Having just finished editing our 2016 US Report, which you can read alongside the October edition of Infrastructure Investor, it's hard not to come away with a sense that the US infrastructure market is – whisper it – finally arriving.
We hesitate to give a full endorsement because, like many of you, we've been here before regarding the US and its infrastructure promise. But there's a sense, especially over the last couple of years, of a growing pipeline of opportunities spanning multiple sectors – a pipeline that is no longer limited to the country's ever-dynamic energy sector.
Higher education public-private partnerships are a good example of this. Born out of genuine ingenuity and successful flagship deals like the University of Georgia's late 2014 student accommodation P3, the sector has really come into its own this year with the closing of Plenary Group's $1.34 billion project to nearly double the capacity of the University of California, Merced's campus by 2020. With 650 people, mostly from universities, getting ready to congregate in San Diego's Higher Education P3 Summit in late October, dealflow promises to continue for the foreseeable future.
Airports are another good example. It's hard to overestimate how important it is that New York's $4 billion LaGuardia redevelopment project – the US's largest P3 – finally reached financial close this summer, led by French fund manager Meridiam. After Chicago Midway's privatisation debacle, the sector was in dire need of a success story and you can't get any better than LaGuardia. Crucially, there are more deals in the works including the revamping of Denver Airport's iconic Great Hall and the modernisation of Los Angeles International Airport.
You could tell similar stories in the transportation and telecom sectors, which means that, even before investors get to energy, they would already be looking at a healthy deal pipeline.
Energy, of course, easily continues to be the most active sector in the US infrastructure market. This might sound like a bit of contentious statement since for many people energy and infrastructure stand apart. We take their point – there's definitely a lot of energy that fits much better with a private equity investor's risk profile; but equally, there are plenty of energy infrastructure opportunities (renewables, gas-fired generation, midstream) with safer, contracted returns that are very much not private equity.
So while we will easily admit that energy is the liveliest game in town – with last year's extensions of the wind and solar tax credits, together with cheap natural gas and the government-mandated retirement of coal power generating plenty of dealflow – we can confidently asset that it is no longer the only game in town.
Importantly, the US is also opening up as an interesting opportunity for infrastructure debt investors. Macquarie Infrastructure Debt Investment Solution's decision to establish a US team is only the latest example of managers responding to that. In September, we also saw IFM Investors and AMP Capital beef up their respective debt teams. That says a lot about a market where municipal bond and European bank project financing used to crowd out everyone else.
All of which speaks to a common theme – that of a US market branching out from its traditional confines and offering a wider set of opportunities, which is set to be a talking point at our upcoming New York LP Summit, to be held on December 6-7. But it's the consistency that's really exciting. No longer a trickle; not yet a flood: US infrastructure dealflow is, for a change, just looking reliably solid.
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