Equity financing is raising money for a project by selling an ownership stake, so investors share in its profits and losses instead of being repaid on a fixed schedule like lenders.
In a parking development, equity sits at the top of the capital stack, above bonds or bank loans. It is paid last and absorbs losses first, so it expects the highest return. Lenders usually require a meaningful equity contribution before they will lend. See debt service coverage ratio.
Where equity comes from
- Developers and their partners.
- Private equity and real estate funds, including infrastructure and parking-focused investors.
- Public-private partnerships, where a public owner contributes land or rights in exchange for a share of the upside.
What equity investors look at
- Stable demand and net operating income.
- Contract structure with the operator. See owner-operator agreement.
- Exit value, usually based on NOI and a cap rate.
- Risks to long-term demand, such as remote work, ride-hailing and autonomous vehicles.
The Parkonomics view
Equity is the money that believes in the project. In parking, that belief increasingly depends on what else the structure can be, a mobility hub, a charging depot, a future building, not only how many cars it can hold today.
Related terms: Capitalization Rate, Net Operating Income, Debt Service Coverage Ratio, Municipal Bonds, Pro Forma, Financial Feasibility Study