Friday, November 20, 2009

Carlyle-SEIU to PPP at Connecticut Rest Stops

The Carlyle Group's infrastructure fund chugged into Connecticut's highway rest stops. It will plunk $178 million into the 23 rest stops in return for a share of the revenue. Carlyle will install Subway and Dunkin' Donut operations in the centers. WaPo reported:

Carlyle launched its infrastructure practice in 2006, and the Connecticut deal is that unit's first public-private partnership (PPP). Other Carlyle infrastructure deals include a wastewater treatment company and a freight transfer firm.

The wastewater firm is Synagro Technologies, which bribed Detroit City Councilwoman Monica Conyers, wife of Rep. John Conyers. Monica was convicted in the crime. Two Synagro officials plead guilty.

WaPo noted lower returns earned by private equity underwriters (PEU's) in the infrastructure space.

Public-private partnerships are generally reliable investments, earning about 15 percent a year, a Carlyle spokesman said. Those returns, however, are generally below the historical average of what private-equity firms earn on their investments.

How many citizens would like a guaranteed 15% return on their IRA? Carlyle is bidding on Virginia ports. Does it help to have a signed Connecticut deal as it courts the Old Dominion or other state infrastructure deals?

Under the Connecticut agreement, the state will own the facilities while Carlyle will manage and maintain them. After 35 years, the operations and maintenance of the facilities will revert to the state.

Carlyle co-founder David Rubenstein noted his desire to hold an asset at the end of a PPP. Do the Dunkin' franchises fill this bill? Carlyle owns Dunkin' Brands, which includes Baskin-Robbins. If PEU's stick to their game plan, Dunkin' will flip several times during the 35 year period.

Carlyle proved its ability to collaborate with the "enemy" in Connecticut.

As part of the deal, the Service Employees International Union, a frequent Carlyle critic, will provide custodial service jobs at the centers.
Did the SEIU sign a 35 year deal as well? Who's providing health insurance coverage for employees; the state, the private side of the partnership or the union? That answer would be telling.

Carlyle and company named the venture Project Service LLC. Who's servicing whom?