AEP Acquires 19 Zax Carwash Sites

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ZAX EFRON

Ammori Equity Partners Acquires 19 Zax Carwash Sites (Read More)

AEP's Strategic Move:

AEP sees this acquisition as an opportunity to leverage their core competencies and propel Zax Auto Wash into a new era of innovation and growth.

• Operational Excellence: AEP, with over 30 years of success in customer service businesses, aims to deliver quality washes at affordable prices.

• New Perspective: Zax Auto Wash expects to benefit from AEP's larger corporate operating structure, allowing each location to thrive in the ever-changing carwash landscape.

• A World-Class Brand: AEP's team-focused culture and operational background will help develop Zax Auto Wash into a world-class brand.

Zax Auto Wash Locations

🧠 EDITOR’S THOUGHTS

Car Wash Craze: As many of you in the industry know, the express car wash market has been wild af in recent years. Here’s why:

• Profitability - Express car washes boast notably higher profit margins compared to other business models. They often yield profit margins ranging from 40 percent to an impressive 60 percent.

• Subscription Models - Weather and seasonality pose significant risks for car wash owners, influencing consumer behavior. Monthly subscription models mitigate these risks by offering customers unlimited washes, allowing them to clean their vehicles at their convenience, regardless of weather conditions.

• Sale Leasebacks - Among the attractive elements drawing equity groups to invest in express car wash businesses are sale-leaseback transactions. Substantial car wash operators capitalize on their strong corporate guarantee, recovering a considerable portion of their business investment by executing long-term leases and subsequently selling the real estate to private investors. This strategy enables these operators to leverage their robust corporate backing and extract value from their real estate assets.

• Lease Structures - They typically secure terms of 15 to 20 years, coupled with annual rent increments, offering a safeguard against inflation. Often, these car washes are priced below the costs required to replace both the building and the business. Express wash development typically incurs expenses ranging from $3 million to $5 million.

• Tax Benefits - The Tax Cuts and Jobs Act, particularly Section 179, grants car wash proprietors the ability to deduct all initial-year expenses for new equipment. Section 179 also accelerates depreciation over a 15-year period, a significant reduction from the previous 30-year timeframe. The only other net lease properties rivaling this depreciation advantage are convenience stores with attached gas stations.

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NET LEASE NUGGIES

• Walgreens Boots Alliance reports better-than-expected Q1 earnings. The pharmacy and health care services company announced a net loss of $67 million, or $0.08 cents a share, for the quarter ended Nov. 30. However, adjusted earnings were $0.66 cents a share, exceeding estimates. Sales rose 10% to $36.71 billion, surpassing expectations. Walgreens' U.S. retail pharmacy sales increased by 6.4% to $28.94 billion, while international sales rose 12.4% to $5.8 billion. The company is maintaining its fiscal 2024 adjusted EPS guidance and U.S. healthcare adjusted EBITDA expectations. (Read More)

• Ulta Beauty revamps loyalty program

  Ulta Beauty has revamped its loyalty program, changing the name from Ultamate Rewards to Ulta Beauty Rewards. The program, boasting 42.2 million members, introduces enhanced benefits including the ability for members to choose their birthday gift from various brands. Ulta has also launched initiatives to promote the updated program, providing educational tips and rewards for members. With over 1,300 stores nationwide, Ulta reported a 4.5% increase in comparable sales and nearly 6% increase in transactions in its latest earnings report. (Read More)

• Kimco Realty expands its portfolio with acquisition of RPT Realty. The $2 billion all-stock deal adds 56 open-air centers, totaling 13 million sq. ft. of gross leaseable area, further strengthening their focus on Sun Belt markets. This acquisition deepens their presence in key Coastal and Sun Belt markets and aligns them with the Singapore-based GIC wealth fund. Kimco's CEO, Conor Flynn, expects the combined company to experience higher growth with an extensive pipeline of signed leases and mark-to-market leasing spread. (Read More)

• Bubbakoo's Burritos Expands to Jonesboro, Georgia A new Bubbakoo's Burritos location is set to open in Jonesboro on January 8th, marking the second location in the state of Georgia. Owned by Tapan Patel, the restaurant aims to provide great food, a welcoming ambiance, and excellent service to the Jonesboro community. Bubbakoo's Burritos, known for its unique menu and fresh ingredients, has been a fan-favorite for over 16 years. With its expansion, the brand continues to grow and offer its popular Mexican-fusion concept to more customers. (Read More)

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