Exclusive: VSS closes minority stake in Cordoba, betting on infrastructure transformation

VSS Capital Partners has taken a minority stake in Cordoba, a Los Angeles-based engineering, construction and program management company, PE Hub is the first to reveal.

“The US is in the middle of a generational reinvestment in its infrastructure across transportation, water systems, grid modernization, energy transition and public facilities, among others,” explained Sai Parepally, a principal at VSS. Parepally co-led the deal with VSS managing partner Jeffrey Stevenson.

“We have seen forecasts that US construction spending will total more than $2 trillion annually, with public infrastructure and institutional work being the strongest and most resilient segments. We think there are a lot of tailwinds within this market,” he added.

Founded in 1983 by George L Pla, the company focuses on program management and construction management (PMCM), serving as the project owner’s representative, managing the engineers and contracts, controlling the schedule and budgets and making sure that the project owner’s goals are fulfilled.

Demand for Cordoba’s services is also expected to come from the growing buildout of data centers to support the proliferation of AI.

“We view AI as a net positive and believe there is no way AI can reasonably displace the need for infrastructure itself,” Parepally said. “On the contrary, the buildout of data centers has created considerable knock-on effects driving the modernization of power, water and other infrastructure to support them.”

The US has a data center space problem, with vacancy rates hovering around 1 percent in some parts of the country, as PE Hub previously reported. PE firms are filling in by providing infrastructure services that support the construction of data centers, such as power, grid and water infrastructure.

What makes Cordoba a significant target for VSS is that the company has been at the center of managing many of California’s “most well-known and economically important” infrastructure projects within transportation, water, energy and education sectors, Parepally said.

Cordoba has worked on a number of high-profile projects, among them the LA Metro – Eastside Transit Corridor Phase 2, which is expanding the E Line nearly nine miles east from East Los Angeles to the City of Whittier, serving the cities of Commerce, Montebello, Pico Rivera, Santa Fe Springs and Whittier, among others. In this project, Cordoba is providing integrated project management, engineering, and stakeholder engagement to support environmental review and regulatory coordination.

“The US’s existing infrastructure is aging and requires substantial investment in modernization and maintenance. Cordoba, with established teams in communities throughout California and beyond, is well-positioned to keep pace with strong demand from an expanding public and institutional customer base,” he said.

M&A strategy

To scale Cordoba, VSS is looking at employing the M&A strategy. Parepally described the project management space as fragmented. That will give room for the company to find the most relevant partners, he added. Organic strategies will also be on the table.

“The fragmentation allows Cordoba to find the right firm to partner with,” he said.

Cordoba is VSS’s second platform in the architecture space. In 2021, the firm invested in HFW Companies, an investment focused on consolidating architecture, engineering and construction (AEC) service firms.

VSS said it likes working with founders and has flexibility to either be a majority or minority partner.

“Our flexible Structured Capital strategy is really something that is relatively unique in that if we have founders who are interested in doing a majority deal, we can facilitate that and if there are founders interested in doing a minority deal and retaining control, we can do that as well,” added Parepally.

“For founders who are seeking an alternative to traditional bank financing, we can provide both debt and equity capital. Our flexible investment approach means we can tailor capital solutions to entrepreneurs’ needs while offering the benefits of a trusted partner like VSS.”