Canadian Pension Funds to Buy Chicago Toll Road
14 November 2015 - 10:30AM
Dow Jones News
Three Canadian pension giants on Friday said they would buy a
Chicago toll road for $2.8 billion, underscoring pension funds'
continued interest in infrastructure projects and the steady cash
flows they provide.
Canada Pension Plan Investment Board, Ontario Municipal
Employees Retirement System and Ontario Teachers' Pension Plan will
acquire Skyway Concession Co., operator of a 7.8-mile toll road
that connects downtown Chicago with the city's southeastern
suburbs, from infrastructure funds managed by Australia's Macquarie
Group Ltd. and a unit of Spanish conglomerate Ferrovial SA
Canada's pension funds have been actively investing in bridges,
toll roads, power utilities and other infrastructure projects.
These assets typically don't generate the same kind of growth as
equity investments, but often provide stable revenue streams which
help offset volatility elsewhere in the funds' portfolios.
The three Canadian pension funds will each hold an equal share
of Skyway, which operates and maintains the toll road under a
concession that runs through 2104. They are paying a total of $1.54
billion and using debt to finance the rest of the $2.8 billion
cost. Macquarie and Ferrovial acquired the toll road in January
2005 for $1.83 billion from the city of Chicago.
A spokesman for CPPIB, Canada's largest pension fund, wasn't
immediately available for comment on the Skyway deal. On Thursday,
the fund, which oversees 272.9 billion Canadian dollars ($205.5
billion) in assets, announced a 1.6% return in its fiscal second
quarter ended Sept. 30 despite declines in global equity markets
during that period. The fund attributed the outperformance in part
to its stake in the Highway 407 toll road in Ontario as well as
other infrastructure assets.
When the S&P 500 stock index is down, "the 407 is going to
continue plodding along, providing us with those resilient cash
flows," CPPIB's Chief Executive Mark Wiseman said Thursday.
About 7.1% of CPPIB's assets are infrastructure. Ontario
Teachers' has about 23% of its C$152.4 billion in assets in
infrastructure and real estate holdings, while about 18% of OMERS'
C$72 billion fund is in infrastructure.
An Ontario Teachers' spokeswoman declined to comment and a
spokeswoman for OMERS couldn't be reached for comment.
Toll-road investments aren't without risks. Last year, the
operator of a toll road in Indiana filed for bankruptcy after
struggling with excessive debt and lower-than-expected traffic.
Australia's IFM Investors agreed in March to invest $5.725
billion in the Indiana toll road. IFM, which is owned by 30
Australian pension funds, said it planned to invest heavily in the
toll road to improve customer service, betting the highway would
benefit from U.S. economic growth and the critical role it plays in
that country's transport network.
Chicago Skyway's recent traffic volumes and toll revenues
weren't available. The latest figures available on Chicago Skyway's
website date back to 2003. In that year, the toll road, which was
built in 1958, served 17.4 million motorists and generated $39.7
million in toll revenue.
Write to Ben Dummett at ben.dummett@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires
(END) Dow Jones Newswires
November 13, 2015 18:15 ET (23:15 GMT)
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