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Arcus secures 2.1x multiple as it realises Fund I with Brisa sale

The firm agreed the sale of Portuguese toll road operator to APG, NPS and Swiss Life last week, the final asset of its €2.2bn first fund.

London-based Arcus Infrastructure Partners fully realised its €2.2 billion Arcus European Infrastructure Fund I after the sale of Portuguese toll road operator Brisa to APG, Korea’s NPS and Swiss Life Asset Management.

The fund manager sold its 81 percent stake in the company, which it held alongside Portuguese conglomerate Jose de Mello group, ending a realisation process for the fund that began in the summer of 2015 with the sale of its share in UK rolling stock company Angel Trains. The fund has secured a net money multiple of 2.1 times and a net IRR “comfortably above” 9 percent, according to Michael Allen, partner at Arcus.

Brisa’s latest financial accounts show 79 percent of its revenue comes from toll income and Allen said the sale in the current climate “certainly did create some questions given the impact on traffic”, although the firm was at the back end of a process that began in October.

“If you were to ask us in October what we expected, we’re broadly in line with that,” Allen told Infrastructure Investor. “Clearly, it has affected how some people looked at the business, that’s not to say who we ultimately sold it to.Covid has had an impact on bank appetite to write big tickets for acquisition financing. We are very pleased with the end result.”

Despite the realisation, AEIF1 does not formally mature until December 2027 after it underwent an extension process in 2016, an option Allen said Arcus had to present to investors as per the fund terms. Some €800 million of capital came into the fund, including new LPs and re-ups from existing investors.

“That was primarily to make sure we didn’t find ourselves in a situation where as a fund, you had to realise assets because of the fund term and at values that may not have made sense,” he said. “We had very clear goals and aspirations for each of the investments and when we have either completed those or when we think the market is prepared to pay for them without us delivering them do we think about selling.”

In addition to Brisa and Angel Trains, the Arcus portfolio from the 2007-vintage fund included Forth Ports, Euroports and Alpha Trains. Allen said the group will continue to look for transport mid-market assets for its second fund, which closed on €1.22 billion last month and is roughly a third invested in four assets.

“We invested pre-GFC when it was a relatively new class, you didn’t have the advent of the mega funds,” Allen recalled. “What’s changed now is you have mega funds and direct pension investors who are writing very large cheques. From where we sit, more of the capital seems to be targeting the very large infrastructure assets and we’re very focused on the middle market where we think there’s more of a chance of doing things bilaterally. Three of the deals we have in fund II are completely bilateral. The European market remains an area with significant opportunities in that respect.”