As a leading international tire distributor for 23 automotive OEMs in the U.S. and eight in Canada, Dealer Tire relies on a sophisticated commercial real estate infrastructure to support its decades-old business.
The company’s 43 distribution centers serve more than 10,000 automotive dealerships and thus, requires diligent management, optimization and oversight.
For years, Dealer Tire lacked a conflict-free CRE broker that could optimize their real estate. Dealer Tire’s 2,500,000 square feet of commercial real estate necessitated not only an organized, central system of information, but also strategic support when lease expirations surfaced.
After discovering Allegro’s conflict-free business model and scope of work, Dealer Tire requested the team provide ongoing portfolio management services.
At the start of the partnership, Allegro reviewed Dealer Tire’s current CRE portfolio and its historical drivers for decision making. This assessment not only allowed Allegro to better understand the needs of Dealer Tire, but also helped the team identify supportive, unsupportive, and missing assets that could be better optimized.
Using the portfolio optimization model, Allegro worked with Dealer Tire to create and implement a strategy for future decision making. The strategy covered key CRE portfolio goals, budgetary needs to make them happen, and an intentional transaction process.
Since joining the Dealer Tire team, Allegro has been responsible for negotiating and overseeing approximately 2,500,000 square feet of leased space. Every year, Allegro manages four to five transactions, each averaging about 80,000 to 100,000 square feet.
Between eighteen to twelve months prior to lease expiration, the Allegro team travels to the distribution facility and tours the surrounding market for other opportunities. After screening the market, Allegro identifies a short list of viable properties for the full team to review. Depending on the outcome of these discussions, Allegro will either tour and negotiate the potential facilities, or recommend that Dealer Tire stay in their existing building.
While each transaction is unique, they are all equally challenging. As a distributor, Dealer Tire’s facilities must be centrally located in urban hubs—an area where distribution and warehouse space is limited, especially during a period of all-time low vacancy rates. Locating warehouses with special features like adequate fire suppression systems (or the ability to add these systems) is also a top priority for the company.
While some buildings meet these unique requirements, most do not. Thus, Allegro has managed a number of new construction deals over the years as well. Despite these challenges, Allegro has worked hard to keep overall real estate costs low.
To organize, monitor, and update the extensive lease documents resulting from these transactions, Allegro provides lease administration services. Using a comprehensive lease admin system, all lease documentation is abstracted and archived for Dealer Tire’s real estate and legal teams.
The cloud-based lease admin system allows all teams to easily access CRE information from anywhere, at any time. The team can search for lease provisions, receive alerts of upcoming expiration dates, and review automated lease abstract reports.
As a strategic CRE advisor, it is critical that Allegro not only manage Dealer Tire’s portfolio, but also discuss overall performance as it relates to short- and long-term goals. Throughout the partnership, Allegro and Dealer Tire have convened on a weekly, quarterly, and annual basis to discuss key portfolio management tasks, strategic initiatives, and real estate goals. Each meeting is managed via a dashboard that tracks portfolio data, market trends, and critical KPIs for decision making.
Weekly meetings are dedicated to discussing portfolio tasks, individual deal details, and any strategic action items that will impact overall goals. During quarterly meetings, Allegro and the Dealer Tire supply chain team review national real estate trends, upcoming transaction information, and portfolio strategy. At the end of the year, portfolio performance is measured against the goals that were set, and strategic adjustments are determined.
Ultimately, working with an exclusive tenant rep brokerage has enabled Dealer Tire to leverage a strategic approach to CRE transactions, while also achieving lower transaction costs. With a deliberate portfolio optimization plan and skilled portfolio management team, Dealer Tire can look ahead to a future of impactful and efficient commercial real estate.
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