CorEnergy completes Portland Terminal acquisition

The Kansas firm has paid $40m in cash for its fourth energy infrastructure asset and will invest a further $10m in the rail and marine energy facility for improvements.

CorEnergy Infrastructure Trust has closed its previously announced acquisition of the Portland Terminal Facility, a rail and marine energy petroleum products terminal in Portland, Oregon, the Kansas-based firm said in a statement.

CorEnergy is paying $40 million in cash and anticipates investing an additional $10 million for terminal-related improvement projects, including upgrading a portion of the existing storage assets; enhancing existing infrastructure; and developing, designing, engineering and constructing throughput expansion opportunities.

The company has entered into a 15-year lease agreement with Arc Terminals, a subsidiary of New York-listed Arc Logistics Partners which will operate the facility. The base rent for the first seven months of the 15-year lease will be “reduced”, CorEnergy said, without specifying the amount, but beginning in August 2014 lease payments will be at least $5 million per year. Once the improvements are complete, the minimum lease payments will be in excess of $6 million annually.

On the fifth year, and every year thereafter, rent will be subject to inflation adjustment. The agreement also includes an additional variable rent component based on the terminal’s throughput volumes, CorEnergy said.

In addition to operating the facility, Arc Terminals will be responsible for maintenance and other capital expenditures required for the terminal’s operation.

Located on a 39-acre site, the facility has 84 tanks and a storage capacity of 1.466 million barrels. It can receive, store and deliver heavy and refined petroleum products via railroad, marine (up to Panamax-size vessels) or truck loading rack, according to the statement.

“We enabled Arc Logistics to assume full commercial control of the Portland Terminal Facility, while providing 100 percent of the acquisition and improvement capital,” CorEnergy chief executive David Schulte said.

CorEnergy is using the net proceeds from its previously announced issuance of common stock to fund the acquisition.

CorEnergy’s history dates to February 2007 when it launched an initial public offering under the name Tortoise Capital Resources (TTO), a closed-end management investment company regulated as a business development company. With most of its securities in energy-related companies and due to its close ties to the energy sector, TTO began to see vast opportunity in direct ownership of infrastructure, according to a company spokesperson.

In December 2012, Tortoise Capital Resources Corp. changed its name to CorEnergy Infrastructure Trust. The name change was part of the company's transition from a business development company managed by Tortoise Capital Advisors to a real estate investment trust managed by Corridor InfraTrust Management, a real property asset manager focusing on US energy infrastructure.

Corridor is an affiliate of Tortoise Capital Advisors, an investment manager specialising in listed energy investments, which was co-founded by Schulte. As of December 31, 2013 Tortoise Capital had approximately $14.2 billion in assets under management.