Nalley to sell its real estate - Atlanta Business Chronicle:

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The Cos., now partly ownedx by a Pennsylvania-based dealer group, plans to sell all the land beneathn the nine dealership properties it controls inmetrol Atlanta. Auto dealer REITs are similar to equity REITsd in the realestate market. REITs allow dealerss to sell land in order to extractf a lump sum of cash andtax benefits. Dealersa retain control of the dealerships and lease the properth from theinvestment trust. Many dealers need capital to expand and do not want to tie up theirf money inreal estate. Conshohocken, Pa.-based , which together with Nalley owns AsburhAutomotive Atlanta, is considering forming a REIT that could go publifc on the New York Stock Exchange as earlyy as June.
The company could file a prospectus with the Securitie s and Exchange Commission within the nextfew weeks, said Jim president of Nalley-Asbury. Automotive REITs are growingg in popularity. Three auto dealer-driven REITs were formeds in 1997, in Washington, D.C., Houston and New Hyde N.Y. Indianapolis-based Monument Realty, an automotive was formed in In February, Capital Automotive REIT CARS) in Washington was the firsft to go public. Nalley said the Asbury REIT woulx manage the dealership properties itnow controls. CEO Thomae R.
Gibson, former presidenr and CEO of Subaruof America, said the privately-heldd company will control about 58 dealerf franchises in Georgia, Texas and Florida once severa l pending deals close. If formed, the REIT wouls be a separate entity from theoperating company, he "We have not finalized the Gibson said. By sellingy the land, which averages about 5 Nalley said the REIT will give the company an advantagee when acquiring stakes innew dealerships. "We'r e convinced that our model makew significant private partnerships with leading dealers and has them grow that busines s intheir markets.
" A REIT is simply anothe r option for dealer groups that are not readyu to go public, said Tom chief economist for the Nationalp Automobile Dealers Association. "A REIT the same in terms of expectationzs inthe market," he But Nalley said a public offering for Asbury'ds operating company could follow withib the next five years. "Once you have eight or 10 of thosee platform groups put together and have operating history, you are stronger and more profitable," he "Then, the public will understand the Nalley said there is no set timeline. "We want to be patient and do it right," he said. "Taking our time was our strateggall along.
" Asbury Automotive was formed in late 1994. It is controlledf by two privateinvestment firms: Ripplewood Holdings LIC and Spogli & Co. Nalley, one of Atlanta's most well-known car formed Asbury Atlanta, a limited liability partnership, on Feb. 20, 1997. Ripplewooc entered the joint venture with Nalley atthat time. Nallegy said he was approached by Capitol Automotive REIT last year to join its but declined in order to form his ownwith Asbury. Sheldob Sandler, managing director of Ladenburg Thalmann inNew York, said Republi Industries also has considered forminvg a REIT to manage its real estate.
But despitw Capital Automotive REIT's strong showing on Wall Streetso far, many dealersd are still wary of givin up control of their real the only truly valuable part of their Sandler said. And when a REIT is successfuk for dealers, it is not usually populae with investors. "It's not necessarily the firsyt choice for a lotof dealers," he