DEAL OPINION - 2 BAY DRIVE THRU CAR WASH

Hello-
I have an opportunity through a relationship I have been nurturing for some time. There is a 2 bay, self-serve drive thru car wash in a secondary market. The business itself is turnkey and passive. In place is a 1099 employee that works for a car wash equipment business who manages the site as a side gig. Asking price is $1.2m. All the equipment was replaced approx. 2 years ago. SDE in 2019 was $140k, and in 2020, it looks as if it will be $126k. As everyone knows, the pandemic put quite the damper on commuting traffic. Additionally, the vending and vacuums have been closed most of the year.

Location is optimal, in a rapidly developing area, but near one of the most prestigious neighborhoods in the city. Commercial property values are increasing rapidly, with limited supply of developable land. I believe it is unlikely that we would see one of the newer concept conveyer/full service washes come in anywhere near this location, as land acquisition costs would likely be prohibitive and there are also likely higher and better uses for the land.

As I evaluate, some of the positives are new equipment, ideal location, opportunities for SBA financing with favorable terms during the pandemic. Some of the negatives are uncertainty on "normal year" productivity of new equipment, valuation seems somewhat high, however, I am talking with a commercial broker on normalizing valuation by separating business from property based on property cap rates in the area.

What are some other things I am missing that I should consider??



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