Sep 5, 2024

Metropolis Technologies calls itself an artificial intelligence company, but earlier this year it became the largest operator of parking garages in the United States. The Los Angeles-based company acquired SP Plus Corp. for $1.5B in May, a deal financed by a group of institutions led by Eldridge Industries, the private equity firm helmed by Los Angeles Dodgers owner Todd Boehly. It was just the latest move in the rapidly consolidating parking industry, which is drawing more attention than ever from deep-pocketed investors who smell an opportunity to infuse technology into a ubiquitous, but often overlooked, segment of the commercial real estate industry. Bisnow/Created with assistance from Microsoft Copilot Private equity is flooding into the parking industry, both for the real estate and for the operators. “We found that the same real estate owners and investors that are interested in deploying our technology are also interested in partnering with Metropolis in acquiring parking,” CEO Alex Israel told Bisnow. “You can think about the industry as highly dependent on old-world technology. [Now] you’re seeing a lot of advancements.” Just last month, global investment firm KKR & Co., which has $135B in real assets under management, was reported to be in talks to acquire parking operator The Parking Spot and its portfolio of properties months after The Parking Spot acquired rival Park ‘N Fly . Todd Casper, a first vice president at CBRE who specializes in marketing parking properties to investors, said he has seen an influx of private and institutional capital, infrastructure funds and real estate investment trusts into the niche property type. “We’ve seen our buyer list grow over the last few years significantly,” Casper said. Over the past 10 years, Casper said he has sold about $32M in parking assets each year. This year, he is on track to sell $75M as private equity and institutional investors increasingly chase higher yields than they can find in more traditional real estate assets. Casper said many legacy owners, coming out of the wreckage wrought by the pandemic, are now motivated to sell their facilities and get out of the business. Some who took out mortgages on their parking assets when debt was cheap are handing over the keys to those properties, with lenders looking to unload the assets. “There are lots of parking ownership entities that are family owners that are exiting for various reasons,” Casper said. CBRE is marketing a 1,442-space, 12-story garage in Chicago and a 1,200-space, 12-story deck in Houston, both of which are attracting interest from various private equity and CRE investors, Casper said. “[Private equity investors] used to just think of office, retail, multifamily. Now people are just thinking outside the box to get some additional yield,” he said. “The beauty of parking is you can mark parking rates to market pretty quickly.” Metropolis was founded in 2017 as an AI-based parking tech company that spread into management when it purchased Nashville-based Premier Parking in 2022. But the company didn't own any parking properties until it bought SP Plus, which owned a portfolio of 10 decks, Israel said. As it deploys its technology into those decks, Israel said he expects the efficiencies to generate operational savings. He expects that to attract real estate investors who could partner with the firm to buy more parking garages. “The most compelling component of owning parking, which is not a core focus for us today, [is] that all of the incremental value that our technology can drive will be accretive to us,” Israel said. A Parking Spot-operated lot at Chicago's Midway Airport Historically, the parking industry in the U.S. has been owned by a variety of entities: families that invested in urban parking lots, developers that built structured parking attached to other projects like office towers, and other smaller investors attracted to something whose revenues can be changed depending on demand. For groups like KKR and Metropolis, the historically scattershot ownership holds the promise of unlocked value if new technology can be put to use, said Andrew Bess, a managing director for advisory firm TrueNorth Capital Partners. Bess advised on  The Car Park's purchase  of McLaurin Parking Co. of Charlotte in 2017 and the acquisition of parking tech firm Oobeo by Toledo Ticket Technologies in 2021. He said garages also have untapped potential as long-term land investments. “Parking real estate has been an overlooked category. It may be seen as an opportunity right now since many other sectors have been well picked over,” Bess said. “As funds look to longer-term opportunities, downtown parking assets can be a form of land bank for future development once city centers inevitably return to greater favor.” The consolidation is coming as the parking industry has largely recovered from the pandemic. While parking revenues crashed 56% nationwide year-over-year in 2020 to $56B, CNBC reported  the industry was expected to reach $144B in revenues last year. Private capital is shopping for pay-for-parking structures and lots under this umbrella of a recovery and are finding many willing sellers, Casper said. But investor interest in parking goes beyond the real estate to focus on consolidating the industry amid a technological revolution. Some of the firms that are getting private equity boosts are third-party management companies that don’t own the real estate they operate. Private equity firm The Broe Group and the Hudson Valley Parking Trust made two major parking operator acquisitions this year, buying  Dallas-based The Platinum Group  and New York’s largest parking operator,  Icon Parking . “You see a lot of PE money coming into the tech space. That’s really driving the transformation,” said John Smith, the former CEO of Icon Parking who stepped down from his day-to-day role when the firm was acquired by Broe. “If you were an operator and you were not very sophisticated and you do not have the capital to invest in technology, guess what — you’re getting gobbled up.” Mubadala Investment Co., a $280B Abu Dhabi-based sovereign wealth fund, recapitalized the parking management firm Reimagined Parking, formerly known as Reef Parking, in November. LAZ Parking purchased Seattle-based International Parking Management in April, although President Jeffrey Karp told Parking Network  a month later that the company would avoid using private equity to fund acquisitions. Bisnow/Kelsey Neubauer An Icon Parking garage in Manhattan A lack of an owned real estate portfolio doesn’t make those companies any less attractive to investors, Smith said. Parking management contracts tend to be sticky for the management firms: Landlords tend to stick with the operators over time instead of jumping from one to another. “All I needed to do was control the real estate,” Smith said. “I didn’t have to own it.” Glenn Kurtz, a senior vice president with Legacy Parking, a third-party parking management company based in Atlanta, said the advent of better parking technology allows owners with bigger portfolios to create efficiencies that the smaller owners don't have the resources to. The number of people employed as parking attendants dropped nearly 20% between 2019 and 2023 to 118,100, according to the Bureau of Labor Statistics . Israel said when Metropolis was exploring the SP Plus acquisition, the firm had “significant” interest from private equity firms that saw the opportunity to add value to the overall parking industry through the influx of new technologies. He said Metropolis’ parking platform, in which a driver reserves and pays for spots via an app, without the need to grab tickets and pay at kiosk stations, has saved parking owners money in the long run. Now, many operators are upgrading their equipment away from ticket-spitting machines and metal bar access controls to virtual forms of parking rentals and access, Kurtz said. These newer technologies make it easier for owners to amass more parking spaces to manage efficiently, hence attracting more private equity dollars to fuel their growth. “Everything is moving to the phone,” Kurtz said. “A bit of the consolidation is occurring because of the technology.” Contact Jarred Schenke at jarred@bisnow.com