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Listing PPPs not as lucrative as private sale - fund manager

Monday 2nd September 2019

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Private equity buyers will offer a bigger payday than listing about $250 million of public-private partnership investments, according to the managers of the suite of assets.

The investment managers said they looked long and hard at a public listing, but decided it won’t match the profits it expects from a private sale. The portfolio has attracted more than 25 expressions of interest from various local and overseas funds.

“The issue is the listed markets aren’t providing that type of pricing that the private markets are," New Zealand Social Infrastructure Fund director Mike Caird told investors at their annual meeting on Friday. 

“If we did go to the IPO listing the outcome would be materially less ... we did look at it and think, there is an appetite for this type of product. But we don't think it will get what unlisted funds will deliver.” 

NZSIF is the second-biggest shareholder in Morrison & Co’s Public Infrastructure Partners Fund - or PIP Fund - behind the New Zealand Superannuation Fund. NZSIF values its 23 percent stake in the fund at $56.8 million, implying its March 31 valuation was around $247.5 million.

PIP Fund executive director Steven Proctor said valuations for the available assets are high and he's positive about a good return for investors. However, executives won’t be drawn on what sort of return investors will get, beyond saying it would exceed the current net asset value of $1.40. 

About 750 investors including Craigs Investment Partners, private individuals, community groups, and Maori and charitable trusts invested in the fund back in 2010.

Its portfolio includes a 49.9 percent stake of the Melbourne Convention and Exhibition Centre, two New Zealand education PPPs, a hospital in Victoria, a half-stake in student accommodation in New South Wales, and the prison PPP in Auckland’s Albany.

Despite its initial term not expiring until October 2027, Morrison & Co wants to take advantage of current market funding and has been marketing the portfolio through KPMG for several months. 

At Friday’s meeting investors were told 25 non-disclosure agreements had been signed with interested parties, the next step in a sale process likely to take a year. The length of time was due to the likelihood of Overseas Investment Office approval, and its equivalent in Australia, being needed.

A non-binding offer would be at least two months away, and then regulatory approvals would mean a sale wouldn’t likely complete until just a year. 

Morrison & Co executive Peter Coman played down the political risk of PPPs changing hands, such as foreigners owning local schools, saying that while they may lead to negative headlines, they could also highlight good returns for the NZ Super Fund. 

In the 2019 financial year, NZSIF received distributions from the PIP fund of $2.46 million and distributed $1.97 million, or 4.8 cents per unit. It announced another distribution of 2 cents per unit paid on July 12.


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