AMP Capital to acquire 40% of Auckland prison PPP from InfraRed

AMP Capital has agreed to buy a 40 percent equity stake in a New Zealand prison PPP via its Community Infrastructure Fund.

The fund manager will acquire the stake in the Auckland South Corrections Facility (ASCF) public-private partnership from InfraRed Capital Partners for an undisclosed sum, subject to approval from New Zealand’s Overseas Investment Office.

Community Infrastructure Fund manager Charles Savage told Infrastructure Investor no hurdles were expected with OIO approval and that the deal was expected to close by the end of 2019.

AMP Capital will acquire InfraRed’s stake in full. The other two equity members of the consortium responsible for the design, build, finance and operation of the prison are John Laing and The Accident Compensation Corporation, a New Zealand crown entity.

Construction of the prison was completed in January 2015 and operations commenced in mid-2015. The 25-year concession contract is an availability-based PPP with the New Zealand Department of Corrections that runs until 2040.

Savage said the Auckland South Corrections Facility fit with the Community Infrastructure Fund’s mandate to invest in social infrastructure assets because it was focused on rehabilitation.

“We will vet these assets – most modern facilities [like ASCF] are focused on rehabilitation, and if it wasn’t, we might not have an interest,” he said.

“We look to invest in things that have a positive social impact and an institutional-grade return – the fund’s not a charity. People come to our schools to get an education and they come to our hospitals because they’re physically ill. They generally end up in our prisons because they’re not behaving appropriately, and modern prisons have an enormous focus on rehabilitation. We think that’s a very positive social impact on the community.”

ASCF will be the 15th asset held in AMP Capital’s Community Infrastructure Fund. The enterprise value of the 15 current assets was around A$3.5 billion ($2.4 billion; €2.1 billion), Savage said, with the value of equity in the fund at around A$840 million.

Savage declined to disclose the value of the ASCF deal but acknowledged that the equity interest in the Community Infrastructure Fund would be “heading towards” A$1 billion in the near future.

AMP Capital is on the lookout for more assets to add to the fund, with two water assets, a school and a hospital car park on the horizon.

Savage also confirmed the fund would be “joining the queue” to assess the possibility of making a bid for Morrison & Co’s portfolio of PPP assets held in its first Public Infrastructure Partners Fund.

Infrastructure Investor revealed in July that PIP’s assets were being prepared for a potential sale.