Global Partners' Strategic Actions Set Stage for Growth
WALTHAM, Mass. — One year ago, Global Partners LP outlined several strategic actions to boost its growth and profitability. Now, the partnership is ready to move forward, according to President and CEO Eric Slifka.
"As discussed on [our fourth-quarter 2015 call], our goals were to ensure a sound balance sheet with ample liquidity and generate sufficient cash flow to cover distributions and capital expenditures without relying on outside sources of capital," Slifka recounted during Global Partners' fourth-quarter 2016 earnings call Thursday morning.
To achieve these goals, the partnership's 2016 plan included cutting expenses, accelerating an asset sale program across its portfolio concentrated on non-strategic assets, and focusing its efforts on businesses that provide the highest returns.
"Our successful execution of business plans in 2016, and continuing in 2017, has provided Global with increased flexibility to invest in assets that are fundamental to growth objectives for our retail, wholesale and commercial lines of business," Slifka reported.
Accomplishments in 2016 included:
- Sale/leasebacks of 30 gas stations and convenience stores, enabling Global Partners to unlock the value of fee-owned real estate.
- The sale of 30 non-strategic gas stations and c-stores to Mirabito Holdings, a transaction that included long-term supply contracts for petroleum products.
"In addition, we made significant progress during the year in selling non-strategic retail sites in the Northeast and Mid-Atlantic. Through the end of 2016, approximately 70 percent of those listed sites [with NRC Realty & Capital Advisors] have been sold or are under agreement," the chief executive said.
In total, the sale/leaseback transactions, the Mirabito Holdings deal, and the disposition of sites in 2016 generated approximately $136 million in gross proceeds for the partnership.
Aside from selling properties, Global Partners also expanded its retail network in western Massachusetts, signing a long-term lease agreement for 22 gas stations and convenience stores in April. The partnership acquired the stores, which carried the Convenience Plus banner, from O'Connell Oil Associates Inc., as CSNews Online previously reported.
"We continually evaluate assets and seek ways to improve the performance of our business," Slifka explained. "Monetizing non-strategic assets remains an important focus for Global. Last month, we completed the sale of our natural gas marketing and electricity brokerage business for approximately $17.3 million."
He also noted that last month, the partnership engaged a financial advisor to solicit proposals for the potential sale of six refined petroleum products terminals in New England, New York and Pennsylvania.
"The core elements of our business — terminaling, marketing and retail — are fundamentally strong," the CEO said. "Looking ahead, we continue to look for opportunities to acquire additional retail and wholesale businesses, and evaluate terminal assets as they become available."
At the end of the fourth quarter of 2016, Global Partners had 248 company-operated sites.
"At the moment, we have a couple of different operating models. We have company-operated sites, we have dealer-leased sites, and we have commissioned-agent sites. The balance we have today is, I think, a balance that fits us well. We will look at every site individually — as we always have and will continue to do — to determine what the best operating model for that site is," explained Mark Romaine, chief operating officer.
If the partnership feels it can add value or extract value from a company-operated model, it will certainly pursue that model, according to Romaine. Similarly, if Global Partners thinks an asset "is better off in the hands of a dealer or commissioned agent," then it will take that route.
"I don't think we have a specific mix that we are targeting. It really boils down to what's the best operating model for a particular site," the COO said. "Certainly as we build newer sites in the marketplace, I would expect those are likely to become company-operated stores, but it's one of those things we will look at site by site."