The Board of Directors of CST Brands, Inc, one of the largest independent retailers of motor fuels and convenience merchandise in North America, has authorized the pursuit of CST Brands in a potential real estate venture that can reduce the cost of capital and accelerate the growth of the company.
"We are pleased to announce the Board's approval of a plan to pursue a real estate venture to enhance value for our stockholders," said Kim Lubel, Chairman, Chief Executive Officer and President of CST. "While there is more work ahead to complete the transaction, we expect the real estate venture to significantly lower CST's cost of capital and provide an attractive financial platform to accelerate new store growth, help fund future acquisitions and potentially purchase existing real estate from CST and CrossAmerica Partners as well."
According to their press release in Business Wire, CST Brands expect that the venture will considerably enhance its new store return on investment from unleveraged returns of 15 percent to over 30 percent under the new venture structure through sales/leaseback leverage. In addition to the company's plan to open more than 350 New-To-Industry ("NTI") in the next five years, CST Brands expect the construction of new stores as build-to-suit locations directly funded by the venture in the beginning of 2017.
"We expect this innovative structure will free up substantial capital that will enhance the Company's ability to pursue its strategic growth initiatives, while also providing an opportunity to unlock additional long-term value for CST stockholders from potential upside in the Company's ownership interest in the real estate venture," added Lubel.
Subject to approval by its Board of Directors, CST Brands is looking forward to announce its venture partner and provide further details of the venture in the second quarter of 2016, closing on the transaction shortly thereafter. There can be no assurance that the Company will enter into a real estate venture or be able to consummate this transaction.
