Following news of Tribeca Asset Management's exit from the company holding a 50 percent stake in City Parking SAS, the activist investor has shared details with Infrastructure Investor about its strategy, and how the company was able to achieve 21.4 percent IRR from a business line in which it had no prior experience in four short years.
To start, investment manager Miguel de Pombo said it's important to note that the Bogota-based activist investment firm doesn't invest purely in infrastructure assets “as other large investors do, where they build large concessions.”
“What we look for are investments that are smaller in scale and have a good potential for smaller equity ticket and quick growth and revenue growth, where we as controllers in those investments can add value,” he said.
Tribeca invested in City Parking in May 2012, and using “a very hands on approach [was] able to increase the company's operations and numbers in all of its departments and it became an attractive target.” At the heart of the growth was “a strong effort to restructure the balance sheet”, de Pombo said.
“When we entered the company, it was properly run to a certain degree, but it lacked stronger management in terms of key performance indicators, commercial efforts by the board, control of cash flow and indebtedness of the company.”
Through this approach, following Tribeca's seven-step value addition process – improving the talent pool; operational excellence; financial optimisation; growth in neighboring or international markets; marketing and branding; execution and capabilities; and stakeholder management – the team was able to see the business grow around the 20 percent range in the initial years, growing that to 37 percent by 2015 and rounding out total growth in the high 20s for the four-year period. The growth surge in the final year of Tribeca's ownership of City Parking was credited to the acquisition of four parking concessions, which significantly boosted the company's revenue.
Tribeca invested in City Parking through its $40 million Fund II after it was able to free up the needed equity through a partial exit from the Bogota airport cargo terminal via a restructuring of that contract in which the firm reported delivering 22.9 percent IRR. As a result, de Pombo said Tribeca was able to squeeze about $64 million of buying power out of that fund.
With the exit from City Parking in the rearview, Tribeca is looking to continue exiting from its current investments with two more exits likely this year followed by another two in 2017, de Pombo said. The goal, he said, is to establish “a strong track record of exits to go to the market and prove that we are able to deliver.”
Once the team feels that it has built its exit credibility sufficiently, de Pombo said that fundraising will begin in earnest for Tribeca's third fund, which was announced last May and has a hard cap of $500 million. A first close is not expected in the near term, he said, but he's confident that investors will see that his team has “returned more capital than the commitments we've had so far”, with the total returned to investors so far calculated out at $425 million by founding chief executive Luc Gerard earlier this month.