Capital Automotive REIT, a publicly held real estate investment trust based in McLean, Va., is acquiring its prime competitor, leaving just one REIT in the market for dealership properties.
Capital Automotive has agreed to purchase MMR Holdings LLC for $206 million.
The deal will add 58 automotive properties to the fold, giving Capital Automotive 200 dealerships with 290 franchises in 23 states.
'After the transaction, 67 percent of our rent volume will come from the top 100 (U.S.) dealers,' said Thomas Eckert, CEO of Capital Automotive.
Business owners sell their property to a REIT in exchange for cash or shares in the REIT.
The REIT leases the property back to the business owners, who continue to run the businesses on the site.
MMR Holdings is the REIT established by Sonic Automotive Inc., a publicly held dealership group based in Charlotte, N.C. Sonic's annual revenue is more than $2 billion.
Fifty-two of the properties were Sonic dealerships. Two others are operated by United Auto Group Inc., a New York-based publicly held dealership chain.
The other four properties are stand-alone body shops operated by an Ohio body-shop chain.
MMR Holdings, the holding company for Mar Mar Realty Trust, had planned to go public this year. MMR had the same chairman and founder as Sonic -car dealer Bruton Smith - although the company intended to keep at arm's length from its sister company, buying properties from Sonic as well as from other dealership chains.
Still, the public market frowns on potential conflicts of interest, said Eckert, explaining why he was able to acquire MMR. A soft REIT market also has prevented MMR and other automotive REITs from doing initial public offerings. REITs generally need to go public to finance a steady stream of acquisitions.
The transaction expands the REIT's relationship with Sonic, which ranks seventh on the Automotive News list of top dealer groups, based on retail unit sales. Capital Automotive already had Sonic and the other four largest publicly held dealership groups as tenants.
This transaction is unique, however, because the REIT has committed to buy an additional $75 million in properties from Sonic as it expands.