Cover Story ~ Bob Rosenthal
Interview by Michael Roscoe
A conversation with Mike Roscoe
In a business stocked full of "good guys," Bob Rosenthal is a "good guy's" good guy. Bob runs one of the country's largest dealership groups and is a co-founder of Capital Real Estate Investment Trust. He's been one of the country's largest dealers for several different manufacturers and saw the coming rise of imports back in the fifties. But the thing Bob is most proud of as a dealer is having helped over two dozen employees become dealers themselves. Here's what Bob had to say when I met with him at his corporate offices.
Bob, how did you get your start in the car business?
I've been in the car business all my life. My family had always been in the automotive business. My father, along with my late uncle, Colonel Benjamin Ourisman, were partners in a Chevrolet dealership where I began my automotive career. My father used to tell me all sorts of stories about the car business, like having to drive Chevy trucks from the manufacturer's plant to pick up the cars. The trucks basically just had a chassis they had no bodies and the passengers had to sit on orange crates. They used to drive these trucks from the manufacturer's plant to bring cars back here to Washington.
I started working in new car get-ready at the dealership when I was sixteen. When I wasn't in school, I worked installing accessories. You had to put heaters in the cars back then; they didn't come as standard equipment. I also worked summers as a service sales advisor, and in the parts department. After I graduated from college, I got married and went to work that very same week.
One afternoon I was in my father's office with him and the used car manager. Unexpectedly, my father announced that he was going to make me the used car manager and move the used car manager to truck manager. The guy became incensed and said, "I'll quit before I become a truck manager." So I said, "Listen Dad, I don't know any more about being a used car manager than I do about being a truck manager. I'll be the truck manager." It was the best move I ever made. There were only so many trucks at the time they were very hard to find. I had to buy them from other dealers all around the country. It was a lot of work, but it paid off. I became a very successful truck manager, which gave me a highly visible profile with Chevrolet.
One day in 1954, I was in a Chevrolet meeting and they were talking about opening two new dealerships in the Washington, D.C., area. I told my father we absolutely had to get one of those franchises. We looked at different locations in Maryland and Virginia and finally decided on a site in Arlington, Va. We opened Rosenthal Chevrolet that same year and we're still here at the same location, still going strong.
I'd like to add that we couldn't have accomplished any of this without the Ourismans. They were instrumental in assisting us with acquiring the real estate and perhaps more importantly they gave us the mandatory recommendation to the manufacturer we needed. In those days, if you were employed by a particular dealer and wanted to get your own dealership, you couldn't do so unless you got that dealer's recommendation. I greatly appreciate all the Ourismans did for us. We've been great friends and competitors ever since.
After that first dealership, were you satisfied or did you want to open more?
No, I was eager to go forward with other lines. I didn't waste much time, either. The following year I opened a Datsun franchise.
In 1955?
Yes. The U.S. distributor only required you to buy twelve cars two loads to become a Datsun dealer, so I went ahead and got them. But I couldn't sell the damn things. The only people who would buy them were military people coming back from Japan. A friend of mine who had a dealership in Maryland told me he'd like to become a Datsun dealer. I said, "I've had a hard time selling Datsuns and you'd have to buy two loads of cars." I told him he could buy one of my loads so he wouldn't have to buy two. That's how I got rid of six of them. Eventually, I sold the other six.
Wasn't it kind of early for Japanese imports?
Yes, it was way too early. But I knew it was coming. It was only a matter of time.
You were sort of an automotive trailblazer.
I guess you could say that.
Where did you go from there?
I took on a Renault franchise, then a Saab franchise. We did well with both franchises. Back then GM frowned upon dealers owning more then one franchise. They didn't want any one dealer controlling a given area. But the import market was just opening up. It was a new market and it gave dealers the opportunity to expand. We had to do a lot of merchandising and advertising and it paid off. We quickly became the largest Renault dealer in the country, selling 200-300 a month.
That's a lot of Renaults in the fifties.
Yes, it was. It was also a stepping-stone for me. When Corvair first came out, the Chevrolet zone manager called me up and said, "If you can sell all those Renaults, I know you can sell Corvairs." So we opened a separate Corvair showroom. We did a lot to merchandise them successfully. They were very plain, so we did a lot of work on them; putting special seat covers on them leather, vinyl, rolled and pleated what have you. That really helped sell them. We did very well with them. In no time we were the largest Corvair dealer in the country.
Then, in '58 or '59, I sold the Saab franchise to an employee, and bought a Cadillac/Oldsmobile dealership down in Norfolk, Va., along with a fellow dealer named Jim McKay and Hubert Hoff, one of my managers. We made Hubert Hoff operating partner.
So, there were three partners, with your ex-manager as operating partner?
Yes. Hubert had worked at Chevrolet and we backed him in the dealership on a five-year buyout. At that time, if you had a second GM franchise, the manufacturer required you to have a five-year buy-out they were very strict about that. But Hubert bought us out in just four years. Then I backed a sales manager in another Chevrolet dealership in 1965 in another five-year buyout. We had the same five-year buyout deal with Lowe's Chevrolet in Upper Marlboro, Md., Price Chevrolet in Charlottesville, Va., and Lane Honda in College Park, Md. Then I backed my controller from Rosenthal Chevrolet, Bob Tamson, in a buyout with a Chevrolet dealership, and in the early '80s, I did five-year buyouts with Woodbridge Nissan, Woodbridge Chrysler, and Woodbridge Ford with Frank Cowles, who was the operating officer of my management company. In recent times I did a similar buyout deal involving College Park Honda/Hyundai with Dick Patterson, my senior executive. Over the years there were several other deals like that.
So you got a lot of dealers started.
You know, I've been involved in 46 dealerships and I've sold over half of them to the operators at book value. We have buyouts to give our managers the opportunity to grow.
So you weren't trying get a portfolio of stores. You'd get a franchise, run it, make money, and then get bought out.
Yes.
You certainly made the lives of your ex-partners much more successful than if they'd never met you.
It's been great for me too. I've gotten a great deal of personal satisfaction from it.
Did you ever run into problems with all these different franchises?
Oh, a couple of times it got touchy. In '71 we got Rosenthal Honda. At the time we were one of the largest Chevrolet dealerships in the country. You have to appreciate the fact that in those days, Honda didn't enjoy the kind of status that it has today. But we put those Hondas right on the showroom floor alongside the Chevys. One day, the GM general sales manager came to visit us. Since we knew he was coming, we took all the Hondas off the showroom floor. But we had a great big Honda sign that we couldn't take down. The first thing he asked was, "where are all the Hondas?" I said, "they're in the trunks of the Chevrolets" (laughs). He laughed and laughed and somehow I got away with it.
In '76, I bought a Jaguar/MG/Triumph store right around the corner from the Chevrolet dealership. One day, we were at a meeting and they told us, "MG and Triumph are going to be eliminated, and we're not sure about Jaguar." Just like that, they stopped shipping and we got a notice that it was finished no discussion, no talking it over, no nothing. It was just finished. Still, somehow we managed to keep Jaguar going by adding Mazda and Dodge to the mix.
Bob, tell me about your store here, Rosenthal Chevrolet/Chrysler/Jeep. There aren't many combinations like that around the country.
No, there aren't Chevrolet would rather have separate showrooms, so we agreed to build another showroom across the street.
You have other combination dealerships too, correct?
Yes. I bought a twelve-acre dealership site in Tysons Corner, Va., in 1986 for 18.5 million dollars that had been the site of a Pontiac dealership. A savings and loan purchased the property and I bought it from them. I moved Nissan in there and I told Nissan that I'd have to put other franchises in with it to cover the expense. So we added Mazda in the same showroom with Nissan, and we built a separate facility for Infiniti.
So you put Nissan and Mazda together, and added an Infiniti site?
Yes.
How did you get away with that?
Well, they allowed us to do it because we were selling so many cars. I recall that we were selling about 5,000 Nissans a year. In '87 we moved the Jaguar dealership from here in Arlington to Tysons Corner where the Honda dealership was, and moved the Honda dealership to where the Nissan dealership was and put Nissan in the new facility. We accomplished all this as well as relocating our Toyota dealership to a new facility in just thirty days.
You're kidding? That sounds like a Chinese fire drill, but with dealerships.
We managed to do it. When times are good, manufacturers are strict about how you use your facilities, they can be very demanding. When times are difficult, manufacturers are much more permissive about how you choose to operate. If you're a good dealer and you make money, you have more latitude. In over 45 years in this business, I've experienced both extremes. Sometimes you have to do things on a temporary basis. You might have three franchises share the same space at a dealership until you have enough time to build facilities for them. It's a good way to start them off.
Tell me about another business venture of yours, Capital Automotive REIT.
I am very proud to have co-founded Capital Automotive REIT, along with Jack Pohanka another local dealer. The REIT is an excellent source of capital for dealers, as well as one of the best tax savings tools a dealer can utilize. We started with a 350 million IPO, and the opportunities it provides a dealer make sense for many reasons. First of all, my existing personal guarantees on the real estate loans were eliminated. The REIT focuses on sale and leaseback transactions for multi-site, multi-franchise auto dealers and we have close to a billion dollars of high-quality auto retail properties in 27 states. Approximately 70% of our rents come from the Top 100 dealer groups, and we have not had a single rental payment default.
I've had a lot of fun starting this venture, and it's been a wonderful investment. The REIT pays a dividend of approximately 10%, and so far this year the stock has provided a total return of about 30%.
I also want to mention that the REIT has made it feasible from a real estate cost perspective for my senior managers to participate in the various partnerships and ventures I've mentioned.
You mentioned consolidators. Obviously, you were approached by some of the consolidators...
They didn't want the whole group, they just wanted to cherry-pick certain dealerships.
Would you ever sell off?
Sure, that's basically what I've always done. I've sold off a number of dealerships to my managers. In fact, I've formed several partnership ventures recently with some long-term managers of mine involving some of my Tysons Corner, Va., dealerships, and I'm presently creating partnership ventures with several other veteran managers.
Wouldn't it make sense to sell to the consolidators the stores they want to cherry-pick? Wouldn't you get more out of it that way?
Definitely, I would get more out of it that way, but these managers have worked very hard and do a great job for us. You have to remember that I was helped in getting my first dealership, and I've tried in turn to help others do the same. It gives me a great sense of pride and satisfaction to see these guys become successful and own their own stores. So far, we've done about 25 of these deals, and many of these guys are millionaires now. They'll probably retire before I do.
You've certainly had some great accomplishments during your career. What other things have you been involved with?
Over the years, my wife Marion and I have actively and enthusiastically supported the arts. My wife has been a member of the board of the National Symphony Orchestra here in Washington for many years. I've served as director and trustee at the National Gallery of Art and I was VP/Treasurer of the Phillips Collection, which boasts one of the largest and finest collections of Impressionist works in the world.
I was recently honored to receive an appointment by Governor Gilmore of Virginia to the Board of the Washington Metropolitan Airport Authority, which operates Reagan National and Dulles International airports.
I am on the boards of First Virginia Bank and The First Virginia Banks, Inc. Currently, I'm the director of Capital Automotive REIT, and I'm also a director and trustee for the Egan Foundation/Coffin School in Nantucket, Mass.
