Fengate closes half-committed Fund III on C$1.1bn

The Toronto-based firm was part of a consortium that brought a $500m US airport PPP to financial close last week.

Fengate Asset Management has closed its third infrastructure fund on C$1.1 billion ($819.3 million; €733.9 million), thereby surpassing its C$750 million fundraising target and an initial C$1 billion hard-cap.

Fengate Core Infrastructure Fund III will follow its predecessors’ strategy of investing in mid-sized infrastructure assets in North America, with a focus on greenfield projects. The firm said in a statement that the vehicle would “also selectively [pursue] brownfield acquisitions where it can achieve its target returns”.

Fengate did not provide further details when contacted by Infrastructure Investor.

However, a source familiar with the firm’s fundraising told us it had drawn half its commitments from limited partners based in Canada, while 25 percent came from Europe, 20 percent from Japan and 5 percent from the US. The source added that the vehicle would target investments – of no more than C$200 million per deal – in public-private partnerships, contracted power and utility assets.

The source said the investments Fengate has made to date through Fund III include developing two US airport PPPs and a number of renewable energy projects. They added that Fengate was on track to deploy the rest of the fund within two years.

Fengate and the members of its consortium reached a financial close this month on the consolidated rent-a-car (ConRAC) facility they will develop at Newark Liberty International Airport in New Jersey.

The consortium, led by Related Fund Management and including Conrac Solutions Capital, secured debt financing that will cover 80 percent of the project’s $500 million cost.

The remaining 20 percent will be financed by the equity partners, who will recoup their investment solely from the proceeds of a $7 customer facility charge applied to rental car transactions.

Martin Klepper, chairman of Fengate, told Infrastructure Investor when the deal was announced that the consortium partners had agreed to assume the project’s entire revenue risk instead of receiving an availability payment from the Port Authority of New York and New Jersey, the procuring agency.

“Taking revenue risk, if there’s significant growth, there’s an opportunity to earn a better return, provided the deal’s structure attributes this upside to the parties exposed to the revenue risk,” Klepper explained. “But there’s also the downside, which is if rental car usage drops off, revenue will be lower.”

Klepper said he believed the deal was attractive because of the demand that rental car companies operating at Newark say exists for such an asset.

In September, another Fengate consortium received approval to design, build, finance, operate and maintain a ConRAC facility at Los Angeles International Airport under a 28-year lease and availability payment agreement.