The Biggest Mistakes Owners and Property Managers Make Selecting Parking Operators and Technology Providers

Parking Advisors has built a successful national practice by focusing on our primary goal – maximizing the value of our clients’ real estate investments. Parking revenues commonly comprise 5% to 20% or more of our clients’ cash flow and value stack, and the decisions they make can have meaningful impact – both positive and negative – on their assets’ financial performance.

The parking technology and operator environment is rapidly evolving, and unfortunately many changes are not in commercial property owners’ best economic interests. As a result, we created this guide to help owners and property managers:

Protect the value of their parking assets
Maintain control of their parking assets
Retain their rights and flexibility

Mistake #1: Selecting an operator with a proprietary technology model

Some new operators’ proprietary technology models are designed to maximize their internal profitability and create high asset owner switching costs. Solutions are often presented as “no upfront cost” but have high ongoing costs and significant switching costs at the end of the contract. We recommend analyzing each vendor’s technology model and contract structure to understand if you are able to switch vendors without significant costs or operational challenges.

The tips below can be used to evaluate any operating structure:

Termination: Does ownership have the ability to terminate the agreement with 30-days’ notice?
Data Transfer: Is the operator required to provide a rent roll of all monthly parkers including: account holder name, billing address, email address, phone number, parker names and parker rates. The data transfer is important to a successful operator transition, so the new operator can bill parkers without issues.
Contract Assignment: Is the operator required to assign all parking agreements and service contracts?
Accounts Receivable: Is the operator required to provide an accounts receivable report at the end of the term?
Termination Fee: If there is a termination fee, is the termination fee reasonable given the upfront cost of the hardware and installation?
Cooperation: Is the operator required to reasonably cooperate with a transition?

These are common requirements for property management contracts. Parking contracts should be structured with similar terms, helping to ensure a smooth transition.

Mistake #2: Not accounting for all of the fees and comparing them to alternative solutions

Sometimes, there are “hidden” fees and other charges that aren’t obvious. Recently, we have observed that transaction fees are commonly not disclosed to owners and property managers. Transaction fees are service fees charged to monthly and hourly parkers by the vendor. They add to the fee paid by the parker and, like increases in parking taxes, reduce the net amount that parking owners can charge.

In a recent example, Parking Advisors’ client made an operator and technology vendor selection based upon proposals presented to them. The client was unaware of the transaction fees the operator charges for their technology, and they were not disclosed in the proposal the client received.

Once the transaction fees were included in the analysis, it became clear that the transaction fees were well-above market, and a comparable solution could have been purchased for significantly less.

Fee Item	Annual Fee Amount
Management Fee	$36,000
Senior Manager Allocation	$6,382
Payroll Tax Mark-Up	$8,401
Workers Compensation Insurance Mark-Up	$2,125
Insurance	$7,200
Payroll Processing	$800
Total: Disclosed Cost	$60,908
Hourly: Transaction/Service Fees	$109,500
Monthly: Transaction/Service Fees	$42,500
Total: Actual Cost	$212,908

In Parking Advisors’ experience, we have observed transaction fees range from approximately $50,000 per year to $500,000 per year. Not including these fees significantly understates the total cost.

Mistake #3: Losing control of your parking asset’s parker and transactional data

Real estate owners invest millions of dollars of capital to acquire assets, with significant associated risks for themselves, their investors and lenders. As part of their fiduciary responsibilities, real estate owners need clear and transparent access to all of the data the parking operator or technology has generated from the asset.

Parking Advisors has observed language in contracts that makes the data generated by the parking facility property of the parking operator or technology vendor. As an example, one vendor’s standard contract language is:

“Data that is generated from the Parking Operator’s parking technology is at all times considered property of Parking Operator.”

The consequences of this language are that the owner has forfeited all rights to:

Audit the parking operator to ensure the operator is performing
Evaluate the performance of the operator
Easily change vendors

As a result of this language, the owner has lost control of its data and its asset. This could negatively impact the sale price of a parking asset because purchasers commonly require detailed data for underwriting purposes, particularly in the case of large and complex assets.

Mistake #4: Losing termination, audit and approval rights

Parking Advisors has observed language in contracts that takes away the real estate owner’s rights to approve:

parking rates
cleanliness and operating standards
employee changes
signage
groups of parkers
the terms and conditions that the parkers sign

The owner of the parking facility should always have the right to approve how the parking facility is operated, the rates that are charged and all changes. In this increasingly competitive environment, many office, retail and other tenants consider parking rates in their leasing decisions.

Mistake #5: Defining the management fee in the parking agreement but not defining the other fees

All fees and direct charges from an operator, including allowable annual increases, should be defined in the vendor’s contract.

The three scenarios you want to prevent are:

Management fees staying relatively flat but other fees increasing at higher rates
Transaction and service fees being charged to customers without your approval or knowledge
New fees being added to the reimbursable expenses without your approval

We recommend defining each fee, including management fees, incentive fees, insurance expenses, payroll processing and parker transaction fees, as well as any allowable annual increases.