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Michael Likosky

Michael Likosky

Posted: July 27, 2009 10:29 PM

Finally, a Craigslist for Government Assets


If you're looking for a good deal on public assets, Allen & Overy LLP, a leading international law firm, has a product for you. It's called the "PPPs & Municipal Home Rule" tool. Don't be turned off by the long-winded name. Allen & Overy is saving investors a lot of time and money by honing in on what really matters.

The two most important things for public asset gobblers are:

(1) good prices

and

(2) elected officials ready to deal

But you might ask: Who has the time to drive around the country looking for good government garage sales? And, Craigslist doesn't have a listing for bridges, emergency response systems and dog shelters.

This is where Allen & Overy provides such a valuable service. It turns out that there are 27 states in America that make it easy for their cities to deal directly with investors. So far so good.

But, that information only takes us so far. That is, the real deal on public assets is to be had from cities in financial distress. A road is not just a road. The same road will command different prices in different cities.

In other words, a cash-strapped city will sell its public park at a better price than a cash flush one. Financial crisis, it turns out, depresses asset price, but not necessarily value. Even crisis-ridden Californians have to drink water and drive to work. And, when the financial crisis does end for more Americans, there'll be more water drunk and more miles driven. Now that's value for the money.

What Allen & Overy does is to find all those cities in states that have had credit rating downgrades during the last quarter of 2008. Ones with, as the law firm puts it, "heightened interest" in selling off public assets. Allen & Overy's right: when looking for "jurisdictions of opportunity", it is easy to become "overwhelmed by the scale of the U.S. infrastructure market." The beauty of the Allen & Overy tool is that they reduce the so-called "pursuit costs" of investors looking for this type of opportunity.

Does this investment tool offer a way out of financial crisis? Or is it an invitation to fleece already struggling cities?