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Legal & General backs First U.S. Infrastructure Deal with University Of California, Merced, Campus Expansion

Legal & General has agreed its first infrastructure transaction in the U.S. as part of a strategy to target real asset deals which provide high quality long-term returns to match pension liabilities. The transaction builds on Legal & General’s fast-expanding U.S. activities and supports plans to invest in infrastructure, direct investments and urban regeneration projects where in the UK £8 billion has been invested out of a medium-term target of £15 billion.

 

The transaction is the first ever educational sector public–private partnership to take place in the U.S. The financing will help to nearly double the size of the University of California, Merced, campus to accommodate 10,000 students and expand its research and teaching programmes. Legal & General Retirement (LGR) is providing a c. $100m in a 38-year facility (Moody’s: BBB1) as part of a total c. $660m from other lenders.

 

Legal & General is well established in the U.S. with three businesses: term assurance through Legal & General America (LGA), asset management through Legal & General Investment Management America (LGIMA) and its pension risk transfer business Legal & General Retirement America (LGRA).  LGA, based in Maryland, is the 10th largest provider of term life assurance, by annual premium equivalent, in the U.S. and remains the 3rd largest provider through the key distribution channel of brokerage general agents with over $1.1 billion of gross premium revenue in 2015.  In Chicago, LGIMA has more than $134 billion of assets under management and specialises in fixed income, liability driven investment (LDI) solutions and index capabilities for the U.S. institutional market. LGRA, based in Connecticut, is writing pension risk transfer (PRT) deals, helping U.S. defined pension schemes de-risk their liabilities.

 

Kerrigan Procter, Managing Director of LGR, said: “This first infrastructure deal in the U.S. shows the growing number of tools in our box to ensure we secure long-term returns to match our liabilities. We continue to be drawn towards social infrastructure and it doesn’t get more attractive than this when the underlying asset is being developed for one of the world’s leading universities.”

 

Charles-Henry Lecointe, Senior Infrastructure Investment Manager, LGIM Real Assets, added: “This first-of-its-kind U.S. public-private deal demonstrates our ability to source high quality infrastructure transactions. We have built up a strong track record in this space and continue to target transactions backed by economic and social infrastructure as part of Legal & General’s wider approach to real asset investments.”

 

The extension of the University of California, Merced, campus will comprise 1.2 million gross sq ft of academic, classroom and laboratory facilities, as well as housing, dining and administrative offices, recreational facilities, utilities and infrastructure. The development will have a total one-time impact related to its design and construction, including direct and ripple effects, estimated at approximately $1.9 billion in the region – and $2.4 billion state-wide. By 2022, the on-going operations of the project will increase spending by over $200 million per year in the State.

 

The University of California is one of the largest public universities in the world and the largest public university system in the U.S. with 10 campuses, six medical schools, five academic medical centres and three national laboratories. In the Autumn 2015, full-time equivalent student enrolment totalled over 252,000 students; the University also employed 145,000 full-time equivalent faculty and staff; 206,000 students applied for admission for Autumn 2016.

 

University of California, Merced is strategically located in the San Joaquin Valley, near Yosemite National Park. Situated in a fast-growing region, the  campus is greatly enhancing economic opportunity, levels of educational attainment and quality of life, while conducting life-changing research into society’s most challenging problems.

 

The project consists of 13 buildings and will be delivered in three phases between 2018 and 2020. The development is being delivered by leading public–private partnership developer Plenary Group and contractor Webcor. Goldman Sachs arranged the financing of the transaction.

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