* Lamar may make REIT election from taxable year Jan. 1,
* Follows Iron Mountain, Corrections Corp in REIT conversion
* Shares rise 14 pct
By Chandni Doulatramani
Aug 8 Billboard operator Lamar Advertising Co
said it was considering converting to a real estate
investment trust (REIT), a move aimed at taking advantage of a
seemingly more favorable tax environment.
Shares of the company, which is eyeing a REIT status by
January 2014, rose as much as 14 percent to a more than one-year
high of $35.99 in early trading.
Analysts have been speculating for the past few weeks that
Lamar might be considering converting to a REIT.
"Billboards will make good real estate assets," MKM Partners
analyst Eric Handler told Reuters.
Lamar operates more than 143,000 billboard advertising
displays that dot highways and busy street corners in the United
States, Canada and Puerto Rico.
Several technology companies, especially those with
significant real estate assets, have said they are planning to
convert into a REIT.
Document storage company Iron Mountain Inc in June
said it was looking at a conversion, and data center operator
Equinix Inc said last month it was watching very
closely the conversion of other technology companies.
American Tower Corp, which said last May it was
looking to convert into an REIT, has seen its shares rise 35
percent since then. The tower company began operating as a REIT
on Jan. 1.
The market is going to view Lamar's move favorably, analyst
Lamar is expected to get approvals from its shareholders and
the Securities and Exchange Commission, apart from the Internal
Revenue Service for the conversion.
LESS TAX BURDEN
MKM'S Handler said shares of Iron Mountain and Corrections
Corp of America have performed well at the S&P 500
since their announcement of a REIT conversion.
Converting to a REIT cuts a company's tax burden, but also
requires it to distribute at least 90 percent of its profit
Evercore Partners analyst Douglas Arthur said it was too
early to tell if the move was a good idea for Lamar.
"I don't totally understand how it adds so much value right
now, but obviously the market disagrees (with his view)," he
He said investors may be viewing the conversion as a more
tax-efficient mean to distribute the company's cash flow.
Lamar's top customers last year included McDonald's Corp
and Verizon Communications Inc.
SECOND-QUARTER REVENUE BEATS
Lamar's revenue increased 3.9 percent to $304.9 million for
the quarter ended June 30, above analysts' expectation of $304
million, according to Thomson Reuters I/B/E/S.
The 110-year-old company, which gets about 80 percent of its
revenue from the U.S. market, forecast third-quarter revenue of
between $303 million and $306 million. Analysts were expecting
Shares of Lamar, which competes with Clear Channel Outdoor
Holdings Inc and CBS Corp-held CBS Outdoor, were
up 10 percent at $34.50 in late-morning trading on the Nasdaq.
Clear Channel's shares were up 5 percent at $5.33 on the New
York Stock Exchange.