Capital Automotive also operates under a special structure, created to take advantage of provisions in federal tax law. The payouts are taxable to investors. Formation of the REIT allowed the founding dealers to cash out their investment in real estate by selling it to the new company. From the point of view of public investors there is an inherent conflict of interest in this structure. The landlords and the tenants are the same people.
Investors are along for the ride.
In return for putting up their cash and putting up with the potential self-interest of the insiders, investors earn what are today truly handsome dividends. Capital Automotive turns out to be the perfect partner for the growing chains of dealerships. The dealer chains don't want to own real estate. It ties up their capital, costs money and it mucks up their financial statements. Nowadays when any of the big car dealer chains begins negotiating to acquire a new dealership, Capital Automotive often goes to the table with them.