The consortium that bagged NSW Land and Property Information for $2.6 billion plans to invest in technology and roll out a range of new products to improve profitability.
On Wednesday, April 12, 2017, the NSW Government announced a $2.6 billion deal to lease the state’s land registry and titles business to a private consortium for 35 years.
The Australian Registry Investments (ARI) consortium is led by global infrastructure fund manager Hastings Funds Management and First State Super – the $80 billion default super fund for NSW Government employees.
First State head of income and real assets, Damien Webb, told Investment Magazine that ARI wants to modernise the organisation’s technology platform and then leverage that investment to develop a number of new products.
“One idea we think is sensible is [to create] a process for expediting plans for developers – a product whereby we guarantee delivery of plans within a tight timetable,” Webb said. “That would have a good societal benefit because it could reduce the holding costs of property for release.”
Webb said existing staff would be engaged to assess whether new product ideas were realistic and viable.
NSW Treasurer Dominic Perrottet said the winning consortium’s bid had been looked on favourably because it included a “technology roadmap” for the transformation of the lands registry service, prepared by specialist registry technology consultancy Advara.
“Advara has led the transformation of Western Australia’s land titling services through the introduction of world-leading titling and registry technology,” Perrottet said. “To ensure that technology meets NSW’s needs, the registrar general will review and approve any major changes to Land and Property Information’s IT system.”
Webb said the first focus would be to maintain a “great business and service”. He said the registry business was already highly profitable with “terrific” operating margins, resulting in attractive cash flows. The business generates $130 million in profit a year.
Registries’ cash flows attractive
Reliable long-term cash flow is the characteristic that led the super fund to consider registry businesses as a new sub-class within its infrastructure portfolio. Unlike traditional infrastructure assets, such as ports, the registry business does not have a ‘hard’ physical asset. Under private ownership, it is expected to transform into a valuable information services business, based in real estate-obsessed Sydney.
Webb said the deal gave First State Super and its consortium partners access to a 35-year “monopoly”.
“This critical and essential service is an absolute backbone to the property market in NSW,” he said.
Economies of scale could also be added by snapping up the land registries of other states. The South Australian registry is up for sale. Webb did not rule out the possibility of participating in a bid for that asset or other government registry businesses.
“I can’t comment on specifics, but as a large, growing fund, we have further appetite for direct investments and private market investments across real estate, infrastructure and property. There are a number of other opportunities that we are doing due diligence on across a range of sectors. Absolutely, we are engaged in a number of opportunities.”
First State Super was previously interested in bidding for the Australian Securities and Investments Commission’s corporate registry. The government has since pulled the sale after not being able to fetch the price it wanted.