RISK VALUATION

Purchasing a parking space involves some financial risk

Thorough due diligence and external advice is always recommended

RISK VALUATION

Purchasing a parking space involves some financial risk

Thorough due diligence and external advice is always recommended

What are the risks?

Purchasing one or more car parking spaces in CarParkFly is – like any other investment – associated with certain risk factors. The risk profile is similar to that of investing in other commercial properties, but it has some special elements to it since it is a new business concept introduced in an upcoming economy.

Purchasing one or more car parking spaces in CarParkFly is – like any other investment – associated with certain risk factors. The risk profile is similar to that of investing in other commercial properties, but it has some special elements to it since it is a new business concept introduced in an upcoming economy.

Concept

The absence of 1) secured indoor parking and 2) valet services along with the 3) extremely limited possibilities for long term parking, minimizes the risk of a low occupancy rate. This is however based on the assumption that the demand for the mentioned services is present and that the number of parking places in CarParkFly is not too high in relation to the demand.

There is also a risk that market is immature and/or so different in its nature from the airports we used to make our due diligence (ie. airports in Europe with +2 million passengers), that the concept itself might not be profitable.

Concept

The absence of 1) secured indoor parking and 2) valet services along with the 3) extremely limited possibilities for long term parking, minimizes the risk of a low occupancy rate. This is however based on the assumption that the demand for the mentioned services is present and that the number of parking places in CarParkFly is not too high in relation to the demand.

There is also a risk that market is immature and/or so different in its nature from the airports we used to make our due diligence (ie. airports in Europe with +2 million passengers), that the concept itself might not be profitable.

Competition

There are currently no secured indoor parking facilities at Split Airport. The possibilities for long term parking are extremely limited. The only real competitor proposes uncovered outdoor parking at a price of €35,00 – 39,00 per week with a very limited capacity of only 30 parking places and a minimum of security.

If the passenger numbers continue to rise at the rate they have been rising the last 5 – 10 years, it is not unthinkable that other companies would purchase land plots with better locations closer to the airport terminal and propose services similar to those of CarParkFly. This will be challenging as most of the land next to the airport is zoned for other purposes (mainly agriculture), but it would not be impossible. Since valet parking as a concept currently is absent in all of Croatia, though it would make more sense to target other airports such as Zagreb or Dubrovnik where they would be entirely free of competition.

There are approximately 1000 free and paid parking places at Split Airport, which will most probably all be paid once the air traffic is normalized. These parking spaces are very close (within walking distance) to the airport terminal and makes any competition for short-term parking pointless. The parking spaces are all outdoors without any security or valet services, and are not suited for long term parking, which leaves a gap in the market for the future services of CarParkFly.

Competition

There are currently no secured indoor parking facilities at Split Airport. The possibilities for long term parking are extremely limited. The only real competitor proposes uncovered outdoor parking at a price of €35,00 – 39,00 per week with a very limited capacity of only 30 parking places and a minimum of security.

If the passenger numbers continue to rise at the rate they have been rising the last 5 – 10 years, it is not unthinkable that other companies would purchase land plots with better locations closer to the airport terminal and propose services similar to those of CarParkFly. This will be challenging as most of the land next to the airport is zoned for other purposes (mainly agriculture), but it would not be impossible. Since valet parking as a concept currently is absent in all of Croatia, though it would make more sense to target other airports such as Zagreb or Dubrovnik where they would be entirely free of competition.

There are approximately 1000 free and paid parking places at Split Airport, which will most probably all be paid once the air traffic is normalized. These parking spaces are very close (within walking distance) to the airport terminal and makes any competition for short-term parking pointless. The parking spaces are all outdoors without any security or valet services, and are not suited for long term parking, which leaves a gap in the market for the future services of CarParkFly.

Changes in flight traffic

During the coronavirus pandemic, airports all over Europe have seen a decline of 60 – 95% in passenger numbers. Declines of this magnitude will certainly have a negative effect on the operations of the parking facility. Even though major lockdowns and severe airport restrictions as seen under the recent pandemic hopefully will be rare in the future, we must expect air travel to be subject to comparable restrictions in case of similar events.

We expect air traffic to be normalized by the time the construction of CarParkFly is completed. The effects of the pandemic should in our opinion not have any negative impact on the operations of the parking facility.

Changes in flight traffic

During the coronavirus pandemic, airports all over Europe have seen a decline of 60 – 95% in passenger numbers. Declines of this magnitude will certainly have a negative effect on the operations of the parking facility. Even though major lockdowns and severe airport restrictions as seen under the recent pandemic hopefully will be rare in the future, we must expect air travel to be subject to comparable restrictions in case of similar events.

We expect air traffic to be normalized by the time the construction of CarParkFly is completed. The effects of the pandemic should in our opinion not have any negative impact on the operations of the parking facility.

Covid-19 and other pandemics

Covid-19 is an important risk factor as it can have a direct influence on air traffic and passenger numbers, and in turn on the rentals in the parking facility. Rising infection numbers and airport lockdowns are areas of concern.

New pandemics with other viruses or other types of pathogens, does also pose a risk to the parking facility if they affect airport traffic, tourism or economic activity in general.

Covid-19 and other pandemics

Covid-19 is an important risk factor as it can have a direct influence on air traffic and passenger numbers, and in turn on the rentals in the parking facility. Rising infection numbers and airport lockdowns are areas of concern.

New pandemics with other viruses or other types of pathogens, does also pose a risk to the parking facility if they affect airport traffic, tourism or economic activity in general.

Changes in the local area

Changes in local infrastructure such as roads, railroads, the airport itself, etc. presents a risk if it affects the transportation time between the airport and the parking facility.

Changes of the zoning plans next to the airport (the land next the airport is currently mainly agricultural land) could make it easier for competitors to purchase buildable land closer to the airport terminal. This could however also work the other way around; restrictions on the land in the vicinity of the airport could make it almost impossible for competitors to purchase building land close to the airport.

Changes in the local area

Changes in local infrastructure such as roads, railroads, the airport itself, etc. presents a risk if it affects the transportation time between the airport and the parking facility.

Changes of the zoning plans next to the airport (the land next the airport is currently mainly agricultural land) could make it easier for competitors to purchase buildable land closer to the airport terminal. This could however also work the other way around; restrictions on the land in the vicinity of the airport could make it almost impossible for competitors to purchase building land close to the airport.

Real estate prices

Fluctuations in real estate prices can affect the potential sales value of the parking spaces. If the prices fall across the entire country, this could affect the sales value negatively. The same could happen with a negative trend in the local real estate prices.

A market crash could also alter the sales value considerably. A crash could be caused by external factors (as it was the case in 2008), but also be a direct consequence of the fact that real estate prices have been rising in Croatia since 2017.

Real estate prices

Fluctuations in real estate prices can affect the potential sales value of the parking spaces. If the prices fall across the entire country, this could affect the sales value negatively. The same could happen with a negative trend in the local real estate prices.

A market crash could also alter the sales value considerably. A crash could be caused by external factors (as it was the case in 2008), but also be a direct consequence of the fact that real estate prices have been rising in Croatia since 2017.

Demography

The declining population in Split-Dalmatia and Croatia as a whole is a risk factor as it diminishes the general economic activity in the region which in turn indirectly can affect the potential number of end users in the parking facility.

Furthermore a large portion of Croatia’s educated and qualified working age population choose to work abroad as salaries in many foreign countries are higher than in Croatia, but also because the opportunities abroad are much greater than in their home country. This tendency can also have a negative effect on the Croatian economy as a whole and indirectly on the potential number of end users in the parking facility.

Demography

The declining population in Split-Dalmatia and Croatia as a whole is a risk factor as it diminishes the general economic activity in the region which in turn indirectly can affect the potential number of end users in the parking facility.

Furthermore a large portion of Croatia’s educated and qualified working age population choose to work abroad as salaries in many foreign countries are higher than in Croatia, but also because the opportunities abroad are much greater than in their home country. This tendency can also have a negative effect on the Croatian economy as a whole and indirectly on the potential number of end users in the parking facility.

Economy

Even though Croatia is experiencing unprecedented growth and the economic outlook is better than ever, it is impossible to know what will happen in the future. In some areas the country is still behind the EU average, which indicates that there is room for growth, but also improvement and change.

A decline in the overall economy will almost certainly influence the number of rentals in the parking facility. This will also be the case if the local economy declines.

Economy

Even though Croatia is experiencing unprecedented growth and the economic outlook is better than ever, it is impossible to know what will happen in the future. In some areas the country is still behind the EU average, which indicates that there is room for growth, but also improvement and change.

A decline in the overall economy will almost certainly influence the number of rentals in the parking facility. This will also be the case if the local economy declines.

Natural disasters

The only type of natural disaster that poses a real risk is earthquakes, which occur above average, but not excessively often. The most recent earthquake was a magnitude 6.4 earthquake that struck Croatia at midday on 29 December 2020. Since 1950 a total of 9 people have died by direct consequences of earthquakes in the country.

Even though the architects and engineers working on CarParkFly follow all the rules, regulations and standards for construction in Croatia, an earthquake has the potential to destroy the parking facility entirely. The risk of damages to the parking facility following an earthquake are considered low and the entire facility will be covered by mandatory insurance.

Natural disasters

The only type of natural disaster that poses a real risk is earthquakes, which occur above average, but not excessively often. The most recent earthquake was a magnitude 6.4 earthquake that struck Croatia at midday on 29 December 2020. Since 1950 a total of 9 people have died by direct consequences of earthquakes in the country.

Even though the architects and engineers working on CarParkFly follow all the rules, regulations and standards for construction in Croatia, an earthquake has the potential to destroy the parking facility entirely. The risk of damages to the parking facility following an earthquake are considered low and the entire facility will be covered by mandatory insurance.

Other factors

The purpose of this section is to cover the most important and most probable risks associated with the purchase of a parking space in CarParkFly. Please note that the risks mentioned here are not an extensive list and we highly recommend that you carry out your own due diligence and seek external advice before purchasing a parking space in the project.

Other factors that could have a negative impact on the operations of the parking facility include political changes, force majeure, etc. These factors are considered low risk and will not be described further here.

Other factors

The purpose of this section is to cover the most important and most probable risks associated with the purchase of a parking space in CarParkFly. Please note that the risks mentioned here is not an extensive list and we highly recommend that you carry out your own due diligence and seek external advice before purchasing a parking space in the project.

Other factors that could have a negative impact on the operations of the parking facility include political changes, force majeure, etc. These factors are considered low risk and will not be described further here.

Summary

The project definitely has some drawbacks. The most important are 1) the distance from the subject site to the airport terminal which can give competitors an advantage, and 2) the fact that valet parking in airports does not have any prior proof of concept in Croatia. A third important risk is the planned number of parking spaces which might be too high in relation to the demand. If this is the case it could severely affect the profitability of the parking space rentals.

If you are purchasing one or more parking spaces as a long term investment, you should carefully take all risk factors into consideration. We also recommend that you do your own due diligence on our project as well as the market in general, and that you seek professional, independent investment advice.

Summary

The project definitely has some drawbacks. The most important are 1) the distance from the subject site to the airport terminal which can give competitors an advantage, and 2) the fact that valet parking in airports does not have any prior proof of concept in Croatia. A third important risk is the planned number of parking spaces (540) which might be too high in relation to the demand. If this is the case it could severely affect the profitability of the parking space rentals.

If you are purchasing one or more parking spaces as a long term investment, you should carefully take all risk factors into consideration. We also recommend that you do your own due diligence on our project as well as the market in general, and that you seek professional, independent investment advice.

Further information

Fill out the contact form below to get in contact with us.