AutoCanada’s executive chairman, Pat Priestner, announced this week that he is purchasing a Honda dealership via his holding company and a financing arrangement it has with AutoCanada.
Priestner will own 100 percent of the equity and voting shares of the holding company, PPH, which was formed for the purpose of purchasing the Honda dealership, Whitby Oshawa Honda in Whitby, Ontario.
The store has been operating in the Whitby/Oshawa area for over 25 years and sold 812 new vehicles and 725 used vehicles last year.
"I am extremely excited about receiving Honda Canada's approval to purchase this great dealership,” Priestner said. “The Honda brand is one of the leading brands in the world automotive market and represents a significant milestone for me. I would like to thank Honda Canada and the entire Honda team for all of their hard work and assistance with this transaction. I look forward to developing a long term, mutually rewarding partnership.”
According to the AutoCanada, the financing arrangement between the group and PPH is that the former will receive approximately 80 percent of the net income of Whitby Oshawa Honda in exchange for providing a participatory loan to PPH to fund 80 percent of the purchase price of the dealership.
The transaction has been received and approved by AutoCanada’s independent board of directors.
Dilawri Group of Companies announced the opening of its new dealership Infiniti Gallery this week, as well as the financial results of the Automotive Properties Real Estate Investment Trust it established this past June, the focus of which is speeding up consolidation and acquiring dealerships in Canada and potentially the U.S.
With the addition of Infiniti Gallery, located in Northwest Calgary, the dealer group now touts 55 dealerships across Canada.
"Dilawri Group of Companies is excited to represent the Infiniti brand at Northwest Automall of Calgary, and we look forward to serving Infiniti customers in the city's north end. We invite everyone from across Calgary and the surrounding regions to visit us and experience the Infiniti line-up and the Dilawri difference first hand," said principal director Tony Dilawri.
The 26,000-square-foot Infiniti Gallery is the eighth dealership for Dilawri in the Calgary region and features a showroom, indoor service drive-thru, 17 service bays and a customer lounge.
Automotive Properties REIT financial results
In other news stemming from the dealer group, this week the Automotive Properties Real Estate Investment Trust announced its financial results for the period of June 1 (the date of formation) through Sept. 30.
The REIT was created this past summer by Dilawri and it completed its initial public offering on July 22 of 7.5 million REIT units for gross proceeds of $75 million.
In conjunction with the IPO, the REIT also completed the acquisition of a portfolio of 26 retail automotive properties encompassing approximately 958,000 square feet of gross leasable area located in the Greater Vancouver Area, Calgary, Regina and the Greater Toronto Area for $357.7 million.
It also issued an additional 620,000 REIT units during the aforementioned period for gross proceeds of $6.2 million.
Management shared the REIT performed in line with the adjusted forecast and expectations for the 71-day period.
Property revenue came in at $5.8 million, and property costs were $0.8 million, while general and administrative expenses came in at $0.3 million.
Other financial highlights included:
- Net operating income for the period was $5.0 million.
- The REIT's properties generated cash net operating income of $4.5 million for the 71-day period.
- Funds from operations of $3.6 million, or $0.199 per unit, and adjusted funds from operations of $3.1 million, or $0.171 per Unit, for the 71-day period, were in line with forecasts.
"We believe the successful completion of our IPO and partial exercise of the over-allotment option during the volatile market conditions in early summer is a strong endorsement from the market of our strategy to own and invest in the real estate underlying high-quality automotive dealerships in strategic Canadian markets, and the stability of our cash flows to support unitholder distributions," said Milton Lamb, chief executive officer of Automotive Properties REIT. "As expected, the REIT's financial performance in the quarter was in-line with our forecast."
Lamb went on to say the REIT is now focused on building its acquisition pipeline.
"We are targeting prime dealership properties with cash flow stability in strategic urban markets across Canada that can enhance our brand and geographic diversification,” said Lamb.
“As the only Canadian REIT focused on automotive real estate, the REIT provides a unique opportunity for automotive dealership owners to monetize the real estate underlying their dealerships while retaining ownership and control of their core automotive dealership businesses. This provides them with liquidity to advance their individual strategic objectives, whether it be succession planning, directly investing in upgrading their dealerships, or redeploying capital to take advantage of the industry consolidation,” he continued.
AutoCanada Inc. announced its third quarter results late Thursday, reporting an increase in revenue and gross profit. The company also shared with the investment community that it will be turning its sites on Eastern Canada in regards to acquisitions, as the oil-heavy Western economy continues to struggle.
Among the company’s third-quarter highlights was an increase of 6.9 percent, or $50.7 million in revenue from existing and new dealerships, to come in at a total of $781.2 million.
Gross profit was on the way up at the company’s existing and new dealerships, as well, with this metric rising by 8.7 percent or $10.3 million to a total of $128.7 million last quarter.
"With our third quarter and year-to-date operating and financial results as the back-drop, we are looking forward to a strong finish to 2015 and towards ensuring AutoCanada being well prepared to face continued challenges in Alberta in fiscal 2016," stated Thomas Orysiuk, president and chief executive officer.
Taking a look at same-store numbers, the story was a bit different: Same-store revenue fell by 6.9 percent, while same-store gross profit fell by 14.1 percent in Q3 year-over-year.
Same-store parts, service and collision repair revenue was also down, dropping by 3.1 percent year-over-year to come in at $1.1 million in the third quarter.
That said, used vehicles were a bright spot — same-store used-vehicle retail revenue was up by 13 percent or $8 million to a total of $69.1 million in Q3.
Same-store used-vehicle retail sales fell a bit, coming in at 5,068, down from 5,258 sold in Q3 of 2014.
In light of the Volkswagen’s recent recall issues, AutoCanada said in its quarterly release, “Management has assessed the matter and does not expect it to have a significant impact on its operations, as sales of the affected vehicles do not represent a significant amount of the company's new- and used-vehicle sales.”
AutoCanada turns eastward
Although earlier this year, AutoCanada management said it would still be focusing on westward expansion, even amid economic struggles in the region, company management is now saying the dealer group will be turning its acquisition focus to Eastern Canada.
In the outlook section of the Q3 results report from Auto Canada, company management touched on the tough economic times in Canada, namely the continued downward pressure on the oil-heavy Alberta economy, as oil prices remain low.
“Although employment levels have improved in some of the company's markets, employment levels in Alberta have yet to rebound; additionally, ongoing concerns regarding crude oil prices continues to negatively impact consumer confidence in Alberta,” the company reported. “Management is unsure of when the Alberta economy will improve and the outlook for the retail automotive industry in Alberta remains challenging.”
That said, company management explained it is “cautiously optimistic” that it will be able to counteract the current economic issues in Alberta “by more effectively marketing its vehicles with a greater emphasis on cost effective digital strategies, and by focusing on gross margins where volumes are constrained.”
But in light of Western Canada’s struggles, and in order to mitigate the impact of the declining Alberta economy, AutoCanada management said, “The company is directing its acquisition efforts to Eastern Canada, in particular Ontario, in an effort to further diversify.
“Management believes Ontario offers attractive returns in a growing market, and is currently engaged in discussions with potential acquisition targets,” they continued.
As part of this new strategy, AutoCanada recently purchased Hunt Club Nissan in Ottawa, along with an Ottowa Nissan open point dealership, and the company is confident it will meet prior guidance to acquire six to eight more dealerships by this coming May. Three of those purchases have already closed.
“Management continues to engage those manufacturers which currently do not accept public ownership and believes that it is making progress,” the company reported.
Orysiuk also said that the company is in the final stages of expanding its revolving credit facility.
"In order to provide us with flexibility to execute on our continuing acquisition strategy and to fund our capital expenditure requirements, while maintaining appropriate operating liquidity, we are in advanced stages of negotiations towards expanding our revolving credit facility," he said. "As part of this process, we have amended our banking covenants to align with current industry lending practices. Together with our free cash flow from operations, the expanded revolving credit facility will provide us with the necessary flexibility to meet our capital requirements."
Editor's Note: Stay tuned to Auto Remarketing Canada for further insight regarding Auto Canada's Q3 performance.
Mixed-use developments are popular these days — think apartments over commercial properties such as cafes and restaurants.
But, add automotive dealerships to the mix, and you have Downtown Automotive Group’s new project in the works: Riverside Square.
The new development, located in the southeast end of Toronto, will combine six dealerships — the part of the project which has been dubbed the Autoplex — over 800 condos and commercial venues.
The Autoplex is visible from the Don Valley Parkway and is located between Queen Street East and Eastern Avenue.
Representing seven brands, (Toyota, Scion, Lincoln, Ford, Hyundai, Nissan and Infiniti), the separate dealership operations within the Autoplex range in size from 35,000 square feet to 60,000 square feet, the largest being the combined Toyota/Scion location.
The project also marks the return of Ford and Lincoln to Toronto, which have been absent from the city for over nine years.
Shahin Alizadeh, president of the Downtown Automotive Group, discussed the giant project with Auto Remarketing Canada.
The project has been in the works for about three years, and the mixed-use development aims to bypass the prohibitive cost for automakers to do business in urban areas. Land values in Toronto have skyrocketed to $20 to $30 million an acre in some cases, Alizadeh said, as the population of the city continues to grow.
Downtown Automotive Group received its final approvals from the Toronto City Planning department a few weeks ago for the project, and recieved final approval by the City Council on Nov. 10.
Then, construction is on for the next 24 months. Phase I will include two towers and all six dealerships and is expected to be completed by November 2017 or December 2017. Phase II of construction will then begin, which will include two more towers and additional commercial venues.
“We owned a large parcel of land in downtown Toronto, and the land value was cost-prohibitive for a development from an automotive-purposes perspective … and the viability of the automotive sector in terms of how land values would be applied to the business model as a rent factor are becoming more and more restrictive and more and more prohibitive,” Alizadeh said.
Since according to Alizadeh, the site could not sustain one or two dealerships, or even three, based on the absorbent land value, the dealership group had to get creative.
“We looked at consolidating our six dealerships in a more traditional manner, but the numbers didn’t makes sense — the numbers were astronomical. So we ultimately, based on discussions, started thinking outside the box,” he said. “And one of the things that we hadn’t realized was that there was an opportunity for us to not only accommodate our needs, but also give us an opportunity to capitalize on a very, very strong real estate market in downtown Toronto.”
The company partnered with Dream and StreetCar development companies to help plan and construct the mixed-use development.
“We were somewhat cautious about combining residential with automotive, but lo and behold, the City Planning Department seemed to really like it. And we felt that given the positive energy that the project had kicked up we should go full blast, and we have,” Alizadeh said.
The Autoplex will tout four levels of parking, a service and reception area and individual service drive-through centers for every brand.
“We have really managed to accommodate all the specific needs, yet we contained the whole thing in a very manageable structure from a cost point of view,” Alizadeh said.
When asked about the cost of the project, Alizadeh said from a construction viewpoint, the per-store cost is very “realistic,” essentially keeping costs in line with what would be a “traditional cost for a dealership for these brands.”
Since real estate values are becoming a real concern for automakers looking to launch dealership in urban areas, it didn’t take long for the project to turn the heads of manufacturers.
The opportunity was particularly enticing to Ford and Lincoln, brands that had been looking for dealership opportunities in Toronto for almost 10 years.
With the addition of Ford and Lincoln, Downtown Automotive Group’s store count will grow to nine.
And manufacturers on board for the project may have long-term plans in mind.
“I think what everyone is excited about is their ability to see a viable long-term business model that is not going to be subjective to real estate fluctuations,” said Alizadeh. “Clearly, this is going to be a single-purpose facility, which almost assures the OEMs that it’s not going to be replaced with anything else. So, win-lose-draw, this will be an automotive facility for a long time to come.”
Alizadeh added, “We think we are onto something that may in fact be a cutting edge approach to combining automotive in urban areas, which has become a very difficult task.”
And the industry is already catching on. Alizadeh shared he has had numerous dealer groups from different parts of the country, and the U.S., contact him, wanting to know the details about the new project.
“The proof is going to be in the pudding, when this building is completed. We are excited that we think we have addressed all of the idiosyncrasies of the automotive relationship to mixed use, and the kind of response we are getting is quite pleasant to hear,” Alizadeh said. “Everyone seems to think that this is going to go beyond what we are doing to other parts of the country.”
AutoCanada is adding two new Nissan points to its lineup, serving to further solidify its presence in the Ontario market.
The company said on Monday it has reached an agreement to buy the operating assets of Hunt Club Nissan Ltd. — which owns and operates a Nissan dealership in Ottawa — from owner Jean Malouin.
Also, as part of the deal, AutoCanada has acquired the right to a new Nissan open point dealership, which is to be operated out of a new leased facility in the Southwest part of Ottawa. The company explained this dealership will be designer to Nissan image standards, and construction is expected to be completed next year.
The transaction is subject to normal closing conditions and is expected to close within 30 days.
"The acquisition of Hunt Club Nissan is a very exciting opportunity for the Company, increases our Ontario presence, and allows for the creation of a Greater Ottawa platform — a highly desirable region with one of Canada's highest per capita average incomes,” said Tom Orysiuk, president and chief executive officer of AutoCanada. “We are fortunate to partner with the Hunt Club Nissan family to build upon its excellent reputation and operational success, and we want to thank the employees of both Hunt Club and our Manufacturer partner, Nissan Canada, for all of their efforts to make this acquisition possible.”
Taking a look at the Hunt Club purchase details, the store is one of the most successful Nissan dealerships in Ontario, according to AutoCanada. It will continue to be operated by Malouin, who will remain as dealer principle and will retain an ownership in both dealerships.
Last year, the dealership retailed 1,109 new vehicles and 452 used vehicles out of its five-acre, 27,608-square-foot leased facility. The facility includes a 12-car showroom, 13 service bays, four detail bays and one alignment bay.
For the second year in a row, Western Canada’s Go Auto dealer group is giving away 30 vehicles.
The cars will be awarded via the company’s “Car-A-Day Giveaway” promotion, though which its Edmonton-based network of dealerships gives away 30 vehicles to 30 customers in as many days.
This year’s promotion began Monday and will run through Nov. 10, during which any customer who buys a vehicle (or RV, trailer or boat) from one of Go Auto’s more than 40 dealerships will be automatically entered to win their purchase the next day.
And when a customer buys a vehicle, they are entered into a pool with everyone else who bought from Go Auto stores that day, which the company said “makes for some pretty incredible odds.”
Last year, Go Auto gave away nearly $1 million in vehicles during the 30-day promotion. Some of the most notable giveaways were a $90,000 RV and a $50,000 Infiniti.
"People have a hard time wrapping their minds around how good their odds are of getting their vehicle for free," said Ben Cochrane, Go Auto's vice president of marketing. "Based on last year's numbers and this year's sales growth, we're anticipating about a 1-in-125 chance for each customer. That's unheard of in our industry. But each day your odds are different, based on how many people happen to buy. Last year, we had a day where your odds of winning were 1-in-53. To win a brand new vehicle."
The dealer group has 18 brands participating, with more than 9,000 cars, trucks, SUVs, vans, RVs, trailers and boats eligible to be won.
"We pride ourselves on providing more value to the customer than any other dealer in the country," Cochrane said. "The only difference this month is that your purchase could very well be free."
For more information on the promotion, see the dealer group’s daily giveaway videos.
"Just as we did last year, we're going to change the lives of 30 people over the next 30 days. The industry doesn't get any bigger or better than this. We're pretty excited about it, and the car-buyer should be too,” Cochrane concluded.
Dealer-to-dealer auction platform TradeRev and ADESA Vancouver announced today a partnership with one of the country’s fastest-growing dealer groups.
The two companies are entering an exclusive used-vehicle trade-in partnership with Canada’s OpenRoad Auto Group, which was featured in this year’s Auto Remarketing Canada Leading Dealer Groups Issue.
Now, all of OpenRoad Auto Group’s trade-in units are listed and sold through TradeRev and ADESA Vancouver. Through the partnership, which was established in July 2015, the companies explained they have built a “complete vehicle trade-in and remarketing process.”
“This exclusive partnership with such a prominent automotive group in one of our core markets represents an outstanding opportunity for TradeRev, and we’re confident that our technology will provide OpenRoad Auto Group with an innovative and profitable process for selling cars to their customers,” said Mark Endras, TradeRev president and co-founder. “Our advanced car auctioning system will help support the ongoing growth efforts of OpenRoad Auto Group.”
Established as Multiland Investment Ltd in 1977, OpenRoad Auto Group was rebranded in 2000 and is one of the largest and fastest growing automotive retail groups in Canada. The company has over 850 associates that represents 14 new-car brands and over 500 used vehicles throughout 16 locations in British Columbia, Canada.
“We are proud to have created a trade-in work flow integration for the OpenRoad Auto Group with an ADESA/TradeRev combined service offering that is both transparent and efficient, all while maximizing total sales,” said John MacDonald, general manager of ADESA Vancouver. “With thousands of active buyers in-lane and online at each auction, we can offer one of the largest international buyer bases for our consigners.”
AutoCanada Inc. announced earlier this week that it has reached an agreement to acquire the operating assets of a Chrysler Dodge Jeep Ram dealership in Spruce Grove, Alberta.
The dealership, Grove Dodge Chrysler Jeep Ltd., otherwise known as Grove Dodge, is owned and operated by Terry Martens and Josh Davis. AutoCanada says Davis will remain with the dealership and will retain a 10 percent ownership interest.
“Grove Dodge has a strong history in the Spruce Grove region and we look forward to solidifying our very strong Chrysler Dodge Jeep Ram platform in Alberta, which now represents three dealerships in each of the key Calgary and Edmonton regions,” said Tom Orysiuk, president and chief executive officer of AutoCanada. “Although currently challenged, the Alberta market has been a long-standing above-average performer in retail automotive and we expect this market to continue to perform.
“We consider Grove Dodge to provide the company an opportunity to further deliver long-term shareholder value through the acquisition of a great dealership at a time when it became available,” Orysiuk continued.
The dealership operates in a 34,000 square foot leased facility, featuring an eight-car showroom, 13 service bays, three details bays and one alignment bay. The dealership retailed 809 new and 407 used vehicles in 2014.
The deal is expected to close within 30 days.
On Saturday, Mercedes-Benz Canada broke ground on its third store in Calgary.
The McManes Automotive Group will be continuing its expansion with the new store, Mercedes-Benz Country Hills.
This store adds to a list of construction projects the auto group currently has in the works, including new Chrysler Dodge Jeep Ram Fiat, Kia and Hyundai stores.
This past weekend Tim Reuss, president and chief executive officer of Mercedes-Benz Canada, and several company executives, joined Calgary city councilor Jim Stevenson, Jim McManes, the auto group president, Mike McManes, general manager, and Rick Bowie, vice president of real estate of McManes Automotive, to break ground at the site of the future dealership in Northeast Calgary.
Mercedes-Benz Country Hills — scheduled to open its doors in 2017 — will be situated on a 7.8-acre site on Stonehill Drive NE, which the company explained is located in the heart of a recently expanded area of Calgary.
"The City of Calgary has experienced exponential growth over the course of the past few decades and the future continues to augur well for the Stampede City. By introducing a retail point in a newly minted neighborhood, Mercedes-Benz wanted to keep a timely and opportune pace with the city's significant urban sprawl by providing even further customer convenience in this very important Calgary market," said Reuss. "I am delighted to officially welcome Jim McManes to the Mercedes-Benz family. Mr. McManes and his team have clearly demonstrated their understanding and commitments to our overall objectives and their vision is undoubtedly poised for future growth."
The 94,500-square-foot dealership will incorporate both new and pre-owned vehicle showrooms.
And approximately 50,000 square feet have been allotted for the dealership’s service area, which will include 30 bays.
The company also is taking into account the extreme weather conditions found in Calgary in the design of the new store.
The new dealership will also focus on providing amenities to its customers, such as a full-service deli style restaurant and a hair and nail salon.
The layout of the facility will follow the Mercedes-Benz Auto Haus design standard, which includes extensive used of glass, and the exterior will represent the new Mercedes-Benz retail corporate identity, which focuses on black components with silver accents.
Jim McManes said, "In keeping with the spirit of the pioneering West, we are thrilled to expand the reach of the brand that invented the automobile. We are committed to building a business with the mission of serving existing and future customers all the while providing a compelling ownership experience. We are confident that the know-how we have gained from managing multiple retail operations will greatly contribute to the continued success of Mercedes-Benz in Calgary."
The new store will add to the automaker’s presence in Calgary, joining Mercedes-Benz Downtown Calgary and Lone Star Mercedes-Benz.
AutoCanada Inc. announced this week it has added another store to its lineup in British Columbia with the purchase of Don Folk Chevrolet in Kelowna.
This announcement comes after AutoCanada management explained in the company’s second-quarter sales results conference call that low oil prices and a suffering economy in the West wouldn’t deter the dealer group from expanding in that region.
The public dealer group has obtained approval from General Motors Canada to purchase an 80-percent non-voting equity interest in the assets of Don Folk Chevrolet — a store which retailed 452 new vehicles in 2014 and 304 used vehicles.
The purchases also includes all the assets of Don Folk Autobody, a standalone auto body shop located next to the dealership.
The dealership has a legacy in the community going back over 60 years. Since Don Folk joined the dealerships in 1971, AutoCanada shared he has led the grown of the dealership from 22 employees to over 70 full-time employees.
The facility includes a 15-car showroom, 14 service bays and six detail bays.
"We are delighted to welcome the Don Folk Chevrolet team to the AutoCanada family. We look forward to building on the tradition of great service under the leadership of Mr. Folk, and ensuring that Don Folk Chevrolet continues with a strong presence in Kelowna. We would also like to thank General Motors of Canada for their continued support,” said Pat Priestner, executive chair of AutoCanada.
The acquisition is subject to customary closing conditions and is expected to close within 30 days, according to AutoCanada management.
This past spring, the company announced it had acquired Airdrie Chrysler in Airdrie, Alberta.
And earlier in the year, the company revealed it will also be opening a new Kia store in Winnipeg, Manitoba.
