Ares Closes $3.8B Net Lease Acquisition of Capital Automotive

Originally published by GlobeSt

Skyrocketing prices for new and used vehicles is making it more likely that consumers will maintain their existing vehicles and it's leading investors to look for ways to play the trend in commercial real estate.

Ares Management Corporation announced that funds managed by its Alternative Credit strategy and Real Estate Group have acquired Capital Automotive (CARS) from a Brookfield private real estate fund for $3.8 billion.

Lanie Beck, Northmarq, Director of Corporate Research, Marketing & Communications, tells that automotive retailers have always been a staple of the net lease investment market.

“This asset class grew in popularity during the pandemic due to the essential nature of many concepts, and just in recent months, the market has seen hundreds of properties transact across the aftermarket auto parts, c-store, auto maintenance, collision and car wash sectors,” Beck said.  

Higher new and used vehicle prices are contributing to growing demand in this space, Beck continued. “We’re actively tracking expansion plans for a number of automotive tenants, and net lease investors will have great opportunities in the coming years as brands like AutoZone, O’Reilly Auto Parts and Take 5 Oil Change, to name a few, carry out their aggressive growth strategies,” she said.

Ares’ latest transaction highlights its increased focus on serving sponsors and companies in need of flexible net lease solutions. “This is an area of the market that plays to Ares’ strengths as a platform given the different disciplines that are in constant collaboration,” David Roth, Partner and Co-Head of US Real Estate, said in prepared remarks. “We believe that our ability to apply a hybrid real estate and credit lens to assess opportunities is a key differentiator.”

CARS Provides Capital to Auto Dealers

Headquartered in McLean, Va., CARS is a self-managed real estate company that provides sale-leaseback capital to automotive dealers in the US and Canada.

The company owns a portfolio of over 250 real estate assets that are structured as long-term triple net leases.

Including the recent investment in CARS, Ares’ funds have invested in over 1,200 assets totaling approximately $7.2 billion of gross asset value in the US and Europe over the last 15 months. This includes net lease investments spanning retail, industrial and office assets leased to tenants with varying credit profiles.

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