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Source: CSP Daily News Exclusive

Getty Realty CEO Not Talking to Dealers

Driscoll Rules Out Negotiations with Retailers Occupying Connecticut Stations

By Carole Donoghue | CSP Daily News | June 2, 2012

JERICHO, N.Y. — Getty Realty will not negotiate with 43 retailers it claims are illegally occupying stations it owns in Connecticut. While the dealers may find it "emotionally satisfying" to air their grievances, said Getty CEO David Driscoll, he doubts that such a sitdown would achieve very much.

"It is not in my power to give them what they want," Driscoll said in an interview first reported in a Raymond James/CSP Daily News Flash on Friday. "We are a real-estate investment trust [REIT], we are not in the business of entering into leases with dealers; we do not operate properties."

Jericho, N.Y.—based Getty leased the dealers' stations to New Paltz, N.Y., wholesaler Chestnut Petroleum Distributors Inc. at the end of April after its former tenant, East Meadow, N.Y.-based Getty Petroleum Marketing Inc. (GPMI), filed for Chapter 11 bankruptcy and turned the stations back to Getty.

The dealers said they are willing to sign new leases directly with Getty, but will not accept the agreements that Chestnut has offered them. Getty has now served them with eviction notices and this week sued in a state court to enforce the quit orders.

The dealers also said Chestnut's agreements do not compare with the terms they had when they leased the stations from GPMI.

Under their GPMI leases, the dealers were covered by the Petroleum Marketing Practices Act (PMPA), which gave them some protection against nonrenewal or termination of their supply contracts. Chestnut has refused to give them new PMPA franchises. Instead, it says they must sign commission agent agreements that would strip them of their PMPA protection and let Chestnut control their pump prices.

According to some CSP Daily News sources, Getty is charging Chestnut a lower-than-normal rent for the stations because of the age and condition of the properties. Given the fatter margin it will earn because of the reduced rent, Chestnut could afford to offer the retailers a PMPA franchise and a rack-pricing deal to end the drawn-out dispute and slow the rapidly rising legal bills on all sides, they suggest.

Chestnut CEO Mickey Jamal did not respond to a request for comment.

Getty offered the dealers a month-to-month license to remain at the stations until they signed new agreements with Chestnut, but the dealers said the licenses amount to a legal waiver of their rights.

"I only care to the extent that my sublessee [Chestnut] cares," Driscoll said. "I told Chestnut that we would deliver the properties free and clear of tenants."

Driscoll said Getty asked Chestnut to work with the dealers to offer them a chance to remain at the stations. "We were trying to do this in the nicest way possible to let them stay."

According to Driscoll, the dealers have not paid rent that they owe on their stations. John Morgan, the dealers' Stamford, Conn.—based attorney, vehemently disputes that contention. The rent checks were sent directly to Getty, but the company returned them, Mr. Morgan said. Documents obtained by CSP Daily News confirmed that the checks were returned by Getty.

Mr. Morgan said the dealers will continue to pay rent to Getty, although he expects the money may have to be deposited into a special fund he hopes the court will establish until the legal issues are resolved.

The dealers' case hinges on Connecticut's right of first refusal law, which they said obligated Getty to give them a chance to match Chestnut's lease offer for their sites. Getty never did so. From Driscoll's point of view, the Chapter 11 filing by GPMI and its subsequent surrender of the station leases ended all legal rights the dealers had to remain at the sites.

According to the dealers, Getty has also failed to respond to their attempts to resolve their differences, short of a court fight.

The retailers say they told Getty they would be willing to enter a joint venture deal with a jobber who would supply them with fuel, submit their rent payments to Getty, and monitor their performance and compliance with environmental laws. In return, Getty would assign them the leases on their stations and the dealers would give Getty personal guarantees to safeguard Getty's financial interest in the sites.

Alternatively, they would be willing to sign minimum 10-year PMPA franchises, with a 10-year renewal option. Under that scenario, the dealers would get to choose the gasoline brand they sell from one of the many that Chestnut has. If not, Chestnut would agree to supply them at rack, price plus one cent per gllon, said Michael Fox, executive director of the dealer group representing the retailers, the Gasoline & Automotive Service Dealer’s of America Inc. (GASDA).

"We want the same financial return on our investment in these stations that Getty Realty gets," Fox told CSP Daily News. "If a dealer has made a $250,000 investment in the property, he should get a guaranteed ROI, just as Getty should get an ROI. We would be willing to guarantee Getty an ROI."

Driscoll said he is aware of the suggested solutions proposed by Morgan to Getty's in-house counsel, but "no formal offer was made." He also contended that the dealers are wrong in believing that Connecticut law gives them first refusal rights on third-party lease assignments.

"We are a REIT, and it is our desire to do triple net leases with qualified distributors. We have an historical relationship with Chestnut, and we are comfortable with them," Driscoll said.

"I don't have a relationship with these dealers and never did, and when this is done with, I still won't have a relationship with them," he added.

There were originally more than 50 dealers involved in the dispute, but some have now signed the Chestnut commission agreements in part due to their financial situation, leaving 43 retailers still at odds with Getty and Chestnut, dealer sources said.

Driscoll predicted the remaining dealers will settle "one by one, two by two and three by three" with Chestnut, and that those who don't will lose their court fight.

"They shouldn't bet on that," said Morgan. "It will be a long and bloody battle, but we'll fight it," he said.

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