The Buzz on the sale of Central Parking

First of all — there has been the traditional law suit to stop the sale. A law firm has filed on behest of a shareholder claiming the price is too low. Nothing much will come of it but if you are interested, read about it here.

As for the sale itself, the buzz is all about what will happen. It seems that Central owns a lot of real estate (much due to its acquisition of Allright) and the value of that real estate is anywhere from $250 million to as much as $600 million. Many believe that much of that will be sold in the near term. Makes sense, the buyer can get back a lot of their investment by simply selling the real assets. Of course much of that property may be what is called "junk property," that is not good for much except, well, a parking lot.

Most feel that in the late 90s the company lost its core focus – parking cars. They reached out to international projects, set up shuttle and transportation operations, and ran on street operations both in the US and abroad. The consensus of folks to whom I have spoken is that the new owners will sell off those operations. They will also quickly look at management agreements around the country and divest themselves of those that aren’t profitable — these private equity firms love cash, and parking companies are supposed to be cash cows. Central hasn’t turned a lot of cash lately so they will be looking for that.

These private equity firms companies can be ruthless. Although the word is that the current management will remain in place, the conventional wisdom is that it seldom really does. They may be given an opportunity to turn the company around but the pressure will be on and the timing short. It is probable that the very high salaries and bonuses that are paid to senior members of the company will have a direct relationship to the bottom line. Period.

After all, the new owners are dealing with OPM (other people’s money) and succeed when they make money, period. Money, that’s the only issue. And it must be. Under performing contracts and staff will be cut. Focus will be placed on cash generators like the myriad of leases Central has in the Northeast. It wouldn’t surprise me if the headquarters is moved to New York.

But don’t take my word for it — here’s a comment on my post last week from a "recent former" Central Employee:

I am a recent former employee of Central and have nothing but good
things to say about them. However I do agree that over the last several
years they became more concerned about stock price and what "the
street" thought rather than fundamental parking operations and bid
acquistions for leases and management agreements.

I worked for Central in the 13th largest market in the country and
witnessed a loss of a large amount of market share over that time.

Wouldn’t it be more likely that the new equity firms that have bought
Central would take a hard look at the operations in this market (both
present and historical) and likely either sell or shut down the
operations in this market unless they were convinced that a turn around
was forthcoming is a very short amount of time rather than giving them
a year or two to work out of it?

Stay tuned.

JVH