Speaking before about 100 attendees, Brock Rule, chief operating officer and managing director for restaurants, Hopkins Appraisal Services, Independence, Mo., said that in comparison to its restaurant holdings, its convenience store portfolio is "recession resistant," noting that multiplesa measure of a c-store chain's [image-nocss] valuehave come "back to normal compared to its peaks [mid-to-late 2000s]."
Rule noted that in his study of private-company transactions through 2000-2004, multiples were at about 6.3x. They rose in 2005-2006 to 6.9x, hitting 7.7x by 2007-2008. Then the recession brought multiples back down to the mid-6x's and in 2010, the low 6xs.
The panel seemed to agree that multiples in the 5.5x to 6x were holding.
Don Bassell, chief financial officer, GPM Investments LLC, Mechanicsville, Va., operator of the Fas Mart chain, agreed, noting how the company's last big acquisition was in 2007 and that it "would not get that deal today."
"Valuations on top-tier properties are still healthy," said Kevin Shea, executive vice president, Getty Realty Corp., Jericho, N.Y. "For second and third tier, valuations are just not there. People are looking at potential portfolios and they're not commanding the price."
Shea did note that major oil companies are definitely garnering bidder excitement over their divestitures. The panel said though that with lender stipulations becoming more conservative and buyers having to come up with more up front, the majors have had to break up initial packages into smaller groupings, allowing for more bidders to enter the fray.
"It's one thing to get the multiples," said Rule. "But another to find the terms."
To better position properties to sell, panelists agreed that having a firm grasp on the company's numbers was critical. Bassell said lenders ask, "How reliable is your data and how do you access it?"
The ability to access profitability data shows the sophistication of the organization and that the company can spot problems and solve them ahead of time, panelists said.
Of course, not all lenders follow the same road map. Sale-and-leaseback arrangements, traditional-debt lending and even private-equity funding have different terms and criteria priorities.
Steve Horn, senior vice president of acquisitions, National Retail Properties, Orlando, Fla., even mentioned a type of deal where the retailer can switch one rental property for another if a shift in a local highway or increased competition changes the value of the original sale-and-leaseback property. "I just want the cash flow to keep paying dividends to my shareholders," Horn said. "I'm not in love with the land."
[Pictured (left to right): Denny Ruben, managing director, NRC Realty & Capital Advisors LLC (moderator); Steve Horn, senior vice president of acquisitions, National Retail Properties; Kevin Shea, executive vice president, Getty Realty Corp.; Michael Phelps, senior vice president, retail petroleum lending, RBS Citizens Bank; Brock J. Rule, MAI, ASA, COO/managing director, restaurant division, Hopkins Appraisal Services; and Don Bassell, CFO, GPM Investments LLC (Fas Mart).]
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