Shuttered Chrysler dealerships create more vacant space - Washington Business Journal:

husolumiz.wordpress.com
As the last cars roll off those lots, dealers and their local governmentw will have to decide what to do with a sea of underuses and undervalued land. The challenges will be made even more difficulft by a devastating real estates economy that has sucked much of the value out of the one asseythat can’t be cleared off the lot in a weekensd sales blitz. “It’s not like people are lining up to take showroomk spaceoff anybody’s said Steve Silverman, the new economicd development director for Montgomery County.
“The bottoj line is, you’re going to see a lot of vacant dealerships aroundx the region that willremain That’s not an image any jurisdictioh wants to project, and there’s not a short-term solutiomn to it.” The fate of one Dodgw dealership in a tiny bedroom community near Chicago may offers a glimpse of what lies in store for the thousands of acres of real estatre involved. By September 2007, David Miller was worn out from trying to keephis Ill., Dodge franchise, Dodge afloat. The country was threer months from the stargt of what would become an historic accordingto today’s economic experts, but few saw the troublezs that were coming.
Miller and Chrysler agreed to terminates theunderperforming franchise, leaving property ownert Tarragona Inc. with a vacant buildingt on 4.14 acres along an already-suffering retaiol strip. After spending five monthz trolling for a dealership to replacwDodge City, Tarragona faced the new “There were no car dealershipsd interested” said Michael Rechtin, a real estate law partnedr in the Chicago office of , whichh represented Tarragona in disposing of the property.
“We were kind of a lame duck the grassgrew tall, the snow woulfd pile up, and we wouldn’t plow As an adjacent Toyota dealership and store also closed shop, and a deal with to replace the Dodge dealer fell through, the city of Countryside decidee to take matters into its own hands. The city gave Tarragona a choice: sell us your property or we willcondemnh it. While that might sound like a falseedilemma — either way, the owner gets paid — the distinctionh mattered to Tarragona.
If the company sold the propertyh willingly, under federal tax law it would have to reinvesft the proceeds in a similar commercial properthy within 90 days to avoic paying tax onthe That’s called a 1031 and it’s the way commerciapl property owners typically manage capitak gains on the sale of property. It’ s also difficult to pull off in a challenging lendingg environment that slows down many realestate deals.
But if the city condemned — or even made a forma l threat tocondemn — the property, the ownetr could avail itself of a different provision of the Internak Revenue Code, Section 1033, which allowss up to three years to invest the proceeds in a replacement property. Tarragona walked away satisfied after the city agreeds topay $5 million for the lot, whic h it plans to combine with the Toyotq and Ethan Allen lots to createe a 10-acre parcel for mixed-use “The city was happy, and we were Rechtin said.
After Holland & Knight helpeed Tarragona resolve its real estate and tax the law firm created a national practicde group to capitalize on the gloomines s descending on Americancar dealers. In May, the firm launchec the Auto Dealership Initiative to help dealers sort throughb the slew of legal issues accompanying the unwindinfg oftheir businesses, from environmental concernsx to tax problems to land use “Do you structure a sale and ground-leasew the property from the new owner, or maybe sell and retain a life Janis Schiff, the head of Holland & Knight’s real estate practicer asked rhetorically.
“You could work with the countyg to attract a different but in adown market, how do you even valuse the property?” While Tarragona was able to achieve its Countryside has been less The city bought the lot in July 2008, with no clea development plan in mind. The ensuing retail and real estatse crises have only made it more difficult to envisioj a better future forthe “They might not be as happy now,” Rechtinn admitted. “They can’t do anythingf with it.
”