International Public Partnerships Limited has announced a further investment in the US military housing sector. This additional investment marks the continued growth of its investment portfolio in the United States. The Company has invested approximately US$32.0 million (GBP24.6 million) into further interest-bearing subordinated debt instruments. The tranche of interests now being acquired are secured on the same underlying military housing assets as those purchased by the Company in October 2015 but rank higher in priority to them.
The interests are underpinned by security over seven operational PPP military housing projects. These encompass a total of 19 operational military bases in the US, with approximately 21,800 individual housing units. The debt has a 36-year tenor and matures in 2052.
Military housing is the longest standing sector in the US for public private partnership projects (“PPP” or in the US, “P3”). 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 attracted capital in excess of US$30 billion from domestic and international investors to date.
The opportunity meets INPP’s investment criteria and the Company expects the instruments to offer INPP an attractive rate of return notwithstanding the weaker USD/GBP exchange rate. The investment provides the Company with further exposure to one of the US infrastructure market’s most established sectors.
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 which creates 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 US military installations.
The opportunity was sourced through the Company’s investment adviser, Amber Fund Management Limited’s relationship with Hunt Companies Inc. Hunt is one of the largest owners, managers and providers of ongoing services in the P3 Military Housing sector having interests in approximately 5200 units. Hunt will asset manage and property manage the majority of the projects that relate to this transaction.
The investment has been funded through a combination of the Company’s cash reserves and its corporate debt facility. The Company has approximately GBP161.6 million of uncommitted credit available under its GBP300 million revolving credit facility (after taking into account its future investment obligations into new projects including its investment commitments to the Thames Tideway Tunnel project).
Rupert Dorey, Chairman of INPP, said: “Our second transaction in the United States marks the measured diversification of our portfolio into the P3 sector and further demonstrates the added value that Amber’s relationship with Hunt provides investors in INPP. We look forward to building on this success by developing additional primary pipeline opportunities in the United States over the medium term.”
INPP invests in US military housing