InstarAGF invests $58.3m in Steel Reef

The Canadian manager’s acquisition of a 20.6% stake in the midstream company marks its third investment through its debut infrastructure fund.

Two months since InstarAGF Asset Management held a first close on its first infrastructure vehicle, the Toronto-based fund manager has acquired a 20.6 percent stake in Steel Reef Infrastructure Corp, a midstream company based in Alberta, Canada.

InstarAGF has invested C$75 million ($58.3 million; €50.7 million) of equity in the midstream company, representing a price of C$2.15 per share. Under the terms of the transaction, InstarAGF president and chief executive Gregory Smith has been appointed to Steel Reef’s board of directors.

“This is an outstanding opportunity for the Fund to acquire a significant minority interest in an established midstream platform that is focused on the middle market, led by a proven management team, and generating stable cash flows,” Smith said in a statement.

Steel Reef, which was established in 2012, is a privately held company that owns and operates processing and transportation facilities that handle oil, natural gas and natural gas liquids. The facilities are located in the Western Canadian Sedimentary Basin.

While the transaction is the first since the Toronto fund manager announced a first close of C$372 million in early March, it is the third investment InstarAGF has made through its fund. In January 2015, InstarAGF was part of a consortium that acquired the passenger terminal at Billy Bishop Toronto City Airport. InstarAGF invested C$105 million for an undisclosed ownership interest in the asset.

In March, the firm invested C$30 million for a 100 percent stake in the Okanagan wind project – two 15MW sites, developed by Zero Emission Developments in British Columbia. The two facilities, which are expected to begin operations in the first quarter of 2017, have 40-year electricity purchase agreements with BC Hydro, a spokesperson for InstarAGF told Infrastructure Investor in an e-mailed response.

With the Steel Reef investment, almost 60 percent of the capital raised so far has been deployed, the spokesperson said. The fund has a target of C$750 million, with a hard cap set at C$1 billion. It will invest in mid-sized power, utilities, civil and social infrastructure assets in North America.

All of the firm’s employees have made investments in the fund, InstarAGF said at the time it announced the first close, describing it as a move meant to exhibit “strong alignment with investors”.

Founded in 2014, InstarAGF is a joint venture between Instar Group, owned by Smith, and AGF Asset Management. InstarAGF, which makes direct investments and co-investments, focuses on North American mid-market infrastructure and other alternative real assets.