State government-owned land title and registry operations are an emerging, cost-effective option for infrastructure investors, as the price of more traditional options such as toll roads or ports remains high.
That is the view of First State Super head of income and real assets, Damien Webb, who spoke to Investment Magazine shortly after it was announced on Monday that the $91 billion fund was successful in its bid to operate Victoria’s land titles and registry functions.
“First State Super is a first mover in this type of asset class,” Webb said. “Our view is that land registries will prove to be a new asset class for infrastructure investors over the medium term.
“There weren’t a lot of ports or airports that you could purchase as a private investor 20 years ago. Hard assets, as we call them, like ports or airports or toll roads, are commonly accepted hard infrastructure [now].”
Following a six-month tender process, First State said on Monday it had paid $2.86 billion for a 40-year concession to operate parts of Victoria’s registry business, which includes products such as land titles searches.
At the end of this period, the asset will be returned to the state, with the Victorian State Government using the funds from the payment to invest in schools, hospitals and transport.
First State chief investment officer Damian Graham said the fund had, over the last few years, taken a “more flexible view of what infrastructure might look like” because more traditional infrastructure assets are “more expensive”.
“That more flexible mandate is a very useful way of trying to get access to very long-dated earnings streams,” Graham said. “The [registry] asset class is newer to Australia but is one we feel is really attractive. We’re seeking to deliver a return stream that is a margin above inflation – these businesses have that.”
Another benefit for First State, whose 800,000 members tend to stay with the fund for decades, is that the income from registry assets is relatively predictable.
In a statement, Victorian Treasurer Tim Pallas said the state would retain full control over prices for the land registry services throughout the 40 years. He added that price increases would be capped at CPI for non-statutory services, provided via the 100 per cent First State-owned Victorian land registry services.
First State made its first moves into this asset class in April 2017 as part of the Australian Registry Investments (ARI) consortium, which was the winning bidder for a 30-year concession to run New South Wales’ land registry business – the country’s largest.
Other members of ARI, which paid a total of $2.6 billion for the concession, were Hastings Fund Management and the Royal Bank of Scotland’s pension fund.
In 2017, a consortium made up of Macquarie Infrastructure and Real Assets and the Public Sector Pension Investment Board, of Canada, paid $1.6 billion for the South Australian land registry business.
“They [registry businesses] are an essential service; everyone has to use them to do their property transaction searches and, as such, they are a real asset,” Webb said.
It is understood the Western Australia state government has also put its land registry business up for sale.
“Now that we have both Victoria and NSW, that improves strategic rationale for why we should hold these two investments,” Webb said. “There are attractive synergies and efficiencies about the operations and [we can] look at what other products we can undertake with reference to both states.”
