CDPQ and DP World Expand Port Platform

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Ship Technology reports DP World and CDPQ to expand port investment platform:

Port operator DP World and its partner Caisse de dépôt et placement du Québec (CDPQ) have announced plans to expand their investment platform for ports and terminals with an additional commitment of $4.5bn.

This will increase the total platform size to $8.2bn.

In December 2016, the companies announced their partnership to create a $3.7bn platform to invest in ports and terminals worldwide.

DP World owns a 55% stake in the platform, while the remaining 45% is held by CDPQ.

So far, the platform has invested in ten port terminals around the world and across different stages of the lifecycle of the asset.

The enhanced platform is expected to target assets around the world with an increased focus to expand the footprint in current locations, including Europe and the Asia Pacific.

The investment platform will follow its implementation and diversification goals with the expansion to the wider parts of the integrated maritime supply chain.

DP World group chairman and CEO Sultan Ahmed Bin Sulayem said: “The partnership between DP World and CDPQ has been very successful and we have benefited from each other’s expertise. 

“The opportunity landscape for the port and logistics industry is significant and the outlook remains positive as consumer demand triggers major shifts across the global supply chain.

“Best-in-class well-connected ports and efficient supply chains will continue to play an active role in advancing global trade and cultivating the business environments closest to their operations.

“Alongside CDPQ, a steadfast partner whose long-term vision we share, we look forward to working together on new investments that will connect key international trade locations worldwide.”

In May, CDPQ acquired a 45% interest in DP World Chile.

In February, DP World and CDPQ acquired Canada’s Fraser Surrey Docks from Macquarie Infrastructure Partners (MIP). 

CDPQ put out a press release on this deal last week: 

  • DP World and CDPQ global investment platform established in 2016
  • Platform has achieved its investment target of US$3.7 billion since launching, investing in 10 port terminals and financing the development of its existing portfolio
  • Current portfolio of ports and terminals spans across North America, Latin America and Asia Pacific 
  • DP World and CDPQ will explore opportunities to expand in existing and new geographies with new US$4.5 billion commitment
  • Platform will also explore new investments in diversified and integrated supply chain support services

DP World, a global infrastructure-led supply chain solutions provider, and Caisse de dépôt et placement du Québec (CDPQ), a global institutional investor, announce the expansion of their ports and terminals investment through a new commitment of US$4.5 billion, that will increase the total size of the platform to US$8.2 billion. DP World holds 55% share of the platform, and CDPQ the remaining 45%.

Since its launch in December 2016, the platform has invested in 10 port terminals globally and across various stages of the asset life cycle. The enhanced platform will continue to target assets globally, but with an increased scope to broaden its footprint in existing geographies, as well as new regions such as Europe and Asia Pacific. The investment platform will pursue its deployment and diversification objectives by expanding across a wider part of the integrated marine supply chain, such as logistics services linked to terminals.

Sultan Ahmed Bin Sulayem, Group Chairman and CEO, DP World, said: “The partnership between DP World and CDPQ has been very successful, and we have benefited from each other’s expertise. The opportunity for the port and logistics industry is significant and the outlook remains positive as consumer demand triggers major shifts across the global supply chain. Best-in-class, well connected ports and efficient supply chains will continue to play an active role in advancing global trade and cultivating the business environments closest to their operations. Alongside CDPQ, a steadfast partner whose long-term vision we share, we look forward to working together on new investments that will connect key international trade locations worldwide.”

Emmanuel Jaclot, Executive Vice-President and Head of Infrastructure at CDPQ, said: “Building on the success of the first collaboration with our strategic partner, DP World, a world-class leader in ports and marine terminals, the enhanced platform will seek investments in high-quality port and terminal infrastructure assets that will help design the future of smart trade and logistics. As we take the next step in our partnership, we will further diversify our geographic reach and look to seize new opportunities in a sector that, even during a uniquely challenging period, is driven by long-term fundamental trends.”

Despite the impacts of COVID‑19 and shifts in the global supply chain landscape, the ports sector has demonstrated a fair degree of resilience. Through recent strategic investments in automation and digital technology, DP World has strengthened its logistics capabilities, combined with their maritime services operations and worldwide network of ports and terminals, to provide a full suite of end-to-end smart supply chain solutions. As such, DP World is well positioned to face the current challenges experienced by the industry and to continue to provide innovative solutions to their customers worldwide.

This is a fantastic deal for CDPQ, expanding the initial one which was announced back in December 2016:

DP World announces the creation of an investment vehicle in partnership with Caisse de dépôt et placement du Québec (CDPQ), one of North America’s largest pension fund managers. The investment platform totals CA$ 5 billion (US$ 3.7 billion), with DP World holding a 55% share and CDPQ the remaining 45%.

The platform will invest in ports and terminals globally (excluding the UAE) across the life cycle of the asset, with a focus on investment grade countries. It will also invest mostly in existing assets, but with up to 25% invested in greenfield opportunities. Through this platform, DP World will share new investment opportunities and CDPQ will have the option of co-investing alongside DP World.

The investment vehicle will be seeded with two of DP World’s Canadian container terminals, located on the Pacific Coast in Vancouver and Prince Rupert, with CDPQ acquiring a 45% stake of the combined assets for CA$ 865 million (US$ 640 million).

Sultan Ahmed Bin Sulayem, Group Chairman and CEO, DP World, said: “As a global trade enabler, DP World is proud to announce the partnership with CDPQ to invest in growth opportunities in port and terminal businesses around the world.

In CDPQ we have found a partner with shared vision who is willing to participate in the risk and reward of investing throughout the life cycle of trade-enabling assets across the globe. The partial monetization of our Canadian assets further strengthens our balance sheet.

The opportunity landscape in the port and terminal sector remains significant and this partnership offers us greater flexibility to capitalise on these opportunities while maintaining a strong balance sheet and retaining control.

By combining our in-depth knowledge of container handling and CDPQ’s expertise in infrastructure investing and long-term horizon, we can continue to develop the port and terminal sector globally.”

Michael Sabia, President and CEO, CDPQ, added: “Through this new investment platform with DP World, a world-class port and terminal operator, CDPQ will have unique access to high-quality transactions, and the opportunity to invest in the best port infrastructure worldwide. As a first step, we are pleased to announce two key investments in British Columbia. We look forward to leveraging our in-house infrastructure expertise and DP World’s strong track record in the port sector to deliver attractive long-term returns for our clients.”

Recall, a little over a year ago, I discussed CDPQ's first investment in Chile's port:

Caisse de dépôt et placement du Québec (CDPQ) has acquired a 45% stake in DP World Chile, which operates terminals in Puerto Central and Puerto Lirquen, serving Chilean consumption and industrial centers. This is CDPQ's first infrastructure investment in Chile and the transaction will be executed at the same price as DP World’s acquisition of the asset in April 2019:

Two years ago, CDPQ partnered with DP World to create a US$3.7-billion platform to invest in ports and terminals globally. DP World holds 55% of the platform and CDPQ holds the remaining 45%. The two new assets in Chile join a portfolio of ports, which includes terminals in Vancouver and Prince Rupert in Canada, that are already owned by the platform.

“This is our first infrastructure acquisition in Chile and our first Latin American ports. It marks an important step in the growth of our platform with DP World and aligns well with its geographic diversification objective,” stated Emmanuel Jaclot, Executive Vice-President and Head of Infrastructure at CDPQ. “We are delighted to continue working alongside DP World, a strategic partner for CDPQ that has a long track record in the port business and provides us with access to high-quality investment opportunities.”
DP World is a leading enabler of global trade and an integral part of the supply chain. Container handling is the company’s core business and generates more than 50% of its revenue.

The company has long-standing relationships with governments, shipping lines, importers and exporters, communities, and many other important constituents of the global supply chain.

In 2018, DP World handled 71.4 million TEU (twenty-foot equivalent units) across their portfolio. With its committed pipeline of developments and expansions, the current gross capacity of 91.2 million TEU is expected to rise in line with market demand.

This is another long-term infrastructure deal where CDPQ will benefit from growth in Latin America. Recall, CDPQ signed deals to co-invest in Colombia's infrastructure, so this is another exciting opportunity to invest in Chilean infrastructure.
Now, obviously the global pandemic hit all transportation infrastructure assets hard, especially airports and toll roads, but I found this passage in CDPQ's press release above interesting:
Despite the impacts of COVID‑19 and shifts in the global supply chain landscape, the ports sector has demonstrated a fair degree of resilience. Through recent strategic investments in automation and digital technology, DP World has strengthened its logistics capabilities, combined with their maritime services operations and worldwide network of ports and terminals, to provide a full suite of end-to-end smart supply chain solutions. As such, DP World is well positioned to face the current challenges experienced by the industry and to continue to provide innovative solutions to their customers worldwide.
So, according to this, ports demonstrated a fair degree of resilience but don't kid yourselves, ports were hit and the pandemic created logistical nightmares when they reopened:

Now, it is true that different ports were hit differently throughout the last six months depending on where they were located. It's not fair to use the Port of Los Angeles which is the busiest seaport in the western hemisphere to extrapolate trends everywhere.
 
Generally speaking, the ports that got hit the hardest initially were the ones that trade the most with China but volumes at these ports, including the Port of Vancouver, have rebounded.

Longer term, we don't know the effects of the pandemic on ports because we don't know how the pandemic will impact global GDP (port revenues are tied to global trade and global GDP), but there's no doubt ports are resilient and here to stay.

DP World is a unique operator with a proven business model which allowed them to adapt quickly to the pandemic. 

And while they do have ports in North America, like Prince Rupert, they operate ports all over the world and this diversification also helped them weather the storm.

For CDPQ, they partnered up with a great port operator, one of the best in the world, and are co-investing alongside them on all these ports. 

For its part, DP World gets a great partner with deep pockets and a long investment horizon. It can expand its operations all over the world and diversify the risk.

In other words, it's a win-win for all parties.

On another topic, this morning I listened to virtual talk featuring Nathalie Palladitcheff, President and Chief Executive Officer of Ivanhoé Cambridge, CDPQ's real estate subsidiary.

Ms. Palladitcheff was being interviewed by Michel Leblanc, President of Montreal's Chamber of Commerce, and she discussed accelerating real estate trends: adapting, innovating, engaging:


It was a great discussion (in French) and Ms. Palladitcheff was superb, very fluently and cogently answering all questions, even some tough ones.

She emphasized three critical points of real estate: flexibility, technology and service.

She discussed the "emotional aspects" of real estate and how important it is to add value to these assets so they can be a place where people go to escape and enjoy working away from home.

She said following the pandemic (but even before), there are cyclical and structural changes going on in real estate. The rise of e-commerce has led to more demand for logistics properties and the pandemic accelerated this trend.

Interestingly, she said retail malls aren't dead. They shed many retail assets but invested in others (Eaton center) and she said they invested in Montreal's downtown core (Queen Elizabeth hotel, Place Ville Marie, Manulife office building and Eaton center) and believe when the REM is completed, it will benefit the downtown core (true but thank god it wasn’t completed now).

She talked a lot about international and sector diversification, stating not all regions were hit the same and that they are focusing on logistics in Europe and Asia but also investing in mobile homes in the US which I found interesting (unless I didn't get that part). 

According to her, multifamily assets will continue doing well in a challenging economic environment but traditional offices will suffer which is why she said it's really important to add value to these assets.

She talked about the need for diversity at an organizational level and how different viewpoints from within her office and from their partners around the world have enriched their working environment.

She discussed the "S" in ESG investing and how important it is in their operations and that of all their partners. She said deep knowledge of local markets is crucial which is why it's important to have great partners with boots on the ground.

Lastly, she discussed how real estate is undergoing changes but it remains one of the most important asset classes for pensions because it provides steady cash flows and price appreciation if you can properly execute on your value creation plan.

"Real estate is indispensable in a world where we live most of our life indoors."

I'm giving you the major highlights and admittedly need to review this clip again but it was well worth the $40 I spent to listen to her speak, she's an exceptional leader and communicates extremely effectively in her native French.

(See this article in Real Estate News Exchange which covers the main themes in more detail).

That's it from me, another packed day which included a Zoom meeting with someone representing Chinese asset managers and a long and interesting phone conversation with a former colleague of mine from PSP who brought some great research on total fund management he's working on to my attention (more on this in the weeks ahead).

Lastly, if there are still people out there who aren't taking COVID-19 seriously, take the time to read this:

 
It's deadly serious, there's still a lot we don't know about this virus, so don't take it lightly.

Below, some clips on DP World which explain why it's one of the best port operators in the world. CDPQ is very lucky to have partnered up with this company to expand its investments in ports and terminals worldwide. 
 
Update: Danny Kurchasky of Real Estate News Exchange covered the Ivanhoé portfolio overhaul which means less retail, office according to its CEO. Take the time to read this article in English here.

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