Should Developers Build Convertible Parking Structures? Or Are They Just a Public Sector Investment?

Figures & data

Table 1. 10-year, 4% Sloped parking structure cash flows.

10 years	Sloped	4%
year	0	1	2	3	4	5	6	7	8	9	10
BTCF		$200,000	$206,000	$212,180	$218,545	$225,102	$231,855	$238,810	$245,975	$253,354	$260,955
resid value											$1,304,773
sum Cash Flow	−1500000	$200,000	$206,000	$212,180	$218,545	$225,102	$231,855	$238,810	$245,975	$253,354	$1,565,728
pv factor		0.96	0.92	0.89	0.85	0.82	0.79	0.76	0.73	0.70	0.68
PV/year	−1500000	192,307.69	190,458.58	188,627.25	186,813.52	185,017.24	183,238.23	181,476.32	179,731.36	178,003.17	1,057,749.61
TOTAL SUM NPV	1,223,423

Table 2. 10-year, 4% Convertible parking structure cash flows.

10 years	Convertible	4%
year	0	1	2	3	4	5	6	7	8	9	10
BTCF		$170,000	$175,100	$180,353	$185,764	$191,336	$197,077	$202,989	$209,079	$215,351	$221,811
resid value											$3,914,320
sum Cash Flow	−1950000	$170,000	$175,100	$180,353	$185,764	$191,336	$197,077	$202,989	$209,079	$215,351	$4,136,131
pv factor		0.96	0.92	0.89	0.85	0.82	0.79	0.76	0.73	0.70	0.68
PV/year	−1950000	163,461.54	161,889.79	160,333.16	158,791.50	157,264.65	155,752.49	154,254.87	152,771.65	151,302.70	2,794,221.90
TOTAL SUM NPV	2,260,044.25

Table 3. 32 baseline NPV summaries for both Sloped and Convertible scenarios.

CF $200K, resid value 20%, .7LTV				CF $170K, resid value 46%, .7 LTV , cost130%
	8.9%	ProjROR	5%		7.5%	ProjROR	5%
	13.3%	Lev ROR	11%		8.7%	Lev ROR	11%
	CASH ON CASH		TARGET		CASH ON CASH		TARGET
SLOPED	SLOPED	SLOPED	SLOPED	CONVERT	CONVERT	CONVERT	CONVERT
		NPV	cents on $ at end			NPV	cents on $ at end
sloped 4% 10years		$ 1,223,423	$ 0.68	Convert 4% 10years		$ 2,260,044	$ 0.68
sloped 8% 10years		$ 614,389	$ 0.46	Convert 8% 10years		$ 1,146,610	$ 0.46
sloped 12% 10years		$ 538,875	$ 0.45	Convert 12% 10years		$ 1,036,017	$ 0.45
sloped 16% 10years		$ 468,569	$ 0.43	Convert 16% 10years		$ 933,051	$ 0.43
sloped 4% 20 years		$ 2,814,565	$ 0.46	Convert 4% 20 years		$ 3,437,977	$ 0.46
sloped 8% 20 years		$ 1,326,220	$ 0.21	Convert 8% 20 years		$ 1,261,142	$ 0.21
sloped 12% 20 years		$ 1,225,283	$ 0.21	Convert 12% 20 years		$ 1,146,458	$ 0.21
sloped 16% 20 years		$ 1,131,308	$ 0.20	Convert 16% 20 years		$ 1,039,684	$ 0.20
sloped 4% 30 years		$ 4,259,166	$ 0.31	Convert 4% 30 years		$ 4,507,424	$ 0.31
sloped 8% 30 years		$ 1,769,330	$ 0.10	Convert 8% 30 years		$ 1,332,437	$ 0.10
sloped 12% 30 years		$ 1,652,568	$ 0.10	Convert 12% 30 years		$ 1,215,207	$ 0.10
sloped 16% 30 years		$ 1,543,859	$ 0.09	Convert 16% 30 years		$ 1,106,062	$ 0.09
sloped 4% 40 years		$ 5,570,722	$ 0.21	Convert 4% 40 years		$ 5,478,377	$ 0.21
sloped 8% 40 years		$ 2,045,163	$ 0.05	Convert 8% 40 years		$ 1,376,818	$ 0.05
sloped 12% 40 years		$ 1,918,550	$ 0.04	Convert 12% 40 years		$ 1,258,003	$ 0.04
sloped 16% 40 years		$ 1,800,669	$ 0.04	Convert 16% 40 years		$ 1,147,382	$ 0.04

Figure 1. Graphs of NPV deltas sorted by holding term (Top) and interest rate (Bottom).

Table 4. Difference of NPV between paired Sloped and Convertible scenarios.

	Difference
	Sloped - Convert		Wash = within 100LK of zero
	Positive means sloped is better
		Favored Scenario
Delta S-C 4% 10 years	$ (1,036,621)	Convert	maybe too early for parking demand to be substantially decreased
Delta S-C 8% 10 years	$ (532,221)	Convert	maybe too early for parking demand to be substantially decreased
Delta S-C 12% 10 years	$ (497,142)	Convert	maybe too early for parking demand to be substantially decreased
Delta S-C 16% 10 years	$ (464,482)	Convert	maybe too early for parking demand to be substantially decreased
Delta S-C 4% 20 years	$ (623,411)	Convert	realistic
Delta S-C 8% 20 years	$ 65,078	Wash	so close better off doing it hedged for conversion
Delta S-C 12% 20 years	$ 78,825	Wash	so close better off doing it hedged for conversion
Delta S-C 16% 20 years	$ 91,624	Wash	so close better off doing it hedged for conversion
Delta S-C 4% 30 years	$ (248,257)	Convert	realistic
Delta S-C 8% 30 years	$ 436,893	Sloped	not realistic -parking demand likely to be substantially decreased
Delta S-C 12% 30 years	$ 437,361	Sloped	not realistic -parking demand likely to be substantially decreased
Delta S-C 16% 30 years	$ 437,797	Sloped	not realistic -parking demand likely to be substantially decreased
	$ -
Delta S-C 4% 40 years	$ 92,346	Wash	not realistic -parking demand likely to be substantially decreased
Delta S-C 8% 40 years	$ 668,345	Sloped	not realistic -parking demand likely to be substantially decreased
Delta S-C 12% 40 years	$ 660,547	Sloped	not realistic -parking demand likely to be substantially decreased
Delta S-C 16% 40 years	$ 653,287	Sloped	not realistic -parking demand likely to be substantially decreased

Table 5. Summary difference of NPV results between paired Sloped and Convertible scenarios: Sensitivity analysis with improved convertible assumptions.

CF $200K, resid value 20%, .7LTV					convert++ $190K CF .8 LTV & resid val .55%, cost 130%
	8.9%	ProjROR	5%			8.5%	ProjROR	5%
	13.3%	Lev ROR	11%			14.6%	Lev ROR	11%		delta
	CASH ON CASH		TARGET			CASH ON CASH		TARGET		sloped - beefy convert
SLOPED	SLOPED	SLOPED	SLOPED		CONVERT	CONVERT	CONVERT	CONVERT		positive means sloped is better
		NPV	cents on $ at end				NPV	cents on $ at end
sloped 4% 10years		$1,223,423	$ 0.68		Convert 4% 10years		$3,623,116	$ 0.68	Delta S-C 4% 10years	$ (2,399,693)	convert
sloped 8% 10years		$614,389	$ 0.46		Convert 8% 10years		$2,310,230	$ 0.46	Delta S-C 8% 10years	$ (1,695,841)	convert
sloped 12% 10years		$538,875	$ 0.45		Convert 12% 10years		$2,181,293	$ 0.45	Delta S-C 12% 10years	$ (1,642,418)	convert
sloped 16% 10years		$468,569	$ 0.43		Convert 16% 10years		$2,061,249	$ 0.43	Delta S-C 16% 10years	$ (1,592,680)	convert
sloped 4% 20 years		$2,814,565	$ 0.46		Convert 4% 20 years		$4,919,572	$ 0.46	Delta S-C 4% 20 years	$ (2,105,006)	convert
sloped 8% 20 years		$1,326,220	$ 0.21		Convert 8% 20 years		$2,381,870	$ 0.21	Delta S-C 8% 20 years	$ (1,055,650)	convert
sloped 12% 20 years		$1,225,283	$ 0.21		Convert 12% 20 years		$2,250,374	$ 0.21	Delta S-C 12% 20 years	$ (1,025,091)	convert
sloped 16% 20 years		$1,131,308	$ 0.20		Convert 16% 20 years		$2,127,948	$ 0.20	Delta S-C 16% 20 years	$ (996,639)	convert
sloped 4% 30 years		$4,259,166	$ 0.31		Convert 4% 30 years		$6,096,627	$ 0.31	Delta S-C 4% 30 years	$ (1,837,460)	convert
sloped 8% 30 years		$1,769,330	$ 0.10		Convert 8% 30 years		$2,426,465	$ 0.10	Delta S-C 8% 30 years	$ (657,135)	convert
sloped 12% 30 years		$1,652,568	$ 0.10		Convert 12% 30 years		$2,293,377	$ 0.10	Delta S-C 12% 30 years	$ (640,809)	convert
sloped 16% 30 years		$1,543,859	$ 0.09		Convert 16% 30 years		$2,169,467	$ 0.09	Delta S-C 16% 30 years	$ (625,608)	convert
sloped 4% 40 years		$5,570,722	$ 0.21		Convert 4% 40 years		$7,165,277	$ 0.21	Delta S-C 4% 40 years	$ (1,594,555)	convert
sloped 8% 40 years		$2,045,163	$ 0.05		Convert 8% 40 years		$2,454,225	$ 0.05	Delta S-C 8% 40 years	$ (409,062)	convert
sloped 12% 40 years		$1,918,550	$ 0.04		Convert 12% 40 years		$2,320,145	$ 0.04	Delta S-C 12% 40 years	$ (401,596)	convert
sloped 16% 40 years		$1,800,669	$ 0.04		Convert 16% 40 years		$2,195,313	$ 0.04	Delta S-C 16% 40 years	$ (394,644)	convert

Appendix of DV adoption, middle scenario.

The middle scenario (shaded font) Uber/robo-fleet numbers replace parking, and total 19%.

Other forecasts: For low adoption scenario, 9% by 2030, and 17% by 2040. High adoption 31% in 2030 and 52% by 2040.

Source: Simons, R. and Malkin A (2020). No parking, fine! The effect of driverless cars on parking and land use. Routledge.