Airport Business - 25

COVER STORY
private sector guarantee with fixed price,
fixed date delivery, then it's a great way
for them to transfer risk," he said.
P3 projects also mean airports
don't have to pay all the construction
costs upfront. It's slowly paid down
overtime, which smooths the burden
of the construction project.
P3 financing can be applied to most
any aspect of the airport, Bell said, as
long as a credit-worthy counterparty is
signing the concession.
"It doesn't have to be something
that generates revenue in itself,"
he said. "We've seen it used for
courthouse projects and academic
buildings at schools. You could use it
for something like baggage handling
or other things that are not thought of
as generating revenue."

A Growing Trend
Airports looking at P3 solutions for
financing improvements should consider
items like gestation time. Bell said it can
take years to close financing for a deal
and if something were to kill the deal
before the financing got too close, it
would be a lot of wasted time and energy
for investors.
"It's challenging for us, because
we see a lot of nice, fancy looking
projects, but we really have to ask
ourselves certain questions as to
whether we will be successful and

our team will be successful or will
anyone be successful," he said.
Bell said investors want to know an
airport has the money available to work
through the project and understand
the P3 project. They should have good
advisors and they should also make sure
there are no outstanding votes that still
need to happen before a project can
proceed.
"The reason these project work
are not because the money is cheaper.
Our money will be more expensive
on the return requirement basis than
the capital that an airport can raise
themselves," he said. "It's really the risk
factor they're after. The fact there could
be cost overruns and schedule overruns
mitigating, on the risk transfer cost it's
certainly more beneficial to them."
Bell also recommended projects be
sizeable enough to get the interest of the
private sector. Fengate typically looks
for projects with a $30 million or more
equity investment, which means you're
looking at a project with private capital
of $300 million or more.
"I think the future of infrastructure
is going to be finding deals like this,
where the private sector is expected to
take some market risk," he said.
Right said the need for ConRACs
continues to grow as airports seek to
consolidate land currently used as rental
car lots and convert that real estate into

more productive uses. This migration
from disparate rental car operations
to a single ConRAC also eliminates
the need for multiple rental car
branded shuttle buses and the resulting
congestion and air pollution caused by
constantly circling the airport roadway
or idling during passenger pick-ups and
blocking curb space. These trends will
continue over time and will be especially
acute as air travel returns to normal.
"Among the financing options for
ConRAC development, we believe
the private equity financed model is
the most attractive as it allows airport
authorities to build new or enhanced
ConRAC facilities without affecting
their debt capacity or balance sheets,"
he said. " Conrac Solutions' leadership
in innovating and developing the project,
coupled with RFM's leadership as the
anchor equity investor in the EWR
ConRAC, provides a model for future
private equity financed ConRACs
across the U.S. We believe the supply of
new ConRAC investment opportunities
should grow over time as airport
authorities look to this template when
choosing to develop and build greenfield
ConRACs or divest/refinance their
existing airport-owned ConRACs." 

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Airport Business

Table of Contents for the Digital Edition of Airport Business
