I think we agreed on the price. This motherfucker is slippery. He calls himself negotiating, I guess.
If I remember, I’ll mention how this asshole was an hour late for a meeting we scheduled the same day. I don’t want my blood to boil before I get through telling you about the deal.
His counter to my offer of $6 million was $8 million. That’s a big-ass spread.
I listened to his logic on how he got there. It was all bullshit, all of it! When we started this dance forever ago, this fucker said he didn’t have any debt on the properties except for a small loan of like $250,000 on one property. I thought that was kind of unusual but I just put it in the back of my mind because that ain’t got shit to do with me. The price I want to pay is the price I want to pay. What he does with his debt is his business as long as it’s not attached to the property after we close.
Anyway, he gets to this price by saying after he pays the debt, guys out the leases or ‘businesses- of his tenants he will only be left with like $500,000. His other reasoning, which might have a little credence, is that if he piecemealed the sales on a property by property basis he would end up with around $8 million over the course of 2-3 years. For me to believe that I would have to believe that he has sold other stores for like, $900,000. Whatever!
I told him, ‘I can’t get to $8 million under any circumstance. There’s too much that has to be done to make these stores something other than eyesores.’ I was thinking pieces of shit but I thought to call them eyesores wasn’t as bad.
He said, “your average price is less than $500,000 per store.” I replied, “yeah, because some of them are no more than dirt and one is contaminated!” That caused him to back up and come up with some new shit after he acknowledged that a couple of the stores needed to be torn down. That didn’t get him to come off the $8 million counter-offer he put out there.
After some bantering and him repeating the same shit of how he got to $8 million I asked him, “what number lower than $8 million will you take?” That was a terrible way to ask the question I had to repeat it a different way a couple of times cause he was trying to figure out what I was asking. Finally, I asked, ‘what’s your minimum price?’ He says I’ll take $7.7 million.” I laughed and said, ‘that’s the same as $8 million.”
He tried telling me that he was selling them to me with no gasoline supplier contract like that was gonna be valuable to me. I didn’t want to be rude but what I was thinking that any supplier contract you have is between you and the supplier. That ain’t got shit to do with me. Him thinking I didn’t know what I was doing or me understanding how the business works didn’t offend me. Fuck him. I’m on a mission.
There are a couple of key things about negotiating that you always have to keep in mind. First, what is your ultimate goal? Why are you negotiating in the first place? You gotta keep that in front of mind. There will be a bunch of shit that will pop up to distract you, like a slippery asshole on the other side of the negotiations.
The other thing, and maybe the most important thing, are parameters. Be sure you have done your homework and know your parameters you want to stay in. You have got to put in the work to know when you go out of bounds or how far you want to go out of bounds. You have to know your limitations. In this case, the limitations are financial.
What I try to do is not negotiate and make decisions at the negotiating table. I’m just not good at that. I like to think about shit, at least 24 hours. I think I mentioned before that if somebody is demanding me to make a decision at the negotiating table, I’m walking away. I’m just not good at that.
I pulled up the calculator app on my phone to see what the difference was on a per-store basis. At $7.5 million, that’s only about $100,000 per store more than what I had offered. I put that on the table saying, “let’s do $7.5 million.” He says you work your numbers and if $7.5 million will work for you we can do it at $7.5 million.
I think that motherfucker was calling me a geek on the sly but who gives a fuck at this point. The price is $7.5 million. I’m supposed to get back with him in a week to confirm $7.5 million will work. I’m overpaying at $7.5 million but I’m going to give him an offer for $7.5 million with some contingencies.
My analysis says $7.5 million is too much to pay. But I know a couple of things I can do, like defer some of the equipment upgrades. Also, my numbers don’t include the ancillary income from other lines of business. I want the businesses to be valued as both standalone businesses and as part of an enterprise. As a standalone business, the $7.5 million price is too much. Not by much but still too much.
When he acknowledged that there were some shit stores in the package he also acknowledged that one of the stores, probably the least desirable store had a contamination problem. That goes along with another store that is not selling gasoline because it has a contamination problem as well. He offered to take these stores out of the package or that I could take them out later if I wanted to. I need incremental revenue from all the stores in the package. I’m not taking shit out unless it has an extreme contamination problem, like a groundwater problem. Due diligence will reveal what I need to do about a particular store. What I will do is reduce the price on the package if I have to remove stores or if the cost of remediation is too high.
Here is the deal. I’m going to put together a written offer for $7.5 million but its gonna have contingencies. The carve outs I will do include:
- The need for environmental remediation won’t be a deal-killer but a price reduction based on the extent of remediation required. I had this issue with the stores I bought from Conoco. Since they were a big multinational company it was easy to work through for environmental exposure. They took responsibility and indemnified me against the exposure. They also agreed to pay for the remediation. We had some contamination that required remediation and they performed under the contract with no issues. I’m going to ask the banks I’m working with how they will look at these properties and what the contract language needs to look like before I tender the written offer.
- I’ll do a carve-out for minimum volumes of at least two stores. If the volume expectations for these two stores are too low, that would be a deal killer. The branded gasoline, excluding diesel, for these two stores needs to be at least 75,000 gallons per month, per store. Preferably the volumes will be higher but they need to be at least 75,000 gallons per store. All the other stores are going to be less than that and I’m okay with that. As I have mentioned before, this deal, in large part, is about the Chevron/Texaco branded contract. There is a minimum volume expectation from Chevron of 10,000,000 gallons of branded gasoline per year. I know I’m going to be under that the first year and maybe the second year but I need to be close enough that with the addition of a store or two, I’’ be there.
- I’m not doing any payments for tenant lease buyouts. He mentioned that he will buy out the tenant leases, effectively putting them out of business. I’m not sure how to handle the inventory for the open stores yet. Gonna need legal advice for the. The tenants won’t be a party to the purchase agreement. Under normal circumstances, I would include the purchase of inventory at costs as part of the purchase agreement.
This clown wants to go directly to a contract. Not gonna happen. The next step is to agree to terms in a letter of intent and for me to do my due diligence. You can due to diligence under a contract but I’m not about to put any earnest money into a deal with a slippery asshole until I know what I’m dealing with. I gotta get volume estimates for what should be the most profitable stores then I can get the ball really rolling.
He thinks this going to take a while. It will. We won’t close before the beginning of summer. I think I’ve been at this for almost 9 months. First major step. Let’s see what happens.
This fucker was an hour late to a meeting he scheduled. Remember, he didn’t even show for the last one. I’m not gonna say fuck it yet. It hasn’t cost me any money which is probably why I’m letting him get away with rude, annoying bullshit. As soon as I write a check for anything, my attitude is going to change and we’re going to cut the disrespect short.
I think my next post is going to be about “negotiating.”