Does Casey's Have the REIT Stuff?

Execs say they have considered real-estate investment trust, MLP moves

Steve Holtz, Editor in Chief, CSP Daily News

ANKENY, Iowa -- Even as Casey's General Stores' executives insist that there is no imminent change coming to their business structure, the public company's board of directors has taken a look at a couple of options, among them a real-estate investment trust, or REIT, and a master limited partnership, or MLP.

"The board continually looks at the value in a number of different strategic alternatives to add value," said CFO Bill Walljasper on an earnings conference call Tuesday. "That [doesn't] mean necessarily we're actively pursuing that particular initiative; it's just that we do look at those periodically."

A REIT is an organization that pools investors' money to invest in commercial real estate. For a retailer, such an option could open opportunity for additional real-estate investment. An MLP, meanwhile, is a publicly traded partnership to raise capital from individual investors. In the past year, a half dozen petroleum retailers have filed intent with the SEC to spin off parts of their companies into MLPs. One of the core engines for MLP growth is its pass-through tax status, a benefit designed to support growth of the country's energy infrastructure.

Because Casey's does distribute gasoline to about 70% of its own 1,731 convenience stores, it could qualify for MLP status, meaning the spinoff and initial public offering of that business into a separate corporation. "That type of income, as I understand, is a qualifiable income under an MLP," Walljasper said.

Meanwhile, a REIT structure would be more difficult based on Casey's current debt structure. "[We have] senior notes, so ... it appears that may trigger the make-whole provisions of our current debt, which would be significant," Walljasper said. "It would be well over $100 million in make-whole provisions, which certainly would be an obstacle when you look at a REIT structure."

Still, he emphasizes both options remain just that--options--without intent today to go in either direction.

"[This information comes] from the research that we have done, albeit not very much; keep that in mind," he said.

Casey's General Stores Inc., Ankeny, Iowa, owns and operates approximately 1,750 convenience stores in 14 Greater Midwestern states--Iowa, Illinois, Missouri, Kansas, Nebraska, Minnesota, Indiana, South Dakota, Wisconsin, Arkansas, Kentucky, Oklahoma, North Dakota and Tennessee.

Steve Holtz, CSP/Winsight By Steve Holtz, Editor in Chief, CSP Daily News
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