Parking… Misunderstood and a Very Attractive Investment
By John Van Horn
“Parking, as an asset class, is not well understood and that’s what makes it so attractive.” Jim Goldman, Vice Chairman and Chief Investment Officer of Green Courte Partners, LLC talks about his company and what companies with money to invest see in the parking industry.
“We love the investment characteristics of parking—it’s a fragmented industry, with high barriers-to-entry, consistent cash flows and low recurring capital requirements. In major urban markets, we would much rather own parking garages or lots than office buildings. Unlike the office buildings, you don’t have potential tenants demanding free rent, large up-front tenant improvements and other concessions or leasing agents looking for bonus commissions. In a weak market, those costs can be devastating to an office building owner. When the office building owner eventually re-leases its building, however, we’ll be there to benefit from the increased utilization of the parking garage without a similarly high capital investment.”
“Plus, let’s face it, the amount of available parking in most urban areas is becoming more and more limited while demand is increasing. A long-term supply and demand imbalance is good for business and creates a rising tide that benefits all parking owners.”
Green Courte currently owns two facilities. “We were able to make these deals when the market was right. Since then we have seen a number of parking garages that sold for record prices. That’s not our market. We sense the market now is moving to a position that more fits our plans.”
When dealing with parking, Goldman went on, we have to have asset managers who closely monitor the on-site managers, who normally work for a parking operator. Green Courte’s goal is to take as much of the cash portion of the operation out of the equation through investment in technology.
“We want to remove labor and cash. Many operators are using centralized systems to control their garages and through the use of pay on foot and credit card technology, keep our costs down. This requires that we interact with the managers regularly. Our asset managers know that we must work with the garage staff every day.”
Green Courte Partners, LLC was formed in 2002 by its Chairman, Randy Rowe. Rowe was formerly an investment banker with Goldman Sachs where he was responsible for its Midwestern real estate investment banking practice. Later, he joined Sam Zell’s Equity Group where he was Chief Executive Officer of Equity Office Properties and Manufactured Home Communities (today known as Equity Lifestyle Properties, Inc.). While at Equity Office, Rowe led Equity’s acquisition efforts to expand Zell’s investments into parking facilities. This portfolio was later sold to the organizers of, and served as part of the foundation for, GE Capital’s InterPark.
Goldman, also a former investment banker, worked with First Union Real Estate when it owned and later divested itself of Impark. After Impark was spun-off, he served as an advisor to Impark’s senior management. His background includes working as an investment banker at Alex. Brown & Sons and PaineWebber, where he focused on a variety of niche real estate strategies such as parking and manufactured housing communities.
Green Courte Partners, LLC is now finalizing its third investment fund, Green Courte Real Estate Partners III, LLC, a $362.5 million private equity fund which is targeting investments in parking garages and lots as well as manufactured housing communities. Green Courte’s manufactured housing community business, which operates under the American Land Lease name, is currently the seventh largest owner of manufactured home communities in the U.S. with 48 communities, containing over 18,000 home sites, located in ten states.
Commenting on Green Courte’s competitive strengths, Goldman stated, “We don’t waste people’s time and we do the work necessary to provide an owner with an offer on which we expect to close. As long as there are no surprises during due diligence, we have never ‘retraded’ any owner and have had virtually all of our transactions close in accordance with their original terms.”
Many owners are attracted by Green Courte’s willingness to structure transactions to meet owner needs. “Often properties are owned by a variety of owners with different income, tax/estate planning and growth objectives. We seek to provide solutions that address the unique needs of each group,” said Goldman. Green Courte is also willing, in certain circumstances, to provide preferred equity capital or mezzanine debt in situations where they have a high degree of confidence in the underlying asset, the property’s operator(s) and owner(s).
“After the financing boom of the mid-2000s, many owners are facing the reality that they will be unable to refinance their properties without additional capital. We can work with existing ownership to provide the “gap equity” that they need to complete a refinancing. In these cases of “good asset/bad balance sheet,” we can be very creative and flexible. At the end of any transaction, we aim to have a deal where everybody feels like they accomplished their goals.”
Unlike many investment funds, however, Green Courte is not focused on infrastructure or on-street parking operations. “We believe that these can be good businesses but they are not our focus. We are real estate investors specializing in parking properties. In the realm of ‘public/private partnerships,’ we would, however, be interested in purchasing or entering into long-term leases for municipal garages or parking lots.”
Article Abstract from April, 2011