Real Estate Acquisition & Financing

By July 29, 2010 Commercial Transactions

RETAIL GASOLINE PROPERTIES & WHOLESALE DISTRIBUTION RIGHTS ACQUIRED IN MULTIFACETED TRANSACTION

Highlights

  • Over a period of nearly 17 months, Cummins & White, LLP, helped one of California’s largest Shell-branded fuel distributors acquire multiple gas stations in a deal totaling nearly $19 million.
  • A key part of the transaction was the creation of a master limited liability company (LLC) and 14 designated series LLCs to limit liability for the client and reduce administrative paperwork.
  • Cummins & White handled numerous items for the client, including negotiations for several of the sites, as well as all detailed and extensive financing and title issues.

Attorneys

Case Study

Fred Whitaker and his team from Cummins & White, LLP, successfully represented Anabi Oil Corporation in a three-part transaction, handling negotiations, financing, and title work for the company as it acquired Shell-branded retail gasoline properties and related wholesale fuel distribution rights.  The attorneys worked closely with multiple parties to successfully close on a total of 30 gas stations.

Background

Anabi Oil Corporation is a diversified distributor, retailer, and owner of gasoline products and properties.  To supplement its existing portfolio, the company planned to purchase a large number of fee and leased service stations from Shell Oil Products in Northern and Southern California

The transaction was complicated by the fact that current lessees of nine sites had a right of first refusal, requiring Shell Oil to offer the lessees the right to purchase their sites before Shell Oil could sell to Anabi Oil.  In addition, with an acquisition of this size, financing was critical.  Anabi Oil planned to work with a bank on a commercial loan, as well as a mezzanine capital partner, to close the transaction.

Legal Strategy

Fred Whitaker and his team  handled numerous aspects of the transaction for Anabi Oil.  This included all financing and title work for the first closing (27 fee and leasehold sites), as well as negotiations, financing, and title work for the second and third rounds (three sites total).

To finance the purchase, Anabi Oil—and all its affiliated entities—secured a primary commercial loan from Wells Fargo valued at more than $29 million, including a term loan, revolving line of credit, and cash reserve account.  As part of the complex loan, Wells Fargo took security in all 30 sites, as well as six additional sites owned by Anabi Oil.  A secondary loan of $8.5 million (with similar collateral requirements) was split evenly by two private investment firms; Central Valley Fund, LP, and Huntington Capital Fund II, LP.

In total, Anabi purchased 14 fee sites.  To limit liability for Anabi Oil, Cummins & White created a master limited liability company (LLC) in Delaware and registered it in California.   Within the master LLC, 14 designated series LLCs were then created to hold title for each fee site, reducing the administrative burden.  The remaining 16 leasehold sites were acquired and held by Anabi Oil Corporation.

During the transaction, Mr. Whitaker and an associate worked with six different groups, including the owners of Anabi Oil, acquisition lawyers handling negotiations for the first closing, title lawyers for Shell Oil, lending and legal staff from Wells Fargo, as well as principals and lawyers for Central Valley Fund, LP, and Huntington Capital Fund II, LP.

Key activities included:

  • Working to ensure that all parties were comfortable with Anabi Oil’s financial position
  • Negotiating with lenders and ensuring that loan documents, purchase documents, covenants, and obligations on behalf of Anabi Oil were acceptable
  • Educating all parties about the client’s LLC/designated series structure
  • Negotiating with Shell Oil for properties involved in the second and third closings
  • Obtaining numerous due diligence items for lenders’ review (permits, liens, business licenses, and corporate documents)
  • Clearing specific debts as requested by Wells Fargo
  • Working with Shell Oil, lenders’ and First American Title Insurance Company on detailed title and survey issues
  • Securing endorsements to insure against title issues

Result/Implication

Mr. Whitaker and his team successfully assisted Anabi Oil Corporation in closing a complex three-part business transaction involving the acquisition of 30 Shell-branded retail gasoline properties, along with the rights to provide wholesale fuel to 83 stations in Northern and Southern California.

Importantly, the transaction also included the assignment of wholesale fuel distribution rights from Shell Oil to Anabi Oil.  The agreement put Anabi Oil in position to be the sole provider of Shell-branded fuel for additional sites that aren’t owned or leased by Anabi Oil.

“We were pleased to work with Anabi Oil Corporation on this important real estate transaction and to be part of the company’s expansion as it broadens its operating platform to include wholesale gasoline distribution and a number of stations throughout California,” Mr. Whitaker said.  “Our expertise and resources helped us navigate a complex transaction to the best benefit of our client.”