Corporate Express Exteriors are OUT of Their Ever Loving Minds!
- Thread starter OurTown
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washnshine
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950 for 67 sites is way out of whack. Even considering central office/administration and pt line workers.
washnshine
Well-known member
OurTown
Well-known member
Just found out there is another being built nearby in the next city over but bordering ours. WhiteWater Express. They are building like crazy in Ohio. It took a year from land purchase to breaking ground. Surely this craziness will slow soon. Right?
MEP001
Well-known member
After the economy collapses.Surely this craziness will slow soon. Right?
Greg Pack
Wash Weenie
I think it will slow down, but the business model still works. Think about the rise in interest rates and the P&L impact on a 4MM loan. It's a six figure change on an annual P&L. There is a backlog of projects already approved. I haven't heard of any installers slowing down yet. I called an installer the other day to see if he was interested in doing a reload on an IBA and he is booked solid until June.
OurTown
Well-known member
The business model still works if they were not over building them now in sketchy locations. All the ones I'm seeing building now have well under 20K ADT or if more than that there is already another one (or two) built or being built across the street. The interest rates are getting nutty and the Feds have the gas pedal welded to the floor. It does take a while to get a project going and I'm sure that is why they are still building now. In talking to a commercial loan officer somewhat recently he said the calls coming in have pretty much dried up. In talking to a general contractor he said they are as busy as ever.
soonermajic
Well-known member
Friend of mine had 4 EEs all in rural (under 10k population) Tx. All in on all 4 was under $8mil, over past 11 yrs.
Take 5 bought him out for,
Wait for it....
$32 MILLION US DOLLAR$!!! What the literal blue hel is goin on?
That was over 11x gross!!!
Take 5 bought him out for,
Wait for it....
$32 MILLION US DOLLAR$!!! What the literal blue hel is goin on?
That was over 11x gross!!!
Eric H
Well-known member
That’s a pretty good ROI for him but what is the ROI for the investors?
At what point does this get labeled as a scam? Im
Sure the guys managing the PE firms are making great money and are certainly smarter than I am but I can never get the math to work.
Earl Weiss
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Perhaps one day it will become clear but like most I don't know how they pln to make $ unless there are huge economies of scale for being Nationwide operators. It would seem they could own or have huge leverage on equipment companies, chemical suppliers an then there are revenue enhancers like Loyalty programs. - I still don't get it.
washnshine
Well-known member
I was thinking exactly what you said about equipment companies, Earl. On of the big chains near me is using one manufacturer’s line exclusively, and I wonder if there is any leverage on the manufacturer.
They started coming in wanting to buy my nephews tunnel almost from the time he opened. About two years later one of them offered him enough that he would have been crazy to say no. They turned around and sold the building and property to an investor and leased it back. They have since run it into the ground and are only washing around 100 cars a day. There is no way they are servicing their debt and I would they will walk away and leave the investor that bought it with a run down car wash that he has no idea what to do with. Their business model is not sustainable.
Islandwash
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This is a fascinating subject. Possibly with current interest rates and a slowing economy, the Private Equity groups will pause for a while. Two years ago, one opened up a half mile away from me. I doubt he is doing the numbers he needs, but neither am I with him there. I'm in a town of 24,000.
Competing with one is not pleasant, but possible to do.
Competing with one is not pleasant, but possible to do.
Roz
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So the financial gurus in equity funds are repackaging them. They are listing many properties for sale at a 5.25% cap (19x). If you buy at 11x and can sell them for 19x then the math really works plus the business (car washing) has their rent locked in for 20-30 years at a very low level (double win for the equity fund).
Real question is will anyone buy a 5.25% cap to own the building? I have the sales pitch, it is like buying a bond with a 5.25% return that has escalation increases built into the lease. There may be some fund managers who will take the stead income stream given the rocky stock market. Anyhow this is the play (not unique to Take5 or any of the other big car wash buying firms). I just wish SS/IBA could do the same play.
JGinther
Zip-tie engineer
There are some ss/inbay companies doing the same. Well, I only know of two actually. It's really a smart move for the operator as they are eliminating their risk by unloading a special use building to an investor that doesn't understand their risks of having such a thing. The operator will buy a wash, sign a lease to themselves, and sell the property under the lower returns an investor will accept for a hands off property. If the operator fails to make it go, they could probably pocket cash for a long time before the bottom falls out, and say sorry, see ya to the real estate owner who has a snowballs chance in hell finding another leasor at the same rent after business has evaporated. It all comes down to the terms of the lease they wrote themselves.
But on the flip side, subscription model economics are way different than per use customer dynamics, and it has pulled a lot more out of each motorists pocket in the last few years for the car wash budget. If that new budget can stick in people's heads going forward, then there is a lot of money to compete for. I doubt it though... Car washing isn't as fun as steaming movies. I think people spend on fun before necessary/maintenance these days.
But on the flip side, subscription model economics are way different than per use customer dynamics, and it has pulled a lot more out of each motorists pocket in the last few years for the car wash budget. If that new budget can stick in people's heads going forward, then there is a lot of money to compete for. I doubt it though... Car washing isn't as fun as steaming movies. I think people spend on fun before necessary/maintenance these days.
Earl Weiss
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Using some simple numbers. If they buy for $5 Million that cap rate is a little over $10,000 a month in rent. Now, places in Chicagoland going for that money have monthly real estate taxes at about $10,000.00 and that is before they go up due to the new valuation based on sale price. So, before you wash a car your expense for rent and taxes is $20,000 a month.
Many have a base EE Wash at $4 with some going to $5 and monthly at $19.95.
Roz
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The math is hard to fathom even if the annual rent is $250,000 and they get $5M per location (in the above mentioned example). Times 4 locations that is $20M which is still a long way from $32M. If GR is say $2.9M (11x) minus $1M for rent leaves an adjusted GR of $1.9M and a $12M gap to pay off. Not certain of the operating expenses for the 4 EEs, but say $900K for argument sake leaving $1M in FCF to service a $12M loan and make a profit. At 7% interest and 30 year loan the payments are just under $1M so no matter how you slice the picture it is hard to understand the logic behind such a deal (only that I would jump at a similar deal for my IBAs/SSs)
10x-12x wasn't uncommon for a great or desirable location. but this is coming to an end with the rise in rates and banks asking for more down. They can build them cheaper and build what they want versus buying something already made. For those that wanted to sell but were waiting for a higher offer may have missed the boat.
But one thing that won't change is these guys building across the street from each other. I just scratch my head every time I see coming soon signs across the street from each other.
But one thing that won't change is these guys building across the street from each other. I just scratch my head every time I see coming soon signs across the street from each other.
