Shell Oil net lease properties offer investors the opportunity to purchase well located assets with strong brand recognition and product offerings. There are roughly 25,000 Shell-branded gas stations across the U.S., providing visible public presence for the market leader. Shell's parent, Royal Dutch Shell, remains one for the top three petroleum companies worldwide.
Note that Shell tends not to operate their actual convenience stores / gas stations; rather they prefer to sign marketing agreements with various distributors and operators across the country. For the net lease investor, this means that there are a wide variety of lease types with varying strength of lease guaranties. Some of the more popular net leased Shell locations in the national market have been backed by regional distributors, offering a large corporate guaranty signed to a 15 - 20 year absolute NNN lease. One upside to these leases is that they offer fee simple ownership of the land and building, giving the landlord significant depreciation as gas station properties are allowed to use an accelerated 15-year depreciation schedule for the building versus a typical commercial depreciation schedule of 39 years. Further, Shell net leased investments offer rental increases in the primary term, with annual increases of 1.25% - 3.00%, or 5-year increases of 8.00% -15.00%.
In terms of the underlying real estate, this varies greatly between geographic regions. Many of the locations in the Northeast are older, smaller in-fill sites, generally on 0.3 - 0.6 acres. However, sites in the suburbs of metro areas across the mid-Atlantic and Southeast have been developed on larger land parcels with more gas pumps. This is primarily due to the availability of land and mass transportation, as the Northeast features a number of metro areas with superior mass transit, many MSA's have been shaped by the urban sprawl of the past 20 years, leaving a population more dependent on individual automobile transportation, creating a boom for gas stations. When evaluating separate Shell properties, it will be essential to recognize the difference between franchisee and corporate-owned units as well as gas station and C-store locations.
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