LaGuardia, the US' largest P3, reaches financial close

Construction of the $4bn project will begin immediately with substantial completion expected during 2022.

LaGuardia Gateway Partners (LGP), a consortium that includes French fund manager Meridiam Infrastructure , has reached financial close on the LaGuardia redevelopment project, whose $4 billion price tag makes it the largest public-private partnership in the US to date.

Financial close, which was announced on Wednesday and a year since LGP was selected to design, build, finance, operate and maintain LaGuardia Airport's Central Terminal B, means construction will begin immediately.

The project entails replacing the existing 835,000-square foot terminal built in 1964 with a new 1.3 million-square foot, 35-gate terminal building to increase capacity; building a new Central Entry Hall, which will connect Terminals B and C; and a new 3,000-space parking garage.

The new Terminal B will be built next to the existing building, while flight operations continue without interruption, Meridiam said in a statement. Replacing Terminal B while the airport continues to operate is one of the biggest challenges the project faces and the main reason the airport's owner and procuring agency – the Port Authority of New York and New Jersey – chose to deliver it as a P3.

According to Meridiam, most of the new terminal will be opening in 2020 and substantial completion is expected during 2022.

The project will be financed using equity, debt, Port Authority milestone payments, as well as retail and airline revenues with equal shareholding amongst the three consortium partners, which along with Meridiam, include Skanska Infrastructure Development and Vantage Airport Group.

According to Port Authority meeting documents, the total cost for the design and construction of the new terminal will amount to $2.8 billion, of which the bi-state agency will contribute up to $1 billion, while LGP will fund the balance.

The Port Authority will also contribute $856 million for the design and construction of supporting infrastructure, which LGP will undertake on behalf of the agency.

The new Central Hall, a component that was not part of the project initially and which will connect terminals B and C for the first time in the airport's history, will cost the Port Authority approximately $310 million. LGP will design, build, operate and maintain the Central Hall for a limited period of approximately seven years from substantial completion, but with the possibility of renewing the lease.

The consortium, however, will operate and maintain Terminal B through December 2050.

The $2.8 billion cost the private consortium will assume will be financed through a combination of debt and equity. The debt portion is in the form of bonds worth $2.41 billion that LGP successfully raised and which received a BBB rating and a stable outlook from Fitch Ratings last month.

The bond issue was 10 times oversubscribed, Meridiam's North America chairman, Jane Garvey, told Infrastructure Investor . “Just seeing the response we got from the bonds really underscores the importance of the project,” she said. “It underscores that the American market is very strong and people want to see infrastructure being built. That's extremely important.”

Procurement of the project has been anything but smooth sailing. First announced in 2011 when the agency issued a Request for Information, the project has been delayed several times by incidents such as the disqualification of a shortlisted team , an unexpected design competition which resulted in the addition of the Central Hall component, and political in-fighting that was on display most recently at a Port Authority board meeting in March .

It was during that meeting that the board authorised the agency's executive director, Pat Foye, an appointee of New York State Governor Andrew Cuomo, to sign a contract with LGP. But in exchange the board also had to include a new bus terminal – a project that is important for New Jersey and which is estimated to cost between $10 billion and $15 billion – in the agency's capital plan.