Auto Dealers and Development/Redevelopment and Real Estate & Retail

Vacant dealerships join already rocky real estate market

June 8, 2009

The owners of car dealerships slated for closure by Chrysler and General Motors face a tough environment for unloading their real estate, but an expected onslaught of such properties has at least one company preparing to grab a slice of the business.

CB Richard Ellis has formed an Automobile Dealership Services group to dispose of some of the thousands of dealerships expected to close as car manufacturers restructure.

"We saw the handwriting on the wall about a year ago that there were going to be a number of auto dealership closures," said Lee Wilhite, a senior associate in the local CBRE office.

Wilhite is the local point man for the group, which CBRE formed two months ago to make sure its brokers nationwide are schooled in how to handle such listings. Los Angeles-based CBRE counts Chrysler and Ford Motor Co., which also is thinning its dealer ranks, among its national clients and stands to pick up listings in cases where the manufacturers own the real estate.

"It's a whole new era--something we're going to be learning just like everyone else," Wilhite said.

Brokers say no one tracks the number of empty car dealerships for sale nationally. Wilhite knows of four or five for sale here, and there will surely be more as manufacturers downsize.

Wilhite's education in the finer points of selling an empty car dealership started about a year ago when he became the listing agent for the former Sharp Ford store at 3931 S. East St. Wilhite had a buyer for the 6.5-acre site owned by Ford, but the deal unraveled over a disagreement about environmental remediation.

Remediation is especially important in the sale of former dealerships because buyers typically want to clear the sites for redevelopment.

A car lot's potential for redevelopment is largely a function of location, said Abbe Hohmann, senior vice president in the local office of Colliers Turley Martin Tucker.

But parcel size also plays a role. Hohmann said developers are typically looking for a 12- to 15-acre parcel, which is on the high end for a car dealership.

Of course, in today's real estate market, finding a buyer willing to pay a decent price is a challenge in itself.

Before the recession, a well-located dealership site of 10 or more acres might have sold for around $12 a square foot, Hohmann said. The same property in a less desirable part of town would have gone for about $3.50 a square foot. She said sellers today can expect to get 25 percent to 40 percent less.

Among those watching the market is Gary Huffman, a partner in the Palmer Chrysler Jeep Dodge dealership at 5051 Pike Plaza Road near Lafayette Square. Palmer moved to the facility, which formerly housed another dealership, in 2007 after what Huffman described as a "major investment" to bring it up to Chrysler's standards. Now the dealership is one of three in Indianapolis Chrysler expects to close.

Huffman said he and his partners got the bad news last month, a few days after finishing another $400,000 in improvements to the 3.1-acre property.

"If we can't work something out with Chrysler, it goes on the market," Huffman said. He and his partners plan to keep Palmer Dodge, at 4545 E. 96th St., which is also on the closing list. It's already being recast as an outlet for used cars.

Gene Beltz Shadeland Dodge, at 1630 N. Shadeland Ave., is another dealership Chrysler is closing. Kevin Beltz said his family hopes to hang onto the property, which it bought in 1999.

"If we have two nickels to rub together after this is over, we're going to try and stay open and sell used cars."

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