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Guest opinion: The best deal for dealerships

Author: Mark Frostick; associate in the automotive and roadside team at property and planning consultants Rapleys.

The automotive property market has moved on considerably in the last 12 months. Available, vacant dealerships on the market are decreasing and, as the economy improves, there are fewer businesses on the market – at least fewer at a sensible price that would make them appealing to the average buyer.

The results of a survey run by AM-Online recently showed, however, that the desire to undertake a major transaction in the next 18 months is high:  44% of respondents were looking to acquire a new site, 32% to dispose and the minority – 24% – intend to maintain the status quo.

If you are in that 75% looking to alter your property portfolio before the end of 2016 you should therefore look at the options beyond a straight sale as a dealership; as a buyer you need to ensure you’re getting the best value for money as possible, as a seller there may be alternative options on the table now that weren’t there before.

Acquisitions

Lease terms should always be carefully inspected. If you can’t buy the property out-right you may have to either take a new lease or an assignment of the existing lease where the inclusion of an additional word, however minor, could mean a significant increase in rent at the next review or, for example, a larger repair bill than expected, if it goes undetected.

If you can’t buy the property out-right you may have to either take a new lease, or an assignment of the existing lease where the inclusion of additional word, however minor, could mean a significant increase in rent at the next review or, for example, a larger repair bill than expected, if it goes undetected.

Business rates can also be a major headache for an occupier. If the previous occupier has already appealed these and settled, or if the property has been empty for a while you may miss out on the savings yourselves.

Lastly, it is a shock that many parties still buy expensive properties without having a survey undertaken. A comprehensive survey can reveal all sorts of hidden dangers, from asbestos to poor construction methods to contamination, all of which can add to the lifetime cost of the building.

Disposals

Whilst a disposal of a property to another car dealer might seem the easiest solution, an investigation with the local authority to explore alternative uses for the site could be worth undertaking. Whilst the big supermarkets’ acquisition programs have been seriously reduced, there are still other commercial occupiers looking for sites. This, combined with the current residential boom in some areas, could see automotive sites worth significantly more as a development of flats, or a mixed-use scheme anchored with a commercial occupier, providing retail or leisure facilities, for example.

Meanwhile, the age old issue of whether to lease or sell a property site outright continues to affect dealership owners. It is always worth bearing in mind that creating an investment through a lease may generate a higher end value than a straight freehold disposal.

The last word

The economic recovery and improved sales figures have combined to make the automotive property market buoyant, but high prices and lack of stock means that maximum value needs to be gleaned from any prospective deal.  Acquisitions and disposals in the automotive industry are often agreed between principles, but not only could there be alternative uses for sites that yield more value, there may also be hidden cost implications which should always be taken into account.



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