How does Capital Automotive underwrite its acquisitions?
Capital Automotive performs complete institutional due diligence on each acquisition, including a real estate review, a financial review, an environmental review, a structural review, and a market review. • What is Rent Coverage? Rent Coverage is a measure of a tenant’s cash flow and is a measure used to evaluate credit risk. Capital Automotive’s leases generally specify minimum cash flow coverage ratios of 1.5 times. • How do you value properties? Properties are acquired at their fair market value. CARS considers several methods of valuation in arriving at fair market value including review and analyses of comparable property sales, review of MAI appraisals, the alternative uses for the properties, and the financial strength of the prospective lessees. • How are rents determined? Initial base rents are determined by applying a “Cap Rate”, or rent factor, to the value of the real estate being purchased. Cap Rates are determined using various factors including: • Current yield on the 10
