Arrivals: New private financing model for Newark Airport ConRAC

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Arrivals: New private financing model for Newark Airport ConRAC

October 2019

flow looks at how an innovative model of private financing for consolidated rent-a-car facilities is set to provide numerous benefits to Newark airport, passengers and the rent-a-car industry

Over the past 20-years, consolidated rent-a-car (ConRAC) facilities have become a regular feature at airports nationwide1. These facilities, which are more than just parking garages, consist of multiple components that when combined, make up the foundation of a ground transportation hub and provide numerous benefits to airports, passengers and rent-a-car companies alike.

Recognising their convenience, the Port Authority of New York and New Jersey took advantage of the rare opportunity to bring all rent-a-car companies at Newark Liberty International Airport under one roof – at a convenient, walkable location – as part of the Terminal One Redevelopment Program. The Airport’s development will support a reduction in congestion and noise with an increase in air quality and landside space for development, while the rent-a-car industry will benefit from shared security, fuelling and maintenance resources and enjoy equitable brand competition. Importantly, once opened, passengers will enjoy simplified wayfinding and the efficiency of a single, centralised rent-a-car access point.

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As niche experts in this unique industry, Conrac Solutions, a private developer, financier and operator of ConRAC facilities, proposed a solution that could be the boilerplate for future airport ConRACs, notably allowing the airport to maintain project control, while alleviating the rent-a-car companies from financial risk and removing the local tax burden by only requiring those who use the facility to pay for it.

Newark Liberty International Airport’s new 2.7 million square foot ConRAC facility will be constructed on a 16.65-acre site, with 2,925 public parking spaces and 3,380 rent-a-car spaces to support 10 rent-a-car brands. It incorporates retail operations with customer way-finding and traffic circulation, provides vehicle fleet storage and enhanced security, and includes shared components such as 15 car washes and 54 fuelling positions along with vacuum systems, waste management and service bays.

The project employs several sustainability initiatives including a solar roof, electric vehicle charging stations, LED efficient lighting, and water reclamation and air quality systems. Completion of the public parking area will take place in 2021 with the ConRAC facility scheduled to open in 2023.

 

New model

The new model of financing used is both a unique and an anticipated model for ConRACs at airports throughout the nation. The financing is supplied by equity partners and then repaid solely through the proceeds received from the Customer Facility Charge (CFC) applied to rent-a-car transactions.

The $500 million ConRAC facility was financed using this innovative financing structure, arranged by Conrac Solutions Capital (CS Capital), a member of the Conrac Solutions family of companies. Equity was provided by Related Fund Management and Fengate Asset Management - and debt was provided by a consortium of banks led by Mitsubishi UFG Financial Group, CIBC and National Bank of Canada. The deal includes a fixed-price, date-certain and fully-bonded design-build contract for construction with a joint-venture of Austin Commercial and VRH Construction Corporation. The project structure includes all design, construction, financing, operations, maintenance and lifecycle management throughout construction and the 35-year lease period. Key advisors to CS Capital on this transaction include Goldman Sachs as financial advisor and Allen & Overy as legal counsel.

“Unlike similar projects at other major U.S. airports, that can put airports at risk for availability payments, this financial structure was made possible by CS Capital and its equity partners, Related and Fengate, with sponsorship from the rent-a-car industry, and the foresight of the Port Authority to embrace an innovative approach”

Mark Pfeffer, Chairman and CEO of Conrac Solutions

Project partners

Given the complexity and scalability of the transaction, CS Capital was able to maintain ease of partnering with lenders and other project participants by engaging Deutsche Bank Trust Company Americas (DBTCA) as its collateral agent, account bank, inter-creditor agent and securities intermediary for all its project related banking needs. The DBTCA team was able to establish a free-flowing rapport with CS Capital and other deal participants from very early on, which allowed communication to flow efficiently.

Leveraging its experience in the project finance and infrastructure marketplace, DBTCA was able to operate within the transaction’s tight deadlines and address several unforeseen and last-minute product needs. Similar to many other project finance transactions on which it has been mandated, DBTCA will service and administer the Newark Liberty International Airport transaction on a day-to-day basis throughout the lifetime of the facility.

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Sources

1 The first ConRAC facility was unveiled at Sacramento Airport in California in 1998 https://en.wikipedia.org/wiki/Consolidated_rental_car_facility

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