Deals

Gillian Tan is a Bloomberg Gadfly columnist covering deals and private equity. She previously was a reporter for the Wall Street Journal. She is a qualified chartered accountant.

It's easy to be skeptical about the fate of the billions being lined up by private equity firms for infrastructure funds -- especially now that President Donald Trump has apparently concluded that the public-private partnerships at the heart of his $1 trillion infrastructure spending proposal aren't feasible. 

Without federal incentives, state and local governments may be understandably slow to move on potential privatization deals for their airports, roads and ports. That could leave Blackstone Group LP, Carlyle Group LP and others sitting on ready cash with few places to put it and scant answers for investors, should they get frustrated. Luckily, there are some other options.

Here's one: Colleges across the nation may have a place for these firms to park their funds -- and I use that verb intentionally, because I'm talking about parking lots.

In late August, the above tweet went viral,  underscoring how deeply the scarcity of college parking resonates with folks on campuses. To some constituents, it is arguably core infrastructure.

Infrastructure funds have an opportunity to step in and solve the problem, and with parking-lot transactions offering the chance for returns in the mid-teens or so by some estimates, they have the incentive to do so. And educational institutions will likely receptive to the idea, in part because there's been at least one successful such deal.

Back in 2012, Ohio State University awarded a 50-year lease of its parking operations to Australia's QIC Global Infrastructure in exchange for $483 million, which went straight into its endowment. The framework included community protections like limits on price increases, which would likely be necessary in any copycat deals.

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Ohio State is the only college in the U.S. that has executed a parking-lot lease transaction. Given the size of some universities' student populations, there is potential for more deals.
Source: U.S. News & World Report
*Data as of fall 2015; only includes undergraduate students

It helps that firms with infrastructure funds are familiar with parking deals, though most of these have been abroad. KKR & Co., for instance, owns Dutch car park operator Q-Park NV. And a fund managed by Macquarie Group Ltd. is reportedly bidding for Spanish car-park operator Empark just months after another of its funds sold the U.K.'s National Car Parks Ltd. to a Japanese consortium. 

Among U.S. colleges, it's positive that there's finally some momentum five years after the Ohio State deal. Eastern Michigan University said in May that it's exploring a similar transaction.

As the adage goes, when one sheep moves, the flock usually follows. A little herding from infrastructure funds may spur more action.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Gillian Tan in New York at gtan129@bloomberg.net

To contact the editor responsible for this story:
Beth Williams at bewilliams@bloomberg.net