Dilawri looks to REIT to accelerate consolidation

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Canada’s largest automobile dealership group has formed a growth-oriented real estate investment trust (REIT) that will focus on owning and acquiring dealerships across the country and potentially in the U.S.

Called the Automotive Properties Real Estate Investment Trust, Dilawri Automotive Group says it has obtained a preliminary prospectus for an initial public offering. The plan, according to documents filed on behalf of the REIT, is to raise $75 million through the issuance of 7.5 million units at $10 per unit.

The expected yield was posted at 7.50 to 8.0 per cent per annum.

A release from early June notes that TD Securities Inc. and Canaccord Genuity Corp. are the co-lead underwriters and joint bookrunners in the offering.

Dilawri is placing 26 properties in the trust representing approximately 958,000 square feet of gross leasable area centred in the Greater Vancouver Area, Calgary, Regina and the Greater Toronto Area.

The company called these “high-quality properties in strategic markets” in a roadshow presentation filed online.

They include stores like Porsche Centre Vancouver, valued in a separate report from Cushman and Wakefield at $24.72 million; Calgary BMW valued at $23.79 million; and Markham Honda valued at $24.42 million.

The combined portfolio value was listed at $343.39 million.

“Management believes the REIT will represent a unique alternative for automotive dealership operators considering a sale or recapitalization of their business, as the REIT will be the only publically listed vehicle in Canada exclusively focused on automotive dealership properties,” the company says in a regulatory filing.

The Canadian auto retail industry has seen a strong rise in ownership consolidation over the past decade. That trend accelerated following the economic crises in 2009 as falling revenues, OEM uncertainty and a lack of clear succession plans forced many from the business.

According to figures from DesRosiers Automotive Consultants, the number of owners with five or more dealerships grew 24 per cent between 2009 and 2013. Single point operators own roughly 50 per cent of the country’s approximately 3,400 franchise car dealerships. The number of owners with two to four stores sits at 15 per cent while those with five or more now tops 35 per cent.

Dilawri currently operates 57 dealerships across the country. It posted combined revenues of approximately $1.6 billion in 2014.

Automotive Properties REIT Dealerships
B.C. Locations:
Porsche Centre Vancouver (Vancouver)
Audi Sales Downtown Vancouver (Vancouver)
Infiniti Vancouver (Vancouver)
North Vancouver Nissan Infiniti (North Vancouver)
Burrard Acura (Vancouver)
Langley Acura (Langley)

Alberta Locations:

Hyundai Gallery (Calgary)
Calgary Honda (Calgary)
Distinctive Collection (Calgary)
Calgary BMW (Calgary)

Saskatchewan Locations:
Regina Honda (Regina)
Regina Hyundai (Regina)
Honda Used Car and Regina Collision Centre (Regina)
Dilawri Acura (Regina)
Dilawri BMW (Regina)
Triple 7 Chrysler (Regina)
Dilawri Nissan Infiniti (Regina)
Dilawri Mitsubishi (Regina)

Ontario Locations:
Dixie Auto Mall (Mississauga)
Oakville Honda (Oakville)
Meadowvale Honda (Mississauga)
Frost Chevrolet Buick GMC Cadillac (Brampton)
Bolton Toyota (Bolton)
Markham Honda and Ford (Markham)
Agincourt Mazda (Toronto)
Markham Acura (Markham)