UK insurer Legal & General has clinched its first US infrastructure deal by helping to fund the $1.34 billion expansion of the University of California, Merced’s campus, a project spearheaded by developer Plenary Group.
L&G is funding $100 million out of a 38-year, $660 million bond facility, rated BBB+ by ratings agency Moody’s and issued by UC Merced. The bonds are part of a larger funding package for the P3 project, which also includes $590 million from the Plenary-led consortium and just over $148 million of the university’s own funds.
“This first infrastructure deal in the US shows the growing number of tools in our box to ensure we secure long-term returns to match our liabilities. We continue to be drawn towards social infrastructure and it doesn’t get more attractive than this when the underlying asset is being developed for one of the world’s leading universities,” commented Legal & General managing director Kerrigan Procter.
The project was originally set to cost $1.14 billion until UC Merced decided to increase its budget in late July. Described as “an unprecedented four-year project” by the university, it will nearly double the physical capacity of the campus, allowing it to grow to 10,000 students from the current 6,700.
The mixed-use campus will be built on a 219-acre, university-owned site adjacent to the existing campus. The proposal is based on a detailed analysis and recommendations provided by the Urban Land Institute in January 2013.
Groundbreaking could begin as early as September, UC Merced previously said, with the first phase of buildings scheduled to be delivered in 2018 and the remainder delivered in 2020.
“The project will be the first in the UC system to use a single private development team for a multi-year, multi-building project of this scope,” the university said in its statement. “[The Plenary consortium] will not only design and build all of the new facilities as a single, fast-track project, but will also ensure major building systems operate effectively over the 39-year term of the contract.”
San Francisco-based Webcor Builders is the lead contractor, while Johnson Controls will provide the operation, maintenance and renewal services.