Every infrastructure investment manager wants to build a brand that is easy to remember, and some brands are certainly easier to remember than others.
American Triple I Partners was launched in February as a spinout from Wall Street investment bank Siebert Cisneros Shank. Before even making a deal, the fund manager has several elements that stick out in an increasingly crowded field of investors.
For starters, its strategy of backing mid-sized public-private partnerships in the US is one that few investors have tried. The firm will focus on deals requiring around $300 million, and will commit up to $50 million of equity in projects ranging from transport to information systems and ‘smart city’ technologies.
American Triple I Partners is also a minority-owned firm led by senior executives from SCS. Henry Cisneros, who was mayor of San Antonio in Texas during the 1980s and served as secretary for housing and urban development in President Bill Clinton’s administration, is one of the company’s founders and its co-chief investment officer. Other founders include former comptroller for the City of New York William Thompson Jr, SCS chief executive Suzanne Shank, and Gary Hall, previously executive director in JPMorgan Securities’ public finance group.
We caught up with the company’s chief executive, David Cibrian, to learn more about what it plans to bring to the market.
Q: Why does American Triple I Partners focus on smaller US PPP markets?
David Cibrian: The model of targeting secondary and tertiary markets is to pursue projects that many of the larger managers do not because they are not big enough. These managers raise mega infrastructure funds and have to put out $200 million to $400 million for one project in high-population areas to make it worth their while and to meet their investors’ mandates.
We’re in a different position and are targeting a different opportunity. There’s crumbling infrastructure throughout the country. A student innovation centre in Texas or the re-development of a closed military base require as much financing as the mega toll road, port and airport projects. In addition, there are courthouses, police stations, hospitals and universities that need to be built or redone. The reason it hasn’t been done [with private capital] is because it’s difficult for the mega funds to deploy in smaller amounts.
That being said, we believe we have a lot of subject matter expertise in airports, ports and water systems. If there’s a large transaction in a large market where we feel we bring unique value, we’ll pursue that as well. We’ll look at deals requiring $150 million to $200 million of investment.
Q: What are the pitfalls of focusing on the big deals?
DC: Larger firms have the ability to raise large blind pools of money in the hope that deals will come. They are chasing the Indiana Toll Roads and Ohio State parking systems and wait for months trying to win a project. And losing [out on them] is something only major funds can withstand.
Smaller emerging managers such as ourselves have to have differentiated models so we’re not in situations where we’re investing time in projects we don’t win. That’s why it’s so important for us to show we have a unique skillset. We have senior people who have great government relationships, and we can win projects.
Q: As a new manager, how important is a well-sourced pipeline to attracting your first LP commitments?
DC: The challenge for a startup infrastructure firm is how to find enough deals fast enough to give investors comfort that you have a place to deploy their money. Managers will often go out, spend a lot of time raising money and then find deals.
We decided to do it backwards. You don’t think there’s enough $25 million to $50 million projects in secondary and tertiary markets? All right, then let’s build a pipeline instead of raising money first. That’s what we’ve done, and in a short amount of time we have a $300 million pipeline.
Now, when we sit down with investors, we have real projects to show them. We can say, ‘Here’s the project. These are going to need to close in six to nine months.’ You’re really not underwriting American Triple I – you’re underwriting the project.
Q: So what deals are you looking at?
DC: We have three categories of projects: the transportation area – airports, rapid bus and parking systems, etc – information systems and smart city technologies. For example, in February, American Triple I was awarded a pre-development agreement to build three interrelated projects at a former air force base in Texas.
We’re doing the entire design, build, finance, operate and maintenance for three projects. We’re going to be building the development of a 130,000 square foot innovation centre. Then we’re building a 150,000 square foot sensitive compartmented information facility, which is supposed to not be hackable. And we’re also doing a smaller sensitive compartmented information facility space on the same campus. We’ll have a concession agreement to operate and maintain these facilities after we build and finance them.
Q: What kind of investors are interested in these opportunities?
DC: We’ve had some preliminary discussions with major pension systems, some of the large university endowments and multifamily offices. Again, we’re giving them access to a market that the mega funds are not accessing. We’re able to give them a slate of investments in a pipeline in markets they haven’t traditionally had exposure to, whether it’s San Antonio or other mid-sized cities in other parts of the country.
Q: There aren’t many minority or women-owned infrastructure managers in the industry, but American Triple I is one of them. Is that important to note?
DC: We consider American Triple I to be an infrastructure firm that happens to be minority-owned. The ownership group is 100 percent ethnic minority-owned. However, we think that’s going to be important, because it’s an area that’s increasingly focused on by governments and investors. If it’s a project that requires participation from minority or women-owned firms, we stand ready to fill that requirement. The team we have are experienced, seasoned investment professionals in their own right. We just happen to be professionals at a minority- and women-owned firm. That is one example of where we think we bring unique value to transactions.
Q: Should the industry expect greater diversity requirements for projects and LP commitments?
DC: I think you’re going to see it at all levels in the fund management business. You’re going to see it at the project level, because state and local governments want to have inclusion and diversity. They are starting to push that infrastructure projects have diversity mandates, for example, requiring X percent of all services to be provided by minority- or women-owned firms.
You’re also going to see it at large pension systems, and even some of the university endowments. These institutions have very clear, articulated, diverse emerging manager programmes. They’re encouraging it and making it important that they will invest through and support minority- and women-owned fund managers.
Of course, we think it’s absolutely the right thing to do. They’re creating an environment where there’s a need to have minority- or women-owned firms exposed to the same level of sophisticated and complex transactions that the larger firms have traditionally been exposed to, and this is one way to do it.”
Like father, like son
Henry and John Paul ‘JP’ Cisneros have made American Triple I Partners something of a family affair. Henry is founder and co-chief operating officer, while JP is managing director. Although Henry’s experience in the public and private sectors stretches back decades, it has been only a decade since JP finished his bachelor’s degree.
As mayor of San Antonio, Henry oversaw one of the largest-ever infrastructure development programmes in the US’s seventh-largest city. After serving in the Clinton administration in the 1990s he founded Los Angeles-based real estate investment firm Cityview. He also serves as executive chairman of Siebert Cisneros Shank.
JP began his career in finance at JPMorgan, where he helped municipal sector clients issue and structure debt to fund infrastructure and other government-related projects. He has also worked at Palladium Equity Partners, where he assisted in the acquisition of a non-standard auto-insurance provider with around $100 million in collected premiums.