Improving economy puts six car dealers on the list.

A List of L.A.'s 100 fastest-growing private companies conjures up images of souped-up software outfits on the verge of being the next Microsoft.

So why all the car dealers?

Six spots on this year's Business Journal List are taken up by auto dealerships - a growth spurt fueled by the opening of new car lots as well as the addition of models to sell.

There is one more explanation for the heady growth - and that's the economy.

"With car dealers, you had pent-up demand from people who could not afford to buy new cars during the recession," explained Esmael Adibi. director of the Anderson Center of Economic Research at Chapman University in Orange.

Sage Holdings Inc., which owns Universal Nissan in Universal City, fueled its 79 percent revenue growth by buying Nissan and Infiniti dealerships in Glendale in 1995.

"Most of our growth is from the opening of the stores in Glendale," said Leonard Sage, vice president and chief financial officer.

The company, which was founded by the Sage family in 1970 as Universal City Datsun, reported revenues of $159.5 million in 1996 compared with $89.1 million in 1994.

Sage said that in addition to revenue growth from its new lots, the company has seen increased used car sales.

City of Industry-based Leo Hoffman Chevrolet Inc., No. 65 on the List, added a new dealership called Puente Hills Chevrolet in 1993. Company president Thomas Hoffman said that although the new dealership opened before the List's survey period, its growth was a significant factor in Leo Hoffman Chevrolet's 56 percent revenue growth to $83 million in 1996.

Hoffman said rising car prices are another factor in the revenue growth. Typically, manufacturers raise prices on the same car two or three times during the course of a year, meaning revenues can rise several percentage points even if sales are down or even.

"Those car price rises don't necessarily mean a rise in profits," Hoffman said.

At No. 11, New Century BMW Inc. of Alhambra saw the fastest growth of any car dealership between 1994 and 1996. It grew at a rate of 195 percent, to $50 million in revenues, and went from two dealerships to three between 1994 and 1996.

Sage says the industry's competitive environment is quickly changing with the advent of companies like Republic Industries Inc. and AutoNation, which are building nationwide chains of auto dealers.

AutoNation bought Magic Ford of Valencia at a bankruptcy auction early this year, and other chains are expected to follow suit.

Hoffman, for one, said he enjoys running the business that his father founded in 1944 and would not consider selling out to one of the expanding national chains.

But Sage said a company sale is not out of the question. While car dealerships usually sell for between one and three times their pre-tax earnings, there have been recent deals in which they have sold for multiples of between four and six, Sage explained.

"If they want to buy the company for what it is worth, the answer is 'no,' "Sage said. "But would I sell for the kind of multiples the market has been seeing lately? I'd say 'make an offer.'"

Nationally, used-car sales are increasing while new-car sales are flat or declining, said George Peterson, president of AutoPacific Inc., an automotive product and management firm in Santa Ann. Rising used-car sales are linked to the growing popularity of car leasing, which breeds large numbers of saleable cars with only a few years of wear and tear.

In 1997, the National Automobile Dealers Association projects that new car sales will drop to 14.7 million units from 15.1 million in 1996. At the same time, 19.6 million used cars are expected to be sold this year, up from 19.2 million last year.

That trend is evident at Sage Holding's local dealerships, where the ratio of new-to-used car sales has gone from 7 (new cars) to 3 (used cars) in 1995 to 4 (new cars) to 6 (used cars) currently, Sage said.