Vauban turns to secondary market for sale of 2012 greenfield fund

A Stafford Capital Partners-led consortium allowed the manager to do a ‘super-efficient’ exit for its greenfield fund.

Vauban Infrastructure Partners has sold off an entire fund – the Fond d’Investissement et de Développement des Partenariats Publics Privés 2 (FIDEPPP2) – to an all-new group of investors via the secondary market. The assets will be transferred to a new continuation vehicle, Core Infrastructure Fund Prime SCP (CIF Prime), that will be managed by Vauban.

FIDEPPP2 was launched in 2012 and originally raised €120 million of equity. It is believed that the secondary sale brought in close to €200 million for CIF Prime, helping Vauban record an estimated cash-on-cash yearly return of 13 percent and a 2x money multiple. Vauban did not comment on the terms of the transaction.

The fund was originally set up as a specialised greenfield investment strategy, focusing on French public infrastructure concessions and public-private partnerships. It has invested in 15 assets, among them fibre concessions in northern France, wastewater treatment near Montpellier and a PPP contract for constructing, financing and maintaining three high schools.

The consortium of secondary buyers was led by Stafford Capital Partners, which ploughed €50 million into the deal, and includes, among others, funds managed by the infrastructure secondaries strategy of Ares Management and Nordea Asset Management.

The sellers are 15 Caisses d’Epargne et de Prévoyance, Natixis Private
Equity, BPCE, BPCE International and Crédit Foncier. All are members of the BPCE Group.

Evercore (financial adviser) and Clifford Chance (legal counsel) advised on the transaction.

Strong secondary market for infra

The decision to sell off the entire fund in one go was the result of an analysis that began 18 months ago, explained Fabrice Garus, investment director at Vauban.

“The secondary market has grown by 25 percent to 30 percent each year during the past seven years, which shows the strong appetite for this type of assets and this type of fund,” he said.

“We believed that we would create more traction and more momentum by offering this opportunity,” added Gwenola Chambon, chief executive and managing partner at Vauban. “By creating a new vehicle, we produced a capacity for investors to get exposed to a French portfolio which is very diverse and complementary.”

The decision was in large part based on the emergence of a secondary market that is sufficiently liquid and sophisticated to engage with a structure such as this. Unlike the broader secondary market, the infrastructure secondary market grew in 2022, recording $7.7 billion in transactions, 57 percent of which were GP-leds, according to a January report from Evercore.

“The secondary infrastructure market is rapidly growing and offering very interesting possibilities,” said Mounir Corm, Vauban deputy chief executive and founding partner. “You have the traditional secondary fund managers that have been raising more and more capital, but you also have some primary investors who want access to well-deployed portfolios that can offer cash yields. So the universe is quite broad.”

An exit like the one just executed is also more efficient. “When you sell single assets, they are by nature very illiquid and require very strong due diligence, which is time-consuming,” added Corm. “What we’ve sold is a financial product, and this is a faster process, especially in the current market, with a stronger guarantee of success.”

Chambon elaborated: “The secondary market is very dynamic. I think we had more than 30 investors expressing interest, and from the initial to the final offer, the process took three months. Provided that your portfolio displays features of resiliency and appropriate indexation to inflation, which investors are very much looking for right now, then a full exit is going to be super-efficient and the best route at the moment.”

Plenty of life left in the assets

FIDEPPP2’s assets have moved from greenfield to brownfield over the initial fund term, but there is plenty of life left in them.

“These assets have reached maturity,” explained Garus. “The remaining life is up to 20 years, depending on whether it is PPPs, which may have 15 years [left], or 20-30 years on our digital platform.” Garus remains bullish about the future value creation potential of the new fund.

“There are different buckets of value creation for this infrastructure portfolio,” he said. “We have very good relationships with public authorities and hope to extend the life or renew our PPP contracts. The second bucket is Vauban Infra Fibre, which is a very big platform, and can be enhanced and refinanced. Then there is Proxiserve, which is smart metering and can be developed along with EV charging. All of these things are identified, and we are ready to set them up in the future.”

The team is eager to continue working on the new fund’s assets and to develop them in line with the changing requirements and needs.

“At the end of the day,” said Chambon, “when you are delivering these essential services, you have to be sure that your service is still providing something efficient, something useful.”