The financialisation of urban infrastructure: A framework of analysis

Abstract

The literature on the financialisation of urban infrastructure typically traces how an infrastructure asset’s balance sheet is (re)engineered to create a financial asset. What the literature neglects are the processes by which an asset generates urban flows. Attention to these processes, we argue, not only gives better insight into the processes of financialisation of infrastructure but also exposes how the act of financing affects the operations of cities through its influence on the performance of infrastructure assets. The argument presented in the article is informed by case studies of infrastructure investments revealed in interviews conducted in New York, London and Sydney. This material is drawn on to generate a framework for understanding the relationships between infrastructure investing and the infrastructure-enabled flows of a city. This framework has three dimensions through which the financialisation process is seen to be mediated. These are capital structure, organisational structure and regulatory structure. The article argues that these mezzanine-level conceptualisations enable us to explore the to-and-fro between financing and operating cities. A key proposition is that the physical flows of a city are basic not only to the design and enactment of an investment instrument but also to its financial viability. The realisation of this relationship has changed the way investors approach infrastructure assets as investment products. Implications for urban management are drawn.

Land Redevelopment and the Built Environment in Third-Wave Cities: Review and Synthesis

“…This fusion was then accompanied by a deepening engagement of financial institutions in mortgage lending and in the financialization of real-estate assets. The overall strategy of financialization was accomplished by means of comprehensive income-generating securities or collateralized mortgage obligations (CMOs) such as mortgaged-backed securities (MBS) and structured investment vehicles (SIVs) based on the aggregation of large numbers of individual mortgages into massive investment pools (Gothan 2012;O'Neil, 2018). The new-found ability to securitize real-estate debt in this way offered enormous windfall profits to financial institutions, including global giants like Bear Sterns, Lehman Brothers, Merrill Lynch, J.P. Morgan, and Wachovia (Crosby and Henneberry, 2016).…”

Varieties of urban entrepreneurialism

“…The taxonomy of processes we present in this article departs from that contained in a new contribution by Pike et al (2019) where financialization is presented as a category to contrast with urban managerialism and urban entrepreneurialism. At the very least, financialization certainly has complex and indeed innovative entanglements with the practices of new urban managerialism, marketing and intrapreneurialism that we highlight here (O’Brien and Pike, 2018), which are surely deserving of further investigation and defy easy characterization in terms of policy and politics (O’Neill, 2018).…”

Value–rent–finance

“…In this vein, relational economic geography has shed light on the sociological roots between finance and Pre-publication version Progress in Human Geography Accepted 19/02/2019 the real economy, arguing that 'it is only through their integration that the social relations of finance and the ways in which its forms of calculation affect economic processes can be understood' (Pike and Pollard 2010: 35). According to O'Neil (2018) this is a two-stage process: the metrification of services provided by the asset (e.g. household water bill) and the creation of property rights over the asset and revenue stream.…”