AUSTRALASIAN Property Investments and Automotive Holdings Group say they have created a new class of investment property with the establishment of a $66 million property syndicate involving five car dealerships in Perth and Sydney.
The Perth properties include Midway Ford in Midland, Challenger Ford’s new and used dealerships in Rockingham, and the Rockingham Hyundai and Suzuki dealership.
Under terms of the syndicate agreement, API has a 90-day option to finalise the AHG Property Syndicate No 1 and a further 45 days to complete the purchase of the five properties for $47 million, $3.5 million above AHG’s book value.
The syndicate would then provide a further $19 million to complete four new car dealerships, including Holden and Hyundai outlets, at Castle Hill in Sydney.
AHG will lease back each site on 15-year lease terms with two 10-year options.
AHG’s property manager, Australia and New Zealand, Phil Oates, said proceeds of the trust would provide additional funding for the company’s growth plans, including the expansion of its dealer network in Victoria.
Late last month the company announced it had acquired all but one of Jeff Wignall Group’s 10 Victorian car dealerships for $14 million, while earlier this week it said it would develop a $4.8 million Holden franchise in South Melbourne.
“The AHG Property Syndicate Number 1 represents a natural progression of our long-standing strategy to recycle dealership properties and release cash for future investments,” Mr Oates told WA Business News.
“This is achieved through a structured sale and leaseback arrangement that releases capital which can then be used to buy further properties or for other investment opportunities.”
Mr Oates said AHG would evaluate the performance of its initial trust before deciding whether to push ahead with a second syndicate covering two undeveloped commercial sites in Sydney, valued at $23 million.
He said the second fund would only come into fruition based on the success of the first fund.
API managing director Peter Hughes was also confident interest in the initial AHG trust would be high, with internal projections indicating a 15 per cent return on investment over its nine-year term.
“API has turned to secure high income-producing investments,” Mr Hughes said.
“In terms of our selection criteria, there is a trifecta of factors that influences our selection – high income, capital growth opportunity, and tax-deferred benefits.
“The AHG Property Syndicate offers a good outcome for all of those, backed by a 15-year lease to Australia’s largest automotive group.
“It certainly gives investors some comfort with the income distributions being maintained.”
Mr Hughes also said current market conditions provided a good opportunity for property syndicates.
Since 2001, API has managed 15 syndicates with values in excess of $400 million, claiming to have never produced a return lower than 13 per cent.
The AHG syndicate is the first syndicate API has established this calendar year, following successful syndications in June and September last year.
“Interest rates are low, and property yields are high, so it is a good time for unlisted property trusts,” Mr Hughes said.
“When the market is booming, it is very hard to give a dividend to an investor.
“These are good buying times for our business.”