The views expressed below are those of Anchor Capital Advisors, LLC (‘‘Anchor’’) as of the date written and are subject to change at any time. They are based on our proprietary research of the stated company and the following is a summary of the primary factors that support our beliefs and rationale for investing in the company. Please see additional disclosures at the end of this publication.
SP Plus Corporation is a leading provider of outsourced parking facility management, with over 2000 parking locations, and parking lots in 63 airports.[i] The company also owns Bags, which provides remote check in services for airports, cruises, hotels, and resorts.[ii]
We believe SP Plus provides value to parking lot owners allowing them to have a high retention rate, with low employee turnover.[iii] They are one of two large national players with clear economies of scale.[iv] It is our opinion that the company sells for materially less than what it would be sold for in the private markets. Due to factors related to the COVID-19 pandemic, we saw the opportunity to buy what we consider to be a double-digit bottom line long-term grower at what we believe to be a discount.
Confirmation through research
Property managers/owners view parking as a profit generator, and is a reason why they value SP Plus’ efficiency, service orientation, etc.[v] Parking is often the second-largest revenue generator for a property, and the first, as well as last, customer experience.[vi] SP Plus takes care of the hiring, training, supervising, marketing, budgeting, monthly pricing analysis, and more.[vii] A main differentiator for SP Plus is that they have a Standard University. This leads to industry lows in employee turnover, as well as industry-leading customer service, client retention, and safety.[viii] Clients include the Four Seasons, Brookfield Properties, Logan Airport, and Yankee Stadium.[ix] Thanks to the value they provide their clients, the company has consistently had customer retention of over 90% for the last 2 decades.[x] On the Bags side, the company has had several marquee cross-sells including Logan Airport and the New Orleans airport.[xi] Further, the company is sustained off 90% management contracts, which prevents them from being impacted by the volume of parking.[xii] In past recessions, the company has seen revenue decline less than 10%.[xiii] Due to COVID-19, there has been an opportunity to invest in what we believe is normally a very recession resilient business at a discount. SP Plus, in our view, sells for a material discount to private market values of these businesses when looking at past transactions over the last 20 years.[xiv]
We do not believe the market is assigning fair value to the business, considering the retention rates of customers, the scale of the business, the recession resilience, the ability to grow double digits earnings outside of this current recession, and the private market transaction value of peers over the last 20 years.