EXCLUSIVE: Startup Looks To Build £200M UK Portfolio In A New Asset Class: American Car Washes

In the U.S., slick, automated car washes run on a customer subscription model have become a $15B industry, attracting attention from private equity firms looking to consolidate a fragmented market. 

Now, a new company is looking to bring the model to the UK and deploy around £200M buying sites and building car washes, Bisnow can reveal.

Backed by investors including Formula 1 driver George Russell, Rays Wash Club is in negotiations to buy its first two sites. It is meeting with agents and landowners across the UK to build as big a pipeline as possible as it looks to roll out up to 60 sites in the next five years.

“We're at the start of the curve of a new operational real estate asset class,” Rays Wash Club Managing Director Daniel Riahi told Bisnow in an interview. 

The company was founded by John Howard, a former KKR executive. Paul Sigfusson, president and chief financial officer of U.S. car wash chain Woodie’s Wash Shack, is an adviser. Riahi is an alumnus of Round Hill Capital and IMMO Capital, a single-family tech platform. 

Riahi said the product Rays is building differs significantly from the typical UK conception of a car wash, which has historically been a metal box attached to a petrol station with rollers that move over a car or a hand-operated jet wash. 

This type of American car wash has a tunnel that ranges from 50 feet to 130 feet long, with technology that washes, dries and shines a car automatically. 

The process takes about two to three minutes, and each tunnel can process four to five cars at a time, meaning about 120-150 an hour can be serviced. A Rays car wash uses about 90% less water than a hand car wash, Riahi said. 

Each Rays site will employ around five to 10 people, providing concierge services and also maintenance to customers, who pay for washes via a subscription rather than on an ad hoc basis — part of the boom in subscription models across daily life. 

In the U.S., memberships typically cost between $30 and $50 a month, and members typically wash their car two or three times a month.

The rise of the subscription model, improved service and design that typically references 1950s Americana have helped turn car washes into a $15B business, when revenue and real estate values are taken into account. 

Players in the sector include KKR and Oaktree Capital Management, and in 2023, Bisnow revealed that UK-based transatlantic investor Henley Investment Management had created a U.S. car wash platform and was looking to deploy $500M into the market.

Riahi said funding is in place for Rays to buy initial sites, and the company would then pursue further capital raising as the business grows. It is weighing both an operating company/property company structure as well as keeping the real estate and operations as part of the same company. 

Investors have been keen to invest in a new sector with an operational component that can be used to drive income, he said.

“The equity funding side in the UK and Europe more broadly has been a bit more difficult and challenging, but because this is a proven concept [in the U.S.] and it's a new concept in the UK, there's been a lot of interest already,” he said. 

Buying and building a site typically costs between £3.5M and £4.5M, Riahi said. He said the company will consider freehold or leasehold sites, and he is looking for agents and landowners to contact him about potential locations. He has assessed more than 200 in the past seven weeks, with about 20 meeting the company’s criteria. 

And those criteria are very precise. Sites need to be at least 0.6 acres, but the ideal size is one acre. They need to be a regular shape, ideally rectangular. Sites need to be passed by at least 20,000 vehicles a day, and at least 50,000 people need to live within a 10-minute drive.

In that sense, Rays is looking at the whole of the UK. A town might not be the most high-profile, but if it has a spot that fits those criteria, Rays will consider it. 

“Micro location is much more important to me than macro location,” Riahi said.

Lastly, colocation with something else people might drive to, like a supermarket, is a strong preference. 

On the question of whether the UK will take to the concept in the same way as the U.S., the original car-centric country, Riahi was positive. UK car sales remain robust, he said, and while public transport use is more common in London than in most of the U.S., outside of the capital, daily life is still structured around car use.

But will the people of a notoriously rainy island pay for a car wash subscription?

“There's many parts of the U.S. where the weather profile is very similar to the UK, if not worse, and these car washes have done extremely well,” Riahi said.