The gentleman was very specific when he arranged an appointment to look at investment opportunities in Costa del Este, so I was only slightly surprised when he walked into the sales center. He didn’t really frown, it was more that he didn’t smile. His button down shirt was crisp and fastened all the way to the top of his chin. Everything was neat and controlled. I had a quick thought of Forrest Gump, the movie character played by the American actor, Tom Hanks.
I extended my hand and he looked down toward the floor, accepting my offering hesitantly. “Did you have trouble finding the office?” I said with a smile and he shook his head negatively. “Your directions were very explicit” he said while taking a seat across from me. I returned the smile.
“I’ll need to improve my Spanish” he said without explanation and then continued. “I couldn’t make myself clear when ordering breakfast this morning,” he said, looking at me directly, “about the difference in whipping eggs and scrambling them,” he continued. “It’s really easy to whip them and it makes a great deal of difference.” He seemed oddly assured when discussing eggs.
I considered the possible difference and couldn’t exactly envision what he was suggesting. Whipped versus scrambled? He caught what must have been a momentary passing of confusion on my face. I didn’t want to comment about my lack of culinary skills or my disinterest in eggs.
Working In A McDonald’s Kitchen
“I’ve worked in the kitchen of a McDonalds restaurant for about 40 years,” he offered.
“The fast-food restaurant?” I said, thinking of the Panamanian hamburger offering, the McNifica? He nodded.
“We have rings where the eggs are contained on the griddle. To cook whipped eggs all you have to do is give them a couple of tosses with the fork and they stay moist and smooth. Velvety. Scrambling eggs means beating them, and more times than not, they become hard and over cooked. Rubber,” he ended, putting both hands on my desk and finally smiling.
All I could think about was the fact he had said he had worked as a cook in a McDonalds restaurant for most of his adult life. Eggs were not the only thing I was confused about. How could a McDonalds cook afford a multi-million dollar investment in real estate? I began recalling our earlier conversation about what he was looking for.
Making Quick Judgements
“So you wanted to discuss Parkside?” I said cutting right to the chase. “Parkside offers units rented most often to executives of multinational companies while on assignment in Panama. Individuals may purchase as little as a single unit,” I said, attempting to go low. “A few individuals want to live there themselves, but mainly Parkside is an investment. A management company does everything needed on site and simply deposits the appropriate amount into the owner’s bank account,” I continued without much fanfare. I considered whether a McDonalds cook could have saved enough for a single unit.
Listen To Me
“I also am very interested in Generation Tower,” he countered. “There wasn’t a lot on the internet, but I have read everything I could find and Generation Tower, is the one in which I am most interested,” he continued. “I think you have pre-construction pricing that looks favorable.”
“Generation Tower is a project aimed at the international investor who wants to realize good return on investment, but the initial entry fee is purchasing an entire floor,” I said. “The concept of individual owners of various rental properties, used sometimes as hotel rooms, is popular in Europe and the United Kingdom and just now entering the Panamanian market.”
As I pulled out a slick brochure on Generation Tower, I nodded. “Since we are only selling floors in that project, even pre-construction pricing starts around $2.5 million per floor,” I said thinking this would at least give him pause. It didn’t. It was not the first time he had been judged inaccurately and he smiled.
Estimated 10% ROI?
“You have a management company in place to handle the details of renting, repairing anything needed, to do all the marketing, checking people in and out,” he said with a steady gaze. “I read you estimated approximately 10% return on investment?” Our conversation began to be a bit like a tennis match. A serve and then a return volley. I was beginning to enjoy the exchange, but I remained a little skeptical.
With A 86% Occupancy Rate Next Door
“This project will be adjacent to the Johns Hopkins affiliated hospital,” I began almost forgetting he was giving me egg cooking lessons minutes earlier. “We feel there is a great market for individuals who come to Panama City for medical procedures, or who are in town on business and need to rent more long-term. The Westin, just a block away, enjoys a mid-week occupancy rate of 86%, so we know there is a demand,” I continued. “These units will be around 750 square feet and will have all the amenities of an apartment. A full kitchen,” I explained as I opened the brochure, “pools and close proximity to everything Costa del Este has to offer.”
“How committed is the developer?” he responded. “One time I was looking at a project in China and they didn’t sell enough units and I had a very hard time getting my initial investment back,” he asked.
“Oh, the developer is completely committed and it will materialize, we have already had so much interest that the project is solidly on track. Generation Tower has enjoyed incredible interest and investment,” I countered. “But, if you are concerned about pre-construction investment, think about Parkside, it’s completed and already has a number of tenants.”
Not My First Time
He smiled. I waited. “I’m interested in both,” he said. “And, I’ll help you out here,” he almost laughed. “It’s not the first time someone thinks a McDonalds cook might not have the funds to invest in such a project.”
I wasn’t sure how to feel. I was a bit embarrassed, but then I also didn’t want to appear foolish. I almost always have to qualify a buyer, but then the old adage “don’t judge a book by it’s cover,” came to mind.
Purchasing One Of The First Franchises
“In the early sixties my father was one of the first people to invest in a McDonalds restaurant and then a second and a third and so on. My mother thought he was nuts and that Ray Kroc was just a great salesman, but in the end it turned out well. I have two brothers and a sister; we all worked in the restaurants. I just happened to really think knowing what went on in the kitchen was the most important place to be. My sister liked the marketing. We have been lucky but none of us think of our share of the inheritance as really our money. We all worked hard, but I don’t want to actually spend any of my inheritance as I think I should be passed along to the next generation. I want to live off the money, but keep the money whole.”
“What did you learn from the kitchen?” I asked beginning to really like and respect the man across the desk from me. “Basics,” he said. “You should never get too far from your business and you should realize what you are asking of your employees. Kroc always said the operation was ‘fool proof’, but it’s not. You have to keep everything running smoothly and nothing is fool proof,” he laughed.
It’s All In The Drinks
“You know, I’ve always wondered how McDonalds could afford the dollar menu,” I countered veering off track, but the access to inside information was so compelling. “Is it real food? I mean how do you offer a sandwich for a dollar? There is the bag and paper it’s wrapped in and the labor costs?” I really had wondered for a long time how fast food restaurants managed to keep prices so low.
“It’s the drinks,” he said simply. “It costs me pennies to serve a Coca-Cola™ and that accounts for a great deal of the profits. It balances or believe me, we wouldn’t be offering anything that didn’t work toward profit.”
I mulled how many times I had run through the McAuto of a McDonalds and ordered a Diet Coke™. I’d been contributing to the bottom line.
Generation Tower For The Next Generation
“I think Generation Tower would be great for you,” I began, because if you invest in the property, the initial investment would increase in value, securing that investment for the next generation, but it would also provide a regular revenue stream. The management company does everything and we are looking at around a 10% ROI. That way you have an income to live on, but your investment is just increasing in value,” I explained.
“It’s also good you are considering some units in Parkside. That project is completed and we have big companies who have done due diligence, securing homes for their executives. Johnson & Johnson, Adidas and Proctor & Gamble, just to name a few. There are over 130 multinational companies with operations in Panama City, many of them centered in Costa del Este. Parkside will give you an immediate revenue stream.”
He moved closer to the desk and asked for a series of financials. He seemed equally at ease with the numbers as he did explaining whipped and scrambled eggs. He moved quickly and confidently and I wasn’t surprised when he asked to visit a third project, one that was currently under construction.
“I want to see the kitchen of your operation,” he said. “The employees, how the construction is going and the materials being used. I want to see how the eggs are going.”