Brodie deal gets snarled in lease fight
By Andrew Gomes
Advertiser Staff Writer
The Texas owner of 25 O'ahu gas stations being leased to operators under the Arco, Lex Brodie and 7-Eleven brands has reached an agreement to sell the portfolio to Honolulu-based Lex Brodie's Tire Co., but a dispute with the operators of 10 stations is complicating the deal.
U.S. Restaurant Properties Inc., a publicly traded real estate investment trust based in Dallas, is trying to sell the 25 stations and a product-supply terminal at Campbell Industrial Park that it acquired from Texaco for about $40 million in 1998.
But the company wants to evict two operators who are subleasing 10 Arco stations from a previous operator, B.C. Oil of California, which sublet the stations shortly after it filed for bankruptcy in August 2000.
At issue is whether the subleases are valid. Richard Wilensky, general counsel for landlord U.S. Restaurant, said the 10 stations were sublet without U.S. Restaurant's knowledge or the approval of the bankruptcy court in California.
"All of a sudden, we're stuck with these guys," he said. "You can imagine it is difficult to sell properties while we don't have possession. We can't do it."
But the station operators, which U.S. Restaurant sued in Hawai'i District Court last August in an effort to take possession of the stations, are arguing that U.S. Restaurant knew about the sublease arrangement and that court permission was not required because subleasing was a part of the normal course of business.
U.S. Restaurant on Friday began removing pump equipment that Wilensky said the company owns at the 10 stations. But a representative of Honolulu attorney Mark Kawata, who is representing the two station operators, said that the property is a possession of the bankruptcy estate and was removed illegally.
It was unclear yesterday how many of the stations are still operating.
Meanwhile, Lex Brodie still expects to complete the acquisition of all 25 stations, according to people familiar with the deal. The purchase would make the company one of the largest gas-station owners in the state.
Lex Brodie president John Mayo declined comment yesterday. Wilensky would not confirm that Lex Brodie is the buyer. The company recently leased two U.S. Restaurant stations formerly operated under the Arco brand.
Convenience-store giant 7-Eleven Hawai'i Inc. in November reached a deal to lease about 10 U.S. Restaurant-owned stations formerly operated by B.C. Oil under the Arco brand. Three former Texaco dealers operate three other Arco-branded stations on O'ahu.
According to the purchase arrangement, Lex Brodie would pay U.S. Restaurant for the fee interest in all 25 stations and a half-interest in the fuel terminal, which Wilensky said is also owned by Aloha Petroleum. Station lessees would continue operating under their lease arrangements.
A 26th U.S. Restaurant station in Waikiki is under contract to be bought by another undisclosed buyer, Wilensky said.
U.S. Restaurant at the end of 2000 owned and operated about 850 restaurant and gas station/convenience store properties in 48 states. For the first nine months of last year, the company had about $55 million in revenue.
U.S. Restaurant bought the O'ahu Texaco stations as part of a court-ordered sale of some Texaco stations to satisfy antitrust issues in the wake of the Texaco-Shell Oil merger.
Reach Andrew Gomes at agomes@honoluluadvertiser.com or 525-8065.
