We’ve seen a shift in the landscape of commercial investments. Some of the longtime stalwarts of commercial real estate success, like retail, hotels, restaurants and gas stations, have found themselves in occasional perilous positions. Changes in the energy industry may play a role in more gas station foreclosures, and those hard money lenders behind these deals should have risk management and foreclosure strategies in place in case a gas station investment goes south.
Here are a few important things that lenders should know about gas station foreclosures in 2024.
What Causes Gas Station Foreclosures?
Gas stations can experience financial distress (and thus enter foreclosure) due to the following situations:
- Poor location (low vehicle traffic, larger competitors nearby, etc.)
- Insubstantial profits on convenience store sales
- Rise in EV cars on the road
Over the next 10 years, the industry may experience a decline as many drivers consider EV cars instead of gas-powered vehicles.
As mentioned above, whether a gas station fails is not solely dependent on what kind of vehicle the average person drives. Higher costs on some of the non-essential food items may have some drivers bypassing the extra expense and sticking to fuel-only purchases.
Mom-and-Pop gas stations are expected to be hit hardest, while corporate-owned gas stations should be more likely to weather the storm.
Lenders with gas station investments should make sure that the owners can make a strong profit on convenience store sales. They should also look for opportunities to provide financial backing for property upgrades (i.e., adding charging stations).
Foreclosed Gas Stations Can Be Hard to Sell
Lenders should be aware that a foreclosed gas station can be a difficult property to sell. All is well if the buyer wants to continue operating the property as a gas station. However, if the buyer wants to turn the property into a different kind of business, then they might have to pay for extensive environmental remediation, mandated by certain states like California. This can be a tedious and costly process and may reduce the desirability of the property.
Lenders typically have a foreclosed property sold to earn back some or all of the outstanding loan balance. This may no longer be a sure-fire foreclosure strategy if:
- The property is no longer a profitable location for a gas station
- Environmental remediation makes the property difficult to sell
“Gas stations can be difficult to repurpose,” says Randy Newman, founder and CEO of Total Lender Solutions. “It’s important for lenders to have comprehensive foreclosure options in case the property can’t generate a strong sales price.”
Gas Station Foreclosure Strategies
Because a foreclosed gas station can be challenging to sell, the lender may need to take into account a variety of different foreclosure strategies, including:
- Renegotiating the loan terms to make it easier for the borrower to make payments
- Taking control of the property and establishing new business ownership
- Holding the property for future redevelopment
A law firm that specializes in commercial foreclosures can help lenders devise the most feasible foreclosure strategy for a gas station, taking into account the reasons behind the foreclosure and the amount of the outstanding loan.
When to Start a Gas Station Foreclosure
Lenders should speak with a foreclosure firm as soon as a borrower begins missing payments.
Total Lender Solutions can assist hard money lenders and financial institutions with gas station foreclosures. Our team has decades of experience helping lenders reach money-saving solutions during commercial foreclosures, and we’ll be there to guide you from processing to UCC sales.
Contact us today to learn more about how we can help you.
