Charter Hall collects $203.75m from 10 car dealerships

Big Rock Toyota in Balcatta, north of Perth.

Charter Hall has sold 10 car dealerships, winding down two Direct Automotive funds approaching maturity.

Nine are trading off-market to AP Eagers (APE) – the occupier – which as part of its leaseback agreements had first and last right of refusal before the landlord could offer them elsewhere.

The 10th property – in Sydney’s Liverpool – has just collected $22.5 million from a Melbourne investor.

The Liverpool investment has just sold for $22.5 million.

Following these disposals, Charter Hall holds one asset, in Queensland’s Hillcrest, on behalf of Direct Automotive Trust No 2 (DAT2).

The funds were set to expire in 2021 and 2022 respectively.

South Morang Toyota was the only Melbourne dealership in the Direct Automotive trusts.

Funds during COVID

Direct Automotive Trust and DAT2 properties were leased to APE, which acquired Automotive Holdings Group (AHG) in late 2019.

During the COVID lockdown, the funds and occupier agreed to defer half the rent (this has either been repaid or is scheduled to be, and has not affected distribution).

Charter Hall also decided to sell the freeholds ahead of liquidity dates.

Ironically, the tenant then found $225m (specifically, $175m from Toyota Financial Services with the balance from Volkswagen Financial Services), allowing it to buy nine dealerships in two tranches over eight weeks from September.

In an ASX statement APE managing director Martin Ward justified that the buy-backs would reduce the company’s annual and ongoing occupancy cost. The prices were consistent with valuations undertaken during the pandemic.

Sell down to date

The pair have just traded a Castle Hill asset – spreading 4.3 hectares, with yards for Nissan, Holden and Hyundai – for $76.25m. Charter Hall paid $65.5m for that property in 2015 with a 12 year leaseback (story continues below)

Last quarter they agreed to exchange eight dealership freeholds for $105m:

  • Zupps Mount Gravatt, Queensland (several investments, occupied by Kia, Mitsubishi, Suzuki, Peugeot and Subaru);
  • Big Rock Toyota Balcatta, Western Australia;
  • South Morang Toyota, Victoria, and
  • Sutherland Mazda, Kirrawee, New South Wales (which cost $24.3m five years ago and is exchanging for $29.5m).

Liverpool dealership collects $22.5m

The two year old Mitsubishi Liverpool asset at 375-377 Hume Highway is the latest property to sell – the price reflecting a 4.66 per cent capitalisation rate.

APE has 12 years left on the rental agreement.

Ten first round offers came in, Stonebridge Property Group director Philip Gartland said.

“The weight of demand has created a perfect environment for investor demand for high quality assets on long lease terms to strong tenant covenants,” according to the executive.

A Melbourne investor has acquired the Mitsubishi Liverpool site.

“Private investors and syndicates are desperate for high quality, modern income producing assets particularly those with outstanding land fundamentals, but stock levels are at all-time lows.

“Seventeen buyers requested contracts…very strong numbers that resulted in attractive pricing and an unconditional exchange”.

Melbourne colleague Justin Dowers added the buyer landscape “is changing quickly as investors are broadening their mandates in order to secure stock”.

The Liverpool dealership has three street frontages.

“The cost of debt has never been lower providing investors with healthy arbitrage yields on income producing investments,” he said.

“The profile of buyer group was surprisingly diverse, from private investors, commercial office investors through to syndicators.

“Enquiry from Melbourne based private investors has also exploded over the past few weeks as they emerge from the frustration of lockdown, with this putting additional pressure on pricing for quality assets”.

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Marc Pallisco

A former property analyst and journalist, Marc is the publisher of realestatesource.com.au.

Marc Pallisco