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Abandoned gas stations both vex, brim with promise

February 18, 2012

It certainly seems like there are lots of vacant and/or abandoned gas stations cluttering Indianapolis and surrounding counties. From the derelict former Shell quietly falling to pieces in the heart of Broad Ripple, to a blighted structure on the corner of 16th Street and Central Avenue that hasn’t pumped a gallon of fuel since 2004, they all serve, at least to casual observers, as ever-present reminders of the carnage wrought by the Great Recession.

gas station A former Shell station near Broad Ripple and College avenues in Broad Ripple awaits a buyer. The tiny location is considered difficult to reconfigure. (IBJ Photo/ Perry Reichanadter)

Less-than-casual observers take a more nuanced view. To them, there are two classes of stations—properties that can change hands relatively quickly, and for which there’s still a strong (albeit not as strong as a few years ago) demand. These are owned by reputable companies, and their underground storage tanks are in good condition and not leaking.

A former station with both those pluses shouldn’t, in theory, present

any more of a hassle to commercial real estate agents than, say, a defunct strip mall or empty burger joint.

But if the station in question was abandoned by a bankrupt, small-time operator (something that’s happened pretty regularly the last few years), or if the tanks leak, then it’s an entirely different and more-complicated story.

If the site is clean and the new buyer is guaranteed they won’t be held liable for any nasty post-sale discoveries, it’s just a matter of drawing up the appropriate papers, said Allison Tiefel, an associate vice president for Cassidy Turley Commercial Real Estate Services who mostly handles transactions involving “good” stations. Tiefel recently sold a couple of old BP locations to the Jack in the Box chain, for instance.

“Fast-food places, banks, CVS and Walgreens—they have no problem buying gas station sites,” Tiefel said. “A lot of times they’re on great corners.”

Some long-vacant stations in high-profile locations lingered on the market for reasons other than environmental concerns. The old Marathon at College and Broad Ripple avenues (recently bulldozed to make way for a parking garage) took forever to sell because its owners wanted the moon and the stars for it, Tiefel reports. And that long-empty Shell station half a block down College remains empty because it sits on a tiny, hard-to-reconfigure lot.

If you want horror stories about derelict, long-empty eyesores, talk to the state. According to the Indiana Department of Environmental Management, there’s been a recent spike in the number of abandoned underground tanks due to bankruptcies, foreclosures, sheriff’s sales and tax sales.

gas stationThere are about 500 to 600 Hoosier sites with abandoned tanks. While not all those facilities are gas stations, a healthy percentage are, said IDEM Public Information Officer Barry Sneed.

Those are the sorts of places that attract the attention of Angela Dorrell Green, attorney at the Indianapolis office of Plews Shadley Racher & Braun LLP, which handles more tank litigation and cleanups than any other local legal group. Like Tiefel, she thinks there isn’t a particularly huge glut of vacant gas stations. They just stick out.

“They’re ubiquitous and markedly visible in highly trafficked areas, unlike many abandoned manufacturing or industrial facilities in more isolated locations,” Green said.

Her firm often gets involved when purchasers of old stations find that the property requires state- and federally required site remediation, forcing them to take legal action against the previous owners and/or to seek government cleanup funds.

Indiana law places the blame for leaking tanks squarely on the shoulders of whoever owned the property at the time the problem began. This allows the current owner to sue for recovery of cleanup costs and legal fees—an exercise that can be problematic if the former owner is bankrupt or has simply faded into the woodwork. In that case, Indiana’s Underground Storage Tank Excess Liability Fund can provide as much as $2 million per site to reimburse tank owners for cleanup and third-party liability costs.

To no surprise, this convoluted process puts off buyers of potentially contaminated sites. But Green maintains that old stations offer a viable, potentially lucrative business play. Just secure a property in a valuable location for a relative song, clean it up and resell it at going rates.

The trick is to determine in advance just how expensive and lengthy that cleanup might be. If the tanks are intact and all that’s required is their removal (mandatory if the property is to be used for something other than a gas station), the cost can be in the low tens of thousands. But if the tanks leak and the surrounding soil is contaminated—well, there’s a reason Underground Storage Tank Excess Liability Fund disbursements can (in theory) go as high as $2 million.

But in spite of the potential cost, there are plenty of examples of old stations getting new lives. In 2003, PK Partners demolished one at 38th and Meridian streets, replacing it with a Starbucks (which was recently replaced by a cell phone store).

A more spectacular achievement was replacing two dilapidated gas stations at 25th and Delaware streets in Fall Creek Place back in 2004. The city—aided by a $100,000 EPA grant—cleaned up the site so a private developer could build a three-story residential/commercial building called Douglass Point Lofts.

The old hulk at 16th Street and Central Avenue remains vacant not because no one wants to develop it, but because the rapidly gentrifying neighborhood where it sits objects to a gas station in its midst. Developers want to replace the old station with a new one, but the neighborhood has sued to stop it.•
 

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