Few years late, but they now want a seat. Tracking this to see how this turns out.
Yield Search: Parking Lots
By Sonia Talati
In the search for higher yield, alternative assets like infrastructure and real estate are drawing ever more scrutiny. But Todd Briddell, CEO and CIO of CenterSquare, the real asset management arm of BNY Mellon, says real estate investors should, at this point in the cycle, consider the most overlooked property assets, such as parking lots.
They are, Briddell says, a sweet addition to the property portfolio that can help maximize returns, particularly when the lots are sold down-the-line. Those actively investing in parking-lot properties, either directly or via funds, can make returns in the 12% to 18% range.
How so? Many companies have outgrown the office parking lots that were originally cut out for them, causing parking demand to increase dramatically, Briddell says. “It used to be enough to have 3.5 to 4 parking spaces per 1,000 square feet on average to accommodate the number of tenants expected to park in a building. But now, the requirement has doubled—and most parking structures haven’t caught up.”
That’s an opportunity, and a few real-estate moguls and quick-witted investors are reshaping and renovating parking lots for more effective uses. Briddell says, keep an eye out for suburban properties needing parking-lot improvements. He found, for example, a building in the outskirts of Dallas, Texas, which was overflowing with call center employees. They desperately needed more parking spots. Briddell noticed an adjacent warehouse that was unused, bought it through CenterSquare’s fund, and converted it into a parking lot, offering to double the parking available to the call center’s employees. With the renovation of the warehouse, he was able to sell an interest and secure a 12-year lease with the company running the call center. That handsomely benefited the CenterSquare clients who had invested in the fund.
The opposite thing happened in Harbor Island, Fla., where a former call center slowly became an upscale business hub with top-notch law firms and consulting services. As a result, “hundreds of parking spaces were available in our building,” says Briddell. He started scouting for better use of the space. Briddell discovered a development going up in the neighborhood—zoned for multifamily residents—that could benefit from the available parking spots. He told the residential developers he could dedicate hundreds of parking spots to residents of the new building and offered to build a bridge connecting the two buildings. In the end, both sides won: the developers didn’t have to construct a parking lot of their own, and Briddell ultimately sold them his parking-lot property for $10 million more than the price he acquired it for.
No surprise, then, that some wealth management firms are jumping in on the parking-lot trend or other such plays, and that includes Tishman Speyer/Citigroup Alternative Investments Real Estate Venture funds and J.P. Morgan Asset Management’s array or U.S. value-added real estate strategies funds.
Briddell’s CenterSquare runs Urdang Value-Added Fund and CenterSquare Value Added Fund, both of which comprise of real estate investments that capitalize on building improvements, leasing and other revenue enhancements, and increasing operating efficiencies. The returns over the last ten years were above 10%. Briddell says direct investors in his firm’s real estate projects, which are offered besides the funds, are institutions, endowments, foundations, and some high-net-worth individuals. There’s a $7.5 million minimum investment in the direct projects.
The underlying principle in all of these niche real estate plays, whether at the fund or directly: find parking structures where supply does not meet demand and figure out a creative way to bridge the two.
Parking Investing Blog
The Expired Meter
International Parking Institute
Donald Shoup on Parking
The Valet Spot
We Wrote the Book on Parking Investing