THE ULAANBAATAR PARKING FUND

An opportunity to gain exposure to market with huge potential through equity investment in a car parking fund focussed on the heart of Ulaanbaatar.

Rapid growth in car ownership!

With over 250,000 vehicles currently registered in Ulaanbaatar alone and fewer than 85,000 estimated existing underground parking spaces there is considerable demand for underground heated parking spaces. This demand phenomenon is further exasperated by the city’s new initiatives against street parking in order to ease congestion. In 2013, the city has started towing operations throughout the city. This year, 2015, it will further reduce street parking and start putting in place payment systems for the remaining formal parking spots thus continuing to drive up demand. A lack of urban planning foresight coupled with a high underground construction cost has meant that very few buildings in the city centre have sufficient parking spaces to meet demand, this is particularly true in the large scale office buildings of the city which have between 40 and 80 parking spaces to cater to over 3,000 workers. The same is true to a certain extent in residential buildings, particularly the higher end residences where there is typically a maximum of one underground parking space per apartment while most households would have 2 to 3 cars. The challenge is exacerbated by the fact the city centre is still made up of mostly older apartments built during the socialist period (which ended in 1991) and were not built with any underground parking structures.

Negative Temperatures for 8 months of the year!

Parking is an often overlooked element within the Mongolian real estate investment market and yet it is one which has considerable potential. Mongolians, like in most rapidly developing nations, are keen to display their wealth and thus buy cars that are large and ostentatious. Those investments must be protected. With frigid winter conditions in Mongolia for most of the year (7 months of the year at negative temperatures), it is essential that cars spend the night in a warm garage so that the engine block does not freeze. The majority of new buildings in Ulaanbaatar have between 1 and 2 floors of underground heated open plan parking spaces. Closed garages are extremely rare as they are not space efficient but a number of owners are adding cages “post-construction” so that they can rent the spaces as storage units. Finally, while a couple of developments have started to build above ground parking spaces integrated within mixed use buildings, there is only dedicated above ground parking structure in the city (Encanto Town) but those spaces are reserved for owners of the residential spaces within the same development and not open to the public. Finally, there are no city wide operators or investors of heated parking spaces.

A market gap of 348,000 garages in 2020!

Since Ulaanbaatar is a city built along concentric circle principles of urban planning, the heart of the city is not only the focus of political power, it is also the CBD and the retail centre. This means that UB is a city of commuters with high density usage at its heart. Furthermore, since it was designed by the urban planners of the Soviet Union, it follows a very rigid plan focused on large traffic axes and poor walkability, this has been further complicated with poor enforcement of urban planning principles, the city has become poorly planned and complex to navigate. In addition to those elements, the public transport infrastructure is poor, not adapted to current needs and unreliable. All of those elements coupled together have meant that car ownership is high, traffic jams to reach the centre of UB omnipresent and wild parking common. It is furthermore often so difficult for the middle class Mongolians to acquire a parking space both at home as well as at work that it is common for family members to act as drivers dropping people off in the centre before returning the car to the home garage.

The majority of the 85,000 estimated underground garage spaces are located in the suburbs of the city centre since that is where the majority of new constructions are located. We estimate the number of garage spaces within the core area of the city at 30,000 and approximately 10% to 15% of those are transacted annually amounting to approximately 2,500 to 3,000 potential purchases per year. We furthermore estimate that the number of new constructions add between 750 and 1,500 new underground heated parking spaces per annum.

VIDEOS

M.A.D. has successfully created a number of documentary videos focused on different aspects of the Mongolian property marketplace so that Investors can now have a clear understanding of the opportunities.

UB Park – Mongolia’s First Parking Focused Investment Fund

The Mongolian Real Estate Market Overview


Exploring Ulaanbaatar’s Urban Heritage

An Exploration of the capital city of Mongolia


The current state of Mongolia’s Infrastructure.

THE OPPORTUNITY

Opportunity exists to leverage the high demand for parking spaces along with the low supply to launch the country’s first parking focused investment fund.

  • The primary concept would be to raise equity capital from a wide variety of sources with a low minimum capital investment of US$10,000, the investment would be based offshore.
  • It is proposed that the private close-ended fund be established in co-operation with M.A.D. Investment Solutions to maximise this untapped potential.
  • The fund will be focused on the purchase of underground heated parking spaces which can be resold throughout the life of the fund once sufficient capital growth has been achieved and can be rented in the mean time at an above market yield of 10 to 15%.
  • Since the market is still relatively small, it is expected that the total investment should not exceed 2 Million USD in its initial stages so as to maximise return on investment and minimise the impact on market dynamics.
  • The equity capital should be raised over a period of 18 months through 3 capital events to allow for conservative capital deployment. While not being deployed, the capital will be held in a high interest USD account in Mongolia (6.5% APR).

Please Contact us for further information