Parking Lot Investments Are An Interesting Component to A Diverse Portfolio Investing Approach
An Alternative investment, that is a first choice for many funds.
Sales Executive: “Ted, good morning — I’m returning your call, a little late — I apologize, are you still in the market for an income producing real estate investment?”
Prospective partner: “Well yes actually, I was looking a little, what have you got?”
Sales Executive: “Fantastic. Think Parking Lots. We buy them, expand their footprint, and increase their value using our proven techniques. I’ve got an offering from our equity fund near completion in an extremely high trafficked area that will guarantee net 12% on your investment in the first year, and target 11–15% thereafter.”
Prospective Partner: “How did you get my number again?”
Heard this pitch before?
No. You likely haven’t... And Ted became on edge because the guaranteed return and hands off ROI sounded too good to be true. In fact, I wouldn’t blame Ted for his skeptical hesitation either as cell phone owners, we get about 6 cold calls per day from robots or India offering to rebuild your businesses website.
By the way — potential partners are referred for specific offerings through affiliate brother/sister websites, almost as if Match.com sent you a message to say, “Hey, we think you two could be a good fit for each other beause you have many interests in common!”
I began working with US Parking Investments a while back and I must say I’m impressed with the product. I’m impressed with the legwork that’s been taken to make sure the company is SEC compliant, the lengths and costs of their best in the business securities lawyers and accountants, and presentation of new age parking investments. The secret weapon of pricing structure (no, I can’t disclose this secret ingredient… think seasoning on Checkers fries type of secret).
Truthfully these parking investments aren’t new though; they’ve existed forever and typically are favored by hedge funds and pension plans. They aren’t cheap to purchase the land and lot so most investors don’t have access to the favorable benefits (more on these soon) of these uber attractive “Alternative Investments”. Being SEC compliant this is not simply a crowdfunding mechanism to buy parking garages… everyone owns a piece of the pie including the business and the underlying land.
There are rules for the investors of this investment though: They must be Accredited (short version: make more than 200k per year for last 2 years or have 1 million in assets outside of primary residence). This term is something the SEC came up with to protect investors with too little capital to take part in larger scale investments. What if someone wasn’t Accredited and they spent their last 4K on a Bitcoin investment at the top of the bubble? They would have at this point lost much of their entire net worth… the SEC assumes accredited investors to have far more money, be well versed with their investment choices, and can stomach a capital loss.
But what’s so special about investing in parking lots?
Nothing. That’s the beauty, it’s an investment about nothing (Insert Seinfeld Jokes). Cars come in, cars go out. They pay for the parking or they don’t get the cars. The selected parking venue appreciates in value as real estate. Investors are protected against inflation as pricing has elasticity and will increase in cost as a gallon of milk will over time. Extremely low maintenance costs result in higher margin profits than other investments. There’s nothing special to see here, and I forewarned you. It’s simple — which is why it’s extremely attractive for investors and the principle of these lots.
But can’t I just go with a REIT?
You can. Real estate investment trusts are good in some cases. Of course this depends upon the investor and the investors risk appetite. US Parking Investments ring fences their investors into shares of a single lot. When investors choose a particular project to be a part of because they feel it may outperform another offering — they live and die by that single lot. If a Miami lot doesn’t perform well because the ice cap melts and Miami disappears, their investment is guarded because they are only invested in Texas.
With a REIT you have a drawdown as you are purchasing a portfolio of investments and losses that are factored into their price per share. Unlike with a REIT, USPI has guaranteed the first year investment with a12% preferred return, and in addition offer to buy investors back out at 125% after the 5th year. They want the land and shares back as long term income will continue to generate on top of the underlying land appreciation in high sought out areas (essentially where all projects are sprouted!).
Another issue with a REIT is slow growth as they must return 90% of profits (minimum) to shareholders. This means they aren’t able to bring in excess capital to reinvest into the property as quickly as a new age, parking lot investment, through a Reg D 506(c) fund for accredited investors.
So then what’s in it for USPI if I’m getting all these benefits?
USPI retains 30% of its lots as management fee with a 35% retainment on profit split, the rest of the shares are portioned to interested partner investors. Investor capital is utilized for rapid expansion and upgrades. Sometimes it may be a simple buyout of neighboring property to add more parking spaces, other times it may be used to steam roll into another lot. Potentially it could even be a combination of both!
Speed is important to the fund. US Parking Investments is in direct competition with many other huge Private Equity funds that are doing the exact same thing. Frankly, the only thing we can’t make more of is Land…. So it’s imperative that those purchases are completed with haste.
The incentive really comes as USPI is a partner in the operation alongside the shareholders. What this translates to is the better monetizing that can be done, the more profits to be divvied.
Disclosure: This is not investment advice. I do not provide investment advice. These are simply my views above on Parking Investments noting publicly researchable facts on REITS and Parking Lot Investments.
Interested in learning more about high profile parking investments? Looking to diversify your portfolio further? USPI has partnered with New Direction to accept funds into a self directed IRA.