Net operating income (NOI) is a property’s revenue minus its operating expenses, before debt service, income taxes, depreciation and major capital spending. For a parking facility, it is the income the operation produces from parking and related services.
NOI is the number investors and lenders care about most. Divided by a cap rate, it sets the facility’s value; compared with loan payments, it sets how much can be borrowed. See debt service coverage ratio.
Calculating parking NOI
- Revenue. Transient, monthly, event, validation and reservation income, plus EV charging, advertising, cellular leases and retail rents.
- Less operating expenses. Labor, management fees, utilities, insurance, property taxes, repairs, technology fees, credit card fees and supplies. See operating expenses.
- Not deducted. Debt service, depreciation, income taxes and major capital projects.
Common adjustments
Buyers and lenders often deduct an annual capital reserve for structural repair and equipment replacement, even though it is not a true operating expense. For parking structures, skipping that reserve overstates sustainable NOI.
The Parkonomics view
NOI is where the operation meets the balance sheet. A dollar of lasting NOI is worth many dollars of value, so it deserves an honest reserve for the concrete.
Related terms: Cap Rate, Debt Service Coverage Ratio, Operating Expenses, Pro Forma, Return on Investment
Further reading: The Underwriting Frame