Five months after acquiring the leases to the SQRL Service Stations convenience store chain, Louisiana investment firm Gas Hub LLC is still refusing to vacate the premises for the hundreds of locations whose leases were terminated by landlord Blue Owl Capital, according to new filings with the U.S. Bankruptcy Court for the Northern District of Texas, Dallas Division.
Gas Hub acquired SQRL Service Stations’ leases on April 5 for $17 million. While some of those stores were owned by independent landlords, 223 of them spanning eight states were owned by Blue Owl, court documents show.
On April 16, Blue Owl terminated the leases for all 223 properties after Gas Hub and its owner, Jamal Hizam, refused to pay April rent. Hizam told C-Store Dive at the time that rent should be paid by SQRL’s previous owner and founder Blake Smith.
Blue Owl has spent the past several months attempting to evict Gas Hub from its stores.
After months of hearings, the bankruptcy court ruled in early August that there was “uncontroverted evidence” that the leases were terminated due to failure to pay rent, and that Gas Hub “does not have an interest in the leases” because they were terminated. Additionally, the court determined that Gas Hub owns and controls all of SQRL Service Stations, contrary to what Hizam and his counsel had claimed months ago.
Despite this ruling, Gas Hub refuses to vacate the stores. In early September, the company’s attorneys said that the court’s ruling violates a U.S. code on automatic stay.
Blue Owl filed an emergency motion on Sept. 6 asking the court to confirm that the August ruling remains in force and the automatic stay does not apply to its eviction process. Parties will meet on Sept. 19 in court to discuss the matter.
In the emergency motion, Blue Owl claims that Gas Hub is partaking in “unlawful squatting” at the stores. The motion also stated that Gas Hub is “pilfering rents from subtenants that are rightfully owed to [Blue Owl], wrongfully marketing [Blue Owl’s] properties for sale or lease, and causing physical damage” to c-stores and equipment.
Andrew Morris, a principal at Blue Owl’s legal and compliance department, said during an Aug. 7 hearing that the firm received reports of locks being changed and chains on the front doors being cut off.
Not only has Blue Owl accused Gas Hub of squatting, stealing rent payments and damaging stores, but it also claims Gas Hub is abusing the bankruptcy process to prevent Blue Owl from regaining possession of the locations, according to the motion.
Blue Owl points to Gas Hub’s “serial filings” over the past few months as its way to avoid handing over the stores. Those included filing two separate involuntary bankruptcy cases against Blake Smith and SQRL Holdings, and more recently declaring Chapter 11 bankruptcy on its own. In that latest filing, Gas Hub noted that it has more than $1.2 billion in debt, most of which have come from lawsuits with Blue Owl.
“This bankruptcy is the fourth attempt by SQRL Stations and Gas Hub in the past four months to use the automatic stay as a shield for their ongoing misconduct at [Blue Owl’s] properties, to which neither SQRL Stations nor Gas Hub holds any legal or equitable right,” the motion said.
In a July interview with C-Store Dive, Sidney Scheinberg, an attorney from the law firm Godwin Bowman, representing Gas Hub, said that his client intended to use its bankruptcy filings to “make deals with the landlords either to purchase some of these stores or to operate the stores under a new lease agreement.”
In the September motion, Blue Owl claimed this showed Scheinberg was abusing the bankruptcy process and called it “a baseless attempt to retain their grip on the Blue Owl Properties, in which they have no legal or equitable interest.”
Scheinberg declined to comment on the matter when reached by C-Store Dive Wednesday afternoon.
