Ontario Teachers’ Pension Plan Makes Deal to Increase Airport Holdings

(July 20, 2011) – The Ontario Teachers’ Pension Plan (OTPP) has made an agreement with Australia’s MAp Airports (MAp) to trade its holding in Sydney Airport and cash in exchange for MAp’s holdings in the Brussels and Copenhagen Airports, OTPP said in a news release.

In the deal, OTPP will give MAp its 11% holding in Sydney Airport as well as an undisclosed cash payment in exchange for MAp’s 39% holding in the Brussels Airport and its 30% stake in Copenhagen Airport. The deal will expand airport holdings for OTPP, who are also investors in the Birmingham and Bristol Airports in the UK.

The deal pairs OTPP, the largest single-profession pension fund in Canada with assets of $107.7 billion, with Australia’s MAp Airports Limited, which is one of the world’s largest airport owners and operators. According to MAp’s website, it owned a majority of the Sydney, Brussels, and Copenhagen airports prior to the deal. MAp, which describes itself as “a long-term investor with a uniquely integrated active management model, bringing together both financial and operational expertise,” has a market capitalization of $5.9 billion on the Australian Securities Exchange and lists many large pension funds as investors.

This deal marks a continued interest in infrastructure investments among pension funds and other institutional investors. Yesterday, aiCIO reported that six infrastructure funds closed during the second quarter of 2010 and that a positive trend was expected to continue in the infrastructure market. Airports are attractive targets for investors because they contain little risk and have a long economic life.

The OTPP has become somewhat of a flag bearer for institutional investors entering into the infrastructure market. In aiCIO Magazine’s summer issue, a column on infrastructure by Dr. Angelo Calvello highlights the OTPP, which summarizes its interest in infrastructure: “Our global portfolios are focused on infrastructure and timberland assets that have a long economic life and offer low-risk, reliable returns linked to inflation in order to help pay pensions for decades.”

In yesterday’s news release, OTPP echoed a similar sentiment about its new acquisitions. “We believe that Brussels and Copenhagen Airports are excellent opportunities that strongly reflect our investment criteria and our long-term investment horizon,” said Stephen Dowd, Senior Vice-President of the Teachers’ Infrastructure Group.

It is not just pension funds that have found infrastructure to be an attractive investment opportunity; infrastructure projects have recognized that pension funds can offer important funding for them as well. In late June, the New York Times reported that the American Federation of Labor-Congress of Industrial Organizations intended to work with union pension fund managers to make $10 billion available to finance infrastructure projects in an effort to increase construction jobs for union members.

By Justin Mundt