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."