- The car boom in Australia has fed into automobile leased assets
- A "once-in-a-generation landholding" is about to hit the market 13 kms from Melbourne's CBD
- Expressions of Interest close on 15 October
Of all the property assets investors can buy, a car dealership (or two) may be an interesting option. How about if it came with a Hungry Jacks as well?
A “once-in-a-generation landholding” is about to hit the market 13 kilometres from Melbourne’s CBD this month. The 6,953sqm freehold investment is located in the suburb of Chadstone.
Attention will probably be driven by the signing of 15-year new leases to Chadstone Ford, Hyundai and Hungry Jack’s, with investors looking for assets that can trade strongly through the pandemic.
Co-agents Burgess Rawson and Gross Waddell ICR are marketing the sale.
“The core fundamentals of the auto sector remain steadfast. Long term leases, large landholdings with high profile exposure, secure income and favourable planning controls ensuring significant future development upside,” said Burgess Rawson Partner Billy Holderhead.
Gross Waddell ICR Director Danny Clark said a number of key drivers have seen the car sales industry skyrocket since COVID reached Australian shores.
“Record profits and a high volume of car sales have combined with supply issues to create the perfect storm for the sector,” said Mr Clark. “The high demand for cars has directly translated to increased appeal for automotive investments.”
The auto sector is booming with consecutive months of growth with half-yearly results revealing cumulative January to June 2021 sales up by 28.3% over the first half of 2020 to 567,468 sales.
Australians are also paying more to secure a car with used cars prices up 40% compared to February 2020, and new car prices increasing by 7.4% over the past 12 months.
David Buckley, Partner at advisory firm Fordham Group, a car dealership accountant and consultant, said several factors are contributing to this trend.
“During the past 18 months or so, dealership profits have doubled or in some cases tripled,” said Mr Buckley.
In fact, profit results from two of Australia’s leading, ASX-listed dealerships have increased 4-fold and even 17-fold.
In the last financial year, Peter Warren Automotive sold 30,000 vehicles achieving a net profit of $37.5 million. This is 400% up on last year. In addition, Eagers Automotive also reported huge results, with net profit increasing to $202 million from $11.8 million a year ago.
Mr Buckley added it is a classic supply versus demand scenario. COVID-related logistic issues and a severe lack of semiconductors have brought about supply shortages from all manufacturers in Australia.
“Demand for cars has rocketed because of a severe 60% drop in public transport use as commuters seek to avoid exposure; a growing move to domestic road travel for holidays; and a significant influx of expats returning home.”
David Buckley, Partner, Fordham Group
Peter Warren Automotive CEO Mark Weaver recently stated that “there is still pent-up demand and people are deferring spending for a while and will be back with a vengeance later in 2021.”
Mr Buckley added that a large number of dealership businesses have transacted during the COVID period with larger players looking for opportunities to consolidate their operations.
“Large groups and listed corporations are actively advertising and pursuing dealership businesses and some businesses that were worth $5 million two years ago are worth $10 million today,” he said.
“These favourable trading conditions for dealership businesses are not abating.”
Robert Gattereder, CEO of Preston Motor Group who have held the property since 2012, said with such favourable market conditions, it was the opportune time to divest.
“Chadstone is a lovely property however we are not in the property investment business, we are in the automotive business,” he said.
“When we decided to divest of our interest in the dealership, the property became non-core and as more and more approaches were made to our company from investors wanting to buy the asset, we thought it best to run a process to select an estate agent to represent our divestment plan.”
The Expressions of Interest campaign will close on 15 October.