The Right Time to Sell

NRC's clients are mostly dealers and distributors throughout the nation. They frequently ask us when is the right time to sell their locations. There are a number of factors to consider in determining the answer to this question.

Market Conditions
If you are waiting for market conditions to improve, such as higher fuel and inside store margins, you may end up selling for less. Over the past few years, margins have been continually moving downward. The market pressure that big-box retailers selling gas have put on the marketplace has lessened profitability. The strategy of making that loss up with volume has also been more difficult in current market conditions. Make sure to consider the current and forecasted market conditions.

Sites making money are much easier to sell than those that are not. Furthermore, banks tend to be much more willing to lend on profitable locations. The rates that they are lending at should also play a roll in making your decision. Long-term interest rates continue to be near historic lows. If a buyer must pay a higher interest rate when borrowing money, that buyer has to pay you less for your property. Rates have been going up steadily for almost a year, and will undoubtedly be 1% higher a year from now.

Competition
If new stations are being built or others being rebuilt in the area that you market in, it's time to take a look at your operation. Consumers are looking for new and updated facilities. Does your location look tired compared to your competition? If the answer is yes, then it's a good time to consider developing a defined turnaround plan, which will take time, energy and capital. If you are missing any one of those, you might be better off selling now. And, if competition has surrounded you and squeezed you out, maybe your site's best use is no longer a service station, but would make an excellent site for a fast food restaurant or other use. Many service stations sit on prime real estate and can be sold for development to other industries.

Motivation
We talk to a lot of dealers and distributors who have been in the business a long time. Many have held onto their businesses and planned to pass them onto their children only to find out that their children have other ideas. We hear a lot about how the industry has changed and is nothing like it used to be. Others are ready to cash out and enjoy their retirement. Many are ahead of the game and adjusting out those sites that no longer fit their business strategy. Whatever is motivating you to consider selling, it's never a bad decision to take an in-depth look at your investments and insure that you maximize your returns.

NRC Realty Advisors, LLC is the national leader in the sealed bid sale of service stations and c-stores. Contact our petroleum industry real estate experts to discuss your divesture plans.

For more information, please visit our website or contact September Mirghanbari, NRC Executive Vice President, at 800.747.3342.