The acquisition may seem relatively small, but the acquirer certainly is not.
When BW Gas & Convenience Holdings acquired its first gas station/convenience-store portfolio in December, it seemed like the dozens of deals that take place in the c-store space every year—the usual wheeling and dealing of networks involving single or tens of stores.
But this move is hardly isolated. BW Gas is an entity of Brookwood Financial Partners, a 23-year-old real-estate investment and asset management company with more than $2.2 billion in holdings.
And the 10 Country Store locations recently acquired in western Iowa are just the beginning. The company says a second acquisition will be announced by early April, along with a brand and design.
The news comes from Thomas Trkla, CEO and chairman of Beverly, Mass.-based Brookwood. He says BW Gas & Convenience has a portfolio of 25 stores under contract and 100 stores behind that in “various stages of due diligence.” The goal is to acquire 100 to 140 locations this year and reach 600 to 1,000 total locations in the next several years.
It’s an exciting industry, which is “why we are getting into it in a very big way and investing a lot of money into it,” Trkla says. “We’re deploying about $300 million toward the strategy.”
So what is that strategy?
Getting Started
To start, the firm is eyeing smaller portfolios with lower EBITDA (earnings before interest, taxes, depreciation and amortization)
multiples in rural and suburban markets in the Midwest.
“A lot of other operators are building these 5,000-, 6,000-, 7,000-squarefoot beautiful stores, but there’s not a lot of value for us there,” Trkla says.
Brookwood, much like United Pacific on the West Coast [CSP—Feb. ’16], is instead looking to use its real-estate expertise by acquiring 1,200- to 2,000-square-foot stores that it can physically improve to create value. The firm plans to spend approximately $1 million on capital improvements to the Country Store locations in Iowa.
The company also sees an opportunity to acquire stores from individual operators who might be facing headwinds from the Affordable Care Act, minimum-wage legislation and new chip-technology standards. “All these things are making it more expensive for the individual to operate,” Trkla says.
Dennis Ruben, executive managing director of NRC Realty & Capital Advisors LLC, Scottsdale, Ariz., doesn’t doubt that Brookwood has the finances to acquire 600 to 1,000 locations, but he says it will be “challenging to get the critical mass they would like quickly doing five or 10 stores at a time.”
He cites New York-based Fortress Investment Group, a private-equity firm that created a platform quickly by acquiring two West Coast chains—United Oil and Pacific Convenience and Fuels—to form United Pacific.
“In two transactions, they went from zero stores to (about) 400 overnight,” Ruben says. And there is “a fair amount of competition [in the Midwest]. Both Casey’s and Kum & Go are strong in Iowa.”
Ankeny, Iowa-based Casey’s has 1,896 stores and was slated to open a second distribution center in Terre Haute, Ind., in February. As for West Des Moines, Iowa-based Kum & Go, it operates 430 stores and, according to the Springfield News-Leader, will open its first 6,000-square-foot Kum & Go Marketplace concept in Johnston, Iowa, in February.
From the Top, Down
Understanding that good employees are critical to success, Brookwood took its time to build the BW Gas & Convenience team, starting at the top. “The first person that I was going to hire was the guy that was going to run this for me,” Trkla says.
Enter industry veteran Brian Trout, who is senior vice president of operations for BW Gas. (See sidebar, below.) He has more than
20 years of fuel and c-store management experience. Trout most recently was vice president of operations for The Pantry Inc. and also worked for 7-Eleven.
“We recognize the fact that this is a business of acquired expertise, and we are not Pollyannish to believe that we can do it ourselves without those experts on staff ,” Trkla says.
Mark Daniels, as managing director and director of alternative real-estate acquisitions for Brookwood, is the other primary lead for BW Gas. He leads the due diligence and acquisition process and identifies, evaluates and recommends opportunities for investment.
While the endgame is to build a profitable company, Brookwood stresses its dedication to becoming an active part of the community in which it operates.
“It’s not about just buying stores because they provide value for the firm. It’s really also about adding value to the community and being a good corporate citizen and being active in things that are important in the community,” says Jayne Rice, director of institutional sales, marketing and investor relations for Brookwood, and partner in the firm.
Trout’s Convenience Trail
At the helm of BW Gas & Convenience Holdings is Brian Trout. As senior vice president of operations, Trout will direct operational strategy across the portfolio, build and lead regional management teams and establish and implement a consistent merchandising plan. He will also oversee the acquisition and due diligence process as Brookwood builds its national presence. And if his name sounds familiar, it’s because Trout has a long history in our industry.
- Most recently, Trout was vice president of operations for The Pantry Inc., overseeing retail operations and merchandising activities for a 10-state division.
- Prior to The Pantry, Trout was a zone leader in the Midwest for 7-Eleven, where he led all activities for 680 stores, with P&L responsibility for a $1.2 billion portfolio.
- Trout also was senior director of sales and marketing for 7-Eleven’s Great Lakes region. In this role, he had strategic oversight of 680 stores in seven states and led a marketing campaign to enhance 7-Eleven’s political and community relationships.
- He was also sales and operation managers of U.S. fuels for BP Inc., where he led the sales, operations, brand and customer management for the branded franchise/dealer business.
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