- Briefing Room
San Juan, Puerto Rico
|Project Sponsor / Borrower||
Puerto Rico Public-Private Partnership Authority
Puerto Rico Ports Authority
Aerostar Airport Holdings
The Luis Muñoz Marín International Airport privatization in San Juan, Puerto Rico took place under the Federal Aviation Administration Airport Privatization Pilot Program (APPP), originally authorized by TEA-21 in 1997 and expanded under MAP-21 in 2012. The Puerto Rican government used the program to enter into a 40-year long-term lease concession with Aerostar Airport Holdings in February 2013 in a deal valued at $2.6 billion over the life of the lease.
When the Puerto Rico Ports Authority (PRPA) applied to the APPP in 2009, the airport had a significant backlog of capital needs, maintenance, and areas of underperforming customer service that diminished its appeal as a hub for air travel in the Caribbean. A report prepared by the Puerto Rico Public-Private Partnership Authority in 2012 noted deficiencies in pavement, lighting, and signage causing safety concerns; little growth in passenger traffic over 20 years; and missed opportunities for growth capitalizing on tourist segments such as cruise ship access. Analysis showed that lease payments and the value of investment in the airport by a private partner, along with attendant economic benefits, would exceed the revenue the government would otherwise earn by continuing to operate the airport.
Following a competitive selection process, Aerostar Airport Holdings - at the time a 50-50 joint venture between Grupo Aeroportuario del Sureste (ASUR), a Mexican airport operator and Highstar Capital, an American infrastructure investor - was selected as the concessionaire. The Puerto Rican government received a $615 million upfront lease payment, annual lease payments over the first five years, and is receiving a share of operating revenue over the remainder of the term. The concessionaire has also been making a number of capital investments in the airport, many of which were completed in the first several years of the lease. Improvements address facility maintenance and upgrades, passenger processing and the addition of an automated baggage scanning system, terminal layout, airport appearance, amenities, and concessions, and better financial accountability and back office operations.
PRPA used a majority of the upfront lease payment to defease outstanding debt, which at the time it applied to the APPP, exceeded $800 million. The payment also covered transaction costs and supported development and operation of other regional airports PRPA oversees.
Highstar Capital was purchased by Los Angeles-based Oaktree Capital Management in 2014. In May 2017, Oaktree Capital Management sold a 40 percent stake in Aerostar Airport Holdings to Public Sector Pension Investment Board (PSP Investments), one of Canada's largest pension investment managers. In addition, ASUR acquired Oaktree Capital Management's remaining interest in Aerostar Airport Holdings, increasing its stake in the company to 60 percent.
$2.6 billion - Estimated revenue and benefits over the 40-year lease term
Concessionaire's original financial structure
|Project Delivery / Contract Method||Long-term Lease Concession (40 years)|
Aerostar Airport Holdings
|Project Advisors / Consultants||
To the concessionaire
Royal Bank of Canada
UBS Investment Bank
|Duration / Status||
Preferred bidder selected July 19, 2012
Federal Aviation Administration approval February 25, 2013
Concession conclusion 2053
Financial close February 27, 2013
Aerostar's operating revenue is derived in large part from airline usage. A 15-year Airport Use Agreement caps the total annual aggregate airline fees at $62 million for the first five years. After the sixth year, the total annual airline fees may be increased annually by a percentage not to exceed the rate of core inflation.
|Related Links / Articles||
San Juan Int'l Forges New Territory with Public-Private Partnership (Airport Improvement, July-August 2014)
Anthony Maceira Zayas