Capital Automotive LLC

The stable outlook on CARS reflects S&P Global Ratings' expectation for credit protection measures to remain highly leveraged over the next year. However, we expect modest improvement in leverage, with debt to EBITDA projected to decline to the mid-11x area in 2019 before rising back slightly to the low-12x area in 2020 (compared with 13.0x in 2018), and adjusted fixed-charge coverage (FCC) around 1.3x. We also expect operating performance to remain stable, supported by high occupancy levels, good tenant coverage, and steady automotive real estate demand. Although unlikely, we could raise the rating on the company if adjusted leverage declines to and remains around 11x, with operating performance remaining stable. In addition to deleveraging, CARS would need to have greater

...Capital Automotive LLC (CARS) is a dominant player in the niche automotive retail real estate market in North America. We expect operating performance to remain stable over the next year, with occupancy in the high-90% area, supported by the stability of the company's triple-net leased portfolio and long weighted average lease terms. Moreover, we expect the company to remain somewhat insulated from headwinds in the automotive industry, given its focus on vehicle dealerships and businesses that generate revenue from parts and services and customer financing. We expect modest improvement in leverage over the next year. This follows outsized asset sales in 2019 (the company sold a portfolio of assets in July 2019 for approximately $585 million), the proceeds of which the company largely used to pay down debt. However, we expect CARS to remain highly leveraged due to the aggressive financial policies employed by sponsor Brookfield Property Partners (BPY)....

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