Capital Automotive Reclaims Full Ownership of 49-Property Automotive Retail Portfolio
Capital Automotive a portfolio company backed by funds managed by Ares Alternative Credit and Real Estate, has completed a transaction that returns full ownership of its MTI Portfolio, a significant collection of automotive retail real estate properties located across the United States.
The company announced that it acquired its joint venture partner’s 90.01% ownership interest in the MTI Portfolio, bringing the entire 49-property portfolio back under Capital Automotive’s ownership. The transaction reverses the partial ownership structure established in 2020, when Capital Automotive sold a majority interest in the portfolio.
The acquisition represents another important step in Capital Automotive’s strategy of investing in and managing real estate that supports automotive retailers and dealership operations. The portfolio consists of properties considered operationally essential to the automotive retail businesses occupying them, providing long-term real estate infrastructure for dealer groups and franchise operations.
49 Automotive Retail Properties Across 20 States
The MTI Portfolio includes 49 operationally essential automotive retail properties covering approximately 2.3 million square feet.
The properties are distributed across 20 states, giving the portfolio broad geographic exposure to automotive retail markets throughout the United States. Its largest concentrations are located in the Southeast, Midwest and Mid-Atlantic regions.
The geographic diversification is an important characteristic of the portfolio because automotive retail markets can vary significantly by region. By maintaining properties across multiple states and markets, Capital Automotive has exposure to a broad range of dealership environments rather than relying on a single metropolitan area or regional market.
The portfolio also has meaningful representation from import and luxury automotive franchises. This provides additional diversification across automotive brands and tenant groups.
Rather than representing a collection of vacant or speculative commercial properties, the MTI assets are operationally important locations used by automotive retailers. Their role in dealership operations makes the underlying real estate closely connected to the day-to-day business activities of the tenants.
Full Ownership Restored
The newly completed transaction returns Capital Automotive to 100% ownership of the MTI Portfolio.
Capital Automotive had previously held an interest in the portfolio before selling a majority stake to its joint venture partner in 2020. Under the joint venture arrangement, Capital Automotive continued to manage the properties throughout the period of shared ownership.
The company was therefore already familiar with the assets, tenants and operational requirements associated with the portfolio. With the acquisition of the remaining 90.01% interest, Capital Automotive now has complete ownership and control of the portfolio.
The transaction follows Ares’ acquisition of Capital Automotive in 2022. Capital Automotive operates as a portfolio company of Ares funds focused on alternative credit and real estate investments.
For Capital Automotive, the transaction creates an opportunity to once again take complete responsibility for the asset management, financing and long-term strategic direction of the MTI properties.
Continuity for Automotive Dealer Tenants
One of the key aspects of the transaction is that tenants are not expected to experience changes to their day-to-day operations.
Capital Automotive managed the MTI Portfolio throughout the joint venture period. As a result, the company already has established relationships with the automotive dealer groups and other tenants occupying the properties.
The continuity of management is particularly relevant in automotive retail real estate because dealership properties are highly specialized facilities. Automotive retailers depend on their locations for showroom operations, vehicle displays, service departments, parts operations, customer parking and other activities that support vehicle sales and aftersales services.
A change in ownership does not necessarily require changes to those operations, but continuity in asset management can help reduce disruption for tenants.
Capital Automotive said that the transaction should therefore be seamless for its dealer partners, with the company continuing its existing relationships and management responsibilities.
CEO Highlights Long-Term Strategy
Roger Stattel, Chief Executive Officer of Capital Automotive, said the company is pleased to bring the assets back under full ownership.
According to Stattel, complete ownership will allow Capital Automotive to oversee the portfolio’s asset management, financing and long-term strategy directly.
The transaction also provides the company with greater control over decisions involving the future of the properties. Full ownership can allow an owner to coordinate property-level strategies across an entire portfolio and align those decisions with broader investment objectives.
For Capital Automotive, the MTI Portfolio represents a substantial collection of automotive retail real estate, with approximately 2.3 million square feet spread across 49 properties.
Stattel also emphasized the established relationship between Capital Automotive and its dealer partners. Because the company remained responsible for managing the portfolio during the joint venture period, the ownership transition does not require a new management structure for tenants.
The company intends to continue strengthening its relationships with the dealer groups operating at the properties.
Triple Net Lease Structure
The MTI Portfolio consists of triple net leased automotive retail properties.
Under a typical triple net, or NNN, lease structure, tenants are generally responsible for expenses associated with the property in addition to paying base rent. Depending on the specific terms of a lease, these responsibilities can include property taxes, insurance and maintenance expenses.
For owners of commercial real estate, triple net leases can provide a structure in which many property-level operating expenses are borne directly by tenants.
Automotive dealership properties can be particularly specialized because they are designed around the requirements of vehicle retail and service operations. These properties can include substantial buildings, showroom areas, service bays, parts departments, vehicle storage and parking facilities.
The combination of long-term leases and specialized automotive facilities can make automotive retail real estate an important segment of commercial property investment.
Importance of Automotive Retail Real Estate
Automotive dealerships require physical locations even as the industry continues to evolve toward digital retailing and changing customer experiences.
A dealership property serves multiple functions. It is not simply a place where vehicles are displayed and sold. Modern automotive retailers frequently use their facilities for vehicle servicing, repairs, parts sales, customer interactions, test drives, vehicle delivery and inventory management.
As a result, strategically located dealership real estate remains an important component of the automotive distribution system.
The MTI Portfolio’s scale gives Capital Automotive exposure to this specialized segment of the commercial real estate market.
Its 49 properties span 20 states and include tenants representing multiple automotive brands and dealer groups. The presence of import and luxury franchises adds another layer of tenant diversification.
Geographic Diversification
The portfolio’s concentration in the Southeast, Midwest and Mid-Atlantic provides exposure to several major U.S. automotive retail regions.
Each of these areas contains established metropolitan markets and communities with significant automotive dealership networks.
Geographic diversification can also help reduce dependence on conditions in any single local market. Automotive sales, dealership consolidation, population trends, employment conditions and real estate values can differ from state to state and city to city.
By maintaining a broad geographic footprint, the MTI Portfolio is positioned across multiple regional automotive markets.
The 20-state footprint also demonstrates the scale of Capital Automotive’s real estate platform and its focus on automotive-specific properties.
Diversification Across Brands and Tenants
In addition to geographic diversification, the MTI Portfolio is diversified across automotive brands and tenant groups.
The company noted meaningful representation from import and luxury franchises. This means the portfolio is not concentrated exclusively in one manufacturer or one type of automotive retailer.
Brand diversification can be significant for automotive real estate owners because dealership networks operate under franchise agreements and manufacturer-specific requirements. Different brands can have different facility standards, market strategies and retail footprints.
A portfolio containing multiple brands and dealer groups can provide broader exposure to the overall automotive retail sector.
Capital Automotive’s Role in the Market
Capital Automotive specializes in automotive retail real estate, focusing on properties that support automotive dealers and their operations.
The company’s continued management of the MTI Portfolio throughout the joint venture period gave it direct experience with the properties and their tenants. That experience is now carried forward under the restored full-ownership structure.
The latest transaction also reinforces Capital Automotive’s emphasis on long-term ownership and management of automotive retail properties.
With complete ownership restored, the company can make portfolio-level decisions without having to coordinate ownership interests with its former joint venture partner.
This could provide additional flexibility in areas such as financing, capital planning, property management and long-term asset strategy, subject to the terms governing individual properties and leases.
A Seamless Transition for Tenants
For the automotive dealers occupying the MTI properties, continuity is one of the most important aspects of the transaction.
Capital Automotive has stated that tenants should expect no change in their day-to-day operations. Since CARS managed the portfolio during the joint venture period, the company already has established operating processes and relationships in place.
This continuity can be particularly valuable for automotive dealers because dealership operations involve significant investment in facilities, equipment, inventory and customer infrastructure.
Maintaining consistent property management allows dealers to remain focused on their core businesses rather than adapting to a new real estate management structure.
Capital Automotive also indicated that it intends to continue developing its relationships with its dealer partners.
Ares’ Ownership of Capital Automotive
The transaction takes place within Capital Automotive’s broader relationship with Ares.
Ares acquired Capital Automotive in 2022, and the company is now a portfolio company of Ares Alternative Credit and Real Estate funds.
Ares has investments spanning multiple areas of credit and real estate, while Capital Automotive focuses specifically on automotive retail properties.
The return of full ownership of the MTI Portfolio therefore expands the assets directly controlled by Capital Automotive within its existing automotive real estate platform.
About Capital Automotive
Headquartered in McLean, Virginia, Capital Automotive provides customized sale-leaseback financing to the automotive industry since 1998. The company partners with dealer groups nationwide to fund acquisitions, construction and facility improvements, as well as estate planning and partner buyouts, while enabling dealers to maintain long-term control of their locations.
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