Closings driving car dealer prices down
The government’s takeover of General Motors and Chrysler meant pink slips for car dealers across the country. Bankruptcy proceedings for Chrysler closed five franchises in South Florida, along with two by General Motors, though those are expected to be the first of many.
The closings eliminate jobs and will push cars off the lot for far less than market value — and force many dealers to transition to selling used cars or selling their properties.
Veteran automobile dealership broker Gordon Page of Tampa’s Gordon Page & Associates says these conditions mean falling prices for dealership lots.
“It has devalued the price of their real estate,” says Page, a former dealership owner who has worked in the car industry since 1958. “We have a lot of dealers calling asking to sell real estate; a lot of things have come up to the front and on the table,” he says.
The closures created large unsold inventories and scrambles to find new franchises and sell the vehicles sitting on their lots.
“Dealerships, because of the price of the real estate, a lot of dealers put their whole life behind the business — that was their retirement. With the manufacturers not having any obligation to buy back cars, buy back parts, dealers are selling cars for a fraction of what they could be selling for just to get rid of them.”
According to Page, the properties can move quickly, although Florida sales can take longer.
“They’re all over the place — sometimes we’ve sold dealerships the same day, and others drag on and on. Different parts of the country have different problems and solutions: New York, for example, New York dealers are not really big in used cars because they don’t have the space. Florida is different, because you’ve got some expansive real estate, and it takes creative selling to sell some of this property.”
Page says some dealers own the land and the dealership building, but in other cases dealers merely lease the land.
When litigation to save their dealerships failed after Chrysler’s bankruptcy, five dealers in South Florida were set to be terminated: Tamiami Chrysler and Maroone Dodge in Miami, Maroone Chrysler-Jeep-Dodge in Coconut Creek, Monarch Dodge in Lauderdale Lakes, and Spitzer Autoworld in Homestead.
Senator Bill Nelson has introduced legislation that would compensate GM and Chrysler dealers for parts and inventory purchased over the past nine months and would give terminated dealers a minimum of 180 days to liquidate inventories.
Two GM dealerships in South Florida, Pines Pontiac in Pembroke Pines and Lehman Autoworld in Miami, are slated to close, with more expected.
Ted Smith, President of the Florida Association of Automobile Dealers, said it’s hard to predict what will happen to property prices. While Chrysler’s terminations have been announced, only a few GM dealerships have been closed, but there’s every indication there will be more, which could skewer valuation projections.
“It’s kind of difficult to know what the impact’s going to be when we don’t even know what the count is going to be in terms of General Motors — they didn’t go through their bankruptcy process in the same way Chrysler did, so even though we’re the state dealer association, what we’re finding is that there’s a tremendous amount of secrecy involved in which GM dealers are the ones being terminated [and] which ones are being allowed to continue.”
“All we do is sell car dealerships, and we sell franchises — this is a good time to be buying a car dealership,” says Page. “It’s a great opportunity. The ones that are left standing should do extremely well.”