QIC GI and Ohio State University: Best Practices in Privatization
Institutions of higher learning today are caught between a rock and a hard place. Providing quality education and research has never been more important to our new economy, yet the competition for a dwindling pool of public funds is getting increasingly fiercer.
Ohio State University (OSU) and QIC Global Infrastructure (QIC GI) are on the leading edge of a new way out of the dilemma.
In September, QIC GI – an Australia-based international investor specializing in major infrastructure projects – closed a $483-million agreement with Ohio State University, giving the firm a 50-year concession for the university parking system. It holds the concession in a special purpose entity known as CampusParc LP.
Over time, CampusParc will implement new technology to streamline permit purchasing and provide additional services for users.
But the agreement also will allow the university to redeploy capital to its endowment funds where, under its own forecasts, it could contribute $3.1 billion of investment earnings over the next half-century. These are funds that, the university says, will directly support academic initiatives, such as hiring more faculty, offering more student scholarships and supporting the arts and humanities.
One of the first such arrangements between a public university and a private investment firm, the transaction has attracted wide attention. In fact, it is being viewed as an example of how to bring additional value to non-core public assets, and as a precursor to additional deals between investors and US colleges and universities.
QIC GI’s relationship with Ohio State through CampusParc has been successful even beyond the firm’s expectations. There are a number of reasons for this, starting with public transparency and a strong partnership between the two entities.
Ohio State University, in Columbus, owns one of the largest campus parking systems in the nation, with nearly 36,000 parking spaces spread across 17 garages, 156 parking lots and 158 metered spaces.
When university’s Board of Trustees first announced that it would seek a private partner for its parking concessions, OSU was intent on making sure students and faculty were fully informed and their questions answered.
In the weeks leading up to the transition, QIC GI and the university worked collaboratively to ensure that questions raised by the university community and the public were addressed.
Early in the process, the university scheduled a series of meetings with faculty and student groups, providing a transparent process that answered questions and confirmed the long-term financial benefits to the university community.
One question was why an Australian-based company would be interested in Central Ohio.
The answer was easy, GIC GI determined, because it looks for infrastructure investment opportunities worldwide, particularly in transport, utilities, telecoms; and universities, hospitals and social infrastructure.
Ohio State’s parking system was especially attractive because it is a large, established organization that has been well-maintained, and has predictable costs and stable demand.
In addition, the firm realized from the start that OSU was going to be an exceptional partner. Its experience in Ohio has proven the viability of such deals, the firm said, and has “set the stage” for similar QIC GI investments at other US universities and in Europe.
Another key to the partnership was the enlistment of LAZ Parking as CampusParc’s operating partner. Founded in Hartford, CT, in 1981 as a valet service, LAZ has grown into one of the “most stable, service-oriented and innovative car parking operations in the country,” QIC GI said.
Now the second-largest parking US operator, LAZ manages more than 600,000 parking spaces in 1,650 locations, including more than 15,000 spaces for universities, significant major event and entertainment parking, and numerous medical campuses and hospitals.
As CEO of the firm’s QIC-Parc division, I believe more of these deals will happen. In fact, Indiana University has announced it is pursuing a similar agreement. Other colleges and universities are reportedly exploring their options more quietly.
How many of these arrangements we will see in the future is uncertain. But there is no doubt that economic realities – along with shrinking government support for education – will lead others to monetize non-core assets so they can concentrate on what they do best: educating the next generation for a new economy.
David Teed, CEO of QIC-Parc Inc., a part QIC GI, can be reached at email@example.com.
Article Abstract from December, 2012