Icon Parking Holdings is a 76-year-old brand that controls 5 million square feet under New York City. While its real estate on which people park their cars, Chairman and CEO John Smith says it’s more than that.
“How can we turn this asset into something that's uniquely different?” he said at the New York Smart Business Dealmakers Conference.
The company doesn’t own the real estate, but it does have many long-term leases, some as long as 50 years. So, in essence, he controls the real estate. He imagines leveraging that asset to accommodate EVs, giving people a place to change their vehicles. Or as an asset that can be used by shipping companies such as UPS and Amazon.
“So, the way I looked at it was this garage is just a hotel for cars,” Smith says. “So, all the analytics, all the revenue management, all those things still work. And how can we bring hospitality to parking?”
With a Trustpilot score of 4.5, which he says is the highest in industry, he says they’re changing how people think not only about parking, but also about how they think about space. In New York, there are garages on every corner, making them a sort of commodity. But there's still an ability to differentiate. One way to do that is through technology.
“I started Icon on January 20, 2020, right before the pandemic. So, soon as I started, the world changed,” he says. “And so, we went through a massive restructuring. But at the same time, we took advantage of COVID. Nobody wants a paper ticket. So, we went from 2 percent digital to 99 percent digital in six months — completely transformed the whole experience. We went to LPR cameras. So, now you come in, we don't have to do anything. If you've been here before, your license place picks up, we know you were here, we end up shooting you a text message to your phone, you walk out of the garage. Different experience.”
By the end of 2021, the business had shrunk its footprint and restructured, leaving the process five times more profitable. The company’s PE backer took notice and decided it was time to sell. But Smith felt it wasn’t the ideal time.
“We said, ‘We're not prepared yet. Do not lift up the hood. There's a lot of restructuring under there. We need time to clean it up.’ Didn't listen,” he says. “Went into a process, investment bank, far reach because the owners were in the deal for 10 years at this point, and I had been there two and a half years at that point. So now we're in a process with a really broad reach. And guess what? We have PE firms, financial buyers, but we also have strategics. And we have a strategic that's really excited about us, because you can't replicate our footprint in New York City today. You can't replicate it. So, they were very eager to get it. But now I'm talking to a competitor, and I got to reveal all the things that we do differently. And so, you're talking about knowing your asset value and knowing what you bring differently, as a CEO, I looked at the other CEO, and I said, ‘What's your SEO strategy?’ We command, if you go in Google parking, we command 75 percent of all parking traffic on Google in New York City, which is five times greater than all our competitors combined. I said, ‘What do you do?’ He said, ‘What is SEO?’ I said, ‘There's no way we could sell to this company. They don't even understand what we do.’ And it wasn't because they were dumb. It was because in New York City, it's a different business model than outside New York City.”
It was not a good marriage and the process ultimately failed. But because of what he had seen through the experience, he decided to buy the company through a leveraged buyout with ArcView capital.
His advice to sellers is really be prepared and understand the value of the asset and where it fits in the world.
“Our owners were trying to fit it to everything — they were just spreading it all over,” Smith says. “And that wasn't the answer. It was really somebody who understood and could leverage what we were doing. And in hindsight, we all should have been talking to an infrastructure buyer who saw the real estate play. We didn't go down that path, which was advantageous for us.”
When engaged in a potential deal, Smith says his aim is to get to “no” as quickly as possible, which is distinct from how many people think about the timing within a process.
“What's going to make this deal fall apart?,” he says “Let's talk about it now. And I know some bankers, some PE guys, let's wait and wait. Let's get them hooked, then reveal it. And then everybody's sort of stuck. And I'm like, Yeah, but then we just wasted so much time. And as an operator, I don't have time to waste. I want to know if this deal is going to happen or not. And if it's not going to happen, I'd rather know, not waste any time and move on. So, for me, it's, how do you get to ‘no’ quickly in the process?”
