EAGERS Automotive will buy a 4.3-hectare Sydney property from its landlords to create a multi-franchise site with separate auction house and used-car warehouse.

The move is part of plans to mop up some property assets of its recently-acquired Automotive Holdings Group Ltd and bring them onto the company’s books.

It is the second announcement from Eagers about changes to its property portfolio. In September, it first said it would reverse the property strategy of AHG – which predominantly leased its dealership sites – and buy up some of the sites it operates around the country.

The latest is a 4.3-hectare (10.6-acre) site in Castle Hill, in the north-west of Sydney. Eagers leases the site from property trust Charter Hall and in a statement to the Australian Securities Exchange, said it now proposes to buy the land for $76.25 million.

It said the property, at the corner of Victoria Avenue and Windsor Road in Castle Hill, “is poorly configured and under-utilised.”

When Eagers bought AHG late last year, the Castle Hill site had Holden, HSV, Infiniti, Nissan and Hyundai franchises. The Holden, HSV and Infiniti brands have since left Australia.

The site currently has three large showrooms, 67 service bays and some “outdated” factory units, Eagers said in a statement.

It now plans eight franchise outlets on the property and will relocate the Sydney EasyAuto123 used-car warehouse and the Carlins auction operations.

Eagers said it had received “strong manufacturer interest” in the site and the reconfiguration “over the coming years would optimise the dealership footprint”.

“The acquisition will significantly reduce expenses, delivering an effective $15 million benefit before taking into account any new franchises or the superior operating efficiencies that can be achieved at the site under our Next100 Strategy,” the company said.

“The relocation of the Sydney-based operations of EasyAuto123 and Carlins will deliver a further benefit via the removal of $2 million in annualised external rent.”

EasyAuto123 is currently in the nearby Sydney suburb of Seven Hills and Carlins is in adjacent Girraween.

GoAutoNews Premium reported earlier this year that Eagers stated it had allocated $105 million to buy eight car yards from property trust Charter Hall.

It followed Eagers getting $225 million in capital to cover both these costs and future similar acquisitions.

The capital for the property purchases comes from Toyota Financial Services ($175m) and Volkswagen Financial Services ($50m).

In addition, Eagers has outlined a plan of how its properties are to be consolidated while at the same time maintaining franchised outlets.

In a statement to the Australian Securities Exchange (ASX) at that time, Eagers managing director Martin Ward said the property purchases “will reduce the company’s annual occupancy costs on an ongoing basis”.

GoAutoNews Premium reported that Eagers makes a point of buying the land on which its dealerships are located. AHG, which it bought last year for $2 billion, preferred to lease the land and where it acquired the property as part of a dealership purchase, would sell it to a property trust, usually Charter Hall.

Now Eagers is buying back the farm, including Big Rock Toyota (Balcatta, WA); South Morang Toyota (South Morang, Victoria); Sutherland Mazda (Kirrawee, NSW); and five properties at Zupps dealerships in Mt Gravatt, Queensland.

“The purchase of the five properties in Queensland will facilitate the consolidation and reconfiguration of 10 existing dealership properties into eight locations by December 2020, reducing further to six locations by early 2022,” Mr Ward said in the statement.

“These changes will achieve additional savings to the company’s cost base without impacting sales volumes and turnover.”

Mr Ward said that maintaining a balance of leased and owned properties “with a focus on ownership in key strategic locations, provides greater flexibility for Eagers Automotive to implement its omni-channel retail approach over an expedited time frame”.

The plan works with the strategy to combine a number of franchises within Eagers’ sites in the Brisbane Auto Mall at the Brisbane airport, and the Albion service hub in Brisbane.

Eagers purchased a Bunnings store in Albion in early 2019 to become a 50-bay workshop with the ability to cater for 12 brands, each with their own service advisors and check-in counters.

In its recent half-year financial report, Eagers said that its property portfolio was valued at $260 million.

By Neil Dowling