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CS Professional · Strategic Management and Corporate Finance · Infrastructure Investment Trusts

Which of the following is the main reason InvITs are attractive for infrastructure developers like a road builder that has completed several toll roads?

InvITs let a developer sell or transfer completed, income-generating assets to the trust, unlocking its capital for reinvestment in new projects. They do not waive approvals, guarantee returns to investors or change the developer's legal status.

  1. AThey allow the developer to monetise operating assets and recycle the capital into new projectsCorrect
  2. BThey exempt the developer from every regulatory approval for new projects
  3. CThey guarantee fixed returns to unit holders irrespective of project cash flows
  4. DThey convert the developer into a government body

Explanation

By transferring completed assets to an InvIT, the sponsor releases locked-up capital and can reinvest it in fresh projects, while investors get access to stable yielding assets. InvITs do not remove approvals, and returns depend on project cash flows, not guarantees.

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