The REIT acquires properties that meet its investment criteria in order to diversify its tenant base while continuing to focus on tenant quality, stability of cash flow and brand and geographical diversification in strategic markets. The REIT evaluates potential acquisition opportunities based on a number of factors, including valuation, expected financial performance, physical features, existing leases, functionality of design, geographic market, location and opportunity for future value enhancement.
Management believes that due to the highly fragmented nature of the automotive dealership industry in Canada, the REIT is well-positioned to capitalize on opportunities for accretive acquisitions from third-party vendors. As the only publicly-listed vehicle in Canada exclusively focused on automotive dealership properties, Management believes that the REIT represents an attractive option for automotive dealership operators who are considering a sale or recapitalization of their business. Of the approximately 3,500 automotive dealerships in Canada (as at Dec. 2018), Management estimates that the top 10 dealership groups represent approximately 10% of total dealerships in operation. Succession planning issues make the sale of a dealership’s underlying real estate an attractive liquidity alternative – allowing dealers to monetize their real estate while retaining ownership and control of their operations, and redeploying capital to expand their business.