Indianapolis has picked eight out of 16 teams to continue in the bidding process for a long-term concession and management contract for its parking assets, according to the city’s procurement website.
Of the eight teams, parking manager Central Parking Systems combined its effort with private equity firm Kohlberg Kravis Roberts (KKR), according to the website. The combination resulted in the following seven groups of bidders:
• KKR, Central Parking Systems, parking enforcement provider Duncan Solutions;
• Spanish road developer Cintra Infraestructuras;
• Cleveland-based private equity firm Gates Group, UK-based outsourcing company Serco Group, parking manger Imperial Parking;
• California-based private equity firm Aurora Capital Group, parking manager LAZ Parking, a LAZ-affiliated investment vehicle known as P4 Partners;
• Xerox-owned outsourcing company ACS, parking manager Denison Global Parking, parking meter equipment provider Evens Time, public relations firm Sease Gerig & Associates;
• Parking manager Lanier Parking Solutions;
• Parking manager Standard Parking.
The request for the companies’ qualifications, issued in February, solicited investors’ interest in either a long-term lease of the city’s 3,669 single-space meters, a management contract for its 14,194 parking garage spaces and 6,067 parking lot spaces, or both the long-term lease and management contract. In March, the city received 16 responses to the request, which now have been published on the city’s website.
Two teams – the KKR team and the ACS team – expressed interest in a concession-only transaction, according to their responses. The remainder all expressed an interest in both a concession and management-contract transaction.
The ACS team, however, proposed a broader concession than just a lease of the parking meters. “We believe that to maximize the total value of the Indianapolis parking program, all parking assets, including meter and facility operations, and violations processing and collection services, should be bundled into a comprehensive, fully integrated parking concession agreement,” the firm wrote in its response.
The Gates Group team also proposed a variant on the concession-only approach. The firm said it would like to pursue a “lease/leaseback” transaction where the city would get a lump-sum upfront payment for the concession of the parking meters and retain 100 percent of their operating cashflows after certain costs are paid for. Gates said it is executing a similar kind of transaction in New Haven, Connecticut, which is attempting to lease its on-street parking assets for 25 years.
The responses to Indianapolis’ request for qualifications also indicated prospective bidders are open to investing in parking assets from both private equity and infrastructure funds, which typically have different return expectations. Infrastructure funds typically target lower, more steady returns than private equity funds.
UBS Global Asset Management, which did not make it to the next round of bidding, said in its statement it was willing to fund a concession payment for the parking meters 100 percent with equity from its $1.52 billion International Infrastructure Fund. The fund had approximately $400 million in undrawn commitments as of 10 March, UBS said.
KKR, on the other hand, said the equity required for the transaction “is expected to be provided by” the firm’s KKR 2006 Fund, a global buyout fund which has $17.6 billion of committed capital. Of that, $13 billion has already been invested, according to a 12 March regulatory filing by KKR.
KKR added the equity could also come from other sources of KKR-managed equity capital. As previously reported on InfrastructureInvestor.com, the firm has been building a team to invest in infrastructure assets directly through a dedicated fund. KKR has said in previous regulatory filings, though, that it aims to invest in infrastructure as a “distinct asset class”, so it may be unlikely that it would co-mingle private equity and infrastructure fund investments in one transaction.
Public hearings on the proposal have already begun and a presentation by the seven qualified bidders to the city are to follow in May, according to the website. Final and binding proposals are expected to be received by the end of June, according to the previously-issued request for proposals.
In related news, the Indianapolis Airport Authority received 11 responses to its request for information with regard to the 18,000 parking spaces under its management. The respondents included many of the same firms who indicated interest in the parking meter concession, in addition to Carlyle Infrastructure Partners and the investment banking arm of Wells Fargo. Those responses have also been published on the city’s website.