An interview with Willie Beck, SVP, Capital Automotive Real Estate Services, Inc.
Capital Automotive Real Estate Services Inc. had a good 2015. CARS, as it usually goes by, isn’t becoming complacent, however. This year the McLean, Virginia-based company will look for more international business and explore non-automotive real opportunities, CARS SVP Willie Beck tells Automotive Buy Sell Report.
CARS already does business in Canada, and it looks to do more deals there this year, says Beck. The legal and automotive environment in Canada is very similar to the U.S., he says, and consolidation is occurring there, as well.
Willie Beck of Capital Automotive
“It provides a logical extension for our core business — the acquisition of automotive properties which are then long-term leased to multi-franchise, multi-dealership groups,” he says.
The concept of sale/leaseback isn’t as advanced in Canada as in the U.S., says Beck, but that is changing fast. Already, CARS has a direct competitor in Canada, Automotive Properties REIT. It owns properties in six urban areas in Canada and is growing.
CARS will have help competing in Canada; it just announced it has renewed its consulting relationship with Seguin Advisory Services, an independent Canadian auto retail advisory.
Chuck Seguin, an auto industry veteran, worked for many years as a Chartered Accountant for PWC, says Beck. His advisory service is focused on helping Canadian dealerships and groups navigate strategic issues such as M&A and succession.
This year, CARS will be looking for other international business, as well. It makes sense – in late 2014 CARS was acquired by Brookfield Property Partners. Based in Toronto and New York, Brookfield has operations in more than 30 countries.
“They have challenged us to come up with other international markets that could be important to us,” says Beck.
CARS tends to find a “significant launch transaction” in a country to build its business around, and likely would enter consulting arrangements with seasoned executives to help generate new business opportunities in other markets, says Beck.
Markets that are similar to the U.S. are good bets for expansion. For example, Australia “could be receptive to our program,” says Beck.
Industries that are similar to the auto dealership real estate sector are also good bets for expansion for CARS, it turns out. In December Lazydays RV in Florida sold then leased back property to CARS in a $56 million transaction. CARS is now looking for other industries ripe for sale/leaseback.
“The RV industry like the car industry is consolidating,” says Beck. “Over the years, we have looked at what other complementary dealership types Capital Automotive could provide benefit to. We haven’t closed on any yet, but we have looked at other businesses like the heavy truck industry and agricultural industry.”
This year looks good
CARS business is not limited to sale/leaseback of existing property. It also acquires real estate simultaneously with a dealer’s franchise purchase, provides land acquisition and ground-up construction funding for add-points and relocations; and offers improvement financing for image programs, facility expansions, and similar projects.
In 2015, CARS made $206 million in real estate investments, up 79 percent compared to the previous year. It added seven new clients, the most since its first year in business, says Beck.
“That’s something we are very, very proud of,” he says.
Half of the current $4.6 billion portfolio is with publicly-traded dealership groups; half with privately-owned.
CARS expects consolidation to continue this year. In 2016 it aims for at least $300 million in investment with the ability to fund $500 million or more, says Beck.
He expects the automotive retail industry in North America to remain strong.
“The dealer business has been very, very good,” he says. “Our dealers’ profitability remains near all-time highs. We expect 2016 to be as good, or better.”
At some point sales growth may plateau, says Beck, perhaps even in 2016. But, “if sales ‘only’ hit 17.5 million again, it will tie the record,” he says.
