- Allocations to listed infrastructure have been on the rise in recent years amid growing demand for real assets offering relatively predictable cash flows.
- REITs are another vehicle that can be used to raise capital for infrastructure investments in “public-private partnership” transactions.
- I maintain a small stake in CORR (less than 1%) and I will continue to hold shares, hoping for the company to benefit from the growing demand in energy infrastructure.
As many of you know, I recently decided to include “Infrastructure” in my “Intelligent REIT Lab” section of my newsletter, The Forbes Real Estate Investor. In a research paper, Cohen & Steers writes:
“Allocations to listed infrastructure have been on the rise in recent years amid growing demand for real assets offering relatively predictable cash flows and the potential for attractive real returns…As cash-strapped governments increasingly turn to private markets to fill a capital void, new security structures have been introduced globally, including those focused on income delivery.”
Cohen and Steers explains that “political shifts in the U.S. have also drawn attention to infrastructure, as the Trump administration appears keen to boost infrastructure spending to repair aging systems and provide economic stimulus.
This trend will be supported by increasing awareness of service and reliability issues—reinforced by headline events ranging from Flint, Michigan-type water crises to the latest freight or passenger train derailment.” The infrastructure universe spans a broad range of subsectors, which C&S groups into four main categories:
The challenges faced by the US in maintaining and updating its current infrastructure have been well documented. While the American Recovery and Reinvestment Act of 2009 provided some stimulus money for U.S. infrastructure projects, public funds simply will not be sufficient to meet all of the ongoing infrastructure maintenance and new construction needs. Additional sources of capital will be necessary to fill the gap.
Although rarely applied until recently, REITs are another vehicle that can be used to raise capital for infrastructure investments in “public-private partnership” transactions. In the abstract, REITs have certain advantages over the fund model. Recently, several favorable IRS private letter rulings sanctioning the use of REITs to own electric and gas distribution systems have increased interest in their role in infrastructure investments.