"We're being patient. When we see good deals with good yields, we take advantage of them," says vice president and CFO David Kay. The plan is based on buying car lots from strong dealerships and leasing them back to the sellers, while maximizing interest rate spreads on the deals.

It achieves several objectives. "We want to maintain good relations with clients and increase net asset values and shareholder value," Kay explains.

The company expects to yield a 10.9% dividend on a running-rate basis. Analysts project that the company's stock, now at about $13.81, will rise to $17 to $18 per share during the next 12 months.

The McLean-based REIT financed most of the debt short-term but expects to convert this to permanent financing during the fourth quarter. About $1.9 million was paid in operating partnership units and $1.6 million in permanent financing was arranged up-front.

Most of the acquisitions, made in four separate deals, build upon Capital Automotive's existing relationships with dealer groups. These include buying five properties in Alabama, Florida, North Carolina and Texas from Sonic Automotive, the nation's second largest auto dealer group; one Illinois property from Auffenberg Automotive Group; and two Houston properties from Momentum Automotive Group. Capital Automotive also found a new partner, buying a wholesale vehicle auction property from Auction Broadcasting Co. in Indianapolis.

Instant Insights /

Capital Automotive REIT Buys Another $39.6 Mil in Car Lots

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