InfraREIT (HIFR) is the first publicly traded high-voltage electric transmission company wrapped in a REIT structure. Spun off from the Hunt family of companies in January, HIFR is structured more like a MLP than a traditional REIT.
InfraREIT is a real estate investment trust REIT. The Company owns state-regulated electric transmission and distribution (T&D) assets, such as power lines, substations, transmission towers, distribution poles, transformers and related property and assets, in Texas. The Company leases its T&D assets to Sharyland Utilities, a Texas-based regulated electric utility privately owned by the Hunt family. The Company owns T&D assets throughout Texas, including the Texas Panhandle near Amarillo, natural gas rich Permian Basin, Central Texas, Northeast Texas, and South Texas. Its T&D assets consist of approximately 50,000-electricity customer delivery points, approximately 620 miles of transmission lines, approximately 10,500 miles of distribution lines, 35 substations and a 300-megawatt (MW) high-voltage direct current interconnection (DC Tie) between Texas and Mexico. 75% of total assets are high-voltage transmission lines.
Taking a page out of the MLP playbook, HIFR owns the assets, but there is no management team to run the operations. Similar to a General Partner, IHFR has hired a Hunt-affiliated management company, appropriately called Hunt Management, for operations and will pay a two tiered management fee. The first is similar to the IDRs, or Incentive Distribution Rights, usually associated with General Partners and includes a fee of 20% of the shareholder distributions over $1.07 a year. The second is a fee equals to 1.5% of shareholder equity with a minimum of $13 million and a maximum of $30 million (or $0.22 to $0.50 a share, based on 60 million shares outstanding).
HIFR will purchase all projects developed by Hunt Development, a construction arm of the Hunt family, which falls within its service territory. In addition, HIFR has the right of first option to buy several other transmission projects in the planning stages through Texas.
