MMCG Model Study. This is a worked example on a real corridor using public data current to September 24, 2026. The parcel is a listed property used for realism; it is not under contract, and no client is involved. Every figure is sourced or labelled as an MMCG assumption.
Question. Can a new-to-industry fuel station with a food-forward convenience store on US 70 in east Durham carry an SBA 504 loan at a 25-year amortization?
Answer. Not as proposed. A 5,500 square foot store at 20% equity covers debt service at 1.18x in the stabilized year, below the 1.25x the bank first-lien lender requires. Resized to a 4,800 square foot store with 25% equity and a smaller lot build-out, the project covers at 1.29x stabilized, rising to 1.38x by year five, with breakeven at about 6,090 gallons a day against a forecast of 7,120. Equity returns are modest at about 12% levered, driven by the exit cap rate and the land basis.
Determination: feasible as resized.
By Michal Mohelsky, J.D., FMVA, Practicing Affiliate of the Appraisal Institute
Last reviewed: September 24, 2026
Key numbers
| Proposed | Resized (base case) | |
|---|---|---|
| Store | 5,500 sq ft | 4,800 sq ft |
| Fueling positions | 16 (8 dispensers) | 16 (8 dispensers) |
| Total project cost incl. land and working capital | $6,245,000 | $5,970,000 |
| Capital stack (bank / 504 / equity) | 50 / 30 / 20 | 50 / 25 / 25 |
| Annual debt service | $414,700 | $371,900 |
| Stabilized gallons (year 3) | 2,600,000 (7,123 a day) | 2,600,000 (7,123 a day) |
| Inside sales (year 3) | $2,200,000 | $2,100,000 |
| Fuel margin, year 3 | 37.5 cpg gross | 37.5 cpg gross |
| Stabilized EBITDA (year 3) | $489,000 | $479,800 |
| DSCR year 3 / year 5 | 1.18x / 1.26x | 1.29x / 1.38x |
| Breakeven gallons a day (year 3) | about 6,410 | about 6,090 |
| Untrended yield on cost | 7.8% | 8.0% |
| 10-year levered IRR | 11.6% | 11.8% |
1. The site
Parcel. The subject is a 4-acre commercial parcel with 240 feet of frontage on US 70 in east Durham, listed at about $1,000,000 in 2026. The listing describes the land as zoned General Commercial (CG) with a Rural Residential (RR) remainder, inside the Urban Growth Boundary, with approved development plans showing future water and sewer lines adjoining the property. The model develops about 2.2 acres of the CG portion and holds the remainder. Land basis: about $247,500 per acre on the whole parcel, or about $455,000 per developed acre if the remainder is later sold or built as an outparcel.
Why this parcel. It is the only candidate found where acreage, zoning, price and frontage all come from one public listing, and the price per acre is the lowest of the size-appropriate listings: a NC-55 parcel near I-40 asks about $410,000 per acre, a Holloway Street parcel about $810,000 per acre, and a Sherron Road assemblage about $412,000 per acre. A low land basis is what gives a new build on a 38,000 AADT arterial any chance of covering.
Corridor. US 70 (Miami Blvd corridor) carried 36,600 to 46,800 vehicles a day between Lynn Rd and TW Alexander Dr in NCDOT’s 2015 counts, with a 2040 forecast of 53,700 to 65,200. The model uses 38,000 as the working AADT at the frontage. The site is mid-block, a short distance from the nearest cross street, with no signal at the frontage; left-turn access from westbound US 70 depends on the median and on NCDOT’s driveway permit.
The access risk that decides the deal. NCDOT project U-5720 studied converting about four miles of US 70, from Lynn Rd to Page Rd Extension, into a freeway with interchanges at S Miami Blvd and grade separations at Angier Ave, Lynn Rd/Pleasant Dr and Leesville Rd/Page Rd Extension. NCDOT’s project page (updated August 26, 2025) lists it as unfunded, and its public input page says work is suspended. If it is ever built, direct access from US 70 at this frontage could disappear and the site would depend on a service road or on Leesville Rd. The study therefore carries an access-loss downside case and makes written NCDOT confirmation of the driveway a condition precedent.
Terrain and soils. Durham sits in the Durham sub-basin of the Deep River Triassic basin, bordered by the Carolina slate belt, with Jurassic diabase dikes cutting the sedimentary rock. The NC Geological Survey flags elevated shrink-swell clay in the Triassic basins, and Triassic mudstones and siltstones slake when exposed and wet. The model assumes White Store series clay over weathered Triassic rock, moderate cut and fill across the frontage, and a diabase dike as the hard-rock wild card. Tank pits get prompt backfill and moisture control, the canopy and fuel court sit on undercut and replaced subgrade, and the budget carries a geotechnical contingency. Borings at the tank field are a loan condition.
Seismic, wind, flood. Durham is a low seismic area; the canopy governs on wind, not on earthquake load. The 2018 NC State Building Code remains in force (the 2024 code’s earliest effective date is May 1, 2027), so the engineer of record designs to the ASCE 7 edition that code adopts. The model assumes Risk Category II, a basic wind speed of about 115 mph, Exposure C on an open arterial frontage, and a default site class for seismic. Flood: the parcel is not mapped in a FEMA special flood hazard area in the model. Stormwater: the site drains to the Neuse River basin, where a disturbance of 0.5 acre triggers full stormwater control, so a wet detention or bioretention SCM sized for the whole developed area is in the budget.
Zoning path. Durham’s UDO defines a convenience store as a retail store under 5,000 square feet that may sell gasoline. That definition is why the store was resized. A 5,500 square foot store with a kitchen risks being classed as retail plus restaurant, with different limited-use standards and parking. Fuel pumps must sit at least 15 feet from property lines, and one parking space per two fueling positions counts toward the parking minimum. Durham fuel rezonings have carried negotiated commitments: the Shell case on NC 54 at Barbee Rd dedicated additional right-of-way on both roads; a Cornwallis Rd case widened the road. The model assumes a rezoning with a development plan on the RR portion and the same kind of commitments, so the budget includes an eastbound right-turn lane and right-of-way dedication on US 70.
Entitlement to opening. About 30 months from contract: due diligence, geotechnical, Phase I and NCDOT scoping in months 0 to 3; rezoning with development plan in months 3 to 12; site plan, civil construction documents, NCDOT driveway permit and stormwater approval in months 9 to 18; building, fire and UST installation permits in months 15 to 20; construction in months 18 to 28; UST notification and NC DEQ registration, inspections, pump registration, certificate of occupancy and opening in months 27 to 30. This is an MMCG assumption; no Durham fuel case with a published schedule was found.
2. What does a 16-position fuel and c-store build cost?
Program (resized). 4,800 square foot store with a made-to-order kitchen, 8 multi-product dispensers (16 fueling positions) under one 5,600 square foot canopy, three double-wall fiberglass tanks (20,000 gallon regular, 12,000 gallon premium, 12,000 gallon diesel), about 600 linear feet of double-wall flexible piping, 15,000 square feet of 8-inch reinforced concrete fuel court, 20,000 square feet of asphalt drives and parking, 40 parking spaces, one wet detention SCM, an LED price pylon, and EV make-ready conduit for four future stalls.
Construction type. Single-story steel-framed store with CMU and EIFS or brick veneer, TPO roof, slab on grade over compacted structural fill; steel canopy on drilled piers or spread footings designed for wind uplift; double-wall FRP tanks in a lined, anchored pit with pea gravel backfill; interstitial monitoring, under-dispenser containment and an automatic tank gauge as required by 40 CFR 280 and 15A NCAC 02N.
Land and acquisition. About $1,000,000 for roughly 4 acres at asking. The two nearest comparable listings price $410,000 to $810,000 per acre, so the model treats the whole-parcel basis as conservative and holds the remainder at zero value inside the 504 project.
| Line | Basis | Resized | Proposed |
|---|---|---|---|
| Land (about 4 acres) | Asking price on the public listing | $1,000,000 | $1,000,000 |
| Site work: clearing, grading, cut and fill in Triassic clay, SCM, curb, landscaping, site lighting, eastbound turn lane and ROW dedication | National typical $400,000 plus $120,000 offsite | $520,000 | $520,000 |
| Utilities: water and sewer extension from adjoining lines, capital facility fees, power service | Analyst estimate; fees to confirm with City of Durham | $185,000 | $185,000 |
| Store building, shell and finish, MEP | $255 per sq ft (contractor ranges $150 to $350) | $1,224,000 | $1,402,500 |
| Canopy with LED lighting and fascia, 5,600 sq ft | $150,000 to $350,000 published range | $250,000 | $250,000 |
| Dispensers, 8 EMV multi-product | $40,000 net installed | $320,000 | $320,000 |
| Tanks (3), piping, submersible pumps, excavation, anchoring, testing | Published tank and install ranges plus a third tank | $370,000 | $370,000 |
| Sumps, under-dispenser containment, ATG, leak detection | Published package price plus installation | $70,000 | $70,000 |
| Fuel court concrete, 15,000 sq ft at $14 | Analyst estimate | $210,000 | $210,000 |
| Asphalt drives and parking at $5 | 20,000 sq ft resized; 24,000 proposed | $100,000 | $120,000 |
| Hard cost subtotal | $3,249,000 | $3,447,500 | |
| Walk-in cooler and freezer, beer cave, reach-in doors | Published $70,000 to $180,000 | $115,000 | $115,000 |
| Foodservice package: kitchen, hot case, fountain, coffee, roller grill | Published $40,000 to $300,000 | $140,000 | $165,000 |
| POS, forecourt controller, back office | Analyst estimate | $40,000 | $40,000 |
| Signage: LED pylon, building, canopy branding | Analyst estimate | $90,000 | $90,000 |
| Shelving, security, office, smallwares | Analyst estimate | $50,000 | $50,000 |
| FF&E subtotal | $435,000 | $460,000 | |
| A&E fees, geotechnical, survey, Phase I ESA, rezoning, building and fire permits, NC DEQ UST notification, NCDOT driveway permit, legal, title, builder’s risk, appraisal and feasibility | Soft costs | $320,000 | $335,000 |
| Contingency: 10% of hard, 3% tariff reserve on canopy, tanks and dispensers, 5% of soft | Section 232 steel and aluminum tariffs at 50% since June 4, 2025 | $369,000 | $393,000 |
| Interim construction interest, 504 one-time fees financed, bank origination, closing | 10-month build, 55% average draw, 7.75% | $247,000 | $259,000 |
| 504-eligible project cost | $5,620,000 | $5,894,500 | |
| Opening fuel and merchandise inventory, working capital (not 504-eligible) | Analyst estimate | $350,000 | $350,000 |
| Total project cost | $5,970,000 | $6,244,500 | |
| Per building sq ft, excluding land | $1,035 | $954 |
3. Financing: the SBA 504 structure
Program fit. SBA treats gas stations with or without a convenience store as special-purpose property, and this borrower is a new business. Under 13 CFR 120.910 the contribution is at least 15% for a limited or single purpose building, 15% if the business has operated two years or less, and 20% where both apply, which is this project. The 504 debenture funds the land, building, canopy, tanks, dispensers, coolers, POS, site work, soft costs and interim interest; inventory and working capital sit outside the project and are funded with equity in this model. Fuel supply, dealer and jobber agreements under the PMPA are franchises for SBA purposes, so the supply agreement must be on the SBA Franchise Directory before closing.
Rates. The model uses a 6.55% 25-year debenture with one-time CDC, underwriter and closing fees of about 2.5% financed into the debenture. The bank first lien is modelled at 7.75% fixed with a 25-year amortization and a 10-year term. The bank funds interim construction on interest-only terms and the debenture takes out its share after the certificate of occupancy. Both rates are MMCG assumptions for this model.
| Proposed (50 / 30 / 20) | Resized (50 / 25 / 25) | |
|---|---|---|
| 504-eligible project cost | $5,894,500 | $5,620,000 |
| Bank first lien, 50% | $2,947,250 | $2,810,000 |
| CDC debenture, net | $1,768,350 | $1,405,000 |
| Debenture gross with financed fees | $1,812,600 | $1,440,100 |
| Equity into the 504 project | $1,178,900 | $1,405,000 |
| Equity for inventory and working capital | $350,000 | $350,000 |
| Total cash equity | $1,528,900 | $1,755,000 |
| Bank payment (7.75%, 25 years) | $267,100 | $254,700 |
| Debenture payment (6.55%, 25 years) | $147,500 | $117,200 |
| Annual debt service | $414,700 | $371,900 |
Why the lender resized the stack. Twenty percent is the SBA minimum for a special-purpose new business. It is not the bank's number. The first-lien lender in this model requires 1.25x on stabilized cash flow, and at 20% equity the proposed store covers at 1.18x. Raising equity to 25% and trimming the building is the cheapest route past 1.25x; the alternative, a companion 7(a) for the working capital, would add debt service rather than remove it.
Jobs test. For 504 loans approved on or after October 1, 2025, a project must create or retain one job per $95,000 of SBA-guaranteed debenture. A $1,440,100 debenture requires 16 jobs. A 24-hour store with foodservice staffs 14 to 16 full-time equivalents, so the project is at the line; the CDC can document a public policy goal under 13 CFR 120.862 if the count falls short.
4. How many gallons does this corridor support?
Visibility and access. The frontage is 240 feet on a four-lane divided arterial at grade. Eastbound traffic sees the pylon from about 1,200 feet; westbound traffic must use a median break. The site sits on the going-home side for RTP commuters heading east toward Wake County, which is the stronger fuel side. Canopy and pylon lighting are limited by UDO lighting standards.
Traffic. Working AADT of 38,000 on US 70, with heavier volumes toward the I-885 interchange. For comparison, I-40 through RTP carries 139,000 to 196,000 (2019), I-85 through central Durham 100,000 to 111,000, NC-147 at Alston Ave 89,000, US 15-501 near Mt Moriah about 50,000, NC-54 9,400 to 25,700, and Fayetteville Rd about 15,000. US 70 is a middle-tier corridor by Durham standards: strong enough for a modern-format store, not a freeway travel-center site.
Trade area and demand. The primary trade area is a 10-minute drive time covering east Durham and the Brier Creek edge of Wake County. Durham County grew from 267,587 people in 2010 to 324,833 in 2020 and about 347,240 in 2025, and NC OSBM projects 354,041 by 2030 and 375,187 by 2040. Median household income is $84,326 in the county, above North Carolina's $73,958 and the U.S. figure of $81,604. About 62.6% to 62.9% of workers drive alone, with roughly two vehicles per household and a 22-minute mean commute. Scaling the BLS 2024 Consumer Expenditure Survey ($2,411 per household on gasoline) across 147,929 county households gives about $357 million of household gasoline spending, or roughly 115 million gallons a year of resident demand; the population-share method on FHWA's 5.22 billion North Carolina gallons gives about 162 million. The county envelope is 115 to 162 million gallons.
Saturation. At 1.25 million gallons per average U.S. fuel-selling store, county demand supports about 92 to 130 average-volume stations. The trade-area gallons per outlet must exceed the model's 2.6 million for the forecast to hold without taking share.
Employment drivers. AbbVie (730 jobs, Durham, April 2026), Novartis ($771 million, 380 jobs, Durham and Morrisville, 2025), Google's Durham engineering hub (more than 1,000 jobs planned), Novo Nordisk's Durham operations, and Research Triangle Park's 7,000 acres sit within 15 minutes of the site. NCDOT's I-885 widening (U-5934) and the NC-55 Alston Ave widening on the August 2026 Board of Transportation list improve commuter flows past the corridor; the Garrett Rd and NC-54 interchange projects on the west side do not affect this site.
5. Competitive set, pricing and assortment
Comps within the trade area. The Durham market is led by Sheetz, with stores at 3021 S Miami Blvd (RTP), 1014 Yunus Rd (US 70 at I-885), 3414 Hillsborough Rd, 3208 N Duke St and 7520 NC-751. The two closest to the subject are Yunus Rd, to the west, and S Miami Blvd, to the southwest; both are 5,000 to 6,000 square foot foodservice formats with 12 fueling positions and drive-throughs. Along US 70 east of I-885 the model identified a CITGO at 1825 E US 70 Hwy, a station at 3308 E US 70 Hwy and a BP at 2219 S Miami Blvd.
Pricing survey. AAA reported Durham-Chapel Hill regular at $4.178, midgrade $4.614, premium $4.997 and diesel $6.240 on September 24, 2026, against $2.926 regular and $3.533 diesel a year earlier. The spike follows the Strait of Hormuz disruption, with Brent near $108; the Durham diesel record of $6.275 was set on September 21, 2026. Durham runs about 5 cents above the North Carolina average and 30 cents below the U.S. average. The model does not underwrite at these prices. It normalizes to EIA's outlook of $3.84 for 2026 and $3.35 for 2027, and it models margin in cents per gallon, not as a percentage of price.
Assortment benchmark. The Sheetz format sets the inside bar: made-to-order food, a beer cave, a drive-through and 24-hour operation. The subject matches the kitchen and beer cave, omits the drive-through (UDO stacking and the store-size cap), and opens 24 hours. The tobacco set benefits from North Carolina's tax position: 45 cents per pack, 12.8% on other tobacco products and 5 cents per ml on vapor, among the lowest in the country. Lottery is a 7% commission on ticket sales under the NC Education Lottery retailer contract.
Comp locations benchmark. The stronger comps sit at interchange quadrants (I-885 at US 70, I-40 at Miami Blvd) with 80,000 to 190,000 AADT. The subject's 38,000 AADT frontage is closer to the neighborhood-arterial tier. The model therefore forecasts below Sheetz-format volumes and above the industry average.
6. Market conditions summary
Durham County adds 4,000 to 6,700 people a year through 2025 and about 2,100 a year after 2030. Household income and vehicle ownership are above state levels. The U.S. store count edged down to 151,975 in 2025 while fuel-selling stores rose to 122,620, an eight-year high; fuel was 65% of sales but 38.8% of gross profit, and foodservice took 28.5% of in-store sales and 38.9% of in-store gross profit. Industry margins ran 39.7 cents per gallon in 2025 against a five-year average of 38.3 cents, and card fees reached $21.3 billion. Sheetz is the incumbent format leader in Durham; Wawa has no announced Durham site; Buc-ee's Mebane (120 pumps, opening late 2027) will pull long-distance I-40/85 traffic west of the city and is roughly neutral for an east Durham commuter site. Retail prices are at a war-driven peak, so margin, not price, is the variable to underwrite.
Financial projections
Fuel volume, top down and bottom up. Top down, NACS counts 322 fueling transactions a day at 8.4 gallons and illustrates a typical store at 1.5 million gallons a year. Bottom up, the model applies a capture rate to passing traffic. The base case uses 2.0% of 38,000 AADT, which is an MMCG assumption and not a measured capture rate: 760 fueling transactions a day at 9.4 gallons, about 7,144 gallons a day, which the model carries as 2,600,000 gallons a year at stabilization, or 7,123 a day. Year one is modelled at 85% of stabilized and year two at 96%, with 1% growth in years four to six as the corridor's population grows, then flat.
Inside sales. NACS reports that 64% of drivers who fueled entered the store. At 760 fueling transactions, that is about 485 fuel-driven inside visits plus non-fuel visits at about 25% of the total, roughly 650 inside transactions a day at an average basket of $8.85, or $2,100,000 a year at stabilization. Category mix: foodservice 30%, packaged beverages 18%, tobacco and nicotine 22%, beer and wine 12%, candy, snacks and grocery 12%, other 6%.
| Line | Basis | Amount |
|---|---|---|
| Fuel sales | 2,600,000 gallons at a normalized $3.30 | $8,580,000 |
| Inside sales | $2,100,000 | $2,100,000 |
| Lottery commission | 7% of $520,000 in ticket sales | $36,400 |
| Other income: ATM, air, vendor allowances | Estimate | $25,000 |
| Gross revenue | $10,741,400 | |
| Fuel cost of goods | Sales less 37.5 cpg gross margin | $7,606,186 |
| Inside cost of goods | 68% of inside sales (blended 32% margin) | $1,428,000 |
| Gross profit | Fuel $973,814; inside $672,000; lottery and other $61,400 | $1,707,214 |
| Line | Basis | Amount |
|---|---|---|
| Labor | 14.5 FTE at $15.50 average plus manager, 18% burden, 3% escalation | $572,900 |
| Card fees | 8.5 cpg on fuel escalated, plus 2.0% on the 80% of inside sales paid by card | $263,528 |
| Utilities | $5,500 a month, 3% escalation | $70,000 |
| Repairs and maintenance | About 1.6% of inside sales | $34,000 |
| Insurance: property, GL, pollution and UST deductible layer, umbrella | Broker planning range $25,000 to $45,000 | $42,400 |
| Property and business personal property tax | $4.5 million assessed at 101.63 cents per $100 inside the City, plus BPP | $57,200 |
| UST fees and compliance testing | $498 per compartment (four), annual tightness and line testing | $8,000 |
| Supplies, bank charges, licenses, advertising, professional fees, software, waste, security | Estimate | $99,800 |
| Owner-operator management | Fixed draw | $79,600 |
| Operating expenses | $1,227,428 | |
| EBITDA (net operating income) | $479,786 |
| Year | Gallons | Fuel cpg | Inside sales | Gross profit | Opex | EBITDA | Debt service | DSCR |
|---|---|---|---|---|---|---|---|---|
| 1 | 2,210,000 | 36.0 | $1,785,000 | $1,422,740 | $1,125,573 | $297,167 | $371,900 | 0.80x |
| 2 | 2,496,000 | 36.7 | $1,995,000 | $1,614,511 | $1,185,338 | $429,173 | $371,900 | 1.15x |
| 3 | 2,600,000 | 37.5 | $2,100,000 | $1,707,214 | $1,227,428 | $479,786 | $371,900 | 1.29x |
| 4 | 2,626,000 | 38.2 | $2,163,000 | $1,757,876 | $1,262,341 | $495,534 | $371,900 | 1.33x |
| 5 | 2,652,260 | 39.0 | $2,227,890 | $1,810,063 | $1,298,303 | $511,760 | $371,900 | 1.38x |
| 6 | 2,678,783 | 39.7 | $2,294,727 | $1,863,821 | $1,335,345 | $528,476 | $371,900 | 1.42x |
| 7 | 2,678,783 | 40.5 | $2,363,569 | $1,908,338 | $1,370,935 | $537,403 | $371,900 | 1.44x |
| 8 | 2,678,783 | 41.4 | $2,434,476 | $1,953,978 | $1,407,543 | $546,435 | $371,900 | 1.47x |
| 9 | 2,678,783 | 42.2 | $2,507,510 | $2,000,770 | $1,445,198 | $555,572 | $371,900 | 1.49x |
| 10 | 2,678,783 | 43.0 | $2,582,735 | $2,048,744 | $1,483,930 | $564,814 | $371,900 | 1.52x |
Year one does not cover. The model funds the year-one shortfall plus a ramp cushion from the working capital line, and the lender takes a 12-month interest reserve at closing.
Breakeven gallons
Breakeven gallons = (operating expenses excluding fuel card fees + debt service − inside gross profit − lottery and other income) ÷ (fuel margin per gallon − card fee per gallon). Year three: about 2,223,003 gallons a year, or 6,090 a day. The forecast of 7,123 a day leaves a 17% cushion. Proposed case: about 6,411 a day.
Debt service coverage and the SBA tests
The coverage test. The bank first lien requires 1.25x on stabilized cash flow and the CDC underwrites the whole project to at least 1.15x. Resized, the project shows 1.29x in year three and 1.38x in year five. Proposed, 1.18x and 1.26x. That gap is the determination.
SOP 50 10 8.1 and this loan. SOP 50 10 8.1 governs applications that receive an SBA loan number on or after October 1, 2026, which this project will. The parts that bite, read from the SOP text itself:
- Change of ownership rules in Appendix 15, including the 1.25:1 historical coverage for an initial acquisition and the Quality of Earnings report at a business purchase price "equal to or greater than $3 million", do not apply: this is ground-up construction by a new business, not an acquisition. Projections are the only cash flow there is, which is exactly why the lender wants a feasibility study and a 1.25x stabilized test with an interest reserve.
- Citizenship applies. The SOP says "SBA financing is limited to business Applicants with 100% direct and/or indirect owners and SBA-required guarantors, all of whom must be U.S. Citizens or U.S. Nationals who have their Principal Residence in the United States, its territories, or possessions." A Lawful Permanent Resident, including conditional status, is in the SOP’s own list of ineligible persons, so an ownership group that includes one does not qualify.
- Environmental: gas stations have their own Appendix 7, so the environmental investigation must begin with a Phase I ESA by an independent Environmental Professional regardless of loan amount; the Phase I documents that there are no existing tanks, and the tank installation will be permitted and registered before the debenture funds.
- Franchise: the branded supply agreement must be on the SBA Franchise Directory. The model assumes a branded supply contract of 10 years with a $250,000 image and incentive package amortized over the term and repayable pro rata on early exit, carried as a contingent liability.
- Owner occupancy: 60% of new construction; the store is 100% owner occupied.
USDA B&I as the alternative. The parcel is inside Durham's urban area, so B&I is unavailable. A rural site would trigger a mandatory feasibility study above $1,000,000 for a new business under 7 CFR 5001.306(a)(3)(i), and a Categorical Exclusion with report for the new tanks.
Sensitivity
| Gallons a year | 28.0 cpg | 32.0 cpg | 36.0 cpg | 37.5 cpg | 40.0 cpg | 42.0 cpg |
|---|---|---|---|---|---|---|
| 2,000,000 | 0.32x | 0.54x | 0.75x | 0.83x | 0.97x | 1.07x |
| 2,300,000 | 0.47x | 0.72x | 0.97x | 1.06x | 1.22x | 1.34x |
| 2,600,000 (base) | 0.63x | 0.91x | 1.19x | 1.29x | 1.47x | 1.61x |
| 2,900,000 | 0.78x | 1.10x | 1.41x | 1.52x | 1.72x | 1.88x |
| 3,200,000 | 0.94x | 1.28x | 1.63x | 1.75x | 1.97x | 2.14x |
Inside sales at base gallons and margin: $1,600,000 gives 0.88x; $1,850,000 gives 1.08x; $2,100,000 gives 1.29x; $2,350,000 gives 1.50x; $2,600,000 gives 1.70x.
| Gallons a year | 7.25% cap | 8.25% cap | 9.25% cap |
|---|---|---|---|
| 2,300,000 | 6.9% | 4.2% | 1.5% |
| 2,600,000 | 13.8% | 11.8% | 9.8% |
| 2,900,000 | 19.4% | 17.7% | 16.1% |
What the grid says: the project lives or dies on gallons and margin, in that order. Inside sales matter less per dollar than the operator expects, because the blended 32% margin is applied after card fees and labor.
Rates: a bank at 8.75% and a debenture at 7.10% cut year-three coverage to 1.20x. A hard cost overrun of 15%, with equity and debt scaled proportionately, cuts it to 1.12x. Both are stress cases, not the base.
Access-loss downside (U-5720 built in year 6, right-in only from a service road): gallons fall 30% to about 1,875,148 a year and inside sales 20%, and year-7 coverage falls to 0.39x. That is the severest case in this study and it is well below breakeven. The mitigation is contractual, not financial: NCDOT driveway confirmation before closing and a right-of-way reservation on the cross-street side.
Returns and exit
| Measure | Resized | Proposed |
|---|---|---|
| Untrended yield on cost (year 3 EBITDA over total cost) | 8.0% | 7.8% |
| Exit cap on owner-operated real estate and business (MMCG assumption) | 8.25% | 8.25% |
| Year 10 exit value on year 11 EBITDA | $6,960,000 | $7,170,000 |
| Loan balances at year 10 | $3,373,000 | $3,772,000 |
| 10-year levered IRR on total cash equity | 11.8% | 11.6% |
An 8% yield on cost against an 8.25% exit cap is no development spread. The equity return comes from amortization and modest growth, not from value creation, which is why the study calls this a lender-feasible project with a thin sponsor case. A sponsor who buys the land below asking, or who sells the remainder as an outparcel within three years, moves the return materially.
Does the deal clear the lender coverage test?
Feasible as resized. The proposed 5,500 square foot store at 20% equity does not meet the first-lien lender’s 1.25x test in the stabilized year, covering at 1.18x. The resized project, a 4,800 square foot store (which also keeps the store inside Durham’s convenience-store definition), 20,000 square feet of asphalt instead of 24,000, and 25% cash equity, covers at 1.29x in year three and 1.38x in year five, with breakeven gallons about 17% below forecast. Conditions: NCDOT written confirmation of the US 70 driveway and a review of U-5720 status; geotechnical borings at the tank field with a rock and expansive-clay contingency retained; a 12-month interest reserve; Franchise Directory listing of the supply agreement; Phase I with a reliance letter; two local bids on paving, site work and utilities before the budget is final.