Capital Automotive Closes MMR Holdings Transaction
17 August 1999
Capital Automotive Closes MMR Holdings Transaction Expected to Add $0.14 Per Share to Funds from Operations Annually
McLEAN, Va., Aug. 16 -- Capital Automotive ,
the nation's leading specialty finance company for automotive retail real
estate announced today the closing of the acquisition of MMR Holdings, L.L.C.
("MMR"), an affiliate of Sonic Automotive Inc. . MMR and its
subsidiaries own 56 properties valued at $200 million. The properties are
located in 10 states: Alabama, Florida, Georgia, Maryland, North Carolina,
Ohio, South Carolina, Tennessee, Texas and Virginia. The properties are
tenanted by 73 franchises including Ford, BMW, Chrysler and Toyota. Two
additional properties valued at $7 million are currently under contract, which
management anticipates closing by the end of the third quarter 1999.
Management expects that this transaction adds approximately $0.14 per share to
Funds from Operations on an annualized basis.
Affiliates of Sonic have entered into new triple-net leases on 48 of the
properties with lease provisions substantially consistent with Capital
Automotive's portfolio. Sonic has guaranteed all of these leases. Other
dealer groups, including United Auto Group, lease the remaining 8 properties.
Initial lease terms on all the properties average approximately ten years.
Sonic has agreed to renew at least 75% of the Sonic lease rental stream for an
additional 5-year period. With this acquisition, properties leased to Sonic
now comprise approximately 23% of the Company's property portfolio.
The majority of the MMR acquisition was financed with a $150 million
mortgage loan from Ford Motor Credit Company ("Ford Credit"). Interest is
fixed at a rate of 8.03% per annum. The loan has a 12-year term, with two
years interest only followed by principal amortization based on a 25-year
amortization schedule. The remaining portion of the purchase price was funded
with cash on hand and a bridge loan from an affiliate of Deutsche Banc
Alex.Brown that requires monthly interest only payments at a rate equal to the
one month LIBOR plus 200 basis points. It is anticipated that the bridge loan
will be paid off with a permanent mortgage loan with the same financial
institution, which is expected to close within the next 90 days.
Thomas D. Eckert, president and chief executive officer of Capital
Automotive, stated, "This closing completes the Company's largest transaction
to date. This outstanding acquisition provided the Company with a leveraged
return on equity of approximately 16.0%. We are proud to be Sonic's real
estate partner and to expand our relationship with Ford Credit. These
relationships further illustrate the solid franchise value we have created,
which will help drive our future growth."
The MMR transaction increases the Company's annualized rental revenue from
the largest 100 dealer groups in the country from approximately 55% to
approximately 65% which management expects to provide further stability to
rental revenues. Approximately 45% of these annualized revenues will be from
the largest 20 dealer groups. The Company's total portfolio cash coverage
ratio increased from approximately 3.2x to approximately 3.7x rental payments
as a result of this transaction.
The Company's portfolio now includes a total of 212 properties with 323
automotive franchises in 26 states. These properties total 7.4 million square
feet of buildings and improvements on 1,174 acres of land. The properties are
leased on long-term, triple net leases with an average initial lease term of
13.2 years.
Capital Automotive, headquartered in McLean, Va., is a self-administered,
self-managed real estate investment trust formed to acquire the 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 web site at
http://www.capitalautomotive.com .
To receive Capital Automotive's latest news and corporate developments via
fax at no cost, please call 1-800-PRO-INFO; use Company code CARS. Or visit
The Financial Relations Board's web site at http://www.frbinc.com .
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 Company's future
operations will depend on a number of factors that may differ, some
materially, from the Company's assumptions. These factors, which could cause
the Company's actual results to differ materially from those set forth in the
forward-looking statements, include risks that the Company's tenants will not
pay rent or that the Company's operating costs may be higher than expected,
risks of interest rate fluctuations impacting future acquisitions, risks that
new or pending acquisitions may not be consummated, environmental and other
risks associated with the acquisition and leasing of automotive properties and
those risks detailed from time to time in the Company's SEC reports, including
its annual report on Form 10-K, its quarterly reports on Form 10-Q, and the
Company's current report on Form 8-K, dated February 26, 1999.
