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EAST MEADOW, N.Y.-- Hundreds of convenience store owners awoke this morning to an uncertain future after news broke yesterday that Getty Petroleum Marketing Inc. (GPMI) filed for Chapter 11 bankruptcy.
GPMI leases approximately 800 stores from real estate investment trust Getty Realty Corp. The company then sub-leases many of those stores to another company, such as Lukoil, who in turn sub-leases the properties once again to independent convenience store owners.
GPMI Chief Executive Bjorn Aaserod, in an exclusive interview with CSNews Online, said the company's independent c-store owners can expect no changes at their stores in the future. "I think it's fair to say the person who operates the convenience store or gas station should experience business as usual."
Aaserod shared breaking news that GPMI was granted a motion yesterday by the U.S. Bankruptcy Court, Southern District of New York, allowing the company to continue to pay commissions to gas station operators, even those commissions earned prior to the bankruptcy filing. "So none of our operators will be hurt," he said. "This was important to us because obviously, our success is based on our relationship with operators."
Michael J. Fox, executive director of the Gasoline & Automotive Service Dealers of America Inc. (GASDA), which represents 75 Connecticut c-store owners, told CSNews Online that the situation is probably the most complicated case he's seen because it involves sub-leases of sub-leases and beyond.
"We trying to assess our position because we are a subtenant of a subtenant," Fox said from the association's Stamford, Conn., headquarters. "Lukoil was the original purchaser of the GPMI properties and leased them directly to our dealers. And in some cases, Lukoil leased those properties to distributors, who leased properties to us. Our distributor in Connecticut is Green Valley Oil [LLC]. Green Valley is trying to assure our members it will be business as usual. But the reality is, if Getty Realty were successful in terminating the master lease [it has with GPMI], we would literally be evicted. So we would have to look into a [legal] action against whoever didn't protect our interests. That could be Green Valley, GPMI or Lukoil."
Fox added that all but a few of the gas stations/c-stores in Connecticut were rebranded by Green Valley as BP. He has received calls from other states, including New York, New Jersey and New Hampshire -- where GPMI properties are also prominently sub-leased -- in an effort to help alleviate their confusion about the future of their stores.
In talking to attorneys now handling the matter, Fox said the rights that independent c-store owners have in Connecticut compared to the other states vary greatly. Connecticut retailers are PMPA dealers, meaning they have some rights under the Petroleum Marketing Practices Act, which sets several requirements between gasoline refiners and distributors and their retailers. One possible benefit of being a PMPA retailer is the possibility for independent c-store lessees to receive the right-of-first-refusal to purchase the properties they operate, if the master lease between the GPMI and Getty Realty is terminated. GASDA's legal team is investigating that possibility.
"Other dealers in other states are commissioned agents," Fox explained. "My understanding through our attorneys is [that] as a commissioned agent, you basically have no rights."
Therefore, if the underlying master lease is terminated in those states, commissioned agent c-store owners can be evicted with little, if any, recourse. Getty Realty said prior to GPMI's bankruptcy filing that it would terminate the master lease and either set up new leases on its own or sell the properties it owns.
On a positive note, however, Fox said he didn't think Getty Realty or any other property owner would want to see hundreds of vacant sites. "Nobody wants to see 200 to 300 locations empty, not pumping any gas and not making any money," he said.
Despite statements that business will operate as usual, c-store operators in the Northeast are still feeling anxious about the situation.
"We're confused about what's going on," said Joel Silver, owner of 331 West Avenue Gas Station LLC, which leases one of the few Getty-branded c-store/gas stations in Connecticut. "I've heard a lot of rumors such as having a conference call among all of the Connecticut [GPMI] retailers to discuss what's going on," he said. "Then, I heard that all the stations will operate as normal. The worse scenario I heard is that we can be evicted. That is a possibility, but you'd think it wouldn't benefit anybody if that happened."
Michael Lindquist, president of two BP-branded c-stores/gas stations in Wilton and Stamford, Conn., said he has no idea what the future holds for the stores he operates. "That's the scary part," he told CSNews Online. "There's a bit of uncertainty out there."
Also scary for Lindquist is the knowledge he can't control the ultimate outcome for his stores. To receive the latest information, he is reaching out to GASDA often. "GASDA has an excellent legal team who is looking into this," he said. "But I don't know who I will be paying rent to, or if I will be out on the street. And I have no idea how long this will take. I don't know if it will take weeks or months to sort out."
Silver, whose store is located in Norwalk, Conn., said he heard the rumor that Connecticut c-store owners would be able to negotiate a deal and buy their properties directly from Getty Realty. "That would be the ideal situation for me," he said. "That would be a nice scenario for a lot of people. That way, I would only need to deal with Getty Realty. It would eliminate all of the sub-leases [with Lukoil and Green Valley]. You have three sub-leases in Connecticut, which is insane."
Lindquist said that scenario would also be ideal for him. "We'd all love to own our own properties," he said. "I'd love to have freedom in what we can do regarding maintenance, repairs, upgrading the facilities and what brands we sell."
Another possible scenario in Connecticut, according to Silver, is that Green Valley could negotiate the 75 leases directly at one time with Getty Realty. That way, one "middle man" is eliminated and c-store owners could perhaps receive more favorable terms in their leases.
David B. Driscoll, Getty Realty's president and CEO, toldCSNews Online he had "no further comment at this time."
However, the company issued a statement last night when Driscoll said he was happy that GPMI's bankruptcy would have the structure and supervision of the U.S. Bankruptcy Court. "Over time, we intend to reposition the portfolio of properties subject to the master lease in order to maximize the value of the portfolio," he said in a news release. "We are fortunate to have completed two acquisitions in 2011 that have significantly reduced our dependence on [GPMI]. These new portfolios, as well as other assets owned outside of the master lease continue to perform and meet our expectations. Notwithstanding the filing by [GPMI] today, we remain optimistic about the future of our company."