A Canadian real estate investment trust gobbled up two high-profile auto dealership properties in the Santa Ana Auto Mall for $30.15 million, highlighting continued investor demand for stable, income-producing real estate in Orange County.
Toronto-based Automotive Properties REIT, which specializes in investing in dealership properties in North America, bought the Audi and Volkswagen dealership sites at 1425 and 1450 Auto Mall Drive from BLT Enterprises.
“This transaction reflects continued demand for well-located automotive real estate supported by strong tenancy and durable cash flow,” Orbell Ovaness, senior managing director of investments at Marcus & Millichap, told the Business Journal. Marcus & Millichap brokered the deal.
In Demand
The purchase is one of the biggest automotive retail deals in Orange County so far this year.
The Santa Ana Auto Mall is in one of Orange County’s most established auto corridors and has been a center for dealership activity for many years.
Its location near Santa Ana (5) Freeway and Costa Mesa (55) Freeway, along with the presence of many Penske Automotive Group dealerships, makes it attractive to investors looking for steady cash flow, Ara Rostamian, senior director of investments at Marcus & Millichap, told the Business Journal.
The two properties cover about 61,000 square feet on nearly six acres. They include a 31,900-square-foot full-service Audi dealership and a 29,300-square-foot Volkswagen dealership within the Santa Ana Auto Mall. The Audi facility was recently renovated with a multimillion-dollar upgrade.
Both properties are fully leased to affiliates of Penske, which is one of the largest dealership operators in the world, said Rostamian.
“It was very much treated like a retail triple-net investment,” said Rostamian. “There’s essentially zero responsibility for the landlord, and you have a very strong operator in place.”
Rostamian said the sale attracted interest from institutional investors, family offices and private buyers.
He said that dealership properties with long-term leases are still appealing, even though many investors are cautious in today’s market.
“We had multiple offers,” Rostamian said. “Ultimately, this buyer stood out because of their ability to move quickly and their conviction. They understood the simplicity of the deal and performed on every level.”
Automotive Properties focuses on investing in this type of deal.
According to the REIT, its portfolio now includes 95 income-producing commercial properties totaling 3.5 million square feet in major markets across Canada (British Columbia, Alberta, Saskatchewan, Manitoba, Ontario and Québec) and the United States (California, Florida and Ohio).
In addition to the Santa Ana properties, the REIT also bought a nearly 60,000-square-foot Rivian dealership in Vista, Northern San Diego County, for $16 million.
Officials from Automotive Properties said they used their revolving credit facility to make the purchase of the Santa Ana dealerships and plan to keep the properties for the long term, relying on the tenant’s stability and the strong location.
“They understand how rare it is to own a freestanding dealership in an auto mall like this,” Rostamian said. “And when you’re buying real estate in a location where Penske operates the majority of the dealerships, that’s a very advantageous position.”
