The Newbie and the Old DowagerA developer in a major West Coast city asked me to look at a parking garage he had purchased. He was going to fix it up, add some offices, and wanted to be certain he was running it properly.
I arrived a bit early, parked on the garage roof, and decided to walk down the ramps to the first level. The garage is probably 75 years old and needs considerable work.
When the owner arrived, I asked him how many spaces it had. He told me the plans showed 600. My count was 380. He immediately told me he wanted to add equipment. The current cash control was the fist of a young woman that held a wad of $5 bills. No gates, no spitters, no counters, nothing.
My advice to those buying a garage is to have someone with a parking background look at the place. If my owner here based the income of the garage on 600 spaces and there were a third less than that, he would have problems out of the blocks. That’s not to say that if a parking expert (like me) looks at the facility you won’t buy it, but you may end up in a better bargaining position and get a much better price.
The number of parking spaces was one thing, but I detected a larger problem: About half or more of the fluorescent tubes in the place were out. It was very dark. This old dowager was a lawsuit waiting to happen. I suggested that the owner get someone in there ASAP and get all the lights working. The garage also was painted white but hadn’t been pressure-washed in decades. A quick washing would greatly increase the light level.
Well, he said, he was going to do a lot of renovation and didn’t see why it couldn’t wait a few months. I put my paw down and growled. “You could be in court in a few months.”
We live in a litigious society. People want to make money off other people, and there are lawyers out there who really want to help them. These were obvious problems; they can be fixed quickly and easily. A judge would look at the issue and tell the garage owner to get out his checkbook.
I also recommended that he hire an operations consultant to come in and look the place over before the owner started putting in equipment. He was charging a flat rate per day. The lot on one side charges a flat rate; on the other, it’s hourly. He needed a rate survey and a recommendation on the “way” the garage should operate. The difference in income could be substantial. This garage was on the “edge” of downtown, but downtown was moving its way. The way the garage might be run in the future could determine the type of system he buys.
If it will always be a flat-rate garage, a simple pay-on-entry system might be just the ticket. However, if future requirements should turn it into an hourly garage, then a pay-on-foot arrangement might be just the thing.
The owner’s goal was to have the garage attended by one person. His office was nearby, and if need be, one of his staff could come over and be on-site in the event of illness or vacation. It looked like a good idea to me, but then again, that goal would factor into the type of equipment he purchased.
I also recommended that he look into a legitimate operator to run the place – the operator in there now was under indictment by the local authority for tax evasion.
There were a bunch of other issues. I asked the owner if he knew what the monthly rate was. I noted a sign that said it offered monthly parking. Neither he nor the attendant knew. I asked what the reported revenues were. He didn’t know. I told him that based on the car count and the current rate, there should be, at that moment, about $1,000 worth of cars in the garage. Assuming there was some turnover, I estimated that the garage should produce about $25,000 a month, assuming there was no increase in the number of cars parked.
There were about 210 cars in the garage, and with 380 spaces, he had about 170 open. My guess was that he could fill those 170 if he repaired the broken windows, replaced the light bulbs, pressure-washed the entire place, put up signs, and cleaned up the interior. That would bring his monthly take up to around $40K.
Oh yes, there was one more thing. This could be a real problem.
As we walked across the floor, his heels were clicking on the concrete. My sharp canine ears noted that the clicks sounded different in some place than they did in others. I also noted some crumbling of the concrete that looked like the beginnings of a pot hole. I sniffed out spalling. He needed an engineer in there fast. Now that’s where the big bucks come in. The previous owner may have gotten out just in time.
Remember, this fellow’s total exposure to the parking industry before buying this garage was parking in one. He had some good ideas, but he was moving very fast, and my guess was that he was going to invest a ton of money getting this actually one-time beautiful, art deco garage into shape.
There are a lot of new folks such as this one coming into our business. They have great ideas but need help with the basics. New blood is always welcome, but too often their philosophy is “Parking – how hard can it be?” Often, it’s very expensive to find out.
My parting words to this fellow were: “Know how to make a small fortune? Take a large fortune and buy a parking garage, unless you know what you are doing.”