Insider's View: Growth Initiatives & Strategic Moves (Part 3 of 3)

Retailers expanding into new markets, bankruptcies and a look at 2014

Published in CSP Daily News

By
Dennis L. Ruben, Executive Managing Director, NRC Realty & Capital Advisors LLC

QuickChek, Wawa, 7-Eleven growing in New Jersey

SCOTTSDALE, Ariz. --Beyond mergers and acquisitions, convenience store industry growth and transition come in many forms—new construction, market focuses, bankruptcies and more. Here’s a look at the major activity from 2013 in those area.

Growth Initiatives

Several major industry players have continued their growth strategies in both existing and new markets.

  • Wawa Inc. announced the grand opening of its 18th store in the greater Orlando, Fla., market, marking its 27th store to open in Florida. Wawa planned to open 25 stores in Florida in 2013 and intends to open 25 stores in each of the next two years; it projects that it will open 100 stores in Florida within the next five years.
  • Wawa, QuickChek and 7-Eleven are all targeting northern New Jersey for expansion. QuickChek and Wawa are aggressively seeking prime locations in Bergen and Passaic counties.
  • Kum & Go LC continues its expansion in existing and new markets, and it recently opened a new store in Bentonville, Ark., bringing the total number of stores in that state to 42. Kum & Go operates 420 c-stores in 11 states.
  • Casey’s General Stores Inc. is also continuing its expansion strategy and has stated that it will build or acquire 70 to 105 stores in its fiscal year, which began May 1. Casey’s also plans to replace 20 stores and complete 25 major remodels. A significant number of the new stores will be in new markets in Arkansas, Tennessee, Kentucky and North Dakota, and it will also “fill-in” locations in existing markets.

Divestiture of Nonstrategic Assets

  • Publix Super Markets Inc. sold its PIX fuel and c-store chain. The chain, consisting of 14 stores in Florida, Georgia and Tennessee, was sold to two buyers. Circle K Stores Inc. purchased the 13 stores located in Florida and Georgia, and Max Arnold & Sons of Hopkinsville, Ky., purchased the Tennessee location. NRC Realty & Capital Advisors LLC served as financial adviser to Publix in connection with the sale.
  • Mutual Oil Co. Inc. sold 19 gas station and c-store wholesale assets to multiple buyers so that it could focus exclusively on its wholesale business. The purchasers included a subsidiary of Global Partners LP and various regional jobbers and individual store operators.

Getty Realty Corp.

Getty Realty Corp. continued the process of successfully repositioning the remaining properties in its portfolio that were previously leased by Getty Petroleum Marketing Inc., its lessee that had filed bankruptcy in December 2011. During 2013, the company continued the sale of properties through its sealed-bid sale program with NRC Realty & Capital Advisors LLC and also identified 108 more gasoline stations and properties for sale under this program. The sale of most of those properties closed during the year, with the remainder anticipated to be closed during the first quarter of 2014.

Bankruptcies

  • Eugene Crane, as Chapter 11 trustee, sold five former BP Connect operating c-stores with gasoline in the Chicago metro market. All of the sites were sold to Atlas Oil Co. NRC Realty & Capital Advisors LLC was engaged by the trustee in connection with the sale.
  • The sale of assets in the Jump Oil Co. Inc. Chapter 11 bankruptcy proceeding was completed recently. Lion Petroleum of St. Louis purchased 32 locations, Casey’s General Stores Inc. purchased four sites and other buyers purchased the remaining 12 sites.

Conclusion

Although most of the transactions that were concluded during 2013 year were private ones in which the purchase prices and EBITDA multiples were not publicly reported, it is safe to assume, based on the information available, that the demand for quality assets and companies remains extremely high and that the demand for such assets far exceeds the supply.

Purchase price multiples for quality assets continue to increase, particularly in certain areas of the country where real-estate prices are high and it is difficult to either find quality locations for new convenience stores or obtain the necessary zoning and permits to build them.

In addition, more lenders and other financial providers are entering the c-store arena or expanding their presence in it, offering reasonable financing terms for qualified operators who want to make acquisitions or grow through new store development. Both the senior debt and sale-leaseback financing markets were robust throughout 2013 and appear to remain active and viable this year as well. All of these factors should make for a very interesting and active 2014 in terms of merger-and-acquisition activity.

Dennis Ruben is executive managing director of NRC Realty & Capital Advisors LLC, Scottsdale, Ariz.

Keywords: 
financial, M&A, new store
By Dennis L. Ruben, Executive Managing Director, NRC Realty & Capital Advisors LLC
View More Articles By Dennis L. Ruben