The Canada Pension Plan Investment Board (CPPIB), AustralianSuper, and UniSuper are taking 50% ownership of a US toll road, as fund leaders signal they will push deeper into infrastructure as a guard against inflation.
The Canadian pension fund will make a $624 million initial investment for a 15% stake in the Transurban Chesapeake toll road in the greater Washington, D.C., area, the fund said Wednesday. Over the next five years, potential payments could amount to $21 million.
The trio of allocators are hoping for stable cash flows from Transurban Chesapeake, which consists of Interstates 495, 95, and 395 Express Lanes. As part of the deal, the three investors will also have exclusive rights to invest into future Transurban developments in Virginia, Maryland, and Washington, D.C.
“Transurban Chesapeake’s Express Lanes provide vital congestion relief in one of the busiest regions in the U.S. and are a good fit with our global infrastructure portfolio,” CPP Investments Managing Director and Head of Infrastructure Scott Lawrence said in a statement.
CPPIB, which has US$358.8 billion in assets, has several sizable stakes in Toronto toll roads, and the fund made its first investment into an Indonesian toll road last year. In the past, it has also partnered with Transurban on investments, notably on projects in Sydney, Australia.
However, the most recent investment comes as CPPIB CEO Mark Machin has signaled in multiple news interviews this week that interest in real assets and other infrastructure investments will rise, as inflation is also expected to swing upward.
In an interview with the Financial Post this week, he said a “wall of money” in savings accounts will head toward real assets because of historically low interest rates. He encouraged public leaders to consider privatizing infrastructure assets, including toll roads.
“I really encourage governments around the world that have got massive deficits to really consider at this point privatizing, you know, selling operating brownfield infrastructure assets, if they can, because they’re going to get extraordinary prices for it, given the wall of money that’s interested in it, and it will help (bring down) deficits,” he told the Financial Post.
The Transurban transaction is expected to close in the first half of 2021, pending approval.
Separately, on Wednesday, the Canadian pension plan said it has also acquired the Trafford Centre, a shopping mall in Manchester, U.K.