Coinmach Question Due Diligence

[Daniel G.]

Hi BP community,

I have a quick question regarding a Coinmach contract for a multifamily property that I am currently inspecting. There is currently a coinmach contract that expired in 2012. As most of you know this lease renews itself unless canceled in writing by the owner. To my understanding this would make the contract active.

I've seen historical financial statements for the property and noticed a downward trend in the revenue streams for laundry income. What was once a decent stream of income diminished to nearly nothing in the last fiscal year. The contract specifies that there is 50/50 split of all monies collected over a hurdle. There is something suspicious about this considering that I've seen the laundry room be very busy.

My question is the following. I want to renew this contract under my company's name since the last agreement was signed in 2002 and expired in 2012. By doing this I would like to get new(er) machines and the signing bonus. What is the best way to go about renewing this contract with Coinmach? Can I get what I want? 

I suspect some degree of fraud in this category. I have seen it before.

Thank you

[Jeff Bridges]

I'm not referring to formal audit procedure specifically. Coinmach has all of the info as they are responsible for all collection/ maintenance and send out the invoices on renvenue. Via seller, see if they can get in touch with the regional rep, ask him to pull up the records for the past 12 months or longer term, and analyze the revenue and send you that report of that if possible. Also ask him to send you a report on all service requests made in the past year to look for trends of high maintenance volume on machines (to support your case replacing them). You might be limited until you own the property on how much you can chat and negotiate with coinmach. Then, following the sale, have a  chat to get his feedback on what might be responsible for the trends you are seeing and make your pitch for possible new machines if necessary. I'd suggest keeping it informal and not accusatory. Feel free to ask about who does the collection and what frequency so you can understand that process and feel at ease. One thing for sure, you do not want to do your own collection and maintenance and own your own machines. I only hear nightmare stories about it not being worth the headache and provides little additional profit to the owners.