How to invest in parking lots? What are the benefits and drawbacks of parking lot investing? How do you even go about learning about this new asset class? Are there lenders in this industry? Brian Spear, Principal at Sunrise Capital, shares what he has learned over the years.
You can read this entire interview here: https://bit.ly/3rFaXuJ
What are the pros and cons of owning a parking lot?
Starting with seeking favorable long term economics, the demand for parking is growing and will continue to grow over the next several decades. The two largest generations that we have, Gen Z and the millennials, are going to need vehicles and travel throughout the entirety of the country. That demand is continuing to increase, while the supply of parking is shrinking over time. As the population grows, cities are getting more and more dense, developers are taking some of the high quality parcels in downtowns and redeveloping those assets into a higher and better uses.
Parking lots are prime parcels and some of the best locations in the country, just by the mere fact that somebody is willing to pay you money for the right to stand on my piece of land, tells you that you’re in a very high quality urban business district, or a very high traffic tourist destination. It’s exceptionally high quality land with low maintenance costs, there’s really not a lot going on inside of a parking lot, you have some bumper blocks, striping, but there’s not a lot of high capital expenditures inside of a parking lot. The vast majority of the revenue goes to the bottom line.
How about some of the negatives in that space?
Because it is fragmented, it is more difficult to scale in the industry, due to the ownership structure, most folks only own that one asset or those couple of assets. In order to scale, you’re not able to buy facilities and large swathes. Parking lots are more of a slow, steady plot. Another drawback is on the financing side. While there are some good lenders, just the mere fact that it’s not a well known asset class, there are fewer lenders in the marketplace that understand the asset class. And for that reason, if you have a more modest sized parking lot, you’re likely going to have more difficulty garnering the best and most attractive financing terms available in the marketplace.
How did you find that first lender?
By networking at these parking conferences, there are a handful of those national conferences on an annual basis. It’s a relatively small industry, and because these are relatively small niches, you have the ability to climb the ladder a little quicker than what you might be able to do with the other asset classes. You can network with some of the players that are top tier in the industry, by virtue of attending some of these conferences and things of that nature and spending some time in the conferences, talking shop with some of the players in the industry, you can garner some business cards that will help you attract some of the better debt available.
Do you get the land on all the parking lot deals as well?
We want to own the land, the value from our perspective is in the long term ownership of the land itself. Customers literally drive the car up and park on an hourly basis.
I always tell people go to a conference for any new asset class, that’s the number one step, you’re going to meet so many people that can help you.
You can do a ton of learning while you’re driving and listening to podcasts, but at some point, you have to get out there and meet people and start to take an action in that manner as well.
Brian Spear
www.sunrisecapitalinvestors.com
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