Part two of a seven part series.
GEEK EDITOR’S NOTE: Here is the second installment of a seven part series by former Administrative Law Officer for the City of Chicago and the author of Stick It To Your Ticket.
Mr. Zeiger, after spending 15 years neck deep in the machinations of parking enforcement for the city, seems like the perfect person to bring perspective to Chicago’s parking meter lease deal. And, if you haven’t seen it yet, take a moment to get up to speed and read part one of the series, “The Meter Lease Deal – A Daley Double Part 1.”
By Sheldon Zeiger, JD, CFP
The plot thickens, as Morgan Stanley Smith Barney enters stage left as the owner and lease holder of Chicago’s streets.
Where do I even begin.
What are two non-actionable words that describe Morgan Stanley’s corporate behavior in regard to this lease? The only word I can come up with is ASS-TOUNDING!
There are going to be Harvard MBA case studies done regarding how botched this deal was.
Morgan Stanley Smith Barney is a global financial services giant with over 45,000 employees representing over 120 nationalities, working in 600 offices in 33 countries with approximately $800 billion in assets under management.
Morgan Stanley Infrastructure Partners (MSIP) is an indirect wholly owned subsidiary of Morgan Stanley. MSIP is Morgan Stanley’s global investment fund dedicated to pursuing investments in infrastructure assets, and targeting investments that generate long-term, stable cash flows in sectors such as transportation, energy and utilities, social infrastructure and communications.
The fund currently owns 100% of the equity in the downtown Chicago municipal parking system. Morgan Stanley’s marketing literature maintains that infrastructure is now an important component of any asset allocation strategy; it offers portfolio diversification and the ability to invest in real assets with uncorrelated investment returns relative to other asset classes. Morgan Stanley announced on May 12, 2009 that it has successfully closed MSIP with $4.0 billion of equity commitments, exceeding the firm’s initial target of $2.5 billion.
Let’s put a couple of names and faces on MSIP. These are the professionals comprising the investment team who delegate the day-to-day managerial and administrative responsibilities of the fund. These individuals are the decision makers at MSIP. These are the men who in effect, control the streets of Chicago. Morgan Stanley’s investment team members are located in New York, London, Hong Kong and Beijing.
Sadek Wahba, is Chief Investment Officer and Global Head of Morgan Stanley. Prior to heading Morgan Stanley, Sadek was a Managing Director of Morgan Stanley & Co. responsible for project and structured financing in Global Capital Markets. Sadek is a graduate of Harvard University where he received his PhD in Economics, the London School of Economics where he obtained an MSC in Economics and the American University in Cairo where he obtained his BA in Economics.
Fred Pollock, is a Vice President and investment professional within Morgan Stanley. Prior to joining Morgan Stanley, Fred was an investment professional within Deutsche Bank’s infrastructure investment management business. Fred graduated summa cum laude with a Bachelor of Science degree in Finance and Economics from the University of Nevada and graduated magna cum laude with a JD from Harvard Law School.
After reading their resumes, I’m absolutely convinced of one thing and one thing only. That I couldn’t get into anyone of the schools that these gentlemen attended. Even though my resume is thin by comparison, I do have a few choice words for you both.
But first one question.
Have either one of you ever actually been to Chicago, other than to purchase our parking lots and execute this lease agreement?
These top executives are most likely stationed at Morgan Stanley’s home office in New York City.
Hey Sadek, Fred, maybe this little tidbit will help you fully understand how we feel in about the lease deal in Chicago. How would you like it if lets say hypothetically, Goldman Sachs and Mayor Bloomberg got together to lease all the meters in the five Burroughs of New York for 100 years or so?
Just to note, New York’s parking system is probably 5 times larger than Chicago’s. If we monetized the NYC meter system, what would be its fair market value? The question that keeps bobbling around in my head is whether Goldman Sachs would be willing to pay the city of New York more money for this cash flow, than mayor Bloomberg’s actual personal net worth? I believe that this is exactly the type of Public Private Partnership that would dramatically improve the quality of life for all New Yorkers. Especially, those who have personal drivers and work in the financial services industry.
Sadek, Fred. Do you appreciate the tremendous responsibility that you have, when you own and control the type of assets held by MSIP? I mean “assets that provide pubic goods and essential services in transportation, energy, utilities, communications and social infrastructure.” These guys buy public assets that you and I can’t live without.
In other words, they have our collective genitals in a vise.
I’m going to ask you nicely. I want to appeal to your logic.
It is at this moment that you need to dig deep and find your corporate social responsibility.
If there is any chance that this deal is going to work for the next 75 years, you had better consider the 2.9 million citizens of Chicago. You had also better consider the 1.4 million registered vehicle owners or this is going to get extremely ugly.
You should do this, if for no other reason than it’s in your own best interest to do so. This deal is a potential public relations nightmare. Your firm’s reputation is on the line and your investors’ rate of return depends on your wise decision making.
But so far I’ve been entirely unimpressed.
If this gentile approach doesn’t work for either of you, why don’t you just take a look-see at the Morgan Stanley website and your company’s code of ethics and business conduct?
On the site, Morgan Stanley maintains that global citizenship is a direct reflection of the firm’s core values. Under the responsible business practices section they claim that “We place critical importance on safeguarding our reputation and our relationship with clients and the community.”
In the Community section they write, “Morgan Stanley is committed to doing its share as a responsible corporation by improving the quality of life in the communities where our employees live and work.”
Yeah, right.
ABOUT THE AUTHOR: Sheldon Zeiger is an attorney and certified financial planner practicing in Chicago.
Zeiger worked as an attorney within Chicago’s parking enforcement program since its inception in September,1990. For 15 years he worked as a hearing officer with the Department of Revenue, Parking Enforcement Division and as an Administrative Law Officer with the Department of Administrative Hearings.
During his tenure with the city he adjudicated over 100,000 parking tickets in person and by mail.
He is also the author: Stick it to Your Ticket The Unofficial Guide to Beating Your Parking Ticket in Chicago
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Oh please. It’s these guys job to make money. This isn’t taking candy from a baby, it’s taking candy from a bunch of idiots who are throwing it at them. Blame Daley and the city council, not M-S.
I don’t think I’m going to be able to defend this installment like I defended the last one…
Morgan Stanley has done everything in its power to insulate itself from responsibility for the meter lease deal. They’ve established several surrogates including their management company LAZ Parking and their holding company Chicago Parking Meters LLC to camouflage their involvement. These organizations are Morgan Stanley’s hired help. Every screw up in the execution of this lease agreement was and is ultimately Morgan Stanley’s responsibility. While the Daley administration takes all the heat, not one word from Morgan Stanley Infrastructure Partners. Why shouldn’t the oragnization that will ultimately profit from the deal over the next 74 years have a duty to act reassonably. I understand that Morgan Stanley is a global financial services giant. I also understand that their job is to make money. However, when they own vital social infrastructure like the cash flow from parking on the streets of Chicago they should’nt be able to hide behind the Daley administration or their corporate structure. Those days are over. Regarding Chicago’s meter lease deal, it is Morgan Stanley’s reputation that is on the line.
It is only going to get more expensive as a former employee I happen to know that MS and LAZ plan to raise the rates every january of every year for the next 74 years.
yourmomma doesn’t seem to understand simple economics. The owner is interested in maximizing profit, not necessarily price. If they raise the rates too high, people will choose not to park there, and the company will lose revenue. Their objective is to find the sweet spot along the curve.
By the way, one potentially positive side effect I’m hoping to see is increased funding for public transit, as people don’t want to pay more and more exhortation parking rates. Sadly, that doesn’t seem to be happening just yet.
MS and LAZ can not raise rates. PERIOD. THE ONLY PARTY THAT CAN RAISE PARKING RATES IS THE CITY.
How difficult is that for people to understand? Yourmomma is both a liar (former employee, right) and ignorant (no clue how the deal works).
I’m not amazed at the stupidity, rather people’s willingness to demonstrate it.
Another point that bears mentioning here, which seems to be widely misunderstood, is that MS is NOT receiving the revenue from the meters. The infrastructure fund, which they manage, is. So the revenue goes into the fund (which is owned by investors, one of which could be you), and MS makes money through commissions and fees on people buying/selling the fund.
Since this stupidity started I’ve been avoiding the meters when possible by choosing destinations with free parking. The special case is right in front of my apartment building’s door, in which it has gotten easier to park when I (rarely) need to! It’s a case of making lemonade out of a batch of lemons. But the deal still sucks.
Does the government have a legal obligation to gain approval from citizens prior to the sale of public property to a private party? If so, is there some order of magnitude that triggers the obligation? Also, is there a specific mechanism for certifying approval, like a referendum.
Basically, can the government sell all public assets without approval from the citizens? If so, that seems very precarious.
Everyone complains about the rate hikes. If meter rates quadrupled, but the revenue remained in the public domain, that would be OK with me. I wonder why the city didn’t just raise rates to upgrade the system on their own, even hire a consultant with an incentive based contract, but to give away the asset in its entirety…I don’t understand.