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Capital Automotive REIT Announces Proposed Restructuring and Proposed Tender Offer for the Series A and Series B Preferred Units of its Successor to be Issued to Holders of its Outstanding Series A and Series B Preferred Equity in Connection with the Restructuring

MCLEAN, Va., Dec. 16, 2005 -- Capital Automotive REIT (the "Company") today announced that, on or about December 30, 2005, it expects to convert from a Maryland real estate investment trust to a Delaware limited liability company. The restructuring will be deemed a liquidation for federal income tax purposes.

Earlier today, the Company completed its previously announced merger with Flag Fund V LLC and other entities advised by DRA Advisors LLC, pursuant to which CA Acquisition REIT, a wholly-owned subsidiary of Flag Fund V LLC, merged with and into the Company, with the Company continuing as the surviving REIT, with all of its common shares owned by Flag Fund V LLC. Following the merger, the Company's 7 1/2% Series A Cumulative Redeemable Preferred Shares and 8% Series B Cumulative Redeemable Preferred Shares remain issued and outstanding, and quoted on the Nasdaq National Market.

In the restructuring, all of the Company's outstanding Series A and Series B preferred shares will be converted into Series A and Series B preferred units, respectively, of the new Delaware limited liability company (the "Company's Successor"), with their rights, preferences, restrictions, qualifications, limitations, terms and conditions as provided in the Articles Supplementary with respect to such securities materially unchanged.

The Series A and Series B preferred shares will remain registered under the Securities Exchange Act of 1934 (the "Exchange Act") and quoted on the Nasdaq National Market until such time as the restructuring has been completed and the Series A and B preferred units are issued. Such units, when issued, will not be registered under the Exchange Act and will not by quoted on the Nasdaq National Market or any other automated quotation system or traded on or through any stock exchange.

Following the restructuring, in early January 2006, the Company's successor expects to commence a cash tender offer for any and all of its then- outstanding Series A and Series B preferred units at a price of $25.00 per unit.

PLEASE NOTE THAT THE RESTRUCTURING COULD HAVE ADVERSE TAX CONSEQUENCES TO SOME OF THE COMPANY'S PREFERRED SHAREHOLDERS. WE ADVISE YOU TO CONSULT WITH YOUR OWN TAX ADVISOR TO DETERMINE HOW THE RESTRUCTURING AFFECTS YOUR OWN PERSONAL SITUATION.

THIS ANNOUNCEMENT IS NOT AN OFFER TO PURCHASE, NOR A SOLICITATION OF AN OFFER TO SELL, THE SERIES A PREFERRED SHARES OR THE SERIES B PREFERRED SHARES, OR THE SERIES A OR SERIES B PREFERRED UNITS, WHEN ISSUED. A TENDER OFFER BASED ON THE PROPOSAL DESCRIBED IN THIS PRESS RELEASE HAS NOT YET BEEN COMMENCED. UPON THE COMMENCEMENT OF ANY TENDER OFFER, THE COMPANY'S SUCCESSOR WOULD DISTRIBUTE AN OFFER TO PURCHASE AND RELATED DOCUMENTS TO ALL HOLDERS OF RECORD OF THE SERIES A AND SERIES B PREFERRED UNITS. THE PREFERRED UNITHOLDERS OF THE COMPANY'S SUCCESSOR SHOULD READ THE OFFER TO PURCHASE AND RELATED DOCUMENTS WHEN THEY BECOME AVAILABLE, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. THE OFFER TO PURCHASE AND RELATED DOCUMENTS WILL BE AVAILABLE FREE OF CHARGE FROM THE INFORMATION AGENT FOR THE TENDER OFFER.

About Capital Automotive

Capital Automotive, headquartered in McLean, Virginia, is a self- administered, self-managed real estate investment trust. The Company's primary strategy is to acquire real property and improvements used by operators of multi-site, multi-franchised automotive dealerships and related businesses. Additional information on Capital Automotive is available on the Company's website at http://www.capitalautomotive.com/.

Forward-Looking Statements

Certain matters discussed within this press release are forward-looking statements within the meaning of the federal securities laws. Although the Company believes that the expectations reflected in the forward-looking statements are based upon reasonable assumptions, the forward-looking statements contained in this press release are subject to risks and uncertainties, including, but not limited to, risks related to the Company's conversion from a REIT to a limited liability company; risks that the proposed tender offer will not be made on the terms described herein, or at all, or that fewer than all of the preferred units will be tendered; risks resulting from the fact that the Series A and Series B preferred units will not be registered under the Exchange Act or quoted in or traded through any stock exchange or automated quotation system; risks associated with the increases in operating costs resulting from the additional expenses the Company has incurred relating to the merger; risks that the Company's tenants will not pay rent; risks related to the mortgage loans in the Company's portfolio, such as the risk that borrowers will not pay the principal or interest or otherwise default, the level of interest income generated by the mortgage loans, the market value of the mortgage loans and of the properties securing the loans, and provisions of federal, state and local law that may delay or limit the Company's ability to enforce its rights against a borrower or guarantor in the event of a default under a loan; risks related to the Company's reliance on a small number of dealer groups for a significant portion of its revenue; risks of financing, such as increases in interest rates, the Company's ability to meet existing financial covenants and to consummate planned and additional financings on terms that are acceptable to the Company; risks that its growth will be limited if the Company cannot obtain additional capital or refinance its maturing debt; risks that planned and additional real estate investments may not be consummated; risks that competition for future real estate investments could result in less favorable terms for the Company; risks relating to the automotive industry, such as the ability of the Company's tenants to compete effectively in the automotive retail industry or operate profitably and the ability of its tenants to perform their lease obligations as a result of changes in any manufacturer's production, supply, vehicle financing, incentives, warranty programs, marketing or other practices or changes in the economy generally; risks generally incident to the ownership of real property, including adverse changes in economic conditions, changes in the investment climate for real estate, changes in real estate taxes and other operating expenses, adverse changes in governmental rules and fiscal policies and the relative illiquidity of real estate; risks related to the Company's financing of new construction and improvements; environmental and other risks associated with the acquisition and leasing of automotive properties; risks related to the Company's status as a REIT for federal income tax purposes, such as the existence of complex regulations relating to its status as a REIT, the effect of future changes in REIT requirements as a result of new legislation and the adverse consequences of the failure to qualify as a REIT; and those risks detailed from time to time in the Company's SEC reports and other filings, including its Form 8-K/A filed on March 11, 2005, its annual report on Form 10-K and its quarterly reports on Form 10-Q.