Interview with Head of Midstream Energy and MLPs Tyler Rosenlicht highlighting why favorable secular, cyclical and valuation factors may currently be aligning in favor of midstream assets.
Recently, Chase McWhorter, Institutional Real Estate, Inc.’s managing director, Institutional Investing in Infrastructure, spoke with Cohen & Steers’ Tyler Rosenlicht, senior vice president and head of midstream energy and MLP strategies. The following is an excerpt of that conversation.
It seems like a lot of smart private-equity funds have been investing in midstream recently, and we had our first privatization with IFM’s acquisition of Buckeye Partners in May. What is your take on this activity?
There’s an interesting tension these days between what listed investors want and what private-equity investors are willing to accept. Listed investors are focused on deleveraging, distribution sustainability, fixing balance sheets, improving governance and resetting business models for the long run, which is commend- able. That being said, there may still be opportunities for mid- stream companies to invest capital at attractive returns, as North America completes a major wave of energy infrastructure projects. So, you have management teams that want to continue to grow, and listed investors who want them to shrink. That tension is weighing down the stock prices of a lot of midstream companies. Private-equity funds have a generally low cost of capital and less need for current distributions, which has catalyzed a lot of activity.