Blackstone Explores Infrastructure Business
December 12 2016 - 12:30PM
Dow Jones News
Blackstone Group LP is considering a new
infrastructure-investing business, coming at a time when funds that
invest in ports, pipelines and other public works have raised
record amounts.
New York-based Blackstone has already made billions of dollars
of investments in this area. The firm has invested in cell towers
in the U.S. and Brazil, built a natural-gas export terminal in
Louisiana and a power line from Quebec to New York, and funded the
construction of a hydroelectric dam in Uganda.
In those cases, Blackstone used cash from its energy and special
situations funds. Now its executives are exploring adding an
infrastructure-specific business, according to a person familiar
with the matter.
Blackstone, the world's largest private-equity firm, would join
rivals such as Carlyle Group LP and Global Infrastructure Partners,
which are soliciting investors for new multibillion-dollar
infrastructure funds. Private infrastructure funds world-wide have
raised a record $52 billion this year, according to Preqin. The
data provider says the amount of ready-to-invest money in such
funds has risen to $144 billion and counting.
The election of Donald Trump, who has promised to pump up
private investment in U.S. infrastructure by offering tax
incentives, has further stoked optimism on Wall Street that
investment opportunities will be abundant in the coming years.
At an investor conference in New York days after the election,
executives from several Wall Street firms said the outlook for
infrastructure investing has brightened with Mr. Trump's
election.
Jonathan Gray, who heads real-estate investing for Blackstone,
said that an attempt years ago by Blackstone to build a business
that invests specifically in infrastructure misfired, but that the
firm was eyeing the field with renewed interest.
"We didn't really pursue as actively as we should," he told
investors at the conference. "I think over time, that's an area
that we should explore, because it's a large area, and if you look
what's coming there, it's going to be more infrastructure spending,
not only here in the U.S., but around the world."
Infrastructure funds operate similarly to corporate buyout
funds, which lock up investors' cash for 10 years or more, but
rather than companies, they buy and build bridges, power plants and
similar assets. They have been a big hit among investors such as
pension funds, insurance companies and wealthy families, who are
drawn by the relatively low risk and steady returns such funds
promise.
Money has flowed to infrastructure funds as the oil price slump
has led cash-starved energy producers to sell assets to raise
money. Mobile technology has necessitated construction of towers
all over the world. Moreover, both developing and developed
countries are badly in need of upgrades to transportation systems
and utilities that strained public coffers are unable to handle on
their own.
It is unclear whether Mr. Trump's infrastructure plan will
entice investment firms like Blackstone to take on more and
different types of public-works projects than they do now.
Historically, such funds have focused on pipelines and other energy
assets in the U.S. as opposed to roads, bridges, airports and other
public property that is generally viewed of in need of repair.
But the president elect is surrounding himself with Wall Street
executives who may help him hone his policy. Earlier this month,
Mr. Trump appointed several business leaders to a presidential
advisory panel that includes Blackstone chief executive Stephen
Schwarzman and Adebayo Ogunlesi, who leads Global Infrastructure
Partners, one of the world's largest infrastructure-investment
firms.
Known as GIP, Mr. Ogunlesi's firm manages $35 billion and is
raising a new fund that it has told investors could reach $15
billion, according to people familiar with the matter. If the fund
reaches that total, it would surpass the $14 billion raised this
summer by Canada's Brookfield Asset Management Inc. as the world's
largest infrastructure fund.
Write to Ryan Dezember at ryan.dezember@wsj.com
(END) Dow Jones Newswires
December 12, 2016 12:15 ET (17:15 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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