Australian developer Lend Lease announced today the sale of an additional three infrastructure public-private partnerships (PPP) to its joint venture with Dutch pension provider PGGM – the Lend Lease UK Infrastructure Fund.
The assets, sold for £30 million (€35 million; $46 million), include a hospital and two schools. Their sale had been agreed when the fund launched in December 2010 with £220 million of committed capital – most of it from PGGM, since Lend Lease only owns 10 percent of the vehicle. When it launched, the fund was seeded with £75 million of assets from the Australian developer.
That means that close to half of the 28-year fund has already been invested, with the remainder to be committed over the next five years. The fund will focus on brownfield infrastructure projects owned by Lend Lease.
“Our integrated model allows Lend Lease to retain a long-term interest in all three PPPs, providing asset and facilities management services as well as ongoing fund management services,” commented Dan Labbad, chief executive for EMEA [Europe and the Middle East].
In a keynote interview published in last month’s issue of Infrastructure Investor magazine, Henk Huizing, the head of infrastructure at the €105 billion pension provider, disclosed that PGGM pays fees to Lend Lease for the management services rendered:
“We pay fees, it’s no secret, but we pay a management fee which is cost-based. I think you can view it in this way: either we would have to put in our own people [managing the daily operations] or we would have to hire somebody else to do that for us. And in this case, Lend Lease is doing it for us – or for the joint venture, in fact.”
Huizing elaborated: “So, we pay a slight, cost-based management fee, based on actual activities, and we pay an outperformance fee. That’s also a difference: there’s no catch-up whatsoever; there’s a hurdle rate and slight outperformance fee just to incentivise Lend Lease to get the best out of the projects. [Compared with traditional general partner structures], these [developer] structures are completely different,” he concluded.