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Corporate Due Diligence

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    Corporate Due Diligence Corporate Due Diligence Presentation Transcript

      • I NFORMATION O F I NTEREST
      • C urrent S tate of the M arket
      • A ffiliated I nfluencers
      U.S. COMMERCIAL PARKING GARAGES INDUSTRY Owners, Operators, and Management Companies M A R K E T R E S E A R C H K R A U T E R & C O M P A N Y specialty lines
    • M A R K E T R E S E A R C H HOT Button Issues Dominating the Industry
      • Ancillary Service EXPANSION
      • Off Airport Parking
      • Valet Services
      • Shuttle Services
      • Parking meter enforcement services
      • Street parking services
      • Car pool coordination
      • Public transportation services
      • RECENT Developments
        • Private companies are now designing, operating, and developing parking garages for stadiums, hospitals, and other large-scale venues.
        • Determined by geographic location  Big operators’ sophisticated cash controls bring in more than mom-and-pop operators, who lose profits primarily to employee theft   investors need multiple properties to justify the cost cash monitoring systems.
      •   $/space by location:
      • Chicago: $4k - $5k/yr
      • Manhattan: $8k/yr
      Parking PRICES Median Parking Structure Construction Costs 2009 City Index Cost/Space Cost/SF Atlanta 90.2 $14,028 $42.64 Baltimore 93.1 $14,479 $44.01 Boston 115.4 $17,947 $54.55 Charlotte 80 $12,441 $37.82 Chicago 114.9 $17,869 $54.31 Cleveland 99.5 $15,474 $47.03 Denver 95 $14,774 $44.91 Dallas 85.4 $13,281 $40.37 Detroit 103.2 $16,049 $48.78 Kansas City 102.1 $15,878 $48.26 Los Angeles 108.3 $16,842 $51.19 Miami 90.3 $14,043 $42.68 Minneapolis 109.8 $17,076 $51.90 New Orleans 88.9 $13,825 $42.02 New York 130.7 $20,326 $61.78 Philadelphia 113.2 $17,604 $53.51 Pittsburgh 97.6 $15,178 $46.13 St. Louis 102.9 $16,003 $48.64 San Francisco 123.8 $19,253 $58.52 Seattle 103.9 $16,158 $49.11 National Avg. 100 $15,552 $47.27
    • parking as a “profit center” NEW OPPORTUNITIES IN PARKING M A R K E T R E S E A R C H
      • Government Operations/Municipal Facilities - Street Parking Enforcement - Parking Meter Service Contracts
      • Medical Facilities
      • Educational Institutions
      • Airports
      • Hotels & Commercial Real Estate
      Commercial real estate developers and property owners view parking as potential profit center, maximizing profits or leveraging the original rental value to a third party lenders by outsourcing to management companies.   Parking Enterprise Funds Municipalities and universities are attempting to harness the power of private sector entrepreneurship by creating an in-house Parking Enterprise Fund (PEF) run as a “wholly-owned subsidiary” of the creating entity, much as the NBC television network and parking operator Interpark are subsidiaries of General Electric.
      • Alatus Management purchased five parking structures from the City of Minneapolis in October 2007 for US $65 million. The city used the funds to retire $16 million in parking structure debt and bolster its parking enterprise fund.[5]
      • An investment group that includes a division of Citigroup Inc., John Hancock Life Insurance Co., and a private consulting firm tied to Canada’s Vancouver Airport, contracted to take over Chicago’s Midway Airport. The terms of this transaction included a US $2.52 billion payment to the City of Chicago. The group won a privatization bid in September 2008 for a 99-year lease. Midway Airport is Chicago’s second airport and the 25th largest U.S. airport based upon annual enplanements.
      Privatization Examples of Monetization of Public Transportation Assets
    • M A R K E T R E S E A R C H Legislation & Regulatory Compliance Americans With Disabilities Act - requires parking facilities to include handicapped spaces, headroom for wheelchairs, and accessible elevators for operation by the disabled  Energy Bill [signed by Bush Sr.] – made free parking provided to employees a taxable perquisite Traditional Facility Management Contracts [typically 1-3 year term] Facility Management Responsibilities: hiring, training, and staffing parking personnel, and providing collections, accounting, record keeping, insurance and facility marketing services. Facility owner pays a minimum management fee and operating expenses: taxes, license and permit fees, insurance, payroll and accounts receivable processing, and wages of personnel assigned to the facility, maintenance, repair costs, and capital improvements.  Contracts & Income Lease [typically for 3-10 year term] Provides for a contractually established payment to the facility owner regardless of the operating earnings of the parking facility. The rent is generally either a flat annual amount, a percentage of gross revenues, or a combination thereof.  Management company is responsible for all facets of operations, including utilities and maintenance. Owner is responsible for major maintenance, repair or property taxes.  Fee Ownership Ownership of parking facilities, either independently or through joint ventures, requires a larger capital investment than managed or leased facilities, but revenue flows directly to the company.  Ownership also provides potential for realizing capital gains from the appreciation in the value of underlying real estate. Parking facilities are often regulated by both municipal and state authorities.  [e.g.; NYC facilities are subject to governmental restrictions concerning number of cars, pricing, and certain prohibited practices.]
      • New Technology - Automated Garages
      • The U.S. parking garage industry has been slow to catch up to Europe’s use of technology. Larger Companies automate all new construction and systems in their facilities  technology solves most of the issues related to employee theft , a problem that has plagued this industry. Technology can generate statistical data about usage, consumer rates, daily traffic timing, and annual fluctuations. Reduction of manpower and streamlining industry operations save costs .
      • Payment Media
      • Nearly all parking facilities accept some form(s) of non-cash payment . The most common type of media across all segments was credit cards.
      • Access/Revenue Control Technology
      • According the International Parking Institute’s “Benchmarking the Parking Profession” [2004 survey], (20%) of U.S. respondents utilize Automatic Vehicle Identification (AVI) technology in their operations. The survey also reported that 26.8% of respondents use License Plate Inventory (LPI) technology.
      • Professionalization
      • The industry IS upgrading the staff it uses to run its facilities.  More college graduates being hired, and more supervisors are being certified by the National Parking Association.  M ore computer software and better accounting/management systems available, resulting in increased revenue control automation equipment. With increased professionalization come higher labor costs, uniforms, more
      • Consolidation - Acquisitions by Large Competitors and “Roll-up” Consolidators
      • In 2002, the 50 largest firms in this industry captured 75% of the industry revenues,
      • Privatization/Outsourcing of Government Operations
      • Privatization of government operations and facilities are providing new opportunities for the parking industry. Privatization of city services will continue for economic reasons. Cities and municipal authorities have begun retaining private firms to operate facilities and parking related services in an effort to reduce operating budgets and increase efficiency. Privatization in the United Kingdom and the United States has already provided significant expansion opportunities for private parking companies. In the United States, several cities have awarded on-street parking enforcement and parking meter service contracts to for-profit parking companies such as Central Parking. 
      Industry TRENDS M A R K E T R E S E A R C H
    • Alternative POINTS of ENTRY
      • PPPs ( Public-Private-Partnership )
      • Provision of a public” service.
      • Contractual relationship.
      • Defined length and purpose.
      • Allocation of Substantial Risks to private company
      • “ Value for money” and PPP incentives
      • BUYERS OF ASSETS IN THE PPP MARKET
      • Investors, such as public pension funds, seek long-dated, cash-flow reliable assets, the return on investment for which is approximately 10-12%. Neither the traditional equities nor fixed-income markets during the past 7 years, but for stocks in 2006 and 2007, has been able to supply this return consistently without undue risk.
      • SELLERS OF ASSETS IN THE PPP MARKET
      • Cities and states happen to own existing assets that fit the characteristics of an investment that investors want: toll roads, parking garages , lotteries, harbors, airports, etc. -  steady and calculable cash flows.
      • The PPP market allows the seller to retain control of the asset and pocket a large, up-front “rent” payment in return for transferring, under a long-term lease, the entity’s profit and loss risk to a private operator which, in turn, can operate the asset far more efficiently. The asset stays in place with no interruption for the users and is intended to provide to the investor the benefits of a traditional equity return for the risk of a bond. The large, up-front rent payment can then be used by the seller for new infrastructure
      M A R K E T R E S E A R C H * Figures according to document prepared by The Royal Bank of Scotland plc and/or RBS Securities Corp. RBS North American Infrastructure Advisory and Finance with Zurich, RBS, Allied, & Peckar and Abramson, PC
    • M A R K E T R E S E A R C H PPP RISKS private sector
      • TYPES of PPPs
      • Management Contracts
      • Design-Build
      • Design-Build-Operate-Maintain
      • Build Operate Transfer
      • Build Transfer Operate
      • Build Own Operate
      • Design Build Operate Finance
      • Concession
      • Asset Sale
      public sector private sector Alternative POINTS of ENTRY , cont’d. (PPPs)
    • M A R K E T R E S E A R C H Risk ALLOCATION underwriting PPPs Alternative POINTS of ENTRY , cont’d. (PPPs)
    • M A R K E T R E S E A R C H Alternative POINTS of ENTRY (PPPs) … to Prospecting OPPORTUNITY Issuer Date Issued Insurance Request The Norwalk Parking Authority The City of Phoenix, Phoenix Convention Center Department The Anaheim Redevelopment Agency 8.25.09 12.11.09 9.3.09 Comprehensive General Public Liability and Business Interruption Insurance in the name of the Management Agent with the Authority and the City of Norwalk named as additional insureds for a combined single limit of $2,000,000 for each occurrence and $2,000,000 general aggregatefor bodily injury and $500,000 property damage will be required. Full fire and extended coverage, again in the name of the Management Agent with the Authority and the City of Norwalk as a named insured, in a minimum amount equal to the full replacement cost of the ramps/garages and equipment will also be required. No co-insurance clause shall apply to any policy. Insurance coverage must be through companies licensed to conduct business in the State of Connecticut with a “Best” rating of “A” or better. The cost of the insurance is to be carried as an operating expense in the annual budget. Workers' Compensation Insurance as required by California statutes;(b) Comprehensive General Liability Insurance, or Commercial General Liability Insurance, including coverage for Premises and Operations, ContractualLiability, Personal Injury Liability, Products/Completed Operations Liability,Broad-Form Property Damage, Independent Contractor's Liability and FireDamage Legal Liability, in an amount of not less than One Million Dollars($1,000,000.00) per occurrence, combined single limit, written on anoc currence form;(c) Garage Liability Insurance in an amount of not less than One Million Dollars($1,000,000.00) per occurrence, combined single limit, written on anoccurrence form;(d) Garage Keepers Legal Liability Insurance in an amount of not less than TwoMillion Five Hundred Thousand Dollars ($2,500,000.00) per occurrence ,combined single limit, written on an occurrence form;(e) Comprehensive Automobile Liability coverage, including - as applicable -owned, non-owned and hired autos, in an amount of not less than OneMillion Dollars ($1,000,000.00) per occurrence, combined single limit ,written on an occurrence form. Example of Tactical Implementation PPP Opportunity to Prospect Opportunity
      • Infrastructure Investment Funds
      • Parking-Specific Asset Management Firms
      • Commercial Real Estate Asset Managers
      • Parking-Specific Consulting Firms
      M A R K E T R E S E A R C H ADDITIONAL Alternative POINTS of ENTRY per Krauter Garage Prospect List *All notes can be found in entirety in the Parking Garage Prospect List*
      • K R A U T E R & C O M P A N Y specialty lines
      M A R K E T R E S E A R C H U.S. COMMERCIAL PARKING GARAGES INDUSTRY Owners, Operators, and Management Companies GENERATING NEW BUSINESS VIA PARKING GARAGE DIALOGUE PARTICIPATION who's talking. what they're saying. how to participate and be heard. THE CONVERSATION
    • M A R K E T R E S E A R C H UNCONVENTIONAL ACCESS POINTS examples in PARKING GARAGE STAKEHOLDER DIALOGUE Forum access point Community of Professionals Stakeholder example Dialogue exchange Dwight Gregory Commercial Real Estate Acquisition Consultant Greater Atlanta Area Subject: Looking to purchase parking garages Message: Interested in buying parking garages 5+ ML in value or more. Anything smaller is too small of an investment for us. Please contact me if you have any deals to discuss. posts to generates interest facilitates dialogue catalyzes response Todd Gallagher COO, Apex Skypark, Inc. Orange County, California Response: Dwight, would you be interested in investing into a Robotic Parking Garage? We believe we have a good site for one in downtown Long Beach, CA.
    • M A R K E T R E S E A R C H UNCONVENTIONAL ACCESS POINTS examples in PARKING GARAGE STAKEHOLDER DIALOGUE , cont’d. Affinity Groups MEMBER EXCHANGE EXAMPLE OF
    • M A R K E T R E S E A R C H UNCONVENTIONAL ACCESS POINTS: CASE STUDY MARINA OPERATORS STAKEHOLDER DIALOGUE GROUP PROFILE GROUP MEMBERS sample of initiating DISCUSSION
    • M A R K E T R E S E A R C H UNCONVENTIONAL ACCESS POINTS: CASE STUDY MARINA OPERATORS STAKEHOLDER DIALOGUE
    • M A R K E T R E S E A R C H UNCONVENTIONAL ACCESS POINTS: CASE STUDY MARINA OPERATORS STAKEHOLDER DIALOGUE
    • M A R K E T R E S E A R C H UNCONVENTIONAL ACCESS POINTS: CASE STUDY MARINA OPERATORS STAKEHOLDER DIALOGUE
    • M A R K E T R E S E A R C H UNCONVENTIONAL ACCESS POINTS: CASE STUDY MARINA OPERATORS STAKEHOLDER DIALOGUE
    • M A R K E T R E S E A R C H UNCONVENTIONAL ACCESS POINTS: CASE STUDY MARINA OPERATORS STAKEHOLDER DIALOGUE
    • M A R K E T R E S E A R C H UNCONVENTIONAL ACCESS POINTS: CASE STUDY MARINA OPERATORS STAKEHOLDER DIALOGUE
    • M A R K E T R E S E A R C H this document utility potential
      • This document can be simplified/customized/segmented/tailored
      • for the following purposes:
      • producer education tool
      • sales presentation
      • information product
      • (whitepaper, webinar, etc.)
      • boilerplate marketing collateral
      • supporting material for sales pitch