August 29, 2014 – 4:27 pm ET
Brookfield Property Partners will acquire Capital Automotive for $4.3 billion, according to a source informed with a deal.
McLean, Va.-based Capital Automotive provides genuine estate financing for dealers to acquire new locations and ascent facilities.
The understanding is approaching to tighten in mid-October, and observers contend it could have widespread implications for a automobile industry.
“It’s a really vast transaction for a industry,” pronounced Erin Kerrigan, handling executive of Kerrigan Advisors in Irvine, Calif. “It’s an denote of a credit peculiarity of a automobile sell attention and a fact that a marketplace believes that automobile dealerships have low credit risks.”
Kerrigan pronounced a understanding could have implications for dealership merger financing “to some degree” going forward.
“Whatever a produce was on this acquisition, it will have an outcome on what dealership top rates can be and a reduce a top rate, a aloft a squeeze price,” Kerrigan said.
Also, Capital Automotive is a usually dedicated automobile dealership genuine estate investment trust, a association that owns and operates income-producing genuine estate, she said.
“I’d be extraordinary to see if their skeleton are to continue to grow this business or since it’s a good pool of properties, they divert a money flow? It’ll be engaging to see a buyer’s plans,” Kerrigan said.
Capital Automotive and Brookfield Property Partners declined to comment. DRA Advisors, that owns Capital Automotive, could not be reached for comment.
Kerrigan pronounced a high cost paid for Capital Automotive is demonstrative of a low produce investment environment.
DRA Advisors, a genuine estate investment firm, bought Capital Automotive in 2005 in a understanding valued during $3.4 billion, Kerrigan said. In 9 years, a value of Capital Advisors has climbed 26 percent to a designed $4.3 billion squeeze price.
The squeeze cost includes a arrogance of all existent debt, as good as debt comforts of $400 million to account a transaction, Reuters reported.
Capital Automotive will launch new debt after a Sept. 1 Labor Day holiday, and also will find capitulation from existent lenders to concede a change of control, Reuters said.
Capital Automotive intends to emanate $300 million of asset-backed bonds and $100 million of new loans underneath the second-lien credit facility, Reuters said.