Global Partners Makes Headway on Portfolio Optimization
WALTHAM, Mass. — Global Partners LP has been busy these past few months, making progress on strategic moves to boost its portfolio.
"We are successfully executing our plan to optimize our portfolio, divest non-strategic assets and pay down debt. With those objectives in mind we have announced the disposition of approximately $160 million in assets," said Eric Slifka, president and CEO, during the company's 2016 fiscal second-quarter earnings call Monday morning.
In July, Global Partners completed the sale-leaseback of 30 New England gas stations to an institutional real estate investor for approximately $63.5 million. The company has a master unitary lease agreement with the buyer. Under the pact, Global Partners will lease the sites for an initial term of 15 years with 20 years of contractual extension options, Slifka said.
In May, Global Partners agreed to sell 31 non-strategic gas stations and convenience stores in New York and Pennsylvania to Mirabito Holdings Inc. for a total cash consideration of approximately $40 million. The sale is expected to close this quarter, Slifka explained.
This deal includes term supply contracts for branded and unbranded petroleum products, "underscoring our commitment to maintain a long-term interest in these assets after the sale is completed," he added.
Global Partners is also in the process of divesting 90 non-strategic sites in Massachusetts, Connecticut and New York through NRC Realty & Capital Advisors LLC. To date, roughly one-third of these sites are under agreement, according to Slifka.
"We are focused on maximizing returns on our existing retail portfolio and expanding our network through long-term leases and other cost-efficient approaches," he said. "Selling stations is one way in which we are optimizing our portfolio. We are also adding high-return locations to our retail deck where we can leverage our skill in branding and merchandising."
For example, Global Partners expanded its retail network into western Massachusetts this spring, inking a long-term agreement for 22 c-stores and gas stations with O'Connell Oil Associates Inc.
The company is also growing organically. According to the chief executive, over the past year Global Partners' Gasoline Distribution and Station Operations segment (GDSO) opened seven new-to-industry (NTI) and renovated sites for a total investment of approximately $9 million.
Several other projects are in the permitting phase. Over the next 12 months Global Partners expect to open as many as five additional NTIs and complete seven raze and rebuilds, he added.
"Through organic growth, marketing efforts and the efficiencies of our vertically integrated system we are realizing higher through-put volume at our strategic gasoline terminals in the Northeast," Slifka said.
According to Slifka, Global Partners' retail gasoline business delivered positive results in the quarter, partly offsetting the impact of the weak crude oil environment. Product margin in Global Partner's GDSO segment increased 18 percent year over year, driven by better gasoline margins, the acquisition of stations and supply contracts from Capitol Petroleum Group, the addition of the O'Connell sites and the opening of raze and rebuilds as well as new stores.
Gasoline distribution product margin in the quarter was up 26 percent year over year. Also, product margin for station operations, which consist of rental income and c-store sales, increased more than 9 percent, he added.
Overall, the net loss attributable to Global Partners for the second quarter of 2016 was $7.3 million, or $0.22 per limited partner unit, compared with net income attributable to the partnership of $7.2 million, or $0.15 per diluted limited partner unit, for the second quarter of 2015.
Combined product margin for the second quarter of 2016 was $154.5 million, compared with $166.2 million for the second quarter of 2015. EBITDA was $41.3 million for the second quarter of 2016, compared with $48.7 million for the same period last year. Adjusted EBITDA was $43.8 million for the second quarter of 2016, compared with Adjusted EBITDA of $48.9 million for the same period of 2015.
Waltham-based Global Partners, a publicly traded master limited partnership, is one of the largest distributors of gasoline, distillates, residual oil and renewable fuels to wholesalers, retailers and commercial customers in New England and New York. With approximately 1,500 locations, primarily in the Northeast, Global also is one of the largest independent owners, suppliers and operators of gasoline stations and convenience stores.