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Foreign investors see stability in highways
Companies motivated by slow but steady payoff that long-term deals to run U.S. roads offer
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By Dan McFeely
[email protected]
When foreign investors feast their eyes on America, they see plenty of potential investments, from businesses to farms to huge amounts of debt.


But interstate highways?
Absolutely, say Australia's Macquarie Bank and Spain's Cintra -- the international partners in the deal to run the Indiana Toll Road -- who view themselves as mavericks in the relatively new world of buying into the privatization of American highways.
The team has previously joined forces to buy the 7.8-mile Chicago Skyway and to plan, build and operate a new Texas toll road, in addition to several other similar projects around the globe.
Their motivation: long-term deals that promise to pay off for investors -- slowly but surely -- the way utility companies provided stability to this generation's parents and grandparents.
"Both of them are in the process of building portfolios of toll roads," said Robert W. Poole Jr., director of transportation studies at the Reason Foundation, a libertarian research group. "They are trying to provide returns for investors -- like pension funds and insurance companies -- and it turns out toll roads are very much like utilities.
"My mother has bonds in electric utilities. These stocks and bonds are steady, stable, long-term returns. That is what the rest of the world has been discovering over the past 10 years. Americans are just now starting to wake up and see this."
That does not mean there is no risk. Reports out of Sydney on Tuesday included concerns that Macquarie, the largest investment bank in Australia, may have overextended itself by bidding so high on the Indiana Toll Road. But the Sydney Morning Herald reported that Macquarie Infrastructure, the bank's unit that manages its toll roads, was playing down those concerns, comparing the Indiana deal to a similar one in Sydney -- a new road called Westlink M7 -- which it said was far riskier than the well-established Indiana Toll Road.
What's more, Cintra, the Madrid-based partner with U.S. offices in Austin, Texas, told investors it expects to produce a 12.5 percent return on its investment.
Poole concurred, saying everything he had heard Tuesday confirmed that the deal was being well received by financial analysts around the globe.
The Macquarie-Cintra partnership faced similar criticism in its deal to purchase the Chicago Skyway, which connects to the Indiana Toll Road. But after raising the Skyway's tolls and cutting pay to employees, the operation is seeing improving results, according to bank executives.
The Australian bank and its affiliates have stakes in everything from wind farms in France and high-voltage power lines in Michigan to shopping centers in China. In addition to the Chicago Skyway and the Indiana Toll Road, Macquarie has successfully gone after a toll road in Virginia near Washington Dulles International Airport; Hawaii's biggest gas utility, Gas Co.; and a 36 percent share in Amsterdam-based business directory publisher YBR Group.
Cintra, meanwhile, manages 21 toll road concessions in Europe, North America and Chile while also operating more than 235,000 parking spaces, most of them in Spain.
Purdue University international economics expert David Hummels, an associate professor of economics at the Krannert School of Management, sees a larger macro-economic trend at play.
"There is a huge amount of foreign capital surging into the U.S.," Hummels said. "It's coming into fund federal debt, U.S. corporate debt, U.S. equities, U.S. farms. . . . This is just one more way for foreigners to make capital investments in the U.S.
"The relevant issue here is this: What is available to plug your money into? The obvious stuff is kind of snatched up. This (highways and infrastructure) is one of the last few things that you can capitalize in the U.S. market."
Poole, who said he has followed Macquarie's progress over the past four to five years, thinks the Indiana Toll Road deal fits perfectly into Macquarie's future.
"It also seems to be a win for the drivers and taxpayers of Indiana," Poole said