Dealerships, Real Estate , ,

PRESTON Motor Group has placed its Chadstone dealership site on the market as property prices in near-city locations boom.

The sale is expected to fetch about $26 million. The dealership, which has Ford and Hyundai franchises on the site alongside a Hungry Jacks outlet, has owned the property since 2012 and will remain as long-term leasees of the property.

Preston Motor Group CEO Robert Gattereder said favourable market conditions meant it was time for his company to sell the asset.

“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.”

Co-agents Burgess Rawson and Gross Waddell ICR said there was a strong appetite for car dealership assets and this site was expected to generate a high level of interest across Australia and internationally “for a once-in-a-generation landholding”.

The 6953 square metre freehold investment in Chadstone is at 1412-1424 Dandenong Road and is 13km from Melbourne’s CBD. The agents said it is the biggest commercial-1 zoned site in the precinct.

“But it’s the brand new 15-year leases to Chadstone Ford, Hyundai and Hungry Jack’s that is expected to drive most of the attention as investors continue to seek high performing tenants that can continue to trade strongly through the pandemic,” the agents said in a statement.

Burgess Rawson and Gross Waddell ICR will market the sale and believe that in the new COVID marketplace, investors are looking for big name tenants in secure asset classes; prominent locations; and strong future development potential.

Burgess Rawson partner Billy Holderhead said that the Chadstone site ticked all the boxes as more savvy investors have turned to the automotive sector over the past 18 months.

“The core fundamentals of the auto sector remain steadfast,” he said.

“Long term leases, large landholdings with high profile exposure, secure income and favorable planning controls ensure significant future development upside.

“The Chadstone Ford and Hyundai site is a great example.”

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,” he said. 

“The high demand for cars has directly translated to increased appeal for automotive investments.”

The auto sector is recovering rapidly with consecutive months of growth with half yearly results revealing cumulative January to June 2021 sales up by 28.3 per cent 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 per cent compared to February 2020; and new car prices increasing by 7.4 per cent over the past 12 months.

David Buckley, partner at advisory firm Fordham Group that specialises in car dealerships, said there were several factors contributing to this trend.

“During the past 18 months or so, dealership profits have doubled or in some cases tripled,” he said.

In fact, profit results from two of Australia’s leading, ASX-listed dealerships have increased four-fold and even 17-fold.

Mr Buckley said that in the past financial year, Peter Warren Automotive sold 30,000 vehicles achieving a net profit of $37.5 million. 

“This is 400 per cent 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,” he said.

He also said it was 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 per cent 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.”

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.”

The sale of the Chadstone Ford, Hyundai and Hungry Jack’s freehold investment will be handled by Gross Waddell ICR and Burgess Rawson in conjunction. 

The Expressions of Interest campaign will close on 15 October and the owners of the property are being advised by Mark Wizel of Advise Transact.

By Neil Dowling