How Macquarie Makes Money By Losing Money on Toll Roads

This is the second post in a three-part series about privately financed highways. Part one introduced the Indiana Toll Road privatization as an example of shoddily structured infrastructure deals. Part three looks at how faulty traffic projections lead bad projects to get built, and how the public ends up paying for those mistakes.

When you invest in Macquarie Atlas Roads, now-worthless shares in the Indiana Toll Road (and four “Other Toll Roads”) are an almost-free bonus with your purchase of shares in APRR, which runs profitable toll roads in France. Image: Macquarie Atlas’ September 2014 Investor Presentation

Macquarie Group, the gigantic Australian financial services firm with some $400 billion in assets under management, has made a lot of money in the infrastructure privatization game.

The publicly traded company owns the Brussels Airport, the Dulles Greenway, telecommunications towers in Mexico, a wind farm in Kenya, and much more. One of those assets was the Indiana Toll Road, which Macquarie purchased in 2006 with Spanish firm Ferrovial — whose most profitable assets include Heathrow Airport and the 407 toll road ringing Toronto. The Indiana Toll Road was housed in a spinoff company called ITR Concession Co. LLC., which filed for chapter 11 bankruptcy in September after a disastrous eight-year run.

Macquarie and Ferrovial paid the state of Indiana $3.8 billion for the Indiana Toll Road. At the time, it was the largest infrastructure privatization deal in U.S. history. Eight years later, the road was saddled with an astounding $5.8 billion in debt, far beyond the original, unexpectedly-high purchase price.

Traffic fell well short of the projections offered by the engineering firm Wilbur Smith (now CDM Smith), and the company blamed the bankruptcy on the fallout from the recession.

But some observers also pointed to the risky financing underlying the deal. Macquarie and Ferrovial each chipped in just $374 million of their own money to finance the deal. The other $3 billion was borrowed from seven European banks, six of which have since been bailed out by their respective governments.

Granted, the deal happened in 2006, when debt was flowing freely. According to a 2007 profile by Fortune’s Bethany McLean, Macquarie borrowed its billions using loans resembling a balloon mortgage. It would purchase a type of derivative, called an “accreting swap,” to get a low teaser interest rate, all the while assuming that a refinance was just around the corner. But when credit markets froze entirely, Macquarie couldn’t extricate itself from punishing interest payments.

McLean cited the example of the Macquarie-owned Chicago Skyway: “In 2007 the Skyway will pay interest of just $129,000 on $961 million of debt. But the interest payment for 2018 is to be $480 million — that’s not a typo.”

That helps explain how Macquarie and Ferrovial ended up owing almost twice as much as they paid for the Indiana Toll Road, after collecting tolls for eight years.

Randy Salzman, associate editor of Thinking Highways North America, has reported extensively about similar tollway deals and their aftermath, saying it’s common for privately financed roads to go bankrupt. He says that firms acquiring infrastructure typically provide very little of their own cash, and because of a complicated mix of fees and tax breaks, they may benefit financially even when the deals go sour.

“You’d think that they wouldn’t be investing in these things because so many of them go bankrupt,” he said. “You’d think that the money would be running away.”

But Salzman says he’s seen these kinds of bankruptcies happen over and over again. “The only question is when.”

Macquarie blamed I-805, which isn’t tolled and runs closer to denser coastal communities, for the bankruptcy of its more distant South Bay Expressway. Photo: SLWorking, via Flickr

Indiana isn’t the first time one of Macquarie’s bets on American toll roads has gone bad. Macquarie’s first project in the U.S., the South Bay Expressway outside San Diego, filed for bankruptcy in 2010. The $658 million project had been backed by $130 million in equity from Macquarie, $340 million in private loans, and a $140 million TIFIA loan from the federal government. In this case, as with the Indiana Toll Road, Wilbur Smith did the traffic projections.

And just like in Indiana, those projections turned out to be unrealistic. Official reports blamed the softening housing market: The South Bay Expressway was designed to serve San Diego’s inland sprawl, and the housing bust dampened projected traffic growth.

In 2011, the South Bay Expressway emerged from bankruptcy and ownership of the road reverted to its private lenders and the federal government. The same year, SANDAG (San Diego’s regional planning agency) purchased the road from the lenders for $344 million, almost half off the original price — using, of course, a fresh federal TIFIA loan to partially pay off the one that went sour.

The public took a hit from all this restructuring, according to a report by the Congressional Budget Office [PDF]:

The new financing and ownership structure required by the bankruptcy court imposed a loss of 42 percent on federal taxpayers, replacing the original TIFIA investment with a package of debt and equity worth only 58 percent of the original investment.

FHWA took a more optimistic view, saying that taxpayers are “positioned to realize 100 percent of the original loan balance” — but over such a long time period that the public would have been better off if the loan had never been made.

Some financial industry analysts have raised these types of concerns about Macquarie in particular, since surprises can easily hide within its opaque corporate structure. The lengthy Macquarie expose by McLean, who also broke the Enron scandal for Fortune, included interviews with several financial analysts who raised troubling points about the company. One of those analysts said that trying to understand the firm’s structure is “like wrestling in the dark with a ghost.”

Macquarie's global headquarters in Sydney, Australia. Photo: /Flickr
Macquarie’s global headquarters in Sydney, Australia. Photo: Christian Tan/Flickr

Macquarie flips its infrastructure purchases into separate corporations that are sold to investors as “income trusts,” an increasingly popular way to acquire shares of assets — like real estate, oil pipelines, or transportation infrastructure — that pay out steady streams of revenue. Investors like income trusts because their high dividends exceed the low returns on bonds, and companies like them because tax laws exempt these trusts’ profits from corporate income taxes.

For example, Macquarie transferred half of its share of the Indiana Toll Road to a private fund for large investors, Macquarie Infrastructure Partners. The other half, along with interests in six other toll roads, was folded into a new public company called Macquarie Atlas Roads. The other roads include the Dulles Greenway, Chicago Skyway, the ill-fated South Bay Expressway, and the Autoroutes Paris-Rhin-Rhône (APRR) in eastern France. The investors in these assets, Macquarie explains, are mostly institutions like pension funds and large banks, although small investors own 9 percent of Atlas.

Since APRR is consistently profitable, Macquarie can continue to pay dividends even when the other roads rack up losses. Those losses are hidden away within each individual road’s books. This rose-tinted accounting is possible by setting up multiple entities, each owning a minority share of each road.

Since investors buy Atlas for the dividend yield — which, as a recent presentation to investors makes clear, stems almost entirely from APRR — they don’t seem to mind when its assets fail spectacularly. So, like a Hydra, Macquarie can chop off various subsidiaries if need be. The South Bay Expressway’s year-long spell in bankruptcy court resulted in a $65 million paper loss for Atlas, yet over that year the company’s stock price rose by 118 percent. Atlas’ $80 million interest in the Indiana Toll Road will likely similarly pass from its books with little notice.

Macquarie's global infrastructure assets. Image: Macquarie.
Macquarie’s global infrastructure assets. More detail at Macquarie Infrastructure and Real Assets

Jim Chanos, president of the hedge fund Kynikos Associates and another famous early doubter of Enron, has been Macquarie’s most outspoken critic. In 2007, Chanos told McLean that Macquarie had “perverse incentive to serially overpay for assets,” and compared the company to a Ponzi scheme.

McLean explained: “That’s because the assets are owned not by the bank itself but by the shareholders in its funds. The shareholders pay Macquarie management fees that are based on the size of the fund, meaning that Macquarie has an incentive to add to its collection.” That’s why Macquarie had every reason to bid a full billion dollars more than the second-place bidder for the Indiana Toll Road: Every additional dollar earned fatter fees for its bankers.

As an investment bank, Macquarie also earns money from transaction fees, which its infrastructure funds pay every time its banking arm rearranges investments into new corporate structures, or refinances a loan, or closes a deal. Chanos pointed out that 84 percent of the deals Macquarie advises involve its own entities. Shareholders ultimately eat the cost of these self-dealing fees.

Macquarie also pays itself handsome annual fees to manage its numerous satellite entities, in an “externally managed” arrangement criticized by corporate governance advocates. McLean called the funds “fee factories” for the company, noting they generate hundreds of millions of dollars each year for the firm. Even though Atlas is just a holding company with little of its own overhead, it paid Macquarie $36.7 million in fees in 2013 — millions more than it paid out to its shareholders.

Macquarie Atlas Roads’ Hydra-like, multi-national structure makes no sense to outsiders, but makes money for Macquarie through management agreements as well as dividends. This graphic was included in a prospectus Macquarie issued when it “demerged” some of its holdings into separate funds. Note that the Dulles Greenway stake is split between entities incorporated in two countries, to keep each share below 50 percent.

The Sydney Morning Herald’s Alan Kohler shares Chanos’ skepticism. In a 2004 editorial, he wrote, “The Macquarie model is justly famous around the world. It is quite possibly the most efficient method of legally relieving investors of their money ever conceived.”

In 2013, Macquarie and another firm were sued for fraud in New York State by Syncora Guarantee Inc., a creditor in the Detroit Windsor Tunnel, owned at the time by Macquarie’s American Roads. Toll Roads News reported that the Chapter 11 suit alleged “the financing and spinoff by Macquarie involved fraud and misrepresentation… Macquarie had a secret and improper relationship with Australian traffic and revenue forecaster Maunsell Australia Pty Ltd (since absorbed into AECOM) to produce unrealistically high traffic and revenue forecasts.”

Syncora alleged that Maunsell’s forecasts were “specifically engineered to ensure that the Macquarie Group could justify the overpriced bids it placed in acquiring infrastructure assets such as American Roads.”

The judge in the motion ruled that Syncora had enough evidence to proceed in a fraud case against the Australian firm, saying the undisclosed bonuses to Maunsell were what concerned him. Ultimately the two parties settled out of court, and Macquarie was never convicted of fraud.

But the dust-up over traffic forecasts points to another big piece of the puzzle. In the case of the Indiana Toll Road, how did consultant Wilbur Smith (now CDM Smith) get the projections so wrong? In the next story we’ll look at the data on traffic projections for privately financed toll roads, why they have a tendency to be very high, and how that can be a very bad thing for investors — and the public.

Posts in this series:

47 thoughts on How Macquarie Makes Money By Losing Money on Toll Roads

  1. Great article. Keep this type of article coming. It’s an under-reported aspect of our infrastructure and economy that needs to be explained.

  2. I’m a little surprised to find this sort of in-depth financial reporting in Streetsblog, but it does sound reasonably well researched. Frankly the whole structure just reminds me of subprime mortgages. The big winner is the bank, the small winner is the seller of the asset (Indiana in this case, anyone who sold their home in 2006-2007 in the case of subprime), and the big losers are the thousands of pension funds and institutional money managers stupid enough to invest in this stuff. Stupidity on the part of investors was not in short supply during the peak of the subprime bubble, and this is just one more way in which banks were fleecing investors.

    I’m all the more surprised at all the attention given to this issue here because the bottom line appears to be the rich screwing over the rich, while the little guy benefits a little from being caught in the middle.

  3. Yeah, I saw that, but your piece here is about the Indiana Toll Road, and the bottom line on that deal seems to be that Indiana got a sweet deal and Macquarie’s investors got shafted while Macquarie made out OK in the end from all the fees.

  4. You’re right, Macquarie is apparently ok. That is the funny thing about this. The question is, is this a legitimate and sustainable infrastructure financing scheme? Make of it what you will.

  5. Yeah, bond holders not doing their homework.

    Caused a lot of problems here, in leveraged buyouts, in subprime and other structured finance products.

    When the government steps in and guarantees the bonds they are the ones not doing their homework. I also maintain that any new road for cars is a mistake but that isn’t a widely held view in Indiana where they are probably pretty happy with their mostly free road.

  6. Oh I think there’s practically zero chance of any deal like this getting done again post-crisis. Next time around there is no way the private sector will bear all the risk. The cautionary tale for taxpayers and their representatives is not to be persuaded by the folks at Macquarie that these sorts of deals are still a good idea with a government backstop.

  7. Don’t think so. There’s a killion scams and no one learned from Enron. Read smartest guys in the room.

  8. The banksters know how to off load debt and have no conscious as they will get the investment firms to tell their clients that these are swell deals. The investment firms want another piece of the pie on the next deal. And by the time it unravels only the little guy is left holding the bag.

  9. It’s great to see this kind of research on an important and neglected topic. This stuff is difficult to disentangle. How does one nominate blog series for journalistic awards? If you extend the series, it would be interesting to explore how these publicly subsidized but “off-budget” projects to build new toll road projects skew the kinds of infrastructure that states focus on and the kinds of places where infrastructure gets developed. Nobody builds sidewalks by leveraging off-budget pedestrian revenues, and nobody even builds toll roads where people are too poor to pay high tolls.

  10. I’ll try to sound as un-cynical as possible with this comment…

    I don’t believe anyone should be surprised that privatization (of infra, gov’t services, etc.) primarily benefits the corporations involved, lobbys, and a few dirty politicians while giving very little (if any) benefit to the public (maybe excepting those that invest in these corporations).

    Please keep up this type of journalism. This story, what went on in Dallas-Fort Worth regarding NCTCOG’s ridiculous projections for a private toll road, etc. will hopefully begin to shed light on what I really believe is a large-scale fleecing of the American public. I’m not opposed to private infra, but this latest generation of P3s seem to be sucking public coffers while returning nothing.

  11. Right you are. But the issue isn’t government backstops, it’s the subsidies that industry is demanding from the public for P3 deals, and the chimerical efficiencies the private sector supposedly provides. Add to that the cowardice of politicians to make the case for public deals. But yes, deals like this are unlikely, though not impossible. What we need is good analysis of deals happening now, not in 2006.

  12. Basically this is just project finance. There is nothing special about the fact that it is a public-private partnership.
    Big capital projects get financed, with some combination of debt and equity. In these cases, the municipality or state government has determined that a private institution can more effectively finance the project, and engaged in the government equivalent of moving a transaction “off balance sheet.” If it was a wholly public project, the relevant government or agency would still issue debt, sell bonds, and pledge dedicated revenues (e.g. tolls) against the debt.

    There is nothing inherently bad about the fact that a private entity is involved. It moves some risk around – and in this case it looks like the government taxpayers come out ahead because they no longer have the risk of making of the revenue shortfall with general tax revenues.
    The complexity of how the risk gets carved up is inherent in the nature of really expensive projects, and of modern finance in general. If you want to move a lot money around very efficiently, one consequence is that you are going to have complex financial markets.

    The allegations of fraudulent estimates of revenues generated from the project are only troubling if you think it is bad for a private entity to overpay a municipal government for an asset. Macquarie, in this case, can apparently earn more from gaming the tax and regulatory structure than the cost of overpaying for some roads. That points to a problem with the tax and regulatory structure itself, but that is an issue of international tax policies and other factors that are far outside the scope of transit.

  13. Thanks.
    The same “to each according to his ability” trend has begun to affect the geographic distribution of transit and placemaking projects. “Favored quarters,” which have long received the lion’s share of new infrastructure within metropolitan areas, have the higher real estate values that make value capture possible.

  14. Macquarie is getting paid many millions of dollars a year for its skills in engineering fantastically complex legal and financial schemes — but towards what end? So far, judging by the abysmal traffic counts on its bankrupt roads, Macquarie has delivered precious little that American travelers consider beneficial.

    As you mention, the USA built most of its infrastructure using much more straightforward financing schemes, with much lower overhead costs. Now, I admit that I’m the sort who carries multiple rewards credit cards to maximize the point value of various categories of purchases — but I’m under no illusion that such use of modern finance is necessarily superior to just paying in cash.

  15. Re: “they no longer have the risk of making of the revenue shortfall with general tax revenues.” No, they don’t have the “risk” because they’re paying for it now and over the next 75 years through subsidies to cover this plus a high enough interest returns to attract private finance. Also, if a project’s revenues fall short, this can easily come back onto the govt budget.

  16. if you pay for everything in cash, you can only build to the extent you have the current resources available.
    If you want an economy to grow, you will need to use the resources that will be generated in the future in order to build things now (and those things hopefully lead to more resources being generated in the future.)

    This is how economies have worked for the last few centuries.

    You can criticize the whole growth paradigm, but that is a different discussion.

  17. That was an attempt at an analogy. No one disputes that finance is a necessary element of a modern economy, and indeed, debt has played a crucial role in paying for US infrastructure for two centuries. Those tools, like municipal revenue bonds, are just as useful as they always were, and many of the projects financed using PPPs could have been financed at lower cost with less “innovative” structures.

    For instance, Chicago issued water revenue bonds this year with a 5% coupon. Yet Macquarie’s projected IRR for the Chicago Skyway, as verified by independent analyses, was over 12%. As far as we can tell, there’s no particularly good reason why the public is paying that kind of a premium for access to capital, especially since these deals require the public to also give up control over its assets.

    Investigations in recent years have not found that increased financial complexity (or the resultant increased size of the financial sector) have not resulted in better outcomes for the economy as a whole. Instead of mitigating risk and efficiently allocating capital, financial innovation is instead simply steering wealth towards rentiers.

  18. Are these deals even viable, I think is the larger concern. I don’t think any of us think private funding of infrastructure is necessarily bad, or even complicated financing schemes. If private entities can make money on these projects whether they’re viable or not, that’s a big problem. It would distort investments in infrastructure in all kinds of ways.

  19. Now, what happens when the French government forces the Autoroute operators to lower the rates (something which is discussed at the moment)? APRR has rather high tolls on their autoroutes (more than 10 (Euro)Cents per km for regular passenger cars).

  20. The water revenue bonds are far more likely to be repaid than ones based on traffic projections. IRR without standard deviation is reasonably useless to see whether or not something is clearly an overpayment.

    I agree with your conclusion but PPPs are sadly one of the only ways for anything to happen anymore because they are politically viable.

  21. Great report. The new game from these giant infrastructure privatization players is to get state DOTs to agree to “availability payment” financing to fund new projects that are independent of projected traffic figures. So Macquarie can build a road that sits empty the middle of a zombie apocalypse for ZombieDOT and still get paid as long as it is open and available for use. Availability payments end up swapping future DOT operating revenues for projected future toll revenue receipts as repayment — a slight of hand that shifts still more risk away from the private players in PPPs. So Macquarie can build a road in the middle of nowhere with no traffic and still get paid as long as it is made “available” for use. I hope you look more into availability payments in the future.

  22. I’ve followed the Indiana Toll Road bankruptcy, which I believe is now reissuing bonds under a new consortium or the like to keep the road financed. []

    To my knowledge, it is only private equity that is involved. If the new consortium can’t fund the road, it goes back to state ownership, and only the investors have lost funds, not the state or federal government.

    When Spain’s Cintra and Australia’s Macquarie Group Ltd. leased the road from Gov. Mitch Daniels for $3.8 billion for 75 years in 2006, the main objection was that the lease was too long. Boy, did Indiana make out in that deal!

    As a transportation reform advocate that strongly opposes driving subsidies, I would point out that prior to the lease sale, “tolls had not changed since 1985,” wrote former Indiana Gov. Mitch Daniels in a 2006 New York Times op-ed (posted in Planetizen)

  23. By no mean is this road “mostly free”. It probably the most expensive road to drive in the Hoosier State as I believe it to be the only toll road in the state.
    Check out the toll rates:

    I played with the calculator: $1.90 for 4 miles without E-Z pass; or 50-cents with E-Z pass.

    Folks are quick to condemn a private outfit for what might be a money-making investment (I had trouble “following the money”) on a money-losing toll road. I guess the alternative: publicly financed, untolled highways is preferable?

    Of course, another alternative is publicly financed toll roads. Good example from a financial perspective is NJ Turnpike that raised toll to finance expansion. Of course I disagree with expanding the road, but the users are paying.

    “The project is the largest in the 63-year history of the Turnpike. It was financed through a series of bonds, which will be repaid with revenue from the last toll hike, which took effect in October 2008 and were phased in. The last part of the toll increase was implemented in 2012.”

  24. Thanks for doing this intensive analysis! This explains Macquarie’s actual business model, which is to increase asset sizes (with unprofitable assets) in order to increase fees paid by “trust” shareholders to Macquarie. The trust shareholders are getting scammed, but the existence of one profitable asset in the trust means they don’t notice.

    It is similar to the original scam on investors run with “bundled” mortgages (though the banks have since gotten involved in much, much worse scams with mortgages, involving actual forgery of documents).

    I do these sorts of intenstive financial analyses sometimes, when I’m trying to figure out who is scamming who. (For instance, Cheseapeake Energy’s business model is one of pump-and-dump land-flipping — buying land cheap, fracking and drilling and announcing large first-year production, selling the land off to a major oil company at high prices ASAP. The major oil company then discovers that the oil runs out in the first couple of years.)

    This sort of financial analysis is a *pain in the neck* because everything is so obfusticated, but they’re very important for figuring out what’s really going on. I appreciate that you’re doing it. It’s a very important sort of investigative journalism. Since Murdoch bought the WSJ (which used to do a lot of this), very few people have been doing it.

  25. Read the article, J12 — this is a scam run by Macquarie. It’s fundamentally a form of securities fraud; they’re selling securities, promising unrealistic returns on them, and then extracting the capital from the securities-holders as “fees”.

    There’s a lot of forms of securities fraud. This is one of them.

  26. Increased financial complexity is usually a tool to hide a scam.

    If you’re not running a scam of some sort, all the financial devices you will ever need were invented thousands of years ago. Finance is ancient.

  27. PPP is an acronym used to cover a huge range of arrangements, from the perfectly reasonable and traditional (franchised, regulated utility company; private company doing contract work for government; etc.) to the fundamentally fraudulent (Macquarie’s stuff).

  28. Tal F. : yeah, that is the bottom line. But do you think anyone should be dealing with a company which sells bonds with the intention of shafting the bond buyers? Such companies shouldn’t even exist.

  29. Angie: it’s what I like to call “sucker financing”. Financing by selling bonds or stocks which have no chance of making any money, and then declaring bankruptcy after you’ve used all the investors’ capital.

    The Channel Tunnel was also financed by “sucker financing”. There’s a sucker born every minute, as they say. It may be a sustainable financing scheme.

    I still don’t consider it legitimate.

  30. Using this project as some kind of broader “teachable moment” is nuts. In other countries, roads are tolled, managed and operated by private companies to a much greater extent and have far greater public infrastructure.

    This is basic project finance. The issue is not with private financing of public infrastructure. Rather, it is with the way in which this particular company sells interests in the SPV that operates the infrastructure facility. That’s the issue. Not project finance, which is a pretty tame area of finance (i.e., there is little to no securitization in project finance contrary to what is implied in these articles).

  31. Dude – I work in the PPP industry. The idea that PPPs are more politically viable is nuts. Politicians kill very sensible projects all the time.

  32. How does it primarily benefit the private sector? The risk was exported to the private sector and the public sector generated a significant amount of money of the transaction. It is hard to understand how Indiana did not come out ahead here.

  33. The. Federal. Government. Is. Not. Guaranteeing. Anything!

    It is a federal loan at below market rates. The TIFIA program was designed to stimulate important infrastructure investment in projects that can’t get market financing. If you look at the performance of the TIFIA program, it has performed VERY well. If there is any criticism of the program, it is that it doesn’t lend to projects that struggle to get private financing.

  34. You understand that when the public sector builds a road, they issue bonds with the exact same pledge, right? Debt financing is the cornerstone to building infrastructure – in every country at every point in time. Seriously.

  35. This is the best point made so far. Deals pre-crisis were aggressive. Today, the due diligence on deals is enormous and, the credit assessment, is very, very detailed and sometimes overly conservative.

    Simply put, people have learned from the failures of the pre-2006 issues.

  36. Did you just compare a public debt financing of a water project with a hurdle rate for a surface transportation project? I don’t understand the comparison.

    Equity demands a higher return because it is taking on the risk that was once held by the public sector. A 12 % return is not enormous considering that the public sector no longer bears the risk of lifecycle and operating costs, which could be much higher than forecast.

    These are not complex financings by the way.

  37. Great article. In North Carolina we have the I-77 toll lanes proposed to be built and operated undr a 50 year contract with Cintra. The $655M project calls for about $100 in tax-exempt bonds, a TIFIA loan of $189M, $94M in taxpayer contribution and the balance in equity, plus a $75M availability payment

    Here’s what I can’t understand:the contract has a revenue sharing provision that basically sends 75% of revenues to NCDOT; leaving 25% for debt service. Why would Cintra sign such a deal? And why would TIFIA make such a loan?

  38. He should have said “some” in the private sector benefited while others lost. However, the pain will reach the public sector too, those public sector pension funds that will eventually take a bath on the funds will burn the public sector.

  39. The logic of the article doesn’t make sense. So, you are basically saying that Macquarie makes money on the fees while the project itself (e.g. toll road) may not be economically feasible and eventually goes bankrupt.

    Investors (Limited Partners or LPs) who lend money to Macquarie (General Partner or GP) ultimately measure the success of their investment by internal rate of return (IRR), which hovers in the 10-15% range for these kinds of projects. Calculation of IRR includes fees paid the to GP. So, as long as LPs hit their target IRR, they are happy. Macquarie cannot go on collecting fees and tanking projects because that would eventually reduce the cash distributions to LPs and would eat into the IRR of LPs. If a GP keeps delivering low IRR to LPs, they will simply stop investing in that GP’s future funds, which is NOT in Macquarie’s interest in the long term.

  40. The only thing you have have remember about so called “privatization” of anything or in this case toll roads is that Wall Street is involved, which usually means a scam on investors and or taxpayers!
    This is the glass-seagall of the so called “privatization” of public assets.
    Simply say no to hucksters from Wall Street.

  41. Since this was published, IFM Investors has taken over the Indiana Toll Road Concession Co. Do you know anything about that company?

  42. IFM is a specialist Infrastructure (mainly) Fund Manager, owned by a consortium of Australia’s largest pension funds.

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