Virus shutdowns that severely curbed vehicle sales in March derailed Asbury's first attempt to buy the Park Place stores. Unable to extend financing agreements for the deal, Asbury pulled the plug.
Asbury, ranked by Automotive News as the nation's seventh-largest new-vehicle retailer, furloughed 2,300 employees and slashed executive pay. New-vehicle sales tumbled 34 percent in April, and used-vehicle sales fell 38 percent. Asbury ultimately eliminated 1,300 positions because of the pandemic.
In the meantime, other buyers were making a play for the Park Place stores, according to Presidio Group, the advisory firm that represented Park Place and owner Ken Schnitzer in the sale.
"There were a lot of folks that were interested," said Presidio President George Karolis. "We spoke to a few, but Asbury stood back up."
Only a handful of the biggest dealership groups in the country have the financial wherewithal to pull off such a purchase. Even at the deal's reduced size, Presidio CEO Brodie Cobb said the Asbury-Park Place agreement is still the second-largest transaction in the industry in at least a decade, behind only Berkshire Hathaway's 2015 purchase of 81 stores from Van Tuyl Group. Even Lithia Motors Inc.'s 2014 purchase of 27 DCH Auto Group dealerships is smaller, in terms of dollar amount, Cobb said.
Asbury revisited the deal as business rebounded rapidly in May and June, Hult said last week. Cost-cutting taken in the early days of the virus — such as the furloughs and moves to defer capital expenses and negotiate discounts with vendors — also contributed.
"These actions, along with our omnichannel initiatives that we started four years ago, helped us achieve year-over-year monthly increases in pretax profit in May and June," Hult said. Asbury's omnichannel platform allows shoppers to purchase vehicles mostly online or to start a deal online and finish it in-store.
The real estate removed from the first iteration of the deal has an estimated value of $217 million, Asbury said last week. Schnitzer will continue to own the property associated with the eight stores being purchased and will be Asbury's landlord for an initial term of 10 years. The deal includes options for Asbury to eventually buy the real estate.