Citi offloads stake in infrastructure fund

DataRoom

CITIGROUP has offloaded the management of its $3.4 billion Citi Infrastructure Fund, a large stakeholder in Australian ports business DP World, to a New York-based private equity firm.

Corsair Infrastructure Management, an affiliate of Corsair Capital, one of the oldest buyout firms in the US, has now assumed control of the fund, prompting speculation about whether the new managers will look to expand or contract their presence in ­Australia.

Citi’s decision to divest the management rights was prompted by regulatory changes in the US aimed at cutting banks’ exposure to riskier assets. The Volcker rule, introduced in 2010 as part of the Dodd-Frank reform act, prevents banks from owning more than 3 per cent of funds that raise money from external investors.

The restrictions, ushered in after the collapse of Lehman Brothers, has resulted in a string of transactions at Citi, including the 2013 spin-off of its $6bn hedge fund business, Napier.

Citi confirmed the deal to The Australian, with a spokesperson in New York stating it had “transferred the investment management responsibilities and operational authority for Citi ­Infrastructure Investors to Corsair Infrastructure Management”.

As part of the deal with Corsair, the fund’s existing co-head, Holly Koeppel, will remain in her role, as will Citi Infrastructure’s Australian MD, Mark Lorkin. While the transfer of the management rights will not trigger any change to the fund’s equity stakes, the move will stir speculation about Corsair’s Australian strategy.

DP World represents Citi Infrastructure Investors’ sole investment in Australia. In 2010 the fund, alongside the Canadian savings giant, PSP, sunk $1.5bn into the struggling ports business, after its parent Dubai World, battled with ballooning debts associated with its Middle Eastern property investments.

However, the arrival of Hong Kong’s Hutchinson Ports Holdings has boosted competition on the waterfront, intensifying the ­financial pressure on DP World, and destroying a duopoly with rival Asciano that had held sway since the late 1990s. While DP World remains a challenging investment, other deals have proved trickier. In 2009, Citi Infrastructure Investors squandered a deposit of $100 million after it failed to complete a $2.5bn deal to buy Chicago’s Midway Airport on a 99-year lease. It also ran into difficulties on a Gatwick Airport tilt.

Citi Infrastructure owns assets around the world including a 37 per cent stake in Britain’s Yorkshire Water and a 42.8 per cent holding in a Madrid-based highway construction company.

South32 listing on track

CHATTER that delays in securing third-party approvals has messed with BHP Billiton’s timeline for the $15 billion spin-off to shareholders of the South32 bag of assets is way off the mark.

The talk was that government approvals in South Africa, where South32 will own coal, aluminium and manganese interests, was proving to be on the tardy side of things, with Pretoria using what leverage it has to secure some undertakings.

Maybe it has. But it is not about to stop BHP meeting its commitment to release full details of the merger by mid-March, which the calendar says is today.

But that is a Sunday in Britain, meaning tomorrow would be a better time to release the documents. The British shareholder base got upset with the original plan not to list South32 on the London market.

BHP eventually relented. So there would be little point in upsetting them again by dumping the South32 documents while they are enjoying their well-earned day of rest.

BHP has yet to say when shareholders will get to vote on the demerger other than to say it will be in early May. A perusal of recent big room bookings in Perth suggest May 6 could be the day.

Perth is where South32 will be based once the ties with the mothership are cut.

Property floats buzz

THE hot property market and the hunt for yield by investors is prompting fund managers in the sector, and their advisers, to step up float ambitions.

The shortage of prime assets on the market is leading many to think outside the square and at least two groups are testing the waters for listed investment companies focused on property.

Franklin Templeton Investments Australia has been doing the rounds as it assesses demand for a product combining both listed and direct real estate on a global scale.

Macquarie Group listed a similar fund during the property boom and local specialists are also ­assessing demand for this kind of fund. Any move would depend on winning support from houses like Bell Potter and Wilson HTM, both of which are active in LICs.

Investors’ hunt for yield is also driving newer groups closer to market. Stephen Day’s Propertylink is high on the list for many investment bankers. The group picked up more than $700 million of assets last year for a range of global clients and just partnered with Moelis Australia Asset Management in buying a $36.6m warehouse in Melbourne.

With Goldman Sachs already backing Propertylink’s flagship industrial fund, the banks may have an edge when float mandates are awarded. Moelis has also been quietly supporting the efforts of Sentinel Property Group, which has flagged the float of retail and industrial property funds. The group’s open-end pooled trust, the Sentinel Countrywide Retail Trust, is on track to pick up $200m ahead of any listing.

Goodman goes global

Goodman Group appears to be going from strength to strength in global logistics markets and its latest move has been in Europe where a trio of relationship banks, BNP Paribas, ING Bank and Royal Bank of Scotland, have agreed to a five-year €100 million ($137.4m) revolving credit facility for the massive Goodman European Logistics Fund. The move is part of a strategy to boost what is already the largest unlisted logistics fund in continental Europe, with a €2.3 billion portfolio across 109 prime logistics assets, by giving it the flexibility to make larger plays. GELF is focusing on prime logistics property and already has assets in 11 European countries.

Striking a second long-term debt deal last November, the fund launched a €400m Eurobond issue that was oversubscribed and is viewed as a sign that the wholesale fund will be extended when it is reviewed next year. An alternative would be floating on a European exchange but this seems less likely as the company’s unlisted raising is popular among global pension and sovereign funds.

Company chief Greg Goodman has flagged that the group would be a net seller of assets this year and it recently offloaded two non-core British portfolios. DataRoom understands that GELF now has about €200m of smaller assets up for sale.

With Barry Fitzgerald and Ben Wilmot