Parking
Monetizations
December 10, 2012
Guy Wilkinson
KPMG LLP
KPMG Infrastructure Advisory
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Considerations
Policy Issues
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–
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–
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Concession term
Control of rate escalation, operations and
enforcement
Limitation of “excessive” concessionaire
returns
Capital requirements and operating standards
Future congestion management objectives
Stakeholder buy-in
Market Issues
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–
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Project valuation, market sounding and
competition
Procurement process and achieving financial
close
Private sector tax analysis
Business and commercial structure
© 2011 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent
member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Legal Issues
–
–
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Property development rights
Real estate lease terms
In addition, concession agreement should
include provisions to address:
– Exercise of certain reserved powers
– Protection of operation and maintenance
standards
– Changes in law and adverse government
action
– Competing facilities built by the City
– Secured lender protections in the event
of default
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2
Key Commercial Structure Considerations
Balancing Value and Public Policy
Public Policy Considerations
Impact on Upfront Value
Caps on rate setting
Down
Compensation events
Up
Upside City revenue sharing
Down
City refinancing gain sharing
Down
Handback requirements
Down
Performance requirements
Down
Longer concession term
Bid bond
Private sector innovation:
• Real estate development rights
• Naming rights
• Technology
• Other
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Up
Down
Up
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Ohio State University Parking Transaction
Overview
■ On September 20, 2012, the Ohio State University (OSU) achieved financial close on a 50-year
concession agreement with operating partners QIC Global Infrastructure and LAZ Parking for an upfront
payment of $483 million.
■ OSU will lease its 35,920 space parking system (including hospital facility parking), with $28 million
annual revenue (2011)
■ OSU will still own its parking lots and be responsible for parking at special events, including athletic
events, graduation, and move-in day.
■ Concession is for operations and maintenance (O&M) of the OSU parking system. The operating partners
will operate and make capital expenditures to maintain or expand OSU parking structures and collect
associated revenues.
■ OSU is the first public university in the country to privatize its parking operations using this type of
transaction structure.
Objectives
■ OSU sought to secure a source of revenue for hiring more faculty, offering more scholarships, and
supporting arts and humanities.
■ Proceeds will be put into the endowment fund (assumed 9% return) and are projected to generate $3.1b
in investment earnings. The expected allocation will be: $200m to faculty initiatives and research, $150m
to transportation and sustainability, $83m to student scholarships, and $50m to the arts district.
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Ohio State University Parking Transaction (cont.)
Other Bids
■ $417 million bid by Macquarie and Central Parking Systems
■ $390 million bid by IFM and Parking Solutions
■ These bids reportedly were not selected based on the parking fee increase schedule each
team proposed.
Financial Structure
■ Debt financing: QIC and LAZ will draw $285m in bank debt, split between a five-year,
$265m term loan and a $20m capex facility. The banks on the deal are BBVA, BTMU,
SMBC, and Wells Fargo.
■ Equity financing: QIC will make almost the entire equity contribution of $250m leading to
an approximately 50:50 debt to equity ratio.
Rate Structure
■ Year 1: No increase in rates.
■ Years 2-10: Rates can increase up to 5.5% annually.
■ Year 11 and beyond: Greater of 4% per year and average annual increase in CPI for 5
preceding years.
■ Rate increases capped at rates in line with or below historic average increases.
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member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
5
Case Studies
City of Chicago - Downtown Parking Garages
Transaction Description
 The City of Chicago and the Chicago Park District completed a 99-year lease of its four
underground parking garages (approximately 9,178 spaces) between Grant and
Millennium parks to Morgan Stanley and LAZ Parking for a one-time upfront payment.
Needs of the Municipality:
 $278 million went to pay off debt associated with the garages.
 $122 was earmarked for Chicago park improvements.
 $120 million set aside for an annuity that would pay out $5 million annually to replace lost
revenues from the lease.
Transaction Status: Financial Close
(2006)
Financial Structure:
Uses:
$563 million upfront payment
Sources:
$350 million 10 yr term loan
$52 million cap-ex facility
$161 million in equity
Capital Investments:
 Under the contract, the concessionaire must carry out certain capital improvements,
particularly the rehabilitation of the East Monroe Street garage (one of the four garages)
within five years. The city’s estimate of the cost is $65 million, however, the actual cost is
to be determined by the concessionaire.
 Bidders were asked to submit a cap-ex figure (for on-going capital improvements) along
with the upfront payment in their bid.
Policy Considerations:
 The contract for the lease did not impose any limits on the rates the concessionaire could
charge for parking (this was decided based on the City’s experience with this type of
asset).
 The City had to decide how much cap-ex they would specify in the contract.
Source: InfraAmericas.
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member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
6
Case Studies
City of Chicago – Parking Meters
Transaction Description
 The City of Chicago and the Chicago Park District completed a 75-year lease of the
operations and maintenance of the City’s approximately 36,000 parking meters to a
consortium of composed of Morgan Stanley Infrastructure Partners and LAZ Parking.
Transaction Status: Financial Close
(2009)
Financial Structure:
Needs of the Municipality:
 $400 million in a long-term reserve/revenue replacement fund.
 $325 million to help balance city budgets.
 $100 million human infrastructure fund to support for programs helping those most in need.
 $320 million to stabilize the city budget.
Capital Investments:
 No future investments had been specified.
Uses:
$1.15 billion upfront payment
Sources:
$600 million 10-yr fixed rate bond -144a
$550 million equity financing
Policy Considerations:
 As part of the agreement, graduated meter rate increases will be implemented over a
period of five years to bring rates closer to market level.
 The Chicago City Council retains the right to revise the rates, change the number of
meters or the hours of operation. However, if the city takes action that negatively impacts
meter revenue; it will be obligated to replace that value to the private operator.
 Consideration of how city road maintenance, road access, and potential future congestion
pricing and other considerations may effect the value of the upfront payment.
Source: InfraAmericas.
© 2011 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent
member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
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Case Studies
Ohio State University– Parking Meters
Transaction Description
 Ohio State University completed a 50-year lease for 13,500 spaces in 17 parking garages,
22,230 spaces in 156 parking lots and 158 metered spaces on the Columbus campus.
The parking spaces are estimated to generate roughly $30 million in annual revenue.
Transaction Status: Financial Close
(September 2012)
Financial Structure:
Uses:
$483 million upfront payment
Needs of the Municipality
 Support growth in priority academic programs by hiring additional faculty.
 Provide funds for student scholarships.
 Support high priority facilities investments.
 Enhance current transportation services and campus accessibility.
Capital Investments
 Concessionaire may build a new facility and operate it, or OSU can require that the
concessionaire build a new facility.
 Agreement includes guaranteed line of credit 5 years prior to hand back of assets for
capital improvements.
Sources:
$265 million 5-year term bank debt
$20 million cap-ex facility
$198 million equity financing
Policy Considerations
 Maximum annual parking rate increase of 5.5% for years 1-10.
 For years 11-50, maximum annual parking rate increase of the greater of 4% or inflation.
 Includes flexibility to increase parking supply in the future.
Source: InfraAmericas.
© 2011 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent
member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
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Case Studies
City of Indianapolis – Parking Meters
Transaction Description
 The City of Indianapolis completed a 50-year concession to manage and operate 3,456
parking meters and management agreements for more than 20,000 garage and lot spaces.
The concessionaire will pay the city an up front fee followed by 20% of revenues per year,
rising to 50% later in the contract's lifetime.
Needs of the Municipality
 Street and sidewalk improvements.
 More convenient and modern parking options.
Transaction Status: Financial Close
(2009)
Capital Investments
 Agreement includes implementation of a more efficient multi-space parking meter
technology.
Financial Structure:
Policy Considerations
 For the first and second years of the agreement, parking meter rates increased according
to a schedule determined in agreement.
 For the third year forward, concessionaire may annually increase rates up to a maximum
of CPI inflation.
 Termination clause was included in the contract that can be activated every 10th
anniversary of the contract. The termination clause requires a termination fee of
approximately $19.8 million, eventually lowering to $8 million.
 Revenue share agreed upon, which is estimated to give the City approximately $620
million over life of lease.
Uses:
$20 million upfront payment
Sources:
N/A
Source: InfraAmericas.
© 2011 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent
member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
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Case Studies
City of Los Angeles – Parking Meters and Garages
Transaction Description
 The City of Los Angeles attempted to pursue a 50-year concession of approximately
8,231 parking spaces located in nine city garages.
Needs of the Municipality
 Proposed to fund the city budget deficit of approximately $208 million.
 Lease would have generated $53 million to the city’s general fund (help pay services such
as policing and parks).
Transaction Status: Cancelled (2011)
Capital Investments
 No future investments had been specified.
Financial Structure:
Uses:
$200-300 million Upfront payment
Policy Considerations
 Presumed meter rate increases would have been involved, but no details had been
reached.
 Winning bidder would have had option to add three additional parking garages to the deal.
Sources:
N/A
Reasons for Transaction Cancellation
 After the release of the RFP, city business leaders persuaded the city council to alter the
concession agreement and include such arrangements as parking rate restrictions and
discounted parking rates at garages retained by the city.
 These changes effectively diminished the potential value of the transaction and deterred
interest from potential bidders.
Source: InfraAmericas.
© 2011 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent
member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
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Case Studies
City of Pittsburgh – Parking Meters and Garages
Transaction Description
 City of Pittsburg attempted to complete a 50-year concession for 8,987 spaces in 11
garages and one attended lot, 6,991 on-street meter places, and 1,776 off-street meter
spaces in 33 surface lots with JP Morgan and LAZ Parking.
Needs of the Municipality
 $220 million in unfunded pension obligations needed to be funded in order to maintain
compliance with State law.
 $100 million to erase parking authority debt.
Transaction Status: Cancelled (2010)
Financial Structure:
Uses:
$452 million upfront payment
$50 million Future cap ex commitment
Sources: (1)
$200-250 million debt financing
$250-300 million equity financing
Capital Investments
 Installation of 922 new parking meters at specified locations.
 $50 million investment into renovation of three parking garages and improvements in
meter technology.
Policy Considerations
 Agreement allowed for potential fare increases in the future.
Reasons for Transaction Cancellation
 Pittsburgh City Council struck down agreement reached between Pittsburgh Parking
Authority and consortium including JP Morgan and LAZ parking, citing concerns over:
– Length of concession agreement (preferred agreement 30 years or less in length)
– Loss of control over meter rate increases
– Union jobs, and overall fear of loss of jobs
– Undervaluation, fear that the City was not being compensated enough for the revenues
in the system.
Source: InfraAmericas.
(1) Sources estimated from knowledge of approximately 40-50% debt included in transaction structure.
© 2011 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent
member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
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© 2012 KPMG LLP, a Delaware limited liability partnership and
the U.S. member firm of the KPMG network of independent
member firms affiliated with KPMG International Cooperative
(“KPMG International”), a Swiss entity. All rights reserved.
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