Carlyle to run Conn. roadside service stops
Firm to get share of revenue for renovating, managing centers

By Thomas Heath
Friday, November 20, 2009

The Carlyle Group said Thursday that it has signed a deal with Connecticut to refurbish and run the state's 23 highway service stops in return for a share of the revenue over the next 35 years.

The District-based private-equity giant and its partners will invest $178 million in the state's roadside service centers as part of the agreement, which will include putting Subway restaurants as well as Dunkin' Donuts locations in the centers, according to a Carlyle spokesman. Dunkin' Donuts is owned by Carlyle.

Carlyle, founded in 1987 by David M. Rubenstein, Daniel D'Aniello and William E. Conway Jr., has more than $86 billion under management.

The venture is part of Carlyle's growing interest in developing partnerships with cash-strapped state and municipal governments to invest in, build and manage projects in exchange for a long-term revenue stream.

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

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.

As part of the deal, the Service Employees International Union, a frequent Carlyle critic, will provide custodial service jobs at the centers. Rubenstein has been a particular target of the SEIU's attacks on the private-equity industry.

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.

The Connecticut service stops, built in the 1940s and 1950s, are located on interstates 95 and 395 and on Route 15. They have had minimal capital improvements over the past three decades.

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