Central Parking Corporation
Central Parking Corporation
Sales: $143.32 million (1996)
Stock Exchanges: New York
SICs: 7521 Automobile Parking; 6719 Holding Companies, Not Elsewhere Classified
Central Parking Corporation is the leading parking services company in the United States, operating nearly 1,500 parking facilities with more than 600,000 parking spaces in 32 states, Washington, DC, and Puerto Rico, and in Europe, Mexico, and Asia. In addition to management and operation of parking facilities, the company offers various ancillary services, including consulting services for new construction projects, insurance for contracted facilities, and related privatized services such as parking meter enforcement and shuttle transportation. Led by founder Monroe Carell, Jr., Central Parking has brought professional management techniques to a highly fragmented, typically “mom-and-pop” industry, scoring high-profile parking contracts such as the new, 8,500-space Atlanta Braves stadium; the Prudential Center in Boston; Busch Stadium in St. Louis; Heathrow Airport in London; the 63-story MesseTurm complex in Frankfurt, Germany; and the 88-story City Centre complex in Kuala Lampur, Malaysia. Other clients include the Hyatt and Westin hotel chains, May Department Stores, and the Rouse Company. None of the company’s contracts, however, accounts for more than five percent of Central Parking’s revenues, and the company’s contract retention rate is high, generally reaching 95 percent or more. The company operates parking facilities primarily under its Central Parking System subsidiary.
Central Parking owns, either independently or through joint venture partnerships, only about three percent of the parking facilities it operates. The largest share of facilities under Central Parking’s watch are operated through management contracts. Central Parking’s responsibilities under these contracts, which are generally short-term renewable contracts lasting one to three years, involve employee hiring and training, collections, accounting, marketing, and insurance. Wages, fees, taxes, and similar payments are paid by the owner of the facility, which also is responsible for maintenance and security. The facility owner pays the company a base monthly fee; Central Parking often receives a percentage of revenues above a certain amount. Since the early 1990s, however, the company has stepped up the number of facilities it operates under lease arrangements. Under a lease arrangement, the company rents the facility and is responsible for all aspects of the facility’s operation. Rent is calculated as a flat annual rate or percentage of gross revenues, or a combination of the two. Leases generally are for ten years. Although they involve greater risk to the company, lease arrangements provide far higher profit margins than management contracts. In the mid-1990s, Central Parking has turned to increasing its rate of leased or owned facilities, converting its management contracts where possible.
Central Parking went public in October 1995 and recorded a three-for-two stock split in March 1996. The company posted revenues of $143 million for its 1996 fiscal year, generating a net income of $13.84 million. In December 1996, the company agreed to acquire New Jersey-based Square Industries, a public company with revenues of $65 million. After completion of the merger, that company’s 117 facilities, located primarily in New York, New Jersey, and Pennsylvania, would add 61,000 parking spaces to the Central Parking empire.
The Professional Approach to Parking in the 1960s
Monroe Carell, Jr. held an electrical engineering degree from Vanderbilt University; his family also owned two parking lots in Nashville, Tennessee. In 1968, Carell gave up a career in engineering to manage the family’s lots, incorporating the company as Central Parking Corporation. During the next decade, Carell expanded the company’s operations, winning management contracts for a steadily growing number of parking facilities. The company was helped by the boom in new building construction that took place across the country during the 1970s and 1980s, as cities began urban renewal projects to revitalize their downtown areas. At the same time, more and more urban real estate was dedicated to parking garages and lots.
Central Parking stepped into the highly fragmented industry by offering a novel approach: promising, and delivering, professional service, with well-maintained facilities and well-trained staff. Under Central Parking management, a parking facility typically saw strong increases in revenues, winning the company a high customer retention rate. But Central Parking’s employee recruitment, training, and compensation policies were essential components of the company’s growth strategy. From the start, Central Parking sought out college-educated personnel who could be groomed as company managers. Central Parking developed its own intensive training procedures, formalized in 1986, and created a specific promotion path. The company also pursued a policy of performance-based compensation. “Since the beginning, we have paid people based on success,” Carell told Investor’s Business Daily. “Everyone has an individual contract.” Managers were paid a base salary, but managers themselves held the key to their earnings potential, with performance-based bonuses capable of more than tripling their base salary. Managers were also encouraged by the company’s policy of promoting from within the organization. New hires spent a year in the company’s management trainee program, then were trained for an additional year as manager of a single facility. After that year, successful managers were promoted to area manager, in charge of several facilities, and from there to operations manager and to general manager.
Central Parking’s growth continued into the 1980s; once the company established itself in one facility in a city, it typically grew to capture a major share of that city’s private parking spaces, allowing the company to achieve greater economies of scale. Until the end of the decade, the company’s growth was based largely on winning contracts for new parking construction. But the collapse of the new building market and a slump in the commercial real estate industry in the late 1980s led the company into new strategies for expansion.
“Take-Away” Growth in the 1990s
To continue its growth, Central Parking switched its emphasis to what Carell called a “take-away” strategy. By promising developers and other owners of parking facilities that the company could maximize parking revenues, Central Parking began increasing the number of facilities under its control by taking existing facility contracts from its competitors. At the same time, the company recognized the opportunity to shift its operating focus from management contracts to leasing arrangements, thereby not only increasing the company’s profits on a facility, but also providing a more stable and predictable income. With the commercial real estate slump sending occupancy rates plunging, developers were eager to relinquish the expense of operating parking facilities for their underused properties. Central Parking, in turn, was able to cut operating costs and gain economies of scale with its increased market share. The company also began marketing itself as a consultant for developers planning parking facilities.
By 1991, Central Parking operated in 630 locations and revenues had grown to $30.6 million. In that year, the company went international, winning a contract to provide consulting services to the Canary Wharf project in London. Later that year, the company expanded its London presence by winning the contract to manage Heathrow Airport’s Terminal 4 parking facility, and it soon added the airport’s Terminal 1 facility. By mid-decade, the company had built its United Kingdom base to nearly 90 facilities. The company also began a new type of service in the United Kingdom, that of providing privatized parking meter enforcement and ticketing services for three cities. This move, begun in 1994, positioned the company for further growth domestically, as increasing numbers of communities, eyeing the successful privatization of services such as the corrections system, began to consider privatizing meter enforcement and ticketing services as well. In 1991, the company entered a consulting agreement with Realty Parking Properties II L.P., in which the company agreed to provide information on potential parking facilities acquisitions. Central Parking received fees based on a property’s acquisition cost and was required to lease and operate the acquired properties.
The following year, Central Parking added significantly to its facilities base when it acquired the management contract rights of Meyers Parking, a regional parking facilities operator with 104 facilities located primarily in New York and Boston. Meyers had been generating $34 million per year in revenues, but was losing money. Central Parking paid $8 million for the contract rights and brought the Meyers system back to profitability. But, by 1992, the company’s move to emphasize leasing arrangements or outright ownership of its parking facilities was already providing the strongest fuel for growth: the company’s parking revenues from leasing or ownership rose to form nearly $27 million of the company’s $46 million in revenues, compared with $19 million from management contracts. By the end of 1993, the company leased or owned 356 of its total base of 948 facilities. Central Parking’s revenues jumped to nearly $95.5 million for the year.
Our focus is superior service, innovative solutions, and consistent earnings growth.
The company’s next international move occurred in 1994, when it entered a joint venture partnership with Mexican developer Fondo Opcion to operate 16 parking facilities in Mexico. Back in the United States, Central Parking continued adding to its list of facilities. The company’s agreement with Realty Parking Properties ended that year, and the company was freed from its obligation to offer that partnership first choice at purchasing properties that Central Parking located. In 1994, the company purchased four parking facilities. By the end of 1994, the company had added a net of 100 facilities, nearly 80 of which were added under leasing arrangements. With leasing and ownership producing three-quarters of the company’s revenues, Central Parking’s sales surpassed $112 million for the year and net earnings neared $9 million. With international sales nearing ten percent of revenues by 1994, the company stepped up its international growth, opening a business development office in Amsterdam, the Netherlands, in 1995 to expand the company’s European presence.
After finishing its 1995 fiscal year with revenues topping $126 million, Central Parking went public in October 1995 to fund further expansion plans, which included not only stepping up its lease equity activities but also the acquisition of other parking services companies. The company’s offering of 2.8 million shares, originally expected to trade at $15 per share, debuted instead at $18 per share and neared $21 per share by the end of the first day’s trading. Shortly after the offering, the company paid $1.6 million for a Nashville garage and $10 million for property in Chicago, adding to the five facilities purchases made in the company’s 1995 fiscal year.
In March 1996, the company added significantly to its European base with the announcement of a joint venture agreement with Wisser Service Holdings AG, a leading German supplier of business services, including building security and maintenance. The joint venture, operating as Central Parking System Deutschland, would bring Central Parking into Berlin, Dresden, and Frankfurt, and help raise the company’s share of revenues from its international operations to 13.6 percent, despite the loss of a number of facilities in the United Kingdom. By the end of its 1996 fiscal year, Central Parking managed 1,359 facilities, including 37 owned by the company. Revenues increased to $143 million, providing net income of $13.8 million.
The start of Central Parking’s 1997 fiscal year seemed to herald a new era of growth for the company. In November 1996, the company made a cash purchase of Civic Parking LLC, a St. Louis-based operator of four parking garages. One month later, Central Parking announced its agreement to acquire Square Industries, which, with 117 parking facilities and nearly $66 million in 1995 revenues, firmly positioned Central Parking as the leader in the U.S. parking services industry.
Central Parking System, Inc.; Central Parking System of Mexico, S.A. De C.V. (50%); Central Parking System of the United Kingdom, Ltd.; Central Parking System Deutschland, GmbH (Germany; 50%); Central Parking System Realty, Inc.; Control Plus Parking System of UK, Ltd (United Kingdom); Larimer Square Parking Associates (50%); LoDo Parking Garage, LLC (50%); Servicios Corporativos Para Estacionamientos, S.A. De C.V. (Mexico; 50%).
Carey, Bill, “Central Parking Stock Takes Off,” Tennessean, May 27, 1996, p. 1E.
——, “Central Parking Top of the Lot,” Tennessean, December 10, 1996, p. 1E.
Maio, Patrick J., “Central Parking Corp.,” Investor’s Daily Business, September 24, 1996, p. A6.
——, “Profit Lots,” Investor’s Daily Business, January 16, 1996, p. A6.
Rudnitsky, Howard, “Take-Away Game,” Forbes, July 29, 1996, p. 50.
Ward, Gethan, “Central Parking Buys Big Rival,” Nashville Banner, December 10, 1996, p. D4.
—M. L. Cohen