Investors are coming around to the prospect of midstream energy infrastructure as a distinct real estate asset class, but it may be some time before the ranks of public players in that new field fill out.

CorEnergy Infrastructure Trust Inc. is the first and so far only midstream real estate investment trust. With a market capitalization of less than $500 million, it is a small fish in the $1 trillion-plus REIT market. But CorEnergy's investor base has grown significantly as the company has matured over its roughly 10-year run. The name was primarily institutionally owned at first, but retail and generalist investors now figure more prominently, and even REIT dedicated investors have been active lately in the company's preferred stock and convertible debt, said Dave Schulte, CorEnergy's chairman, president and CEO.

REIT investors are drawn to CorEnergy's relatively high and stable yield, facilitated by the company's low leverage and long contractual lease terms with its energy infrastructure tenants, he said. CorEnergy's dividend yield as of March 5 was 7.9%, compared to a 3.7% yield for the SNL U.S. REIT Equity index.

"Even though we're small, we've been at this for 10 years now, and we've established some credibility with investors that our model is working," Schulte said in an interview.

CorEnergy's maturation and success attracting new investors in the public market have opened the prospect that more midstream energy REITs will come to market. So have favorable IRS rulings that the company's pipeline, storage and transmission assets qualify as real property for tax purposes, just like office and apartment buildings. Some speculate that master limited partnerships — flowthrough entities comparable to REITs but widely used in energy infrastructure — might begin converting.

MLPs and REITs have long been linked. Both are tax-advantaged, high-yield vehicles that pass income on to unit holders and shareholders. But the two differ in critical ways. REITs have independent boards elected during proxy season, while MLPs do not, limiting unit holders' voice in corporate governance matters. MLPs issue the burdensome Schedule K-1 form to their investors, requiring more detailed, itemized accounting of the partnerships' business, while REITs issue the more streamlined 1099-DIV form, allowing investors to simply report dividends received from the REIT stocks.

MLPs performed poorly in the market over the last five years as volatility in oil and gas prices exposed underappreciated risks in the space. MLPs were over-levered and operating beyond their cash-flow means. When the capital markets closed to them, many were forced to cut their dividends. Investors decamped, and they have continued to stay away.

"At a high level, sentiment for energy, including MLPs, is probably tilted to the negative side today," Stacey Morris, director of research at information services firm Alerian, told S&P Global Market Intelligence.

Several MLPs have converted to traditional C corporations via consolidation with peers, absorption into their sponsors or other means to bolster their access to capital, thinning the overall number of companies in the space. According to Morris, MLPs are more inclined today to consider conversion to a C corporation than to a REIT, given the stringency of the REIT requirements — the bulk of a company's gross income must come from passive sources like rents, and any additional services must be housed under a separate taxable REIT subsidiary — and the fact that there are so few midstream REITs to serve as comparables.

"I hear a lot more about MLPs considering converting to a C corp, as opposed to converting to a REIT," she said. "It's just not talked about very often."

Mike O'Leary, partner at law firm Hunton Andrews Kurth, said the REIT structure's tax efficiency, and REITs' broad appeal among investors, may ultimately prompt more conversions among the MLPs that recently converted to C corporations.

"In the REIT space, they would have access to larger pools of capital," he said. "You're doing the same thing you would do with a C Corp [but] you get rid of that tax leakage."

Neither O'Leary nor Alerian's Morris was aware of an MLP actively and seriously considering REIT conversion, however. On a Jan. 30 earnings call, the CFO at prominent MLP Magellan Midstream Partners called the REIT structure "interesting" but said many of the company's revenue streams would not qualify as rents.

CorEnergy's Schulte said the company is not likely to face much competition in the REIT arena in the near term. Any new midstream REIT is likely to be formed from the ground up, or via an initial public offering undertaken by a private infrastructure fund seeking to exit its investment, rather than conversion, he said. Most MLP portfolios are full of assets and revenue streams that would not pass "the REIT test."

"To convert to a REIT would require a lot of corporate actions, segregating ownership into different vehicles. And frankly, the energy midstream sector has seen its share of that and wants simplification, not added complexity," he said. "We believe the conversion phenomenon is unlikely to occur to a great degree."