A recent flurry of car park deals has prompted market intelligence firm S&P Global to warn investors that the assets may not be such an easy ride.
S&P noted that increased interest from infrastructure and private equity funds, combined with the decline of green-field opportunities in the infrastructure market and the attractiveness of some car park operators’ credit characteristics, had driven mergers and acquisitions.
But private equity-style deals often involve bringing in debt to fund the high acquisition prices, which “exposes companies to future refinancing risk” according to S&P.
It also added that technology developments, such as ride-hailing apps and autonomous cars, could reduce the need for car parks and limit their profitability. Economic growth, meanwhile, has been shown to correlate with car park operators’ performance, making them vulnerable to downturns.
S&P said that investors would have to be careful that business models of the car parks could adapt to these changes. Companies which own the car parks rather than leasing could be less susceptible to risk.
In just a few of the past year’s deals, Spanish operator Empark Aparcamientos Y Servicios has been acquired by Macquarie, Japanese car park operator Park24 grabbed the UK’s National Car Parks, and KKR bought Q-Park.