August 28, 2014 — Capital Automotive LP, a power broker in the dealership acquisition market, announced today it has been sold to Brookfield Property Partners for $4.283 billion.
Based in McLean, VA, Capital Automotive has more than $3.5 billion invested in more than 450 dealerships spread across 37 states. The company provides financing to dealerships looking to make acquisitions or complete facility upgrades. The management team led by Co-Founder and Chairman Thomas Eckert and President and COO Jay Ferriero is staying with the company.
It was founded 16 years ago by two Washington D.C.-area car dealers, Robert Rosenthal and John Pohanka along with Eckert. The idea was to use the land their facilities sat on to generate cash. The model was a real estate insurance trust (REIT) in which Capital essentially buys the real estate from the dealer. Rosenthal and Pohanka took the company public in early 1998. The model exploded and within seven years, they exited the business when real estate firm DRA Advisors took it private in what amounted to a $3.5 billion deal. DRA exits the deal making nearly $800 million with its investment.
In the last nine years, Capital has added more than 100 properties and $1 billion to its portfolio.
According to a company press release and Reuters, the deal will close sometime in the fourth quarter pending approval from existing lenders for a change in ownership control, which Capital will solicit following Labor Day. The acquisition is being funded by debt facilities of $400 million along with the assumption of Capital’s debt.
Capital also will issue $300 million of asset-backed securities along with $100 million of new loans under its second-lien credit facility. The company’s current credit facility, which includes a $1.5 billion, six-year term loan B and a $325 million, seven-year second-lien term loan, is administered by Barclay’s.
This is the latest deal in what has been a record breaking year for vendor acquisitions in the automotive retail world with almost $23 billion billion in equity changing hands — and that’s not including ADP’s pending spinoff $700 million IPO of its $1.9 billion Dealer Services Group.
- Ally Financial led the way with a $12.04 billion IPO earlier this year.
- Brookfield Property Partners is acquiring Capital Automotive for $4.283 billion.
- Cars.com is being acquired by Gannett Co. in a deal valued at $2.5 billion.
- TPG acquired the Warranty Group for $1.5 billion
- KKR acquired Internet Brands (CarsDirect) for $1.1 billion.
- DealerTrack acquired Dealer.com for $987 million.
- TrueCar’s IPO was valued at about $880 million.
Another seven smaller transactions have occurred this year that amount to an estimated $600 million to $700 million.
- OneCommand’s $11 million purchase of CRM firm Higher Gear.
- Private Equity firm HPPG’s purchase of AutoAlert.
- Vista Equity’s majority stake in DealerSocket.
- AutoLoop buys Car Research.
- Reynolds and Reynolds acquired AddOnAuto, a firm that helps dealers sell accessories online.
- DealerTrack’s acquisition of ASR Pro.
- Search Optic’s acquisition of DigiGo.
Meanwhile, dealerships also are enjoying what may be a record breaking year for acquisitions according to data compiled by The Banks Report for the 2014 Mid-Year Dealership Buy-Sell Update.
Become a subscriber and get access to more in-depth analysis on the dealership buy-sell market — including the industry’s most comprehensive list of acquisitions going back to January 2013.
About The Banks Report:
Designed for top automotive executives, dealers, industry analysts and investors who want to cut through the noise and get an accurate picture of what’s going on in the Automotive Retail space, the Banks Report is an online source that provides subscribers with daily insight into the top news stories of the day.
The Banks Report was created by Cliff Banks, an award-winning journalist with more than 20 years in the automotive retail space. As an editor of two automotive-related media companies, he built a vast network of sources ranging from CEOs to service technicians at the dealership. There’s no one better at connecting the dots and putting the news into perspective.