Gas Station Real Estate Draws Investors

United Pacific Lists for Sale 23 California Gas Stations for Combined $79MM - The Registry Southern California Real Estate News

California Portfolio Tests Market for Fuel-Retail Properties

BLUF (Bottom Line Up Front): A 23-property United Pacific gas station portfolio across California has entered the market at $79.36 million, with strong early activity reflecting renewed investor appetite for fuel-retail real estate despite California's aggressive push toward electric vehicles and concerns about the long-term viability of traditional gas stations.

Portfolio Sale Reflects Broader Monetization Trend

A United Pacific affiliate is marketing 23 California gas station properties for approximately $79.36 million through CBRE, part of a growing trend of legacy fuel retailers monetizing real estate holdings as the industry confronts an uncertain transition period.

The portfolio, originally structured in a 2014 sale-leaseback transaction, has already seen significant market traction. Two properties have closed, 12 are under contract, and nine remain available for purchase, according to marketing materials. The properties span Los Angeles, San Diego, Riverside, and Fresno counties, with individual pricing ranging from $1.67 million to $6.36 million.

CF United LLC, which operates the United Pacific, Rocket, and United Oil brands across 511 locations in five western states, maintains operations under absolute triple-net leases through tenant APRO, LLC. The lease structure, featuring 8.8 years remaining with 7.5% rent escalations every five years and three renewal options, transfers all operating expenses to the tenant while providing income stability for investors.

Electric Vehicle Transition Creates Investment Paradox

The sale comes as California accelerates its transition away from gasoline-powered vehicles, creating a complex calculus for real estate investors. Governor Gavin Newsom's executive order banning new gasoline vehicle sales by 2035 has established California as the nation's most aggressive state on vehicle electrification, yet gas station real estate continues attracting capital.

The California Air Resources Board projects that zero-emission vehicles will comprise 35% of new car sales by 2026, rising to 68% by 2030 under the state's Advanced Clean Cars II regulations. Despite these mandates, gasoline consumption patterns suggest a longer transition period than policy timelines indicate.

California's total gasoline consumption reached approximately 14.4 billion gallons in 2023, according to the U.S. Energy Information Administration. While this represents a decline from the 2018 peak of 15.5 billion gallons, the reduction has been gradual rather than precipitous, driven more by fuel efficiency improvements and pandemic-related behavioral changes than electric vehicle adoption alone.

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SIDEBAR: California's ICE Phase-Out and the Gas Station Real Estate Dilemma

Policy Framework and Timeline

California's Executive Order N-79-20, signed in September 2020, established the nation's most aggressive timeline for eliminating internal combustion engine (ICE) vehicle sales. The policy requires 100% of new passenger vehicle sales to be zero-emission by 2035, with interim targets of 35% by 2026 and 68% by 2030.

The California Air Resources Board codified these targets through the Advanced Clean Cars II regulation, approved in August 2022. The framework extends beyond passenger vehicles, with Advanced Clean Trucks regulations requiring 40% to 75% zero-emission truck sales by 2035, depending on vehicle class.

Governor Newsom has framed the policy as addressing both climate change and public health, citing California's persistent air quality challenges. The state accounts for approximately 11% of U.S. vehicle registrations but has historically led national emissions standards development through Clean Air Act waiver authority.

Projected Impact on Fuel Demand and Station Viability

Multiple analyses project significant gasoline demand erosion under California's timeline, though estimates vary substantially based on assumptions about fleet turnover rates, charging infrastructure development, and policy compliance.

The California Energy Commission's 2023 Transportation Energy Demand Forecast projects gasoline consumption declining to approximately 9.8 billion gallons by 2035—a 32% reduction from 2023 levels. More aggressive scenarios from environmental groups project declines exceeding 50% by 2040 as the existing ICE fleet ages out.

However, these projections assume linear policy implementation without political reversals or practical constraints. The average vehicle lifespan of 12.5 years means significant ICE vehicle populations will persist through the 2040s even under optimistic EV adoption scenarios.

Station economics become challenging well before complete demand elimination. Industry analysts suggest gas stations require minimum throughput of approximately 60,000 to 80,000 gallons monthly to maintain profitability. As demand declines, station density must contract proportionally, creating a "last stations standing" dynamic where remaining locations capture consolidated volume while others become economically unviable.

The Charging Station Conversion Challenge

Converting existing gas stations to EV charging facilities appears superficially logical but faces numerous practical obstacles that make such transitions economically and technically problematic.

Electrical Infrastructure Limitations: Most gas stations lack sufficient electrical service for meaningful fast-charging deployment. A typical gas station operates on 200-400 amp electrical service adequate for lighting, refrigeration, and point-of-sale systems. A single 350kW DC fast charger—the current standard for commercial installations—requires approximately 500 amps of dedicated service.

Installing 8-10 fast chargers to match gasoline refueling throughput would require electrical service upgrades costing $500,000 to $2 million per location, depending on distance from utility infrastructure. Urban locations may face transformer upgrades or substation modifications, while rural stations may require new distribution line construction.

Revenue Model Disconnect: Gasoline station economics depend on rapid throughput and convenience store sales. Vehicles refuel in 5-7 minutes, creating opportunities for impulse purchases. EV charging, even with 350kW fast chargers, requires 15-30 minutes for meaningful range addition. This dwell time fundamentally changes the business model, requiring different amenity offerings and real estate configurations more aligned with shopping centers or restaurants.

Charging margins also differ substantially from fuel margins. California gas stations average 15-20 cents per gallon in gross margin before operating costs. EV charging economics depend on utility rate structures, with commercial electricity costs ranging from $0.15 to $0.35 per kWh in California. After accounting for equipment costs, charging network fees, and demand charges, margins compress significantly compared to traditional fuel retailing.

Environmental Remediation Requirements: Converting contaminated gas station sites to other uses triggers California's strict remediation requirements. Underground storage tank removal, soil testing, and potential groundwater cleanup become mandatory before alternative development proceeds. These costs, ranging from $125,000 to over $1 million per site, often exceed economic viability for charging station conversion.

Site Configuration Mismatch: Modern gas stations occupy relatively compact footprints optimized for rapid in-and-out traffic. EV charging facilities benefit from different spatial arrangements with longer parking durations, amenity access, and often prefer locations integrated with existing destinations rather than standalone fuel-oriented sites.

Federal Policy Shift and California's Authority

The transition from the Biden administration's strong EV support to a potentially more skeptical federal posture under a second Trump administration creates substantial policy uncertainty for California's timeline.

During his first term, President Trump's EPA revoked California's Clean Air Act waiver authority in 2019, challenging the state's ability to set vehicle emission standards exceeding federal requirements. The Biden administration restored the waiver in 2022. A second Trump administration has indicated potential revival of waiver challenges, though legal precedents have generally supported California's authority since the 1967 waiver framework establishment.

Federal EV incentive changes could significantly impact California's adoption timeline. The Inflation Reduction Act provides up to $7,500 in federal tax credits for EV purchases, with additional incentives for charging infrastructure. Elimination or restructuring of these incentives would reduce EV affordability and slow adoption rates, particularly among middle-income buyers.

However, California has demonstrated willingness to pursue climate policies independent of federal support. The state has allocated over $10 billion through various programs supporting ZEV adoption, including Clean Vehicle Rebate Project incentives, Clean Cars 4 All replacement programs, and charging infrastructure grants. State-level incentives, combined with California's large market size (approximately 15 million vehicle sales over the 2035 ban timeline), provide substantial leverage over automaker product planning regardless of federal policy.

Legal and Political Challenges

California's ICE phase-out faces mounting legal challenges that could moderate implementation timelines. Multiple lawsuits from automotive industry groups, dealership associations, and conservative legal foundations challenge both the state's waiver authority and the practical feasibility of the mandated timeline.

The Alliance for Automotive Innovation, representing major automakers, has not directly challenged the California mandates but has lobbied extensively for more flexible compliance pathways and timeline adjustments based on market conditions. Automakers face the practical reality that California, combined with the 16 states that have adopted its standards, represents approximately 40% of the U.S. vehicle market.

Political dynamics within California also show emerging tensions. Rural counties and Central Valley representatives have expressed concerns about charging infrastructure availability and EV affordability for working-class residents. Agricultural interests worry about zero-emission requirements for farm equipment and heavy trucks. These internal political pressures could drive timeline modifications or compliance flexibility mechanisms.

Implications for Gas Station Real Estate

The policy uncertainty creates a challenging valuation environment for gas station real estate. Properties with 8-10 year lease terms face substantial questions about viability beyond current agreements.

Investors appear to be underwriting several scenarios: (1) moderate policy implementation with extended timelines allowing 15-20 year fuel retail viability; (2) alternative use potential leveraging location and zoning rather than continued fuel sales; or (3) opportunistic holding periods capturing current cash flows with exit strategies before demand cliff events.

The strong market response to the United Pacific portfolio—despite California's aggressive policy framework—suggests investors remain skeptical of near-term demand collapse and may anticipate federal policy moderation or state implementation flexibility. However, pricing appears to incorporate risk discounts, with capitalization rates for California gas station properties running approximately 150-200 basis points above comparable retail properties without transition risk exposure.

For the United Pacific portfolio specifically, the 8.8-year weighted average lease term provides substantial buffer before California's 2035 deadline becomes immediately relevant. The challenge emerges during renewal periods in the 2030s, when demand trends will be clearer but policy uncertainty may persist regarding post-2035 existing vehicle populations and fuel availability requirements.

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Site Locations Offer Redevelopment Potential

The United Pacific portfolio's 17.43 acres across 19 cities present investors with both cash-flow opportunities and potential redevelopment plays. The properties average 47 years of operating history, with locations established in the mid-1970s that have evolved alongside California's suburban development patterns.

Several properties occupy corner locations on major thoroughfares in densely populated areas, potentially positioning them for alternative uses if fuel demand weakens. The Oceanside property commands the highest asking price at $6.36 million, reflecting San Diego County's strong real estate fundamentals, while the Compton location at $1.67 million represents the portfolio's most affordable entry point.

Environmental remediation costs remain a critical consideration for gas station acquisitions. California's strict underground storage tank regulations and potential soil contamination create substantial liabilities that can exceed property values. The State Water Resources Control Board oversees approximately 12,000 cleanup sites statewide related to leaking underground fuel storage tanks.

Market Fundamentals Support Near-Term Viability

Despite California's electric vehicle ambitions, several factors support continued gas station viability through the 8.8-year lease term. California's registered vehicle fleet exceeded 31 million in 2023, with electric vehicles representing approximately 1.9 million, or roughly 6% of total registrations, according to the California New Car Dealers Association.

The slow turnover of the existing fleet means gasoline-powered vehicles will dominate California roads for at least another decade. The average vehicle age in California is approximately 12.5 years, suggesting that even aggressive EV adoption rates will require substantial time before significantly reducing fuel demand.

Infrastructure constraints also temper transition speed. California has approximately 14,000 public and private EV charging ports per million residents, compared to approximately 250 gas stations per million residents, according to the Alternative Fuels Data Center. Building sufficient charging infrastructure to match current refueling convenience remains years away.

Sale-Leaseback Structures Provide Exit Liquidity

The United Pacific transaction exemplifies how sale-leaseback arrangements allow fuel retailers to monetize real estate while maintaining operational control. The 2014 original transaction enabled CF United to extract capital from property holdings while continuing operations under long-term lease arrangements.

This structure has become increasingly common as publicly traded fuel retailers and convenience store operators seek to optimize balance sheets and redeploy capital into operational improvements or shareholder returns. Major operators including Murphy USA, Couche-Tard (Circle K), and 7-Eleven have executed similar transactions in recent years.

The absolute triple-net lease structure transfers property taxes, insurance, and maintenance costs to the tenant, creating passive income streams attractive to real estate investment trusts and institutional investors seeking predictable cash flows. The 7.5% escalations every five years provide inflation protection while remaining modest enough to avoid driving operating costs to unsustainable levels.

California's Unique Market Dynamics

California's fuel market operates under unique constraints that support premium real estate values despite transition concerns. Stringent permitting requirements make new gas station development exceptionally difficult, creating scarcity value for existing locations.

The state's special fuel formulation requirements, designed to reduce air pollution, limit the number of refineries capable of supplying California's market. This regulatory framework, combined with distance from alternative supply sources, creates occasional supply tightness that supports retail margins and, by extension, real estate values.

California's gasoline prices consistently rank among the nation's highest, averaging $4.50 per gallon in December 2024 compared to a national average of approximately $3.10, according to AAA. While these prices reflect taxes, environmental compliance costs, and transportation expenses rather than retail profits, they demonstrate California's unique market structure.

Investment Risks and Considerations

Prospective buyers face several risk factors beyond the electric vehicle transition. California's aggressive climate policies include potential carbon pricing mechanisms and additional fuel taxes that could accelerate demand erosion beyond current projections.

Legal and regulatory challenges also loom. California has faced numerous lawsuits challenging its vehicle emission standards and zero-emission mandates, creating policy uncertainty. The state's authority to set standards stricter than federal requirements, granted through Clean Air Act waivers, has been contested through multiple presidential administrations.

Environmental liabilities represent the most immediate financial risk. California's strict liability framework for underground storage tanks means property owners can face cleanup costs regardless of when contamination occurred. The State Water Resources Control Board estimates average cleanup costs of $125,000 to $250,000 per site, though complex cases can exceed $1 million.

The portfolio's fee simple ownership structure provides buyers with full property rights and potential bonus depreciation benefits under current tax law, though these advantages must be weighed against environmental exposure and transition risks.

Market Outlook

The strong early market response—with more than half the portfolio under contract or closed—suggests investors remain confident in near-to-medium-term fuel retail viability despite California's electric vehicle push. The 8.8-year weighted average lease term provides sufficient runway for investors to capture returns before potential demand erosion becomes critical.

However, the longer-term outlook remains uncertain. California's 2035 gasoline vehicle sales ban, combined with federal incentives for electric vehicle adoption and improving battery technology, creates substantial headwinds for fuel retail real estate beyond the current lease terms.

Successful investors will likely be those who underwrite properties with flexibility for alternative uses or redevelopment, view the leases as providing time to execute repositioning strategies, or accept shorter investment horizons with appropriate return requirements.

The United Pacific portfolio sale provides a real-time market test of how investors value these competing considerations, with pricing and absorption rates offering insights into market expectations for California's fuel retail transition timeline.

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Verified Sources and Formal Citations

1. California Air Resources Board. (2024). "Advanced Clean Cars II." Retrieved from: https://ww2.arb.ca.gov/our-work/programs/advanced-clean-cars-program

2. California Air Resources Board. (2024). "Advanced Clean Trucks." Retrieved from: https://ww2.arb.ca.gov/our-work/programs/advanced-clean-trucks

3. U.S. Energy Information Administration. (2024). "California State Energy Profile." Retrieved from: https://www.eia.gov/state/analysis.php?sid=CA

4. California Energy Commission. (2023). "Transportation Energy Demand Forecast." Retrieved from: https://www.energy.ca.gov/data-reports/energy-forecasts-reports/transportation-energy-demand-forecast

5. California New Car Dealers Association. (2024). "California Auto Outlook." Retrieved from: https://www.cncda.org/

6. Alternative Fuels Data Center, U.S. Department of Energy. (2024). "Alternative Fueling Station Counts by State." Retrieved from: https://afdc.energy.gov/stations/states

7. State Water Resources Control Board, California Environmental Protection Agency. (2024). "Underground Storage Tank Program." Retrieved from: https://www.waterboards.ca.gov/water_issues/programs/ust/

8. AAA. (2024). "Gas Prices." Retrieved from: https://gasprices.aaa.com/

9. Office of Governor Gavin Newsom. (2020). "Executive Order N-79-20." Retrieved from: https://www.gov.ca.gov/wp-content/uploads/2020/09/9.23.20-EO-N-79-20-Climate.pdf

10. U.S. Environmental Protection Agency. (2024). "Clean Air Act Overview." Retrieved from: https://www.epa.gov/clean-air-act-overview

11. U.S. Environmental Protection Agency. (2022). "California State Motor Vehicle Pollution Control Standards; Advanced Clean Cars Program; Reconsideration." Retrieved from: https://www.epa.gov/regulations-emissions-vehicles-and-engines/california-state-motor-vehicle-pollution-control

12. Alliance for Automotive Innovation. (2024). "State Policy." Retrieved from: https://www.autosinnovate.org/innovation/state-policy

13. California Air Resources Board. (2024). "Clean Vehicle Rebate Project." Retrieved from: https://ww2.arb.ca.gov/our-work/programs/clean-vehicle-rebate-project

14. CBRE Group, Inc. (2024). Marketing materials for United Pacific portfolio. [Offering memorandum referenced in article]

15. California Department of Motor Vehicles. (2024). "Vehicle Registration Statistics." Retrieved from: https://www.dmv.ca.gov/portal/vehicle-industry-services/official-dmv-statistics/

Note: Specific pricing, contract status, and portfolio details are derived from The Registry article and CBRE marketing materials as cited in the source material provided.