In the eternal quest to increase revenue and cut costs, co-op and condo boards are finding new ways to raise money from unexpected sources – including their garages and parking lots. Here are lessons from three boards that tried, with varying degrees of success, to turn their car parks into cash windfalls.
Build in a rent reset
With 2,820 units, Penn South in Chelsea qualifies as a massive co-op, with a huge number of parking spaces – 839 of them – to match. Since the co-op’s shareholders require only 564 spots – half in an upstairs, open-air lot, and half in a ground-floor garage – the co-op entered into a long-term lease with a garage operator, Impact Parking, which specified that it could rent the remaining 275 outdoor spaces on an hourly, weekly, or monthly basis.
“Impact keeps the revenues from its operation and it pays us an annual rent that provides a major source of income to help keep maintenance charges down,” says Brendan Keany, who has been manager at Penn South for 22 years. “It also allows us to charge shareholders only $165 a month for downstairs parking and $125 for upstairs, while market rates are easily $550 and $350. After all, we’re a middle-income co-op, and we want to keep costs for amenities affordable. Hiring an outsider operator has been good for us overall.”
So good, in fact, that when it came time to renew the lease in 2001, the board readily agreed to Impact’s request for a 30-year term. “At that time, Impact, which handles repairs and maintenance, had paid for lots of improvements to the outdoor deck, so they made the argument that they had to amortize that investment over a longer period of time,” explains Keany. “But one thing we didn’t envision was the tremendous development that has happened in the neighborhood, which has dramatically increased the demand for parking. As a result, the cost of daily and monthly parking has almost doubled. Impact is benefiting from that, but we are not.”
The lesson learned? “When you’re doing a long-term lease, it’s not enough to build in, say, a three-percent escalation every couple years, which is what we did,” says Keany. “There needs to be some form of reset in the lease, so the rent you’re charging won’t become woefully under market.”
Do It Yourself
Boosting your bottom line by offering parking spaces to non-residents might seem like a win/win, but as the board at the Forest Hill co-op in Forest Hills, Queens, discovered, it can be anything but. The 120-unit building, which has 50 parking spots in a downstairs garage reserved for shareholders, was raking in $3,000 a month from its lease with a garage operator, which was free to rent the 48 additional spaces in an upstairs outdoor deck. Problem was, the arrangement came with an unexpected cost.
“In order to make a healthy profit, the garage company was packing cars in so tightly that it took forever for shareholders to retrieve their cars or find a parking space,” says board president Ray Ochs. “Sometimes, 50 cars had to be moved to get to someone’s car.”
The situation became so untenable that the board members started looking for an exit plan. After checking out the rates for parking in the area (the co-op is next to an expressway and the Long Island Rail Road), they did the math and calculated that they could make a healthy profit of their own by renting out monthly spaces to non-residents, which would also solve the overcrowding problem. When the contract with the garage operator expired, board members took the leap and decided to manage the parking themselves.
In a business-savvy move, the co-op advertised at a $275 monthly rate for the outside spaces, “undercutting slightly what the area would bear to make our parking more attractive,” explains Ochs. The co-op also offered a reduced rate to its commercial tenants, which occupy the 12-story building’s entire first floor. As a result, after one year, almost all of the outdoor spots are rented – including four spaces to ZipCar – netting the co-op around $11,000 a month.
“There’s no question you can make a lot more money by switching to self-managed parking, especially if you’re near a commercial area like we are,” says Ochs. “The board does have to do a lot more work, and so does our management company – but it’s worth it.”
Sometimes there’s extra coin to be found simply by taking a second look. That was the case at Homestead Owners, a 163-unit co-op in Hartsdale, Westchester County, which has 166 parking spaces spread throughout an indoor garage, carport, and outdoor lot.
“That may seem like plenty of parking, but newer residents often have more than one car, and we were looking to gain additional spots,” says Brian Scally, vice president of Garthchester Realty, which manages the property. “The co-op was doing some repaving last fall, so the super, the board president, and I and took that opportunity to walk around and see if we could find something.”
While eyeballing the layout in the open carport area, the trio noticed there were eight spaces that were actually long enough to accommodate two cars, not just one. “All we had to do was repaint and lengthen the lines to reconfigure each one into a tandem spot – it really was that easy,” Scally says. “Since our outdoor spaces are $60 a month, we’re bringing in an extra $6,000 or so a year.”
The board didn’t stop there. At a different building, “in spots that don’t fit a car, we’ve also created parking areas for bicycles, which generate a little bit more money and are a nice amenity for shareholders,” Scally adds. “And when Homestead underwent renovations recently, we installed LED lighting with motion sensors, so they automatically dim when no one is there, which saves us money in two ways. It may seem impossible to optimize a parking garage or lot beyond what it was originally designed for, but it’s definitely doable.”