Bankrupt Toyota store in Florida sells for $18.7 million
A federal bankruptcy court has approved the sale of a bankrupt Toyota dealership in St. Augustine, Fla., for $18.7 million.
The buyer, Michael Beaver, owner of Beaver Toyota in Santa Fe, N.M., will close on the sale in April, said Joe Luzinski, senior vice president of Development Specialists Inc. in Miami. The firm specializes in distressed business, loan workout and restructuring situations. It is headquartered in Chicago.
No other bids came close to Beaver's offer, Luzinski said.
Beaver's offer includes $10 million of goodwill value and other intangible assets such as customer lists and marketing materials, Luzinski said -- in other words, what dealers call "blue sky.''
"That was a very good offer," Luzinski said in an interview Friday with Automotive News. "If he were to bid $5 million, my suspicion would be there'd be a few other people who might say, 'Yeah for $5 million goodwill offer, I'm interested in bidding,' and we would have had an auction. But most people looked at it and said, '$10 million is a little too rich for me. I'll take a pass.'"
The court allowed dealership owner Howard Hubler to present a plan to continue to operate the dealership and repay creditors. But Beaver's offer provided better value for debt repayment, Luzinski said.
Beaver, Hubler and Toyota did not immediately return calls for comment on Friday.
On Oct. 24, 2012, Lighthouse Imports, which does business as St. Augustine Toyota-Scion, filed for Chapter 11 bankruptcy protection. A month later, Luzinski took over as chief restructuring officer of the dealership, he said.
The company listed $9.4 million in assets and $10 million to $50 million in liabilities in its filing.
Hubler bought the dealership in September 2007 for about $12 million, public records show. He spent another $16 million on renovations.
In late 2009, Hubler was faced with "a series of tumultuous events that became nearly impossible to overcome," according to the case management summary.
First the recession hit, slowing car sales for most of the auto industry.
Then there was "widespread" public concern about alleged "unintended acceleration" defects in specific Toyota brand vehicles, the summary said. The publicity hurt Hubler's sales, it said.
Next a potential equity partnership was unable to be completed and a tsunami devastated parts of Southeast Asia, interrupting the vehicle supply chain for many dealerships, according to the summary.
All of these events contributed to the dealership's inability to pay its debt of $23 million to World Omni Financial Corp.: $3 million for a capital loan, $7 million for floorplanning and $13 million for a mortgage. World Omni is part of JM Family Enterprises, which also owns the Southeast Toyota distributorship and its Southeast Toyota Finance captive finance arm.
"It's highly unusual for a Toyota dealership to end up in this kettle of fish so the fact that we're here indicates some highly unusual circumstances," Luzinski said. "At some point banks just want to get paid back though."
The key to the store's success going forward will come down to management, Luzinski said.
"I really think it is a managerial issue," Luzinski said. "Car guys have their own ways of doing things and whether [Beaver] wants to focus on selling more used cars or more fleet cars is his decision. But the dealership has been an underperformer compared to its peer groups and with the right touch the dealership can be a profitable operation."
St. Augustine Toyota-Scion is an updated store that meets Toyota's facility standards, so it does not require a lot of investment in store renovations, Luzinski said. But there could be "more dedicated marketing whether that's on network TV, cable TV or Internet driven," he said.
Luzinski added: "There's room for improvement by just managing the operation more efficiently without investing a lot of money."
PRESS RELEASE: DSI arranges sale of bankrupt Toyota dealership in Florida for $18.7 million
(March 22, 2012)--Miami, FL – Joseph J. Luzinski, senior vice president of Development Specialists Inc., (DSI) and Daniel J. Stermer, a consultant with the company, announced the court-approved sale of Toyota dealership Lighthouse Imports LLC, in St. Augustine, Fla.
DSI secured a stalking horse bid from Michael D. Beaver, owner of Beaver Toyota in Santa Fe, New Mexico. No other bids came close to the $18.7 million offer from Beaver, which includes $10 million of value for goodwill and other intangible assets such as customer lists, marketing materials, etc.
"The initial stalking horse bid was so good that no other parties exhibited interest in overbidding that offer," said Luzinski, who is the court appointed chief restructuring officer. Added Stermer: "This bidder hit the ball out of the park on the first swing in an effort to secure the purchase of the dealership."
Luzinski said he anticipates quickly preparing and filing a plan of reorganization that should provide a distribution to approved creditor claims. The purchase is expected to close in early April.
On Oct. 24, 2012 Lighthouse Imports filed a voluntary petition for Chapter 11 bankruptcy protection. The company listed $9.38 million in assets and $10 million to $50 million in liabilities.
Lighthouse, which does business as St. Augustine Toyota/Scion, owns a six-car showroom in St. Johns County, Fla., selling new Toyota and Scion cars and pre-owned vehicles. The business has continued to operate and serve customers uninterrupted during the Chapter 11 process.
The debtor acquired the dealership in September 2007 for approximately $12 million and spent another $16 million on its sales and service center. In late 2009, the debtor was faced with several financial setbacks as a result of the recession. The problems were further exacerbated by the tsunami in Japan that interrupted the supply chain for Toyota dealers, according to court documents.
In 2011, the debtor entered into a management agreement with Werner TSA LLC. Werner infused $1.2 million into the dealership in anticipation of creating a joint ownership, but that plan was rejected by the lender and the bankruptcy court removed Werner as the management company.
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Joseph J. Luzinski has managed the Miami, Fla. office for more than two decades. During this time, he has been involved with a number of significant engagements both within and outside of formal reorganizations. He has considerable experience in restructuring businesses in numerous roles as Chapter 11 Trustee, Chapter 7 Trustee, Chief Restructuring Officer, Chief Financial Officer, President, Director, Financial Advisor, Interim Manager, Receiver, Assignee for the Benefit of Creditors, Plan Agent, Liquidating Agent and Plan Trustee.
Daniel J. Stermer joined DSI in 2009, bringing with him more than 20 years of experience in the private and public sector. He served as an assistant attorney general for the Florida Department of Legal Affairs in the Economic Crimes Litigation Unit. He also has served as special assistant to the United States Attorney in the Southern District of New York assigned to the Organized Crime Unit and as an assistant district attorney with the Bronx County District Attorney's Office. He currently serves as receiver for numerous high-profile companies.
Development Specialists, Inc. (DSI):
DSI is a leading provider of management consulting and financial advisory services, including turnaround consulting, fiduciary roles, financial restructure, litigation support, wind-down oversight and forensic accounting services. Clients include business owners, corporate boards of directors, financial services institutions, secured lenders, bondholders, unsecured creditors and creditor committees. For more than 30 years, DSI has been guided by a single objective: Maximizing value for all stakeholders. With its highly skilled and diverse team of professionals, offices throughout the United States and in Europe, and an unparalleled range of experience, DSI not only achieves that objective, but has also built a solid reputation as an industry leader.
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