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News release

Washington, D.C.

Private Public Partnership Capital Key to Bridging $3.6 Trillion Infrastructure Spending Gap

Jones Lang LaSalle’s Public Institutions Group offers five factors for successful PPP


WASHINGTON, Jan. 28, 2014 – Infrastructure spending in the United States declined five percent between 2006 and 2012, despite an aging infrastructure that needs a $3.6 billion investment. Jones Lang LaSalle Public Institutions experts say public private partnerships (PPP) play a critical role in bridging that gap and there are several factors that can help with the success of these ventures.

“Local and state entities are increasingly looking at PPP opportunities as a way to plug infrastructure costs and then deploy funds where they are needed most,” said Kevin Wayer, International Director, Jones Lang LaSalle. “Despite challenges, private sector participation in U.S. infrastructure spending is expected to grow between 2012 and 2017 as the economy continues to recover. In the next five to 10 years, many funding requirements will be met through public private partnerships in a variety of infrastructure projects.”

According to research compiled by Jones Lang LaSalle, private sector infrastructure spending accounted for 67 percent of the total $857 billion spent on infrastructure in 2012, with demand from the residential sector contributing approximately 33 percent to overall infrastructure spending.

Wayer notes that there are a number of key factors which can impact the success of these projects:

1. Clear goals: Be clear and concise on goals and objectives of the privatization effort upfront, so that the project moves forward as smoothly as possible.
2. Risk and rewards: Identify the risks as well as rewards upfront to enable bidders to submit the best possible proposals and structure an optimal deal.
3. Transparency: Establish a clear and transparent public selection and approval process.
4. Communicate: Keep all stakeholders in the community informed about the PPP project by communicating effectively and often.
5. Deal structure: Negotiate a fair deal structure that takes into account the needs and desires of both parties.

“We are seeing more and more PPP projects across the country because in many cases these projects, which use a combination of public funds and private investments, are being built faster and more cost effectively than traditional delivery methods,” added Wayer.

UC Merced – a PPP in the making
The UC Merced campus, the tenth campus in the University of California System, does not have sufficient facilities for its current enrollment and is faced with a growing gap between strong admissions demand and the campus’ limited physical capacity to accommodate that demand. To meet doubling enrollment figures by 2020, the school is launching a public-private partnership initiative to identify a master development team to design/build and potentially finance a 1.5 million- square-foot campus expansion that will provide new teaching, research and residential facilities on a 219 acre, university-owned site adjacent to the existing campus. Jones Lang LaSalle is the University’s development advisor.

More PPPs needed in the future
Aging infrastructure and rising funding gaps are expected to drive the demand for privatization in the U.S.  One in nine of the nation’s bridge, with an average age of 42 years, has been rated structurally insufficient.  The cost for improvement is estimated at $20.5 billion.  Leaky pipes waste an estimated seven billion gallons of clean water every day while aging sewage systems are adding billions of gallons of untreated wastewater to the waterways each year.

“The substantial gap between actual and required spending will drive the demand for privatization,” added Wayer.  “But these projects are not without challenges.”

The standard government contracting process requires significant change to incorporate key principles of successful PPP projects into the procurement process, legal frameworks and regulatory and political environments, requiring sponsors to be flexible with their approach. And disagreements about PPP in the political arena on issues such as reduction in the number of jobs and make them difficult to promote.

About Jones Lang LaSalle
Jones Lang LaSalle (NYSE:JLL) is a professional services and investment management firm offering specialized real estate services to clients seeking increased value by owning, occupying and investing in real estate. With annual revenue of $3.9 billion, Jones Lang LaSalle operates in 70 countries from more than 1,000 locations worldwide. On behalf of its clients, the firm provides management and real estate outsourcing services to a property portfolio of 2.6 billion square feet and completed $63 billion in sales, acquisitions and finance transactions in 2012. Its investment management business, LaSalle Investment Management, has $46.7 billion of real estate assets under management. For further information, visit www.jll.com.