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Monday, November 17, 2014

Change or Die
Consolidation, competition preying upon c-store channel, panelists say at Outlook

Source: CSP Daily News
By Mitch Morrison, Vice President & Group Editor

SCOTTSDALE, Ariz. -- “Sell or die. Or grow or die,” Rick Claes warned.

“I would add a third,” Jim Fisher added. “Improve or die.”

The convenience store channel is undergoing its biggest makeover, as historic-low interest rates and tax-friendly master limited partnerships (MLPs) are triggering a tidal wave of activity in an industry better equipped for incremental tweaks than wholesale changes.

“It’s just a matter of time that a competitor will come with fresh assets and change the competitive dynamics. Are you prepared to respond?” said Claes, former Thornton’s CEO and senior managing director of Chicago-based Mesirow Single Tenant Properties LLC, echoing other panelists at the capital markets symposium hosted by CSP’s Outlook Leadership Conference.

The session, moderated by NRC Realty & Capital Advisors executive managing director Dennis Ruben, featured a five-member panel of former veteran retailers and financial experts: Claes; IMST CEO Jim Fisher; NRC managing director Jeff Kramer; Michael Phelps, senior vice president at Citizens Commercial Banking; Brock Rule, COO at Hopkins Appraisal Services; and Kevin Shea, executive vice president at Getty Realty Corp.

Underscoring the standing-room-only session is a convenience store channel that has seen thousands of stores shift in just the past 24 months into the hands of large private-equity investors like Energy Transfer Partners, restructured companies like CST Brands and deep-pocketed traditional chains like Speedway.

Kramer spoke with some authority on behalf of the many midsized operators in the room who are being forced to consider whether to grow, upgrade their portfolio or sell--or some combination thereof. It was only two years ago when Kramer sold his chain of more than 70 stores, Prima Marketing, to 7-Eleven.

“The decision to sell is very difficult, and for many, very personal,” he said. “There are, beyond the personal (considerations), some irreversible trends.”

Three big ones, he said, are:

  • Foodservice: “That’s something you’re going to have to size up.”
  • Fuel: “Gasoline demand is not going to go up very much.”
  • Consolidation: Kramer and others at the capital markets symposium predicted continued accelerated consolidation through 2015 and possibly 2016.

“There were a lot of blockbuster transactions,” said Ruben. “Consolidation seems to be occurring at a more rapid pace than ever before.”

Oakbrook Terrace, Ill.-based CSP Business Media’s Ou