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Open Road Capital steers Bain funds into dealerships

Open Road Capital, an auto-retail investment company, expanded its dealership investments in 2021. The group last year announced it had partnered with Bain Capital Credit. Now it's using that funding to work with franchisees and help them grow.

Open Road Capital, just more than a year after making its first auto dealership investments with Bain Capital Credit as a funding partner, has grown its store platform through three new partnerships.

Open Road, an auto-retail investment company which in September 2020 bought a majority stake in four Mississippi dealerships with Bain Capital Credit funding, has invested into three projects this year:

1. It bought a minority stake in Pritchard Cos., a family-run, commercial-fleet-focused dealership group in Iowa.

2. Last week, it bought a majority stake in a BMW dealership in Ridgefield, Conn., with Keeler Motor Car Co. of Latham, N.Y.

3. In November, it bought a majority stake in three Monrovia, Calif., dealerships with dealer partner Rinaldi Halim, and bought a majority stake in his two other Chrysler-Dodge-Jeep-Ram stores in California.

"Because of Open Road's investment, it gave me an opportunity to also become a landowner in the retail automotive sector," said Halim, 42, who is now president of the five-dealership group in California.

Open Road of Tysons Corner, Va., and the dealers declined to provide specific ownership interest figures.

The firm, led by partners Tim Batchelor and Eric Chelline, made its first auto-retail investment in 2017 when it bought a majority stake in Toyota Walnut Creek in California. Last year, it announced it had partnered with Bain Capital Credit, part of Boston investment firm Bain Capital. Funding from Bain Capital Credit flows through the Open Road operating company, Batchelor said, and if Bain Capital Credit ever wanted to monetize its investments that would be done at the Open Road level and dealerships wouldn't be sold.

Batchelor said more partnerships are likely in 2022.

"These three transactions illustrate why we established Open Road Capital," Chelline said in an email.

The company aims to partner with "top-notch" operators and provide funding for various purposes such as a family-member or business-partner buyout, to transfer businesses to the next generation or to management, for recapitalizations or for acquisitions.

Batchelor described Halim as "one of the best merchandisers I've ever seen."

"He's one of these bootstrap guys, he's not a family legacy," he said. "He's done everything on his own."

Halim was dealer principal of Los Angeles Chrysler-Dodge-Jeep-Ram and Monrovia Chrysler-Dodge- Jeep-Ram — stores he said he worked to successfully turn around — when a business associate introduced him this year to Chelline.

Halim purchased the Monrovia dealership in January 2020 from dealer Peter Hoffman and after signing a nondisclosure agreement with Kerrigan Advisors, a sell-side firm in Irvine, Calif., learned Hoffman wanted to sell his three other dealerships.

And Halim wanted to buy them. But doing so on his own would have been financially risky, he said, as he knew he couldn't afford the real estate for Subaru, Honda and Chevrolet dealerships in the pricey Los Angeles market and with blue sky — the intangible value of dealerships, including goodwill — at historic levels.

"It was just a little too big for me to swallow," Halim told Automotive News. "Even if I took out some leverage, it would have been really dicey. I really could have put myself in a dangerous spot if there was ever a blip in the economy."

But with Open Road's majority investment into the three new dealerships and in his two Chrysler-Dodge-Jeep-Ram stores, Halim was able to buy the three Monrovia stores and the real estate.

Halim is dealer principal and controlling owner, though Open Road's investment is larger than his, he said. He said he also retained two minority partners, Sean Hogan and Preston Han, through the deal with Open Road Capital.

Similar case
Open Road is helping in a somewhat similar fashion with Keeler, led by CEO Jesse Hord. In May, Hord said he took a call from Ed McGill, who along with partners owned BMW of Ridgefield in Connecticut, and he told him they were considering selling the store.

"I knew the operations, knew what a great market it was and figured that I had to find a way to do it," said Hord, whose group operates five dealerships and sells Mercedes-Benz, BMW, Mini, Honda, Alfa Romeo and Maserati brands in New York.

But Hord said he already had some capital expenditures lined up for the Keeler stores, including manufacturer image-compliance upgrades and that doing it all would have been a stretch. Hord said Ryan Kerrigan of Kerrigan Advisors connected him with Chelline.

"And Eric and I had a long conversation about the industry and the business and the opportunity and I felt very comfortable," Hord said. "And as we went along, we were able to put the transaction together. And we're thrilled, one, with this initial transaction, and then what we have planned down the road, which is kind of building a big regional platform in the luxury and import space."

Hord, who is dealer operator of the newly acquired BMW store, said he hopes with Open Road's partnership to expand in areas such as New York's Hudson Valley, in Albany, N.Y., and down into Connecticut and the Northeast.

Batchelor said Open Road's business plan in part focuses on partnering with strong dealers and going out and buying dealerships "in the surrounding area where there's upside."

Minority stake
Open Road also makes minority investments into dealerships, which was the case with Pritchard Cos., a family-run, 108-year-old business now into its fifth generation.

CEO Joe Pritchard said his company had been talking with Open Road since late 2019 following a family meeting about the future of its business and the industry. "We looked out on the horizon to see the changes that we were going to embrace in our industry and decided to search for a capital partner to help us fund that growth," Pritchard said. "But we just didn't want to include capital, as we would put it. There's plenty of capital on the streets right now and back then, but we were looking for a strategic partner that had the same vision that we did."

He said they found that in Open Road.

Pritchard said the company has seven franchised dealerships in Iowa that focus on commercial and fleet sales.

More than 85 percent of its revenue is generated from the commercial side, and it also operates a fleet management finance company.

Pritchard said the minority position with a partner also was attractive.

"We don't want to give control up of the family business," he said.

To Open Road, the commercial-focused business was appealing, Batchelor said, adding that its partnership has helped to provide lower financing rates to Pritchard Cos.

"All the money we put in went onto the balance sheet and it gives them the floorplan credit line that allows them to, I think, to eventually quadruple sales," Batchelor said.

Pritchard Cos. COO Angela Pritchard Spiteri, part of the fifth generation working in the family business along with two siblings, said the Open Road partnership not only gives them "third-party eyes on the business," but will help them as they transition over time from a single-generational owner to multiple owners.

"Our goal out of this is how to learn a lot about what we want the company to become, to put a growth path in place that allows us to get there and gives us, again, options at the end of that pathway," she said.

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