Auckland Council's shares in the city's international airport and port facilities would be eagerly snapped up by investors should they be put on the market, say market players.
Council officers are putting forward a paper to the finance committee that asks for the full or partial sale of assets to form part of a review of alternative finance sources for the cash-strapped council, which unveiled sweeping rate increases this month.
Chief executive Stephen Town has reportedly discussed the idea of selling shares in Ports of Auckland and Auckland Airport. The possible sale is due to be discussed by councillors today.
Paul Glass, principal of Devon Funds Management, said a partial privatisation of the port - in which Auckland Council retained ownership of the land and the operational assets were floated on the stock exchange, with the council retaining a major shareholding in the assets - could improve its performance.
The port was previously listed until 2005, when the council bought back the 20 per cent of shares it did not own.
"It then [after de-listing] became a very poor-performing asset under council ownership for a long period and it's only in recent times that returns from it have started to improve," Glass said. "There's probably room for a lot of improvement in the operating side of the business."
The port company was valued at $1.1 billion last year, while the council's 22.4 per cent stake in NZX-listed Auckland Airport is worth about $1.4 billion.
Craigs Investment Partners head of private wealth research Mark Lister said investors would be keen on both assets, particularly the council's airport stake, which he reckons could be sold in a matter of hours.
"Infrastructure assets like ports and airports are sought after by investors," Lister said. "Auckland Airport is a must-own for just about every investor in the country, whether it be retail investors, KiwiSaver funds or institutions."
Auckland Airport shares have gained 46 per cent in the past year on the back of its financial results and booming tourism numbers.
Yesterday, the company said total passenger numbers in the year to June 30 rose 5.7 per cent to 8.6 million.
It is now New Zealand's biggest listed company in terms of market capitalisation, worth $6.3 billion, $689.3 million more than Fletcher Building, the second-biggest.
Auckland Airport shares closed down 3.5c at $5.30 last night.
Lister acknowledged that the city would lose an income stream - dividends - if the stake was divested.
Last year the council banked a $83.9 million special dividend from the airport, which was used to pay down debt.
"While they'll give [dividends] up, they will bank a billion or a billion and a half dollars," Lister said. "Many would argue that sharemarkets are trading at very high levels after a very strong six years so if you're looking to divest some assets then arguably it's not the worst time to do that."
Asset sales would, however, draw some opposition from the public.
Mayor Len Brown has said there was no proposal to sell "strategic assets" and he would not support such a proposal.
But JBWere New Zealand equity manager Rickey Ward said the council needed to find other ways, outside rate rises, to fund expenditure.
It made sense for the council to reduce its airport stake to 10 per cent, reap a capital return, and continue receiving dividends from the remaining shares, he said.
Stephen Bennie, of Auckland fund manager Castle Point, said a key consideration for investors evaluating Ports of Auckland was whether the facility had a future as a major freight hub, with the ability to remain competitive against Port of Tauranga.
"That's unclear, which is a concern for investors," Bennie said. "With Auckland Airport, there's absolutely no doubt on what is the hub for New Zealand air travel, whereas with Ports of Auckland it's less clear."