Northern Wheeling and Dealing

Gameocalypse

2010-04-05T15:48:00.000-07:00

I read an article recently about the forthcoming "Gameocalpyse" - essentially everything will be Wi-Fi enabled and directly tied to advertising and customer loyalty programs. The example provided was that of toothbrushes that are linked to the internet - if you brush twice daily you get coupons for new brushes and toothpaste. Moreso if you brush correctly.

Personally, this to me seems like a great tool albeit with some downsides. I would imagine that property managers would easily be able to justify expenses to owners and easily update clients on repairs - blogs for each site which would contain gps locational info for contractors, maintenance personnel, along with real time pictures of work in action (midnight roof or hvac repairs with video!). Or portfolio specific sites that would track similar information, and tracking info comparing jobs on a per square foot or per hour basis across differing contractors seems like just the tip of the iceberg.

Property Redevelopment though would be a lot tougher. Sometimes the key to a redevelopment is a lot more involved than just the cost per square foot. It may lead to more potential tenants - if a tenant is happy with a redeveloper they would work hand in hand with them to secure new or additional space, which can reduce costs for both sides.

I'm certain a buck or two could be made on this - most large property management houses already have something similar, though not as all-encompassing.

Ideally we'd design the site in house and beta test with real world scenarios and updates - now to find someone with the skills to put it together.
Sent from my BlackBerry® wireless device

New Decade, New Blog?

2010-03-19T15:23:00.000-07:00

I've been considering taking up blogging again for a little while and, obviously, I'm giving it a whirl. I think instead of talking about specific projects I will try and focus on overall events without getting into specifics as then I don't have to dedicate hours on end to specific updates.

Having said all of that, I would note that the current climate seems to favor business development instead of pure one sector projects. In front of me are half a dozen new proposals at any given time - and while I appreciate the opportunities being offered, sometimes the players behind each are ... Intriguing.

With some deals - the key contact knows the figures, knows the terminology, and knows the industry well enough to repeat it in their sleep... But they are so difficult during the negotiations that their demeanor kills everything. Don't get me wrong - sticking to your guns or being a tough negotiator is a great trait, but some people really need to find a better passtime.

Maybe I'm just taking things the wrong way - at the end of the day the only person you can change is yourself.

But their must be a way to develop better deal flow... Maybe I need my own website? Or maybe that would just detract from the mystique. Heh.

Shazad
Sent from my BlackBerry® wireless device

Update

2010-03-19T14:11:00.000-07:00

After quite a hiatus, an update is definitely in order. Hopefully this afternoon too!

Shazad
Sent from my BlackBerry® wireless device

Big News on the Horizon

2007-01-13T12:26:00.000-08:00

Several projects are in the final stages of pre-development, moving quickly into the fast and furious world of feasibility, cost, and sustainability reports. Drawings are being developed and development permits sought at least in a few cases, and as more and more information comes to light more and more developments are being pieced together. Now more than ever I am interested in working partners versus simply trying to organize and develop systems myself.

A brief overview and update:

Fort Car Wash: The sale is now completed, save for one or two minor issues stemming from the local municipality and the inspection of a few valves. Sadly, the subsequent Fort Truck Bay Expansion has been shelved as a result - but this does free up some capital which can be moved into other projects.

Edson Car Wash: Going strong - weather permitting. Currently the main focus is obtaining more fleet accounts and developing the additional sources of income typically associated with this style of building. A "Mudbuster" is also being developed, and one excellent prototype was viewed in Rocky Mountain House. This prototype has been in service for the better part of a decade and it's structure and durability are a testament to the owners of the Car Wash that developed this. A patent has been filed on this product, and I wish the inventors the best of luck as it is an excellent, high quality, effective solution to the mud and debris-related problems faced in rural communities.

Truck Stop Development: A suitable parcel with a seller willing to sell has been located. Time is required to put this style of deal together, though several other methods have been put forward in terms of Corporate Structure and Financing to assist this deal move through it's paces. I would expect construction on this project potentially this year (2007) culminating in early 2008. This may be a portion of a much larger development, though I would still expect this to require $600-750,000 as an equity portion.

Rural Industrial: A reasonable parcel with a potentially willing seller may have been located. More information as it becomes available, though there may be some other options in this regard.

Rural Multi-Family: A parcel has been obtained and developmental drawings are in their early phases. This forms the first portion of a three phase development on this parcel, though a meeting with the local developmental authority may provide additional options. The commercial portion of this development is the one that is most appealing at this point, with a myriad of options available.

Destination Development: With the upswing on consumer spending capability in Alberta an interesting offshoot has been the destination development. This style of development serves a specific use and relates only to gatherings of a group of similarly minded persons for a specific purpose. A working partner is the main stumbling block in this case, but a three to four acre site would allow for the best solution. More info as it becomes available, and preferrably to fruition.

Well, here's to tommorrow and the brightness it brings.

Growth

2006-12-16T06:42:00.000-08:00

Recently I have been trying to push the boundaries of what I know and move into an area of development much larger in scope and size compared to what I have traditionally been doing.

It's been hard slogging. On many occassions I did not believe I could do it. I must have "almost" given up a half dozen times. I'm still not out of the woods yet. But I do feel as though a major hurdle has been overcome. I feel as though I am achieving this next level and moving myself and my growth in the direction it needs to be.

Without getting into too much of the philosophy behind all of this - let's just say that unlike the majority of subjects out there, the nature and source of information on this particular area of development is extremely limited and typically comes only from actually living the experience. So what is it that I'm trying to do? Well.... I can't really reveal the details until we have shovels in the ground, so to speak - but I'll try and give an example of the growth I'm trying to undertake.

To date, I have mostly undertaken small to medium sized commercial projects - car washes, strip centers, plazas and the like. The majority of my focus has been on 1 to 2 year developmental projects. Typically in the sub $5,000,000 CDN range. A few projects have been loftier reaching in to the $20,000,000 range, but as yet this size of development has not come to fruition.

The growth I am trying to reach is into this $20-25,000,000 range. However, this range has been strangely elusive to me. What I have come to realize in the last several months is that I must reach still higher to achieve even this level of development. The developmental goals I am now focused on are of the $60-100,000,000 range and would take place over 5 to 7 years. Thus, I achieve my $20,000,000 developmental goals but on a recurring basis inplace of as a one time project.

And the thing that helps to cement that I am on the right track - since I have opened my mind to such a project and all that is required, I have come across 2 separate sites in the two communities I had in mind to pursue. In addition, information is coming as to better communities to focus on (out of the two we focused on, one is an ideal hot spot and the other we will have to develop into one), and potential clients are supplying the information to us as well as assisting with the design.

As soon as I opened myself to the ideas presenting themselves a myriad of options become available and the deals piece themselves together with the layout and schedules almost appearing on the pages. When the student is ready, the teacher shall appear - and sometimes the teacher is what is already within you.

Here's to tomorrow, and all the promise it holds.

Where to Begin?

2006-12-02T05:39:00.000-08:00

It's been quite a journey til now.
These last few months have seemed like years in terms of growth and knowledge.

First the updates:

Fort Car Wash: Phase One Renovations complete. Phase Two Truck Bay Expansion drawings complete. Development permit has some hiccups, but after a meeting or two, we should have a path forward on this issue.

Edson Car Wash: Up and running. After several months worth of gremlins, the troubles seem to have stemmed from an incorrectly installed CPU and have since been corrected.

Urban Market: On hold until I clone myself.

West Edmonton Industrial Strip Center: On hold until Spring 2007.

There are a host of other developments in the final stages of analysis moving towards becoming full fledged projects.

Edmonton Area Staged Project: A multi-phased project in a nearby Edmonton locality. The first two stages center around 30 unit multi-family apartment style condominium complexes. The final stage creates a medical based strip center. This project is expected to last 3-4 years. More info as it comes together.

Edmonton Area Industrial Project: Another multi-phased project in a nearby Edmonton locality. Several sites are being chosen which would allow for some commercial applications - Gas Bar, Car/ Truck Wash, Truck Stop, Motel, Restaurant, and Miscellaneous CRU; in addition to the primary goal of establishing an industrial complex. This project is expected to last 5-6 years.

Edmonton Area Land Development: Again, a multi-phased project involving the development of raw land to a planned community consisting of rural acreages, commercial, residential, and multi-family style areas.

Industrial and Truck Wash Development: Several communities in Northern Alberta are being researched for a new Industrial and Truck Wash development. Two front runners are located significantly far from Edmonton (3-5 hours driving time). Careful consideration needs to be placed on this development, solely from the travel perspective.

Here's to tomorrow and the tremendous planning involved in just one of these projects.

Busier than Ever

2006-08-28T06:50:00.000-07:00

I apologize for the delay in posting, but here's an overview of the current projects:

Fort Car Wash: Phase One renovations and refinancing complete. Construction portion of renovation (Doors, steel coating, and motor repositioning) was scheduled for 4 days and lasted 5. 1 additional day was required for curing of steel coating.
Equipment portion of renovation is actually still ongoing. Work was estimated at 2-3 days, actual was closer to 2 weeks. Equipment supplier is short on manpower, and the current installation is still incorrect. Timer display is not 100% functional and random fluctuations still occur. Disappointing.

Fort Car Wash Phase 2: Truck Expansion still planned. Searching out alternatives to alleviate some pressures.

Edson Car Wash: Up and Running. Construction has some deficiencies and electrical has left alot to the imagination. Equipment supplier still has deficiencies (same supplier as in Fort Saskatchewan) . Credit Card based payment system is still outstanding. Automatic has had a string of issues. Seems to be corrected at this point.
Name has been trademarked as : Splash & Go Car Wash

Urban Market: With renewed vigor we chase this project. Manpower, location, equity position, and suppliers in place. Focus and vendors required.

West Edmonton Industrial Strip Center: On hold till Spring 2007.

Commercial Strip Center: This project has been dropped. I do not believe in the long term stability of this development nor this location.

Rural Multi-Family: This project is still on the books and will be combined with a Commercial Plaza Development. I expect to sell of a portion of this project to fund the other portion.

A host of other projects are currently being progressed upon but the details at this point are difficult to pass along without specifics.

Here's to the future.

An Overdue Update

2006-05-08T08:23:00.000-07:00

Fort Car Wash Refinancing: Financing Institution has agreed to the financing package put forward. Currently jumping through hoops and completing renovations as required.

Fort Car Wash Phase 2: Local competition has closed up shop and the building is now in recievership. Commercial bay requests continue to increase. A brochure is currently being assembled for this expansion - construction could potentially start as early as August/ September 2006, completing in early 2007.

Each bay would measure 25' wide and 110' long and would include it's own fixed catwalk. This new construction would cost an additional 65% as compared to the original constructed value and would allow for two additional industrial bays (as compared to 10 car bays).

The advantage being that a truck will take 45-60 minutes to clean, versus a car or pickup which takes on average 10 minutes. Add to this the extra large bay requirements and the subsequent additional charge for use ($1.25 per minute versus $0.60 per minute) and the benefits quickly add up.

Car/Pickup (denoted "Car") versus Long Haul Truck/ Industrial Vehicle (denoted "Truck") Direct Comparison:

Typical Car Wash: $6
Typical Established Car Wash Occupancy (Rural): 25-35%
Typical Cost per Bay - Car (without Land): $125,000
Typical Income Range per Bay - Car: $3,800-5,300 per month

Typical Truck Wash: $65
Typical Established Truck Wash Occupancy (Rural): 35-50%
Typical Cost per Bay - Truck (without Land): $350,000
Typical Income Range per Bay - Truck: $11,000-15,800 per month

Edson Car Wash: Construction continues. Labor shortage affects our major suppliers. Car Wash equipment may not be complete until end of June 2006.

Urban Market: Research continues. More focus required.

A few new projects on the horizon. More details as they become available.
The lack of detailed information will be mitigated soon.

Here's to the future.

Spring-ing into the New Year

2006-04-11T13:41:00.000-07:00

An (overdue) Update:

Fort Car Wash Refinancing: Approved by both the financing institution and the board. Upgrades in progress. Equipment pricing still to be finalized as new technologies may be better utilised than traditional upgrades.

Fort Car Wash Phase 2: Local competition has closed up shop and the building is now in recievership. Commercial bay requests continue to increase.

One option to capitalize on this may be the incorporation of a second company - with the first owning the buildings in both Edson and the Fort and the second acting as an operating company for both of these locations. A third company would then act as the equipment owner in both cases and would then be paid a lease payment for the use of said equipment.

Another option would be for the merger of the Edson and Fort companies with the inclusion of an additional two commercial bays in the Fort location. Sound expert advice will be required for this development.

Edson Car Wash: Construction continues. Sumps and in slab piping is currently underway. Floor pour is expected in two stages during the week of April 18-25 2006. Operational date has moved to mid-June 2006.

Urban Market: Research continues. More focus required.

On the horizon:

West Edmonton Industrial Strip Center: Our development with the Truck Parts supplier has enlarged to some degree and now consists of a total building foot print of 18,500 square feet with most bays measuring 25' wide x 100' long. Leases for upto 10,000 square feet are being sought to add value and further develop the site. Preliminary drawings should be available by week's end.

Commercial Strip Center: A potential has arisen for a commercial strip center near a soon-to-be boom town. Several major projects are slated for the area and should they proceed the land values are expected to double virtually overnight. Cashflow analysis is still somewhat weak as their are virtually no comparables in the marketplace and the cost to construct at this point is somewhat higher than expected due to the increased labor costs.

Construction on such a development would not occur until a minimum number of the homes in the area are built and the other developments slated - Truck stop and Hotel are completed. However, a multi-unit apartment project has been approved in the area across the street from this development. In excess of 150 units are expected to be built over the next while.

Rural Multi-Family: A design has been chosen and approximate costs estimated for this development. Active pursuit of a site to facilitate the 36 unit complex in several boomtowns with underground parking and mid-level finishes throughout is underway. Each unit measures 1100 sft, has 2 bedrooms and 2 bathrooms and in 2004/05 retailed for $175-$200,000 in Camrose. Similar developments are occuring in a host of Alberta cities.

Active research in this area will be the primary hope of locating adequate land for construction. The primary focus at this time is adequate corporate structure to ensure maxmium return and financing in all projects.

Well, here's to the future and all it holds.

March brings a new direction

2006-03-22T09:05:00.000-08:00

First an Update:

Fort Car Wash: Excessive snow in the Edmonton area has slowed business some. Warmer temperatures and sunshine are expected over the next few days helping to improve business to some extent.

Fort Car Wash Refinancing: Reviewed financials have been completed and submitted. Hopefully this is the last of the hurdles involved before finalization.

Fort Car Wash Phase 2: Growing interest in the area is leading the charge here. A template format for the letters of interest to be filled out by the local business will be ready within a few weeks.

Edson Car Wash: Sump placement is currently ongoing. Slab is expected to be poured by end of March 2006. Building should be complete save for seasonal deficiencies and paving by April 30 2006. Operational date is still May 2006.

Urban Market: Business plan to be complete by May 2006 with advertising beginning in June 2006. Operational date is October 2006.

Potential Projects:

West Edmonton Industrial Development: Our development with the Truck Parts supplier has enlarged to some degree and now consists of a total building foot print of 19,000 square feet with most bays measuring 25' wide x 100' long. A lube operation is currently being sought to fill a 5000 square foot double bay.

Rural Multi-Family: A design has been chosen and approximate costs estimated for this development. Active pursuit of a site to facilitate the 36 unit complex in several boomtowns with underground parking and mid-level finishes throughout is underway. Each unit measures 1100 sft, has 2 bedrooms and 2 bathrooms and in 2004/05 retailed for $175-$200,000 in Camrose. Similar developments are occuring in a host of Alberta cities. Building footprint is approximately 15,000 SFT.

Construction cost for these units run about $130,000 each which includes access, underground parking, permits, and engineering. New Home warranty costs are about $10,000 per unit, which is held in an account for a period of time and if unused, returned. Normally a 1.5 acre lot is required, and assuming it can be purchased for $360,000 - this would add an additional $10,000 to the cost of development. Total cost is typically $150,000 per unit with a portion of the $10,000.

The pre-construction pricing (selling a maximum of 20 units) would be of the range $170-$180K. These units would be sold in lots of five. A final selling price (post-construction) would then start at $200K. In most areas, costs greater than $200 per square foot for similar developments with street level parking are common. Pricing remains to be fine-tuned as several hurdles are still on the horizon.

Commercial Strip Center: A potential has arisen for a commercial strip center near a soon-to-be boom town. Several major projects are slated for the area and should they proceed the land values are expected to double virtually overnight.

The commercial strip center would encompass 20,000 square feet of space with 12-14,000 reserved for a pharmacy, doctors office, dentist's office, and potentially a medical lab of some kind to complete the theme. A franchise such as Tim Horton's or Wendy's is being sought to provide a drive-through on site as the immediate area will service more than 2000 homes. The remaining areas will be used for local amentities such as hair salons or fast food franchises.

Construction on such a development would not occur until a minimum number of the homes in the area are built and the other developments slated - Truck stop and Hotel are completed.

Accessory and Parts Wholesale Franchise: On the horizon is a unique opportunity to grow a northern franchise of an established American Parts and Accessory wholesale dealership. This would be developed with assistance from a few existing businesses which supply to the oil patch and wish to grow in the retail and industrial areas.

While it would appear that the focus has moved from the Truck/ Car Wash concept it should be noted that a much broader picture is now involved. Washes will be used to secure larger centers with multiple tenants. Additionally, effort and focus is being expended towards the development of a new bank type operation which would lend funds as well as provide banking related services.

So - here's to tomorrow and all it holds.

ROI of a Car Wash

2006-03-09T13:56:00.000-08:00

I've been asked recently what is the ROI on a typical car wash. While the numbers will vary based on location and climate - here's is a brief synopsis of the communities surrounding this industry.

1) Development: Normally takes 1-2 years to find a suitable site, tie it up and deal with the zoning requirements, contractors, engineers/ architects, and local politicians to get the project to the next stage. Typical cash involvement is $25-50,000. Skills, time, and contacts would be of the most importance here.

2) Construction: Normal equity requirements for bank financing would be 25-30% on a commercial building plus additional monies for float capital. On a $1,000,000 development (land, building, equipment, interest losses, etc) this would equate to roughly $300,000 which includes the $25-50,000 already spent to achieve site readiness. Construction can range from 180 days to more than a year depending on labor and local climate.

Several communities of investors will purchase the project at this stage netting out the developer at minimum double what they have already invested into the project. In some cases projects sold at this stage are sold due to cash constraints of the developer and the resulting owner can profit handsomely. ROI at this stage is usually 100% plus.

3) Initial Operation: During the initial operation many communities of investors will venture out to purchase the development for 25-30% more than the development's overall cost. In the case of our $1,000,000 development this would relate to at least a $250,000 gain over the initial cost of the project relating to a 83% gain. Should the construction contract be based on a well-managed construction management basis it is entirely possible to increase this overall gain by as much as 50% should the contractor and the owner discover serious cost savings (in our example $125,000 in savings would relate to the aforementioned 50%).

Many real estate agents specialize in this area as they can typically purchase a property in a soon to be appreciating area for a considerable discount by offering the developer a substantial profit. In areas where land is a highly valued commodity these values can increase considerably more than those posted, but a typical ROI at this stage is usually 75-80% including all real estate fees and charges associated with new business operations.

4) Short Term Operation: After the first year to two years of operation a new development is considered to be complete and valued based on it's cashflow. A typical non-urban Albertan car wash will achieve occupancies of 10-15% in it's first year, 15-20% in it's second year, and 25% plus it's third year - assuming no long term abnormal weather patterns. At 25% occupancy our $1,000,000 car wash would be (theoretically) worth $1,500,000 based on it's $150,000 of annual NOI (Net Operating Income) valuated with a 10% capitalization rate.

After three years of operation the facility will have achieved a moderate amount of debt pay-down as a typical equipment loan is amortized over 5 or 7 years. In a 7 year case, approximately 40% of this cost will be repayed and would be an additional bonus to the developer and investors at time of sale. Assuming no re-financing has taken place over this period, ROI's of greater than 200% are common including all debt paydown, real estate fees, and charges.

5) Long Term Operation: After it's third year of operation a typical car wash costing $1,000,000 to construct achieving 25% or better occupancies should return at least $60,000 per year to it's shareholders assuming no refinancing has taken place nor has there been any expansions of the operation. This equates to a yearly ROI of 20% but at this stage a greater amount of equipment wear and tear is present and as such a greater amount of management is required. Bear in mind that the remainder of the income for the year ($150,000 - $60,000 = $90,000) would be spent in debt repayment.

A typical plan would be to develop and construct such a facility with a five year holding plan. During this time the cash proceeds would be utilised to expand the facility - resulting in a larger facility worth at least $2,500,000. Net debt on this building should be less than 70% resulting in a total ROI of 350% plus.

Here's to tomorrow and all it holds.

Another Look at the Current Project

2006-03-05T15:08:00.000-08:00

Currently the project on the table concerns a West Edmonton location for the New Concept Truck wash along with a national truck parts manufacturer. The issue at hand is how best to structure this deal for maximum benefit. As previously noted, the typical return would be around 10% - which is hardly ideal.

Another method to structuring this deal may be to hold the Truck Wash and the lease with the Parts Manufacturer together as one operating entity. This operating entity would then own a series of Truck Washes with and without other tenants possibly through an umbrella style structure where a monthly royalty payment is paid to a central holding company for advertising and chain development. I preface this discussion with the normal disclaimer - I am not a professional and this is posted primarily for my own benefit as a path to explore an idea, not as a plan or as sound advice.

First some assumptions:

Truck Parts Manufacturer (TPM) requires 6000 square feet and an additional canopied area exterior to thier shop measuring 1800 square feet.
TPM pays rent directly reflective of the cost involved (plus a small profit of 10%) and signs a long term lease (20 year total length, in 5 year terms)
New Concept Truck Wash (NCTW) requires 5500 square feet based in two bays each measuring 22' Wide x 110' long with an additional area (660 square feet) for a customer lounge.
Land costs are between $2-$2.50 per square foot.
30% Equity is required
Construction cost = $85 per square foot for built up areas
No Financing is available from the Truck Wash Equipment Manufacturer

Analysis:

This method would allow for a total cost of approximately $2,200,000 for the construction and development of this site plus all tenant improvements. This figure allows for paving of a majority of the site as well as project management costs and the required equipment necessary for the successful operation of the NCTW. Annual mortgage payments on this amount (20 year amortization period, 5 year term, 7.00% interest) would be approximately $150,000 per year or $12,500 per month. At this level, the NCTW requires approximately 16 washes per day to break even with minimal staffing allowances ($1,000 per month). As a separate entity, this wash would be fully viable at this level of financial liability.

However, TPM also pays rent to the holding company. Based on our assumptions this rental should be $12-$14 depending on their interior requirements. Using an average value of $13 per square foot, this equates to an annual payment of (6000 square feet x $13/ square foot =) $78,000. An additional amount, similar in magnitude, would also be paid for the exterior area yielding (1800 square feet x $10/ square foot =) $18,000 per year. This would yield an annual payment of ($150,000 - $78,000 - $18,000 =) $54,000 or $4,500 per month. This relates to approximately 10 washes per day.

To put this all in perspective, 20 washes per day would relate to an occupancy of ((20 washes x 20 minutes/wash)/(24 hours/day x 60 minutes/hour) / 2 Bays =) 17 % occupancy and a net annual profit of $360,000. 10 Washes per day would then relate to approximately 7.0% occupancy with 2 bays in operation. A typical car wash will achieve 10-15% occupancy in it's first year in a rural location. By it's third year, occupancies higher than 25% are typically achieved. 25% occupancy at the NCTW relates to 36 washes per day for a gross income of over $50,000 per month.

Equity in this case would be around $650,000 with our current assumptions. At 10% occupancy this would relate to 430 washes per month (15 washes per day) or a net annual return of $90,000 - 14% CCR. However, assume for a second that financing is available from the equipment manufacturer - how does this change things?

Total development value would reduce to $1,700,000.
Annual mortgage payment would decrease to $125,000 (approximately).
The equity requirement would decrease to $500,000.
NCTW's base payment would decrease to $2,000 per month.

Seems like a win-win all around. Or does it? The equipment worth $500,000 would then have to be paid back to the manufacturer at a minimum of 10% interest. Amortized over 5 years as is normal industry standard this relates to a monthly payment of $9,200. Amortized over 10 years yields monthly payments of $4,600. The normal industry standard would probably rule in this case.

The primary reason for doing this would be to allow for two separate operating companies - one for the NCTW and another for the building itself. To allow the building a modest 10% return would require a $14 per square foot lease rate from the NCTW in addition to it's additional payment of $9,200 would yield a total monthly payment of $15,600. While this relates to a break even occupancy of 12% - 18 washes per day; for a new concept this may prove to be a difficult sell. Mind you, the only people in the know would be ourselves and the equipment supplier....

And it may even be possible to get the land in exchange for some tenant improvements.

Here's to tomorrow.

Truck Wash Development Design

2006-03-04T13:33:00.000-08:00

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.

Opportunities Come (and Leave) Quickly

2006-03-02T05:45:00.000-08:00

It's been quite the interesting few weeks. First the new projects:

New Concept Truck Wash and Car Wash Development: In a nearby soon-to-be boom town, several developers are quitely reforming the town and it's commercial hub to the intersection of two nearby highways. Lots at the corner of these two highways are reasonably priced (less than $7 per square foot) and development is soon to be underway with hotel chains and gas stations gobbling up adjacent property. The issue with this location however, is the holding time. If construction started late this year, ending in Spring 2007 - the area would still require a minimum of 1-2 years to develop to a point where it could sustain such a development. Delaying construction by one year may be the solution, but alot of this depends on major area projects being given governmental approval.

Rural Multi-Family Development: We now have a reasonable design for rural multi-family developments, incorporating both underground parking, elevators, in-suite fireplaces, and an average room size of 1200 square feet for a 2 bedroom 2 bathroom suite. One potential sitemay become available in the near future for a reasonable amount - however the waiting list on such a property is quite lengthy. Other methods for finding land must be investigated, however there are several townships where this style of development is in serious need.

Based on the funding requirements along with the Alberta New Home Warranty committments, a sale price of $180,000 plus would be required for such suites - which is easily attained in todays marketplace for 1200 square foot units.

West Edmonton New Concept Truck Wash: Of the new developments, this one has the most likelyhood of achievement. A local Car and Truck parts manufacturer owns some property immediately adjacent to a Truck Stop near West Edmonton. After approaching this parts manufacturer to purchase an acre of property, they responded that should we provide a proposal to build a facility for them with terms being mutually acceptable - this development would be approved.

Currently, our builder and architects are diligently pursuing this development and within a few short weeks we should have a concrete proposal for this parts manufacturer. Equity for this project may still be an issue however, and options in terms of equipment leasing companies for the additional equity required are being currently researched. Worst case scenario, a partner or two are taken on for this development - resulting in a shared ownership scenario of the truck wash only, not the concept.

And now, the existing projects:

Edson Car Wash: Construction continues. Interior partition wall between Automatic and Self-serve area is constructed and heat is currently being forced into the building to thaw the foundation. Sump placement and underslab piping is expected within a few weeks time. Updated pictures are available at http://edsoncarwash.blogspot.com .

Fort Car Wash: The streak of good weather has lessened some, but still continues. During this break we have begun construction on the interior wall addition and updated photos should be available shortly at http://fortcarwash.blogspot.com . It appears that this renovation will be concluded by Friday March 10 2006. The remaining portions of the interior renovation (Steel painting, door replacement, interior fan assembly, etc) will be done during our typical slow period in June. Refinancing is still underway.

Fort Car Wash Phase 2: Addition of two Commercial bays (25' Wide x 110' Long), one with a catwalk and self-serve equipment and the other with a Large Vehicle automatic seems to be well favored by the local industrial population. Research is being conducted via letters from individual industrial business owners into the likelihood of thier use of these bays. Construction is expected in late 2006, concluding in early 2007.

Urban Market: Research continues. A graphic designer has been enlisted to develop a brand logo. Business plan is currently being assembled and Marketing is expected to start in May 2006. Operation is expected in October 2006.

Tech Head: Growth in terms of market knowledge and viral advertising is exceptional. Very impressive work from the team involved. http://techheadcanada.blogspot.com

On a personal note, I am now constructing a home in one of West Edmonton's premier new communities for $170 per square foot (approximately), which is considered normal for this market and demographic. This home is expected to appreciate by slightly more than 11% during it's construction phase which helps to relate the extreme nature of the Alberta real estate marketplace. So here's to the future and all it holds.

Truck Wash Chain Development

2006-02-19T14:17:00.000-08:00

Originally I had hoped to name the Truck Washes similarly to the Car Wash chain we are attempting to create ("Best Car Wash" -> "Best Truck Wash"). I do have several other contenders for this title though, and am leaning closer and closer to a separation of the two chains - for branding, growth, and resale reasons. Separation would lead to easier portional sales and a higher return for each as sold separately. Mind you, the other way to handle this would be to incorporate a separate company which owns the trademark on the name and license it out to the individual locations.

The potential name highlights (Note that Automatic, Industrial, and Truck are relatively interchangeable in all cases) :

QuickTrip Truck Wash (My tied - personal favorite as it encompasses the majority of the 20 minute automatic wash concept)
EasyClean Truck Wash (My tied - personal favorite as it encompasses the majority of the 20 minute automatic wash concept)
Happy Habor Truck Wash
Green Geyser Truck Wash (Kind of Ecofriendly...)
Steady Stream Truck Wash
Northern Storm/ Northern Power Truck Wash (Alienates southerners....)
Surge Truck Wash
Monsoon Industrial Wash (Another favorite)
Crankshaft's Industrial Wash (Another favorite)
Splash N Dash (better suited to a self serve)
Suds N Buckets (Better suited to a self serve)

The "big guys" in the USA are Blue Beacon Truck Washes (http://www.bluebeacon.com), but their model revolves more around 24 self serve stations with staff as opposed to 24 hour automatics. My preference in this case goes to the automatics as an owner - minimal staffing, minimized cleanup, no caustic/acid issues, and on and on. The main drawback would be the potential for increased damage if you don't have monitoring systems available.

Blue Beacon has over 100 locations between the USA and Canada, and I think that given the right length of development (10 years), this new concept truck wash would be able to easily achieve half of that number throughout Canada following the major trading routes. There may even be a method or two to not only weather the economic downturn, but to flourish as well.

Flying J is our major concern in Alberta (http://www.flyingj.com). This is a mega-chain and I feel somewhat like a small mom-and-pop going up against Wal-Mart by competing against them, but they have not yet made a major foothold into Canada and in the intervening time much can be accomplished. Road Ranger in the Midwestern United States seems to have followed this philosophy as well, and is currently implementing it with considerable success - mind you, that still has to be confirmed.

The other major competitor would be the Truck Wash Guys (http://www.truckwashguy.com) especially as we venture into the Western Seaboard and other areas. It's almost a different market they are trying to capture - but this type of operation requires alot of manpower and replacement of manpower would be the major area of concern

Well, here's to the future.

Car Washes R Us

2006-02-16T09:27:00.000-08:00

Fort Renovations: Ongoing - vending machine wall and security upgrades are currently being conducted. Current construction schedule notes that the wall with vending machines should be in place by the end of February 2006.

Edson Car Wash: Construction underway. Underslab installation in progress. New pictures expected on February 26 2006 after site visit.

New Washes: Travelling to International car wash show for March 13-15 2006 for Truck Wash Automatic and Self Serve research. This research will help flesh out the Fort Car Wash Phase 2 expansion as well as the new Truck Wash Concept for the Alberta Marketplace. We may even end up moving into the Western seaboard area should the opportunity arise.

Due to nature of this business, our knowledge of the issues and solutions required, and the upside potential - all I can see is opportunity for this type of venture. Using a hub and spoke setup, I have already determined a dozen excellent locations in Alberta along with another dozen along the Western seaboard along with supply chains to best deal with the inherent problems in a system of this type.

I also envision a variety of offshoots starting with advertising revenues, chemical sales, as well as our own branded accessories. I've got the branding, got the drive, and I've got the assistance I need to make it all work out. Now I need to prove the concept in a location or two nearby - and the rest is a clear acceleration.

Not that there won't be issues. Seed capital is a big one right now - but not because it's not available, but more so because we're not 100% sure how to structure everything. What I wouldn't give for some books on corporate structure and financial strategies leading to minimized downside potentials. I have a few people in mind for the capital involved - one or two of which I am leaning more towards than the others, but as always Captial is available.

The other issues will arise during the proof of concept stage - but are fully managable. I can see a clear burn on this concept for as long as trucking is our main source of overland transportation. I am concerned about the primary resource based economy - but at the same time if I can prepare from now with as little debt in the operating companies as possible, it may be totally viable to not only survive the downtimes, but to thrive in them as well. Distinct opportunities will arise during those periods, and as long as goods have to be shipped via industrial and long haul traffic routes our base rates of renumeration will always be available.

More research awaits me - and that's a good thing. I need to stay humble, focused, and driven - things that research and development helps breed in the right people. Well, here's to the future and all it holds.

New Concept

2006-02-11T16:07:00.000-08:00

First the Updates:

Fort Car Wash: Updated scheduling information has been obtained for the renovations and it appears that the vending machine wall addition and concrete planter installation should take place almost immediately. Door upgrades will require one full day for installation, steel painting will require several days, as will equipment stand recoating so these changes will take place during our low season.

Edson Car Wash: Updated pictures from our recent site visit are available at http://edsoncarwash.blogspot.com. The next few weeks will contain some very important work - sump and underground piping installation, as well as the installation of concrete floors with a 4% slope in some areas. We will have to watch this closely to avoid oversloping the floors which can lead to vehicle damage.

Urban Market: Research and refinement ongoing. One interesting idea that has come to bear is the allowance for only one brand of company in our space. For instance, should one person wish to sell Watkin's products in our marketplace, for an additional fee we can ensure they are the only person with Watkin's products within our walls. However, other non-Watkin's brands would not be affected by this premium even if they compete with this product. This would still allow the consumer to rule in terms of which brand they buy from, but would allow the retailer the satisfaction of knowing that all Watkin's sales in that space would stem from them.

Advertising revenues are also being researched and an updated logo is well on it's way. This updated logo will potentially end up on the site as well, once it is complete.

The other major refinement has been the inclusion of local artists to entertain (and work for tips) while at our locations. From this, a more beneficial layout has been developed which allows for a greater number of booths while still providing the flexibility we require.

Parking and location will of course be our major concerns - but several good sites are currently available.

New Concept Truck Wash:

I have several locations (previous posts list as many as half a dozen) in mind for a new concept Truck Wash. As I dig further and further into this new concept - while cash intensive to some extent, it does look more and more feasible the longer we research it. A recent example:

A major soft drink company (one of the big two) has a location in Edmonton. This is their major distribution center for our area. This distribution center is home to more than 60 highway trucks, and at present they are all totally unclean. The company has been diligently trying to find someone to hire to clean these vehicles - but such a person would require a Class 1 license. Even at the $30-$40 per hour this company wishes to pay they cannot find anyone because anyone with a Class 1 license right now is interested more in hauling as it pays considerably more than $40 per hour.

One option for such a company would be to make use of our New Concept Truck Wash - which will clean the Truck within 20 minutes while the driver sits inside and (potentially) does paperwork. A company of this type usually employs a variety of paperwork and this could save the company a massive amount of money and allow for good public image as a side benefit - not to mention the tax rebates the company would recieve for keeping their vehicles free of dirt and debris and the extended lifespan of the outer portions of the vehicle. Here's a brief look at the numbers involved:

Typical Wash time = 60-90 minutes ($75 as an average cost)
Washer wages = $35 per hour x 2 hours (1-1.5hours for washing, plus travel time, plus waiting time = $70)
Average cost/wash = $145

New Concept Wash Time = 20 minutes ($50 as an average cost)
Truck Driver Wages = $0 (they would be filling out paperwork at this time which would normally be paid for by the company - additional cost is nothing except travel time - $25)
Average cost/wash = $75

Additionally, with such a large fleet a discount would be more than prudent with this client. We could potentially knock $10 off the per wash price - netting the total cost to $65/wash. This company could potentially provide 1 wash per vehicle per week (or more depending on travel arrangements and time of year) = 280 washes per month or just over 9 washes per day. With one or two of these large accounts using our facilities, our break even of 12 washes at $50 per wash would be easily achieved.

At 20 washes per day (14% occupancy), profit is somewhere around 20% based on our assumptions and what we are currently achieving in the Fort Car Wash location. Keep in mind there are still some bugs in terms of how such a system would work - 75% of which will be answered at the car wash show in Las Vegas, but some others will only come from operation. Well, here's to the future - and making it all happen.

February 7 Update

2006-02-07T12:05:00.000-08:00

Edson Car Wash: Exterior Cladding is 85% complete. Interior insulation follows quickly behind. Heat should be in the building along with the gas meter by the latter end of the month and the slab should be able to be poured shortly thereafter. Interior excavation, in slab piping, and sump layouts are the current priority.

Fort Car Wash: Good weather = good business. Needed renovations expected to take place in two stages with the first occuring this month (February). Might need to close down for a few days in June (slow period) to change out the doors, paint the steel, recoat the in-bay equipment stands, and potentially add slope to the floors. Replacement of Data Key system needs a re-tooling prior to actual application. Other alternatives do exist.

Fort Car Wash Refinancing: Package in front of financing institutions. Additional information required to aid process. Still waiting.

Fort Car Wash Phase 2 Expansion: An additional upgrader has been planned for the Fort Saskatchewan area. This brings the list to 3 planned, 1 ready for governmental approval, 1 currently under construction (2006 -2007), and 1 completed with an addition in the works. Should another one move from the planning stage to the governmental approval stage a variety of possibilities open up including the addition of commercial bays on the existing car wash and the expansion of the Rural Development Corporation's holdings.

Potential Future Truck Washes: Much more research is required and will be conducted via this year's annual car and truck wash show in Las Vegas - but the following are the current possibilities for Truck Wash/ Truck Stop projects:

1) Edmonton-Calgary Highway location - Excellent potential for leased premises with self-serve and/or automatic truck wash addition.
2) West End Original location - Excellent Truck Stop location
3) New West End location in current Truck-Friendly area - 2 Automatic Truck Wash concept.
4) Sherwood Park location - 2 Automatic Truck Wash concept.
5) Dungeon location in West End - 2 Automatic Truck Wash concept.
6) Bikini Truck Wash location. - Not feasible with current asking price.

As these developments are cash intensive, it may require a syndicated group to take on this style and size of development. Available shares of 25-30 each costing $50,000 (MMC acting as the managing partner with 5 shares) may be the best way to deal with my investors and this type of development - starting with one or two locations and branching into a dozen or more within a few years time. Branding is the major issue to be worried about to ensure maximum growth.

Edson Commercial Condos: Still a possibility. Though several other styles of development may be a much better match for this property.

Commercial Center: Still awaiting Owner's response. At this time I may let this opportunity go due to the lack of interest from the Owners.

Urban Market: Research ongoing. More time needs to be spent with fine tuning the rental rates, common area charges, and Utility costs to get an accurate picture of the scope of the project. Several possibilities exist for franchising or branching out, as well as a very interesting side development stemming from talks with a potential investor. Logo should be prepared by Month's end and open vendor recruiting is expected in short order. Expected opening is October 2006. An Excellent Manager has been located.

Tech Head: Growing organically at this point. I'm happy with the current status, but at the same time realize that the largest hurdle (focus) is still in front of us. The business partner is an excellent fellow who just wants to make it work and is looking for a little direction, but no problem is insurmountable so long as we are working together and looking at it logically and objectively.

On the personal front it appears that I may have found the appropriate home for my soon to be budding family. Both myself and the other (better?) half like the model with a few upgrades - but as early as January 2007 I may be the proud owner of a newly constructed home in a nicer neighborhood in Edmonton's West End.

One final note... Recently an opportunity to achieve $5,000 per month for 10 hours per week in a management capacity was offered by an acquaintance of mine. While the numbers did look enticing, a lot more emphasis needs to be put on the quality of presentation. Numbers backed up by paper (lease agreements, governmental submittals, in house financials, etc) go alot further than numbers recalled from memory. Timing was the major issue in this case, but one thing I have learned from financing companies is that if you have all the numbers and documents ready they can typically achieve a lot faster results than if they have to repeatedly call you.

Well, here's to the future.

January 28 2006 Update

2006-01-28T08:14:00.000-08:00

Just some brief updates, and a new development or two:

Edson Car Wash: Exterior and Interior walls are going up currently. I should have updated pictures on http://edsoncarwash.blogspot.com within a week's time as I will be making a site visit next Sunday (February 5 2006). Mechanical and Electrical details will be making up the majority of our focus as soon as the floor has been poured.

Fort Car Wash: Good weather has brought good business with it, but we are still having trouble with the exit door. It appears people are trying to race the door as it is closing and either hitting the door or having it hit their vehicles. Temporary solution is to put up a sign on the interior bollard indicating people should slow down and use caution as the door closes automatically.

I am currently researching other door products in place of the clear plastic doors we had hoped to replace our current doors with in the phase one renovations. The door currently with the greatest focus is the airplane hangar style door. This door opens width wise, instead of up and down and should allow for quicker in/out times. The main problem with this style of system will be the renovation of our office area as the door will recess into that area when open. Hopefully the supplier we have been referred to (http://www.sunshinedoor.com) will have something that can work for us. Mind you, the sunshine door by itself may be the right way to go with some different controls for the doors.

Refinancing: Still ongoing. Seems like December and January are not the best months to approach financing companies.

Possible New Vehicle Washes:

1) Original West End Location ("Dungeon")
2) West End highway location (Truck Stop Development)
3) Former Bikini Truck Wash location (Financing may be extremely difficult)
4) Edmonton-Calgary Highway location (Truck Stop Development)
5) Toronto area Car Wash currently for sale

Edson Commercial Condos: Traffic Impact Assessment. Nothing can be done until this is complete.

Commerical Strip Center: Still awaiting owner's response. A second strip center opportunity may be coming our way near the city of Edmonton. Much smaller in size (7500 Square feet), but the right development should move this building from it's current asking price of $750,000 to a worth of just over $1,000,000 within a one year time frame.

Land Development Corporation: Meeting with potential partners on February 2 2006.

Urban Market: The Urban Market research team is in full swing this weekend, visiting local flea markets and determining if this is truly a worthwhile venture. Table widths, table rentals, number of repeated vendors, number of MLMers, quality of building, cleaniless of facilities, along with a host of other issues will be researched and analyzed. The major stumbling block will be the traffic flow in and out of such establishments, along with the quality of vendors they attract.

Rental rates for this type of development have been confirmed, and our original assumptions have been verified. Break-even occupancy is below 50%. Meeting with a potential manager on February 2 2006.

And as a side diversion, I'm hosting a Cashflow Game (a mixture of 101 and 202) on February 2 2006 - and as always, here's to the future and all it holds.

Land Development and Urban Market Updates

2006-01-24T10:30:00.000-08:00

This is turning out to be a busy week.

Rural Land Development Corporation

We have found several towns where serviced residential land can be purchased for $0.80 per square foot or less, and built up homes are selling for $230 per square foot. What the development in these towns would typically entail would be the purchase of a large lot, subdivision, and then building of 4-plex style homes in the lots.

An example would be the purchase of a 3.0 acre site for $90,000. Services for this site are located at the property line. Subdivision of the property into 10,000 square foot sites (each approximately 80X120) yielding 10-12 sites depending on the community. Next the construction of 4plex style units each measuring 900 square feet above ground. Each 4,000 square foot 4plex should cost (with utility hookups) in the vicinity of $400,000.

Next we can either condominiumize the units or keep them for rental income. Mind you, in most communities rentals would not exceed $600 per unit per month so $2,400 per month to cover a $410,000 cost before profit is a hard pill to swallow. Assuming we go the condo route, town homes may be a better land use, but running the numbers at 12 units per development leads to costs of:

Land Cost: $ 90,000
Subdivision/ Legal: $ 30,000
Construction: $ 1,200,000
Realtor Fees: $ 80,000
Total (Before profit): $1,400,000

Yielding a selling price of $116,600 per unit without profit. We would potentially end up selling them around $139,900 each, having our own in house financing for zero down deals (HELOC style break-even around $800 per month), and potentially keeping one or two for cashflow or capital gains purposes.

All this would potentially cost $400,000 and would return $275,000. Now if we can find a way to decrease the construction cost by $10 per square foot, that would leave another $120,000 on the table. Almost seems worthwhile....

Or the other route is a small mobile/ modular home project to be built out in stages. Much more research is needed here, but the average sale price for land and mobile runs around 200K. A new mobile home runs between 75-90K.

Urban Market

Urban Market research and development is back on track. More updates as they become available.

Well, here's to the future.

An Update for the Northern Alberta Truck Wash

2006-01-23T12:38:00.000-08:00

A brief bit of interesting news returns me to updating my blog far too quickly. It appears that the building I was after for the Northern Alberta Truck Wash may have been taken over by the bank. Other interesting facts include the existence of 4 tenants, none of which have any documented leases, and the lease rate for the building would be no more than $5.00 -$6.00 per square foot.

Analysis of the lease rate leads to a building worth no more than $600,000 with a 12% cap. rate at $6.00 per square foot and $500,000 with a $5.00 per square foot lease rate. Keeping in mind that a portion of the building is empty and 25% is owner occupied, the actual value should be somewhat closer to 60% of those values. Asking price on this building was closer to $700,000, which would be supported by a $5.00 lease rate with an 8.00% cap rate - or a $7.00 lease rate with a 12% cap (more likely, but still high for the market).

So, my initial assumptions of purchasing the building for $500,000 don't seem too far out from the actual value of the place - and I want to move on it quickly to ensure a consolidation in that marketplace, but it may prove fairly difficult to get funding there for a car wash as this one has failed so completely.

Well, here's to the future.

Rook Developments?

2006-01-22T13:00:00.000-08:00

I have been researching the sanskrit word for Phoenix or Fire Bird for quite some time in an effort to name my Development/ Equities company. I've also been on the lookout for a name for the larger vehicle washing entity which is on the horizon. From this search I have come up with a few interesting operating names.

Development and Equities Company

Rook Developments or Rook Equities - The word Rukh is Arabic for Fire Bird and would fit quite nicely with an english approximation. The symbol has many possibilities including:

Another name for Phoenix is Samander (persian), but Samander Corp or Samander Holdings may not be the best name for a company which specializes in smaller towns. The other choice I have in this regard is "Shabara" Developments or Equities which represents a mythical monster which is part lion, part ram, and part horse.

Vehicle Wash Company

This company will start out as a large operating entity and grow from there, so I want the name to reflect this. Each could be paired with Corporation, Inc, or Holdings and my current favored options include:

Makara - Sanskrit for Crocodile. Makara Corp.
Kraken - Large and Murderous Squid or Lobster style Monster. Not the best visual, but it makes a nice sounding name. Kraken Corp or Kraken Holdings.
Triton - King of the Water. Most likely to already be in use - I know of an industrial construction company called Triton. Triton Holdings.
Hydra - Had multiple heads, and the central one was immortal. Good for multiple locations. Hydra Holdings or Hydra Corp.
Leviathan - Huge Sea Monster mentioned in the bible.... Maybe being associated with the end of the world is not the best image to present. Still, Leviathan Holdings has a nice ring to it. Why not just call it Charbydis Corp? Same or better symbolism and such a snappy sounding name.
Quazer - A huge and murderous beast that guards parts of the artic ocean. Can't get more Canadian than that, eh? Quazer Corp or Quazer Holdings.

I'm leaning heavily towards either Kraken Corp or Hydra Corp. Maybe I should start looking into middle eastern mythical creatures instead....

Oh well, here's to the future.

Possible Northern Alberta Truck Wash

2006-01-18T14:06:00.000-08:00

We may have the opportunity to develop a building in Northern Alberta into a Semi-Truck Wash. This building is approximately 120 feet deep and 100 feet long. Currently the building is a multi-tenant industrial building which is over 50% vacant and is in dire need of exterior repair and development.

The major upgrades required for the outside would include paving of the remaining site at a cost of $150,000 and landscaping at $25,000. The majority of the exterior of the building is adequate and would simply require a reworking of the exterior signage and beautification of the grounds. The total of the external upgrades including permitting, fees, and soft costs is estimated at $200,000.

The interior would be demised as 4 25'X60' Bays (1500 square feet) and two are currently rented. Currently it is estimated that the gross lease rate for these leases are in the vicinity of $4-$6.00 per square foot. An average of $5.00 per square foot is used in our calculations (below). The remaining interior bays would be developed into two high quality self service commercial vehicle bays. The area averages $7.00 per square foot for a sub-prime location and upwards of $15.00 per square foot for prime locations.

Each bay would require two pump stations as well as catwalks, see-through plastic doors, upgrades to the sumps and motors, interior beautification, rebranding, and the development of an office space for timed washes and vending products. Interior upgrades of this nature are estimated at $150,000 for the two bays, and an additional $25,000 for the office area.

Total upgrades required for this location would be $400,000. Assuming the location can be purchased for $500,000 - $300,000 would be required in equity, leaving a $600,000 mortgage. Triple net income of $5.00 per square foot for 4 X 1500 Square feet yields $2,500 per month - enabling a quality truck wash operator the capability of break-even around $14,000 per month in income.

This equates to 10 washes per day at $50 per wash ($1 per minute) or 30% occupancy. A typical rural car wash will achieve 10-15% occupancy in it's first year, ramping up to 30% or better in 3 years time. Better returns may be had with the use of a Truck Automatic - which would raise costs by $200,000 - but could be used in only one bay with very minimal staff.

Under such a scenario - the total cost of upgrades (interior, exterior, vending area, and equipment) would be approximately $450,000 for one bay - yielding a total cost for the development of $950,000 and enabling an additional bay to be rented. Thus 6 x 1500 square foot bays each rented at $5.00 per square foot would yield $45,000 in annual income. The same $300,000 can be used as equity in this case yielding an annual break-even on the truck wash component of $10,000 per month or 7 washes per day at an average cost of $50 per wash. The large advantage to this system would be that each $50 wash would only take 20 minutes thus decreasing the occupancy to 16% for a normal 14 hour day. However, keeping in mind that this system can effectively operate 24 hours per day (Virtually unmanned) the actual occupancy will be much closer to 9.7%. At 20% occupancy (24 hour day) the gross income from the truck wash alone is greater than $20,000 per month - over $10,000 in profit per month.

Bear in mind that there are alot of assumptions involved in this project - which makes me lean closer to renting each bay out and treating the whole thing as an income property. In that case, the total cost of the development would be $200,000 for the exterior upgrades + $50,000 for interior upgrades + $500,000 for the building = $750,000. Equity would be $250,000, yielding a $500,000 mortgage.

Based on $5.00 per square foot in income for 8 x 1500 square foot bays total annual income is $60,000. The building at this rate is only worth $600,000 - and would only cashflow $10,000 or so per year with a 20 year loan at prime plus 2.00%. However, if the building could be purchased for $250-300,000 the project would become much more worthwhile. At $300,000 plus $250,000 for upgrades the equity requirement would be $150,000 - yielding a loan of $400,000. Cashflow from this development would then be closer to $25,000 or a 17% return.

So the conclusion I have for this development is for 6 x 1500 square foot rental bays producing $45,000 per year in income coupled with a truck wash automatic requiring 7 washes per day at $50 per wash to break even. Yes, the costs are higher at the front end $950,000 for only one automatic bay versus $900,000 for two truck bays - but the upside potential is much more lucrative: at 15% occupancy the project is producing almost $10,000 in income based on a 14 hour day ($16,000 based on a 24 hour day) and has broken-even (or made $6,000 profit on a 24 hour day) with slightly less than 7 washes per day versus two truck bays producing $7,600 based on a 14 hour day with a break-even of $14,000 for the project - which equates to a monthly loss of $6,400 with 5 washes per day between the two bays and staff onsite at all times.

The largest advantage to the automatic is the minimal staffing required - we could potentially use some of the staff at a nearby location to clean the place after thier shifts, coupled with the fact that the building itself already attracts commercial traffic, has a UFA cardlock across the street, and would still allow us to develop a nearby location to it's fullest potential.

Well, here's to the future.

A New Year Begins

2006-01-16T21:39:00.000-08:00

A small update:

Edson Car Wash: Construction continues. http://edsoncarwash.blogspot.com has all the pictures, as well as all the learnings. June 2006 opening.

Fort Car Wash: Still waiting on the Phase One renovations. http://fortcarwash.blogspot.com has some interesting pictures.

Edson Commercial Condos: Requirement for Traffic Study is holding up this project. Another avenue or two may have opened up in this regard.

Downtown Edmonton Commercial Building: Difficult to locate owners. All indicators are the owners are totally unreasonable.

Home Theatre Installations: Partner is going ahead full throttle.

New Projects:

Possible New Car Wash: Two locations have serious potential in the Edmonton area, as well as one in an outlying area. More detailed information as it becomes available. Perfect location has covenant from large American developer totally damning development.

Commercial Strip Center: 25,000 Square foot strip center may become available - needs some serious work. More Information as it becomes available.

Edson Land Development: Several new avenues may be available for a land development corporation in Edson, starting with our lot and branching out in a variety of directions.

New doors open daily - so, here's to the future.

PS: More detailed info soon, I promise.

Possible Exit Strategies for the Alberta Car Washes

2005-12-18T07:24:00.000-08:00

As part of my due diligence on exit strategies for the car washes, and with the looming prospect of half a dozen or more in our control within a few years time I have begun researching the TSX Venture Exchange for a possible IPO. There are a wide variety of options available, and using conservative examples I will explore a few:

Car Wash (operating entity) IPO: This is potentially the most difficult way to go. Each company has differing shareholders and a large amalgum package will need to be put together. Assuming 3 locations with a conservative estimated gross income of $85,000 per month and EBITDA of $45,000 per month - we'd be looking at a market value of about $6,000,000.
Assuming we had 10,000,000 shares available each share would be worth $0.60. We would then sell off a 40% interest in the open market yielding a cash inflow of $2,400,000. Half of which would go to the shareholders for the return of thier equity (half of the available shares on the open market would be that share of the company), the other half would - approximately $1,200,000 would be split as follows: $150,000 in total supplied to each location for additional float monies and marketing; $150,000 would repay the fees for joining onto the Exchange; and the additional $900,000 or so will be used to purchase 2-3 more sites for development or rehabilitation.
This would yield a return to each 10% shareholder of the larger asset company a one time payout of 400,000 shares (initial 4% available on the open market with half going to recoup the shareholders outlay) x $0.60 = $120,000 and an asset worth $360,000 (remaining 6% x 10,000,000 shares available x $0.60/ share).
As noted this would be the most difficult but one of the most advantageous to the shareholders of each company. The hard part would be explaining the concept of a smaller piece of a bigger pie as each shareholder would in fact lose out on the number of shares, but the value of each share would increase.

Car Wash (operating entity) Trust IPO: This would result in a dividend being paid for each share owned and could potentially lead to higher returns for the shareholders. With the same assumptions listed above: $85,000 gross income, $45,000 net income, and 10,000,000 shares available with 40% on the open market we could potentially distribute $250,000 a year in dividends per share. This would result in a per share dividend of $0.025, which with the current P/E ratios used would result in a net price of $1.00 or so per share (P/E for real estate is around 40). This would yield a market capitalization of $10,000,000 for the company.
What would this mean for a typical 10% shareholder? Well, this would yield a one time payout of 400,000 shares x $1/share x half to shareholders = $200,000 and an asset worth $600,000 distributing a return of $15,000 a year.
While a much better return and a long term income supplement - the argument of smaller piece and larger pie applies as well.

Real Estate Investment Trust (IPO): This is the easiest to set up. Basically a new company would be concieved which would get a net rent from each operating car wash company. Assuming $12 per square foot as an operating rent (triple net) this would lead to an approximate gross income of $308,000 and a net income closer to $60,000. At $15 per square foot the net income would increase to $140,000 or so. What would typically happen would be a staggered scale rising to $15 per square foot after three years of operating at $12 per square foot for new washes.
With the same 10,000,000 shares available the resultant dividend would be around $0.01 per share. Thus, each share would then be worth $0.40.
Each 10% shareholder would then recieve a one time payout of 400,000 shares x $0.40 per share x half going to shareholders = $80,000 and end up with two assets:
1) Keeping their non-diluted share of the operating company with whatever distributions that company can provide with a higher rental rate. (Assuming a gross figure of $25,000 for income this would yield a net annual income of around $70,000 to be split or reinvested as the shareholders see fit). With current rules, this would have a net value on $280,000 or so as it would be dealt with as a franchise (4 times net income = franchise value).
2) A diluted share in the property management company - 600,000 shares x $0.40/ share = $240,000 providing a dividend equal to $6,000 per year.

The third option actually seems to be of the most benefit to me - as it allows the operating entities to continue their operations with no input from outside sources. It also allows for controlled growth via a new property management company with $500,000 available to purchase a new asset or two.

Well, here's to the future.

One Door Closes and a Window opens....

2005-12-15T06:50:00.000-08:00

Well, it's been an interesting couple of days. Here's an updated.

Edson Condo Project: Might be put on hold (duration unknown). Alberta Transportation requires a Traffic Impact Analysis to be completed prior to allowing any further development on the parcel of land in Edson. Couple this with the additional costs for obtaining the CN Land and bringing them up to standard for development, along with the additional paving costs and we are over $100,000 in additional costs to get this thing going. Some serious rethinking needs to happen here....

Possible Car Wash: There is a car wash in Edmonton which while in an excellent location, is a pretty poor wash by no stretch of the imagination. It caters primarily to the industrial clientelle we are become more acquainted with - as opposed to the normal commerical clientelle one would normally see in a typical car wash.
There exists the possiblity to develop this car wash into a stellar location. More information as it becomes available.

Downtown Commercial Property: Currently we have a small commercial center in an up and coming area of Edmonton's downtown. Since we purchased this building, it has increased in value over 40% in just over 2 years. With several new developments in the area, now would be an excellent time to make another acquisition.
To this end, we have located such a property and in the new year will pursue it with vigor. It is ideally suited for two store fronts and a small office area above, or two store fronts with offices. What will decide the end use will, of course, be the tenant that we can find to fill this location.

Industrial Condo Project(s): While the Edson location may have closed for us, with some concerted effort we may be able to develop this same concept in other areas. Several Industrial backed towns in the Alberta area deserve focus and we may well be able to get one or two off the go this year. I would hazard a guess that land purchases would be made and pre-sales would begin in first quarter 2006, construction starting in early third quarter 2006, and occupancy would be available in first quarter 2007.

Additional things I am keeping an eye on:

Home Purchase: I also have my own home purchase to look into. I have chosen an area or two, as well as a builder I'd like to consider - but I need to get back to Edmonton and get that started.

Home Theatre Installations: I am very lucky that my partner is such a self starter. This business has tremendous growth potential, and for that reason I must put some effort towards it.

Urban Market: Always on the backburner - but a very good opportunity nonetheless. Marketing Assistance is what I need here.

Divider Advertising Company: As the Car Wash chain enlarges, we are going to need such a division in house. Once again it comes down to sales and someone to sit and make them happen. Potentially, when there are three operating car washes I will have to hire someone on to make this happen. I'd love to offer a portion of the company during the start up period for this company but finding someone with the vision and creativity to make this happen is more difficult than I have originally thought.

Detroit, Michigan: Excellent deals abound. Might be worth a trip down to see what is going on at the auction house. But when, if ever, will the economy rebound?

South and/or East Africa: I definitely want to get some projects started in that area of the world. Research will probably continue until at least First Quarter 2007, but I expect a purchase soon after that.

Saskatchewan and North West Territories: Timetable would be similar to South and/or East Africa, but would be a lessor priority in the short term (3 year horizon).

Economic Outlook for North America: I don't think it's a secret I have a healthy interest in the state of the North American economy. Based on what I have read to date, it would appear that interest rates are going up in the short term - to max out around 5.50% by the end of 2006 as a prime lending rate. A lot of uncertainty exists in relation to higher fuel costs and decreased productivity in 2007 and at that time it is currently assumed that the interest rate may actually decrease.

Well, with a renewed sense of vigor - Here's to the future, and all it holds.

Everything and Nothing is New

2005-12-13T15:53:00.000-08:00

The title basically sums it up - everything and nothing is new. Updates:

Fort Car Wash: After a number of days of 250 plus vehicles each day, we are currently experiencing a few slower days (less than 100 cars per day) due to the change in the weather - need the snow to stop for business to pick up again. Trouble spots like the Make Up Air Unit are being dealt with (a solution has been found - and only a year later!), but we need a bit of interior signage to note our rules.
Phase One: Financing package is out and about with the financiers.
Phase Two: I've got to go and visit the Ryko site down east still and put the finishing touches on the Phase Two package. And I've got to get a new appraisal to go with the whole thing. Won't need this until February 2006.

Edson Car Wash: Need to find a Vending Machine/ ATM distributor for both this location and the Fort. Steel should be being erected as we speak and the building should be up by the time I get back to Edmonton. Then the heat goes into the soil so we can pour in January - and potentially open in Mid-May 2006. Shareholders meeting is set for December 22 2005 to discuss progress.

Edson Condo Project: Dealing with the town and additional parking space issues. A few bumps on the horizon as always.

Home Theatre Installations: Company is alive and kicking. Check it out at http://techheadcanada.blogspot.com . My partner is vigorously driving ahead and marketing the heck out of the business via the traditional methods - word of mouth, networking groups, and co-workers. As soon as business cards are available I can start doing my end of things in the marketing department - hopefully in the new year we can have half a dozen appointments on the go before I come back up north.

Still looking for a product to market at flea markets in Edmonton so that I can begin getting my foot into that marketplace. I have an excellent partner available - but the product is what is lacking... Any ideas of what to sell at a flea market?

Well, here's to the future.

The Winding Road of (Car Wash) Construction in Alberta

2005-12-07T10:14:00.000-08:00

Fort Car Wash: Appraisal is now complete. We are chasing lenders for 60% LTV on an open mortgage and putting together a package for the next phase of the renovations. I'll need to go to Montreal more than likely, to see the Ryko Truck Automatic in action.

Edson Commercial Condos: We may be able to purchase some additional land in Edson from a former governmental agency for an extremely modest sum. Bear in mind that is unserviced and has no road to it - but is selling for less than 4% of market rates. This could lead to some additional units at a minimum, or potentially - a second phase of Condos and a partially redesigned site.

Edson Car Wash: Ongoing battle. Nothing new here on the construction front. I'm assuming the place won't be ready to open to the public until Mid-May 2006. However, due to this additional property becoming available - a reworking of the access features of the property may be allowable. If we can manage some savings from this reworking, we may be able to pick up the additional lands for close to nothing out of pocket.

Now to make things work. Here's to the future.

December 2 Update

2005-12-03T07:57:00.000-08:00

We'll call it a mini-update as there are a few new developments that need massaging before I can free the details.

Fort Car Wash: Waiting on updated appraisal before approaching financiers. Lots of options, need the full package before moving onward.

Edson Car Wash: Delayed. Earliest potential opening is April 1 2006. More likely to be mid-May 2006. Delays due to labor mostly, though concrete powder shortage has been a major factor as well as lack of rooms in Edson.
Might buy a house to rent back to our contractor. A number (4) homes on the market have 4 or 5 bedrooms and typical rent is $500 per bedroom per month. Asking price is around $240,000 or so. I'd have to put down 25% in any case - $60,000 or so. Interest Only mortgage, insurance, and property tax would end up around $1,000 per month so a 4 bedroom would return $1,000 per month and a 5 bedroom $1,500 per month. 4 bedroom would return 20% per year, and a 5 bedroom would return 45% - if you can find them.
Might even consider taking on an investor for the downpayment - I'd handle the rentals etc (putting the deal together), and split the monthly income and appreciation. Options, options.

Edson Condos : A number of options here. Might require some additional parking space, depending on what the town is looking for. We may even have the opportunity to purchase some other land in Edson to facilitate this development. I'll upload some more drawings after they are finalized.

Home Theatre Installations: Partner and I have reconciled. Business cards are being printed soon, and the networking will begin shortly.

As the Edson car wash is delayed significantly, I am considering extending my stay at the Mine. Also looking at rolling more cash into shopping malls and multi-tenant apartments (60 units plus as a minimum) in foreign countries. I've got a few ideas for other countries I would like to invest in, but more research is required - and their definately not what most are looking to as an alternative to North America.

Well, here's to the future.

November 25 Mini -Update

2005-11-25T05:51:00.000-08:00

Fort Car Wash: Having a bumper couple of weeks. Hopefully the weather holds out. Phase One of the re-financing package is together, just waiting on the updated appraisal to complete it.

Edson Car Wash: We now have grade beams and a delay caused by the Building erector. Shooting for a February 1 2006 opening.

Edson Commercial Condos: Base level pricing information is together. Going to see the Realtor and the town next week to obtain a development permit. Will also have a site visit at the same time.

Home Theatre Installations: Primary partner and I are not seeing eye to eye, and it looks like we may part ways. When I get back to Edmonton in January, the potential still exists to develop the concept into a great cashflowing entity with the other joint venture partners available.

Urban Market: In research mode right now - gearing to open up shop in a flea market in early 2006. Potential for late 2006 opening in the Edmonton region.

Well, here's to the future.

Urban Market back on track

2005-11-23T12:31:00.000-08:00

The Urban Market is back on track again. The other (better?) half is vigorously chasing the Flea Market scene in Edmonton and it looks like the dream can become a reality once again. The numbers can definately make things worthwhile - I've run through an example below - but the problem is both space and management.

Typical Start Up Costs:
Chairs and Tables (per vendor)
Rental Deposit
Marketing and Signage
Cleaning and Startup Supplies
Interior improvements
Opening Float Monies

Total Start Up costs (for 300 vendors): $50,000 Rounded.

Monthly Costs:
Rental (20,000 Square Feet)
Utilities
Common Area Charges
Marketing
Janitorial
Management
Misc.

Total Monthly Expenses: $25,000

Income per Table per Weekend: $25
Income per Month: $25 x 270 Tables x 4.33 x 5% Vacancy = $27,800

Annual Net Income (with 5% Vacancy) = $37,200.
Annual CCR (%) = $37,200/ $50,000 = 74.4%

In the second year, we would increase the table rental to $30, yielding an Annual Net Income of $103,200 with a vacancy factor of 5%.

Additional savings can be had with the utilities kept under control, and with better lease rates. A lease rate of $7.00 per square foot would value the building at $1,170,000 with a 12% cap. If a building can be purchased for $60 or less per square foot - this building can then be held by one company and operated by the other with decent results.

For instance, 20,000 Square feet at $50 per square foot would cost $1,000,000. Assume 30% down payment (typical in industrial property) and you are left with a mortgage of $700,000. Payment on a $700,000 mortgage is approximately (5% APR, 20 year amortization, 5 year term) $4,600 per month or $55,200 per year. As this would be a triple net lease (all common area charges are paid by the tenant), the yearly net income would be:

$7.00 per square foot x 20,000 Square Feet = $140,000.
Mortgage Payment (annual) = $55,200.

Annual Net Income (Property holding company) = $84,800 from a $300,000 investment.
Annual CCR (%) = 28%.

Not bad, but couple this with a multi-unit property - let's say 50,000 square feet and you end up with something closer to 50% CCR. Well, here's to the future.

November 19 Update

2005-11-19T07:34:00.000-08:00

A brief Update - and a picture or two.

Fort Car Wash Phase One: We've gotten some pricing together now for the first phase renovations, and the new Appraisal should be ready shortly. We're anticipating an appraised value of $1,300,000 with new financing at 60% or so ($760,000 would be fine) over 5 years. We'd have to keep this mortgage as a floating rate deal because of the expansion probablities in phase two. Even still, our total payment should be less than we are currently paying as the mortgage would now be valued as building only and would be amortized over 20 years.

Fort Car Wash Phase Two: We're looking into different possibilites for Phase Two. We're hoping to start construction in Spring 2006, but the question remains as to whether or not a truck wash or an automatic would be a better fit for this development. One possibility that has recently emerged is a truck automatic. Ryko produces a truck automatic which can handle any size of vehicle that can fit within it. It's called the Ryko Atlantis (http://www.ryko.com/index%2015.htm) and we are very keen on employing such a unit. A few units are making their way to Alberta, but most operate down east. Might have to take a trip to see them in action.
Pricing is considerable - but we are considering putting in one bay as a traditional truck wash bay (2 Pumps) and one bay using this Ryko unit. Such an addition would potentially increase the total developed value to over $2,200,000 and would require 75% financing for it to be a "Zero Down" addition. Assuming we could get a 5 year fixed rate over a 20 year amortization our monthly payment would effectively double, but our income potential would increase by 100% or better (even at 15% occupancy - typical for first year).

Edson Car Wash - Going through the normal heartaches associated with developments of this size in a hot market - mostly trade and material related issues. No asphalt this year. At least this way when we are able to do the paving in the spring, we should be able to achieve some costs savings as 43rd street, our development, and the new Commercial condo development needs to be paved at the same time.

Edson Commercial Condos - We have a preliminary design. Two units will actually have to be removed from this plan so we don't have to pave 1st avenue - which is a large cost savings. Based on how things sit, we can have a largely successful development returning 100% of the shareholders loans within the first year from the sale of these Condos alone. I'd rather split the difference - half to the shareholders, and half to be rolled forward into a few other ideas I have for this particular town. Now just to make the development actually happen - we're going to Edson the next time I am in Edmonton so that we can get the development permit process for these units on the go. December would be an ideal time to get our Realtor's sign out on the property for pre-sales, and we're going to need to see a lawyer or two that specialize in this type of development to figure out some logistics.

Home Theatre Installations - We're working together to create a viable system. Growth potential is fantastic, but the devil is in the details as they say.

It's mornings like these that I think I can take on another project or two and the only thing stopping me is what my mind can imagine. Well, here's to the future.

Small Business in a Box

2005-11-17T05:54:00.000-08:00

I've got an excellent small business model, needed in every city in Canada, a marketing plan which employs the customer to gain explosive growth, start up costs of less than $500, not to mention a partner who is ready and able to pursue the thing 24 hours a day, and a way to ensure that the customer is watching my minions so I can tell if they are stealing from me or not - BUT, the problem I have is that I want to roll it out across the country (probably selling off the license to individual cities) and have no idea how to protect the thing.

I don't have the resources to sue everyone who infringes on my copyrights (should I choose to get them). Should I just market the thing as a "small business in a box"? Would people pay $2500 for a small business like this? Can I just sell the system to each person and hope that I can make up on volume what I would lose in copyright infringement?

I suppose one option would be to sell off the system in electronic format via a website a friend of mine can set up for me for a small piece of every sale. Potentially a $1,000 price tag for the system which comes with all the "tools" required, along with a CD detailing all the steps to the process. Realistically, profit should be $300-$500 each. Now if I can only sell a few hundred (or a few thousand) of them, I'd be set.

Greg (remember it's the internet, no one knows whom I'm speaking to), I'd like to think of this as Option B. Option A is for you to pursue and develop this business in the Edmonton area. Then, as soon as we have all the parts and pieces to the system we can put together a website and have my buddy do the marketing (Option B). Hopefully we can sell at least a hundred packages at $1,000 CDN each. If anyone in North America can do it - I don't see a reason we can't sell a few thousand or more. By the end of 2006 I'd like to be moving into Option B.

Here's to the future. And a bright one at that.

Commercial Condo Template

2005-11-15T13:47:00.000-08:00

Research Shot for the Edson Commercial Condo Development

November 13 Mini-Update

2005-11-13T14:51:00.000-08:00

And now for "Mini-Update":

Home Theatre Business: Besides the random badgering from my counterpart in the comments section, I am still awaiting either acceptance of or revisions to the partnership agreement. Our Joint Venture partner is anxiously awaiting getting this off the ground, and several opportunities for marketing are presenting themselves quite quickly. Hopefully we will be able to maximize them.

Fort Car Wash: Still working on the phased financing package. Awaiting information from the contractor to get all the numbers together. It will be together by the time I am next in Edmonton (November 25 2005). I have started working on the expanded employee manual for the "Best Car Wash" Chain. I want to produce a nice, glossy book similar to what you would find at any franchise.

Edson Car Wash: Still waiting on the construction schedule. Hopefully by week's end the majority of the outstanding (minor) issues are dealt with. Asphalt still bothers me.

Edson Condos: Waiting to get the maximum building size and exterior photos from various parties. With this information, I'd like to get a development permit application in front of the town by Monday November 21 2005. Hopefully by December 2 2005 we can have the development permit finalized so we can start pre-sales before the end of the year. Pricing will obviously depend on what the town will allow us to build.

Chemical Manufacturing: Still bubbling away in my head. Hopefully over the next few months I can get some indications from the African/ Asian region as to what, when, how, and for how much.

Well, here's to the future.

November 9 Update

2005-11-09T07:27:00.000-08:00

A brief update:

Fort Car Wash: Working on a phased financing package for consolidation of loans and renovations/ additions. Phase One would be the consolidation loan and minor interior renovations, Phase Two for the truck bay expansions. More details to follow as they become available. Expected costs are in the range of $100,000 for Phase One and $600,000 for Phase Two.

Edson Car Wash: Piling is finally underway. Cement shortage in Alberta has effected us substantially - though we should be still able to open in early 2006. Asphalt paving looks like it may be an issue on site, and definately an issue with the city as they have not yet paved 43rd street as promised.

Edson Commercial Condos: Met with the local real estate agents and found a design we would potentially utilise. 1000 Square foot units, 22-24' tall would be ideal with 18' overhead doors. Major selling feature will be the ability to complete to suit. Serious potential in town for this type of development, with the right real estate partner.

On a side note - the land in Edson has appreciated considerably. Our lot was purchased in April of 2005 for $2 per square foot. Currently there are no lots larger than 48,000 square feet for development within the downtown core of Edson. 100 Meters from our site is another piece of property marketed as vacant land, even though it has a 4800 square foot building upon it. The listing is below, and while the square footage is incorrect (actual square footage is 120,000 square feet) - this still yields an asking price of $11.67 per square foot.

http://www.icx.ca/PropertyDetails.aspx?vd=&SearchURL=%3fPage%3d4%26Mode%3d0%26vs%3d2%26rlt%3d%26cp%3d%26pt%3d0%26mp%3d0-0-0%26mrt%3d-1-0-0%26o%3dA%26of%3d1%26ps%3d6%26db%3d0%26ld%3d0%26mfs%3d%26mxfs%3d%26mls%3d%26mxls%3d%26lsu%3d2%26brd%3d%26lid%3d%26ptgid%3d2%26aid%3d5215%26MapURL%3d%253fAreaID%253d6428&Mode=0&PropertyID=4102556

At this price, or even at $10 per square foot (which is what I think it will sell for), that values our land alone at $960,000. That's a 380% jump in 6 months. Even paying the builder off (etc), we would still double our money at a minimum. Crazy. All I want to do now is not hold onto anything. And we've got a few different ways of attacking that.

Home Theatre Business: Looks like the Home Theatre based small business may in fact take off. We're going through the partnership agreement and coming up with the typical problems - one person does the physical work and believes that to be the majority of what has to happen to make the business operate, when this is in fact a small portion of the overall picture. It's the same thing as an inventor thinking he should make 100% of the profit for coming up with an idea. I'm sure it's just a bit of fine tuning and we are good to go. And I've got a joint venture/ cross promotion partner all set up.

Here's to the future.

The Government's Response to Delphi

2005-10-31T13:11:00.000-08:00

Another out of the ordinary post. The government appears to be totally unwilling to take on the behemoth of elder care, and is forcing companies to live up to their obligations - even if that puts them out of business. An interesting read.

WASHINGTON -- In a move with great consequences for Michigan workers and retirees, Congress is moving toward legislation that will put even more financial pressure on beleaguered automakers and auto parts manufacturers to protect retiree pensions.
The pension overhaul legislation would force companies to fully fund their pension systems. But while most companies would be allowed several years to catch up, a provision in the Senate bill could have dire consequences for employers with poor debt ratings. Struggling companies such as General Motors Corp., Ford Motor Co., Delphi Corp. and Northwest Airlines would be required to pay their outstanding pension liabilities in a shorter time frame.
"Essentially, you're kicking a company while it's down, even though its pension plan might be sound," said Darren McKinney, spokesman for the National Association of Manufacturers in Washington. "If the goal is to continue these kinds of pension plans, the legislation should not be making it more onerous to offer the plans."
Pension reform bills have taken on new urgency with the recent bankruptcies of Delphi, Northwest and other companies, which have swept over Capitol Hill as a bleak warning about the financial health of American industry.
As more companies use bankruptcy to restructure and transfer their pension plans to the Pension Benefit Guaranty Corp., congressional leaders fear that taxpayers will soon be on the hook for a bailout similar to the savings and loan debacle of the early 1980s.
Congress created the PBGC in 1974 after 4,000 Studebaker-Packard Corp. workers were left without pensions when the automaker closed in 1963. The agency insures pension plans that provide workers with a monthly payment based on their wages and years of service.
The PBGC acts like an insurance company for pensioners when companies fail or choose to end their pension plans. The agency is funded by premiums paid by each employer who offers a pension plan. If a company defaults on its pension plan, the PBGC guarantees workers will receive a minimum pension payout.
But many now believe this social safety net is disintegrating. The gap between the agency's obligations and assets has grown to an estimated $23 billion and could reach $100 billion within a decade.
If the PBGC defaults, taxpayers could be on the hook.
The PBGC's financial problems are largely a result of bankruptcies in the steel and airline industries. Now with Delphi and other auto suppliers in bankruptcy, the auto industry has emerged as the greatest threat to the solvency of the PBGC.
The PBGC estimates that the pension plans of automakers and auto suppliers are underfunded by $45 billion to $50 billion.
Delphi has made no decision about terminating its pension plan. Delphi Chairman and CEO Robert S. "Steve" Miller says management wants to save the plan, but its fate depends on whether the company can negotiate lower labor costs with its unions and restore profits.
Other Metro Detroit bankrupt parts suppliers -- including Federal-Mogul Corp., Intermet Corp. and Tower Automotive Corp. -- have sought to or expect to transfer pension plans to the agency.
Amid the growing concerns, the House and Senate will vote next week on changes that will raise the cost of PBGC premiums paid by companies from $19 per worker to $30 per worker annually.
At the same time, both chambers are working on long-term overhauls of the pension system.
A plan backed by Senate Finance Committee leaders Charles Grassley, R-Iowa, and Max Baucus, D-Mont., would force companies with bad credit ratings to pump more money into their pension plans. The senators want companies to pay up before the plans are abandoned.
That could mean more cash contributions for companies like Delphi, GM, and Northwest, all pillars of the Michigan economy that meet Congress' definition of corporations with pension plans in distress.
"It's all designed to shore up the PBGC," said Alan Reuther, legislative director of the United Auto Workers. "We believe it will lead to more bankruptcies, more plant closings and more companies walking away from their pension plans."
Business groups say there is no direct link between the health of a company's pension plan and its debt rating -- the criteria the Senate Finance Committee wants to use to decide which companies have to make steep, catch-up pension payments.
GM, whose bonds were cut to junk in May, is among the companies lobbying against the measure that penalizes companies with bad debt ratings.
"Having the government make you put even more money into the plan while struggling down the road to recovery is like putting extra bricks in your backpack," said GM spokesman Chris Pruess.
Manufacturers will be disproportionately affected by the change, said McKinney of the National Association of Manufacturers. Industrial companies are more affected by downturns in the economy, he said. That means their credit ratings may suffer. At the same time, he said, their pension plans might be well-funded, since funding levels are not always tied directly to a company's operating performance and financial health.
Even though GM's credit rating has been downgraded to non-investment grade and it is losing money, the company has nearly $20 billion in cash and securities, and its U.S. pension plans are overfunded by $1.5 billion. The PBGC, however, calculates pensions differently and says the company's pension plan is underfunded.
The manufacturers say the new funding requirements Congress is weighing may accelerate the transfer of company pension plans to the PBGC.
The Senate came close to passing the pension plan two weeks ago. But the bill was pulled just before a planned floor vote when business interests objected. Since then, business groups have been waging a lobbying campaign for changes.
Business groups say companies should be given decades to properly fund their pension plans, since their obligations to retirees stretch out over a long time frame.
But moves companies have made to raise executive compensation -- as Delphi did just before its bankruptcy filing -- have made Senate leaders more determined to move forward with pension reform.
"Big businesses say they can't afford to put money in their pension plans, but they've had no problem handing out huge salaries and special retirement plans for their executives," Grassley said earlier this month. "At some point, Congress has to say enough is enough."
Delphi's pension plan was underfunded by an estimated $4.4 billion at the end of 2004. Under current rules, it faces a pension funding payment of $1.1 billion next year.
Another problem is looming. If no new measure is in place by Jan. 1, a temporary measure passed two years ago will expire and pensions law will revert to regulations that were in place before then. The old law -- which used different standards to measure companies' assets and liabilities --would force companies to make higher payments to their pensions funds.
Miller, who presided over bankruptcy restructurings at Bethlehem Steel, United Airlines and Federal-Mogul Corp., said the real problem is that companies made open-ended promises they could not keep.
"We are witnessing the slow, agonizing death of defined benefits as industrial compensation policy," Miller said. "That is not all bad. These programs have a way of toppling traditional large employers."
But Michigan Sen. Debbie Stabenow last week urged Miller to focus on national solutions to rising health care costs, pension woes and changing trade laws instead of dismantling union contracts and pensions. "My concern is the underlying assumption that we have to accept this race to the bottom, that we have to match Mexican wages ...to match Chinese wages," she said.

Regina Property

2005-10-31T06:45:00.000-08:00

I have been interested in investing in Prince Albert, Saskatchewan for quite some time due to the nearby Diamond Mines which are currently undergoing the approval process. Searching for properties in Saskatchewan, I have found an interesting property in Regina - and possibly a quick way to make some cash.

The building only nets around $7 per square foot, has a rented area of around 6850 square feet and a vacant bay measuring 900 square feet. Net income of $47,000 for a property that can be had for $400,000 or so - not the world's best investment, but not bad either ($51.60/ SFT). This equates to a 11.75% cap - far above what is typical for Alberta right now. CCR would end up around (47,000 income - 300,000 Mortgage/ 100,000 down) 29%, with a 5 year fixed mortgage (annual payment is around $18,000). But let's see how we can make this better.

If we can condominiumize the building into 5 separate units with a cost per square foot around $65, we should be doing pretty well. We can leave the common areas as part of the condomium association and will have raised the value of the building to $500,000 (approximately). This would mean that a unit measuring 2000 square feet would cost $130,000. Condo fee would be the same as Common Area Charges (CAC), so that should be no problem. But what to do if the tenant's have no down payment?

One solution would be to carry the mortgage for the first two years yourself, for a slightly higher selling price - say $140,000. Obviously we would put these units on the general market, but at the same time a typical monthly rental on a 2000 square foot unit would be around $1,150 (plus CAC). The 100% mortgage payment on such a place would be $650 per month (on $130,000). Thus in two years, the rentor has paid down the overall mortgage by $500X24 payments = $12,000 minus a small percentage you would make. Let's say at the end of two years they have moved the mortgage down to $130,000 from $140,000, then it is up to them to make the mortgage happen, or lose the additional pay-down as they were leasing in any event. Basically the same theory as a lease-wrap, but on a slightly different scale.

Another option would be to have a mortgage broker set up the deals for them, perhaps on a HELOC/CELOC basis so that their payment is virtually cut in half - and they would then have no problem qualifying for the loan. A HELOC on $130,000 equates to a monthly payment of $550 - which is slightly less than half the rent they were originally paying. A good broker would not even cost them anything, as they would make their money from the bank.

To make this all happen I need a few things:
1) Lawyer - I'm sure we can find a good one in Regina. Payment would be made when the units are sold, so there would be no cash outlay.
2) Details on the property - condition of building, why is the owner selling. All that good stuff.
3) Time to make the deal happen. This is one thing I do not have - and will potentially cost me this deal.
4) $100,000 for closing. - I've already got an investor ready with $50,000 - fine tuning the numbers may make this only net out $20,000 each (2 investors plus me, after realtor fees), but a 40% return in 12 months is usually a pretty good deal for most people. I should be able to find another $50,000 - from an investor or as a personal loan.
Worst case scenario, it takes 2 years to come to full fruition - we'd make ($140,000-5x$10,000 pay downs) $90,000 from the sales, plus another $2,000 per door for the interest = $10,000, but there would be no realtor fees (etc). So then our return each would be spread over 2 years, but would be $16,700 (approx) per year each or 33%.

Looks like a go, if I only had the time. I have a cousin who has recently moved to Edmonton. Maybe in a year's time he and I can be partners and I can try a deal or two like this out. Or maybe I'll realize that the majority of this can be done with the local agencies... Maybe it's time to make a few phone calls. Here's to the future.

Amazing Article by Delphi's CEO

2005-10-30T05:29:00.000-08:00

This is not the typical post, but one I definately thought would be of value.

GM motors can be said to be a microcosm of the United States of America. Below is the CEO of Delphi’s latest speech after the Chapter 11 bankruptcy filing. What I find most interesting is the nod towards not higher wages than the developing world, but greater efficiencies and productivity. He seems to allude that North American Manufacturing can survive if the entitlement mentality, that is, defined benefit pension plans and extensive corporate sponsored benefit packages are basically done away with. An interesting read, nonetheless.

"The following are prepared remarks made by Delphi Corp. Chairman and CEO Robert "Steve" Miller to reporters in Washington, D.C., on Friday.
Thank you for taking the time to meet.
October has been a watershed month for the key automotive sector, with Delphi's bankruptcy and GM's historic rollback of retiree health-care benefits.
First, I'd like to share my perspective, starting specifically with Delphi and then, since this is Washington, I'd also like to talk about public policy implications. Then, I'll be happy to respond to your questions.
At its birth at the spin-off in 1999, General Motors had created Delphi, the world's largest auto supplier, with both the incredible blessing of sophisticated automotive technologies and the curse of uncompetitive labor contracts. By agreement, Delphi was saddled with automakers' wages and benefits, yet it expected to compete with other US-based suppliers, many of which were organized by the same unions, but were paying less than half the automaker wages and benefits for their workforce.
The spin-off of Delphi was the right concept for GM. No automaker can successfully compete in the long-term, while paying above-market labor costs for the systems and components for their vehicles. The basic idea was for Delphi to outrun the legacy problem of its inherited labor costs by diversifying its customer base and global footprint. That strategy sounded good, but ultimately failed.
So what went wrong? Three things.
One. The spread between automaker' labor costs and competitive supplier labor costs has widened sharply over the past decade, driven by globalization and by rising health care and pension costs.
Two. Given our high fixed costs and inflexible labor rates, the recent sharp declines in our shipments to GM due to their market share losses have been devastating.
Three. The game plan for Delphi included 'flow-backs' to GM of excess Delphi workers. But GM has had no room to accept Delphi employees, resulting in a $100 million penalty last quarter alone for 4,000 idled workers in Delphi's jobs bank, drawing full pay and benefits.
So what's happening now?
For one thing, our Chapter 11 process is limited to our U.S. corporate entities. So half of our business, which is located overseas, is not included in the filing.
Our customers are continuing to receive shipments on time, under contractual terms, throughout our restructuring.
Our workers are continuing to receive their current pay and benefits until we are well into the Chapter 11 process. Under the bankruptcy law, we are required to bargain with our unions in good faith. Despite all the noise, that process is under way. As is usually the case, we hope to arrive at an equitable settlement without court-authorized rejection of the labor contracts. Rejection results in a free-for-all, wherein management can impose contract modifications and the union is free to strike. Nobody wants to end up there. I believe we will find solutions that we can all live with.
Behind all the motions, hearings and ongoing negotiations are the lives and livelihoods of thousands of our workers. These are honest, loyal, hard-working people who took a job at GM or Delphi and played by the rules. They cannot be blamed for pursuing the American dream. They expected us to live up to our promises and we fully intended to deliver. All of us have been caught short by fast-changing global economics. Our people are being severely impacted. I don't blame them for being frightened, uncertain or even angry.
It is a very difficult -- and a very humbling -- job to be the CEO of a company going through this transformation, knowing that my decisions will affect so many. I expect a continuing heavy barrage of criticism for my role here, but I will not shy away from facing up to the harsh realities of our situation.
Let me turn now to what I think is the broader context in which the Delphi reorganization is being played out.
Globalization is a fact of life these days. The implications for America are enormous. And it boils down to this: If you want your kids to live well and be in control of their own destiny, get them a great education. At one time in America a high school diploma and a job at the local factory was the ticket to success, but no longer. Nonetheless, globalization doesn't deserve all the blame for what's happening. There's more to the story.
My recent experiences have been with three industries that are undergoing profound change: as CEO of Bethlehem Steel, as a board member at United Airlines, and as CEO at Delphi.
Steel, airlines, and autos. Different industries. Similar painful transformations.
What these three industries have in common is an implied social contract that has evolved over the past half century between oligopolistic competitors, in capital-intensive businesses, and fostered by workforces organized by strong centralized labor unions. With the enormous leverage inherent in the threat of prohibitively expensive work stoppages, unions in these industries were able to elevate their workforces above the standards enjoyed by most other Americans, while their employers passed along the costs to customers.
Elaborate defined benefit retirement programs, spurred on by favorable tax treatment, saddled future managers with growing burdens. Back in the days when you worked for one employer until age 65 and then died at age 70, and when health care was comparatively less sophisticated and inexpensive, the implied social contract inherent in these defined benefit programs perhaps made some economic sense. It no longer works in today's economy.
In the steel industry, we were being run off the road, not so much by imports, but by domestic competitors such as Nucor and Steel Dynamics. They paid equally good wages, but needed half the labor hours per ton to do the same job. You may have seen the fine article in last Saturday's NYTimes about Bethlehem Steel. Now part of Mittal Group, there are 8,000 well paid workers producing the same tonnage that 12,000 workers did just three years ago. How can that be? The elimination of antiquated work rules and job classifications is the biggest part of the answer.
In the airline industry, Delta and Northwest were shot down by Jet Blue and Southwest, not Air India or Air China. Worker productivity is a big part of the difference.
And in the auto industry, Toyota, Nissan, and Honda are competing from assembly plants in our back yard, but without the crippling work rules and social costs embedded in Big Three labor contracts. In each case, the old oligopoly has crumbled, not so much from globalization, but from upstart domestic competition.
This is part of the story of Delphi. We can compete on American soil with many of the components we make, but only if we have labor contracts that are competitive with domestic competition.
Today, traditional defined benefit programs are an anachronism, and we are witnessing the slow agonizing death of defined benefits as industrial compensation policy. That is not all bad. First, the lack of portability of defined benefits forces people to stay with one employer, even though we have a much more mobile and flexible population these days. Second, the notion of having all your retirement eggs in one basket -- your employer -- is a concentration of risk that is simply ill advised for anyone in today's fast-moving economy. Finally, these programs have a way of toppling traditional large employers. No company should be making open-ended promises to its workers for events fifty years down the road. One of the more visible examples is GM, a junk bond credit these days as it staggers under a burden of $170 billion of combined pension and health-care obligations.
Add to the mix that people are living longer these days. And medical science is rapidly expanding the capability to spend vast amounts of money to keep individuals alive for decades. Of course, that is a good thing. But the question is, how do we pay for it? As a society, we must generate enough wealth in our working years to support our income aspirations and health-care needs in our sunset years. It's getting tougher all the time.
In the midst of these trends, the unions in the traditional steel companies and the traditional auto companies successfully bargained for 'thirty-and-out'. The theory was, create more jobs by retiring people sooner. And isn't working thirty years in a factory enough? What this means is that people can start work at age 20, retire at age 50, and expect full pensions and health care until age 90 or so. In real terms, this idea says that you will enjoy the fruits of your labor for more years than you were actually at labor. As a society, somebody has to pay. And to the shock of the Big Three automakers, they've found that consumers won't pick up these costs when they have choices. As someone said, buy a Hyundai and get a satellite radio as an option. Buy a Chevy, and social welfare comes as standard equipment!
Things are about to get messy for the Big Three in coping with all of this. The current labor agreements expire in 2007. Stay tuned for a historical collision point of all these social and economic forces.
My worries -- and the scope of this problem -- go well beyond the auto industry. What I am describing is also embedded in the ongoing debates over Social Security and Medicare. The overwhelming voltage in the political third rail of touching these entitlements will forestall corrective action for years, but the problem will only grow. Think of the coming inter-generational conflict, as young people increasingly resent having their wages reduced and taxed away to support social programs for their grandparents' income and health-care concerns.
Now, let's talk about pensions. It is an important topic that I'd like to spend a few minutes on today.
Delphi's pension plans have been the object of much speculation. We have about a $5 billion shortfall in our plan assets to our plan liabilities. Some have speculated that Chapter 11 means automatic termination of the plans. That is simply not true.
As background, I have been involved in a leadership position in about ten corporate restructurings, starting with Chrysler in 1980, and now at Delphi. Half of them involved Chapter 11. Usually, the pension plans survived intact. Only at Bethlehem Steel did the PBGC (Pension Benefit Guaranty Corporation) take over the pension plan. There we had 12,000 active workers in six steel mills, all bleeding red ink, trying to support 130,000 dependents. The math did not work. The PBGC justifiably took action to terminate the plans.
At Delphi, we have made no decision to terminate our pension plans. The big question will be whether we can formulate a Plan of Reorganization over the next few months that can generate sufficient capital to support continued efforts to restore funding of the plans.
For starters, our labor agreements need to be modified such that we have profit margins sufficient to repay the pension plan shortfall out of future years' profits. This will put the unions in the difficult position of perhaps having to make trade-offs between maximizing the pay and benefits for active workers versus maximizing the chances for saving the pension plans. It is a calculus made infinitely more complex by GM contingent benefit guarantees for our retiree benefits.
Second, we need to keep key customers confident in the future viability of our business.
Third, we will probably require some flexibility as to our required PBGC funding schedule.
And fourth, we will have to convince creditors in our bankruptcy case that we should reorganize in a way that holds the PBGC harmless.
Tough assignment. The jury's out as to whether we'll succeed.
Putting aside Delphi's predicament, the PBGC has accumulated a staggering deficit from the numerous recent plan terminations, and Congress is clearly worried about it.
Here's my take. On one hand, the pension problem is slowly being resolved as more and more of our private sector moves to defined contribution, 401(k) type of programs, which means no more legacy liability issues for the newer sectors of our economy. In recent years, the number of plan sponsors has declined from over 100,000 to fewer than 30,000. I think this long term trend is a good thing. We can still do something, however, to avoid further devastating train wrecks with remaining traditional defined benefit programs.
Congress has been wrestling with this issue for several years. The big question surrounds this dilemma: Do you tighten the funding rules and risk tipping over more pension plans into the arms of the PBGC? Or do you loosen the rules, only to find more pension plans getting into trouble later?
A number of companies, most notably some airlines, are pressuring Congress for relaxation of the rules. And I agree that more time to allow for a cure is preferable to plan terminations, which would further deepen the PBGC's woes.
Where I find myself at odds with my colleagues in much of the business community is the notion that one-size-fits-all solutions are appropriate. In a nutshell, I would tighten, not loosen, the rules; require all plans to be targeted at 100 percent funding. At the same time, I would give the PBGC the flexibility, with approval authority vested in its board, to cut tailor-made repayment plans that reflect the needs of particular companies that fall behind. And I would give the PBGC what I call 'conventional weapons', including the right to negotiate covenants, collateral packages, benefit freezes, and other mechanisms to protect the interests of the PBGC from catastrophic failures. Right now, the PBGC has only the "nuclear option" of plan termination, which they use sparingly and only when all is lost.
One reason we seem to have so many plan failures is that our current accounting rules permit companies to use generous assumptions about the earning power of plan assets. These rules often end up underestimating the potential true economic shortfall in plan funding. The SEC is looking into this, and I expect some changes in the disclosure requirements so that we can at least face up to the problem.
Point Two is that there is incredible lag time in addressing any shortfall. A stock market decline in plan assets occurring in January of Year One does not even get addressed by the contribution rules until September of the following year, and then the recovery requirement is spread over a bunch of future years. By the time the rules catch up with you, you may be hopelessly behind. Sure, there are other things companies would rather spend money on than shoring up the pension plan. But it was not the intent of the system to provide easy credit at the expense of the PBGC. I would require a mark-to-market exercise quarterly, rather than annually, and require recovery plans to be worked out with the PBGC promptly.
What I am suggesting will not make our current problems disappear. But neither do I think Congress should be tinkering with a legislated rule set that can't possibly fit widely different situations. And while I'm at it, why should airlines get an easier deal than auto companies? As noted in The New York Times a couple weeks ago, I have suggested changing the name of my company to 'Delphi Airlines' to get longer relief.
To repeat my suggestion: Don't loosen, but tighten the legislative rules. But give the PBGC the tools to deal with problem situations.
Well, if you think the pension situation is bad, what about health care?
Unlike pensions, which are pre-funded to some extent, retiree health care promises by and large are completely unfunded and without any Federal backstop other than Medicare.
For some time, GM has been sagging under the weight of $80 billion in unfunded health-care obligations to retirees. Some have said GM is actually a giant HMO that happens to make cars! Just last week, they got some relief from the UAW in exchange for putting a billion a year or so into a VEBA, (Voluntary Employee Beneficiary Association) which reduces the reported accumulated liability to a mere $65 billion.
We are reaping the harvest of years of putting more and more of our country's social costs on the backs of private employers. We lament the loss of jobs to foreign entities that sell goods to our consumers without those burdens. How long are we going to put up with it? Why do you think the next big Toyota assembly plant in North America is being built in Canada? The calculus of health-care costs might have been a major factor.
We could spend a month talking about all the things that could be done to reduce the cost of health care. It's an important debate. Tort reform, prescription drugs, information technology, and health savings accounts all need to be part of the mix. Clearly it's time to consider some bold proposals. I expect to join in the discussions as we search for answers. It won't be easy.
So there you have it. Delphi is a metaphor for nearly every economic and social issue gripping American manufacturing. These are huge problems that also present huge opportunities to at last confront our economic problems straight on and deal with them.
Thank you for taking the time to hear me out. I'll be glad to take your questions. "

Well, here's to the future.

October 27 Update

2005-10-27T08:33:00.000-07:00

Another brief update:

Edson Car Wash: Construction underway. Equipment costs have risen slightly, but construction costs may decrease slightly as the Equipment supplier will be installing more of the car wash equipment components. This allows for a better overall product and easier troubleshooting.

Edson Condos: Based on what has been provided by our Commercial Realtor, we are leaning heavily towards Warehouse style space with an upgraded front. 24' Tall units in two sizes - 1400 SFT and 1000 SFT would be built, possibly for as little as $275,000 and $200,000 respectively. Keep in mind that these units would include 4 parking stalls each as well as the ability to easily double their square footage by adding a mezzanine floor - even at an additional cost of $100,000 per unit, this equates to a rough cost of $140 per square foot for a finished unit.

Based on a 10% cap, rents of $13.50 would be break-even in an area where $14 is the norm and a new development should charge $18 these would make ideal cash-flow generating units. At $14 per square foot (NNN), cashflow is $21,000 (approx) on $75,000 or 28%. With a CELOC style repayment setup (interest only), cashflow would increase to $24,000 or 32%.

Fort Car Wash Renovations: Costs still to be finalized.

Here's to the future.

October 19 Update

2005-10-19T09:25:00.000-07:00

Just some brief updates:

Fort Car Wash: We're holding off on the marketing for the time being. Looks like we may be able to build a small addition of 5500 square feet onto the 7260 square foot building for an additional $650,000 or so. This addition will probably end up being a 4 pump controlled 2 bay truck wash. Should bring the total development to the $2,000,000 mark, but as always, it depends on what the city will allow.

Edson Car Wash: Construction is now underway. Layout has been approved as per original. Opening January 2006. Equipment seems to be the only major hurdle remaining. Seems being the operative word.

Edson Condo Development: Commercial Agent is working diligently to make the whole thing come together. We are viewing existing properties the next time I'm in town. Comparative Market Analysis (CMA) is going to be the major deciding factor - apartment style offices would require pricing around $150 per square foot, warehouses would be closer to $110 per square foot. Apartment style offices have the potential to yield upwards of 30 units. Warehouses, less than 15.

Pay-Less Video expansion: One of Pay-Less Video's subsidiary companies is involved with Rental racking throughout Canada. Payback can be quicker than one year if you know what you're doing - but it's next to impossible to raise funds for it. Having said that - I may well have found someone to help us expand this concept alot faster than we had originally thought possible.

Home Theatre Installation Company: Looks like this one is going ahead full steam - assuming we can come up with a decent name. Why does it always depend on the name and logo?

Help may soon be on the way as I cannot be in 1000 places at the same time, and possibly even from more than one source. Well - here's to the future.

A Flight Risk?

2005-10-10T14:46:00.000-07:00

Most banks consider someone without personal property to be a flight risk. No matter how much they may have in holdings or Real Estate in that region, because it can "easily" be handed over to a manager and that person could then relocate with relative ease. After this they can cease their payments during a period of economic downturn and this in turn would create a loss for the bank. And as well, should you have the resources you should own your own home. Regardless of your current regions economic situation.

While this basically flies in the face of everything I personally believe in (I try and own as little as possible), the bank deems it to be a flight risk if I do not have a personal residence in my personal name. So, to correct this starting tomorrow when I return to Edmonton I will be looking in all the new neighborhoods for a small dwelling I can call my own. The other (better?) half and I are planning a union soon, so this will be an excellent addition to our modest middle class exterior.

The major variable is the purchase price. I'd like to keep the dwelling under $200K as I believe, based on the information I have available, that this is potentially the market with the largest percent increase ahead of it in the Alberta region - especially if it has 3 bedrooms. 3 Bedroom units will see an increase in value over all others in the coming years because of the mass exodus of younger families to the inner city areas. As the family begins to expand more and more rooms will be required. Small condo living, while excellent for starting ones life - needs an upgrade when the kids come. Another excellent feature would be a "Mother -in- Law" type suite. This way, should the parents need to move in with thier children - it can be easily facilitated. Or, it can be used for a source of income, should that be a factor.

As the current average income in Alberta continues to climb, I have doubts we will see the mortgage-based and derivative products they are currently seeing in the states (35 and 40 year amortizations, note holders repurchasing their own home notes at a discount, and separate titles for land and building amongst others). I think that prices will continue to climb, but more dramatically in the below $200K and over $500K markets. These markets are mainly fuelled by:
<$200K - influx of persons living in the region. Most "Starter Homes" are in this bracket and should a third bedroom be available in these type of dwellings, the resale capacity can be tremendous. Especially with preferrential mortgage rates available via assumption.
>$500K - keeping up with the Jonses for above average income earners. Increased costs from utilities (etc) do not seem to affect this group. Upper middle class that tends to lose out the largest during periods of economic downturn. Lots of "doodads", no assets.

But I digress - what I'm basically after is a $180K pre-construction price which will be worth around $200K after construction. I'd couple this with a $30K downpayment (from the NWT job), yielding a 75% mortgage opportunity. Options for this vary - but I think a combination of HELOC and traditional VRM would be the way to go. Assuming a "simple plan" - 50% HELOC ($75,000 PMT= $275 per month approx), and 50% VRM Mortgage ($75,000 PMT= $425) even the worst case scenario payment ($600) is very managable. And it allows us the flexibility to move in many different ways.

The simple plan is to pay the house off as much as possible and use a HELOC based against the house for investments. Paying the interest only - a 100% tax deduction, and rolling the shareholder's loans through into the new companies. While a tried and true method of wealth accumulation it does hinge on the fact that a portion of the equity must be available for the HELOC. Which makes me reconsider the VRM portion of the mortgage. But you always need a backup plan right?

Here's to the future.

Mid-Rise Opportunity?

2005-10-06T07:43:00.000-07:00

An opportunity may present itself for a small High-Rise or Mid-Rise development in one of Edmonton's better known nieghborhoods. Details are still sketchy at this point, but the upside potential definately makes it worth looking into. That and the $60 billion worth of work set to happen in Alberta in 2007.

Might have to take on a partner or two on this end to make it all work out - but you'd be surprised how many are just waiting in the wings. Funny how the focus has gone from finding money for deals to finding ways to keep me in control of the project.

Some brief updates:

Edson Car Wash: Revised the site plan so that we will be able to give the second phase of the development the primary spot on site. We'll see if it doesn't affect too much - and then go after it if it makes sense. I'm going to try and upload a picture or PDF of the site if I can figure out how.

Fort Car Wash: Really need to get the advertising together. It'll be my primary focus when I am next back in Edmonton. As well, our mortgage comes up right away, and I'm seriously considering getting a 5 year fixed mortgage. Rates for this are around 5% right now, which would save almost $1000 a month if we were able to get the full cost of the car wash as a loan. I'm trying to see a creative numbers guy on Friday - maybe something can be worked out.

Shopping Centre: I really want to put this deal together, but until December at the earliest, I won't have any idea how much cash I'll have available. The partners are basically ready and waiting.

Two small business have also come up:

Health Related Business: Selling and operating senior specific and health related items. I have tremendous respect for the lady who is attempting to set all of this up - I just need to have a look at the planning and meet her partners.

"New Concept" Charge Card: Details are sketchy, but the cost for start up is extremely low (under $40K) for the payback potential - and it's backed by some of the biggest names in Credit. Only issue is location - more research is need, as always.

Here's to the future.

It's like Liquidation World for Electronics

2005-09-27T05:43:00.000-07:00

First a little background: Here in Canada we really only have a few major dealers in Electronics. Best buy, their subsidiary Future Shop, Circuit City, and some one off type speciality (mostly higher end) stores. International Stereo is a low cost supplier that is in it's sunset IMHO. Additionally, we have only a few dealers in liquidations style sales - Liquidation World, X/S Cargo, and some other one off types.

I'm planning to buy the stock that doesn't sell from the larger companies and sell it via a Liquidation World style warehouse setup. I personally believe that a large market is emerging for cheaper consumer electronic goods which are not quite as up to date as the stuff you see at the major chains. Possibly used equipment -but I do want to avoid this.

The aspect that really appeals to me is the subsidiary businesses that will stem off - financing agency, technical services, advertising development, and of course the Real Estate holding company. I'd like to have a location in all major Canadian Cities with 5 years.

Additionally, I have a business which deals in Used and New DVD and VHS sales. I believe there can be some excellent deals passed through this new entity - a chance for the empire to build within itself, so to speak.

But, there are some major hurdles to getting this off the ground - number one being how to manage all of the sales, stock, and employees. In this I may well have some help. My other half (better half - depending on how you look at it) may well end up getting the information via becoming a manager at one of the large chains. I'm hoping that 6 to 8 months in a managerial position there can have us geared up and ready for a potential August 2006 opening - just in time for the back to school rush.

I'm not worried about finding a place to buy/ rent until the business takes off. I'm not even worried about cash equity for the stock purchases (I can always take on investors for this as a worst case - but, I can probably swing a $50K loan paid over 5 years without too much trouble). I do worry though about how to manage the whole thing... imagine the data management alone.

Here's to the future.

The Four Parts of a Deal

2005-09-26T06:34:00.000-07:00

Many people seem to be misinformed about what it takes to get a deal done. In my view, here is a listing by importance of the four parts of a deal.

1) Skills - this is of the most importance. If I have the knowledge to understand what makes a good location, the knowledge to understand how the numbers work, and how to make the deal come to fruition - this is really 35% of the battle. Some people call it experience, I like skills - skills anyone of any age can develop, experience tends to be associated with those older and wiser.
I'll put it this way - if two people want to build a shopping center, and one has worked or owned a convenience store or liquor store or other such business, and the other has made some money from the sale of his personal residence (or via the stock market) - who would you choose to partner with? Me - I'd choose the business owner 9 times out of ten. The business owner would know what it would take to make a good location versus a bad one. The business owner would understand the cashflow aspects of the business (typically) and would understand the need for adequate startup capital and timings. This person would bring something to the table, and in the financing institutions eyes, would provide a very good case for the development.

2) Contacts - you can pay for a portion of this one. Either via mortgage brokers, Appraisors, or a host of other professionals - almost half to two thirds of this can be paid for. Key contacts such as contractors that can get the job done on time and on budget, leasing agents with specializations, and excellent brokers with key contacts can only have thier relationships developed over time. Most good contacts cannot be found via opening the phone book - they need for you to be referred to them. This is where skills and time in the marketplace comes into play. I'd say this is probably contributes 27.5% to the overall project.

3) Time - this is one that you can pay for. Yes, you can pay for skills, but in most cases it will require a portion of the business for specialized skills - such as day-to-day management. You need someone who can do all the legwork, who has the time and the effort to get the job done - be it chasing documents for the bank, dealing with the city on issues, or even assisting with start up operations to help the business/ development get off to the right track. I'd say this is probably 27.5% of the overall picture.

4) Money - something alot of people have. Alot of people chase after this every day, but money for good deals always seems to come together. Especially if you are able to market yourself. Realistically, this makes up 10% of any project. Money can always be found - the other skills cannot. Complete one deal/ project - and see how much money comes your way - especially if you have partners. It's incredible what can come your way if you take a few others with you on your journey.

So to recap:
Skills - 35%
Contacts - 27.5%
Time - 27.5%
Money - 10%.

So why is it that everyone is always worried about the 10%?
Here's to the future.

It just fell into my lap.

2005-09-25T10:22:00.000-07:00

I've had the opportunity to come in contact with a very bright fellow (who just happens to be an Electrical Engineer, no less) who has some very specialized skills. He has graciously allowed me to become his business partner in a small endeavor located here in Edmonton.

Basically, he's willing to go to a person's home and set up all thier stereo and home theatre equipment for a small $100 fee. Any supplied cables and connections would be at cost. The best part though - he'll do it for free if you can recommend 5 people who need the same service. I'm getting my dad's place done for free and it looks like I've got a bunch of other people interested in it as well.

Sometimes the opportunities just fall from above.
Here's to tommorrow.

Random Musings

2005-09-24T05:38:00.000-07:00

I've been meeting with a lot of novice investors lately these days - via the web or in person when I'm in Edmonton. It's left me with a few musings I wanted to share:

EdmontonShaz - the name

My name is Shazad. That's it. You can call me Shaz, I don't mind that. Don't call me Mr. Mardhani, and especially not "Sir". I suppose the whole sir thing stems from my stint in the Canadian Forces - that is one that normally sets me off in the wrong direction. This kind of couples with the next topic on benevolency (is that a word?) - more on that below, there is no need for the whole Mr and Sir thing.

Benevolency (aka the Sharing of Information)

I don't think the sharing of information and experience is a one way street. Where I may have more experience in one area, most of the people I meet have more experience than I do in other areas. For me, I prefer the exchange of information - which is why I post on bulletin boards and regularly meet with a majority of people who email me. It's a little selfish I'm sure, but I need information and experience from the people I meet to analyze other market trends currently ongoing in markets I am not familiar with to see if I can make use of any opportunities there. Like that whole HELOC/ CELOC thing - I am very impressed with the fella who introduced me to that, and what he tells me about his organization.

Down payments and Business Structure

A lot of people seem to have a problem with down payments right now. I can put you in contact with some pretty decent residential agents in Edmonton who can not only get you a great deal, but finance it as well. One realtor I used to play Cashflow 101 with is an expert in this area and I have no problem recommending him to anyone looking to get into the Edmonton Residential game.
Bigger deals require more money though. Multi-family and Commercial seem to require 25-30% down to make them work, but that doesn't have to be all your money. Take on some partners, but retain the control - that's the key to everything. Everyone makes money, and you get to learn all the ins and outs of the project with a minimized risk. Seems easy enough, but then everyone says "I don't know anyone to invest with". The simple answer is - go market yourself. Go to Darren Weeks' events and other clubs and market the hell out of yourself. Make friends, let people know you are preparing a syndicate of some kind. Don't get greedy though - people get very worried when you ask for their money but won't put up any of your own.

And now, a minor update on current projects:

Edson Car Wash - financing has been arranged, and we are now in construction. Looks like paving might have to wait until next year, otherwise things are on track. From a down payment perspective it looks like I will have to put up $30K for this deal out of pocket. My shares are 40% of the 2 million CDN deal, with 70% financing from the bank. Obviously there is more to it than this - but a guy's got to have some secrets, right?

Edson Condo's - I've found a very nice layout. If I could figure out how to take pictures out of a PDF I would upload the layout. I still have to find out if office condos are the way to go, or if we should focus more on warehouse spaces. Offices with this design would end up around 30 units or so ranging in size from 800 to 2200 square feet.

Advertising Company - got the idea, got the details - need someone to do the sales. I wonder if one of these guys who email me would be willing to work on a commission basis for such a thing? Mind you, it may get shelved for a few months depending on what happens.

Shopping Centre - I've found an excellent little shopping centre in Edmonton's south side which I may pursue. More details to follow.

Trailer Park - still on the books. Looking for land. And money.

Charter C Bank - I have investors for this (you need a couple of million to make it work), and the crowd to market the whole thing to. I just need to find the information and the time to make the whole thing work.

Hopefully I can make the updates on this thing alittle more regularly - I'm pushing for 3 times a month, but we'll see how it goes. Here's to the future.

The Calm Before....

2005-09-10T10:08:00.000-07:00

Some updates:

Fort Car Wash: Possible buyer in the wings. We'll have to see what the offer is.

Edson Car Wash: Waiting on the contractor to get working and the bank to finally approve the loan funds. I've gnawed my fingers off to the bone waiting. Hopefully it gets sorted out soon so we can move onto the Condo project.

Car Wash #3: A colleague here in the North has recommended another location for a car wash, and it coincides with a location one of our original investors wants us to look at. The area looks good - just need a site.

New Car Wash Concept: I've developed a new car wash concept I think would work well in Edmonton - I've even found land to put it up on. Now, it's just about making the whole thing happen. Labor is virtually zero'd out, but equipment costs are considerably higher. Which leads into the Branding I am hoping to develop - which leads to:

Chemical Manufactuing: I've got a contact which can produce the chemicals for us (for sale), but I need to get my Branding on the front. Think, think, think I must.

Shopping Center on the horizon as well in Edmonton.... And a three acre lot I am completely unsure of what to develop on. Three acre lot is reasonably priced ($100K an acre in an area where a quarter section is going for $140K) - but what can be built on it? The local realtor is no help at all....

Well, Here's to the future.

The Researching North

2005-07-30T08:28:00.000-07:00

I’ve taken a small consulting position with BHP Billiton Diamonds Inc. back up in the EKATI Diamond Mine until December 2005. It’s turning out to be half of 3 weeks on, 1 week off and half 2 weeks on, 1 week off - but it’ll help me achieve my Professional Engineer’s license, as well as give me a little coin to spend on building my own home next year. I plan on purchasing an older building, knocking it down, and building 4 units on it – with 3 for sale and the profits used as my down payment. Onto a brief update:

Edson Car Wash:
Development Permit has been issued by the Town, and am now working with the Engineers to get the design finalized. Construction should officially start this week. Moderate savings with the Equipment supplier, and construction costs to be finalized within a week. Financing is pretty close, but we have to see what the formal offer is.

Edson Commercial Condos:
Have come up with a tentative design – looks like 800 square feet with 24 feet of clearance per unit, supplied bare. Expected pricing in the range of $130-$150 per square foot depending on what the town requires as far as paving and access/egress. Typical pricing in town is around $165 per square foot.

Fort Car Wash:
July 2005 has been a fairly decent month. Definitely better than May and June 2005 primarily due to weather. The flyer still has not taken shape as yet, but at least the ground work for it has been accomplished. All we need to do now is get the flyer produced as per our design and then sent off. I was very surprised at how varied the total delivered cost was for these flyers – ranging from 18 cents each (delivered) to 29 cents each (delivered). Keep in mind that the delivery cost of 10 cents each was fixed by Canada Post and only the production values changed.
Financing company also wants to take on the Fort Car Wash. Based on our payment and their amortizations, we should be able to cash out about half of the initial investment and decrease our monthly payment by $500 per month. Also discovered a way around personal guarantees on large projects.

Divider Advertising Company:
Back on track. Partner is co-ordinating the day to day stuff with the Marketing company. All we need to do is tie down the production costs and a little bit of legal and it should come together pretty well.

Thinking about possibly taking the Car Washes public – or selling off the business portions only. Rental of $12-14 per square foot would still leave lots of cash on the table for everybody, and would represent a significant return to my investors. Variables of the Oil Economy I guess.

Oh well, Here’s to the future.

Life at the Center of an Oil Boom

2005-07-05T21:26:00.000-07:00

Edson Car Wash:
Development Permit has been issued by the Town. It's sitting with the lawyer right now. Equipment Manufacturer has finalized pricing - we managed to get a 12% discount (not bad on $400K worth of equipment). Architectural drawings should be completed by the end of the week, and all other drawings within 2 weeks following that. Budget Price should become a firm price within 4 weeks. Project now sits around $2 million.

Edson Condo Development:
Realtor is chomping at the bit to get going - not that I blame her, the market really needs this type of development. I'm hoping to put in 12-14 units with pre-sales starting in October 2005. Construction to begin early 2006 and we already have 2 or 3 interested parties without putting pen to paper. Project now sits around $5 million.

Fort Car Wash:
Over the rough patch felt in June due to weather. Been a good few days already in July. Working out better costs for chemicals - made easier by the used Chevy Astro Van I just purchased. Planning a marketing flyer for July 2005 - 9 car washes and the tenth is free. Completed car wash flyers are then eligible for Canadian Tire gift certificates and car related items. Need a better supply of air fresheners and such. Want to build an extension onto the building - not sure if it should be an automatic or full serve wash. I'd probably lease out a full serve wash.

Future Projects:
If this first condo project works - I'll put up another 3 or 4 next year (2006) and might be able to squeeze in a couple in 2007 before it catches on. With half the cash from the first one though - I want to put up a trailer park someplace around an oil town. The other half I want to redevelop a dying shopping center I know of, and quite possibly build another car wash. Either that or redevelop an empty warehouse in Edmonton I am familiar with and turn it into a self storage business.

This oil boom is an interesting thing - money can be made from all kinds of things, but like the Gambler (Kenny Rogers Song) "You gotta know when to fold 'em, know when to hold 'em, know when to walk away, and know when to run."

Well, here's to the future.

Two Steps Forward, One Step Back

2005-04-22T10:58:00.000-07:00

Well, the Fort Car Wash was broken into on Friday evening. We managed to get some video of the perpetrators in action - hopefully we'll be able to get something from it. More importantly though - the fellas down the street at the Equipment Rental shop were taken by the same guys for alot of stuff... I hope this helps them somewhat.

Things in Edson (New Car Wash and Commercial Development) are moving well enough. The only thing that appears to stand in our way at this point is Alberta Transportation's ok on the whole thing. We may have to scrap the truck bay to make it work - but it still seems like a viable project as an overall. The bank is overly happy with our management of the Fort Car Wash and has advised us to add a section on our management system within the business plan for the Edson Development.

Additionally, I got alot of information from the International Car Wash Show in San Antonio a few weeks ago. The information that can be employed in the New Car Wash easily will be - but at the same time several things came out that make us look beyond this project to the next one in the pipeline. There are Automatic Semi-truck and Industrial Truck Washes available which would not require a full-time attendent, and which can easily be (and have been sucessfully) adapted to our harsh Canadian environment. We're currently toying with the idea of putting in two Automatic Semi-Truck sized bays in across the street (or within viewing distance) of existing high traffic Semi Truck Stops. Costs are high - around $500K per bay plus land, but assuming you could put in two bays on an acre of land ($200K), hired on a full-time person to be there for 40 hours per week (mostly weekends - $30,000 per year), slightly higher than average chemical costs, and charged $1 per foot for an average wash - the breakeven is around 1.00% occpancy (with $300K equity) as the unit is operational 24 hours per day. Basically it needs 3 washes per day to break even. 4 If we have full time staff. Now where to find $300K in a year's time? hmmmm.....

Well, here's to the future.

Heady Times

2005-03-11T14:41:00.000-08:00

So the meeting with Edson's Mayor went pretty well. He gave me additional insights into the town - like the need for weeping tile, and noted that a new multi-tenant development would work very well with both the Oil Patch as well as Consultants operating in the area.

So, I inquired with a good Commercial Realtor friend of mine as to the actual lease rates in the area and it appears that a new multi-tenant project in the Edson area should fetch lease rates between $12 and $16 triple net. So with an average of $14 per square foot (triple net), to reach 18% CCR an investor would need to pay $200,000 for a condo in this area including base upgrades.

So for me to sell at $139,900 (plus $10-20,000 as base upgrades depending on clientele) as a pre-construction price.... maybe it's too low. Realistically I should be charging $189,900 as a pre-construction price, otherwise secondary investors are making too much money. Who would have ever thought I would have to raise the price on a development for it took make financial sense to people?

Oh well, here's to the future.

Back from the States

2005-03-07T14:02:00.000-08:00

Well, after a brief trip to Toronto, Texas, Vegas, and LA - I'm back at it in Northern Alberta. I've seen a few new things I'd love to bring up here - but sadly I need someone to help me run that particular venture as I just do not have the time. There are at least three extremely viable options from this trip ranging in price from $1 per unit to more than $5000. And I'm not too worried about Cash from this particular venture - the mid ranged item is valued around $500 CDN each unit and I would only procure it based on a pre-authorized order. I have to order in bulk however - so 100 units at a go. The one dollar item would require a couple "proto-types" and would be resold for $5 at local grocery stores - just need someone to pound the pavement and make it work - no money down, just a sales job at the front end.

The $5000 item could be extremely lucrative... We have the locations already, the problem would be funding them. I'd need to start out with a minimum of 50 units and would only make money on a per use basis. Upside is tremendous - with a conservative estimate of 50 uses per machine per week at fifty cents per use (profit) - we're talking about $1250 per week or 65,000 per year. I may be able to get funding in the range of 55-70% but I've got a feeling I'd end up paying 8% at a minimum, over 5 years max. $3,500 per month is a bit steep ($42,000 a year) but brings my investment down to $75,000... but it only nets $23,000 in this scenario. Mind you I can get $50,000 over 5 years for $1,200 per month.... Which brings my annual cashflow down to $8,000 for a $25,000 investment. Still, I can't do anything without a partner to do the grunt work. I'd probably prefer the $75,000 down option - 30% CCR is a pretty easy sell these days.

The preliminary drawings for the Edson car wash are in. Needs a wee bit of work but everything looks pretty good. Now let's see how things go in Edson tomorrow and then we'll be able to step things up a notch.

Well, here's to the future.

New Car Wash on the Go!

2005-02-15T20:59:00.000-08:00

I'm off to see the contractor in the morning, our offer was countered at less than $60,000 an acre in an area that is worth (in my humble opinion) at least $125,000 an acre if developed correctly. My current plan for the property is a three phased one:

1) 8 Bay Car Wash with 2 attached Truck Bays.
Construction to start May 2005 and finish in October 2005
2) 30-40 Unit "Town House Style" Commercial Condo Development
Construction to begin May 2006, pre-sales to begin October 2005
3) 100 Unit "Apartment Style" Multifloor Commercial Condo Development
Construction to begin May 2007, pre-sales to begin October 2006.

While an ambitious project, I don't believe it is totally out of the ballpark for this community (at least phases 1 and 2). I think we'd go for Townhouses to have an imprint of 1000 Square feet and be provided bare (walls only) with the end user to deal with the builder (possibly local, possibly ours) to develop the interior. I would think that pricing of $110 per square foot plus realtor and closing costs - so $119,900 would not be unheard of. Especially considering that this price includes a rotating pylon sign, two storey high walls with stucco finish, all utility connections, and a small "donation" to the condo reserve fund per unit. Completion costs would probably be around $20-$40,000 depending on options - and I know you can get at least $12 a square foot triple net in this area. Some details to work out... but maybe I'll even upload the sales brochure. At least it beats the 1% rule and there are some real estate companies that can run the place for an out of town investor. Options, Options.

Well, here's to the future.

Some new developments

2005-02-11T17:52:00.000-08:00

Well,

It's been a few weeks since my last post, and a few new developments have arisen. The out of town property we put an offer on has now been countered, and it looks like we will accept. Now it's the fun due diligence period. With a Gas station near by the first thing we need to do is a soil survey to make sure there is no contamination. The last one was done in 1995 (I think) and it looked ok. But you never know what 10 years can do.

The bank is looking quite favorably on this project currently. I'll keep you posted, but it looks like much better financing than last time around. Much better. But we have to see what they'll put on paper.

I've approached a new local car-related franchise for a location in Fort Saskatchewan (where the current car wash is), and they seem quite taken with the community. It looks like I may even be able to become an area manager of some kind. Now I just need someone to help me run the place. I wonder where I can find someone who wants to run a non-food related franchise in an up and coming suburb of Edmonton.... hmmm.... .

Beyond that I've got a franchise show next weekend (Northern Gift Trade Show), a Cash flow Gaming session on Saturday night with two fairly intelligent fellas I was introduced to the other night - they referred to themselves as the "Plankton of the Commerical Real Estate World." I like them. I think they want me to be their mentor.

At the end of the Month I'm off to the states for a quick tour around at some amazing real estate bargains. Imagine - 10,000 square feet of prime commercial real estate for zero down and $1000 a month for the next 2 -3 years. After which time I expect the properties to at least be worth 20% more than we "paid" for them. So some quick math with the following assumptions:
1) 10,000 SFT valued at $40 per SFT empty
2) I can find tenants willing to pay a portion of the rent (flea markets, auctioneers, etc)
So the monthly PIT = $4000 or $5 a square foot (give or take) to break even. I think that's managable- triple net. Seems doable.

Talk soon.

Car Wash Options

2005-01-21T18:14:00.000-08:00

A very good friend of mine (who is a Commercial Realtor) informed me of a prime location for a new Car Wash. Apparently there even was a recent owner of this property who planned a Car Wash but due to management issues didn't pursue it. Looks like something for me to definately investigate further. I would think 2 RV bays and a 6-8 bay car wash would be the best option for a place like this. Probably have to couple it with an RV dumping station to ensure that we get the traffic we need. And a Gas Station with a C-Store. What I'll probably have to do is subdivide the land and sell off a portion to a Gas Company. We'd set the thing up in such a way so that from the Car Wash you could enter the C-Store. Perhaps a Lease would be a better solution there.... Have to run some numbers.

Another location has crept up in the West End. Prime location - they are charging astronomical amounts for the land, but it definately has the traffic count. The best solution would be to divide the lot into two selling half of it to a Gas Company, which should net me out the majority of the downpayment for the car wash. We'd have to share the C-Store area similar to what we'd do in the other location - but, for almost no money out of pocket - why not?

A third location I am currently chasing is under an environmental freeze. While in a prime location, this former gas station and it's underground tanks seem to have impacted the area. I think a small 6-8 bay car wash would work well in the area. We'll just have to keep after it, I guess.

Well, here's to the Future.

Background

2005-01-21T08:06:00.000-08:00

Well.... I'm 27, a Graduate of the University of Alberta Civil Engineering program with a Specialty in Construction. The going joke is that I paid off someone - because School (especially Math, Physics, and Chemistry) have never been my strong suit. I excelled in high school in English and Social Studies, which I think have lead to some skills in technical writing. I served in the Canadian Army Reserves for four years as an Engineer - and at one time had a dream to go into robotics. Let's just say that my grades and my dreams in that way did not match.

During University my mother convinced me to purchase a rental house, which I did with a personal loan and the majority of my student loans from that year. We found a bank foreclosure erroneously listed at $42,900. It came on the market on Friday afternoon at 4Pm, and by 4:30 our offer was in. By Saturday Morning there was 6 backup offers, but ours had been first and for the full amount. After some minor renovations and a ridiculously lengthy mortgage process we were the proud owners of a $30,000 mortgage on an appraised building valued at $55,000. We had spent a total of $15,200 out of pocket - including all closing costs. Within a month we found a rentor at $500 per month (market = $550) for 3 years, with a $25 per month increase per year.

18 months after purchasing the first, we purchased another unit (with Personal loans) in a similar area which again was a bank foreclosure. We purchased this one for $52,900 and following a similar process purchased a $67,000 condo with less than $15,000 including closing costs. The first rentor we had was a realtor who was building a new home and ended up living in that condo with her family for the better part of a year. Her rent was about $650 per month (market = $675), and we all got along quite nicely.

On the first rentors renewal date, she decided to stay with us again - as we had had no calls from her except one to replace a stove element, we agreed. She renewed for one year at $650 per month (market = $650) and she mentioned to us she may be leaving at the end of that term as she had a large inheritance coming that year. The realtor in the second rental left, and within a month we had found a family of four to live in thier place at $725 per month (market = $775). Within a month of this family moving into this unit, we started to recieve mailings and calls from the condo board.

It started innocently enough, the father (Frank) wanted to mount a Satellite Dish, which was against condo bylaws. Followed by some incidents with his dog relieving itself in places it shouldn't have. Within 3 months, Frank was now paying his rent in cash - usually 50-75% on the first on the month and the remainder on the 15th. Another 3 months later he was arrested by the police for chasing his daughter's boyfriend (and father of her child) around the parking lot of thier home with a kitchen knife. Not long after this we found out he had been subletting the basement out to his daughter and her boyfriend and all of them were in some way involved in trafficking of some kind of substance.

Frank and his family packed up and left in the middle of the night - leaving an entire house full of furniture, tv's, clothes, and a surprising amount of heavy metal cd's. A friend of mine and I emptied the house over a weekend and I ended up selling the house 2 years and 2 months after I purchased in for $88,900. I sold the first rental property to the tenant the next year for $84,900 after I did a re-fi on the place and transferred the mortgage to the tenant and received the remainder in cash. I then rolled that money into a small commercial center, where a business I own operates out of.

Things have not always been rosy though. In 1995 my family was having very large financial troubles after my father had a series of heart attacks. At one time he owned and managed 17 video stores in the Edmonton Area.... and by that time we were down to 1, located 30 minutes via highway from our house. When I graduated from University I went to work for a local contractor and was building some apartments on the side with some of my father's business associates. The Contractor we hired was lax (to say the least) in his duties and ended up pocketing the majority of the money we had paid him to do the job. He dies before the end of the project - and here we are almost four years later and the full monies have not yet been released by the new owners. Deficiencies still abound, apparently. At least I'll take solice in knowing that they haven't paid condo fees in four years - I'd imagine that would be a fairly large bill.

We also tried out a new concept - DVD subscriptions from a fixed location - like Netflix but from a storefront. As we were picking up steam alot of the internet versions started coming out in Canada, and eventually we decided to go back to wholesaling.

The last big part of my background has been the project I have been working on for basically the last two years - a Car Wash. I have a ten bay coin operated car and pickup wash in a growing suburb out here, and let me tell you it was worth every bit of blood, sweat, and tears I have spent getting here. I took on partners to come up with the downpayment, and I didn't do things the way I should have. But I have learned from my mistakes and i know the two more I want to build this year and every year for the next five years will operate and cost much less than this one did.

Here's to the future.