Record Set on Sale of New-Construction Single-Tenant Car Wash

RICHMOND, TX—The recent sale of a Quick Quack Car Wash in the Houston metro area represents a cap rate of 5.39%, which is a record-low cap for an express car wash net-lease transaction outside of California. The buyer was a private investor based in California.

Austin Blodgett, Hanley Investment Group Real Estate Advisors’ vice president, in association with ParaSell Inc., represented the Houston-based seller, Read King Commercial, in the transaction. The buyer was represented by Jason Hernandez of Marcus & Millichap in San Francisco.

Expected to open later this month, Quick Quack Car Wash is located within the new Waterview Town Center at 19311 West Bellfort Blvd. This 134-acre retail development has anchors including At Home, Academy Sports + Outdoors, Studio Movie Grill and LA Fitness. The newly established regional retail intersection will ultimately be comprised of more than 1 million square feet of retail space when completed.

“All of the buyers that inquired on this property were immediately drawn in by the location of this shopping center and the affluence of the surrounding neighborhoods,” Blodgett says. “Within a 1-mile radius of the subject property, there are numerous brand-new single-family and multifamily home developments. Richmond is an extremely high-growth trade area. All of this coupled with the strength of the tenant resulted in multiple offers within just days of bringing this deal to market.”

Quick Quack Car Wash is a fast-growing chain of self-serve exterior-only express car wash locations that first opened its doors in 2004 in Sacramento. Alongside its equity partner, Seidler Equity, Quick Quack has expanded to more than 100 US sites with locations in California, Arizona, Utah, Colorado and Texas. It is now the fourth largest express car wash brand in the country.

“This transaction demonstrates the strong demand for new-construction net-lease retail assets in Texas, along with the strength of the growing express car wash buyer pool,” said Blodgett. “The fact that the tenant continued to pay rent despite a global pandemic speaks to the strength of the car wash industry as a whole, and how express car washes will be poised for long-term success despite economic uncertainty. We will continue to push for aggressive cap rates nationwide on net-lease car wash offerings as buyers become more familiar with this asset type. We expect that the supply of net-leased car washes will continue to increase over the next 12 months as developers and operators continue to take advantage of this low-cap rate environment.”

This is Blodgett’s eighth express car wash sale in the last eight months. In the last 18 months, Hanley Investment Group has sold more than $92.4 million of single-tenant car wash properties across the country, bringing its total value of car wash properties sold in escrow and listed for sale to more than $180 million.

“Express car washes continue to be a strong choice for net lease investors nationwide, and we are continuing to see cap rates compress as more private investors become comfortable with this asset type,” Blodgett tells GlobeSt.com. “Net lease express car washes have proven to be pandemic- and recession-resistant, and in most cases, express car wash brands are seeing higher sales now than ever before due to their convenient locations, speed of service and lower cost to consumers with monthly membership plans. Also, the express do-it-yourself model aligns directly with COVID guidelines and social distancing because everything is done by the vehicle owner. Based on health concerns, consumers like that no one else will be entering the car to clean it.”

Many of these express car wash properties that are located throughout the southern United States are sold to Western region buyers that are looking to move capital into tax-free states such as Texas and Florida. Additionally, investors are keen to take advantage of the bonus depreciation rule which does not apply to many other retail asset types.

“Car wash operators are also seeing the higher multiples that they can make from selling off the real estate by itself, along with developers who are able to capitalize on record-low cap rates for a ground lease or build-to-suit with these operators,” Blodgett tells GlobeSt.com. “This is a perfect storm and as more money continues to move into the express car wash space and these brands continue to grow their footprints, we expect to see a large increase in new construction net lease car wash sales over the next year.”

Located in southeast Texas in Fort Bend County (Texas’ 10th most populous county), Richmond had 12,758 people in 2019, according to US Census estimates. Fort Bend County has recorded nearly a 40% increase in population since 2010, which makes up part of the greater Houston MSA, the fifth most populous US metropolitan area. Fort Bend County encompasses a total of 875 square miles and Richmond is 4.44 square miles.

“In contrast to the Houston area in general, Fort Bend County’s economy is more diverse, with numerous service sector jobs in healthcare, energy, education, hospitality and other areas,” Blodgett tells GlobeSt.com.