Tuesday, November 30, 2010

Hunt Consolidated Creates Two New Energy-linked REIT's, Getty Realty Pumps Gas and Yield (GTY; LUKOY)

First up, BloggingStocks: 
Getty Realty (GTY): Fill Up with Gas Station Gains
"Getty Realty Corp. (GTY), yielding 6.6%, is the largest publicly traded REIT which owns and leases gas stations and convenience stores," notes income specialist Carla Pasternak.

The editor of High Yield Investing explains, "The REIT has provided strong double-digit average returns of 11% annually over the past decade and a half (almost double the 6% for the S&P 500).
She continues, "It owns about 1,060 properties, mainly in the northeastern and mid-Atlantic state and operates nine petroleum distribution terminals.
"Getty was started in 1955 with one service station. The company went public in 1971 and spun off Getty Petroleum Marketing in 1997.

"That company was bought by Lukoil, Russia's largest integrated oil company. Lukoil's service stations currently lease 78% of Getty's properties. The other 22% are leased by individual operators.

"Getty has increased its distribution in small increments for six straight years. In 2004, the dividend was $0.425 cents a quarter.

"With the latest dividend increase in September, GTY is now paying out $0.48 a quarter or $1.92 per unit a year. At current prices, the REIT yields just over 6.6% ($1.92/$29.02).

"In 2009, well over 99% of the distributions came from ordinary income, taxable at your marginal income tax rate.
"Most of the balance was distributed from capital gains. As such, the REIT is best held in a tax-advantaged account.

"For the first nine months of 2010, adjusted funds from operations (AFFO) were $1.61 per unit. Getty uses this measure to calculate its dividend payout ratio.

"Of that amount, $1.35 per unit was distributed or about 83.8% of total AFFO. The payout ratio was down from roughly 90% in the year earlier period, and appears highly sustainable going forward.

"The dividend reinvestment plan is open to any shareholder of record. That means you must hold the units in your name and cannot be a 'beneficial' shareholder or hold the REIT through your broker.
"In addition to dividend reinvestment, shareholders can also purchase additional stock. If more stock is bought, the minimum amount must be $100 and the maximum allowed is $3,000 in a quarter.

"Getty's fortunes remain closely tied to those of Getty Petroleum Marketing, which provides about 80% of revenues.
"This division ensures steady rental income to Getty under long-term leases through 2015, which also provide for annual 2% rent increases.

"The stations haven't missed a single rent payment, but profit margins at the Marketing division tend to be volatile....MORE
And from the Dallas Morning News' Texas Energy and Environment blog:
Hunt creates first real estate investment trust for energy assets

Hunt Consolidated Inc. created two real estate investment trusts amounting to $2.1 billion, but not for the company's property arm.
The Hunt trusts will be the first real estate investment trusts to hold energy assets. One will hold electricity transmission infrastructure and the other will have natural gas pipelines.
The unique investment vehicle allows the company to avoid taxes. It could also draw fresh money into the utility sector at a time when the U.S. needs new transmission lines.
"We were challenged with determining a better way to allow investment to come into the infrastructure grid than currently exists," said Kirk Baker, president of Hunt's two new energy trusts. "I left that meeting and came back, and on my desk was a prospectus for a real estate investment trust. So I asked, why can't we do this?"
A real estate investment trust doesn't pay taxes, so long as it distributes its earnings to shareholders. The investors then pay taxes on their own earnings.
Baker had to get special permission from the Internal Revenue Service, but three years after he spied that prospectus, Baker is doing it.
Four other investors will put money into the Hunt trusts: Marubeni Corp., John Hancock Life Insurance, TIAA-CREF and OPTrust Private Markets Group.
The trusts will buy or build utility projects in Texas and other western states. Texas and the Great Plains states have seen growth in wind farm developments, which require new transmission lines. Hunt would like to build those lines.
"It's in the renewables breadbasket. Also demographically we think those areas will continue to grow," Baker said.
The trust will start by buying a stake in Sharyland Distribution and Transmission Services, a Hunt company that's building power lines in the Panhandle to carry wind power to North Texas. The trust aims to invest in or with other utilities, big and small....MORE
HT: Maril Hazlitt, PhD.
The Hunt REIT is not open to the public. For folks who don't know the Hunt family genealogy (picture Medusa's hair) Hunt Consolidated is the holding company for Hunt Oil Company, run by Ray Hunt, half-brother of Nelson Bunker who degraded the family crown jewel, Placid Oil, by way of a silver-induced madness bankruptcy back in the '80's.

In '92 Ray got into a bidding war with Ross Perot to buy Bunker's ranch. It was not sibling loyalty.