International Public Partnerships Limited has announced its first investment in the US. The Company has invested approximately US$48m (£32m) into a series of fully yielding mezzanine debt instruments with a remaining average life of 37 years.
The mezzanine debt is being acquired by the Company from the Federal Home Loan Mortgage Corporation (“Freddie Mac”) and is underpinned by security over seven operational PPP military housing projects relating to a total of 19 operational military bases in the US comprising approximately 21,800 individual housing units.
The military housing is the longest standing sector in the US for public private partnership (“PPP” or in the US, “P3”) projects. The introduction of private sector capital and resources in the provision of military housing was established by Congress in 1996 through the Military Housing Privatization Initiative (“MHPI”) and schemes have, to date, attracted capital in excess of US$30 billion from domestic and international investors.
The military housing projects have the following characteristics:
- a secure revenue stream via the US military’s Basic Allowance for Housing paid to service personnel creating an indirectly government sourced revenue payment;
- high barriers to entry as the number of on-base housing units is limited;
- no residual value exposure;
- a geographically diverse portfolio of housing units across the continental US including some of the largest and most critical of US military installations.
The acquisition opportunity was identified as a consequence of the Hunt Companies Inc’s shareholding in INPP’s investment adviser, Amber Fund Management, and the relationship that exists between Hunt and INPP with respect to US opportunities. Hunt are one of the largest owners, managers and providers of ongoing services in the P3 Military Housing sector having interests in approximately 33,000 housing units including those the subject of this transaction where they also provide property management services in respect of most of the units.
The investment has been funded through a combination of the Company’s cash reserves and its corporate debt facility. Given the Company’s corporate debt facility is largely committed the Board is continuing to consider fundraising options.
INPP makes first US investment