Tortoise acquires New Mexico power line for $16m

The deal was facilitated by Corridor Energy, an asset manager established by principals from Tortoise Capital earlier this year. Corridor targets energy infrastructure assets that can qualify as real estate investment trusts.

New York Stock Exchange listed-company Tortoise Capital Resources has acquired an infrastructure asset that can qualify as a real estate investment trust, purchasing a 40 percent stake in a New Mexico power transmission line for $16.1 million.

The 216-mile transmission line, known as the Eastern Interconnect Project, is operated by the Public Service Company of New Mexico, a subsidiary of Albuquerque-based energy holding company PNM Resources.

The transaction was facilitated by Corridor Energy. Corridor is an asset manager established in January by Tortoise Capital Advisors, Tortoise’s majority owner Montage Asset Management and The Calvin Group for the purpose of targeting energy infrastructure assets that can qualify as real estate investment trusts (REITs). The Eastern Interconnect Project marks Corridor’s first REIT-qualifying acquisition, according to a statement.

US lawmakers created REITs 50 years ago to make it easier for smaller investors to pool money and own real estate. By law, a REIT must generate at least 75 percent of its revenue from real estate and invest at least 75 percent of its total assets into real estate, according to the Securities and Exchange Commission.

REITs typically pay less taxes than corporations, and 90 percent of a REIT’s taxable income must be paid to shareholders.

Corridor managing director Richard Green said in a statement that the acquisition marked “an important step” in “transforming” Tortoise from a business development company into a REIT. If Tortoise Capital Resources can acquire more REIT investments, the company will choose to be treated as a REIT for the 2012 tax year, according to a statement.

Last year, Hunt Power – along with Marubeni Corporation, John Hancock Life Insurance (USA), Teachers Insurance and Annuity Association–College Retirement Equities Fund (TIAA-CREF) and OPTrust Private Markets Group – established $2.1 billion of electric and gas transmission infrastructure REITs, claiming that their use of REITs for infrastructure was the first of a kind.