Ohio State University Issues Parking Privatization RFQ

CHICAGO — Ohio State University’s plan to privatize its parking system advanced this week when the school posted a request for qualifications for firms interested in the asset.

Interested investors have until Nov. 2 to respond to the RFQ. Bidders that the school deems qualified will then have several months to perform due diligence before submitting a final proposal in March 2012. Ohio State hopes to close the transaction by May 2012.

If the deal goes forward, it would mark the first time a university has entered into a long-term lease of its parking system. OSU said investors must make a minimum up-front cash payment of $375 million. It would use the money to help finance scholarships, research and academics.

Morgan Stanley is the university’s advisor and helped craft the RFQ. Jones Day is legal counsel.

The 36,000-space parking system generates nearly $30 million annually for the Big Ten school, which is one of the largest in the country.

In the RFQ, the finance team notes that a private concessionaire would benefit from already-secured OSU board approval, limited competition, the relatively new age of many of the assets, the system’s predictable and growing cash flow, and OSU’s “compelling market dynamics.”

The system includes 17 garages across the main campus and medical campus in Columbus, 156 parking lots, and 158 metered spaces on the main campus.

The OSU board voted Sept. 9 to authorize the 50-year lease and concession agreement. The resolution stipulated that a final proposal must feature a 50-year lease, a minimum payment of $375 million, and rate increases that do not exceed 7.5% each year for the first 10 years.

After 10 years, the concessionaire would be allowed to raise rates either 4% or at a rate that matches the consumer price index, whichever is greater.

The RFQ outlines several qualifications, including proof — backed by three years’ worth of audits — that the financing team can come up with $375 million of cash and has the resources to maintain the system for 50 years.

The team should also provide evidence that it can raise financing for capital projects and be able to demonstrate knowledge of parking and security systems, the ability to raise debt and equity, and the number and size of previous related transactions.

Investors that are deemed qualified by the school will be asked to sign a confidentiality agreement and receive additional information about the parking system and the transaction process. Final proposals are due in late March 2012, with an anticipated closing in May.

As part of the transaction, OSU would defease $80 million of outstanding bonds backed by parking payments.

Fitch Ratings and Standard & Poor’s maintain AA ratings on the university, and Moody’s Investors Service rates the credit Aa1. Ohio State University has $1.9 billion of debt, including its commercial paper program.

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