New York City-based W. P. Carey has completed a $287-million sale-leaseback deal with Go Auto for 14 automotive dealership properties in Greater Vancouver, Edmonton, Calgary and Winnipeg.

The portfolio totals 574,854 square feet and is triple-net leased to Go Auto for 25 years, with annual Consumer Price Index-based rent escalations. 

“This is a continuation of our existing global strategy of pursuing large-scale sale-leasebacks,” W. P. Carey senior vice-president of investments Boyd Borjiet told RENX in an exclusive interview. “The property type here is a little different from what we’ve typically done in Canada, which is industrial, but it's very much in line with what we've done globally. 

“We've invested in auto dealerships in the U.S. and Europe. We found this opportunity completely off-market in Canada through relationships.”

Deal frees up capital for Go Auto

Go Auto is the second-largest automotive dealership group in Canada with 74 locations across Western Canada and the United States. It offers customers a selection of more than 16,000 new and pre-owned vehicles across 31 brands.

Borjiet said Go Auto sold the portfolio to free up capital to reinvest in its business, which is common among companies doing sale-leaseback deals. 

“By partnering with someone like us, a public REIT with ample liquidity and plenty of access to capital, they’re unlocking not only capital trapped in these properties themselves, but they find in us a long-term partner,” Borjiet explained. “With every sale-leaseback we enter into, it's not just one and done.

"It's to establish a partnership to be their go-to real estate partner.”

Dealerships involved in the transaction

These are the 14 Go Auto dealerships involved in the transaction:

• a 103,380-square-foot property at 5600 Parkwood Cres. in Richmond, B.C.;
• a 98,870-square-foot property at 5680 Parkwood Cres. in Richmond;
• an 18,091-square-foot property at 13611 Smallwood Pl. in Richmond;
• a 30,000-square-foot property at 1751 and 1881 United Blvd. in Coquitlam, B.C.;
• a 31,228-square-foot property at 20622 Langley Bypass in Langley, B.C.;
• a 29,174-square-foot property at 19360 and 19372 Langley Bypass in Langley;
• a 49,579-square-foot property at 18215 and 18245 Stony Plain Rd. in Edmonton;
• a 27,502-square-foot property at 1275 101 St. in Edmonton;
• a 68,402-square-foot property at 18925 Stony Plain Rd. in Edmonton;
• a 25,837-square-foot property at 18920 100 Ave. NW in Edmonton;
• a 26,000-square-foot property at 170 Glendeer Cir. in Calgary;
• an 8,385-square-foot property at 175 Glendeer Cir. in Calgary;
• a 31,227-square-foot property at 475 Sterling Lyon Pkwy. in Winnipeg;
• and a 27,179-square-foot property at 660 Pembina Hwy. in Winnipeg.

The properties are in strategic locations in top retail and commercial corridors along highly trafficked thoroughfares. Quality automotive real estate is extremely supply-constrained in these markets, Borjiet noted, which enhances the strategic importance of the sites.

“We really like this particular portfolio of real estate because these are some of the company's highest-performing locations,” he said. “We really like the brand mix and really believe in the future potential of these sites – not only from a real estate value perspective but also from a profitability standpoint, as we believe in the continued strength of these brands at these locations.”

W. P. Carey’s portfolio

W. P. Carey is a publicly traded real estate investment trust that was founded in 1973. Its portfolio encompassed 1,682 net lease properties totalling 183 million square feet and with an annualized base rent of US$1.6 billion as of Dec. 31. Its properties housed 371 tenants and had a 98 per cent occupancy rate.

W. P. Carey has owned properties in Canada for more than 20 years. This latest deal expands its footprint in the country to almost 50 properties totalling more than six million square feet. 

Before this latest transaction, more than 97 per cent of the Canadian portfolio was comprised of industrial and warehouse properties. Most were in Ontario. 

This includes 11 pharmaceutical research and development and advanced manufacturing properties encompassing about 2.3 million square feet leased by Apotex Pharmaceutical Holdings, which makes it W. P. Carey’s second biggest tenant overall.

Borjiet said W. P. Carey is very bullish on Canada and will continue to be active in the market since there’s less competition for sale-leaseback deals in this country than in the U.S.

“We're hoping that this transaction is a signal to the market that we're the pre-eminent provider of sale-leasebacks in Canada – not just when it comes to industrial and manufacturing properties, but to all asset classes and to all operators that are looking to free up capital to reinvest in their business,” said Borjiet.