NPS restarts alternative investment with Portugal and Manhattan deals

  • 2020-05-07

The National Pension Service has invested at least one billion dollars in aggregate in a Portuguese toll road operator and a property redevelopment project in Manhattan, ending a months-long lull in overseas alternative investments caused by the coronavirus pandemic.

In a consortium with Dutch pension fund APG Asset Management NV and Swiss Life Asset Management AG, NPS has acquired an 81.1% stake in Brisa Auto-Estradas de Portugal S.A, for 3 billion euros ($3.2 billion), according to an NPS source on May 6.

In the US, NPS has made a joint investment of $492.2 million to buy a 49.5% interest in One Madison Avenue, a $2.3 billion redevelopment project, with US developer Hines Interest LP.

They were the first major alternative investments by the $600 billion pension scheme after it began running an emergency team to cope with the Covid-19 pandemic from February 28.

Its investment in the two deals reached the billion dollar level, but NPS declined to specify numbers.

NPS’ investment in Brisa, Portugal’s leading toll road operator, was made through a vehicle owned by the consortium and jointly controlled by APG and NPS, according to a statement from Arcus Infrastructure Partners last week.

The three-way consoritum bought the stake from the Portuguese conglomerate Jose de Mello and London-based Arcus.

Brisa runs a network of 17 motorways and six national highways of 1,628 kilometers. The transaction is expected to close at the end of the third quarter of this year.

In the auction for the majority stake in Brisa, China State Construction Engineering Corporation (CSCEC) and Spain’s Abertis Infrastructure reportedly had participated.

The investment was made just before Portugal on May 4 began a gradual relaxation on lockdown measures which had led to a sharp decline in toll road traffic. Portugal has reported nearly 1,100 deaths and over 26,000 confirmed infection cases of the Covid-19 since the pandemic occurred.

ONE MADISON AVENUE

For One Madison Avenue next to Madison Square Park, NPS joined forces with Hines to buy the 49.5% stake from SL Green Realty Corp. which will have the remaining stake after the divestment.

SL Green and Hines are co-developing the $2.3 billion project for a 130,000-square-meter office tower.

In 2017, NPS invested $500 million in One Vanderbilt Place in midtown Manhattan to buy a 27% stake from SL Green Realty. Hines also participated in the skyscraper project of about 150,000 square meters.

NPS is aiming to increase the share of alternatives to 15% of investment assets by the end of 2023, which means it may need to allocate at least 10 trillion won ($8 billion) to alternatives annually, including reinvestment.

In February, the world’s third-largest pension fund posted a negative 0.45% return on investment, due in large part to the stock market plunge. It compared to a 0.6% return in January and 11.31% for the entire 2019.

The February results stemmed mostly from interest and dividend incomes and foreign exchange gains, without reflecting valuation changes of alternative assets such as infrastructure and real estate.

By Jung-hwan Hwang

jung@hankyung.com

<Edited by Yeonhee Kim>

(Photo: Getty Images Bank)