let me turn to Aviation first. Our Aviation business continues to exceed our expectations for both growth and profitability. Aviation adjusted EBITDA was $72.5 million versus last quarter of $64.8 million. As such, our actual annualized Aviation EBITDA excluding gains on sale is now approximately $290 million per year, a new record. We closed on $110 million of new investments in Q3, or approximately $300 million year-to-date through September 30. And we have also closed another $60 million since September 30…

Thank you Joe. Operator, you may now open the call to Q&A.

[Operator Instructions] Your first question comes from Justin Long with Stephens. Your line is open.

Thanks. Good morning and congrats on the quarter. So we're continuing to see really strong results from aviation. So I wanted to get your updated thoughts on how you see this segment progressing longer term. What are you targeting for the optimal size of this business, and what do you see is a reasonable target for profitability?

Well as I’ve said before, we don't like to budget investment volumes, but I would say overall the market opportunity is bigger. And I can give you a couple ways I think about it. Today, if you just look at the engines that are on the 737s and the A320s today that are on aircraft that are 10 years or older, there's about 10,000 of those engines. And that tends to be our target market and most of those engines are serviced in the aftermarket, in other words, not by the original equipment manufacturers. That market itself is going to grow from about 10,000 engines today to about 20,000 engines over the next 10 years. So it's a huge market now and it's going to grow every year, and the cost of shop visits is going to go up. So adjusted on the asset side alone, my belief is that our relevant market opportunity is quite a bit bigger than we originally expected. But again, I'm not -- I don't want to say it's a precise number of what we're going to invest because we're very returns driven. And as I mentioned, our return profile is we're exceeding our return profile right now, and so I'd like to keep doing that. The other thing that we've really just started to scratch the surface on is I think our portfolio of products, which we think we can deliver $1 million to $2 million of savings per shop visit, we've just begun to try to figure out how to market that to other parties like airlines and others who are desperately looking for solutions to an increase in maintenance costs. And so we believe, that we'll be able to approach a market that we hadn't really previously thought about, which is partnering or working with airlines to share some of the benefits and the savings and to grow our non-asset based component of our business. And so that's a whole new area of opportunity that I think we were just beginning to realize we could capitalize on. So I think that the growth opportunity for the two of those is actually quite a bit bigger than I would have said a year ago.

Okay. That's helpful. And secondly, I was wondering if you could review some of the numbers around the power plant you just talked about it briefly, but since we're getting closer to that opportunity materializing, could you help us think about the capital flows as you sell the 49% minority stake and eventually what the EBITDA opportunity looks like based on the percentage ownership that you're going to retain.

Sure. So we do have pretty good visibility. We've negotiated most of the structure and the terms of the contract. So we expect that the completed power plant will produce between probably 115 million and 120 million of annual EBITDA. And if you look at comparable transactions in the space using a 12 multiple in some cases higher is not an unrealistic assumption. So you could see when the plant is ready to deliver a total value of call it $1. 4 billion to $1.5 billion, that's out in 2021, so that's two and a half years out. So if you had $600 million of debt on that that would be worth $800 million to $900 million for the equity. And if you factor in time value of money and you discount that back to the first quarter this year, we think it could that equity value could be $400 million to $500 million and thus 49% of it would be worth half of that. So very nice economics, and again, we think there's upside in that power plant. So we think we should we could potentially get a higher multiple given that we have the ability to substitute on tenant, on-site users into the -- to increase the profitability but we'll see. We'll see about that, but I think there could be upside as well and we're still going to own half of it, and we'll have taken all of our money out of the whole and paid for the whole terminal.

Okay. Great. Very helpful. I appreciate the time today.

Thanks.

Thank you. Your next question comes from Chris Wetherbee with Citi. Your line is open.

Hey. Thanks. Good morning guys. I wanted to start on Jefferson, and maybe touch a little bit on the crude by rail economic. So maybe two questions. First, I know you only got a month of the new deal so we're going to see a full sort of quarter run rate -- run rate around that, can you give us some sense of maybe what that business sort of looks like from a revenue perspective? And then as you think about how the economics of crude by rail has maybe evolved for you at Jefferson, spreads certainly have blown out to pretty meaningful levels at this point and I'm curious if what we used to contemplate for the appropriate economics for Jefferson back when you guys came public during the first sort of wave of crude by rail has evolved and changed materially given sort of how pronounced those spreads are in 2018/2019.

Yes. I think they have. I mean, basically on the crude by rail, so there's two types of business that we do. One is where we arrange the entire logistics chain and actually what we do is we work with the producers in Canada and then simultaneously execute sales in the Gulf. So we can capture a much bigger piece of the economics and as you point out given the spread widening, it's quite a bit better than the other business which we do, which is really a more of a traditional terminal relationship where you charge a fixed price per barrel to unload crude that somebody else owns. So in the fourth quarter, we'll do both of those. And, but by far the more profitable business is where we arrange the whole supply chain, and that's why I mentioned we only did three trains in September. We expect to do four in November, hopefully six by December and then all of next year. And I -- I don't think we're forecasting revenues yet on that. It's -- I will just say it's quite good, but we're not going into detail at the moment on that. But that's really -- that's the evolution and it's quite a positive development.

Okay. But it's fair to say that given the spread there is some benefit of the spreads that can accrue to Jefferson?

Absolutely.

Okay. Got it. I wanted to follow up on your comments around the NGL loadings. I think, long ridge to Repauno, it seems like an interesting business considered it’s captured between two of your assets. I just wanted to see if you could expand a little bit on that opportunity sort of what it looks like from a volume perspective maybe what it could become?

Sure. So as I mentioned, we're looking loading directly from rail to ship starting in 2020. And that is, what we found is there's a tremendous amount of demand from Europe for propane, primarily from these PDH plants that are come online, a number of them have started up and they're looking for supply sources and when they look around the world you can source from the Gulf of Mexico or from the Middle East and there's only one other option from the East Coast and that's the Mariner [ph] East market sub terminal, and that has had fits and starts with getting its pipeline on line. And so the East Coast, first of all the Marcellus is the cheapest, one of the cheapest sources of propane in the world, and so if you want to get Marcellus propane you either get it through the East Coast, which is closer, shorter, and cheaper or you go through the Gulf, which is longer and slower. So we like faster and cheaper, and therefore if we arrange the full supply chain we should be able to again capture bigger portion of the economics and we see very strong demand for long term contracts also. This is -- when these plants are constructed and built, they're meant to run. So people need supply and they need diversification of supply. So it's a very good fit for long term contract. So and the volumes in 2020 and 2021, before we have larger caverns available, we'll be looking probably at a unit train a day sort of max, but that could generate 25 million to 30 million of income – of EBITDA in those two years. And then as we mentioned previously, we're very optimistic about the availability of underground granite storage cavern. We've done the engineering and what's the right word, geological work to know that we can use that. So in 2022, we expect to have millions of barrels of storage, which will allow us to increase the throughput significantly and as we said previously, 3 million barrels of storage should produce roughly 150 million of EBITDA. So that's kind of the trajectory of that business which we feel pretty good about.

Okay, that's very helpful. Then one last one if you let me. On the rail side CMQR, I guess generally you've been in the process of acquiring assets feels like maybe that's an opportunity that potentially is the best is you move forward. Let's just sort of play that out assuming that does happen. [Indiscernible] to put the -- the cash, the capital to work, is it primarily aviation, because the yields there are just really, really strong or would that tend to stay, that infrastructure capital tend to stay with an infrastructure?

No. I mean, I think that if we do sell that we might as I mentioned we could also sell half interest in Repauno we'd be generating cash from infrastructure. So, and the project expansions at Repauno I think we can 100% financed with debt. So I don't see a big need of equity for infrastructure. It would more likely go into aviation.

Okay. That's helpful. Thanks for the time this morning. I appreciate it.

Yes.

Thank you. Your next question comes from Devin Ryan with JMP Securities. Your line is open.

Great. Good morning and congratulations fantastic quarter. My first question on Long Ridge, just given that you've already negotiated all the output I just love some perspective around when you would maybe think about trying to increase the capacity there and really the process around that? I know we've spoken about that before. And then, kind of the second part of it is with respect to the sale of up to a 49% interest appreciate the perspective on potential value. Are those conversations already occurring around that, just given kind of where you are on the negotiations of the output? And then any sensing for demand and then would this be financial buyers or strategic buyers?

So there's a lot of people that invest in power plants infrastructure. It's a popular infrastructure category. So there's a pretty ready market of buyers. It's both domestic and foreign. So it's a relatively known universe. It's not a pioneering activity. And we've had preliminary conversations, but and until you have everything buttoned up, and you're signed, it's not really fruitful to have more detailed conversations. So we're sort of its all hands on deck to get this thing closed this quarter and then we'll turn to the equity side. But we have, we're not uneducated about what we think the process will be and the counterparties could be.

Got it. Okay that's very helpful. And then just Jefferson, just given what's going on in Canada and just the broader macros that you walk through I mean that there's a lot of balls in the air and a lot of things that you should be excited about. I'm just curious, if with everything that's kind of been moving in your favor from a macro perspective, if the opportunity is there to maybe accelerate some of the development. I know, we've kind of walked through an outline of a timeline on recent calls just around kind of that asset being kind of developed a bigger picture and how that will evolve. I mean, can you accelerate and what can you accelerate just based on how positive the macros have been?

We can and we certainly when we're engaged with refineries in the area and customers and exporters, we certainly present an opportunity for them to take advantage of that. One thing is dock space on the Gulf is pretty limited. So, we have we've started construction on the second deep water dock. And almost all of these items are its almost always six to nine months, 12 months lead time. So, it's you have to really do all the work in advance before you're ready. But yes, the dock space is a big asset. We've also got plans in development where we're doing the engineering and permitting for additional two deep water docks. And we can present that as well as the pipeline capacity, the available land, the storage, we have a very complete offering. So, I think yes we can accelerate and we will accelerate if the situation if the right circumstances come out. And it's important to be able to go in the meetings ready to saying we've done the work and we're prepared. Is otherwise people tend to be a little bit dismissive if you've got a long list of things that are open?

Yes, got it, okay great. Just last quick one here just in aviation, just for our models. On the utilization rates, could you remind us just how we should be thinking? I know there's a lot of moving parts and the macros have been quite good there but just as we're thinking about over the next year so kind of a good utilization rate on both sides to be thinking about. I guess, particularly on the engine side.

I mean, we've always targeted 50% to 75% and we're at the high end of that range which is good but it will fluctuate with acquisitions. So, if we acquire a large number of engines in the quarter, it takes time to put some of this out and it also is a function how many shops are how many engines are in the shop. In the side, the numbers are not that sensitive to utilization. So, from a returns point-of-view so we're not really that keyed into it to be to say that was it's not the big driver. So, we want to have good engines at a good price and have availability. And that's really the main thing.

Yes, fine.

And the aircraft should be in the 90s. You shouldn’t -- aircraft have time-based maintenance, so you don’t want them sitting around; engines it doesn't matter as much. If you put an engine in a warehouse and it stays there for three months, it comes out with a same number of hours in cycles available. There's no time-based maintenance on an engine.

Understood, great. Well, thank you, Joe, I appreciate you taking now my questions.

Thanks.

Thank you. Your next question comes from Brandon Oglenski with Barclays. Your line is open.

This is actually Nathan for Brandon. Thanks for taking my question. Just on Jefferson a quick question and crude by rail. Since crude rail crude by rail can be volatile at times and some of the rails have kind of moved toward obtaining longer term multi-year deals and contracts. Is that something you could do at Jefferson potentially to keep things more stable and going forward?

Yes. And we're very much focused on it. We like the current opportunity that we that's been available to us now but we're also is thinking very all the time about how do we lock that in for a multi-year period. And so, I think that that's going to be -- that will be something we're going to focus a lot on in 2019. And it could be from Canada, there is also other regions where rail has a natural advantage. So, we are and that's one of our great assets at the terminal and we're trying to maximize and leverage that.

Okay, great. And then another quick follow-up on aviation, your profitability has improved. And it sounds like a lot of the improvements are structural in nature. So, is it fair to assume that given other puts and takes but could we assume this level of profitability really going forward and could it improve further?

I think the trend line is improved but I wouldn’t promise every quarter that it's going to be that good. So, I do think that directionally we're trending the right way but I'd hesitate to say every quarter you can expect this, so.

Okay, that's fair. That's all I got. Thank you.

Thanks.

Thank you. Your next question comes from Ariel Rosa with Bank of America Merrill Lynch. Your line is open.

Hey good morning, guys. First off, congrats on all the momentum here. Let me start out, it's nobody else has asked it. What are the thoughts or what's the outlook for raising the dividend in 2019?

So, last quarter -- last call we said we expect to achieve two to one covers between Q4 this year and Q2 of next year. And so, I would maintain that. I think it's probably most highest probability would be we hit that in Q1 of 2019 and then we'll look from there as to when to raise the dividend.

Okay. But as you hit two times coverage, I mean if I think that couple of years, I mean it sounded like it was a pretty high certainty. So, I mean obviously nothing is certain but it sounds like 2019 it's pretty reasonable to expect that to start to move up. Is that fair or am I kind of jumping the gun there?

No. and I think it's fair.

Okay, terrific. And then second question. Wanted to ask about kind of exposure to aviation and the pace at* which you're adding asset there, obviously 2018 was a terrific gear in terms of putting capital work in that space. Does that rate start to slow down in 2019 or do you think it kind of continues the pace with where you are at?

Well, as I mentioned earlier, and I think the opportunity the growth opportunity is bigger. So, but I can't promise every year you'll find the same number of deals that hit the return profile. But the opportunity said, I think is larger, so I'm hopeful that we'll end up doing even more. But it's very hard to budget on the investment side because it takes two to tango.

Okay, fair. And then just last question for me, Joe. We've seen a little bit of height and volatility in the market recently and it seems like conditions in some geographies maybe are starting to raise a couple of questions. Has that impacted the availability of partner capital or when you go out and have conversations with people, is that changing the nature of the dialogue at all or is that is it still kind of too early to tell?

I would say; "No. I mean from my observations, the public markets are much more volatile than the private markets. Private market is still flush with cash, people have a lot of money. And I haven’t seen any decline because of the stock market volatility which thank God Octobers over but it seems like the private capital is still in abundant supply.

Okay, terrific, sounds good. Thanks for the time.

Yes.

Thank you. Your next question comes from Robert Dodd with Raymond James. Your line is open.

Hi, guys. In the attempt to back you into a corner, Joe, on with some numbers. Obviously normalized FAD in the quarter 39.6. If infrastructure is breakeven alone in the fourth quarter, that adds 10. The pace that aviation is on with the NOI's you've signed and the run rate growth and EBITDA et cetera. It looks to me that something would have to go wrong for you'd not to hit double coverage of the dividend from FAD in the fourth quarter. So, if with that and I think Q1 for sure, Q4 probably. What then is the process and obviously I realize this is a board decision for deciding on when to change the dividend. I mean, would you expect the board put a little bit of a lag in just for conservatism or you hit 2x is going up?

I don’t know yet. I think we'll it's going to be a combination of looking at -- forward-looking I think is really what we'll drive it. So, you look ahead and you'll say how do you feel about the backlog and the prospects. So, I would think that would be a bigger factor than just the single math.

Got it. I appreciate that. So, that kind of leads into the next question, also kind of a follow-up. Obviously with your potentially selling 49% of long which that's 200 million to 250 million of potential capital. CMQR maybe at some point in '19. You'd also discussed on prior calls that maybe offshore after the pride has done with its repurposing, maybe that could be on the block if you can't find additional acquisitions. So, all get the returns up there. That's potentially $300 million to $400 million in capital that could be coming back to the business. That could obviously be reinvested in aviation. But aviation, to a large degree I think has shown its ability to self-fund in a lot of ways. So, what's the calculus on to your point -- the existing infrastructure projects don’t need equity but maybe if you could make a large additional initiative maybe starting a new project, what's the calculus on with that amount of capital coming in, do you do that, do you add something new with the other ones going so well. And if you do, obviously that's got the potential to initially to be capped negative if you start a new initiative. So, what's the balance there?

Its returns driven as we've always been and I think the experience we've had is these repurposing of brownfield sites I think has been quite good and I see it as a bit of a niche in the market. And Repauno and Long Ridge are both good examples. They're very low acquisition costs, nobody had any idea really what to do with them and sort of threw an application of pretty a process we've come up with some really good investment opportunity. So, I see the potential from more of that but I wouldn’t I'm not saying we have anything lined up yet, we're really focused on execution first. So, but that's an opportunity of which I see things that could present themselves after we have achieved some of these milestones. So, other than that, if we don’t see what we something we like that give return, we'll figure out how to give the money back or something. We're not going to invest it just to invest it.

Got it. I appreciate it, thank you.

Yes.

Thank you. [Operator Instructions] Your next question comes from Robert Salmon with Wolfe Research. Your line is open.

Hey, good morning guys.

Good morning.

The first question I have is there's been kind of increased talk regarding some of the lease accounting changes that are being coming into effect in '19. And we're just kind of curious how we should be thinking about the potential impact on aviation given the age of your engine and aircraft assets that you have. I'm really not sure how much of an impact you will have in terms of the differed maintenance. But any sort of kind of preliminary thoughts will be helpful for us as we're trying to gear our models for next year.

We don’t think it has any impact on us. So, we've been monitoring it but the primary group that would be impacted would be airlines, as they'd have to put formally put lease obligations on the balance sheet. But in my experience, airlines and airline analysts have been doing that for 30 years. They've been capitalizing rent and doing adjusted leverage ratio anyway. And so, and the big benefit for airlines is really that you get a 100% financing on an extremely high capital intensive business. So, I don’t see, we don’t see any decrease in interest and leasing from airlines and we don’t think it has any impact on our financials.

Okay, yes. My question is more geared at the P&L and in terms of the differed maintenance revenue recognition but it sounds like it's really not a needle mover for you guys?

No, we've been monitoring and we don’t see anything.

And then, Joe, kind of my follow-up question here is with regard to the portfolio. Can you give us an update in terms of including this $600 million, how much non-recourse debt have that currently has, just so we're kind of thinking about the right debt to equity coverage as we're looking at the model.

Right now, we counted all basically as balance sheet add. The first non-recourse debt that we would sort of exclude would be the Long Ridge financing.

Okay, that's helpful. Thanks, so much.

Yes.

Thank you. And I'm showing no further questions at this time. I'd like to turn the call back over to Alan Andreini for closing remarks.

Thank you, operator. And thank you all for participating in today's conference call. We look forward to updating you after Q4.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program and you all may disconnect. Everyone have a wonderful day!