Editor's note: This is the second of a four-part CSP Daily News series highlighting the selling off of retail assets by the major oil companies. To read yesterday's installment, click here. For a complete picture of how the retail landscape is changing, watch for the March issue of CSP magazine.
OAK BROOK, Ill.-- Putting a divining rod over a U.S. map to find out where the hottest markets are in terms of major-oil selloffs is like pointing that water-finding [image-nocss] rod at Lake Michigan: It's happening just about everywhere with properties ranging from multi-million-dollar company ops to bare strips of dirt.
For instance, Doug Dorfman, manager of brand product and marketing for Cenex brand owner CHS Inc., Inver Grove Heights, Minn., points to states such as Iowa, Kansas, Nebraska and Wisconsin that may hold significant growth potential as a result of oil companies' departure from direct-served or company-operated retail.
I would say that we saw more growth [last year] in our southern-tier states, he said, and that falls in line with the marketplace where the majors are pulling out.
CHS added 150 sites in 2005 and another 100 last year, according to Dorfman, putting the company's network at approximately 1,600 Cenex-branded convenience stores and freestanding fueling locations. Dorfman expects to add another 100 to 150 locations to the Cenex brand family in 2007.
There are tremendous opportunities with what we see Big Oil doing, whether it's ConocoPhillips getting out of the direct-served market or CITGO pulling out of some key markets, said Dorfman. You also see some growth in the normal course of business and other changes being made by the brands, with brand agreements or contracts running out.
Another retailer espousing the potential of the Midwest is Bob Juckniess of the Indianapolis-based firm RWJ Management Cos. Inc., which operates six high-volume BP-branded stores. He's in the process of bidding on some sites opening up in Indianapolis, even though some industry analysts have characterized it as an ugly and competitive market with extraordinarily tight margins. He also hinted at possible growth opportunities in other markets within striking distance of Indianapolis or Chicago.
We'll see what happens, he said, adding that he has a goal of reaching 15 sites by the end of 2007. It's a changing landscape, and that brings both risk and opportunity.
One source who has been involved in transactions with ConocoPhillips in the past said the sites currently up for sale from the Houston-based retailer are a mixed bag of high-volume, prime-location sites all the way to closed properties that need to be sold off for other uses. The majority of the sites, according to the source, are in California and in key markets in western states and along the West Coast.
Bob Bassman of Bassman, Mitchell & Alfano, Washington, D.C., said that while many of the properties in these deals are leased sites, those sites that include the actual dirt --especially in California, where prices for land are higher than national averages -- will be quite valuable.
Tomorrow, CSP Daily News addresses how interested parties are forging deals with the Big Oil companies. One key issue: It's more than just the dirt.
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