Harrisburg (9661MF), the Pennsylvania capital whose insolvency sparked a decision to default on some general-obligation bonds, got inquiries from Morgan Stanley and 13 other companies on buying or leasing its parking system.
A different Morgan Stanley venture may earn a $9.58 billion profit from a 75-year lease of Chicago’s parking facilities, based on documents from the group. Other potential bidders that expressed interest in the Harrisburg operations include financial services firms, parking companies and a pension fund.
“It’s extremely good for the city,” said Bob Philbin, a spokesman for Mayor Linda Thompson. “It speaks well for the perceived value of the assets.”
Selling or leasing assets is part of a plan from David Unkovic, Pennsylvania’s first municipal receiver, to deal with more than $300 million in incinerator-related debt, five times the city’s general-fund budget. The community of 49,500 residents backed financing an overhaul of a waste-to-energy plant which hasn’t produced enough revenue to cover the cost.
Morgan Stanley (MS) is partnering with Central Parking Corp. (PK) of Nashville, Tennessee, on the Harrisburg inquiry, according to a list from McKenna Long & Aldridge LLP, a law firm working for Unkovic. The New York-based bank, joined by Abu Dhabi Investment Authority and Allianz Capital Partners, set up a venture to lease Chicago’s parking operations in 2008, and the profit was estimated based on projections in a 2010 offering document.
Others in Pennsylvania
Other parties in Pennsylvania that sent inquiries were Boenning & Scattergood, a securities broker in West Conshohocken, and Brandywine Realty Trust (BDN), a Radnor real estate investment trust. Firms calling themselves Harrisburg Forward LLC, Harrisburg Parking Partners LLC, and Keystone Parking Group also submitted statements of their qualifications to bid, according to McKenna Long. The firm didn’t say where any of the companies are based.
Most inquiries came from out of state, including Guggenheim Partners, a financial services firm in New York; InterPark Holding Inc., a parking manager and developer in Chicago; National Development Council, a community and economic- development organization in New York; NW Financial Group LLC, a Jersey City, New Jersey-based investment bank; a partnership between the Ontario Teachers’ Pension Fund and Vancouver-based Impark Parking Corp. (2896591Q); PaNGo Mobile Parking; QIC Private Capital, part of the Australian fund manager QIC Ltd.; and Vion Municipal Capital, part of Vion Receivable Investments of Atlanta.
Facilities in Play
Unkovic may put up for grabs 10 parking garages, five surface lots, and 1,250 metered spaces, which provide 72 percent of the public parking in the city. In 2010, the Harrisburg Parking Authority, which owns the facilities, reported $13.8 million in revenue. The deadline to submit bidding qualifications was March 12.
“We want to move expeditiously,” Unkovic said yesterday by telephone. “We need to solve this problem.”
City officials are aware of Morgan Stanley’s history with the Chicago transaction and “will scrutinize every proposal,” said Philbin, the mayor’s spokesman.
In 2008, a Morgan Stanley-led partnership agreed to a deal with Chicago whose profit before interest, taxes and appreciation is estimated at almost 10 times the $1.15 billion it agreed to pay over the life of the lease, based on the offering document issued in 2010. Mary Claire Delaney, a Morgan Stanley spokeswoman, declined to comment on Harrisburg.
On March 5, the city got five submissions expressing interest in buying the incinerator, whose debt load pushed the community into insolvency. Another five submitted qualifications to run the water and sewer systems.
None were required to say how much they may offer for any of the facilities or operations.
Unkovic has said he expects to negotiate with a smaller number of prospective buyers and close any transactions by June, subject to court approval.
Once he knows the value of the assets, Unkovic has said he’ll determine how to tackle the remainder of the city’s debt. His plan for fiscal recovery was approved by the state’s Commonwealth Court, which deals with state legal matters, on March 9.
Harrisburg will skip $5.27 million in general-obligation bond payments due March 15, Unkovic said in a March 9 notice. The money saved will provide enough cash to pay for vital services such as police and firefighters, he said.
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