The COVID-19 pandemic has had a devastating effect on many service-focused businesses. Chief among these have been restaurants and hotels; a marked decrease in travel, widespread job losses, and limitations on in-person activity have all contributed to a rise in loan defaults and foreclosures in both industries. Another type of business that’s been hit hard: gas stations. With a decrease in commuting and travel, and a sustained drop in gas prices, gas station owners have struggled to keep up with loan payments, and gas station foreclosures have increased. Foreclosing on a gas station presents unique challenges. If you’re looking to resolve a defaulted loan on a gas station, here are three things to consider before you move forward with foreclosure.
What Does The Initial Assessment Reveal?
In many ways, foreclosing on a gas station is similar to foreclosing on restaurants and hotels. As with both of those, an initial assessment of the gas station may give some insight into the facility’s future. The analysis that occurred prior to the loan being given will reveal the business structure. As conditions may have changed significantly since the loan was granted, it’s important to have all of the required information and documentation on file. The borrower’s current financial information should also be on file and accessible.
What Is The Gas Station’s Ownership Structure?
These days, privately owned gas stations are extremely rare. If there is a private “owner”, the gas station will almost certainly be a franchise. Convenience stores like 7-11s may also have gas pumps; these are typically franchised as well. The vast majority of gas stations fall under oil company umbrellas – Shell, Texaco, Arco, etc. Understanding the ownership and management structure is critical. The value of the collateral (which may include attached convenience stores and even kitchen and dining facilities) and the future viability of the business must be analyzed.
What Are The Environmental and Safety Concerns?
An added wrinkle to foreclosing on a gas station are the environmental and safety issues involved. Gas stations, of course, sit atop large storage tanks full of gasoline. In addition, many gas stations come equipped with automated car washes. On top of that, gas stations with attached convenience stores bring a host of other issues, including product storage and food safety. Prior to initiating a foreclosure, the lender must perform due diligence. Safety inspections and cleanups will be required, and considerable effort must be made to avoid serious environmental accidents and ensuing fines and penalties.
Gas station foreclosures may require considerable extra work. Before lenders embark down that road, it’s important to understand the borrower’s situation and examine the alternatives.
At Total Lender Solutions, we advocate for lenders looking to maximize recoveries on defaulted loans. For over 15 years, our team of highly experienced real estate professionals and legal experts has transformed complicated processes into clear resolutions for institutional and private lenders. We work as a vigorous extension of your team to provide comprehensive solutions and seamless communication, from pre-foreclosure and notice of default to the final sale phase. Our dedication and persistence when it comes to the foreclosure process ensures that our clients feel confident in reaching a successful outcome. Contact us today.
