Where many see rusting beams and potholes, some investors see the next big opportunity. With the prices of conventional real estate at or near cyclical highs, there is a growing interest by investors in toll roads and bridges, which have many of the financial characteristics of commercial properties, including predictable cash flow.

Just last year, for example, a joint venture between a pair of Australian and Spanish investment firms shelled out $1.83 billion to buy a 75-year leasehold on the Chicago Skyway. The 7.8-mile long Skyway, which connects the Dan Ryan Expressway to the Indiana Tollway, throws off annual toll revenue of $45 million. And, later on last year, the state of Indiana announced plans to lease its 157-mile long Indiana Toll Road for 75 years to the same Australian/Spanish joint venture for $3.8 billion.

“Money continues to inundate the commercial real estate market and much of that capital is having a hard time finding a home,” says Dale Anne Reiss, Global Director of Ernst & Young’s Real Estate, hospitality and construction sector. “Public infrastructure is certainly a sister to real estate, and the returns are both steady and long-term.”

Both New York and New Jersey are now considering privatizing toll roads, says Reiss. While private toll roads are common in Europe and Canada, the concept is slowly gaining traction here in the United States. Privatizations are hardly risk-free, too: The 22-mile long Camino-Colombia Toll Road, one of four toll bridges that span the Rio Grande River in Laredo-Nuevo, Texas, was built for $90 million by a private company with deep roots in the area. It opened in the fall of 2000 hoping to lure heavy truck traffic at a $16 toll for 18-wheelers.

But the project proved to be a financial disaster. After the borrowers foreclosed, Camino-Colombia fell into the hands of the Texas DOT for just $20 million. The doomed venture effectively gave the state of Texas a new toll road for just .22 cents on the dollar.

Despite these bumps in the road, Reiss believes that pension funds and other institutional investors will look to privatize public infrastructure in order to lock in steady returns for decades. She also believes that privatizations will appeal to many budget constrained local governments that are anxious to get costly roads and highways off their books.

New York and New Jersey present the greatest opportunity. The New Jersey Turnpike and Garden State Parkway generated $1.12 billion in revenue last year, exceeded only by New York, which generated $2.08 billion in toll revenues. Together, these two states represented roughly half of all U.S. toll revenue in 2005, according to the Bureau of Transportation Statistics.

Investing in a toll road or a bridge should not be a difficult leap for real estate pros, says David Geltner, director of the Massachusetts Institute of Technology’s Center for Real Estate. “How is a highway or a bridge any different from a commercial property? People pay to use both for a certain period of time,” he says.

And how are the returns? It’s still too early to gauge how strong the returns would be for U.S. infrastructure, but a well-established toll road in Europe can yield 8% annual returns within the first 12 years of ownership, according to RREEF, the real estate and infrastructure investment management arm of Deutsche Bank, which holds stakes in Australian tunnels and airports. A RREEF spokeswoman declined to comment on the company’s plans for the U.S., citing a quiet period surrounding infrastructure investments.

“I think that infrastructure really represents the next frontier for real estate investors,” says Geltner. “Especially since the returns are already so low for core properties.”