London City Airport up for sale

GIP, the airport’s majority shareholder, is seeking a buyer for the airport, which was the New York fund manager’s first-ever investment.

Global Infrastructure Partners (GIP) is looking to sell the 75 percent interest it currently owns in London City Airport (LCY), Infrastructure Investor was able to confirm on Thursday.

GIP first invested in the airport in December 2006 when it partnered with AIG Financial Products Corp, a wholly-owned subsidiary of US insurer American International Group, to acquire 100 percent of the airport. While the two firms did not disclose financial details at the time, reports placed the purchase price at around £750 million (€1.1 billion; $1.2 billion).

GIP funded its portion of the transaction – which represented a 50 percent ownership interest – through its debut fund, which it launched in 2006 and closed in May 2008 with total commitments of $5.64 billion that included capital from founding investors Credit Suisse and General Electric. The London City Airport acquisition was the firm’s first-ever transaction.

In October 2008, GIP increased its stake to 75 percent. US buyout firm Oaktree Capital owns the remaining 25 percent interest and, according to reports, has agreed to the sale.

Both firms declined to comment.

London City Airport is the only airport located in the city of London. Because of its proximity to Canary Wharf and London’s financial district, it is popular among business travelers and has seen a steady increase in passenger numbers throughout GIP’s ownership.

Last year was the airport’s busiest, serving 3.65 million passengers, an 8 percent increase over 2013. LCY plans to reach 6 million passengers by 2023.

To that end, the airport announced last February that it had received the go-ahead for a £200 million investment that will enable the airport to operate up to a permitted 111,000 annual flights from the current 70,000. According to a press release, expansion plans include developing existing infrastructure to increase runway capacity and to accommodate the next generation of aircraft, opening new markets for LCY.

At the moment, 10 airlines fly out of London City Airport to more than 40 mainly European destinations, as well as to the US.

GIP has two other airports in its portfolio – Gatwick, the UK’s second-largest, and Edinburgh Airport, Scotland’s busiest.

News of the intended sale comes just two weeks after Infrastructure Investor reported that GIP is also looking to sell Great Yarmouth Port, an asset it acquired when it bought International Port Holdings (IPH) in May 2007, a company that had emerged as the preferred bidder for the port the previous year. That transaction was also financed through its debut fund Global Infrastructure Partners I.

Since then, the infrastructure investment firm has raised a second fund, GIP II, which closed on $8.25 billion in October 2012, making it the largest infrastructure fund ever raised.

As well as New York, GIP has offices in London, Colorado Springs, Connecticut and Sydney. It targets investments in power and utilities, natural resources infrastructure, air transport infrastructure, seaports, freight railroad, water distribution and treatment, and waste management.