W. P. Carey Grabs 73-Property Automotive Dealership Portfolio in the UK
- Jan 29, 2015
W. P. Carey Inc.’s international footprint just grew by 1.6 million square feet. The REIT recently acquired a portfolio of 73 automotive retail facilities in the U.K., all net leased to Pendragon plc., for a total of $355 million.
The price tag of one-third of a billion dollars may seem large to some, but W. P. Carey believes it got a great deal. Jennifer Lucas, executive director with W. P. Carey, told Commercial Property Executive, “Cap rates for smaller portfolios of dealerships tend to be much sharper than the pricing we were able to achieve for this transaction. W. P. Carey’s critical mass and access to capital markets allowed us to deliver on a much larger deal and as such, achieve a premium to market.”
W. P. Carey drove away with quite a package. Not only are the properties fully leased to a credit tenant–Pendragon is the largest auto retailer in the U.K.–they are occupied under leases with a weighted average term of 15 years, as well as built-in annual rental growth based on inflation. And talk about diversification. “In this auto-dealership transaction we gained exposure to a well-diversified portfolio in terms of locations across the U.K., as well as a range of brands carried across a range of price points providing a range of services, including retail sales and after sales service,” Lucas added. “Permitting for such sites is generally difficult to obtain so these sites are critical to Pendragon, and would be attractive to other dealership operators.”
W. P. Carey is no stranger to the automotive sub-sector of the retail real estate market. Through CPA:17 Global, one of its publicly held non-traded REIT affiliates, the company snapped up a 380,000-square-foot collection of nine dealerships in the U.S. for $66 million in 2012. However, securing such portfolios, be they in the auto dealership arena or another single-tenant occupant sector, is no simple feat.
“There is intense competition for well-priced, high-quality single-tenant net lease portfolios in both the U.S. and Europe today,” Lucas concluded. “Well capitalized investors like ourselves with access to capital markets in both Europe and the U.S. who are able to borrow at attractive rates, are best able to capitalize on these types of opportunities.”