Mixed-Use Retail and Office Property
Property Overview
The property is a 41,000-square-foot mixed-use retail and office building in West Hollywood, California, served by a 288-space garage. The building is fully occupied and anchored by a specialty grocer and a fitness club. Office tenants and transient parkers from the surrounding neighborhood make up the rest of the demand. With the grocery anchor newly open, ownership engaged Parking Advisors to assess the operator’s performance and find new income. Over the trailing 12 months the garage earned about $946,000 in gross revenue and $636,000 in net operating income. Annualized operating expenses over the most recent three months were running about 36% higher, driven by staffing.
Recovering Income From Validations, Rates and Staffing
Staffing costs were rising, and validation and hourly rates sat below lease terms and the market. We tested revenue controls against system data, surveyed competing rates, compared tenant validation billing with lease terms, benchmarked staffing and fees, and reviewed the management agreement and monthly statements. We identified $236K in added annual net income, a 37% increase in parking NOI and $3.4M of value at a 7.0% cap rate, with no capital spending required.
- Validations to lease terms: the fitness anchor’s lease sets two-hour validated parking at $3.00, but its members were charged $2.00. Billing at the lease rate adds $78K a year.
- Hourly rates to market: rates for stays of 30 minutes to 3 hours sat well below the closest competitors. Raising them to just below the market leaders adds $55K.
- Staffing: a salaried manager’s time charged to the garage had risen to 90% from a historical 25%. Returning it to 25% saves $73K.
- Operator fees: data processing, audit and health insurance mark-ups ran above benchmarks. We also found $7K in state disability reimbursement the operator had not claimed for a manager’s medical leave.
- Revenue controls: thousands of transactions over three months were charged at non-standard rates. We recommended reconfiguring the gate and payment system to approved rate bands only and reconciling access cards against billings.
- Customer experience and governance: we recommended a longer exit grace period for visitors to both anchors, an online presence for the garage, and amendments to the management agreement. The amendments require a dedicated property bank account and a monthly bank reconciliation.
The result gave ownership a clear plan to recover income across the garage’s two largest drivers, validations and labor.