1. National Association of Motor Vehicle Boards and Commissions 2011 Fall Workshop Manufacturer Facility Requirements David G. Braun Comerica Bank

2. Virtually all major manufacturers have them Those that do not are announcing them (Hyundai) Some manufacturers have had multiple image programs over the past 20 years (VW, Toyota, Mercedes) There is varied opinion on whether the images drive sales or add value A Banker’s Perspective on Image Programs

3. Expenditures are not small – typically not just a facelift – Dealers have spent $1 billion in renovations as part of Image USA II and they plan to spend another $2 billion over the next two years - Automotive News September 2006 Image programs often require interior designs with product specified by the manufacturer The recession has brought some reality and reasonableness to some of the requirements Perspective on the Image Programs

4. Factors in Reviewing Requests for Financing Real Estate Location, Location, Location – Urban vs. Rural – Dealer Row vs. Auto Center – Zoning in the area – Availability of other Franchises – Availability of land in the area

5. Franchise Availability Can Be Important ChevroletFord Toyota HondaChrysler Nissan LexusMercedesBMWAudi CadillacLincoln VW Infiniti AcuraSuzukiSubaruSaturn

6. Franchise Availability Can Be Important

7. Factors in Reviewing Requests for Financing Real Estate Franchise, Franchise, Franchise – Some franchises have enduring value – Some franchises are up and comers – Some franchises have declining value – These can change over time – Some franchise image programs make it difficult to reconfigure the building

8. Various Franchise Images

9. Factors in Reviewing Requests for Financing Real Estate Cash Flow, Cash Flow, Cash Flow – How is the existing store operating ? Will rent need to be increased ? – What are the expectations for profitability after the renovation ? Profit expectations can vary a lot based on the size of the expenditure – Are there other cash flow sources that can help carry the burden if this store falters ? – Would higher interest rates stress the cash flow?

10. Miscellaneous Factors in Reviewing Real Estate Requests How will the cost of the image program impact the appraised value of the real estate ? Will the image program be on balance sheet as a leasehold improvement ? What would be the impact of not doing the image program on the dealership’s operations or blue sky value ?

11. David Braun Comerica Bank 714-433-3203 dgbraun@comerica.com