Ohio parking deal could be a lodestar for industry(2)

Ohio State University netted $483m for a 50-year lease of its campus parking. The deal is being hailed as a breakthrough for non-core infrastructure privatisation that could be a signpost for the asset class.

A potentially precedent-setting parking deal involving Ohio State University (OSU) could prove instrumental in making on-campus parking – as well as school-owned infrastructure in general – more appealing than municipally-held assets.

The university a week ago accepted a $483 million offer from Brisbane, Australia-based Queensland Investment Corporation (QIC) and consortium partner LAZ, a parking lot operator headquartered in Hartford, Connecticut, for a 50-year parking concession agreement. A request for qualifications (RFQ) published in September elicited serious interest from not just Queensland, but industry players like Macquarie Group and $34 billion investment manager Industry Funds Management (IFM).

OSU is the third-largest college campus in the America by enrolment with 57,000 students, and has 35,000 on-campus parking spaces. The agreement with QIC and LAZ marked the first time a US college decided to privatise parking, and could signal a watershed moment, according to industry personnel who closely followed the Ohio State deal.

“Even though a university is still a political environment, a trustee board can make a decision unilaterally,” explained Mark Williamson, a managing director with Evercore Group, which advised QIC in pursuing the OSU mandate.

Having that kind of centralised decision-making process, said Williamson, a Wall Street veteran who has worked for Goldman Sachs Group and Merrill Lynch & Company, can negate the adverse impact of “political will,” which can obstruct finalising a concession agreement.

Williamson blamed the adverse impact of political will in hindering or altogether spiking municipally-leased parking in the recent past, including in Los Angeles and Pittsburgh, both of which could have earned $300 million and $450 million upfront respectively from privatisation.

OSU and its adviser Morgan Stanley deserve credit for structuring an attractive package that cut out the prospect of having the deal shot down in procurement said Kent Rowey, partner with law firm Freshfields Bruckhaus Deringer. “Ohio State and Morgan Stanley ran a great process, especially in getting trustee approval in advance,” said Rowey.

Rowey, whose firm is frequently involved in advising the public sector on privatisation, called the agreement “terrific for the [parking] sector, and praised Ohio State for having a particularly attractive asset in its parking.

“It has a monopolistic nature,” Rowey said. “Given the makeup of where the school is located, in Columbus, Ohio, it’s unlikely a competing facility will emerge as a competitor”. “This was an outstanding deal for the university,” agreed an industry official close to the deal.

Evercore executive Williamson described the OSU lease as a “pretty good precedent” for higher education, with Rowey adding that he would not be surprised if a large state university in California or Florida, for example, chose to initiate a similar process.

One infrastructure official called university property primed for privatisation, adding housing and food service could follow parking as sought-after assets.

Queensland and LAZ submitted their winning bid, as well as an alternative offer worth $583 million, in June. Macquarie, which teamed with Central Parking Systems, also received serious consideration with a $417 million package. Lastly, IFM and Parking Solutions put together a $390 million deal.

Ohio State University has said its parking system is capable of generating $28 million annually. The school is planning to use money generated from the lease to shore-up its endowment. OSU treasurer Michael Papadakis did not return a voicemail seeking further comment.