Some BMW dealers choose to sell rather than renovate

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More BMW dealers than expected are choosing to sell their stores rather than modify them to meet the brand's new facility standard.

"If you look at the number of dealerships changing hands -- the buy/sells -- we have more activity now than we had before," said Peter Miles, newly appointed vice president of sales channel development and customer relations.

Miles said about 12 buy/sells are under way -- three times the typical number -- and it isn't just older dealers who are selling.

"The dealers that do not see the future are selling," Miles said. "Those that do are buying, and the price is strong."

BMW has 339 U.S. dealerships.

Ludwig Willisch, CEO of BMW of North America, said BMW dealerships are commanding, on average, blue-sky multiples of 8 -- among the highest in the industry.

Blue sky is the intangible value of a dealership, including goodwill and items such as customer lists and marketing materials, over and above the price of the physical facility. It is expressed as a multiple of adjusted pretax income. That means buyers of those dealerships typically can expect to pay 8 times the store's current pretax profit, adjusted for various extraordinary items, on top of the price of the physical property.

A California store recently sold for $140 million. "That's a lot of Bahamas," Willisch said.

Alan Haig, managing director of the Presidio Group of San Francisco, said the blue sky BMW stores is commanding is higher than the average 5.5 to 7.5 multiples that both BMW and Mercedes-Benz stores have been going for.

"Whenever a manufacturer launches a new facility program, it does stimulate a lot of buy/sell," he said.

"It forces a dealership owner to make a decision."

You can reach Diana T. Kurylko at dkurylko@crain.com. -- Follow Diana on Twitter


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