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Project Service LLC
Project Service LLC
About Project Service LLC and the Transaction
In December 2009, Carlyle entered into a joint venture called Project Service LLC with Doctor’s Associates, Inc., the parent company of SUBWAY Restaurants, and Subcon, Inc., forming a 35-year public-private partnership with the State of Connecticut to redevelop, operate and maintain Connecticut’s 23 highway service areas across the state. Project Service and its tenants expect to invest approximately $230 million in improvements and upgrades to the service areas and to create approximately 375 jobs. In total, the state is expected to receive nearly $500 million in economic benefit from the redevelopment effort.
An Innovative Public-Private Partnership
The Project Service transaction is an innovative public-private partnership through which private sector funding will help to rebuild and maintain public infrastructure. In this effort, Project Service will pay for 100% of the improvements to the service areas in exchange for a right to operate the facilities for 35 years. The state will continue to own the facilities through the term of the agreement, and at the end of 35 years, the state will resume responsibility for the operations and maintenance of the facilities.
Capital to Renovate and Upgrade Service Areas
Carlyle and its joint venture partners expect to invest approximately $230 million in redeveloping and maintaining the 23 service areas on Interstates 95 and 395 and Route 15 (The Wilbur Cross and Merritt Parkways). The current facilities were built in the 1940s and 1950s and have had no significant capital improvements in the past 25 years. Project Service and its tenants are expected to invest approximately $178 million over a five-year period to renovate and upgrade the facilities and an additional $52 million in capital to maintain the facilities after they are redeveloped.
Project Service is expected to provide Connecticut with clean, safe and upgraded facilities that will reflect the local character and history of the state, as well as meet the needs of the traveling public. Project Service will reduce the energy usage and emissions associated with trucks by implementing new environmental technologies that include silver LEED design elements and truck-idle reduction technology. Project Service will also install police substations in select service areas in order to provide increased coverage by law enforcement.
Project Service commenced operations of the service areas on December 7, 2009. The redevelopment process will span a three- to five-year period, and the first major redevelopment is expected to be completed in 2011. In July 2010, Project Service broke ground on the first redevelopment project, on Route 15 in North Haven, Connecticut.
In addition to funding the initial redevelopment costs, Project Service will share revenue with the state. It is projected that the state will receive a minimum of $250 million in payments during the term of the agreement. Such payments allow the state to share in the upside of the partnership, as the renovated facilities attract more customers and generate more revenues. In total, the state is expected to receive nearly $500 million in economic benefit from the project.
Employment Growth/Partnership with the SEIU
Project Service is expected to add an estimated 375 new jobs to the approximately 750 current positions—a 50% increase in headcount. During redevelopment, a minimum of 100 new construction jobs are projected to be created. After redevelopment, the new food and retail businesses are expected to employ approximately 200 new full- and part-time positions and 75 custodial positions. Custodial services will be provided by a local company whose workers are represented by the Service Employees International Union.
Expanded Service Offerings
As part of the redevelopment, Project Service is expected to increase the product offerings and services to travelers. The restaurant and retail offerings will include for the first time SUBWAY, Dunkin’ Donuts (a Carlyle portfolio company) and a variety of other local restaurants and shops, supplementing existing brands such as McDonald’s. Project Service will also offer improved fuel services, expanded convenience stores and tourism resources.