Absolute Internet-Proof Investment? Collision Centers May Offer an Option

If you wreck your car, there’s a higher-than-average chance you’ll have it repaired at a so-called collision center.

It’s a growing multibillion-dollar industry that has become ripe for real estate investors seeking alternative safe havens that offer the potential for steady cash flow and a nice return.

“People love them because they are completely internet proof,” said Kevin Mansour, managing partner for the Mansour Group in San Diego, a Marcus & Millichap real estate services firm specializing in single-tenant retail and shopping center properties.

These properties fall into the nontraditional net-lease category since they aren't quick-service restaurant properties, dollar stores or pharmacies, which tend to be more popular investments.

With net leases, the landlord pays little to no operating expenses on the property. In return, they get an annual return on investment, known as the capitalization, or cap, rate.

Caliber Collision and Service King, both Dallas-Fort Worth-area based companies owned by major private equity firms, lead the auto body industry. Caliber Collision is the bigger of the two, with more than 1,100 locations in 37 states. Service King has 344 locations in 24 states.

CoStar data shows 47 Caliber Collision were sold last year and more than 30 so far this year. Meanwhile, eight Service King properties have been sold this year and 17 were sold last year.

Combined, “that’s a lot for nontraditional net-lease,” Mansour said.

For perspective, investors snapped up 152 Starbucks properties last year and 87 have traded this year. The coffee chain, of course, has about 15,000 locations around the U.S.

Prices and annual yields for collision centers vary by property. Factors in pricing and cap rate include the property’s age, terms left on the lease and location.

For example, a Caliber Collision in Leander, Texas, built last year sold to an individual investor in June for $5.46 million with a 6.1% cap rate. A property built in 2003 in Columbia, South Carolina, was sold last month for $2.4 million with an 8.66% cap rate.

Building new locations tends to require special permitting to open, so they aren’t likely to move. But finding a new tenant should they leave could be a challenge.

Mansour said a lot of the individual buyers come out of California. They typically sell apartments there to get away from the property maintenance, management and expenses and roll their gains into the collision center property, he said.

Caliber Collision and Service King continue to expand locations, either through new construction or buying an existing shop and converting it. This gives investors more opportunities over time.

Service King has backing from New York private equity firm Blackstone. Blackstone bought a majority stake in the chain five years ago from the Carlyle Group, another private equity firm which remains a minority owner. At the time, Service King had 177 locations

San Francisco-based private equity firm Hellman & Friedman bought a majority stake in Caliber Collision last December and merged the company with Hellman’s other investment ABRA Auto Body & Glass, taking the chain to more than 1,000 locations.

Earlier this month, Caliber Collision bought Herb’s Paint & Body, adding eight locations in the Dallas area.

Steve Grimshaw, Caliber’s CEO, said in statement then that bringing in Herb’s is part of the company’s “drive toward becoming the collision repair provider of choice in every community we serve.”