The Tustin Toyota auto dealership is expanding after buying the former site of an auto museum and events center.
Tustin Toyota last month completed the acquisition of Joe’s Garage in the Tustin Auto Center, just off the Santa Ana (I-5) Freeway.
The price for the 4.6-acre site, next to the Tustin Marketplace shopping center, was $9.8 million, or $2.1 million per acre.
The building includes about 39,000 square feet of showroom space and about 88,000 square feet of multilevel parking.
Tustin Toyota, whose existing dealership is run out of a nearby site at the auto center, is planning an expansion of its operations into the new space, according to R.J. Romero, president and owner of the dealership.
The existing dealership was keeping many of its vehicles off-site in several locations, which was proving to be inefficient, according to Romero. The new addition will allow the dealership to keep autos on 7 acres of land.
The dealership’s also planning to expand its service and parts department with the acquisition, he said.
An expansion is a rarity these days for local auto dealers, which employ close to 13,000 people and bring in some $8 billion of revenue.
2009’s industry downturn—the worst in recent memory—saw nearly 24 Orange County dealerships projected to disappear, or about 20% of the county’s 122 dealers. In 2008, 15 dealers closed here.
Local dealerships that have closed in the downturn include Saturn of Anaheim, Planet Acura of Buena Park and Costa Mesa Hyundai.
Nationally, some 800 Chrysler dealers closed in 2009, with the cutbacks stretching to Union Chrysler Jeep Dodge in Garden Grove.
General Motors Co. also said it planned to close up to 2,600 dealerships in 2009 and 2010 across the country.
Romero, who has been at the Tustin location for about eight years, said the local Toyota dealership has been among the strongest owned by Oremor Automotive Group, for which Romero is president.
Oremor (Romero spelled backward) owns Tustin’s Toyota and Scion dealerships, Toyota-Scion of Glendale, Fresno Lexus, as well as Nissan, Buick, Mazda, Hyundai and Jeep-Chrysler-Dodge dealerships in Ontario.
Oremor’s 2008 sales of about 1,000 new Toyotas and used autos is dwarfed by the county’s largest Toyota dealership, Toyota of Orange, which sold 5,079 new autos and 2,810 used ones in 2008, according to the Business Journal’s March 2009 list of local dealerships.
Museum
The building that Tustin Toyota is buying had served as the longtime home of Joe’s Garage, a private automotive museum and banquet facility.
Joe’s Garage was founded by Joe MacPherson, an automotive icon who had helped develop the Irvine, Tustin and Foothill Ranch auto centers, in addition to owning several local dealerships.
The museum, full of hot-rods, racecars and classic motorcycles, was considered a tribute to Southern California’s car culture.
MacPherson died in 2007, and the museum closed the following year. Close to 50 historic motor cars and another 25 motorcycles were auctioned off later that year.
The building was sold by the MacPherson family trust.
Unique
The sale also was unique for 2009, when industrial deals were few and far between, said Jeff Chiate, executive director for the Irvine office of Cushman & Wakefield Inc.
Chiate, along with partner Rick Ellison, represented the sellers in the transaction.
Investment sales of industrial buildings were off about 75% in OC in 2009 compared to a year earlier, according to Chiate.
About $250 million worth of midsize and larger industrial building sold last year, according to data from New York-based Real Capital Analytics Inc.
The average building sold at about $110 per square foot, while capitalization rates ran about 7.3% for those deals, according to the research company’s data.
Unlike office properties, distressed industrial assets in OC have yet to really hit the market, which has kept pricing higher than most potential buyers are willing to pay, according to Chiate.
“There’s not a lot of (industrial) stress out there. It’s frustrated a lot of buyers,” he said.
Industrial tenants are seeing some upside to the down commercial real estate market, with lease rates in some cases falling to levels last seen in the late 1990s.
“Lease rates have adjusted more quickly,” Chiate said.
The average monthly lease rate for an industrial building at the end of 2009 was about 60 cents per square foot, down from a recent peak of 80 cents per square foot, according to Newport Beach-based Voit Real Estate Services.
