Infrastructure: A Road to Riches?
If somebody asked if you wanted to buy the Brooklyn Bridge, you'd know it was a con. But how about buying the Indiana Toll Road?
Before you snicker, you should know the Indiana highway was auctioned off last week for $3.8 billion.
For the next 75 years, the more than 150 miles of Interstate 80 will be run by a pair of Spanish and Australian companies that will collect the tolls, operate the pit stops, keep up the highway and try to make a profit.
Cintra SA, the Spanish firm, and Macquarie Infrastructure Group, the Aussies, are teaching Americans the business of investing in roads, bridges, water mains and the like.
You may have heard of Macquarie. Last year it bought a controlling interest in the company that operates the Dulles Greenway for $533 million. A year ago, Macquarie and Cintra took over the Chicago Skyway, adding it to a network of toll roads and bridges around the world. And Macquarie is part of one of the rival groups bidding $1 billion to take over the Dulles Toll Road for 50 years, with the money expected to underwrite Metrorail's extension to Dulles.
The Australians launched a sister company in the United States in December 2004. Since the $25-a-share initial public offering, Macquarie Infrastructure Co. Trust (MIC on the New York Stock Exchange) has climbed to $34.45. Counting reinvestment of the hefty $2-a-share dividend, investors have made a 45 percent total return since the company went public 15 months ago.
With that kind of money to be made, Americans are lining up to try their luck at Wall Street's hottest new game -- investing in infrastructure.
Washington's biggest financial firm, the Carlyle Group, just created an eight-member team to get into roads, bridges, etc.
Goldman Sachs & Co., which made $9 million advising Chicago on the Skyway sale and stands to collect about $20 million in fees for putting together the Indiana Toll Road deal, is raising a multibillion-dollar fund to buy infrastructure.
Wall Street is getting into infrastructure because politicians have bailed out on one of the most important issues facing the nation.
Transportation was once one of the things Americans counted on their government to provide. New York Gov. De Witt Clinton built the Erie Canal and opened up the Midwest in the early 1800s. President Dwight D. Eisenhower started the interstate highway system in the 1950s and put America on the road to being the world's most motorized society.
But anybody who's ever been caught in Washington traffic knows our elected officials lack the vision and the political will to deal with transportation issues that require difficult, politically unpopular decisions. Like raising taxes.