Macquarie Group pioneered the model of parking infrastructure assets in listed funds and then milking them for huge base, performance, advisory and debt management fees.
After a decade of glorious profits the model is now under severe stress with investors in some of the funds under water as many of them trade at huge discounts to net asset backing. But is the Millionaire Factory taking a backward step? Not on your Nellie.
I was in town this week giving a speech on corporate governance at the RACV to a group of IT professionals involved in internal audit. During the course of the evening I learnt that Macquarie has bought 187 taxi licences in Melbourne as part of a plan to acquire 250 and then float them on the stock exchange.
Given the debacle that was Lime Taxis in Sydney – see this story from The 7.30 Report – you would think the bank might have been scared off the industry. Not so, it seems. A licence is worth about $470,000 and Macquarie has so far spent about $80 million. The bankers naturally don’t drive the cabs, instead renting them out at $2,400 a month, which is regarded as excessive.
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However, AMP does a similar thing and it owns about 500 licences in Melbourne which it then offers as an investment class to clients. Macquarie is also pushing into wine, agriculture and even beef properties for a planned agriculture fund, so they don’t appear to be slowing down.
That said, there is talk that a landmark study is about to be released which casts serious doubts on the sustainability and credibility of the Macquarie model.
With the Macquarie impersonators such as MFS and Allco falling over, I reckon the model is stuffed. A spate of collapses have placed corporate governance front and centre again and these huge discounts are simply unsustainable. The rational response is to wind them up or internalise the management. Babcock & Brown is starting to head down that track but Macquarie still hasn’t awoken to the new reality.
Rather than launching a new taxi fund, surely the priority now is closing that huge NTA discount which is bedevilling the whole listed fund model.