Looking for Opinion on an Express For Sale

[Newbmaster]

Hi Everyone,

Been reading this forum for awhile and am looking to get opinion on a local wash for sale. Saw a listing and received the "financials" and had a brief talk with the broker.

They are asking 1.1 million
Car was is one IBA and 2 SS. Gutted and all new equipment in 2017.
Last year revenue was a little over $520k. 43k cars thru the tunnel, 20k self serve

Payroll-140k. Place open 10 hours a day. Owners are absentee.
Supplies-20k
Repairs-15k
Water and electric-$35k. Water is 50% well
Fixed costs-$35k
Other items not included-$33k
Rent-$61k. 5K per month
Rent would increase 3% per year and I would have right of first refusal. 28 years left on current lease. Owner or car wash is not the landlord

EBITDA-$180k

Asking 1.1. 6X EBITDA, 2.12X gross
Tax accessor has fair market value at 700k.

Gut tells me its not a good deal, but the net keeps me poking around.

Thanks and please let me know what other info you would like to know.

Thanks!

 

[JGinther]

I personally wouldn't consider a lease, but if it suits you.... Most important thing would be to look at the prior 3 years and see if sales are increasing and if there's upside (memberships, extra services, new local developments). Also would heavily consider the option that a new competitor could move in to eat some pie. You had better add in depreciation of the equipment... Do you own the equipment with the check for 1.1M? Sounds like the lease is for the building and the land? Keep in mind, you are buying nothing more than a 'cash flow' really, and market changes can make that 'cash flow' stop flowing easily and you have nothing like land value to back you up. Also, you mentioned IBA which stands for In-Bay Automatic which is quite different than an 'express' tunnel wash. Those would be top numbers for an IBA, and there wouldn't be much upside for it. But an express tunnel with a long tunnel and plenty of room could easily provide much more volume.

 

[Kramerwv]

Depends on lots of things including whether or not you’ll be absentee, paying cash or financing, etc.

 

[Newbmaster]

T

I personally wouldn't consider a lease, but if it suits you.... Most important thing would be to look at the prior 3 years and see if sales are increasing and if there's upside (memberships, extra services, new local developments). Also would heavily consider the option that a new competitor could move in to eat some pie. You had better add in depreciation of the equipment... Do you own the equipment with the check for 1.1M? Sounds like the lease is for the building and the land? Keep in mind, you are buying nothing more than a 'cash flow' really, and market changes can make that 'cash flow' stop flowing easily and you have nothing like land value to back you up. Also, you mentioned IBA which stands for In-Bay Automatic which is quite different than an 'express' tunnel wash. Those would be top numbers for an IBA, and there wouldn't be much upside for it. But an express tunnel with a long tunnel and plenty of room could easily provide much more volume.

JG,

Thank you for taking the time to read and respond. Yes, sales have been increasing YOY since the current owner took it over. Yes, I would own the building and everything inside. Although I would have right of first refusal, I am struggling to wrap my head around arrangement.

The tunnel is conveyor belt and 65ft.

 

[Newbmaster]

Depends on lots of things including whether or not you’ll be absentee, paying cash or financing, etc.

Thanks Kramer,

Id be financing and on site.

 

[Axxlrod]

I'm confused.

You titled the thread Express, but then mention 2 SS bays and IBA. Then mention a conveyor belt. Which is it? If conveyor, is it actually a belt or a typical chain and roller?

You would own the building? So what is leased then? Leases usually include the land and building. FF&E is usually considered property and is separate.

Also nobody counts or cares about the number of cars washed in the SS bays. All that matters is the revenue $$$.

 

[Newbmaster]

HI AX,

Lol, yes, you're thought process should be "this guy is a f***ing idiot". I apologize for botching the equipment.

The sellers deck sheet says conveyor express. I do not know if belt or chain/ roller at this point.

I would own the building and lease the land the building sits on.

The arrangement isnt really making a ton of sense to me, but, clearly, I am new to all of this.

Thanks!

 

[Kramerwv]

If you being there could lessen that payroll number eventually and you could come up with say $400k down then it seems workable. Lots of things can bring down numbers quickly like new competitors, recessions, etc. so be sure to leave yourself some liquidity. Good luck

 

[JGinther]

Maybe you should ask about owner financing (assuming you are qualified)... The response might give you a hint as to whether the current owner thinks its sustainable long term.

 

[jfmoran]

43K for an express tunnel is low. $140K for labor is high. Is this an Express Exterior, meaning pay stations, no prep, no towel dry and free vacuums? EBITDA at 35% is low, investors like to see about 50% EBITDA. You would need to see some tax returns and audited financials. I would also want to know why the volume of the wash is so low? Too much competition? Low traffic count? Poor location? Not enough population? Poor quality wash or poorly operated? Etc...

 

[washallday]

The value of the wash will decrease as it gets closer to the end of lease. You have first right of refusal of the land at what price??? Unless you have the sale price negotiated today the other guy, he holds all the cards, to say he wants $50 million down the road just so you walk away and he ends up with a car wash to sell. In the past I purchased several rental properties with a lease agreement but the sale price was already agreed to at signing of lease.