REAL ESTATE - HSBC is to set up an offshore investment company to exploit seemingly limitless investor appetite for infrastructure.
The bank predicts an initial dividend yield of 5.75% in the company’s first financial year.
HSBC spokesman Richard Lindsay said the launch came at a good juncture for the sub-sector. “Now PFI and PPP projects have been running for 10 years we have solid evidence of historical performance,” he said. “The underlying assets are known and clear, the legislation around PPP is known and tested, and we also know what doesn’t work.”
Despite its general optimism over infrastructure as a sub-sector, the company will apply strict criteria to potential investments. Investible projects will be long-term and stable, with known revenues and performance metrics. Those sourced at launch, collectively valued of £250m, are all long-term concession contracts to build and operate UK government offices, schools, hospitals and transport links. All have completed or almost completed construction.
Currently the company is made up primarily of UK projects, with one based in the Netherlands. Within Europe the UK has the most mature market for infrastructure projects but Lindsay did not rule out further investments in mainland Europe.
He said infrastructure was the driver of several HSBC businesses, including project finance. “It varies with the country or territory, but we’re seeing global growth in the use of PFI and PPP contracts,” said Lindsay. “In South America and Asia, partnership with the state is a prominent element.”