First State Super secures Victoria land registry in $2.09bn deal

The Aussie superfund’s solo bid beat a joint offer from MIRA and Sunsuper, with Cbus dropping out of the process.

First State Super has secured the 40-year concession to run Victoria’s land registry business in a A$2.86 billion ($2.09 billion; €1.8 billion) deal.

The superannuation fund beat a joint bid from Sydney-headquartered investment manager Macquarie Infrastructure & Real Assets and Australian superannuation fund Sunsuper with its offer, according to sources familiar with the process.

Hong Kong-listed CK Infrastructure had also considered making a bid but pulled out of the process to focus on its takeover of Australian gas pipeline giant APA Group, a source familiar with the process told Infrastructure Investor in June.

First State Super had initially worked on a joint bid with fellow superannuation fund Cbus, but the latter dropped out leaving First State Super to bid alone. Several Australian media reports indicated that Cbus retreated from the process due to the high asking price. Cbus had not responded to a request for comment prior to publication.

Speaking to Infrastructure Investor, First State Super’s head of income and real assets Damian Webb declined to comment on Cbus’ decision to drop out other than to say that it was “agreed between the parties that First State Super would pursue the final deal on its own”.

Webb said that First State Super had taken a “research-based approach” to the land titles sector, weighing up the opportunities while participating in the three auctions to date in South Australia, New South Wales and Victoria.

First State Super holds a significant stake in New South Wales’ land registry business, NSW Land & Property Information (NSW LPI), having been part of a successful A$2.6 billion joint bid with Hastings Funds Management and the Royal Bank of Scotland’s group pension RBS Pension Trustee in April 2017. First State Super’s investment in LPI is worth approximately A$320 million, according to its website. Meanwhile, MIRA currently holds the concession for the South Australian land registry business alongside Canadian pension PSP Investments, which it secured for A$1.605 billion in August 2017.

“We were looking at opportunities that we thought made sense for our members, bearing in mind we are looking for CPI-linked long-term cashflows,” Webb said. “We secured a material interest in the NSW land registry business and we were keen to cement that with another strategic holding, and that came in the form of the Victorian land registry. Together they speak for over 50 percent of the population and 60 percent of the property market.”

“We were looking at opportunities that we thought made sense for our members, bearing in mind we are looking for CPI-linked long-term cashflows”
Damian Webb

Webb added that the superfunds’ experience of bidding in South Australia and New South Wales, alongside its experience in running NSW LPI, had put it in a good position during the Victorian bid process. “That put us in a more confident state to take that significant step of being the lead, and then the sole investor in this Victorian opportunity,” he said.

Western Australia is also considering privatising its land registry business, Landgate. It recently launched a sale process for the Landgate-owned Advara, which provides cloud-based computing services to the land registry, in a move that is widely seen by industry observers as a precursor to a privatisation of the land registry proper.

Webb said while First State Super’s short-term focus was on separating the Land Registry Services business, which is being privatised, from Land Use Victoria – and transitioning the Victorian business, it would consider bidding on future opportunities in Western Australia.

“Once we are through [the transition], we are aware that the WA government is looking to commercialise a component of its land registry business. We will certainly take a moment to have a look at what they are proposing, but I’d say our key focus right now is on the initial 100-day plan for the Victorian transition,” he said.

Under the 40-year concession for part of Land Use Victoria, the state will retain full control over prices for statutory land registry services throughout the 40-year term and price increases will be capped at CPI for non-statutory services provided by Victorian Land Registry Services, First State Super’s special purpose vehicle that was awarded the bid.

The A$2.86 billion proceeds from the concession will be used by the state government to fund construction of new schools, hospitals and transport infrastructure, the government said in a statement. The deal reflected “strong bidder interest in a highly competitive market”, it added.

First State Super had A$63.7 billion of funds under management at 30 June 2017, according to its latest annual report, as well as A$18.2 billion through StatePlus, the financial planning company it purchased in 2016. It has funds invested in infrastructure and real assets through GPs including Brookfield Asset Management, Morgan Stanley Investment Management, IFM Investors, Blue Sky Water and Orion Energy Partners – as well as several direct investments, such as its two forays in land registries.

Outgoing CEO Michael Dwyer told Infrastructure Investor in June that the superfund is planning to double its infrastructure allocation to 5-6 percent over the next few years.