Closed Auto Dealerships Offer Small-Cap Redux Opportunities
June 1, 2011
Dealership downsizing and brand elimination by automakers have dumped a couple thousand or so vacated former car lots on real estate markets across the country over the past couple-three years. And savvy real estate investors and users have been jumping on many solid opportunities to buy and renovate the sites at attractive prices - with purchase costs often between $1 million and $3 million.
Logically the most popular new use is retail space, including fast and not-so-fast food service. Indeed as we'll see, one attractive characteristic of dealership sites in many cases is that they're about the only ones along high-traffic commercial strips that are deep enough to accommodate certain users - grocers, pharmacies "formula" restaurants and the like.
Not only do many of these properties offer profitable redevelopment/re-use opportunities to savvy-small-cap players, they also generate property and sales taxes as well as new jobs at temporarily unproductive sites.
The Milwaukee area alone is seeing several former dealership sites accommodating stable employers (see related story). In western suburb Wauwatosa, a Pick ‘n Save grocery store now graces the former Renner Auto Dealership site - right next door to Russ Darrow Kia. The site proved deep enough to accommodate the first such store along the Mayfair corridor.
A few blocks to the north along Mayfair, near the regional Mayfair Mall, a new 34,000-foot Dave & Busters restaurant now sits on the former Ewald dealership.
Even for-profit and non-profit thrift shop operators have acquired closed dealership sites for conversion to new locations. For example in Hayward, Cal., regional for-profit thrift store operator Eco Thrift Corp. bought the former Hayward Mazda site and its 41,542-square-foot facility along Mission Boulevard from longtime property owner Robert J. Rao for $2,525,000.
The Novato-based company, which specializes in recyclable, locally procured items it typically buys at charity fundraisers, relocated its existing Hayward store to the larger and higher-profile site.
Likewise, The Salvation Army last fall bought the 33,000-square-foot former Kia dealership along Lafayette Road in Portsmouth, NH - although it appears the site ultimately became a thrift store operated by Goodwill Industries of Northern New England.
More typical of the dealership redevelopment projects are multi-tenant retail centers combining eateries, shops and services businesses - in many cases utilizing some components of existing structures along with additional construction.
For example in southern Cleveland, local developer Stamford Properties is finishing up its roughly 23,000-square-foot Liberty Commons center on the five-acre site of the former Liberty Lincoln-Mercury dealership along Rockside Road.
The $4 million development, in a suburban commercial district just off I-77, features eateries Panera Bread, DiBella's Old Fashioned Submarines and Melt Bar & Grilled, along with Verizon and Key Bank. The development and brokerage services firm headed by principals Bob Dickinson and David Breuning bought the property last summer for $2.5 million.
In some submarkets, of course, more ritzy redevelopments make sense. Out on Long Island, for example, mortgage bankers at NorthMarq Capital just arranged $7.7 million in construction and permanent financing allowing their unnamed developer client to expand the 22,000-square-foot former Meadowbrook Ford dealership in Syosset into a 30,000-foot high-end retail project dubbed Jericho Crossing Shopping Center.
But even though retail/restaurant is often the most viable use for former dealership properties, they can certainly serve other purposes as well.
For instance Dix Communications, parent of The Record Publishing Co., publisher of the daily Record Courier and various weeklies in northeast Ohio, bought a 24,852-square-foot former Bruce Caudill Mazda dealership in Kent last summer for $840,000.
The intent is to cut overhead by consolidating operations located in the communities of Stow and Ravenna to the to-be-refurbished facility in Kent - a city where the company had previously maintained an office it closed three years ago. The plan also includes relocating Dix's web and IT operations to the Kent property.
The publishing company is now seeking a modest tax abatement from the city to help cover its planned $3 million overall investment into the property on W. Main Street.
Meanwhile in Bridgeport, Conn., an affiliate of the DeMattia Companies - which is involved in real estate, automotive businesses and other pursuits - just bought the 1.5-acre former Key Lincoln Mercury dealership and is configuring its roughly 23,000 square feet of existing structures for various uses. DeMattia will use some of the warehouse-type space for storage, and aims to lease out showroom and service facilities.
And in Alcoa, Tenn., Amerco Real Estate Co. just bought the 83,600-square-foot former Neill Sanddler Ford Lincoln Mercury dealership for $2.58 million. Phoenix-based Amerco, which serves the U-Haul truck rental network's real estate needs, plans to reconfigure the property as both a self-storage center and a van rental station.
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