Investing in marine terminals and port infrastructure remains a viable option for pension funds and other investors who are patient over the long-term, according to an investment banker.
It will be several years before growth rates in the port business return to the levels experienced in 2005 to 2007, said Richard Nicholson, managing director at Macquarie Capital Funds.
Outside investors rushed into the marine terminal and port infrastructure space in those years on the belief that double-digit growth rates would continue for years to come. They paid prices ranging from 10 to 22 times earnings for port properties in the United States and elsewhere.
Those investments now appear to be foolish because of the global trade recession. The global container trade last year declined by 10 percent, and that was the first significant drop in cargo volume after 30 years of annual double-digit growth.
In fact, if the intra-Asian trade is removed from the calculation, the container trade last year declined by 30 percent.
Long-term investors in infrastructure normally look for an annual return on investment of 4 to 6 percent over inflation, Nicholson said. Based on those numbers, investors should feel comfortable with port properties, he said.
Nevertheless, given current uncertainties in the North American and European markets, investors in port properties today will look first to Asia, where strong growth in the container trades continues, he said.
Contact Bill Mongelluzzo at email@example.com.