First State Super has become the majority investor in a AUD400m (€259m) infrastructure fund to own three large social infrastructure projects in Australia.
The AUD55bn superannuation fund is taking a 90% stake in the fund, launched by Sydney-based property group Lendlease, which holds the remaining 10%.
The latest investment brings Australia’s second-largest superannuation fund’s exposure to private/public partnership (PPP) projects to AUD500m, Damien Webb, First State Super head of income and real estates, told IPE Real Estate.
The deal will give First State Super “meaningful” equity in two public hospitals in Queensland and Victoria and the redeveloped Sydney Convention Centre complex in Darling Harbour.
The three PPP investments will be held in the Lendlease Public Infrastructure Investment Company.
Lendlease, which will manage the fund, said the investment vehicle would take equity positions in three social infrastructure PPP assets.
These include the 450-bed Sunshine Coast University Hospital in Queensland, the 372-bed New Bendigo Hospital in Victoria and Sydney’s Darling Harbour Live.
The latter is an extensive redevelopment of the Sydney Convention and Exhibition Centre, the Sydney Entertainment Centre, the SEC car park and surrounding public areas in Darling Harbour, collectively worth more than AUD4bn on completion.
Lendlease said all three projects were in delivery and expected to be in operation over the next 12 months.
Its chief executive and managing director Steve McCann said: “Lendlease has developed a strong track record in financing and developing quality infrastructure assets.
“Selling our equity interest at or near the operational phrase is consistent with our strategy.”
The Queensland, NSW and Victorian governments are backing the three PPP projects.
“This will give us very credit-worthy long-term cash flows – and our members will receive good returns – from the state governments,” Webb said.
“We are keen to grow our exposure to PPP projects. We have the internal knowledge and capacity to invest in these projects. And we understand the financing structure.
“We like social infrastructure because it gives us a steady stream of cash flow from the state governments.”
He added that First State Super saw its investment in PPPs as helping to build social infrastructure – such as transport, art centres and hospitals – which is “absolutely critical” to the needs of Australian society.
“The infrastructure also contributes to a better world for our members to live in, and retire into,” he said.
First State Super, which has 750,000 members, made its first direct PPP investment in the AUD2.1bn Sydney Light Rail in 2014.
It joined the ALTRAC consortium, which has the contract to design, build, construct, finance, maintain and operate Sydney’s new CBD and South East Sydney Light Rail Project.
Its financial adviser in the rail deal was Capella Capital, which also brought the super fund to its latest PPP investment.
“They advised us on these three PPPs,” Webb said.
“When its parent Lendlease was looking to sell down its stakes now that the projects are nearing completion, they approached us. We were happy to add the three stakes to our other PPP exposure.”
Webb told IPE Real Estate that First State Super now had a total exposure of AUD500m to PPPs and was continuing to invest in PPP projects.
He said the fund was actively looking at renewable projects in Sydney and across Australia.