A Banker`s Perspective of Manufacturer Facility

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National Association of Motor
Vehicle Boards and Commissions
2011 Fall Workshop
Manufacturer Facility Requirements
David G. Braun
Comerica Bank
A Banker’s Perspective on Image
Programs
• Virtually all major manufacturers have them
• Those that do not are announcing them
(Hyundai)
• Some manufacturers have had multiple image
programs over the past 20 years (VW, Toyota,
Mercedes)
• There is varied opinion on whether the images
drive sales or add value
Perspective on the Image Programs
• Expenditures are not small – typically not just
a facelift – Dealers have spent $1 billion in
renovations as part of Image USA II and they
plan to spend another $2 billion over the next
two years - Automotive News September 2006
• Image programs often require interior designs
with product specified by the manufacturer
• The recession has brought some reality and
reasonableness to some of the requirements
Factors in Reviewing Requests for
Financing Real Estate
• Location, Location, Location
– Urban vs. Rural
– Dealer Row vs. Auto Center
– Zoning in the area
– Availability of other Franchises
– Availability of land in the area
Franchise Availability Can Be
Important
Chevrolet
Ford
Toyota
Honda
Chrysler
Nissan
Lexus
Mercedes
BMW
Audi
Cadillac
Lincoln
VW
Infiniti
Acura
Suzuki
Subaru
Saturn
Franchise Availability Can Be
Important
Factors in Reviewing Requests for
Financing Real Estate
• Franchise, Franchise, Franchise
– Some franchises have enduring value
– Some franchises are up and comers
– Some franchises have declining value
– These can change over time
– Some franchise image programs make it difficult
to reconfigure the building
Various Franchise Images
Factors in Reviewing Requests for
Financing Real Estate
• Cash Flow, Cash Flow, Cash Flow
– How is the existing store operating ? Will rent
need to be increased ?
– What are the expectations for profitability after
the renovation ? Profit expectations can vary a lot
based on the size of the expenditure
– Are there other cash flow sources that can help
carry the burden if this store falters ?
– Would higher interest rates stress the cash flow?
Miscellaneous Factors in Reviewing
Real Estate Requests
• How will the cost of the image program
impact the appraised value of the real estate ?
• Will the image program be on balance sheet
as a leasehold improvement ?
• What would be the impact of not doing the
image program on the dealership’s operations
or blue sky value ?
David Braun
Comerica Bank
714-433-3203
[email protected]
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