Infrastructure assets are coveted because of their steady cash flows derived from fees and tolls paid by motorists, energy consumers, air and rail travelers and more. The asset category is diverse and the different asset types produce uneven performance. Savvy investors can use this to their advantage, but if not managed correctly, the bumpy performance can be risky. The current recession has been unique among recent recessions because of an intense freeze on credit — something essential to financing infrastructure investment — and it has tested infrastructure investors’ skills.
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The need for trillions of dollars to be invested in U.S. infrastructure is well documented. Future models for infrastructure investment in the United States will include elements of both private equity and debt, but something is needed to better mobilize vast amounts of private capital sitting on the sidelines. Might investment structures involving long-term debt, inflation protection and federal government credit enhancement help open the floodgates for pension fund and other institutional investor capital to enter the infrastructure asset class?
Positive market momentum carried over into the third quarter, boosted by signs of recovery across major economies, particularly the United States.
Larry Varellas is national tax managing partner – real estate with Deloitte. Varellas has more than 27 years of experience serving real estate and construction clients. His practice focus has included inbound international investors/owners, hotel/resort owners, U.S. and foreign construction companies, real estate limited partnerships, and real estate investment trusts. Institutional Investing in Infrastructuresenior editor Drew Campbell spoke with Varellas about the burgeoning infrastructure REIT market.