Lamar On Track For REIT Conversion

Outdoor advertiser Lamar Advertising Co., which has an estimated 155,000 out-of-home ad surfaces around the country, is pushing ahead with its plan to convert itself into a real estate investment trust for tax purposes, the company announced this week.

However, it has more red tape to wade through before the conversion is complete, including approval from the IRS. Lamar expects to be able to convert itself into REIT in time for the 2014 tax year.
 
Companies that qualify as REITs can reduce their tax burden and increase their cash flow as long as they distribute at least 90% of their annual taxable income to investors through dividends. In the last few years, a number of outdoor advertising companies have converted to REITs or considered doing so; the most prominent example is CBS Outdoor, which converted to an REIT as part of its spinoff from CBS Corp., in conjunction with the sale of its international business.
 
Lamar -- whose property, plant and equipment across the U.S. is worth $3 billion -- first revealed it was considering converting itself into an REIT in August 2012 and submitted a formal request to the IRS in November 2012. The process has subsequently slowed, due to heightened regulatory scrutiny in the wake of the CBS conversion.
 
This week, the IRS announced that it still hasn’t made a ruling on whether Lamar will be permitted to convert itself into an REIT. However, Lamar’s legal counsel (and various independent Wall Street analysts) have expressed confidence that the company will be allowed to go forward with the conversion, although the timing of IRS approval remains uncertain.
 
Lamar has been enjoying fairly steady growth in recent years. In the first nine months of 2013, Lamar’s total revenues were up 6.1% to $931.3 million. Its long-term debt fell 18% from $2.13 billion to $1.75 billion.
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