Petrol Stations???

Hi,

All I know is that cleaning up an old site can be very expensive and time consuming. The petrol seeps from the tanks and contaminates the soil and ground water… very costly to fix.

Also, in recent times there has been very little margin in petrol. I suspect that there is much higher margin selling the chips and coke than there is in selling fuel.

So… the question is, what are you buying? The business (leasehold) or the freehold (property)?

Cheers,

Steve McKnight

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Remember that success comes from doing things differently.
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Some lenders wont touch ex petrol tank sites because of the environmental bill associated with them.

Simon Macks
Mortgage Broker
http://www.mortgagehunter.com.au
0425 228 985

Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.

No idea what the cost would be to replace underground tanks. Obviously much would depend on their size and position. I guess first thing to find out would be who owns them. I’m sure with that sort of thing there would have to be records kept of when they were installed, too. I wonder whether there would also had to have been regular inspections? I’d be surprised if the EPA (or somebody) didn’t require that.

There’s a QS I know in Melbourne who helps us out with some of our commercial depreciation work (we specialise in residential). He knows a fair bit about petrol stations and tanks. He would be worth talking to – Harry Hird 03 9598 9111. Harry might even have the name of a company that replaces tanks.

Scott

Steve,
I own a few petrol stations in NZ and have worked for Caltex Oil in Australia.

The steel underground tanks can leak over a period of time but there lifespan is dependent on the water tables in the area.

These days the u/g tanks are fibreglass strapped to a concrete slab and with an indefinite lifespan.

In the good old days the oil companies were responsible for the tanks, and any environmental problems. It is usually “the polluter” who carries the burden and invariably the oil company. Times have changed though.

Tanks are monitored on a daily basis. Operators must do fuel reconciliations to ensure there is no loss. Any leaks would immediately be detected. If a leak is suspected they may do a pressure test and soil tests. The commercial viability of the site will determine whether or not the tanks will get replaced or not.

If you check out the lease it will probably mention who owns the tanks. Importantly you need to know the litreage of fuel the site is doing. This will give you an indication if the oil companies will support the site or not.

Fuel is a commodity and is often sold as a “loss leader”, that is they don’t expect to make a lot of money purely from the fuel sales, they attempt drag you in off the street and sell you a good old Aussie pie and a can of coke instead.

Hope this information is of some help. If you don’t have any luck give me a yell I might be able to sell you one of mine.

Cheers
Jeff

Hi Steve,

All my sites have been fine except one. The tanks were lifted by Mobil but I managed to keep the mechanic on as a tenant and still get a reasonable income from it. The failure of this site was largely due to future roading changes and Mobil could not determine if they would have enough time to get a return on their investment.

Generally service stations are good long term leases because of the substantial investment under the ground. You don’t spend a few hundred thousand dollars and expect to move in a couple of years.

Most people do not understand the fuel game so are hesitant about petrol stations. Also talk of the supermarkets selling fuel etc etc.

Check out the competition in the area and see if you can find out if there are any major developments on the cards. Local knowledge will help you here.

You can email me on [email protected]

Catch you later
Jeff

Steve, what’s the asking price and return?

Cheers
Mel

Balliez, the property for sale is the freehold, rather than the business – so the landlord doesn’t really have to worry about the operating costs of the petrol station.

Steve, $200K to me sounds like a really cheap price – especially for petrol station and residence!!! What’s the population?

Cheers
Mel

Yep, 200k for PS plus residence… sounds like the kind of price of a bypass place. steve, check out plans for the town. Think about places like bookham- tiny little place on the princes highway that got a bypass, everything closed down- including the servo/mixed business. Now it’s lucky to get a “stop revive survive” event at the local town hall on major public holidays. I am sure you can get 10% pozz geared places there too…

kay henry

Don’t base all your opinions of the fuel industry on retail margins alone. Remember that most of the major oil companies are involved in exploration, wholesale and retail. Each area commands its own margin. With oil prices at a high most of these companies are prepared to suffer losses in the retail area because they’re creaming it on the value of their reserves. (Except maybe Shell who have been overstating their reserves)

Aside from this a petrol station needs to do a certain number of litres throughput to be viable. These days 2 million litres per annum is a small site but it does depend on what other profit centres are available at the site. eg workshop, diner, liquor etc etc.

Regarding the move into Supermarkets such as Coles. In most cases you find the discount being offered on fuel is only if you spend so much on your grocery bill. As I explained in an earlier post, the fuel is a commodity and is often used as a “loss leader” to attract customers in the door. Profits are made in other areas, they look at the $$$ profit per customer for all the goods purchased rather than $$$ profit per item purchased.

A site for $200k sounds extraordinarily small. Check out litreage, land size (for possible development), local population, roading and town planning – better still, ask the agent to.

Cheers
Jeff