Offer Range Ready!

I’m ready to present my offer range and begin discussions regarding how we structure a possible transaction. The plan is to reach out to the seller today (11/26/19) to arrange a meeting to see if we can get close.

The one thing i need to do is to identify negotiating points.  What I dont have Jr know, with any accuracy, is volume or sales information.  It’s going to cost me money to get that so I won’t have it until after we get to a price range. The cost of a study for the two highest fuel volume or sales sites will be about $3,000. I don’t have $3,000 to spend on a whim. That’s actually one of the negotiating points.

Here are the general approach and some of the broader key points:

  1. This is a real estate transaction rather than a ‘going concern’ transaction. He’s not operating the sites and can provide historical information.
  2. The sellers will need to somehow negate the leases, for those stores that are currently leased. The better deal is for them to assign the leases to me and let me cancel the leases.
  3. Documentation.  I need to see whatever shit they have. I have asked for this before and they keep holding back. I can’t and won’t make a blind offer.
  4. Here’s a sticky one. I have mentioned at least a dozen times that these are shitty sites. That includes being shitty environmental sites as well which means there will be some remediation required.  Any sale price has to take that into account.  We will get environmental assessments after we have a contract or LOI signed. Phase I assessments will cost about $35,000. Most all these sites will require Phase II assessments which involves drilling and taking soil samples from each site to get the extent of any contamination so we can develop a remediation plan. This is huge. Banks can and have refused to lend on contaminated sites
  5. Equipment. We have to replace the fuel distribution systems at each site. Some of these can be delayed but the costs of placing the fuel system have to be accounted for, regardless of the timing
  6. Buildings, all of the buildings will require some renovation. For the buildings where the renovation is strictly cosmetic, we won’t discount the price, dramatically.  For the buildings where we have to raze and rebuild, we will heavily discount the purchase price.   
  7. With respect to the buildings and equipment, they argument that I will make is that those repairs are an operational necessity, for my planned operation.  I mean, I won’t get a branded supply contract without the improvements.  As a seller, I wouldn’t give a shit about that if it discounted the price too much; however, I really wanted to sell or “cash out” I would let that be a consideration.

These are the key deal points.

What I’m not trying to do is overpay. Remember, the money is made on the buy side of the transaction.

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