Airport investors team up for block-buster bids
In Jun-06, the Centre for Asia Pacific Aviation estimated there was a pool of 60 active and potential global airport investors have combined funds of approximately USD50 billion to invest in airports around the world.
These players included Aecon Group, Aeroporti di Roma, Aeroports de Paris, AIG, Airports Company South Africa, Amlak Finance, Australian Infrastructure Fund, BAA plc, Babcock & Brown Ltd, Bidvest Group Ltd, Blackstone, Borealis, Caisse de dépôt et placement du Québec, Carlyle Infrastructure Partners, Changi Airports International, Chrysalis Capital, CITIC Allco Investments Ltd (Allco Finance Group Ltd, ABN AMRO, CITIC Capital and the Australian Superannuation Fund), Citigroup Inc, Colonial First State Global Asset Management, Copenhagen Airports A/S, Credit Suisse, DNATA, DS Construction, Dubai Aerospace Enterprise, Emaar, Emirates National Oil Co, Essel Group, Flughafen Wien AG, Fraport, GE Infrastructure (including GECAS), GIC Special Investments, GMR Infrastructure Ltd, Goldman Sachs International, GVK Industries Ltd, Hastings Funds Management, HOCHTIEF Airport GmbH, HSBC, ICICI Venture, IDF, Infrastructure Leasing and Financial Services Ltd, Infratil, Invesco Asset Management, John Hancock, Macquarie Airports, Macquarie Bank, Malaysia Airports Holdings Bhd, Mubadala (Abu Dhabi Government), Morgan Stanley, Old Mutual Asset Managers, Ontario Teachers' Pension Plan, Orix Corp, Penta Equity Group, Raiffeisen Zentralbank, Reliance, Royal Bank of Scotland Group, Santander, Schroder Investment Management, Scottish Widows Investment Partnership, Schiphol Group, Siemens, Singapore Changi Airpiort, Standard Chartered, Star Capital Partners, Sterlite Group, TAV, Unique Zurich and YVRAS.
With a couple of exceptions (some players have been caught up in the intervening global credit crunch) and some new additions, the number of players still far exceeds the number of investment opportunities, which has contributed to soaring airport valuations in recent years. Bidding is intense when new opportunities surface, such as the long-term lease of Chicago Midway, which has attracted the following bidding groups:
- JV between Abertis Infraestructuras SA, Babcock & Brown Group and GE Commercial Aviation Services;
- AirportsAmerica Group, including Carlyle Infrastructure Partners;
- Chicago Crossroads Consortium, comprised of Macquarie Capital Group, Macquarie Airports, Macquarie Infrastructure Partners, Macquarie Infrastructure Partners II;
- Chicago First Consortium, comprised of HOCHTIEF AirPort GmbH, GS Global Infrastructure Partners I and HOCHTIEF AirPort Capital GmbH & Co;
- Midway Investment and Development Corp, comprised of YVR Airport Services, Citi Infrastructure Investors and John Hancock Life Insurance Co;
- JV between Morgan Stanley Infrastructure Partners, Aeroports de Paris Management and HMSHost.
The Chicago Crossroads Consortium and Midway Investment and Development Corp Group are considered inside runners for the Midway lease. The Morgan Stanley-led group has also received a boost with the successful recent establishment of Morgan Stanley's new USD4 billion infrastructure fund, which considerably surpassed its original target of USD2.5 billion.
The latter has however been strengthened with the announcement this week of plans by Citi Infrastructure Investors (CII) to acquire a 50% shareholding of YVR Airport Services Ltd (YVRAS), a unit of Vancouver Airport Authority. Through the partnership, CII and YVRAS aim to jointly pursue the "sourcing, funding and maximisation of potential airport opportunities" around the world.
YVRAS, with an established track record of foreign airport ownership and management, will become CII's exclusive platform for investing in airport assets. CII will bring extensive global connections and long-term capital to the management of YVRAS.
Felicity Gates, Co-Head and Partner of CII, stated, "CII is seeking to establish a small number of best-in-class infrastructure platforms for growth and long-term investment, and so we are delighted to be able to announce this partnership with Vancouver - undeniably a global leader in airport management". YVRAS' roots within a government-controlled entity could also deliver a strong cultural fit and provide comfort to the sellers of airport infrastructure, which are invariably governments, and would been part of the attraction to CII.
Vancouver Airport Authority Chairman, Graham Clarke, noted, "this is a new chapter. In only 12 years, YVRAS has grown from three people and a bold idea into a major airport development company, operating 18 airports in seven countries".
The Authority's President and CEO, Larry Berg, added, "if British Columbia is to grow, then YVR must compete and win in the gateway battle for airlines and passengers - and to be the best at home, you need to be achieving out in the world…We believe we have found a strong, complementary long-term partner that understands airport infrastructure and brings a lot to the table".
The first test of this partnership will be played out in Chicago in the coming months.