Over the past few years, QSuper's investment team has increased QSuper's level of investment in infrastructure assets, with the aim of matching the long-term investment strategy required of a super fund. In this article, we put the spotlight on one of our more recent indirect investments made by QSuper in Edinburgh Airport.
As Scotland's number one airport, with a diverse selection of routes and airlines and a solid customer base, Edinburgh Airport can be considered a particularly attractive infrastructure investment.
Edinburgh is in fact the second most popular tourist destination in the UK (after London), with a good proportion of these tourists arriving by plane. There's also plenty of action on the departure front, as being the political, cultural and financial centre of Scotland Edinburgh has a high proportion of wealthy inhabitants, many of whom like to travel.
Just as importantly, Edinburgh Airport has lots of potential for growth, which is one of the many things QSuper looks for when making an infrastructure investment. Because of its location and customer base, and planned operational improvements, it is expected that over the coming years, it will attract new airlines and develop new routes, making it even more profitable.
Recent developments at Edinburgh Airport include a new route to Istanbul with Turkish airlines, Virgin Atlantic's announcement that it will begin services between Edinburgh and Heathrow in March 2012, and new airline deals with easyJet and Ryanair.
Port of Brisbane
In 2010, QIC (one of QSuper's investment managers) successfully acquired an interest in the Port of Brisbane, as part of the Queensland Government's privatisation process. As a result, most QSuper members have exposure to one of Australia's fastest growing container ports, and Queensland's largest general cargo port1.
The Port of Brisbane is located at the mouth of the Brisbane River, approximately 24km from the city's central business district. It features world class cargo handling capabilities and warehousing facilities, and in the 2012/2013 financial year, more than 37 million tonnes of cargo passed through the port.
The Port of Brisbane provides a crucial gateway for trade between Queensland and the rest of the world; it has an extremely strong competitive position and significant capacity to grow. With its diversity of revenue sources and cargo, it is a highly attractive infrastructure asset that QIC expects will provide good capital growth and stable returns for QSuper members over the long term.
As a landlord port with 750 hectares of usable land, the Port of Brisbane earns revenue from the use of its key assets, including cargo based charges from the use of the shipping channel and wharves and rental income from tenants who require land in close proximity to a major import and export facility.
In 2006 QSuper's infrastructure manager, QIC, acquired an interest in Thames Water, providing QSuper members with an equity stake in the largest water and wastewater services company in the United Kingdom. Thames Water provides services to millions of users across London and the Thames Valley, and employs almost 5,000 people. Its revenues are regulated, which provides comparatively stable and predictable cash flows set on a five-yearly cycle. Its asset base continues to grow, and it is this asset base which provides the company with its returns.
With its transparent regulation, predictable cash flows and position as a stable, monopoly business providing essential services, Thames Water is a particularly attractive infrastructure investment. It is one that we expect will continue to provide stable returns for the longer-term benefit of QSuper members.
One Times Square
New York, USA
Situated in the heart of Times Square, this New York icon has been featured in countless TV shows and movies, is the site of the famous New Years Eve 'ball drop', and its billboards and LED signs can be seen from ten blocks away.
Although 25 stories high, most of the floor space is in fact empty. Retail makes up only 16% of the revenue source, with the only major tenant being Walgreen pharmacy – which has a flagship store over three floors. The real moneymaker is those billboards.
Due to its extreme visibility – around 35 million people walk through Times Square every year and an estimated 1 billion watch the new year festivities – advertising rates for these signs are among the highest in the world, and since 1998 have increased at an average of 8.4% per annum. Coupled with the fact that most signage leases are five to ten years, and that advertisers include blue chip companies such as Toshiba, Sony and TDK, this makes One Times Square a quality investment that the QSuper Board expects to continue to provide solid returns over the long term2.
1. Source: Port of Brisbane
2. Past performance is not a reliable indicator of future performance.