Determining the real value of real estate, primarily housing, is very important for buyers and sellers. The valuation of some private properties is of special importance. Feasibility studies that should be done before the establishment of income-generating real estate such as gas stations will provide information about the risks investors have.
The fact that those who have invested in the fuel station can be taken to work before they are ready can soon lead to frustration. Harmoni Real Estate Appraisal and Consulting Inc. Assistant General Manager Ömür Remzi Demirel, who shares his experiences in this matter, points out that the investments to be realized without the feasibility and valuation report can result in losses. Demirel stated that station owners or individual investors did not receive professional support and said, "They are not still making very conscious choices on this issue. I can say that they prefer to buy a station without a projection about the future and knowledge of legal issues except for getting information about the past and observing the current situation. This is of course also related to the risk appetite of the investor; however, as a result of the investments made with lack of analysis, it is observed that the stations cannot be financially carried out and changed very frequently.
Harmoni Real Estate Appraisal and Consultancy Inc. Member of the Board of Directors Ömür Remzi Demirel's statements about the valuation of fuel stations are as follows...
What recommendations can you make so that investors who wants to invest in a gas station can find out the real price of the gas station plant?
What should be done in the process of purchasing a fuel station is primarily research about the station's past and detailed environmental analysis. These are the main factors affecting income-generating activities for gas stations. Actually, I make this statement with the assumption that the legal obligations required for the station to operate are fulfilled. I am of the opinion that a detailed appraisal report is needed to analyze realistically the operating performance of these real estate properties that have their specific conditions within the framework of EMRA legislation. Apart from this, I think that the buyer's preference based only on experience can pose serious risks because of possible legislation and market changes.
How much is the installation cost of a station?
The cost of installation is, of course, very different from the position and conditions dealt with. However, if you want to build an average station with minimum costs (including fuel tank, equipment, pump and software) we have to pay a minimum of $ 500,000. This expenditure does not include invisible costs. Depending on the location, size, closed area and facilities of the station, the cost can be up to several million USD. In the meantime, an important issue that should not be mentioned before is that when the usufructuary agreements are made, the tank, the installation, the pump assembly, the distributor of the dealership is provided. This situation significantly reduces the costs. Of course, these costs do not include the costs such as development of the plant, change of plan and fuel license. We know that these costs change according to the relevant management tariffs, that EMRA license fees change every year, and these items are very serious costs.
What are the factors that determine the value of the fuel station? What information should be obtained from which institutions?
The most important factor determining the value of the station is the regular income that it provides and the risk rate that will affect its sustainability. Income, vehicle density passing through the zone, transportation links with attraction centers (such as city center / tourism / logistics / industrial zones) are directly related to the plant variety in the station.
In order to measure the determinants, we first need to determine the legal and actual framework of the immovable property. It is necessary to identify elements (such as unregistered structures or unauthorized station entrances) that are currently in use, but which are likely to be sustainable in the future, applied in the past incompliant with the laws.
For example, in the past, the Transportation Coordination Center had witnessed a station built with intrusion from the main road without permission, but had to open the side access from the main road entrance due to legal obligations after the hand was changed. Of course, the decrease in the number of vehicles entering the station undesirably affected the income and value. The report we prepared for the prospective buyer on the subject led to the release of this issue from a very critical mistake.
Another example of this is related to the station, which has an occupancy permit document for building use, but a different legend is defined by removing it from the fuel lease in the new construction plan. Since the former owner of the station handed over the real estate but did not transfer the operating company, the new owner had to set up a new operator. Of course, because it was a different legend in this case, the 2nd class non-sanitary enterprise in the municipality could not receive the license, so the station cannot be active again. This element, which we mentioned in our report on the subject, prevented the investor from making a risky investment. Later, for other third parties who bought the station later, I can say that this problem continues despite many years.
As a standard procedure, we receive information from all the institutions and persons related to the fuel station and its related elements. Land Registry Directorate, Cadaster Directorate, Municipality, Special Provincial Administration, EMRA, Distributor Companies, are some of the authorities operating in the same sector in the region. It is possible to see the documents we received from all these and the reports we prepared in the reports we prepared.
What are the reasons why the petroleum industry is attractive for investors?
The biggest factor that makes attractive the fuel sector for investors, is one of Turkey's dynamo sector, the country's power needs created by the risk-reducing factors, EMRA followed by the integrated profit margin by (even falling down, the rate over time) protection and corrected with relatively short range by this margin, also vehicle ownership in our country is constantly increasing. I think it is the most attractive point to be a sector in which sales will not be realized if the financial leg is operated properly.
What are the risks of the fuel sector?
Two of the greatest risks of the fuel industry are actually the reverse process of what I regard as an advantage in the previous problem. Thus, because of the ceiling price imposed by EMRA, the ratio of the integrated profit margin over the years has been adversely affected. There has been a great decline in profits, especially for franchises, per liter. However, the infrastructural and technological costs of distributing and fulfilling legal obligations imposed by the legislator on the prevention of illegal fuel oil have had a major negative impact on the profitability of this sector.
Turkey has grown by focusing on the need for growth and increased energy consumption because of it. However, especially in the dealer's foot, the fact that profit rates have fallen by about 30-40% in recent years has made it much more risky to manage this business.
Another issue that we can consider as a risk is the payment of the private consumption tax in the fuel sector and the need for a guarantee letter to cover the entire stock.
Spending on infrastructural costs, technological investment obligation, tax burden and financial sanctions, profitability and manageability of the business are tightened to a very narrow corridor, and when the profits are gained, especially for small-scale stations, they are pushing vital borders.
In addition to these, developments in reducing the use of fossil fuels in the world and in our country negatively affect the hopes of this sector's long-term future.
Is there a place you can call 'the ideal place' to set up a gas station?
I can say that the stations that will be installed in the logistic areas located in the western outlets of the cities of Anatolia are the best choices for the future if I exclude full / crowded locations such as İstanbul province or other city centers where the station building potential reaches its saturation point
Does the fuel station owner have contact with you for new investments?
To be honest, station owners or individual investors are still not making very conscious choices in this regard. I can say that they prefer to buy a station without getting information about the past and observing the current situation, or a projection about the future, or without any knowledge of legal issues. This is of course also related to the risk appetite of the investor, but as a result of the investments made with the lack of analysis, it is observed that the stations are not able to execute financially and changed hands very frequently.
Our largest customer portfolio in relation to our fuel sector is forming our present banks and distribution companies. The valuation reports required for the collateral letter and other financial services constitute a large majority.
Harmoni is experienced in this matter. How many establishments have you filed reports for now?
Harmoni can be said to be one of the most experienced consulting firms in the country. So far, more than 700 station and fuel leased land / plant appraisal reports have been issued. In 2017 alone, we organized 100 reports on the fuel sector.