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REIT Purchases Go Auto Dealership for $23 Million Is It A Good Financial Acquisition Choice?
Posted by :GreciaPosted date : October 21, 2016In CarComments Off on REIT Purchases Go Auto Dealership for $23 Million Is It A Good Financial Acquisition Choice?
Just on the heels of a recent acquisition, The Automotive Properties Real Estate Investment Trust, Toyota Woodland, added to the news that they were in the process to also acquire the Go Auto dealership property in Edmonton for over 23 million dollars.
The REIT has made arrangements to purchase real estate that houses Go Auto’s Land Rover and Porsche Center Edmonton. It is a dealership that includes a 44,800 square foot building where the current dealerships reside. Built in the year 2014, the purchase will lead to a seventeen-year triple net lease with the Automotive Properties REIT.
Gaining traction in Canada, this is the second purchase for the real estate group, after making the deal to buy Toyota Woodland in just one month. That means they have a healthy outlook and expectations for their future in the automotive industry. The purchase entered into will lead to a sixteen-year lease with REIT as well, which will tie them up in both ways for close to two decades.
The expansion is the first time that the REIT has been able to gain third parties as tenants and to add a prestigious car maker like Land Rover to their list of car sales. A high-end luxury vehicle, it puts them in a different and higher class of dealership categories.
It is also, their first move into the Edmonton district and kia Langley service industry. Their top-tier dealerships are likely to make them a huge presence in across Canada. Not stopping with their current growth, prospects are that they will soon be acquiring more. Bringing Go Auto on board is bringing them to another whole level in the automotive industry. Breaking into both a new market and a new niche market, is an exciting venture for everyone involved.
How does REIT have the money to make all these purchase decisions?
Their plan is to take out a fifteen million dollar mortgage with the Canadian Chartered bank and then use the credit to start up and fund the facility. The finalization and signing on the dotted line are subject to all parties being pleased with the deal and agreement to all terms.
Go Auto is currently one of the largest automotive dealerships in Canada. With over 40 separate dealerships located around Northwest Territories, British Columbia and Alberta, it is also one of the fastest growing with expansion likely to continue.
Is it a good financial acquisition for REIT? Most definitely. In an auto industry hurt by the TTP trade agreement, the atmosphere is ripe for a sink or swim being tied to the automotive industry. A very uncertain time, some are thinking that it is a risky endeavor, while others believe that it is exactly the right conditions needed to get in when the getting in is good.
Not only acquiring the land, but they are also buying into the name of Go Auto. An already established dealership, the risk that they are bringing someone on board who won’t make it, is very slim to none. Although a long term financial hardship, if thingsgo as expected, they will likely own it before the mortgage term and then have nothing to do but sit back and cash in.
Since the economy has not been a very stable one, making a 23 million dollar buy not your average purchase. Many in the business know that if you don’t strike while the iron is hot, you could find yourself missing out on striking it big.
Dealerships have changed in so many ways over the past decade. Many have switched hands after the crash of the 2007 market while others have been bought out or merged.
Seeing potential, many who had the means, made the smart decision to buy up what they could and try their hand at it. Go Auto is just one of the many successful dealerships finding their niche in a growing industry.
Speculation is that this buy, along with the impending expansion, is a smart investment for the future. If all else fails, they will still have prime real estate to recoup any losses. Freeing up the capital to invest in other ventures is an excellent way to diversify and capitalize on a market when it is ripe for the taking. What is on the horizon for both organizations is still left to be seen. One to watch for sure, time will tell if it was a good buy or not, but speculation is that it was a good one.
Grecia is the author of tournavationmke.com. She loves to travel around the world and share her experience and knowledge about the travel industry, features about travel trends. Prior to travel writing, Grecia covered Internet and Technology articles and contributing for many other web blogs.