CorEnergy Infrastructure Trust, Inc. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Leased Properties and Leases

Leased Properties and Leases

9 Months Ended

Sep. 30, 2017

As of September 30, 2017, the Company had three significant leased properties located in Oregon, Wyoming, Louisiana, and the Gulf of Mexico, which are leased on a triple-net basis to major tenants, described in the table below. These major tenants are responsible for the payment of all taxes, maintenance, repairs, insurance, and other operating expenses relating to the leased properties. The long-term, triple-net leases generally have an initial term of 11 to 15 years with options for renewals. Lease payments are scheduled to increase at varying intervals during the initial terms of the leases. The following table summarizes the significant leased properties, major tenants and lease terms:



Summary of Leased Properties, Major Tenants and Lease Terms
Property	Grand Isle Gathering System	Pinedale LGS⁽¹⁾	Portland Terminal Facility
Location	Gulf of Mexico/Louisiana	Pinedale, WY	Portland, OR
Tenant	Energy XXI GIGS Services, LLC	Ultra Wyoming LGS, LLC	Arc Terminals Holdings LLC
Asset Description	Approximately 153 miles of offshore pipeline with total capacity of 120 thousand Bbls/d, including a 16-acre onshore terminal and saltwater disposal system.	Approximately 150 miles of pipelines and four central storage facilities.	A 39-acre rail and marine facility property adjacent to the Willamette River with 84 tanks and total storage capacity of approximately 1.5 million barrels.
Date Acquired	June 2015	December 2012	January 2014
Initial Lease Term	11 years	15 years	15 years⁽²⁾
Renewal Option	Equal to the lesser of 9-years or 75 percent of the remaining useful life	5-year terms	5-year terms
Current Monthly Rent Payments	7/1/16 - 6/30/17: $2,826,250 7/1/17 - 6/30/18: $2,854,667	$1,741,933	$513,355
Initial Estimated Useful Life	27 years	26 years	30 years
(1) Non-Controlling Interest Partner, Prudential, funded a portion of the Pinedale LGS acquisition and, as a limited partner, holds 18.95 percent of the economic interest in Pinedale LP. Pinedale GP, a wholly-owned subsidiary of the Company, holds the remaining 81.05 percent of the economic interest.
(2) The lessee of the Portland Terminal Facility has a purchase option beginning in February 2017, which it can exercise with 90-days notice, as well as lease termination options on the fifth and tenth anniversaries of the lease. If exercised, the purchase option and termination options are subject to additional payment provisions and termination fees prescribed under the lease.

The future contracted minimum rental receipts for all leases as of September 30, 2017, are as follows:



Future Minimum Lease Receipts ⁽¹⁾
Years Ending December 31,	Amount
2017	$	15,359,741
2018	61,409,965
2019	63,685,398
2020	70,846,857
2021	77,027,332
Thereafter	376,287,233
Total	$	664,616,526
(1) Future minimum lease receipts include base rents for the Portland Terminal Facility through its initial 15-year term.

The table below displays the Company's individually significant leases as a percentage of total leased properties and total lease revenues for the periods presented:



	As a Percentage of ⁽¹⁾
	Leased Properties				Lease Revenues
					For the Three Months Ended				For the Nine Months Ended
	September 30, 2017		December 31, 2016		September 30, 2017		September 30, 2016		September 30, 2017		September 30, 2016
Pinedale LGS	39.7	%	39.8	%	31.1	%	30.4	%	30.8	%	30.4	%
Grand Isle Gathering System	50.1	%	50.0	%	59.2	%	59.8	%	59.5	%	59.8	%
Portland Terminal Facility	10.0	%	9.9	%	9.5	%	9.7	%	9.6	%	9.7	%
(1) Insignificant leases are not presented; thus percentages may not sum to 100%.

The following table reflects the depreciation and amortization included in the accompanying Consolidated Statements of Income associated with the Company's leases and leased properties:



	For the Three Months Ended				For the Nine Months Ended
	September 30, 2017		September 30, 2016		September 30, 2017		September 30, 2016
Depreciation Expense
GIGS	$	2,438,649	$	2,153,928	$	7,315,947	$	6,451,578
Pinedale	2,217,360		2,217,360		6,652,080		6,652,080
Portland Terminal Facility	318,915		318,914		956,745		524,170
United Property Systems	9,059		8,515		27,178		23,365
Total Depreciation Expense	$	4,983,983	$	4,698,717	$	14,951,950	$	13,651,193
Amortization Expense - Deferred Lease Costs
GIGS	$	7,641	$	7,641	$	22,923	$	22,923
Pinedale	15,342		15,342		46,026		46,026
Total Amortization Expense - Deferred Lease Costs	$	22,983	$	22,983	$	68,949	$	68,949
ARO Accretion Expense
GIGS	$	170,904	$	184,104	$	492,162	$	542,561
Total ARO Accretion Expense	$	170,904	$	184,104	$	492,162	$	542,561

The following table reflects the deferred costs that are included in the accompanying Consolidated Balance Sheets associated with the Company's leased properties:



	September 30, 2017		December 31, 2016
Net Deferred Lease Costs
GIGS	$	267,524	$	290,447
Pinedale	627,059		673,085
Total Deferred Lease Costs, net	$	894,583	$	963,532

Substantially all of the lease tenants' financial results are driven by exploiting naturally occurring oil and natural gas hydrocarbon deposits beneath the Earth's surface. As a result, the tenants' financial results are highly dependent on the performance of the oil and natural gas industry, which is highly competitive and subject to volatility. During the terms of the leases, management monitors the credit quality of its tenants by reviewing their published credit ratings, if available, reviewing publicly available financial statements, or reviewing financial or other operating statements, monitoring news reports regarding the tenants and their respective businesses, and monitoring the timeliness of lease payments and the performance of other financial covenants under their leases.

UPL

UPL is currently subject to the reporting requirements under the Exchange Act and is required to file with the SEC annual reports containing audited financial statements and quarterly reports containing unaudited financial statements. Its SEC filings can be found at www.sec.gov. Following emergence from bankruptcy, Ultra Petroleum Corp. stock is trading on the NASDAQ under the symbol UPL. The Company makes no representation as to the accuracy or completeness of the audited and unaudited financial statements of UPL but has no reason to doubt the accuracy or completeness of such information. In addition, UPL has no duty, contractual or otherwise, to advise the Company of any events that might have occurred subsequent to the date of such financial statements which could affect the significance or accuracy of such information. None of the information in the public reports of UPL that are filed with the SEC is incorporated by reference into, or in any way form, a part of this filing.

EXXI

EXXI is currently subject to the reporting requirements of the Exchange Act and is required to file with the SEC annual reports containing audited financial statements and quarterly reports containing unaudited financial statements. Its SEC filings can be found at www.sec.gov. Its stock is currently trading on the NASDAQ under the symbol EXXI. The Company makes no representation as to the accuracy or completeness of the audited and unaudited financial statements of EXXI but has no reason to doubt the accuracy or completeness of such information. In addition, EXXI has no duty, contractual or otherwise, to advise the Company of any events that might have occurred subsequent to the date of such financial statements which could affect the significance or accuracy of such information. None of the information in the public reports of EXXI that are filed with the SEC is incorporated by reference into, or in any way form, a part of this filing.

ARCX

On August 29, 2017, the parent company of our tenant at the Portland Terminal Facility, Arc Logistics, announced its definitive agreement to be acquired by Zenith Energy U.S., LP. ("Zenith"). The merger is targeted to close by February 7, 2018. In September, Arc Logistics filed a preliminary proxy pursuant to which it will ultimately solicit unit holder approval for the merger. In that preliminary proxy, Arc Logistics described a number of different actions available to it under the Portland Lease Agreement, which include (i) continuing with the current terminal lease, (ii) exercising its buy-out option on the terminal or (iii) terminating the lease at its fifth anniversary, subject to the termination provisions in the lease. The preliminary proxy states that Arc Logistics has not yet decided which of those plans of action it may select, and the Company has not received notice with respect to either a buy-out or termination option election. Additionally, it is not clear whether the proposed merger will have any impact on whether, or when, any of the options would be exercised.

ARCX is currently subject to the reporting requirements of the Exchange Act and is required to file with the SEC annual reports containing audited financial statements and quarterly reports containing unaudited financial statements. The audited financial statements and unaudited financial statements of Arc Logistics can be found on the SEC's website at www.sec.gov (NYSE: ARCX). The Company makes no representation as to the accuracy or completeness of the audited and unaudited financial statements of ARCX but has no reason to doubt the accuracy or completeness of such information. In addition, ARCX has no duty, contractual or otherwise, to advise the Company of any events that might have occurred subsequent to the date of such financial statements which could affect the significance or accuracy of such information. None of the information in the public reports of ARCX that are filed with the SEC is incorporated by reference into, or in any way form, a part of this filing.