Truck Wash Development Design

As things are ramping up to include a rural development company as well as a chain of truck washes - and most importantly a series of equity developments, the naming of our equity entity becomes more and more important. One idea rattling around is to utilize a syndicate approach to the equity investments and sever the New Concept Truck wash from this entity completely. Let me preface this discussion with the disclaim that I am shooting completely "from the hip" and do not offer this as advice, but as a method to explore the idea. Professional help from lawyers and accountants (as well as others) should and will be sought in all cases prior to any decision.

A typical structure would allow for a New Equity Company (NEC) to develop an industrial mall using the New Concept Truck Wash as an anchor tenant. The New Concept Truck Wash would then operate as a closely held private company operating in leased establishments. This would allow for a lower sales figure sale as each would be valued based on 3-4 times annual net income as opposed to valuations based on capitalization rates, but would allow for less financing as in effect we are developing corporately held franchises. Requirements for the New Concept Truck Wash would be approximately $600-650,000 with greater than 75% of this cost being equipment - which may be able to be financed via the manufacturer. Eventually the chain of washes could then be sold as a package to an institutional investor or held for a longer period as after a short number of years the debt will be completely paid off in this case.

The NEC would be comprised of a large number of shares (1000 or so) - and potentially shareholders. A typical project would require 50-100 shares to be sold based on the new value of the company after the new project to ensure fairness to all parties. So, an example:

Project 1 requires $500,000 in equity. Project 1 has 4 tenants including the New Concept Truck Wash. Project 1 produces $50,000 in annual net income.

Project 2 occurs after Project 1 has come to completion. Project 2 requires $300,000 in equity. Project 2 has 3 tenants including the New Concept Truck Wash. Project 2 produces $40,000 in annual net income.

In this case, Project 1 would require 50 shares to be issued valued at $10,000 per share. Each share would then cashflow $1,000 per year. Project 2's addition will value the company at $800,000 in equity producing $90,000 per year in net income. Thus each new share to be issued will be valued $16,000 each requiring issuance of approximately 20 shares. Each share would then be valued at ($800,000/70 shares =) $11,500 approximately and would produce ($90,000/70 shares =) $1285 per share - an 8% return, versus the Project 1 shareholders with a 12.9% return.

This seems to shortchange the Project 2 shareholders... Perhaps the better method is to value each share at a fixed rate and then employ a yearly escalation. Using the above noted theoretical numbers, Project 1 would then still require the same number of shares (50 valued at $10,000 each) . But how to proceed from here? One option would be: Project 2 would then be issued with a requirement for 30 shares each valued at $10,000 with the caveat that the Project 1 investors would roll the income of Project 1 into 2. So, Project 2 would then only require 25 shares to be sold. Thus each share would then be valued at $10,000 and each would recieve ($90,000/ 80 shares =) $1,125 per share. This would allow Project 1 shareholders to recieve a greater return on two fronts (increased returns and increased standing) and still provide a decent return to Project 2 shareholders. And so we end up with a privately held REIT of sorts.

Seems like the easier thing to do is to put together the first development and then proceed to value each set of 100 shares as one project. Thus equity for the first five or ten developments can be attained at the front end and then put into play as soon as projects can be put together. As always there are many many options and possibilities. Professionals should be able to offer sound advice on this issue...

But what to name the NEC?

With such a large percentage of the potential owners being of the Indo-Canadian community and emphasis should be placed in that direction. One possibility would be the sanskrit word for Pheonix - Garuda, as in "Garuda Equities Limited". As noted by Wikipedia (www.wikipedia.org):

"Garuda (Sanskrit: गरुड Garuḍa), the eagle, is a lesser Hindu divinity, the mount (vahanam) of Vishnu, one of the main forms of God in Hinduism. Garuda is depicted as having a golden body, white face, red wings, and an eagle's beak and wings but a man's body. He wears a crown on his head like his master, Vishnu. He is ancient and huge, and can block out the sun.

In Thailand it is known as Krut (ครุฑ). Garuda is the Malay form of the Phoenix. The Japanese also know the Garuda, which they call the Karura, although recent characters modeled on it retain the spelling Garuda (ガルーダ - see below). These three forms are local pronunciations of this Sanskrit name. In Myanmar, garuda are called ga-lon."

Another possibility would be "Nawab Equities Limited" (again from Wikipedia - www.wikipedia.org):

" Nawab or Nabob was originally the subadar (provincial governor) or viceroy of a subah (province) or region of the Mughal empire.
The term is Urdu, derived from the Arabic word naib, meaning deputy. In some areas, especially Bengal, the term is pronounced Nabob. This later variation has entered the English and other foreign languages, see below.
Since most of the Muslim rulers of the subcontinent had -like most otherwise titled Hindu (maha)radjas and other princely states- accepted the authority of the Mughals at the height of this empire the term Nawab is often used to refer to any Muslim ruler in the subcontinent. This is technically imprecise, as it was also awarded to others and not applied to every Muslim ruler. With the decline of that empire, the title and the powers that went with it became hereditary in the ruling families in the various provinces."

As always, the possibilites are only bound by the imagination. So, here's to the future and all it holds.