Some of the world’s most valuable real estate exists in New York City, and the wealth doesn’t end with residential buildings and office space. In a city with so many people and so little space, a place to park your car can be priceless. Just ask anyone who’s spent half an hour driving around Brooklyn or Queens at night looking for a parking space like it’s the Holy Grail. Because of the subway system and other underground infrastructure, office buildings are rarely allowed to put much parking underneath their property, unlike other big cities where the city insists that buildings accommodate the vehicles of all the people working inside.
“New York is the opposite because [the city government] doesn’t really want people to drive into the city, so they minimize any type of parking an office building can have,” says Gunnar Klintberg, vice chairman of Holberg Industries Inc., a large parking management firm based in Greenwich, Connecticut. “That makes parking a valuable component for any co-op or condo to be a part of, as they can utilize the extra room to make money.”
And that’s why a having a parking lot can be a tremendous perk for a co-op or condo building. But running a parking garage takes more than paving an unused lot and painting some white lines. Not only does a parking lot give residents a place to put their cars, but it also adds extra responsibilities to the overall operation and management plan.
In Manhattan, however, a parking garage is a near-must. Just about any new residential building will probably feature a garage or adjacent parking lot, and with the market so competitive, the option of paying for a parking space in the building they live in is a big draw for buyers.
“It’s just convenience,” says Andrew Grossman of GGMC Parking LLC in Manhattan. “In Manhattan, it’s a great feeling to be able to go down to your basement and get your car instead of having to walk or take a cab to get to it.”
Operating a Garage
When it comes running a garage adjacent to a co-op or condo building, there are two basic options. The first is to lease out parking facilities to an operating company.
“You can lease [the garage] to a parking company and the company will pay so much a month to run the facility, and bring in transient parking,” says Klintberg, “and whatever they can and any money they make above what is agreed upon is their money,” says Klintberg. “With a management contract, you pay the parking company and have control over [the garage]. There’s a fee to the building’s management company to run the parking but the building would foot all the costs and get all the revenue. It’s a lot more involved.”
“[When the] lease is coming up, the managing agent will contact some companies they know,” says Grossman, “or they may hire a broker to look for a garage operator, and generally they’ll put it out for bid and take proposals.”
“In the New York market, most condo and co-op buildings typically tend to lease out the parking facility for a fixed number of years … and the operator pays a fixed rent,” says Kristen Sokich of Propark America in Hastings-on-Hudson. “Sometimes they work into it that a certain amount of spaces will be made available to the residents of the building at a set rate, but basically the operator charges market rates on the parking, and pays the real estate tax and utilities himself.”
The other option is to have a management company run the facility. This entails paying the company a fee to run the facility, and the building keeping the revenue the garage generates.
Each system has its benefits. Having an operator lease out the facilities generates revenue without the condo or co-op board or management company having to worry about the day-in, day-out operation of the facility. On the other hand, using a management company generally gives the condo or co-op more say in how the garage is run.
“You bring in a management company, and the focus changes a little more to customer service, greeting people, helping them with their packages, providing amenities like tire inflation, battery jump-starts, little things like that,” Sokich says.
That said, Sokich says that leasing is by far the more popular option New York. “I think in New York, 90 percent of the market goes with leasing and only 10 percent probably has their parking managed, where in the rest of the country it’s probably the reverse of that.”
Bringing in the Revenue
The amount of money a parking facility can generate will vary based on several factors — location being the biggest, most influential variable.
“It depends on the neighborhood a building is in,” Sokich says. “In Manhattan, neighborhoods can vary from one block to the next. One block can make a big difference in the amount of rent parking operators are able to charge for a parking space.”
For a general range, Sokich says a single parking space in Manhattan can bring in between $2,000 and $8,000 a year. A garage with 200 spaces, therefore, can generate $1.2 million a year in fees. But of course there are operational costs, so that’s not pure profit.
Being a homeowner in a building doesn’t mean you get to park in your building’s lot for free. But deals between buildings and a parking operator or management company can stipulate that shareholders or unit owners get a discounted rate on spaces.
Additionally, although when a company operates a condo or co-op’s parking facilities, the lot is open to the public, contracts usually stipulate that a certain amount of spots are set aside for the building’s residents, and/or that residents are given priority status on waiting lists.
“If it’s a public parking facility, typically it’s first-come, first-served,” Sokich says. “But a lot of condo boards will put in restrictions saying [a certain number] of spaces have to be made available to the residents of the building.”
“Each shareholder is entitled to a parking spot,” Grossman says. “If they’re all full, they get on the waiting list, and they’re favored over the outsider. Generally they pay the same rate, but sometimes [buildings] make deals where shareholders pay a lower rate.”
Selling their parking lot is an option more buildings are considering, Sokich says. “We’ve actually put in quite a few offers like that to actually buy the parking component of the building,” he says. “It’s not something that’s prevalent in the marketplace, but I think it’s something people are starting to look at intently.”
The obvious reason why buildings opt to sell their parking lot or garage is money. Selling a lot can bring millions of up-front dollars to a building, which in turn can be used for improvements to the building or for investment. Provisions can made to ensure that the space will only be used for parking (preventing something unwanted like a store or another residential building being built in the space), and that a certain amount of spaces will be reserved for building residents. Sokich says it’s an attractive option for parking operators, who are always looking for new spaces, and for the building because of the money it can bring in. The risk, though, is the building is giving up control of the lot.
“It’s not costing the co-op or condo board anything to sell it off, other than the fact that they’re going to get this lump sum of money rather than getting it over 20, 30 or 40 years,” he says.
80/20 and Parking
Having a parking garage has an additional benefit for co-op communities in terms of meeting 80/20 requirements. The federal tax code requires that co-ops obtain at least 80 percent of their revenues from shareholders, as opposed to revenue taken in from businesses that have space in the building.
Therefore, by having the building collect payments for parking spaces from the shareholders, co-ops can increase their so-called “good income.”
“If they have an outside garage, and they receive rentals from the outside garage, they will often make a deal with the garage company to reduce the rent that the garage company pays them, and then have the tenant/shareholder pay directly to the co-op,” says Marc Taub, a tax consultant with the Manhattan-based accounting firm, ERE LLP.
Grossman says co-ops usually arrange payment differently than condos in order to comply with 80/20.
“Co-ops, in order to help them with their 80/20 tax issues … instead of having the individual shareholders [paying the garage] for their monthly rent, the co-op will bill in bulk, they’ll bill [the shareholders who park in the garage]. We’re charging them, but the co-op will collect it and that’s considered good income.”
As long as Manhattan remains an island and the city’s other boroughs remain densely populated, built-out metropolises, finding a space to park your car will continue to be a daily challenge—which is to say, forever. Given that, if you’re lucky enough to have a parking facility in or adjacent to your building, the convenience and peace-of-mind is probably worth the financial and management considerations. n
Anthony Stoeckert is a freelance writer and a frequent contributor to The Cooperator.