Local super too late for Brisbane Airtrain

Australian superannuation funds were too slow to assess the merits of Brisbane railway Airtrain, allowing it to be snapped up last month by the UK’s Universities Superannuation Scheme, according to Airtrain’s CEO, Mike Pelly.

“They had trouble getting their head around it quickly,” Mr Pelly told The Australian Financial Review.

The agreement to sell Airtrain for $109.5 million last month to USS marks the latest in a series of overseas purchases of local infrastructure assets as local super funds struggle to keep up with deep-pocketed foreign funds.

Bankers say that while local super funds were interested in Airtrain, they were not prepared to move as fast as foreign funds to strike a deal.
“Australian investors won’t be rushed, so they don’t invest,” said one banker, pointing out that local funds lacked the resources to move quickly on potential infrastructure acquisitions and “get them done.”

Although Airtrain’s patronage is now well-established after being open for more than a decade – underlying passenger trips have an annual compound growth rate of 8.4 percent – local super funds still have relatively small teams dedicated to infrastructure, making it hard for them to quickly analyse potential investments.

Some super funds, such as REST Industry Super, are now teaming up with infrastructure developers to obtain the resources to assess investments.

USS, which manages more than $50 billion and allocates 7 percent of its funds to infrastructure, is the second largest investor in Melbourne-based toll road group ConnectEast, which owns EastLink and was sold to a consortium of foreign funds in late 2011.
USS also has an equity stake in Sydney’s airport train, Airport Link.

Mr Pelly said that Airtrain’s board expected to complete the sale, which is being undertaken by a scheme of arrangement, by the end of March, provided that no other offers emerged.

“The offer is fair and above our book value and everybody should be happy with it,” Mr Pelly said.

“USS will do an outstanding job.”

Airtrain’s leading shareholders, which include RBS with 34 per cent, have been keen to sell the asset since it was restructured in 2005, but waited for the opening of Brisbane’s Airport Link road tunnel to see if it improved passenger demand.

Airport Link, which opened in July, is however struggling to generate its own traffic, and has not had any impact on demand for Airtrain.
The elevated 8.5 kilometre railway was built by Transfield in the late 1990s at a cost of $220 million