Following a strong performance in 2015, the Brookfield Property Partners-owned Capital Automotive Real Estate Services is looking to spend some big money in 2016.
“Our goal is employ US$300 million this year,” explains Willie Beck, senior V-P and director of acquisitions at CARS. “Whether that is all in the U.S. or a combination of the US and Canada remains to be seen. We think we could be an attractive source of capital for interested dealers.”
The U.S.-based firm says it was the first company to solely focus on providing sale-lease back capital to the automotive retail industry. And with the concept gaining additional traction here thanks to the early success of the Dilawri-backed Automotive Properties Real Estate Investment Trust, Beck says this year should be a strong one for CARS.
Capital Automotive completed US$206 million in real estate investments last year up from USD$115 million the year before.
According to a February report from the company, it increased its portfolio’s value to US$4.5 billion with over 300 properties. While its footprint is spread across 36 U.S. states, its foray into Canada has been staggered and relatively minimal by comparison.
The company had divested its previous Canadian real estate holdings back in 2011 but returned to the market in 2014 after inking a deal with the Ontario-based Phaeton Automotive Group.
Beck notes another signal of their north-of-the-border intentions was the recent renewal of a consulting relationship with Seguin Advisory Services. Also helping boost the business here is the 2014 deal that saw the Toronto and New York-based Brookfield Property Partners acquire CARS for US$4.3 billion.
In terms of targets, CARS has some specifics in mind.
“We are looking for larger, multi-franchise, multi-location dealer groups that want to continue to expand. That model served us very well through the U.S. downturn in 2009 where dealers that weren’t dependent on one location or one brand seemed to be able to survive the downturn better than smaller competitors,” Beck says.
“We would look at group that had two or three stores if their ultimate goal was to grow. But really, a single point dealer, particularly in a smaller market would not be our primary target.”
The key for dealers, he notes, is to know exactly what they are trying to achieve and whether the sale leaseback program would be appropriate based on their goals.
While bank financing might be appropriate depending on the objectives, the type of capital CARS can provide might make more sense for succession planning, land acquisition, ground-up construction funding, add points, relocating or even to help comply with manufacturer image requirements and facility expansions.