The market for midstream energy master limited partnerships (MLPs) (approximately $250B market capitalization at the end of September 2019) has suffered from a lack of growth momentum in recent years, while the public real estate investment trust (REIT) market (approximately $1T of market capitalization at the end of September 2019) has, by contrast, experienced significant growth.1 These two trends, combined with the fact that some well-known asset managers have recently converted their MLP-like publicly traded partnership (PTP) structures into traditional corporate structures after the enactment of the Tax Cuts and Jobs Act of 2017, which reduced the corporate tax rate from 35 percent to 21 percent, have renewed market participants’ interest in the midstream energy REIT structure. A principal reason for those PTP conversions was to expand the universe of potential investors, thereby substantially increasing the demand for such securities, which is expected to result, over time, in higher stock price levels. This Sidley alert reviews the midstream (i.e., infrastructure such as pipelines and storage facilities) energy REIT alternative to midstream MLPs.
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