The Blue Diamond numbers don’t work, at least not yet
I have rough costs estimates for most of the major components of the blue Diamond store acquisitions and the and the numbers don’t work. What I mean is when I look at the projected revenue, expenses, acquisition costs and renovation or remodeling costs, it doesn’t make investment sense. What might work, and I’m still doing the analysis, is modifying the renovation plan and lowering the asking price to see if this can make sense. The thing I keep in mind, the value of this transaction is the gasoline contract with Chevron/Texaco. That’s a reason to push.
The one thing I haven’t done is get the site/market studies done. What I’m going to do is get the study done for what I see as the 2 highest volume sites. If my numbers are either lower or in line with the results of the study, that would make me feel comfortable pushing forward. As of right now, those two sites are carrying the deal. You could easily ask the question, ‘why not just buy those two sites?’ The easy answer is that I need the volume of the other sites to get to the minimum volume required by Chevron/Texaco. I guess the next question would be, ‘why not sub-out the lower volume, less desirable stores for other stores?’ The answer to that is it adds a layer of complexity to the deal that I don’t need and, and I could or will add stores subsequent to the acquisition to grow the enterprise.
The other thing I need to do is get with the seller and see if we can get close on price. That’s a vis ass question. My offer now is $2 million less than what I would have proposed a couple of month’s months ago. He doesn’t know that. The costs of the rehab are significantly more than I had expected, by a lot. I’m going to have to make the renovations fit the financial model and be sure I have the image that I need and want.
The other thing that can make this shit work, identifying a quick serve restaurant (QSR) to go into 3-4 locations. The restaurants would have to be profitable but the ‘rent income’ from. being in the convenience stores could be the difference between a go, no-go on this whole deal.
Let’s see what plays out over the next couple of weeks.