Vantage Seeks More Deals After LaGuardia’s $4 Billion Revampby
Airport developer looking at opportunities in Chicago, Boston
In talks with eight airlines to finalize LaGuardia leases
Vantage Airport Group Ltd., the Canadian developer leading a planned $4 billion makeover of New York’s LaGuardia airport, is looking for fresh deals in the U.S.
The Vancouver-based company, which has overhauled airports from Chile to New Zealand, expects more U.S. airports to seek private sector expertise and dollars to upgrade congested, aging infrastructure.
“We think LaGuardia is a good opportunity to move more private engagement into transactions in the U.S.," George Casey, chief executive officer of the closely held company, said in an interview. “We’re now looking at opportunities in Boston, other New York airports, and Chicago."
U.S. airports require almost $76 billion in investment by 2019 to ensure they remain globally competitive and meet projected growth in passengers and cargo, according to Airports Council International. The traditional way of funding airports through government grants and passenger fees will fail to meet that requirement, the industry body said in a report last year.
Vantage Airport and its partners Sweden’s Skanska AB and France’s Meridiam SAS last month sold $2.4 billion of debt in the biggest municipal bond offering since March to finance the facelift of the 52-year-old central terminal in Queens, which U.S. Vice President Joe Biden famously likened to one found in a third-world country.
The debt will be repaid with fees from airlines and concession sales. About 80 percent of the project’s revenue through the lease term to 2050 will come from airline rates and charges, he said. Those fees will be among the highest in the country, estimated at $27.42 per passenger in 2025, according to bond offering documents.
“A big driver of that financing being successful was the approach we took with the airlines,” Casey said. “We had to develop a methodology with the airlines that would support the long-term issuance of debt."
The rates are competitive with other airports in New York, Casey said. The airlines will also benefit from a more efficient design that will lower the amount of fuel burned by improving usage and flexibility, he said.
Non-binding term sheets have been signed by eight airlines, including American Airlines Group Inc., United Continental Holdings Inc., and Air Canada, he said. The group is working to finalize those terms into new airline subleases.
Moody’s Investors Service, which called the construction project among the most complex it has evaluated, ranked the bonds Baa3, one step above junk. It warned that could be downgraded if construction is delayed. The project is expected to be completed by July 2022.
“We believe we’ve de-risked the project," Casey said. The group slashed in half the number of construction phases in order to simplify the project and will minimize impact on the airlines during construction, he said.