AHG in sale and lease-back talks

Automotive Holdings Group has entered discussions for a $77.5 million sale and lease-back of an existing dealership and two development properties on the east coast, the second deal of this type in three years.

AHG plans to sell and lease-back its Sutherland Mazda dealership at Kirrawee, as well as a property in Hoxton Park, west of Sydney, for $38.5 million.

Under the terms of the proposed transaction, the buyer will fund the development of a NSW state office and distribution centre at Hoxton Park, and will purchase and fund AHG’s Hillcrest Mazda dealership development at Browns Plains near Brisbane.

“The proposed transaction is part of our normal capital management strategy to maintain capacity in our balance sheet to fund growth opportunities,” AHG managing director Bronte Howson said.

No binding agreement has been entered into by the parties at this stage.

If completed, AHG expects to relieve about $39 million in future development spending.

It doesn’t expect the transaction will have a material impact on forward operating earnings.

Last week, AHG announced it would be selling its Covs Parts business to GPC Asia Pacific for about $45 million.

In 2012, Australasian Property Investments launched a $66 million unlisted automotive property trust with AHG, which involved the sale and lease-back by AHG of five automotive dealership sites in Perth and Sydney.

About $47 million was paid to AHG, with $19 million refunded to cover development costs at its Castle Hill dealerships in New South Wales.

AHG shares were 0.3 per cent higher to $4.25 each at 11:30am.