development or road work, may have diverted traffi c away from the gas station. In addition, a higher sales tax or new
mandatory government regulations may have added expenses for which the station owner is unprepared. Such requirements can be costly, and operators may not have the fi nancial resources to meet them.
Pump Pain While all these variables are contributing factors, higher gas prices remain the No. 1 factor in the downfall of many gas sta- tions. As gas prices climb and consumers are forced to spend more on fuel, they are less likely to make other purchases. Con- venience store products sold at most gas stations provide the highest profi t margin of all goods sold. Fewer c-store purchases, due to a decrease in income and fewer visits to gas stations, negatively impact operators' bottom line. When gas prices soar, consumers are also more likely to comparison shop, using the
Internet to fi nd stations with the least expen- sive fuel. T ey may opt to drive less, or even invest in more fuel-effi cient vehicles, result- ing in less gas sold. Credit cards are also a more popular payment method and credit card fees can cut into a station's gross profi t margin signifi cantly.
Default Options All of these factors have lead to gas station owners defaulting on their loans, leav- ing lenders with few avenues for fi nancial recourse. One option for a lender dealing with a
defaulted gas station loan is to sell the note to a third party, oſt en at a tremendous dis- count. T is is a quick fi x for getting a bad loan off the books, but it may not be the best solution for every lender. Another option is to foreclose on the prop-
erty, seize it, and operate it as a bank-owned asset. T is solution works best for properties that are already in good working condition and are not in need of costly improvements.
Lenders who choose to operate the gas station themselves must keep in mind that they will become the owner, with all of the attendant risks and liabilities of operating a business. If the lender has concerns, another option
is to appoint a receiver, which will shield the lender from ownership liability. T e receiver is then responsible for protecting and pre- serving the property, troubleshooting as necessary, and oſt en marketing and selling the property in receivership. Finally, the lender may choose to modify
or extend the existing loan, deciding on new terms with the interests of both borrower and lender in mind. As America continues its uneven path to
recovery, troubled gas stations are a com- mercial real estate trend that cannot and should not be ignored.
Stephen J. Donell, CCIM, CPM, ARM, is a state and federal court-appointed receiver and presi- dent of FedReceiver in Los Angeles. Contact him at steve.donell@fedreceiver.com.
CCIM.com
September | October | 2012
17