BR’s Lamar Advertising could change to trust

Baton Rouge-based Lamar Advertising Co. said Wednesday it may ask shareholders to approve changing the company into a Real Estate Investment Trust.

The outdoor advertiser said it will seek a ruling from the Internal Revenue Service on the move. The shareholder vote would likely be held in 2013.

Lamar reported the potential move in its second-quarter earnings report.

Lamar turned a profit of $13.9 million, or 15 cents per share, compared to $11.4 million, or 12 cents per share, a year earlier. Stock analysts surveyed by Thomson Reuters forecast earnings of 15 cents per share.

Lamar generated revenue of $304.9 million, a 3.9 percent increase over the same period in 2011. Stock analysts predicted revenue of $304 million.

Real Estate Investment Trusts, which invest in property or mortgages, don’t pay corporate income tax on earnings distributed to shareholders if the trust distributes at least 90 percent of earnings. Shareholders pay income tax on the dividends.

The IRS has broadened its definition of which assets qualify for conversion to Real Estate Investment Trusts. One of the recent additions? Billboards.

According to the Wall Street Journal, a growing number of firms are considering the move.

The shift allows firms to return excess cash to shareholders, avoid federal income taxes and boost the value of their stock, according to an Aug. 7 column by senior editor Vipal Monga in the Journal’s CFO Report. However, the conversion process can be “complex, expensive and time-consuming.”

Monga cited the estimated $375 million that data-storage company Iron Mountain Inc. expects to spend to complete the move by 2014.

On the plus side, Iron Mounta expects its shareholders will receive $1 billion to $1.5 billion in dividends as a result of the move.

In its earnings report, Lamar said there is no certainty regarding timing of a REIT election or whether the company will hold one.