Service Stations Worry Oil Merger Will Drive Up Rent

By Kaplan, Peter | The Washington Times (Washington, DC), December 7, 1998 | Go to article overview

Service Stations Worry Oil Merger Will Drive Up Rent


Kaplan, Peter, The Washington Times (Washington, DC)


Wall Street brokers talk about things like corporate culture, federal regulations and the Asian financial crisis when they discuss Exxon Corp.'s takeover of Mobil Corp.

But for Dennis O'Brien, the big question is what will happen to the rent on his Mobil stations in Largo and Mitchellville.

Like most of his colleagues, Mr. O'Brien leases his two Mobil stations from the giant oil company, at rates that are usually lower than those charged by Exxon Corp. For him and other gas station owners, the $82 billion merger has raised a lot of questions about the future of their relationship with their giant landlords.

"There's a lot of uncertainty now," said Roy Littlefield, executive director of the Washington/Maryland/Delaware Service Station and Automotive Repair Association, an organization that represents 1,500 station owners in the region. "For the lessee dealer, the questions on a merger like this are largely unknown at this time."

Among the prime concerns, Mobil typically charges less rent, signs longer leases and has a reputation for treating its dealers better.

"The rent piece of the lease is in question right now," Mr. O'Brien said. "That's the question that people are asking."

The two companies have said they plan to keep their Exxon and Mobil outlets separate. But many station operators are expecting the company will only have one set of rules for all the gas stations.

To make matters more complicated, many of the leases contain a clause that allows the companies to re-negotiate the rent almost at will.

"There's a lot of dealers out there that this could really affect because I think at this time Mobil probably has a lot lower [rent] than Exxon," said Wilson Beach, a 40-year industry veteran who runs two Exxon stations in Maryland.

"Mobil dealers like the leases they have," Mr. Beach said.

Theoretically, the merger should be helpful to gas stations, since the $2.8 billion worth of cost-cuts that Exxon and Mobil are planning would be enable them to hold down the cost of rent and wholesale gasoline.

But with crude oil prices falling, Mr.

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